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

                                   FORM 10-Q

[ X ]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
                      For the period ended  June 30, 1997

                                       OR

[ _ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934
         For the transition period from _____________ to ______________

                         Commission File Number 1-8972

                          INMC MORTGAGE HOLDINGS, INC.
                    (formerly CWM Mortgage Holdings, Inc.)
             (Exact name of registrant as specified in its charter)



         DELAWARE                                       95-3983415
(State or other jurisdiction of                   (I. R. S. Employer 
 incorporation or organization)                   Identification No.)   

155 NORTH LAKE AVENUE, PASADENA, CALIFORNIA            91101-1857
(Address of principal executive offices)               (Zip Code)


       Registrant's telephone number, including area code (800) 669-2300

     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
requirements for the past 90 days.  Yes   X    No  _____
                                         ---

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the close of the period covered by this report.

        Common stock outstanding as of  June 30, 1997: 54,107,452 shares
<PAGE>
 
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
 
INMC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<CAPTION>

                                                                        June 30,                 December 31,
                                                                         1997                       1996   
                                                                      ----------                 ---------- 
                                                                     (Unaudited)

<S>                                                                  <C>                        <C>
ASSETS

Loans:
  Mortgage loans held for investment, net                             $1,582,562                 $1,210,891
  Manufactured housing loans held for investment, net                     26,636                     25,822
  Mortgage loans held for sale - prime                                   691,443                    404,346
  Mortgage loans held for sale - subprime                                156,445                    177,913
  Manufactured housing loans held for sale                               146,029                     74,949
  Construction loans receivable, net                                     685,510                    460,546
  Revolving warehouse lines of credit, net                               268,141                    251,032
Mortgage securities                                                      400,177                    231,780
Collateral for CMOs                                                      268,127                    289,054
Investment in and advances to IndyMac                                    161,607                    169,730
Cash and cash equivalents                                                 20,797                     12,450
Other assets                                                              69,190                     47,546
                                                                      ----------                 ---------- 
    Total assets                                                      $4,476,664                 $3,356,059
                                                                      ==========                 ========== 

LIABILITIES AND SHAREHOLDERS' EQUITY

Repurchase agreements and other credit facilities                     $3,570,506                 $2,531,509
Collateralized mortgage obligations                                      243,750                    264,080
Senior unsecured notes                                                    59,820                     59,759
Accounts payable and accrued liabilities                                  29,411                     22,287
                                                                      ----------                 ---------- 
    Total liabilities                                                  3,903,487                  2,877,635

Shareholders' equity

  Common stock - authorized, 100,000,000 shares of
   $.01 par value; issued and outstanding, 54,107,452 shares
   at June 30, 1997 and 50,200,146 at December 31, 1996                      541                        502
  Additional paid-in capital                                             570,809                    490,695
  Net unrealized gain (loss) on available-for-sale mortgage securities
   Held by INMC                                                           (2,421)                    (7,166)
   Held by IndyMac                                                           222                     (8,427)
  Cumulative earnings                                                    263,136                    219,135
  Cumulative distributions to shareholders                              (259,110)                  (216,315)
                                                                      ----------                 ---------- 
    Total shareholders' equity                                           573,177                    478,424
                                                                      ----------                 ---------- 
  Total liabilities and shareholders' equity                          $4,476,664                 $3,356,059
                                                                      ==========                 ========== 
</TABLE> 

                                       2
<PAGE>
 
INMC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>

                                                                          Quarter Ended June 30,    Six Months Ended June 30,
                                                                          ----------------------    -------------------------
                                                                           1997          1996          1997          1996    
                                                                          -------       -------       -------       -------   
  <S>                                                                  <C>           <C>            <C>          <C>      
REVENUES                                                                                                                     
                                                                                                                             
      Interest income                                                                                                        
        Mortgage loans held for investment                                $28,288       $22,627      $ 55,221      $ 49,709  
        Manufactured housing loans held for investment                        663           -           1,296           -       
        Mortgage loans held for sale                                       16,240        14,098        31,412        28,073  
        Manufactured housing loans held for sale                            3,208           150         5,468           150  
        Construction loans                                                 17,506         5,939        32,218        10,422  
        Revolving warehouse lines of credit                                 4,395         3,831         8,424         7,650  
        Mortgage securities                                                 5,516         2,330         8,838         4,797  
        Collateral for CMOs                                                 5,195         6,034        10,596        11,367  
        Advances to IndyMac                                                 2,530         2,133         5,240         3,906  
        Other                                                                 340            58           385           142  
                                                                          -------       -------      --------      --------
          Total interest income                                            83,881        57,200       159,098       116,216  
                                                                                                                             
      Interest expense                                                                                                       
        Repurchase agreements and other credit facilities                  49,654        30,634        91,219        64,202  
        CMOs                                                                4,898         5,917        10,103        11,526  
        Senior unsecured notes                                              1,379         1,347         2,757         2,694
                                                                          -------       -------      --------      -------- 
          Total interest expense                                           55,931        37,898       104,079        78,422  
                                                                          -------       -------      --------      --------
            Net interest income                                            27,950        19,302        55,019        37,794  
                                                                                                                             
      Provision for loan losses                                             3,900         2,646         7,800         5,049  
                                                                          -------       -------      --------      --------
            Net interest income after provision for loan losses            24,050        16,656        47,219        32,745  
                                                                                                                             
      Equity in earnings of IndyMac                                         2,735         3,646         6,994         7,191  
      Unrealized gains on securities                                        1,413          (133)        1,119          (321) 
      Other                                                                 1,461         1,046         3,066         1,441
                                                                          -------       -------      --------      -------- 
            Net revenues                                                   29,659        21,215        58,398        41,056  
                                                                                                                             
EXPENSES                                                                                                                     
                                                                                                                             
      Salaries                                                              2,869         1,851         5,858         3,494  
      General and administrative                                            2,036           920         4,132         1,692  
      Management fees to affiliate                                          2,098         2,075         4,407         4,143
                                                                          -------       -------      --------      --------  
          Total expenses                                                    7,003         4,846        14,397         9,329  
                                                                                                                             
                                                                                                                             
NET EARNINGS                                                              $22,656       $16,369      $ 44,001      $ 31,727  
                                                                          =======       =======      ========      ========  
                                                                                                                             
                                                                                                                             
EARNINGS PER SHARE                                                          $0.43         $0.37         $0.85         $0.72   

Weighted average shares outstanding                                    53,296,345    44,649,927     51,674,810   43,877,750
</TABLE> 

                                       3
<PAGE>
 
INMC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
                                                                                      Six Months Ended June 30,            
                                                                                      -------------------------------     
                                                                                          1997                1996        
                                                                                      -----------         -----------     
                                                                                                                          
<S>                                                                                   <C>                  <C>                 
Cash flows from operating activities:                                                                                     
 Net earnings                                                                             $44,001             $31,727    
 Adjustments to reconcile net earnings                                                                                    
  to net cash provided by (used in) operating activities:                                                                 
    Amortization and depreciation                                                          12,952              11,629     
    Provision for loan losses                                                               7,800               5,049      
    Equity in earnings of IndyMac                                                          (6,994)             (7,191)    
    Unrealized gain on trading securities                                                  (1,697)           -       
  Purchases of mortgage loans held for sale                                            (1,865,673)         (2,112,762)    
  Sale of and payments from mortgage loans held for sale                                1,537,190           1,928,652        
  Net purchases of manufactured housing loans held for sale                               (71,286)            (15,648)       
  Net purchases of trading securities                                                     (37,982)           -  
  (Increases)/decreases in other assets                                                   (13,862)              3,030     
  (Increases)/decreases in other liabilities                                                6,894                (938)       
                                                                                      -----------         -------------   
    Net cash used in operating activities                                                (388,657)           (156,452)    
                                                                                                                          
