UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549


                                    FORM 10-Q


  X  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13  OR  15(D)  OF  THE
  -  SECURITIES  EXCHANGE  ACT  OF  1934

FOR  THE  QUARTERLY  PERIOD  ENDED:     JUNE  30,  1999

                                       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:       001-11914


                      THORNBURG MORTGAGE ASSET CORPORATION
             (Exact name of Registrant as specified in its Charter)

                 MARYLAND                      85-0404134
     (State  or  other  jurisdiction  of     (IRS  Employer
     incorporation  or  organization)     Identification  Number)

          119  E.  MARCY  STREET
          SANTA  FE,  NEW  MEXICO                       87501
     (Address of principal executive offices)         (Zip Code)

        Registrant's telephone number, including area code (505) 989-1900

    (Former name, former address and former fiscal year, if changed since last
                                     report)

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

     (1)  Yes          X          No
                       -
     (2)  Yes          X          No
                       -

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate  the  number  of  shares outstanding of each of the issuer's classes of
common  stock,  as  of  the  last  practicable  date.

Common  Stock  ($.01  par  value)     21,489,663  as  of  August  4,  1999

<PAGE>
<TABLE>
<CAPTION>
                       THORNBURG MORTGAGE ASSET CORPORATION
                                     FORM 10-Q

                                       INDEX

                                                                              Page
                                                                              ----
<S>                                                                           <C>
PART I. FINANCIAL INFORMATION
  Item 1.  Financial Statements

    Consolidated Balance Sheets at June 30, 1999 and December 31, 1998 . . .     3

    Consolidated Statements of Operations for the three and six months ended
     June 30, 1999 and June 30, 1998 . . . . . . . . . . . . . . . . . . . .     4

    Consolidated Statements of Shareholders' Equity for the six months
     ended June 30, 1999 and 1998. . . . . . . . . . . . . . . . . . . . . .     5

    Consolidated Statements of Cash Flows for the three and six months ended
     June 30, 1999 and June 30, 1998 . . . . . . . . . . . . . . . . . . . .     6

    Notes to Consolidated Financial Statements . . . . . . . . . . . . . . .     7

  Item 2.  Management's Discussion and Analysis of
    Financial Condition and Results of Operations. . . . . . . . . . . . . .    17

PART II.  OTHER INFORMATION

  Item 1.  Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . .    34

  Item 2.  Changes in Securities . . . . . . . . . . . . . . . . . . . . . .    34

  Item 3.  Defaults Upon Senior Securities . . . . . . . . . . . . . . . . .    34

  Item 4.  Submission of Matters to a Vote of Security Holders . . . . . . .    34

  Item 5.  Other Information . . . . . . . . . . . . . . . . . . . . . . . .    34

  Item 6.  Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . .    34


  SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    35

  EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    36
</TABLE>

                                        2
<PAGE>
PART  I.     FINANCIAL  INFORMATION

ITEM  1.     FINANCIAL  STATEMENTS

<TABLE>
<CAPTION>
THORNBURG  MORTGAGE  ASSET  CORPORATION  AND  SUBSIDIARIES

CONSOLIDATED  BALANCE  SHEETS
(Amounts  in  thousands)

                                                               June 30, 1999    December 31, 1998
                                                              ---------------  -------------------
<S>                                                           <C>              <C>
ASSETS
  Adjustable-rate mortgage ("ARM") assets: (Notes 2 and 3)
    ARM securities . . . . . . . . . . . . . . . . . . . . .  $    3,452,933   $        3,094,657
    Collateral for collateralized notes. . . . . . . . . . .       1,009,206            1,147,350
    ARM loans held for securitization. . . . . . . . . . . .          12,187               26,410
                                                              ---------------  -------------------
                                                                   4,474,326            4,268,417
                                                              ---------------  -------------------

  Cash and cash equivalents. . . . . . . . . . . . . . . . .          39,746               36,431
  Accrued interest receivable. . . . . . . . . . . . . . . .          32,850               37,939
  Prepaid expenses and other . . . . . . . . . . . . . . . .           7,447                1,846
                                                              ---------------  -------------------
                                                              $    4,554,369   $        4,344,633
                                                              ===============  ===================


LIABILITIES

  Reverse repurchase agreements (Note 3) . . . . . . . . . .  $    3,212,276   $        2,867,207
  Collateralized notes (Note 3). . . . . . . . . . . . . . .         989,848            1,127,181
  Other borrowings (Note 3). . . . . . . . . . . . . . . . .           1,344                2,029
  Accrued interest payable . . . . . . . . . . . . . . . . .          16,616               31,514
  Dividends payable (Note 5) . . . . . . . . . . . . . . . .           1,670                1,670
  Accrued expenses and other . . . . . . . . . . . . . . . .           3,545                3,209
                                                              ---------------  -------------------
                                                                   4,225,299            4,032,810
                                                              ---------------  -------------------

SHAREHOLDERS' EQUITY (Note 6)

  Preferred stock: par value $.01 per share;
    2,760 shares authorized; 9.68% Cumulative
    Convertible Series A, 2,760 and 2,760 issued
    and outstanding, respectively; aggregate
    preference in liquidation $69,000. . . . . . . . . . . .          65,805               65,805
  Common stock: par value $.01 per share;
    47,240 shares authorized, 21,990 and 21,990 shares
    issued and 21,490 and 21,490 outstanding, respectively .             220                  220
  Additional paid-in-capital . . . . . . . . . . . . . . . .         341,890              341,756
  Accumulated other comprehensive income (loss). . . . . . .         (63,442)             (82,148)
  Notes receivable from stock sales. . . . . . . . . . . . .          (4,632)              (4,632)
  Retained earnings (deficit). . . . . . . . . . . . . . . .          (6,105)              (4,512)
  Treasury stock: at cost, 500 and 500 shares, respectively.          (4,666)              (4,666)
                                                              ---------------  -------------------
                                                                     329,070              311,823
                                                              ---------------  -------------------

        $. . . . . . . . . . . . . . . . . . . . . . . . . .       4,554,369   $        4,344,633
                                                              ===============  ===================
</TABLE>

See  Notes  to  Consolidated  Financial  Statements.

                                        3
<PAGE>
<TABLE>
<CAPTION>
THORNBURG  MORTGAGE  ASSET  CORPORATION

STATEMENTS  OF  OPERATIONS
 (Amounts  in  thousands,  except  per  share  data)

                                              Three Months Ended      Six Months Ended
                                                    June 30,              June 30,
                                                 1999      1998       1999       1998
                                              ---------  --------  ----------  ---------
<S>                                           <C>        <C>       <C>         <C>
Interest income from ARM assets and cash . .  $ 63,087   $73,019   $ 122,732   $149,335
Interest expense on borrowed funds . . . . .   (54,015)  (65,243)   (107,094)  (130,132)
                                              ---------  --------  ----------  ---------
  Net interest income. . . . . . . . . . . .     9,072     7,776      15,638     19,203
                                              ---------  --------  ----------  ---------

Gain on sale of ARM assets . . . . . . . . .        35     1,497          35      3,025
Provision for credit losses. . . . . . . . .      (689)     (453)     (1,375)      (841)
Management fee (Note 7). . . . . . . . . . .    (1,020)   (1,048)     (2,038)    (2,075)
Performance fee (Note 7) . . . . . . . . . .         -         -           -       (759)
Other operating expenses . . . . . . . . . .      (364)     (297)       (627)      (581)
                                              ---------  --------  ----------  ---------

  NET INCOME . . . . . . . . . . . . . . . .  $  7,034   $ 7,475   $  11,633   $ 17,972
                                              =========  ========  ==========  =========


Net income . . . . . . . . . . . . . . . . .  $  7,034   $ 7,475   $  11,633   $ 17,972
Dividend on preferred stock. . . . . . . . .    (1,670)   (1,670)     (3,340)    (3,340)
                                              ---------  --------  ----------  ---------

Net income available to common shareholders.  $  5,364   $ 5,805   $   8,293   $ 14,632
                                              =========  ========  ==========  =========

Basic earnings per share . . . . . . . . . .  $   0.25   $  0.27   $    0.39   $   0.69
                                              =========  ========  ==========  =========

Diluted earnings per share . . . . . . . . .  $   0.25   $  0.27   $    0.39   $   0.69
                                              =========  ========  ==========  =========

Average number of common shares outstanding.    21,490    21,796      21,490     21,299
                                              =========  ========  ==========  =========
</TABLE>

See  Notes  to  Financial  Statements.

                                        4
<PAGE>
<TABLE>
<CAPTION>
THORNBURG MORTGAGE ASSET CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Six Months Ended June 30, 1999 and 1998
(In thousands, except share data)

                                                                  Accum.      Notes
                                                                   Other     Receiv-
                                                     Additional   Compre-   able From  Retained              Compre-
                                Preferred  Common     Paid-in     hensive     Stock    Earnings/  Treasury   hensive
                                 Stock      Stock     Capital     Income      Sales    (Deficit)   Stock     Income      Total
                                ---------  --------  ----------  ---------  ---------  ---------  --------  ---------  ----------
<S>                             <C>        <C>       <C>         <C>        <C>        <C>        <C>       <C>        <C>
Balance, December 31, 1997      $  65,805  $    203  $  315,240  $(19,445)  $  2,698)  $   (951)  $     -              $ 358,154
Comprehensive income:
   Net income                                                                            17,971             $ 17,971      17,971
   Other comprehensive income:
      Available-for-sale assets:
        Fair value adjustment,
       of amortization                  -         -           -   (10,875)         -          -         -    (10,875)    (10,875)
      Deferred gain on sale of
       hedges, net of                   -         -           -      (909)         -          -         -       (909)       (909)
                                                                                                            --------
   Other comprehensive income                                                                               $  6,187
Issuance of common                                                                                          ========
      stock  (Note 5)                            17      26,261               (1,934)                                     24,344
Dividends declared on preferred
   stock - $1.21 per share              -         -           -         -          -     (3,340)        -                 (3,340)
Dividends declared on common
   stock - $0.675 per share             -         -           -         -          -    (14,513)        -                (14,513)
                                ---------  --------  ----------  ---------  ---------  ---------  --------             ----------
Balance, June 30, 1998          $  65,805  $    220  $  341,501  $(31,229)  $ (4,632)  $   (833)  $     -              $ 370,832
                                =========  ========  ==========  =========  =========  =========  ========             ==========

Balance, December 31, 1998      $  65,805  $    220  $  341,756  $(82,148)  $ (4,632)  $ (4,512)  $(4,666)             $ 311,823

Comprehensive income:
   Net income                                                                            11,633             $ 11,633      11,633
   Other comprehensive income:
      Available-for-sale assets:
        Fair value adjustment,
       of amortization                  -         -           -    19,131          -          -         -     19,131      19,131
      Deferred gain on sale of
       hedges, net of                   -         -           -      (425)         -          -         -       (425)       (425)
                                                                                                            --------
   Other comprehensive income                                                                               $ 30,339
Interest from notes receivable                                                                              ========
     stock sales                                            134                                                              134
Dividends declared on preferred
   stock - $1.21 per share              -         -           -          -          -    (3,340)        -                 (3,340)
Dividends declared on common
   stock - $0.46 per share              -         -           -          -          -    (9,886)        -                 (9,886)
                                ---------  --------  ----------  ---------  ---------  ---------  --------             ----------
Balance, June 30, 1999          $  65,805  $    220  $  341,890  $(63,442)  $ (4,632)  $ (6,105)  $(4,666)             $ 329,070
                                =========  ========  ==========  =========  =========  =========  ========             ==========
</TABLE>

See Notes to Consolidated Financial Statements.

                                        5
<PAGE>
<TABLE>
<CAPTION>
THORNBURG  MORTGAGE  ASSET  CORPORATION

STATEMENTS  OF  CASH  FLOWS
(In  thousands)
                                                         Three Months Ended       Six Months Ended
                                                              June 30,                June 30,
                                                          1999        1998        1999         1998
                                                       ----------  ----------  ----------  ------------
<S>                                                    <C>         <C>         <C>         <C>
Operating Activities:
  Net Income. . . . . . . . . . . . . . . . . . . . .  $   7,034   $   7,475   $  11,633   $    17,972
  Adjustments to reconcile net income to
    net cash provided by operating activities:
  Amortization. . . . . . . . . . . . . . . . . . . .      8,976      13,054      19,772        23,161
  Net (gain) loss from investing activities . . . . .        654      (1,044)      1,340        (2,185)
  Change in assets and liabilities:
  Accrued interest receivable . . . . . . . . . . . .     (2,982)     (1,337)      5,089        (2,235)
  Receivable for assets sold. . . . . . . . . . . . .          -     (39,991)          -       (39,991)
  Prepaid expenses and other. . . . . . . . . . . . .     (2,081)        225      (5,601)       (2,157)
  Accrued interest payable. . . . . . . . . . . . . .      5,248      10,677     (14,898)      (10,945)
  Accrued expenses and other. . . . . . . . . . . . .        805         115         336           111
                                                       ----------  ----------  ----------  ------------
  Net cash provided by (used in) operating activities     17,654     (10,826)     17,671       (16,269)
                                                       ----------  ----------  ----------  ------------

Investing Activities:
  Available-for-sale ARM securities:
  Purchases . . . . . . . . . . . . . . . . . . . . .   (839,360)   (459,050)   (939,067)   (1,152,794)
  Proceeds on sales . . . . . . . . . . . . . . . . .      6,574     141,687       6,574       333,512
  Proceeds from calls . . . . . . . . . . . . . . . .      4,126      60,900       4,126       115,779
  Principal payments. . . . . . . . . . . . . . . . .    241,161     451,193     579,621       781,729
  Held-to-maturity ARM securities:
  Principal payments. . . . . . . . . . . . . . . . .          -           -           -        15,152
Collateral for collateralized notes:
  Principal payments. . . . . . . . . . . . . . . . .     62,515           -     135,773             -
  ARM Loans:
  Purchases . . . . . . . . . . . . . . . . . . . . .          -    (373,947)          -      (493,972)
  Principal payments. . . . . . . . . . . . . . . . .      1,476      21,429       6,568        32,663
  Sales . . . . . . . . . . . . . . . . . . . . . . .          -       2,043           -         2,043
  Purchase of interest rate cap agreements. . . . . .       (441)       (248)     (1,910)         (542)
                                                       ----------  ----------  ----------  ------------
  Net cash provided by (used in) investing activities   (523,949)   (155,993)   (208,315)     (365,430)
                                                       ----------  ----------  ----------  ------------

Financing Activities:
  Net borrowings from reverse repurchase agreements .    568,427     171,609     345,069       371,538
  Repayments of collateralized notes. . . . . . . . .    (62,581)     (1,353)   (137,333)       (2,210)
  Repayments of other borrowings. . . . . . . . . . .       (602)     (1,353)       (685)       (2,210)
  Proceeds from common stock issued . . . . . . . . .          -       8,054           -        24,344
  Dividends paid. . . . . . . . . . . . . . . . . . .     (6,613)     (9,641)    (13,226)      (21,397)
  Interest from notes receivable from stock sales . .         68           -         134             -
                                                       ----------  ----------  ----------  ------------
  Net cash provided by (used in) financing activities    498,699     168,669     193,959       372,275
                                                       ----------  ----------  ----------  ------------

Net increase (decrease) in cash and cash equivalents.     (7,596)      1,850       3,315        (9,424)

Cash and cash equivalents at beginning of period. . .     47,342       2,506      36,431        13,780
                                                       ----------  ----------  ----------  ------------
Cash and cash equivalents at end of period. . . . . .  $  39,746   $   4,356   $  39,746   $     4,356
                                                       ==========  ==========  ==========  ============
<FN>
Supplemental  disclosure  of  cash  flow  information
and  non-cash  activities  are  included  in  Note  3.
</TABLE>

See  Notes  to  Financial  Statements

                                        6
<PAGE>
NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS

NOTE  1.     SIGNIFICANT  ACCOUNTING  POLICIES

CASH  AND  CASH  EQUIVALENTS

Cash  and  cash  equivalents includes cash on hand and highly liquid investments
with  original  maturities of three months or less.  The carrying amount of cash
equivalents  approximates  their  value.

BASIS  OF  PRESENTATION

The  consolidated  financial  statements include the accounts of the Company and
its  wholly  owned  special  purpose  finance  subsidiaries,  Thornburg Mortgage
Funding  Corporation and Thornburg Mortgage Acceptance Corporation.  The Company
formed  these  entities  in  connection  with  the  issuance  of  the  callable
collateralized  notes  discussed  in Note 3.  All material intercompany accounts
and  transactions  are  eliminated  in  consolidation.

ADJUSTABLE-RATE  MORTGAGE  ASSETS

     The  Company's adjustable-rate mortgage ("ARM") assets are comprised of ARM
securities,  ARM loans and collateral for AAA notes payable, which also consists
of  ARM  securities  and  ARM  loans.  Included  in the Company's ARM assets are
hybrid  ARM securities and loans ("Hybrid ARMs") that have a fixed interest rate
for  an  initial  period,  generally  three to ten years, and then convert to an
adjustable-rate  for  their  remaining  term  to  maturity.

Management  has  made the determination that all of its ARM securities should be
designated as available-for-sale in order to be prepared to respond to potential
future  opportunities in the market, to sell ARM securities in order to optimize
the  portfolio's  total  return and to retain its ability to respond to economic
conditions that might require the Company to sell assets in order to maintain an
appropriate  level  of  liquidity.  Since  all  ARM securities are designated as
available-for-sale,  they  are reported at fair value, with unrealized gains and
losses  excluded  from  earnings and reported in accumulated other comprehensive
income  as  a  separate  component  of  shareholders'  equity.

Management  has  the  intent and ability to hold the Company's ARM loans for the
foreseeable future and until maturity or payoff.  Therefore, they are carried at
their  unpaid  principal  balances,  net  of unamortized premium or discount and
allowance  for  loan  losses.