Cash flows from investing activities:                                                                                     
 Purchases of mortgage loans held for investment                                         (520,602)           -            
 Payments from mortgage loans held for investment                                         195,927             170,787     
 Net increase in construction loans receivable                                           (225,939)            (91,225)     
 Purchases of mortgage securities                                                        (153,316)           -            
 Sales and payments of mortgage securities                                                 18,877            -            
 Net (increase) decrease in revolving warehouse lines of credit                          (17,409)             15,560     
 Net purchases of manufactured housing loans held for investment                             (814)           -            
 Advances (to)/from IndyMac                                                                23,764             (17,274)    
 Net payments from collateral for CMOs                                                     20,913              29,411     
                                                                                      -----------         ----------- 
    Net cash (used in) provided by investing activities                                  (658,599)            107,259     
                                                                                                                          
Cash flows from financing activities:                                                                                     
 Net increase (decrease) in repurchase agreements and other credit facilities           1,038,997             (89,942)    
 Net proceeds from issuance of common stock                                                80,152              44,489     
 Cash dividends paid                                                                      (42,797)            (31,008)    
 Proceeds from issuance of collateralized mortgage obligations                           -                    146,931      
 Principal payments on collateralized mortgage obligations                                (20,749)            (27,057)     
                                                                                      -----------         -------------   
    Net cash provided by financing activities                                           1,055,603              43,413     
                                                                                                                          
Net increase/(decrease) in cash and cash equivalents                                        8,347              (5,780)    
Cash and cash equivalents at beginning of period                                           12,450               8,049     
                                                                                      -----------         -------------   
Cash and cash equivalents at end of period                                                $20,797              $2,269    
                                                                                      ===========         =============   
                                                                                                                          
 Supplemental cash flow information:                                                                                      
    Cash paid for interest                                                               $102,122             $77,089    
                                                                                      ===========         =============   
</TABLE> 
 Supplemental disclosure of non-cash activity:
    $154.6 million of mortgage loans held for investment were transferred to
    collateral for CMOs in 1996 in association with the issuance of a CMO.
<PAGE>
 
                 INMC MORTGAGE HOLDINGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 1997
                                  (UNAUDITED)

NOTE A - BASIS OF PRESENTATION

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. INMC Mortgage Holdings, Inc. has elected to be treated as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986, as
amended. The consolidated financial statements include the accounts of INMC
Mortgage Holdings, Inc. and its qualified REIT subsidiaries ("INMC"). The
mortgage loan conduit operations are primarily conducted through IndyMac Inc.
("IndyMac"), a taxable corporation, which is not consolidated with INMC for
financial reporting or income tax purposes. INMC owns all of the preferred stock
and a 99% economic interest in IndyMac. INMC's investment in IndyMac is
accounted for under a method similar to the equity method. As used herein, the
"Company" includes INMC and IndyMac and their respective subsidiaries.

All significant intercompany balances and transactions have been eliminated in
consolidation of INMC. Certain reclassifications have been made to the financial
statements for prior periods to conform to the June 30, 1997 financial statement
presentation.

In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the six months ended June 30, 1997 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1997.  For further information, refer to the consolidated financial statements
and footnotes thereto included in INMC's annual report on Form 10-K for the year
ended December 31, 1996.

NOTE B - ALLOWANCE FOR CREDIT LOSSES

During the six months ended June 30, 1997, INMC added $7.8 million to its
allowance for credit losses. The allowance for credit losses totaled $21.4
million at June 30, 1997, and primarily includes reserves for mortgage loans
held for investment, construction loans, warehouse lines of credit and CMOs in
the amounts of $16.4 million, $3.2 million, $1.5 million and $300,000,
respectively. INMC recorded chargeoffs of $3.4 million and $2.1 million during
the six months ended June 30, 1997 and 1996, respectively.

NOTE C - MORTGAGE SECURITIES

Mortgage securities consist of subordinated securities, principal-only and
interest-only securities and inverse floater securities.  Interest-only
securities are comprised primarily of excess master servicing fees sold by
IndyMac to INMC and subsequently securitized by INMC, which are classified and
accounted for as available for sale, and also include securitized excess master
servicing fees acquired by INMC in connection with the securitization of
mortgage loans held for sale by IndyMac, which are classified and accounted for
as trading securities.  Contractual maturities on the mortgage securities range
from 10 to 30 years.

                                       5
<PAGE>
 
NOTE C - MORTGAGE SECURITIES - CONTINUED

Following is the estimated fair value of INMC's mortgage securities as of June
30, 1997 and December 31, 1996:

<TABLE>
<CAPTION>  
                                                               Gross                  Gross                      Estimated
                                     Amortized               Unrealized             Unrealized                      Fair  
         (Dollars in thousands)        Cost                    Gains                  Losses                       Value
                                       ----                    -----                  ------                       -----
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                     <C>                  <C>                         <C> 
June 30, 1997
  Securitized Master Servicing Fees   $ 23,612                   $    -                 $      -                   $ 23,612
  Other Mortgage Securities             44,787                        -                        -                     44,787
                                      --------                   ------                 --------                   --------
    Total Trading                       68,399                        -                        -                     68,399

  Securitized Master Servicing Fees     80,465                    2,198                   (6,333)                    76,330
  Other Mortgage Securities            253,733                    2,197                     (482)                   255,448
                                      --------                   ------                 --------                   --------
    Total Available for Sale           334,198                    4,395                   (6,815)                   331,778
                                      --------                   ------                 --------                   --------
        Total                         $402,597                   $4,395                 $ (6,815)                  $400,177
                                      ========                   ======                 ========                   ========     
 
December 31, 1996
  Securitized Master Servicing Fees   $ 25,570                   $    -                 $      -                   $ 25,570
  Other Mortgage Securities              7,439                        -                        -                      7,439
                                      --------                   ------                 --------                   --------
    Total Trading                       33,009                        -                        -                     33,009
  Securitized Master Servicing Fees     87,457                    1,159                  (10,486)                    78,130
  Other Mortgage Securities            118,480                    2,209                      (48)                   120,641
                                      --------                   ------                 --------                   --------
   Total Available for Sale            205,937                    3,368                  (10,534)                   198,771
                                      --------                   ------                 --------                   --------
        Total                         $238,946                   $3,368                 $(10,534)                  $231,780
                                      ========                   ======                 ========                   ========     
</TABLE>
As of June 30, 1997, all of INMC's mortgage securities were pledged to secure
repurchase borrowings intended to finance the holding of such securities.

NOTE D - INVESTMENT IN INDYMAC (Unaudited)
------------------------------------------

Summarized financial information for IndyMac follows:

<TABLE>
<CAPTION>
             (Dollars in thousands)                       June 30, 1997            December 31, 1996
----------------------------------------------------------------------------------------------------
<S>                                                       <C>                      <C>
Loans held for sale, net                                       $224,310                     $ 86,962
Mortgage securities                                             550,800                      541,672
Master servicing fees receivable                                 44,009                       44,239
Other assets                                                     46,204                       38,232
                                                               --------                     --------
Total assets                                                   $865,323                     $711,105
                                                               ========                     ========
 
Repurchase agreements and other credit facilities              $649,738                     $496,052
Due to INMC                                                     105,510                      130,153
Accounts payable and accrued liabilities                         53,411                       44,243
Shareholders' equity                                             56,664                       40,657
                                                               --------                     --------      
    Total liabilities and shareholders' equity                 $865,323                     $711,105
                                                               ========                     ========
</TABLE>

                                       6
<PAGE>
 
NOTE D - INVESTMENT IN INDYMAC (Unaudited) - continued
------------------------------------------------------
<TABLE>
<CAPTION>
                                                            Quarter ended                    Six months, ended
                                                              June 30,                            June 30,
                                                   -----------------------------------------------------------------
         (Dollars in thousands)                     1997              1996                  1997           1996
                                                   -----------------------------------------------------------------
                                                              (as adjusted)                            (as adjusted)
<S>                                                <C>               <C>                    <C>              <C>
Interest income
   Loans held for sale                             $ 3,740           $   829                $ 5,269          $ 2,307
   Mortgage securities                              10,321            10,390                 20,526           19,613
   Master servicing fees receivable, net             2,835               438                  4,823            1,184
                                                   -----------------------------------------------------------------
          Total interest income                     16,896            11,657                 30,618           23,104
 
Interest expense                                    12,335            10,112                 23,061           18,854
                                                   ----------------------------------------------------------------- 
          Net interest income                        4,561             1,545                  7,557            4,250
 
Gain on sale of loans and securities                11,575            10,920                 28,086           19,801
Other                                                  763               477                  1,095              725
                                                   ----------------------------------------------------------------- 
          Net revenues                              16,899            12,942                 36,738           24,776
 
Salaries                                             7,663             4,703                 14,770            8,583
General and administrative expense                   4,511             1,901                  8,698            3,587
Management fees to affiliate                             -               467                    757              910
                                                   -----------------------------------------------------------------
         Total expenses                             12,174             7,071                 24,225           13,080

Earnings before income tax provision                 4,725             5,871                 12,513           11,696
Income tax provision                                 1,962             2,499                  5,242            5,044
                                                   -----------------------------------------------------------------
 
Net earnings                                       $ 2,763           $ 3,372                $ 7,271          $ 6,652
                                                   =================================================================
</TABLE>

Allowance for Credit Losses.   IndyMac's allowance for credit losses related to
loans held for sale totaled $1.3 million at June 30, 1997.  IndyMac recorded
chargeoffs of $754,000 and $18,000 during the six months ended June 30, 1997 and
1996, respectively.

Mortgage Securities. Mortgage securities consist of subordinated securities,
principal-only and interest-only securities. Interest-only securities are
comprised primarily of securitized excess master servicing fees retained in
connection with the securitization of mortgage loans held for sale. IndyMac
restated its 1996 financial statements to classify and account for certain
subordinated securities, principal-only and interest-only securities retained in
connection with IndyMac's securitization activities as trading, in accordance
with SFAS No. 115.

                                       7
<PAGE>
 
NOTE D - INVESTMENT IN INDYMAC (Unaudited) - continued
------------------------------------------------------

Contractual maturities on the mortgage securities range from 10 to 30 years.
Following is the estimated fair value of IndyMac's mortgage securities as of
June 30, 1997 and December 31, 1996:
<TABLE> 
<CAPTION> 
                                                                        Gross                Gross             Estimated
                                                 Amortized            Unrealized           Unrealized            Fair
                   (Dollars in thousands)         Cost                 Gains                Losses             Value
------------------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                    <C>               <C>                   <C> 
June 30, 1997
    Securitized Master Servicing Fees            $223,898              $       -          $         -           $223,898   
    Other Mortgage Securities                     276,150                      -                    -            276,150 
                                                 --------              ---------          -----------           --------
      Total Trading                               500,048                      -                    -            500,048
   
Other Mortgage Securities Available for Sale       50,233                  1,418               (1,031)            50,620
                                                 --------              ---------          -----------           --------         
      Total                                      $550,281              $   1,418          $    (1,031)          $550,668
                                                 ========              =========          ===========           ========
December 31,1996
  Securitized Master Servicing Fees              $209,190              $       -          $         -           $209,190
  Other Mortgage Securities                      $199,676                      -                    -            199,676
                                                 --------              ---------          -----------           --------         
     Total Trading                                408,866                      -                    -            408,866
 
Other Mortgage Securities Available for Sale      147,482                  2,815              (17,491)           132,806
                                                 --------              ---------          -----------           --------
Total                                            $556,348                 $2,815          $   (17,491)          $541,672  
                                                 ========              =========          ===========           ========
</TABLE>

During the quarter ended June 30, 1997, IndyMac sold mortgage securities
classified as available-for-sale with an amortized cost of $5.0 million (based
upon specific identification) for proceeds of  $6.0 million, resulting in gross
realized gains of $1.0 million. There were no realized losses during the quarter
ended June 30, 1997.  For the six months ended June 30, 1997, IndyMac sold
mortgage securities classified as available-for-sale with an amortized cost of
$25.4 million (based upon specific identification) for proceeds of $29.6
million, resulting in gross realized gains of $4.2 million. There were no
realized losses during the six months ended June 30, 1997.  For the six month
period ended June 30, 1996, IndyMac sold mortgage securities available-for-sale
with an amortized cost of $22.4 million for proceeds of $26.6 million, resulting
in a gross realized gain of $4.2 million. There were no realized losses during
the six months ended June 30, 1996.  The estimated fair value as of June 30,
1997 in the above table reflects decreases in market interest rates during the
first six months of 1997.

As of June 30, 1997, all of IndyMac's mortgage securities were pledged to secure
repurchase borrowings intended to finance the holding of such securities.

                                       8
<PAGE>
 
NOTE E - SUBSEQUENT EVENTS

On July 1, 1997, INMC and Countrywide Credit Industries, Inc. ("CCR") completed
a transaction whereby INMC acquired all of the outstanding stock of its manager,
Countrywide Asset Management Corporation ("CAMC"), from CCR in exchange for
3,440,860 new shares of common stock of INMC.  The transaction was approved in
January, 1997 by a Special Committee consisting of the independent Directors of
INMC, by the full Board of Directors of INMC, and by the full Board of Directors
of CCR. The transaction was then approved by INMC's shareholders at their Annual
Meeting held on June 24, 1997. Following consummation of the transaction, CAMC
was merged into INMC, and INMC became a self-managed REIT.

INMC will account for its merger with CAMC for book purposes as the settlement
of its management contract, which will result in a non-recurring charge for INMC
of approximately $75 million and a reported loss during the third quarter of
1997. For tax purposes, the transaction represents a tax-free exchange of shares
with CCR, and will not have a material effect on INMC's taxable income. 
Accordingly, INMC's dividends will not be affected by the charge since it will
be taken for book purposes only, not for tax purposes.

At its 1997 Annual Meeting, INMC also obtained the approval of its shareholders
to change its name to "INMC Mortgage Holdings, Inc." from it's former name of
"CWM Mortgage Holdings, Inc." This change was effective on July 1, 1997 and
included the changing of INMC's NYSE trading symbol from "CWM" to "NDE."