The collateral for the AAA notes includes ARM securities and ARM loans which are
accounted  for  in  the same manner as the ARM securities and ARM loans that are
not  held  as  collateral.

Premiums  and  discounts  associated  with  the  purchase  of the ARM assets are
amortized  into interest income over the lives of the assets using the effective
yield  method  adjusted  for  the  effects  of  estimated  prepayments.

ARM  asset transactions are recorded on the date the ARM assets are purchased or
sold.  Purchases of new issue ARM securities and all ARM loans are recorded when
all  significant  uncertainties  regarding the characteristics of the assets are
removed  and,  in  the  case  of  loans,  underwriting  due  diligence  has been
completed,  generally  shortly  before  the settlement date.  Realized gains and
losses  on  ARM asset transactions are determined on the specific identification
basis.

CREDIT  RISK

The  Company  limits  its  exposure  to  credit  losses  on its portfolio of ARM
securities  by  only  purchasing  ARM  securities  that have an investment grade
rating  at  the time of purchase and have some form of credit enhancement or are

                                        7
<PAGE>
guaranteed by an agency of the federal government.  An investment grade security
generally  has  a security rating of BBB or Baa or better by at least one of two
nationally  recognized  rating  agencies,  Moody's  Investor  Services,  Inc. or
Standard  & Poor's, Inc. (the "Rating Agencies").  Additionally, the Company has
also purchased ARM loans and limits its exposure to credit losses by restricting
its  whole  loan  purchases  to  ARM  loans  generally originated to "A" quality
underwriting  standards  or  loans  that have at least five years of pay history
and/or  low  loan  to  property  value  ratios.  The  Company further limits its
exposure  to  credit  losses  by  limiting  its  investment  in investment grade
securities  that  are  rated  A, or equivalent, BBB, or equivalent, or ARM loans
originated  to  "A"  quality  underwriting standards ("Other Investments") to no
more than 30% of the portfolio, including the subordinate securities retained as
part  of  the  Company's  securitization  of  loans  into  AAA  securities.

The  Company  monitors  the  delinquencies and losses on the underlying mortgage
loans  backing  its  ARM  assets.  If  the  credit performance of the underlying
mortgage  loans  is  not as expected, the Company makes a provision for possible
credit  losses  at a level deemed appropriate by management to provide for known
losses  as  well  as  unidentified  losses  in  its  ARM  assets portfolio.  The
provision  is based on management's assessment of numerous factors affecting its
portfolio  of  ARM  assets  including,  but  not  limited  to,  current economic
conditions,  delinquency  status,  credit losses to date on underlying mortgages
and  remaining  credit  protection.  The provision for ARM securities is made by
reducing the cost basis of the individual security for the decline in fair value
which  is other than temporary, and the amount of such write-down is recorded as
a  realized  loss,  thereby reducing earnings.  The Company also makes a monthly
provision  for  possible credit losses on its portfolio of ARM loans which is an
increase  to  the  reserve for possible loan losses.  The provision for possible
credit  losses  on loans is based on loss statistics of the real estate industry
for  similar loans, taking into consideration factors including, but not limited
to,  underwriting  characteristics,  seasoning,  geographic location and current
economic  conditions.  When  a  loan  or  a  portion  of  a loan is deemed to be
uncollectible,  the  portion  deemed  to be uncollectible is charged against the
reserve  and  subsequent  recoveries,  if  any,  are  credited  to  the reserve.

Credit  losses  on  pools  of  loans  that  are held as collateral for AAA notes
payable  are  also  covered  by  third party insurance policies that protect the
Company  from  credit  losses  above  a  specified level, limiting the Company's
exposure  to credit losses on such loans.  The Company makes a monthly provision
for possible credit losses on these loans the same as it does for loans that are
not  held  as  collateral  for  AAA  notes  payable,  except,  it  takes  into
consideration  its  maximum  exposure.

Provisions for credit losses do not reduce taxable income and thus do not affect
the  dividends  paid by the Company to shareholders in the period the provisions
are  taken.  Actual  losses  realized by the Company do reduce taxable income in
the  period  the  actual loss is realized and would affect the dividends paid to
shareholders  for  that  tax  year.

DERIVATIVE  FINANCIAL  INSTRUMENTS

INTEREST  RATE  CAP  AGREEMENTS

The  Company  purchases  interest  rate cap agreements (the "Cap Agreements") to
manage  interest rate risk.  To date, most of the Cap Agreements purchased limit
the  Company's  risks associated with the lifetime or maximum interest rate caps
of  its  ARM  assets should interest rates rise above specified levels.  The Cap
Agreements  reduce  the  effect of the lifetime cap feature so that the yield on
the  ARM  assets will continue to rise in high interest rate environments as the
Company's  cost  of  borrowings  also continue to rise.  In similar fashion, the
Company  has  purchased Cap Agreements to limit the financing rate of the Hybrid
ARMs  during  their  fixed  rate  term,  generally  for  three to ten years.  In
general,  the cost of financing Hybrid ARMs hedged with Cap Agreements is capped
at  a  rate  that  is  0.75%  to 1.00% below the fixed Hybrid ARM interest rate.

All  Cap  Agreements are classified as a hedge against available-for-sale assets
or  ARM  loans  and  are  carried  at their fair value with unrealized gains and
losses  reported  as  a separate component of equity.  The carrying value of the
Cap  Agreements is included in ARM securities on the balance sheet.  The Company
purchases  Cap  Agreements  by  incurring  a  one-time  fee  or  premium.  The
amortization  of the premium paid for the Cap Agreements is included in interest
income  as  a  contra item (i.e., expense) and, as such, reduces interest income
over  the  lives  of  the  Cap  Agreements.

                                        8
<PAGE>
Realized  gains  and losses resulting from the termination of the Cap Agreements
that  were  hedging  assets  classified  as held-to-maturity were deferred as an
adjustment  to  the carrying value of the related assets and are being amortized
into  interest  income over the terms of the related assets.  Realized gains and
losses  resulting  from  the  termination  of  such agreements that were hedging
assets  classified  as  available-for-sale were initially reported in a separate
component  of  equity,  consistent  with  the reporting of those assets, and are
thereafter  amortized  as  a  yield  adjustment.

INTEREST  RATE  SWAP  AGREEMENTS

The  Company  enters  into  interest rate swap agreements in order to manage its
interest  rate  exposure  when  financing  its  ARM  assets.  In  general,  swap
agreements  have  been utilized by the Company in two ways.  One way has been to
use  swap  agreements  as a cost effective way to lengthen the average repricing
period  of  its  variable  rate and short term borrowings.  Additionally, as the
Company  acquires  Hybrid  ARMs, it also enters into swap agreements in order to
manage  the  interest  rate  repricing  mismatch  (the  difference  between  the
remaining  fixed-rate  period  of  a  hybrid  and  the maturity of the borrowing
funding  a Hybrid ARM) to approximately one year or less.  Revenues and expenses
from the interest rate swap agreements are accounted for on an accrual basis and
recognized  as  a  net  adjustment  to  interest  expense.

All  Swap  Agreements  are classified as a liability hedge against the Company's
borrowings.  As a result, the unrealized gains and losses on Swap Agreements are
off  balance  sheet  and  are  reported  in  the  Company's  Notes  to Financial
Statements.

OTHER  HEDGING  ACTIVITY

The  Company  also  enters  into  hedging  transactions  in  connection with the
purchase  of  Hybrid  ARMs  between  the trade date and the settlement date.  In
doing  so,  the Company hedges the cost of obtaining fixed rate financing, which
is  obtained and priced at the time of the purchase of the Hybrid ARM, such that
the  cost of the fixed rate financing closely approximates the cost available to
the Company at the time the Company committed to the purchase of the Hybrid ARM.
The  Company  generally  does this by entering into a commitment to sell similar
duration  fixed-rate  FNMA  mortgage-backed securities ("MBS") on the trade date
and  settles  the  commitment  by purchasing the same fixed-rate FNMA MBS on the
purchase  date.  Realized gains and losses are deferred and amortized as a yield
adjustment  over  the  fixed  rate  period  of  the  financing.

INCOME  TAXES

The  Company  has elected to be taxed as a Real Estate Investment Trust ("REIT")
and  complies  with  the  provisions  of  the  Internal Revenue Code of 1986, as
amended (the "Code") with respect thereto.  Accordingly, the Company will not be
subject  to Federal income tax on that portion of its income that is distributed
to  shareholders  and as long as certain asset, income and stock ownership tests
are  met.

NET  EARNINGS  PER  SHARE

Basic  EPS  amounts  are computed by dividing net income (adjusted for dividends
declared  on  preferred  stock)  by the weighted average number of common shares
outstanding.  Diluted EPS amounts assume the conversion, exercise or issuance of
all  potential common stock instruments unless the effect is to reduce a loss or
increase  the  earnings  per  common  share.