On July 15, 1997, the Board of Directors declared a cash dividend of $0.43 per
share to be paid on, September 2, 1997  to shareholders of record on July 28,
1997.

                                       9
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

GENERAL

INMC Mortgage Holdings, Inc. was incorporated in the state of Maryland in July
1985 and reincorporated in the state of Delaware in March 1987.  References to
"INMC" mean either the parent company alone or the parent company and the
entities consolidated for financial reporting purposes, while references to the
"Company" mean the parent company, its consolidated subsidiaries and IndyMac and
its consolidated subsidiaries, which are not consolidated with INMC for
financial reporting or tax purposes.

In its mortgage loan conduit business, the Company acts as an intermediary
between the originators of mortgage loans and permanent investors in mortgage-
backed securities ("MBS") secured by or representing an ownership interest in
such mortgage loans. The Company purchases "jumbo" and other "nonconforming"
mortgage loans from mortgage originators, including subprime mortgage loans
(i.e., "A- through D paper" mortgages).  The Company and its sellers negotiate
whether such sellers will retain, or the Company will purchase the rights to
service the mortgage loans delivered by such sellers to the Company.  All loans
purchased by INMC, for which a Real Estate Mortgage Investment Conduit ("REMIC")
transaction or whole loan sale is contemplated, are committed for sale to
IndyMac at the same price at which the loans were acquired by INMC pursuant to a
Master Forward Commitment and Services Agreement. At present, IndyMac does not
purchase any loans from entities other than INMC. Additionally, IndyMac's
conduit operations include the purchase or origination, securitization and sale
of consumer and mortgage loans secured by manufactured housing and home 
improvements.

The Company's principal sources of income from its conduit operations are gains
recognized on the sale or securitization of mortgage and consumer loans, the net
spread between interest earned on mortgage and consumer loans and the interest
costs associated with the borrowings used to finance such loans pending their
sale or securitization, and master servicing fee income.

In addition to its conduit operations, the Company earns fee income and net
interest income through its construction and warehouse lending programs and its
investment portfolio of mortgage and manufactured housing loans and mortgage
securities.  The construction lending operation consists of two distinct
divisions:  (i) the Builder Division, which  provides subdivision construction,
builder custom home, model home, land acquisition and development and certain
condominium loan financing on a nationwide basis to builders, and (ii) the
Consumer Division, which provides construction-to-permanent, home improvement
and residential lot financing to individual borrowers who wish to construct or
remodel their principal or secondary residences.  The Company's warehouse
lending operation provides financing to small-to-medium-size mortgage
originators for the origination and sale of mortgage loans.

FINANCIAL CONDITION

CONDUIT OPERATIONS: During the first six months of 1997, INMC purchased $2.4
billion of non-conforming mortgage loans, including $78 million of subprime
mortgage loans.  In addition, the Company purchased $89 million of manufactured
housing loans.  These loans were financed on an interim basis using equity and
short-term financing in the form of repurchase agreements and other credit
facilities.  In general, the Company, through IndyMac, sells the loans in the
form of REMIC securities or whole loan sales or, alternatively, through INMC,
invests in the loans on a long-term basis using financing provided by CMOs or
repurchase agreements and other credit facilities.  During the first six months
of 1997, IndyMac sold $1.4 billion of its prime mortgage loans through the
issuance of five series of multiple-class MBS in the form of REMIC securities
and two whole loan sales.  There were no subprime or manufactured housing loan
securitizations or loan sales during the first six months of 1997.  At June 30,
1997, the Company had committed to purchase $787 million of mortgage loans from
various mortgage originators. The IndyMac master servicing portfolio at June 30,
1997 had an aggregate outstanding principal balance of $11.5 billion with a
weighted average coupon of 8.53%.

                                       10
<PAGE>
 
MORTGAGE LOANS HELD FOR INVESTMENT:   INMC's $1.6 billion portfolio of mortgage
loans held for investment at June 30, 1997 consisted of $1.2 billion of
adjustable-rate products which contractually reprice in monthly, semi-annual or
annual periods, $310 million of mortgage loans which have a fixed rate for a
period of three to ten years and subsequently convert to adjustable-rate
mortgage loans that reprice annually, and $112 million of fixed-rate mortgage
loans.  The weighted average coupon of mortgage loans held for investment by
INMC at June 30, 1997 was 8.34%. INMC finances mortgage loans held for
investment with repurchase agreements and other credit facilities which reprice
at intervals ranging from overnight to two months as of June 30, 1997. INMC also
utilizes interest rate swap agreements to manage interest rate exposure on its
portfolio of mortgage loans held for investment. The allowance for losses
related to mortgage loans held for investment totaled $16.4 million at June 30,
1997.  Chargeoffs related to mortgage loans held for investment totaled $3.4
million for the six months ended June 30, 1997.

CONSTRUCTION LENDING OPERATIONS: At June 30, 1997, INMC's Builder Division had
commitments to fund construction loans of $965 million with outstanding
principal balances of $489 million.  The Consumer Division had commitments to
fund construction-to-permanent and home improvement loans of $325 million at
June 30, 1997 with outstanding principal balances of $197 million.  The
allowance for losses related to construction loans totaled $3.2 million at June
30, 1997.  Chargeoffs totaled $70,000 related to construction loans during the
six months ended June 30, 1997.  The Company had outstanding borrowings under
various revolving credit facilities totaling $422 million at June 30, 1997
associated with the financing of construction loans.

WAREHOUSE LENDING OPERATIONS:  At June 30, 1997, INMC had extended commitments
to make warehouse and related loans in an aggregate amount of $770 million, of
which $268 million was outstanding, net of reserves.  The allowance for loan
losses related to warehouse lines of credit totaled $1.5 million at June 30,
1997.  There were no chargeoffs against such allowance during the six months
ended June 30, 1997.  Repurchase agreements associated with INMC's financing of
these warehouse lines of credit totaled $229 million at June 30, 1997.

CMO PORTFOLIO: As of June 30, 1997, the CMO Portfolio was comprised of 9 series
of CMOs. Collateral for CMOs decreased to $268 million at June 30, 1997 from
$289 million at December 31, 1996. This decrease of $21 million is primarily the
result of repayments (including prepayments and premium and discount
amortization) of $19.7 million, a decrease in guaranteed investment contracts
("GICs") held by trustees of $1.2 million and a decrease in accrued interest
receivable of $100,000. The fair value of the collateral for CMOs totaled $262
million and $282 million at June 30, 1997 and December 31, 1996, respectively.
INMC's CMOs outstanding decreased to $244 million at June 30, 1997 from $264
million at December 31, 1996. This decrease of $20 million resulted from
principal payments and discount amortization on CMOs of $19.7 million and a
decrease in accrued interest payable on CMOs of $300,000.

RESULTS OF OPERATIONS
QUARTER ENDED JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30, 1996

NET EARNINGS: INMC's net earnings were $22.7 million or $.43 per share, based on
53,296,345 weighted average shares outstanding for the quarter ended June 30,
1997, compared to $16.4 million or $0.37 per share, based on 44,649,927 weighted
average shares outstanding for the quarter ended June 30, 1996.

The increase of $6.3 million in second quarter earnings resulted primarily from
an increase in net interest income of $8.7 million and an increase of $1.5
million in unrealized gain on securities, offset by an increase of $1.0 million,
$1.1 million and $1.3 million in salaries, general and administrative expenses,
and provision for loan losses, respectively, and a decrease of $900,000 from
equity in earnings of IndyMac.

                                       11
<PAGE>
 
INTEREST INCOME:   Total interest income was $83.9 million for the quarter ended
June 30, 1997 and $57.2 million for the quarter ended June 30, 1996.  The
increase in interest income of $26.7 million is primarily due to increases in
interest earnings on construction loans, mortgage loans held for investment,
manufactured housing loans, mortgage loans held for sale, and mortgage
securities of $11.6 million, $5.7 million, $3.9 million, $2.1 million, and $3.2
million, respectively.

Interest income on mortgage loans held for investment, consisting primarily of
adjustable rate mortgages,  totaled $28.3 million and $22.6 million, resulting
in effective yields of 7.47% and 7.95%, for the quarters ended June 30, 1997 and
1996, respectively.  The average outstanding balance of such loans increased  to
$1.5 billion for the second quarter of 1997 from $1.1 billion during the second
quarter of 1996.

Interest income earned on mortgage loans held for sale totaled $16.2 million and
$14.2 million, resulting in effective yields of 8.71% and 8.91%, for the
quarters ended June 30, 1997 and 1996, respectively.  The average outstanding
balance of such loans increased to $747.8 million for the quarter ended June 30,
1997 from $642.7 million for the quarter ended June 30, 1996.

Interest income on manufactured housing loans totaled $3.9 million and $150,000
with interest earned at effective yields of 10.34% and 9.90%, for the quarters
ended June 30, 1997 and 1996, respectively. The average outstanding balance of
such loans increased to $150.2 million during the second quarter of 1997 from
$6.1 million during the second quarter of 1996.

Interest income on construction loans totaled $17.5 million and $5.9 million
with interest earned at effective yields of 10.97% and 12.71%, for the quarters
ended June 30, 1997 and 1996, respectively.  The average outstanding balance of
such loans increased to $640.1 million during the second quarter of 1997 from
$188.0 million during the second quarter of 1996.

Interest income on collateral for CMOs was $5.2 million and $6.0 million for the
quarters ended June 30, 1997 and 1996, respectively.  This decrease was
primarily attributable to a decrease in the average aggregate principal amount
of collateral for CMOs outstanding to $272.9 million for the quarter ended June
30, 1997 compared to $319.7 million for the quarter ended June 30, 1996, offset
by an increase in the effective yield earned on the collateral for CMOs to 7.64%
in the second quarter of 1997 from 7.59% in the second quarter of 1996.
Interest income on collateral for CMOs includes the impact of amortization of
premiums paid in connection with acquiring the loan portfolio, the delay in the
receipt of prepayments and the temporary investment of cash payments in lower
yielding short-term holdings (GICs) until such amounts are used to make payments
on CMOs.

Mortgage securities consist of subordinated securities, principal-only and
interest-only securities and inverse floater securities.  Interest-only
securities are comprised primarily of excess master servicing fees sold by
IndyMac to INMC and subsequently securitized by INMC, which are classified and
accounted for as available for sale, and also include securitized excess master
servicing fees acquired by INMC in connection with the securitization of
mortgage loans held for sale by IndyMac, which are classified and accounted for
as trading securities.  Net income related to mortgage securities totaled $5.5
million during the second quarter of 1997 as compared to $2.3 million for the
second quarter of 1996.

                                       12
<PAGE>
 
Interest income earned on revolving warehouse lines of credit totaled $4.4
million and $3.8 million, at effective yields of 9.03% and 8.74%, for the
quarters ended June 30, 1997 and 1996, respectively. The average outstanding
balance of such loans increased to $195.2 million during the second quarter of
1997 from $176.4 million during the second quarter of 1996.

INTEREST EXPENSE:  For the quarters ended June 30, 1997 and 1996, total interest
expense was $55.9 million and $37.9 million, respectively.  This increase in
interest expense of $18.0 million was primarily due to an increase in interest
expense on repurchase agreements and other credit facilities of $19.0 million,
offset by a decline in interest expense related to CMOs of $1.0 million.

Interest expense on repurchase agreements and other credit facilities used to
finance mortgage loans held for sale and investment, revolving warehouse lines
of credit, construction loans and master servicing fees receivable totaled $49.7
million for the quarter ended June 30, 1997, compared to $30.7 million for the
quarter ended June 30, 1996.  This increase was principally the result of an
increase in the aggregate average balance of indebtedness outstanding for the
period to $3.1 billion for the quarter ended June 30, 1997 compared to $2.0
billion for the quarter ended June 30, 1996 and an increase in the weighted
average effective rate applicable to such indebtedness to 6.46% for the quarter
ended June 30, 1997 from 6.17% for the quarter ended June 30, 1996.

Interest expense on senior unsecured notes totaled $1.4 million and $1.3
million, resulting in effective rates of 9.25% and 9.22% for the second quarter
of 1997 and 1996, respectively.

Interest expense on CMOs was $4.9 million and $5.9 million for the quarters
ended June 30, 1997 and 1996, respectively.  This decrease was primarily
attributable to a decrease in average aggregate CMOs outstanding to $249.8
million for the quarter ended June 30, 1997 from $293.0 million for the quarter
ended June 30, 1996, combined with a decrease in the effective rate on the CMOs
to 7.86% in the second quarter of 1997 from 8.12% in the second quarter of 1996.

EQUITY IN EARNINGS OF INDYMAC:  The 1997 second  quarter earnings of $2.8
million for IndyMac, in which INMC has a 99% economic interest, resulted
principally from net interest income of $4.6 million and gain on sale of
mortgage loans and securities of $11.6 million, offset by salaries, general and
administrative expenses of $12.2 million, and income taxes of $2.0 million.

During the second quarter of 1996, IndyMac's earnings totaled  $3.4 million
which resulted principally from net interest income of $1.5 million and gain on
sale of mortgage loans and securities of $10.9 million, offset by salaries,
general and administrative expenses of $6.6 million, management fees of $467,000
and income taxes of $2.5 million. IndyMac's interest income related to mortgage
securities totaled $10.3 million during the second quarter of 1997 compared to
$10.4 million during the second quarter of 1996.

SALARIES, GENERAL AND ADMINISTRATIVE EXPENSE:  The increase of $2.1 million in
salaries, general and administrative expenses for the three months ended June
30, 1997 compared to the three months ended June 30, 1996 is primarily the
result of the increased personnel and expenses deemed necessary to support the
growth in the operations of INMC and its qualified REIT subsidiaries.

MANAGEMENT FEES: Management fees paid by INMC to CAMC were $2.1 million for both
the three months ended June 30, 1997 and 1996.

                                       13
<PAGE>
 
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996

NET EARNINGS: INMC's net earnings were $44 million or $0.85 per share, based on
51,674,810 weighted average shares outstanding for the six months ended June 30,
1997, compared to $31.7 million or $0.72 per share, based on 43,877,750 weighted
average shares outstanding for the six month ended June 30, 1996.

The increase of $12.3 million in 1997 earnings resulted primarily from an
increase in net interest income of $17.2 million and an increase of $1.4 million
in unrealized gain on securities, offset by an increase of $2.4 million, $2.4
million, and $2.8 million in salaries, general and administrative expenses, and
the provision for loan losses, respectively.