                                        9
<PAGE>
Following  is  information  about the computation of the earnings per share data
for  the  three  and  six month periods ended June 30, 1999 and 1998 (amounts in
thousands  except  per  share  data):

<TABLE>
<CAPTION>
                                                         Earnings
                                    Income     Shares    Per Share
                                  ----------  ---------  ----------
<S>                               <C>         <C>        <C>

Three Months Ended June 30, 1999
--------------------------------
Net income . . . . . . . . . . .  $   7,034

Less preferred stock dividends .     (1,670)
                                  ----------
Basic EPS, income available to
 common shareholders . . . . . .      5,364      21,490  $     0.25
                                                         ==========
Effect of dilutive securities:

 Stock options . . . . . . . . .          -           7
                                  ----------  ---------
Diluted EPS. . . . . . . . . . .  $   5,364      21,497  $     0.25
                                  ==========  =========  ==========

Three Months Ended June 30, 1998
--------------------------------
Net income . . . . . . . . . . .  $   7,475

Less preferred stock dividends .     (1,670)
                                  ----------
Basic EPS, income available to
 common stockholders . . . . . .      5,805      21,796  $     0.27
                                                         ==========
Effect of dilutive securities:

 Stock options . . . . . . . . .          -           -
                                  ----------  ---------
Diluted EPS. . . . . . . . . . .  $   5,805      21,796  $     0.27
                                  ==========  =========  ==========
</TABLE>

<TABLE>
<CAPTION>
                                                         Earnings
                                    Income     Shares    Per Share
                                  ----------  ---------  ----------
<S>                               <C>         <C>        <C>

Six Months Ended June 30, 1999
--------------------------------
Net income . . . . . . . . . . .  $  11,633

Less preferred stock dividends .     (3,340)
                                  ----------
Basic EPS, income available to
 common shareholders . . . . . .      8,293      21,490  $     0.39
                                                         ==========
Effect of dilutive securities:

 Stock options . . . . . . . . .          -           2
                                  ----------  ---------
Diluted EPS. . . . . . . . . . .  $   8,293      21,492  $     0.39
                                  ==========  =========  ==========
Six Months Ended June 30, 1998
--------------------------------
Net income . . . . . . . . . . .  $  17,972

Less preferred stock dividends .     (3,340)
                                  ----------
Basic EPS, income available to
 common stockholders . . . . . .     14,632      21,299  $     0.69
                                                         ==========
Effect of dilutive securities:

 Stock options . . . . . . . . .          -           3
                                  ----------  ---------
Diluted EPS. . . . . . . . . . .  $  14,632      21,302  $     0.69
                                  ==========  =========  ==========
</TABLE>

The  Company  has  granted  options to directors and officers of the Company and
employees  of  the Manager to purchase 141,779 and 42,784 shares of common stock
at  average  prices  of $9.0625 and $15.99 per share during the six months ended
June 30, 1999 and 1998, respectively.  The conversion of preferred stock was not
included  in  the  computation  of  diluted  EPS  because  such conversion would
increase  the  diluted  EPS.

                                       10
<PAGE>
USE  OF  ESTIMATES

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

NOTE  2.  ADJUSTABLE-RATE  MORTGAGE  ASSETS  AND  INTEREST  RATE  CAP AGREEMENTS

The  following  tables present the Company's ARM assets as of March 31, 1999 and
December  31,  1998.  The  ARM  securities  classified as available-for-sale are
carried  at their fair value, while the ARM loans are carried at their amortized
cost  basis  (dollar  amounts  in  thousands):

<TABLE>
<CAPTION>
June 30, 1999:
                                  Available-
                                   for-Sale       Collateral for
                                ARM Securities    Notes Payable     ARM Loans      Total
                               ----------------  ----------------  -----------  -----------
<S>                            <C>               <C>               <C>          <C>
Principal balance outstanding  $     3,405,554   $       995,041   $   12,173   $4,412,768
Net unamortized premium . . .           81,137            15,071          103       96,311
Deferred gain from hedging. .             (450)                -            -         (450)
Allowance for losses. . . . .           (1,356)           (1,479)         (89)      (2,924)
Cap agreements. . . . . . . .            7,516               380            -        7,896
Principal payment receivable.           25,063               193            -       25,256
                               ----------------  ----------------  -----------  -----------
  Amortized cost, net . . . .        3,517,464         1,009,206       12,187    4,538,857
                               ----------------  ----------------  -----------  -----------
Gross unrealized gains. . . .            7,750                31           83        7,864
Gross unrealized losses . . .          (72,281)           (7,176)          (1)     (79,458)
                               ----------------  ----------------  -----------  -----------
  Fair value. . . . . . . . .  $     3,452,933   $     1,002,061   $   12,269   $4,467,263
                               ================  ================  ===========  ===========
  Carrying value. . . . . . .  $     3,452,933   $     1,009,206   $   12,187   $4,474,326
                               ================  ================  ===========  ===========
</TABLE>

<TABLE>
<CAPTION>
December 31, 1998:
                                  Available-
                                   for-Sale       Collateral for
                                ARM Securities    Notes Payable     ARM Loans      Total
                               ----------------  ----------------  -----------  -----------
<S>                            <C>               <C>               <C>          <C>
Principal balance outstanding  $     3,070,107   $     1,131,007   $   26,161   $4,227,275
Net unamortized premium . . .           86,956            17,112          324      104,392
Deferred gain from hedging. .             (613)                -            -         (613)
Allowance for losses. . . . .           (1,242)             (729)         (75)      (2,046)
Cap agreements. . . . . . . .            8,302               440            -        8,742
Principal payment receivable.           14,330                 -            -       14,330
                               ----------------  ----------------  -----------  -----------
  Amortized cost, net . . . .        3,177,840         1,147,830       26,410    4,352,080
                               ----------------  ----------------  -----------  -----------
Gross unrealized gains. . . .            1,070                38           53        1,161
Gross unrealized losses . . .          (84,253)           (7,606)         (87)     (91,946)
                               ----------------  ----------------  -----------  -----------
  Fair value. . . . . . . . .  $     3,094,657   $     1,140,262   $   26,376   $4,261,295
                               ================  ================  ===========  ===========
  Carrying value. . . . . . .  $     3,094,657   $     1,147,350   $   26,410   $4,268,417
                               ================  ================  ===========  ===========
</TABLE>

During the quarter ended June 30, 1999, the Company realized $35,000 in gains on
the sale of $6.5 million of ARM securities.  During the same period of 1998, the
Company  realized  $1,712,000  in  gains  and  $215,000 in losses on the sale of
$142.2  million  of  ARM  securities.  All  of  the  ARM  securities  sold  were
classified  as  available-for-sale.

Since  the Company did not sell any ARM assets in the first quarter of 1999, the
gains realized during the six months ended June 30, 1998 are the same as for the
three  month  period.  During  the  same  six  month period of 1998, the Company
realized  $3,498,000  in  gains  and  $473,000  in  losses on the sale of $332.5
million  of  ARM  securities.  All of the ARM securities sold were classified as
available-for-sale.

                                       11
<PAGE>
As  of  June  30,  1999,  the  Company  had  reduced  the  cost basis of its ARM
securities  due to potential future credit losses (other than temporary declines
in  fair  value)  in the amount of $1,356,000.  At June 30, 1999, the Company is
providing  for  potential  future  credit  losses  on  two  assets  that have an
aggregate carrying value of $10.7 million, which represent less than 0.2% of the
Company's  total  portfolio  of ARM assets.  Both of these assets are performing
and  one has some remaining credit support that mitigates the Company's exposure
to potential future credit losses.  Additionally, during the first six months of
1999,  the  Company, in accordance with its credit policies, recorded a $764,000
provision  for potential credit losses on its loan portfolio, although no actual
losses  have  been  realized  in  the  loan  portfolio  to  date.

The  following  tables summarize ARM loan delinquency information as of June 30,
1999  and  December  31,  1998  (dollar  amounts  in  thousands):

<TABLE>
<CAPTION>
  June 30, 1999
------------------
                      Loan     Loan   Percent of   Percent of
Delinquency Status    Count  Balance  ARM Loans   Total Assets
                     ------  -------  ----------  ------------
<S>                  <C>     <C>      <C>         <C>
  30 to 59 days . .       2  $ 1,885       0.16%         0.04%
  60 to 89 days . .       2      765       0.06          0.02
  90 days or more .       3    4,802       0.40          0.10
  In foreclosure. .       4      821       0.07          0.02
  Real estate owned       1       55       0.00          0.00
                     ------  -------  ----------  ------------
                         12  $ 8,328       0.69%         0.18%
                     ======  =======  ==========  ============
</TABLE>

<TABLE>
<CAPTION>
December 31, 1998
------------------
                      Loan     Loan   Percent of   Percent of
Delinquency Status    Count  Balance  ARM Loans   Total Assets
                     ------  -------  ----------  ------------
<S>                  <C>     <C>      <C>         <C>
  30 to 59 days .         4  $ 1,138       0.11%         0.03%
  60 to 89 days .         2      423       0.04          0.01
  90 days or more         1    3,450       0.32          0.08
  In foreclosure.         5    1,097       0.10          0.02
                     ------  -------  ----------  ------------
                         12  $ 6,108       0.57%         0.14%
                     ======  =======  ==========  ============
</TABLE>

The  following table summarizes the activity for the allowance for losses on ARM
loans  for  the  quarters  ended June  30,  1999  and  1998  (dollar  amounts in
thousands):

<TABLE>
<CAPTION>
                       1999   1998
                      ------  -----
<S>                   <C>     <C>
Beginning balance. .  $  804  $  42
Provision for losses     764    195
Charge-offs, net . .       -      -
                      ------  -----
Ending balance . . .  $1,568  $ 237
                      ======  =====
</TABLE>

As  of  June 30, 1999, the Company had commitments to purchase $176.3 million of
ARM  securities,  $103.8  million  of  which  are  ARM  loans  which  are  being
securitized  as  part  of  the  purchase agreement.  In addition the Company had
commitments  to  purchase  $10.3 million of loans through its correspondent loan
program  which  commenced  operations  on  May  15,  1999.

The  average effective yield on the ARM assets owned, including the amortization
of  the net premium paid for the ARM assets and the Cap Agreements, was 5.74% as
of  June  30,  1999  and  5.86%  as  of  December  31,  1998.

As  of  June  30,  1999  and  December  31,  1998, the Company had purchased Cap
Agreements  with  a  remaining  notional  amount  of  $3.425  billion and $4.026
billion,  respectively.  The  notional  amount  of  the Cap Agreements purchased
decline  at  a  rate that is expected to approximate the amortization of the ARM
assets.  Under  these  Cap  Agreements,  the  Company will receive cash payments
should  the  one-month,  three-month  or  six-month  London InterBank Offer Rate
("LIBOR")  increase  above  the contract rates of the Cap Agreements which range
from  5.75%  to  13.00%  and average approximately 9.74%.  Of the Cap Agreements
owned  by  the Company as of June 30, 1999, $154 million are hedging the cost of

                                       12
<PAGE>
financing  Hybrid ARMs and $3.425 billion are hedging the lifetime interest rate
cap  of  ARM assets.  The Company's ARM assets portfolio had an average lifetime
interest  rate cap of 11.71%.  The Cap Agreements had an average maturity of 2.2
years  as  of  June  30, 1999.  The initial aggregate notional amount of the Cap
Agreements  declines  to  approximately  $3.100  billion  over the period of the
agreements,  which expire between 1999 and 2004.  The Company has credit risk to
the  extent  that  the counterparties to the cap agreements do not perform their
obligations  under  the  Cap  Agreements.  If one of the counterparties does not
perform,  the  Company would not receive the cash to which it would otherwise be
entitled  under  the conditions of the Cap Agreement.  In order to mitigate this
risk  and  to  achieve  competitive  pricing,  the  Company has entered into Cap
Agreements  with  six different counterparties, five of which are rated AAA, and
one  is  rated  AA.

NOTE  3.  REVERSE REPURCHASE AGREEMENTS, COLLATERALIZED NOTES PAYABLE  AND OTHER
BORROWINGS

The  Company  has  entered into reverse repurchase agreements to finance most of
its  ARM  assets.  The  reverse  repurchase agreements are short-term borrowings
that  are  secured  by  the  market  value  of the Company's ARM assets and bear
interest  rates  that  have  historically  moved in close relationship to LIBOR.

As  of  June  30,  1999,  the  Company had outstanding $3.212 billion of reverse
repurchase  agreements  with  a  weighted  average borrowing rate of 5.15% and a
weighted  average remaining maturity of 3.8 months.  As of June 30, 1999, $1.757
billion  of  the Company's borrowings were variable-rate term reverse repurchase
agreements  with  original  maturities  that range from three months to fourteen
months.  The  interest  rates  of  these  term reverse repurchase agreements are
indexed  to  either  the one- or three-month LIBOR rate and reprice accordingly.
The  reverse  repurchase  agreements at June 30, 1999 were collateralized by ARM
assets  with  a  carrying  value  of $3.375 billion, including accrued interest.

At  June 30, 1999, the reverse repurchase agreements had the following remaining
maturities  (dollar  amounts  in  thousands):

<TABLE>
<CAPTION>
<S>                 <C>
Within 30 days . .  $1,622,964
31 to 89 days. . .     230,381
90 days or greater   1,358,931
                    ----------
                    $3,212,276
                    ==========
</TABLE>

As  of  June  30, 1999, the Company had one whole loan financing facility with a
committed  borrowing  capacity  of $150 million, with an option to increase this
amount  to  $300 million.  This facility matures on January 8, 2000.  During the
second  quarter  of  1999,  the  Company  entered into two additional whole loan
financing  facilities.  One  with an uncommitted amount of borrowing capacity of
$300  million  and  one  with  an  unspecified  amount  of uncommitted borrowing
capacity.  As  of June 30, 1999, the Company has no balance borrowed against any
of  these  whole  loan  financing  facilities.

On December 18, 1998, the Company, through a special purpose finance subsidiary,
issued  $1.144  billion  of  callable  AAA notes ("Notes") collateralized by ARM
loans  and  ARM  securities.  As  part of this transaction, the Company retained
ownership  of  a  subordinated certificate in the amount of $32.4 million, which
represents  the  Company's  maximum  exposure  to  credit  losses  on  the loans
collateralizing  the  Notes.  These  Notes  were issued with call features which
provided  the  Company with the ability to re-issue the debt at better financing
terms when and if the market for mortgage-backed debt improved.  Effective March
25,  1999, the Company negotiated a modification of these Notes that reduced the
interest  rate  on  the Notes from one-month LIBOR plus 0.70% to one-month LIBOR
plus  0.38%.  The  modification  also  eliminated  the  scheduled step-up in the
interest rate that was to take effect after November 1999.  As of June 30, 1999,
the  Notes  had  a  net balance of $989.8 million, an effective interest cost of
5.67%  and  were  collateralized by ARM loans with a principal balance of $901.9
million  and  ARM securities with a balance of $125.5 million.  The Notes mature
on  January  25, 2029 and are callable by the Company at par once the balance of
the  Notes  is reduced to 25% of their original balance.  In connection with the
issuance  and  modification  of  the  Notes,  the  Company  incurred  costs  of
approximately  $6.0  million  which is being amortized over the expected life of
the  Notes.  Since  the  Notes  are  paid  down as the collateral pays down, the
amortization  of the issuance cost will be adjusted periodically based on actual
payment  experience.  If  the  collateral  pays  down  faster  than  currently
estimated,  then  the  amortization  of  the issuance cost will increase and the
effective  cost  of  the  Notes will increase and, conversely, if the collateral
pays  down  slower  than  currently estimated, then the amortization of issuance
cost  will  be decreased and the effective cost of the Notes will also decrease.

                                       13
<PAGE>
As  of  June 30, 1999, the Company was a counterparty to seventeen interest rate
swap  agreements  ("Swaps")  having  an  aggregate  notional  balance  of $733.7
million.  As of June 30, 1999, these Swaps had a weighted average remaining term
of 3.4 years.  In accordance with these Swaps, the Company will pay a fixed rate
of  interest  during  the  term of these Swaps and receive a payment that varies
monthly with the one-month LIBOR rate.  As a result of entering into these Swaps
and the Cap Agreements that also hedge the fixed rate period of Hybrid ARMs, the
Company has reduced the interest rate variability of its cost to finance its ARM
assets  by  increasing  the  average  period  until  the  next  repricing of its
borrowings  from  22  days to 283 days.  All of these Swaps were entered into in
connection  with  the  Company's  acquisition  of Hybrid ARMs and commitments to
acquire  Hybrid  ARMs.  The Swaps hedge the cost of financing Hybrid ARMs during
their fixed rate term, generally three to ten years.  The Swaps at June 30, 1999
were  collateralized  by  ARM  assets  with  a  carrying  value of $0.9 million,
including  accrued  interest.

As  of  June  30,  1999,  the Company had financed a portion of its portfolio of
interest rate cap agreements with $1.3 million of other borrowings which require
quarterly  or semi-annual payments until the year 2000.  These borrowings have a
weighted  average  fixed  rate  of interest of 7.87% and have a weighted average
remaining  maturity  of  10.8  months.  The  other  borrowings  financing  cap
agreements  at  June  30,  1999  were  collateralized  by  ARM securities with a
carrying  value  of  $2.6  million,  including  accrued interest.  The aggregate
maturities  of  these  other  borrowings  are as follows (dollars in thousands):

          1999 $   712
          2000     632
               -------
               $ 1,344
               =======

The total cash paid for interest was $48.2 million during the quarter ended June
30,  1999.