INTEREST INCOME:   Total interest income was $159.1 million for the six months
ended June 30, 1997 and $116.2 million for the six months ended June 30, 1996.
The increase in interest income of $42.9 million is primarily due to increases
in interest earnings on construction loans, mortgage loans, manufactured housing
loans,  and mortgage securities, of $21.8 million, $8.9 million, $6.8 million,
and $4.0 million, respectively.

Interest income on mortgage loans held for investment, consisting primarily of
adjustable rate mortgages, totaled $55.2 million and $49.7 million, resulting
in effective yields of 7.97% and 8.23%, for the six months ended June 30, 1997
and 1996, respectively.  The average outstanding balance of such loans increased
to $1.4 billion for the first six months of 1997 from $1.2 billion for the first
six months of 1996.

Interest income earned on mortgage loans held for sale totaled $31.4 million and
$28.2 million, resulting in effective yields of 8.70% and 8.80%, for the six
months ended June 30, 1997 and 1996, respectively.  The average outstanding
balance of such loans increased to $728 million for the six months ended June
30, 1997 from $645 million for the six months ended June 30, 1996.

Interest income on manufactured housing loans totaled $6.8 million and $150,000
with interest earned at effective yields of 10.23% and 9.86%, for the six months
ended June 30, 1997 and 1996, respectively. The average outstanding balance of
such loans increased to $133.3 million for the first six months of 1997 from
$3.1 million for the first six months of 1996.

Interest income on construction loans totaled $32.2 million and $10.4 million,
with interest earned at effective yields of 11.73% and 12.65%, for the six
months ended June 30, 1997 and 1996, respectively.  The average outstanding
balance of such loans increased to $554 million from $166 million for the six
months ended June 30, 1997 and 1996, respectively.

Interest income on collateral for CMOs was $10.6 million and $11.4 million for
the six months ended June 30, 1997 and 1996, respectively.  This decrease was
primarily attributable to a decrease in the average aggregate principal amount
of collateral for CMOs outstanding to $277 million for the six months ended June
30, 1997 compared to $304 million for the six months ended June 30, 1996, offset
by an increase in the effective yield earned on the collateral for CMOs to 7.70%
in the six months of 1997 from 7.52% in the six months  of 1996.  Interest
income on collateral for CMOs includes the impact of amortization of premiums
paid in connection with acquiring the loan portfolio, the delay in the receipt
of prepayments and the temporary investment of cash payments in lower yielding
short-term holdings (GICs) until such amounts are used to make payments on CMOs.

                                       14
<PAGE>
 
Mortgage securities consist of subordinated securities, principal-only and
interest-only securities and inverse floater securities.  Interest-only
securities are comprised primarily of excess master servicing fees sold by
IndyMac to INMC and subsequently securitized by INMC, which are classified and
accounted for as available for sale, and also include securitized excess master
servicing fees acquired by INMC in connection with the securitization of
mortgage loans held for sale by IndyMac, which are classified and accounted for
as trading securities.  Net income related to mortgage securities totaled $8.8
million during the first  six months of 1997 as compared to $4.8 million for the
first six months of 1996.

Interest income earned on revolving warehouse lines of credit totaled $8.4
million and $7.7 million, at effective yields of 9.09% and 8.72%, for the six
months ended June 30, 1997 and 1996, respectively. The average outstanding
balance of such loans increased to $187 million for the six months ended June
30, 1997 from $176 million for the six months ended June 30, 1996.

INTEREST EXPENSE:  For the six months ended June 30, 1997 and 1996, total
interest expense was $104.1 million and $78.4 million, respectively.  This
increase in interest expense of $25.7 million was primarily due to an increase
in interest expense on repurchase agreements and other credit facilities of
$27.0 million, offset by a decline in interest expense related to CMOs of $1.4
million.

Interest expense on repurchase agreements and other credit facilities used to
finance mortgage loans held for sale and investment, revolving warehouse lines
of credit, construction loans and master servicing fees receivable totaled $91.2
million for the six months ended June 30, 1997, compared to $64.2 million for
the six months ended June 30, 1996.  This increase was principally the result of
an increase in the aggregate average balance of indebtedness outstanding for the
period to $3.0 billion for the six months ended  June 30, 1997 compared to $2.1
billion for the six months ended June 30, 1996 and a decrease in the weighted
average effective rate applicable to such indebtedness to 6.09% for the six
months ended June 30, 1997 from 6.28% for the six months ended June 30, 1996.

Interest expense on senior unsecured notes totaled $2.8 million and $2.7
million, resulting in effective rates of  9.30% and 9.22% for the six months
ended June 30, 1997 and 1996, respectively.

Interest expense on CMOs was $10.1 million and $11.5 million for the six months
ended June 30, 1997 and 1996, respectively.  This decrease was primarily
attributable to an decrease in average aggregate CMOs outstanding to $255
million for the six months ended June 30, 1997 from $278 million for the six
months ended June 30, 1996, combined with a decrease in the effective rate on
the CMOs to 8.00% in the six months ended 1997 from 8.33% in the six months
ended of 1996.

EQUITY IN EARNINGS OF INDYMAC:  The six months earnings of $7.3 million for
IndyMac, in which INMC has a 99% economic interest, resulted principally from
net interest income of $7.6 million and gain on sale of mortgage loans and
securities of $28.1 million, offset by salaries, general and administrative
expenses of $23.5 million: and income taxes of $5.2 million.  Additionally,
equity in earnings of IndyMac, in INMC's consolidated statement of earnings, was
adjusted during the first quarter by $205,000 to reflect the cumulative effect
on IndyMac's earnings through December 31, 1996 of IndyMac's restatement of its
financial statements, reflecting the reclassification of its portfolio of
mortgage securities retained in connection with the securitization of loans from
both available for sale and held to maturity to trading securities. Because the
effect of this adjustment was not material to INMC's earnings, INMC did not
restate its earnings at December 31, 1996 in it's 1996 Form 10-K/A.

                                       15
<PAGE>
 
During the first six months of 1996, IndyMac's earnings totaled $6.7 million
which resulted principally from net interest income of $4.3 million and gain on
sale of mortgage loans and securities of $19.8 million, offset by salaries,
general and administrative expenses of $12.2 million, management fees of $1.0
million  and income taxes of $5.0 million. IndyMac's interest income related to
mortgage securities totaled $20.5 million for the first six months of 1997
compared to $19.6 million for the first six months of 1996.

SALARIES, GENERAL AND ADMINISTRATIVE EXPENSE: The increase of $4.8 million in
salaries, general and administrative expenses for the six months ended June 30,
1997 compared to the six months ended June 30, 1996 is primarily the result of
the increased personnel and expenses deemed necessary to support the growth in
the operations of INMC and its qualified REIT subsidiaries.

MANAGEMENT FEES:  For the six months ended June 30, 1997, management fees paid
by INMC to CAMC were $4.4 million compared to $4.1 million for the six months
ended June 30, 1996.

LIQUIDITY AND CAPITAL RESOURCES

The Company uses proceeds from the issuance of CMOs, repurchase agreements, bank
debt, other borrowings and common stock to meet its liquidity requirements. In
addition, in connection with its mortgage conduit operations, IndyMac issues
REMIC securities from time to time to help meet such requirements.