NOTE  4.  FAIR  VALUE  OF  FINANCIAL  INSTRUMENTS

The  following  table presents the carrying amounts and estimated fair values of
the  Company's  financial  instruments  at  June 30, 1999 and December 31, 1998.
FASB  Statement  No. 107, Disclosures About Fair Value of Financial Instruments,
defines  the  fair  value  of  a financial instrument as the amount at which the
instrument  could be exchanged in a current transaction between willing parties,
other  than  in  a  forced  or  liquidation  sale (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                     June 30, 1999          December 31, 1998
                                -----------------------  -----------------------
                                 Carrying      Fair       Carrying       Fair
                                  Amount       Value       Amount       Value
                                ----------  -----------  -----------  ----------
<S>                             <C>         <C>          <C>          <C>
Assets:
 ARM assets. . . . . . . . . .  $4,468,436  $4,461,373   $4,266,497   $4,259,374
 Cap Agreements. . . . . . . .       5,890       5,890        1,920        1,920

Liabilities:
 Callable collateralized notes     989,848     989,848    1,127,181    1,127,181
 Other borrowings. . . . . . .       1,344       1,369        2,029        2,077
 Swap agreements . . . . . . .       1,454      (4,525)         (87)       7,326
</TABLE>

The  above  carrying  amounts for assets are combined in the balance sheet under
the  caption  adjustable-rate  mortgage  assets.  The carrying amount for assets
categorized  as  available-for-sale  is  their  fair  value whereas the carrying
amount  for  assets  held  for  the  foreseeable future is their amortized cost.

The  fair values of the Company's ARM securities and cap agreements are based on
market  prices  provided  by certain dealers who make markets in these financial
instruments  or third-party pricing services.  The fair values for ARM loans are
determined  by  the  Company  by  using  the same pricing models employed by the
Company  in  the  process  of  determining  a price to bid for loans in the open
market,  taking  into  consideration  the aggregate characteristics of groups of
loans  such  as,  but  not limited to, collateral type, index, margin, life cap,

                                       14
<PAGE>
periodic  cap, underwriting standards, age and delinquency experience.  The fair
value  of  the Company's long-term debt and interest rate swap agreements, which
are off-balance sheet financial instruments, are based on market values provided
by  dealers  who  are  familiar  with  the  terms of the long-term debt and swap
agreements.  The  fair values reported reflect estimates and may not necessarily
be  indicative  of  the  amounts  the  Company could realize in a current market
exchange.  Cash  and  cash  equivalents, interest receivable, reverse repurchase
agreements, callable collateralized notes and other liabilities are reflected in
the  financial statements at their amortized cost, which approximates their fair
value  because  of  the  short-term  nature  of  these  instruments.

NOTE  5.  COMMON  AND  PREFERRED  STOCK

On  July  13,  1998,  the  Board of Directors approved a common stock repurchase
program  of  up  to  500,000  shares  at  prices  below  book  value, subject to
availability of shares and other market conditions.   On September 18, 1998, the
Board of Directors expanded this program by approving the repurchase of up to an
additional  500,000  shares.  The  Company  did not repurchase any shares of its
common stock under this program during the three or six month periods ended June
30,  1999.  To  date, the company has repurchased 500,016 at an average price of
$9.28  per  share.

On  January  21, 1999, the Company declared a dividend of $0.23 per common share
which  was  paid  on  February  18,  1999 to common shareholders of record as of
January  29,  1999.

On  March  17, 1999, the Company declared a first quarter dividend of $0.605 per
share to the shareholders of the Series A 9.68% Cumulative Convertible Preferred
Stock which was paid on April 12, 1999 to preferred shareholders of record as of
March  31,  1999.

On  April  15, 1999, the Company declared a first quarter 1999 dividend of $0.23
per common share which was paid on May 18, 1999 to common shareholders of record
as  of  April  30,  1999.

On  June  15, 1999, the Company declared a second quarter dividend of $0.605 per
share to the shareholders of the Series A 9.68% Cumulative Convertible Preferred
Stock  which was paid on July 12, 1999 to preferred shareholders of record as of
June  30,  1999.

On  July  15, 1999, the Company declared a second quarter 1999 dividend of $0.23
per common share which will be paid on August 18, 1999 to common shareholders of
record  as  of  July  30,  1999.

For  federal  income  tax  purposes,  all  dividends are expected to be ordinary
income  to  the Company's common and preferred shareholders, subject to year-end
allocations  of the common dividend between ordinary income, capital gain income
and  non-taxable  income  as  return  of  capital,  depending  on the amount and
character  of  the  Company's  full  year  taxable  income.

NOTE  6.  STOCK  OPTION  PLAN

The  Company has a Stock Option and Incentive Plan (the "Plan") which authorizes
the  granting of options to purchase an aggregate of up to 1,800,000 shares, but
not  more  than 5% of the outstanding shares of the Company's common stock.  The
Plan  authorizes  the  Board  of  Directors,  or  a  committee  of  the Board of
Directors,  to  grant  Incentive Stock Options ("ISOs") as defined under section
422  of  the  Internal  Revenue  Code  of  1986, as amended, non-qualified stock
options  ("NQSOs"),  Dividend  Equivalent  Rights  ("DERs"),  Stock Appreciation
Rights  ("SARs"),  and  Phantom  Stock  Rights  ("PSRs").

The  exercise  price for any options granted under the Plan may not be less than
100%  of the fair market value of the shares of the common stock at the time the
option is granted.  Options become exercisable six months after the date granted
and  will  expire  ten  years  after the date granted, except options granted in
connection  with  an offering of convertible preferred stock, in which case such
options  become  exercisable  if  and  when  the  convertible preferred stock is
converted  into  common  stock.

                                       15
<PAGE>
The  Company issued DERs at the same time as ISOs and NQSOs based upon a formula
defined  in  the Plan.  During 1999 the number of DERs issued is based on 45% of
the  ISOs and NQSOs granted during 1999.  The number of PSRs issued are based on
the  level of the Company's dividends and on the price of the Company's stock on
the  related  dividend payment date and is equivalent to the cash that otherwise
would  be  paid  on  the  outstanding  DERs  and  previously  issued  PSRs.

During  the  six  month  period  ended June 30, 1999, there were 141,779 options
granted  to buy common shares at an average exercise price of $9.0625 along with
63,803  DERs.  As  of June 30, 1999, the Company had 754,181 options outstanding
at  exercise  prices  of  $9.0625  to  $22.625  per share, 496,482 of which were
exercisable.  The weighted average exercise price of the options outstanding was
$15.95  per share.  As of the June 30, 1999, there were 144,815 DERs granted, of
which  115,835  were  vested,  and 9,724 PSRs granted.  In addition, the Company
recorded an expense associated with the DERs and the PSRs of $28,000 and $46,000
for  the  three  and  six  month  periods  ended  June  30,  1999, respectively.

Notes  receivable  from  stock  sales  result from the Company selling shares of
common  stock  through the exercise of stock options partially for consideration
for  notes  receivable.  The notes have maturity terms ranging from 3 years to 9
years and accrue interest at rates that range from 5.40% to 6.00% per annum.  In
addition,  the  notes  are  full  recourse promissory notes and are secured by a
pledge  of the shares of the Common Stock acquired.  Interest, which is credited
to  paid-in-capital,  is payable quarterly, with the balance due at the maturity
of  the  notes.  The payment of the notes will be accelerated only upon the sale
of  the  shares of Common Stock pledged for the notes.  The notes may be prepaid
at  any  time  at  the option of each borrower.  As of June 30, 1999, there were
$4.6  million  of  notes  receivable  from  stock  sales  outstanding.

NOTE  7.  TRANSACTIONS  WITH  AFFILIATES

The Company has a Management Agreement (the "Agreement") with Thornburg Mortgage
Advisory  Corporation  ("the  Manager").  Under the terms of this Agreement, the
Manager,  subject  to  the  supervision  of the Company's Board of Directors, is
responsible  for  the management of the day-to-day operations of the Company and
provides  all  personnel and office space.  The Agreement provides for an annual
review  by the unaffiliated directors of the Board of Directors of the Manager's
performance  under  the  Agreement.

The  Company  pays  the  Manager  an annual base management fee based on average
shareholders'  equity, adjusted for liabilities that are not incurred to finance
assets  ("Average  Shareholders'  Equity"  or  "Average  Net Invested Assets" as
defined  in  the  Agreement)  payable monthly in arrears as follows: 1.1% of the
first  $300  million  of  Average  Shareholders'  Equity,  plus  0.8% of Average
Shareholders'  Equity  above  $300  million.

For  the  quarters  ended  June  30, 1999 and 1998, the Company paid the Manager
$1,020,000  and  $1,048,000, respectively, in base management fees in accordance
with  the terms of the Agreement.  For the six month periods ended June 30, 1999
and  1998,  the  Company paid the Manager base management fees of $2,038,000 and
$2,075,000,  respectively.

The Manager is also entitled to earn performance based compensation in an amount
equal  to  20%  of the Company's annualized net income, before performance based
compensation,  above  an  annualized Return on Equity equal to the ten year U.S.
Treasury  Rate plus 1%.  For purposes of the performance fee calculation, equity
is  generally  defined  as  proceeds  from  issuance  of  common  stock  before
underwriter's discount and other costs of issuance, plus retained earnings.  For
the  quarters  ended  June  30, 1999 and 1998 and for the six month period ended
June  30,  1999,  the  Company  did  not  pay  the Manager any performance based
compensation  because the Company's net income, as measured by Return on Equity,
did  not  exceed  the  ten  year  U.S. Treasury Rate plus 1%.  For the six month
period  ended  June  30,  1998, the Company paid the Manager an incentive fee of
$759,000.

                                       16
<PAGE>
ITEM  2.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION  AND
          RESULTS  OF  OPERATIONS

Certain  information  contained in this Quarterly Report on Form 10-Q constitute
"Forward-Looking Statements" within the meaning of Section 27A of the Securities
Act  of  1933,  as  amended,  and  Section 21E of the Exchange Act, which can be
identified  by  the  use  of  forward-looking terminology such as "may," "will,"
"expect,"  "anticipate,"  "estimate,"  or "continue" or the negatives thereof or
other  variations  thereon  or  comparable terminology.  Investors are cautioned
that  all  forward-looking statements involve risks and uncertainties including,
but  not  limited  to,  risks  related  to  the future level and relationship of
various  interest  rates,  prepayment rates and the timing of new programs.  The
statements  in the "Risk Factors" section of the Company's 1998 Annual Report on
Form  10-K  on  page  13  constitute cautionary statements identifying important
factors,  including  certain  risks  and  uncertainties,  with  respect  to such
forward-looking  statements  that could cause the actual results, performance or
achievements  of  the  Company to differ materially from those reflected in such
forward-looking  statements.

GENERAL
-------

Thornburg  Mortgage  Asset  Corporation  and  subsidiaries  (the "Company") is a
mortgage  acquisition company that primarily invests in adjustable-rate mortgage
("ARM")  assets  comprised  of  ARM securities and ARM loans, thereby indirectly
providing  capital  to  the  single  family  residential  housing  market.  ARM
securities  represent  interests  in  pools  of  ARM  loans, which often include
guarantees  or  other  credit  enhancements  against  losses from loan defaults.
While  the  Company  is  not  a  bank or savings and loan, its business purpose,
strategy, method of operation and risk profile are best understood in comparison
to  such  institutions.  The Company leverages its equity capital using borrowed
funds,  invests  in  ARM  assets  and  seeks  to  generate  income  based on the
difference  between  the  yield  on its ARM assets portfolio and the cost of its
borrowings.  The  corporate  structure  of the Company differs from most lending
institutions  in that the Company is organized for tax purposes as a real estate
investment  trust  ("REIT") and therefore generally passes through substantially
all  of  its earnings to shareholders without paying federal or state income tax
at  the corporate level.  During 1998, in connection with the Company's issuance
of  $1.1  billion  of  callable AAA notes, the Company formed two REIT qualified
subsidiaries.  These  subsidiaries  are  consolidated in the Company's financial
statements  and  federal  and  state  tax  returns.

In  1998, the Company began investing in hybrid ARM assets ("Hybrid ARMs") which
are  included  in  the  Company's  references  to  ARM securities and ARM loans.
Hybrid  ARMs have a fixed rate of interest for an initial period, generally 3 to
10  years, and then convert to an adjustable-rate for the balance of the term of
the Hybrid ARM.  On July 15, 1999, the Company's Board of Directors expanded the
Company's  investment policy to allow for the acquisition of Hybrid ARMs with an
initial  fixed  rate  period  of  up  to  ten  years.  Previously, the Company's
investment  policy  limited  the  acquisition of Hybrid ARMs to Hybrid ARMs with
initial  fixed  rate  periods  of five years or less.  To mitigate interest-rate
risk,  it  is  the  Company's policy to fund the Hybrid ARMs with long-term debt
obligations that mature within one year or less of the first interest rate reset
date  of  the  Hybrid  ARMs.

The  Company's  mortgage  assets  portfolio  may  consist  of  either  agency or
privately  issued  securities  (generally  publicly  registered)  mortgage
pass-through  securities,  multiclass  pass-through  securities,  collateralized
mortgage  obligations  ("CMOs"),  collateralized  bond  obligations  ("CBOs"),
generally  backed  by high quality mortgage backed securities, ARM loans, Hybrid
ARMs  or  short-term  investments  that either mature within one year or have an
interest  rate  that  reprices within one year.  The Company's investment policy
limits its investment in Hybrid ARMs to no more than 30% of its total investment
portfolio,  and  limits  its  interest  rate  repricing mismatch (the difference
between  the remaining fixed-rate period of a Hybrid ARM and the maturity of the
fixed-rate  liability  funding  a  Hybrid  ARM)  to  no more than one year.  The
Company's  investment  policy  further limits its investment in Hybrid ARMs that
have  a  fixed  rate period of seven years or greater to no more than 10% of its
portfolio.

The  Company's  investment  policy  is to invest at least 70% of total assets in
High  Quality  adjustable  and  variable rate mortgage securities and short-term
investments.  High  Quality  means:

(1)     securities that are unrated but are guaranteed by the U.S. Government or
issued  or  guaranteed  by  an  agency  of  the  U.S.  Government;
(2)     securities  which  are  rated  within  one  of  the  two  highest rating
categories  by  at  least  one  of either Standard & Poor's or Moody's Investors
Service,  Inc.  (the  "Rating  Agencies");  or

                                       17
<PAGE>
(3)     securities  that  are unrated or whose ratings have not been updated but
are  determined to be of comparable quality (by the rating standards of at least
one  of  the  Rating  Agencies)  to  a  High Quality rated mortgage security, as
determined by the Manager (as defined below) and approved by the Company's Board
of  Directors;  or
(4)     the  portion  of ARM or Hybrid ARM loans that have been deposited into a
trust and have received a credit rating of AA or better from at least one Rating
Agency.

The remainder of the Company's ARM asset portfolio, comprising not more than 30%
of  total  assets,  may  consist  of Other Investment assets, which may include:

(1)     adjustable  or  variable  rate  pass-through  certificates,  multi-class
pass-through  certificates  or  CMOs  backed  by  loans  on  single-family,
multi-family, commercial or other real estate-related properties so long as they
are  rated  at  least  Investment  Grade  at the time of purchase.   "Investment
Grade" generally means a security rating of BBB or Baa or better by at least one
of  the  Rating  Agencies;
(2)     ARM  loans  secured  by  first  liens  on  single-family  residential
properties,  generally  underwritten  to "A" quality standards, and acquired for
the  purpose  of  future  securitization  (see  description  of  "A"  quality in
"Portfolio  of  Mortgage  Assets  -  ARM  and  Hybrid  ARM  Loans");  or
(3)     a  limited  amount,  currently $70 million as authorized by the Board of
Directors,  of  less  than  investment  grade classes of ARM securities that are
created  as  a  result  of  the  Company's  loan  acquisition and securitization
efforts.

Since  inception,  the  Company  has generally invested less than 15%, currently
approximately  4%,  of  its  total  assets in Other Investment assets, excluding
loans  held for securitization.  Despite the generally higher yield, the Company
does  not  expect  to  significantly increase its investment in Other Investment
securities.  This is primarily due to the difficulty of financing such assets at
reasonable  financing terms and values through all economic cycles.  The Company
has  never had a large investment in Other Investment securities and believes it
has  always  been  very  selective  and  cautious  regarding  these investments.

The  Company  does  not  invest  in  REMIC residuals or other CMO residuals and,
therefore  does not create excess inclusion income or unrelated business taxable
income  for  tax  exempt  investors.  Therefore,  the Company is a mortgage REIT
eligible  for  purchase  by  tax exempt investors, such as pension plans, profit
sharing  plans,  401(k)  plans,  Keogh  plans and Individual Retirement Accounts
("IRAs").

FINANCIAL  CONDITION
--------------------

At  June  30,  1999,  the  Company  held  total assets of $4.554 billion, $4.474
billion  of  which  consisted  of  ARM assets, as compared to $4.345 billion and
$4.268  billion,  respectively,  at  December  31,  1998.  Since  commencing
operations,  the Company has purchased either ARM securities (backed by agencies
of  the  U.S.  government  or  privately-issued,  generally publicly registered,
mortgage  assets,  most  of  which are rated AA or higher by at least one of the
Rating  Agencies)  or ARM loans generally originated to "A" quality underwriting
standards.  At June 30, 1999, 95.8% of the assets held by the Company, including
cash and cash equivalents, were High Quality assets, far exceeding the Company's
investment  policy  minimum  requirement  of investing at least 70% of its total
assets  in  High  Quality  ARM assets and cash and cash equivalents.  Of the ARM
assets  currently owned by the Company, 86.2% are in the form of adjustable-rate
pass-through certificates or ARM loans.  The remainder are floating rate classes
of  CMOs  (9.9%)  or  investments in floating rate classes of CBOs (3.9%) backed
primarily  by  mortgaged-backed  securities.

                                       18
<PAGE>
The following table presents a schedule of ARM assets owned at June 30, 1999 and
December  31,  1998  classified  by High Quality and Other Investment assets and
further  classified  by  type  of  issuer  and  by  ratings  categories.