The Company has established a revolving financing facility with Merrill Lynch,
Pierce, Fenner & Smith Inc. and certain of its affiliates, in an aggregate
principal amount of $1 billion.  The facility is committed for a period of at
least two years from its date of execution and currently permits the Company to
finance its mortgage conduit, mortgage portfolio, warehouse lending, consumer
construction lending and manufactured housing lending assets and operations.
This facility carries a floating rate of interest based on LIBOR, plus an
applicable margin, which varies by the type of asset financed.

The Company has entered into a repurchase facility with Nomura Asset Capital
Corporation in an aggregate principal amount of $300 million.  This financing
facility is currently under renegotiation to renew and carries a floating rate
of interest based on LIBOR, plus an applicable margin, which varies by the type
of asset financed.

The Company has entered into a repurchase facility with Paine Webber Real Estate
Securities, Inc. in an aggregate principal amount of $500 million. Such
repurchase facility is committed for a one-year period from the date of
execution and currently permits the Company to finance its mortgage conduit,
warehouse lending and mortgage portfolio assets and operations. Such repurchase
facility carries a floating rate of interest based on LIBOR, plus an applicable
margin, which varies by the type of asset financed.

In May 1995, the Company entered into a credit facility with a syndicate of
commercial banks led by First Union National Bank. This facility primarily
finances mortgage loans, builder construction loans, and master servicing
assets. In September 1996, the Company amended this credit facility to expand
the number of lenders and the available committed borrowings from $300 million
to $405 million and to increase financing available for builder construction
loans. In July 1997, the Company again amended this credit facility to increase 
the available committed borrowings from $405 million to $500 million. The
interest rates under this credit facility are based, at the Company's election,
on LIBOR or the federal funds rate, plus an applicable margin, which varies by
the type of asset financed.

During the fourth quarter of 1995, the Company raised $59.6 million in
connection with the private placement of senior notes with certain institutional
lenders. These senior notes are unsecured, and the proceeds are utilized by the
Company in connection with its working capital needs. The effective rate of

                                       16
<PAGE>
 
interest on such senior notes is fixed at 9.22% for a period of seven years from
the date of issuance. The senior notes were rated "BBB-" by Duff & Phelps Credit
Rating Co. at the time of issuance and, in December 1996, were rated "BBB-" by
Fitch Investors Service, L.P.

The Company has from time to time raised additional capital through secondary
public offerings. Since the inception of its new business plan in 1993, the
Company has raised a total of $205 million in connection with such secondary
offerings. The Company also raises new equity capital primarily through the
optional cash payment feature of its Dividend Reinvestment Plan. During the
second quarter of 1997 the Company raised $29.7 million and a total of $79
million for the first six months of 1997 through such Dividend Reinvestment
Plan. During 1996 and 1995, the Company raised $133 million and $25 million,
respectively, through such Dividend Reinvestment Plan.

During the first quarter of 1996, the Company issued one series of CMOs in an
aggregate principal amount of $146 million, secured by collateral consisting of
mortgage loans with an aggregate principal balance of $155 million.

The REIT provisions of the Internal Revenue Code restrict INMC's ability to
retain earnings and thereby replenish the capital committed to its mortgage
portfolio, conduit, commercial lending and other operations by requiring INMC to
distribute to its shareholders substantially all of its taxable income from
operations. Certain of the Company's material businesses, including its mortgage
conduit and commercial lending operations, are known to require significant and
continuing commitments of capital resources.

The Company's liquidity and its ability to raise working capital has generally
improved during recent periods, and management believes that the Company's cash
flow from operations and the Company's existing debt and equity financing
arrangements are sufficient to meet the Company's current short-term liquidity
requirements. To the extent the Company possesses working capital in excess of
its current liquidity requirements, such working capital is as a general matter
utilized to repay borrowings under those tranches of the Company's lines of
credit which carry higher rates of interest, which borrowings would typically
remain available for reborrowing by the Company pursuant to the terms and
conditions of the applicable credit facility.

The Company's ability to meet its long-term liquidity requirements is subject to
the renewal of its repurchase and credit facilities and/or obtaining other
sources of financing, including issuing additional debt or equity from time to
time. Any decision by the Company's lenders and/or investors to make additional
funds available to the Company in the future will depend upon a number of
factors, such as the Company's compliance with the terms of its existing credit
arrangements, the Company's financial performance, industry and market trends in
the Company's various businesses, the general availability of and rates
applicable to financing and investments, such lenders' and/ or investors' own
resources and policies concerning loans and investments, and the relative
attractiveness of alternative investment or lending opportunities.

CASH FLOWS

Operating Activities - Net cash used in operating activities totaled $389
million for the six months ended June 30, 1997 in comparison to $156 million for
the six months ended June 30, 1996.  The primary operating activity for which
cash was used during the six months ended June 30, 1997 was the acquisition of
mortgage loans and manufactured housing loans held for sale.

Investing Activities - Net cash used in investing activities totaled $659
million for the six months ended June 30, 1997 compared to a net cash provided
by investing activities of $107 million for the six months ended June 30, 1996.
The primary investing activity for which cash was used during the six months
ended June 30, 1997 was the funding of construction loans receivable and
acquisition of mortgage loans held for investment.

Financing Activities - Net cash provided by financing activities amounted to
$1.1 billion for the six months ended June 30, 1997 compared to $43 million for
the six months ended June 30, 1996. The 

                                       17
<PAGE>
 
increase in cash provided by financing activities was primarily the result of
new borrowings under repurchase agreements and other credit facilities and
proceeds of common stock issuances pursuant to the Dividend Reinvestment and
Stock Purchase Plan during the six months ended June 30, 1997.

EFFECT OF INTEREST RATE CHANGES

Due to the characteristics of certain financial assets and liabilities of the
Company, and the nature of the Company's business activities, the Company's
financial position and results of operations may be affected by changes in
market interest rates.  With respect to its financial assets and liabilities,
the Company has devised and implemented a general asset/liability investment
management strategy which seeks, on an economic basis, to mitigate significant
fluctuations in the financial position and results of operations of the Company
caused by changes in market interest rates.  This strategy attempts, among other
things, to balance investments in various types of financial instruments whose
values are expected to move inversely to each other in response to movements in
market interest rates.  However, there can be no assurance that this strategy
(including assumptions concerning the correlation thought to exist between
different types of instruments) or its implementation will be successful in
any particular interest rate environment.

Financial assets of the Company that tend to increase in value as interest rates
increase, and decline in value as interest rates decrease, include securitized
excess master servicing fees and master servicing fees receivable. These
financial assets carry an implicit yield that is based upon estimates of future
cash flows on an underlying pool of mortgage loans. As interest rates increase,
the prepayments on the underlying pool of mortgage loans tends to slow,
resulting in higher residual cash flows than would otherwise have been obtained,
and therefore results in higher implicit yields. As of June 30, 1997, INMC and
IndyMac on a combined basis held $324 million of securitized excess master
servicing fees and master servicing fees receivable. Of the $324 million
aggregate amount, $248 million of such assets are classified as trading
securities in accordance with the requirements of SFAS 115 since they were
acquired in connection with the securitization of loans held for sale by
IndyMac.

Financial instruments of the Company that tend to decrease in value as interest
rates increase, and increase in value as interest rates decline, include fixed
rate subordinated securities, principal-only securities and inverse-floater
securities.  Similar to the securitized master servicing fees, the principal-
only and inverse floater securities carry an implicit yield based upon estimates
of future cash flows on an underlying pool of mortgage loans.  However, the
principal-only and inverse-floater securities generally sell at a discount,
similar to a "zero-coupon" bond, in order to yield an estimated return.  If
interest rates increase and prepayments slow in comparison to assumed prepayment
rates, the repayment rate of the principal-only and inverse-floater security
would tend to lengthen and thus reduce the implicit yield on the security.
Conversely, if interest rates decrease, the rate of prepayment on the underlying
pool of loans would tend to increase, resulting in a more rapid rate of
repayment on the principal-only security and inverse floater security and
therefore a higher implicit yield.  To a lesser extent, any mortgage securities
held by the Company and supported by adjustable rate mortgage loans may decline
in value as interest rates increase, if the timing or absolute level of interest
rate adjustments on the underlying loans do not correspond to any increases in
market interest rates.  As of June 30, 1997, INMC and IndyMac on a combined
basis held $627 million of fixed and adjustable rate subordinated securities,
principal-only and inverse floater securities.  Of the $627 million aggregate
amount, $321 million of such securities are classified as trading securities.

                                       18
<PAGE>
 
In addition to the inherent risks in seeking to manage fluctuations in the value
of certain assets due to interest rate changes, there may be timing differences
in the recognition of the offsetting effects of gains and losses which are
attributable to specific instruments depending upon whether a security is
classified as trading or available for sale.  The unrealized holding gains and
losses on trading securities are recognized in earnings of the period for the
reporting entity.  By comparison, the unrealized holding gains and losses of
securities available for sale are excluded from earnings of the reporting entity
and included as a separate component of shareholders' equity.  Therefore, to the
extent that the Company is required under GAAP to classify certain securities as
trading, such identification and the resulting accounting  could cause
additional volatility in the Company's future reported earnings in periods where
interest rates fluctuate.

The Company is also subject to certain business and credit risks in connection
with interest rate changes. Increases in interest rates may discourage potential
mortgagors from borrowing or refinancing mortgage or manufactured housing loans,
thus decreasing the volume of loans available to be purchased through the
Company's mortgage conduit operations, or financed through the Company's
construction and warehouse lending operations. Additionally, with respect to
adjustable rate loans, the rate of delinquency may increase in periods of
increasing interest rates as borrowers face higher mortgage payments.

The Company's liquidity position and net interest income could also be adversely
impacted by significant interest rate fluctuations.  Each of the Company's
collateralized borrowing facilities described above in Liquidity and Capital
Resources permit the lender thereunder to require the Company to repay amounts
outstanding and/or pledge additional assets in the event that the value of the
pledged collateral declines due to changes in market interest rates.  In the
event of such a decrease  in collateral values, it could be necessary for the
Company to provide additional funds and/or pledge additional assets to maintain
financing for its holdings that have not been financed to maturity through the
issuance of CMOs or other debt securities.  In addition, increases in short-term
borrowing rates relative to rates earned on asset holdings that have not been
financed to maturity through the issuance of CMOs or other debt securities may
also adversely affect the Company's "spread income" on such assets and thus
reduce the Company's earnings.

                                       19
<PAGE>
 
PART II. OTHER INFORMATION

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

At the annual meeting of INMC's stockholders held on June 24, 1997, the
stockholders voted to re-elect INMC's directors. The votes cast in this regard
were as follows: David S. Loeb - 48,882,441 for and 1,111,191 withheld; Angelo
R. Mozilo - 48,911,663 for and 1,081,969 withheld; Lyle E. Gramley - 48,906,085
for and 1,087,547 withheld; Thomas J. Kearns - 48,910,046 for and 1,083,586
withheld; and Frederick J. Napolitano - 48,906,684 for and 1,086,948 withheld.
In addition, the stockholders voted to approve the merger of CAMC with and into
INMC. The votes cast on this proposal were as follows: 33,862,359 in favor;
364,366 against; 373,369 abstaining; and 15,393,538 representing broker non-
votes. INMC's stockholders voted to approve amendments to INMC's Bylaws to
delete references to the management of INMC by an outside management company and
certain related provisions. The votes cast on this proposal were as follows:
33,732,470 in favor; 418,001 against; 449,623 abstaining; and 15,393,538
representing broker non-votes. INMC's stockholders voted to approve an amendment
to the Certificate of Incorporation changing INMC's name from "CWM Mortgage
Holdings, Inc." to "INMC Mortgage Holdings, Inc." The votes cast on this
proposal were as follows: 48,888,176 in favor; 625,389 against; 480,067
abstaining; and 0 representing broker non-votes. INMC's stockholders voted to
approve an amendment to the INMC 1996 Stock Incentive Plan to increase the
annual per person limit for benefits payable under the plan. The votes cast on
this proposal were as follows: 42,835,148 in favor; 6,119,432 against; 797,739
abstaining; and 241,313 representing broker non-votes. INMC's stockholders voted
to approve the annual cash bonus provisions of the Employment Agreement of
Michael W. Perry. The votes cast on this proposal were as follows: 46,694,818 in
favor; 2,123,141 against; 997,360 abstaining; and 178,313 representing broker
non-votes. Finally, INMC's stockholders voted to ratify the selection of Grant
Thornton LLP as INMC's independent certified public accountants for the fiscal
year ending December 31, 1997. The votes cast on this proposal were as follows:
49,478,216 in favor; 175,744 against; 339,672 abstaining; and 0 representing
broker non-votes.

                                       20
<PAGE>
 
Item 6.  Exhibits and Reports on Form 8-K
         --------------------------------

         (a) Exhibits
             --------

             2.1* Agreement and Plan of Merger dated as of January 29, 1997
                  among INMC Mortgage Holdings, Inc., formerly known as CWM
                  Mortgage Holdings, Inc. (the "Company"), Countrywide Asset
                  Management Corporation ("CAMC"), and Countrywide Credit
                  Industries, Inc. ("CCR") (incorporated by reference to
                  Appendix A to the Company's Definitive Proxy Statement filed
                  with the SEC on May 21, 1997).
 
             2.2* Registration Rights Agreement dated as of July 1, 1997 among
                  the Company and CCR (incorporated by reference to Exhibit A to
                  the Company's Definitive Proxy Statement filed with the SEC on
                  May 21, 1997).

             3.1  Certificate of Incorporation  of the Company, as amended.

             3.2  Bylaws of the Company, as amended.

             4.1  1996 Stock Incentive Plan adopted May 29, 1996, as amended
                  June 24, 1997.

             10.1 Employment Agreement dated January 1, 1997 between CAMC and
                  Richard H. Wohl.

             27   Financial Data Schedule

             *  Incorporated by reference.
 
         (b) Reports on Form 8-K.
             --------------------
 
             None

 

                                       21
<PAGE>
 
                                   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, in the City of
Pasadena, State of California, on August 14, 1997.



                          INMC MORTGAGE HOLDINGS, INC.

                      
                          By:  /s/ Michael W. Perry
                               -------------------
                               Michael W. Perry
                               President and Chief Operating Officer



                          By:  /s/ James P. Gross
                               -----------------
                               James P. Gross
                               Senior Vice President and Chief Financial Officer

                      

                                       22