<TABLE>
<CAPTION>
                       ARM ASSETS BY ISSUER AND CREDIT RATING
                           (Dollar amounts in thousands)

                                   June 30, 1999             December 31, 1998
                             --------------------------  --------------------------
                                Carrying     Portfolio      Carrying     Portfolio
                                 Value          Mix          Value          Mix
                             --------------  ----------  --------------  ----------
<S>                          <C>             <C>         <C>             <C>
HIGH QUALITY:
 FHLMC/FNMA . . . . . . . .  $   2,016,453        45.1%  $   2,072,871        48.6%
 Privately Issued:
   AAA/Aaa Rating . . . . .   1,719,434 (1)       38.4    1,398,659 (1)       32.8
   AA/Aa Rating . . . . . .        541,001        12.1         597,493        14.0
                             --------------  ----------  --------------  ----------
     Total Privately Issued      2,260,435        50.5       1,996,152        46.8
                             --------------  ----------  --------------  ----------

                             --------------  ----------  --------------  ----------
     Total High Quality . .      4,276,888        95.6       4,069,023        95.4
                             --------------  ----------  --------------  ----------

OTHER INVESTMENT:
 Privately Issued:
   A Rating . . . . . . . .         54,275         1.2          40,591         1.0
   BBB/Baa Rating . . . . .         83,617         1.8          88,273         2.1
   BB/Ba Rating and Other .      47,359 (1)        1.1       44,120 (1)        0.9
 Whole loans. . . . . . . .         12,187         0.3          26,410         0.6
                             --------------  ----------  --------------  ----------
     Total Other Investment        197,438         4.4         199,394         4.6
                             --------------  ----------  --------------  ----------

     Total ARM Portfolio. .  $   4,474,326       100.0%  $   4,268,417       100.0%
                             ==============  ==========  ==============  ==========
<FN>
(1)   AAA  Rating  category  includes  $883.5 million and $1.020 billion as of June
30,  1999 and December 31, 1998, respectively, of whole loans that have been credit
enhanced  by  an  insurance  policy purchased from a third-party and credit support
from an unrated subordinated certificate for $32.4 million included in BB/Ba Rating
and  Other  category  and  that  are  held  as  collateral  for callable AAA notes.
</TABLE>

As  of  June  30,  1999,  the  Company  had  reduced  the  cost basis of its ARM
securities  by  $1.4  million  due to potential future credit losses (other than
temporary  declines  in  fair  value).  The  Company  is providing for potential
future  credit losses on two securities that have an aggregate carrying value of
$10.7  million,  which represent less than 0.2% of the Company's total portfolio
of ARM assets.  Although both of these assets continue to perform, there is only
minimal remaining credit support to mitigate the Company's exposure to potential
future  credit  losses.

Additionally,  during the three months ended June 30, 1999, the Company recorded
a  $384,000  provision  for  potential  credit  losses  on  its  loan portfolio,
although  no actual losses have been realized in the loan portfolio to date.  As
of  June 30, 1999, the Company's ARM loan portfolio included nine loans that are
considered  seriously  delinquent (60 days or more delinquent) with an aggregate
balance  of  $6.4 million.  The ARM loan portfolio also includes one real estate
property  ("REO") that the Company owns as the result of the foreclosure process
in  connection  with  one  loan  in the amount of $55,000.  The average original
effective  loan-to-value  ratio  of  these  nine  delinquent  loans  and  REO is
approximately  66%.  The  Company estimates that the realizable value of each of
the  single  family  homes  backing  these loans and the REO to be more than the
Company's  investment  in  these  assets  and,  therefore,  the Company does not
currently expect to realize a loss on any of these delinquent loans or REO.  The
Company's  credit  reserve  policy  regarding  ARM  loans is to record a monthly
provision  of  0.15%  (annualized  rate) on the outstanding principal balance of
loans  (including  loans  securitized  by  the Company for which the Company has
retained  first  loss exposure), subject to adjustment on certain loans or pools
of  loans  based  upon  factors  such  as, but not limited to, age of the loans,
borrower  payment  history, low loan-to-value ratios and quality of underwriting
standards  applied  by  the  originator.

                                       19
<PAGE>
The  following table classifies the Company's portfolio of ARM assets by type of
interest  rate  index.

<TABLE>
<CAPTION>
                                   ARM ASSETS BY INDEX
                              (Dollar amounts in thousands)

                                               June 30, 1999          December 31, 1998
                                           ----------------------  ----------------------
                                            Carrying   Portfolio    Carrying   Portfolio
                                             Value        Mix        Value        Mix
                                           ----------  ----------  ----------  ----------
<S>                                        <C>         <C>         <C>         <C>
ARM ASSETS:
    INDEX:
     One-month LIBOR. . . . . . . . . . .  $  709,409       15.9%  $  556,574       13.0%
     Three-month LIBOR. . . . . . . . . .     175,653        3.9      181,143        4.2
     Six-month LIBOR. . . . . . . . . . .     768,134       17.2      939,824       22.0
     Six-month Certificate of Deposit . .     250,688        5.6      313,268        7.3
     Six-month Constant Maturity Treasury      41,078        0.9       49,023        1.2
     One-year Constant Maturity Treasury.   1,452,636       32.5    1,479,054       34.7
     Cost of Funds. . . . . . . . . . . .     244,865        5.5      268,486        6.3
                                           ----------  ----------  ----------  ----------
                                            3,642,463       81.5    3,787,372       88.7
                                           ----------  ----------  ----------  ----------

HYBRID ARM ASSETS . . . . . . . . . . . .     831,863       18.5      481,045       11.3
                                           ----------  ----------  ----------  ----------
                                           $4,474,326      100.0%  $4,268,417      100.0%
                                           ==========  ==========  ==========  ==========
</TABLE>

The  portfolio  had a current weighted average coupon of 6.85% at June 30, 1999.
This  consisted  of  an average coupon of 6.73% on the Hybrid ARM portion of the
portfolio  and  an average coupon of 6.86% on the rest of the portfolio.  If the
non-hybrid  portion  of the portfolio had been "fully indexed" on June 30, 1999,
the  weighted  average  coupon  of the non-hybrid portion of the portfolio would
have  been  approximately  7.19%,  based  upon  the  current  composition of the
portfolio  and  the  applicable  indices.  As  of  December  31,  1998,  the ARM
portfolio  had  a  weighted  average  coupon  of 7.28%, consisting of an average
coupon  of  6.96%  on  the  Hybrid  ARMs  and  7.32% on the remainder of the ARM
portfolio.  The  lower  average  coupon on the ARM portfolio as of June 30, 1999
compared  to  December  31,  1998  is  primarily the result of the ARM portfolio
adjusting  to the current lower interest rate market as individual ARM loans and
securities  reach  their  scheduled  interest  rate  reset  dates.

At  June  30,  1999,  the  current  yield of the ARM assets portfolio was 5.74%,
compared  to  5.86%  as  of  December 31, 1998, with an average term to the next
repricing  date  of  320  days  as  of June 30, 1999, compared to 253 days as of
December  31,  1998.  The  average  term to the next repricing date includes the
effect  of  Hybrid  ARMs  which have an average remaining fixed-rate term of 3.9
years  as  of June 30, 1999.  The non-hybrid portion of the ARM portfolio has an
average  next  repricing term of 86 days as of June 30, 1999.  The current yield
includes  the  impact  of the amortization of applicable premiums and discounts,
the  cost  of  hedging,  the  amortization  of  the  deferred gains from hedging
activity  and  the  impact  of  principal  payment  receivables.

The  reduction  in the yield of 0.12% as of June 30, 1999,  compared to December
31,  1998,  is  due  to  a  number  of factors including a 0.43% decrease in the
weighted  average coupon and an increase in the cost of hedging by 0.01%.  These
two  factors were partially offset by reduced amortization of purchase premiums,
which  improved  by  0.31%,  and  a  0.01%  improvement  in  the  impact  of the
non-interest  earning  principal  payment  receivables.

                                       20
<PAGE>
The  following  table  presents various characteristics of the Company's ARM and
Hybrid  ARM  loan  portfolio  as of June 30, 1999.  This information pertains to
both  the loans held for securitization and the loans held as collateral for the
callable  AAA  notes  payable.

<TABLE>
<CAPTION>
                       ARM AND HYBRID ARM LOAN PORTFOLIO CHARACTERISTICS

                                                Average             High              Low
                                            -------------  -----------------------  -------
<S>                                         <C>            <C>                      <C>
  Unpaid principal balance . . . . . . . .  $    273,440   $            3,450,000   $  309
  Coupon rate on loans . . . . . . . . . .          7.23%                    9.63%    5.00%
  Pass-through rate. . . . . . . . . . . .          6.92%                    9.23%    4.61%
  Pass-through margin. . . . . . . . . . .          2.28%                    5.45%    0.75%
  Lifetime cap . . . . . . . . . . . . . .         12.90%                   16.00%    9.50%
  Original Term (months) . . . . . . . . .           339                      480       72
  Remaining Term (months). . . . . . . . .           309                      349       32

  Geographic Distribution (Top 5 States):.                 Property type:
    California . . . . . . . . . . . . . .         21.04%    Single-family           64.13%
    Florida. . . . . . . . . . . . . . . .         11.98     DeMinimus PUD           20.59
    Georgia. . . . . . . . . . . . . . . .          7.02     Condominium              9.45
    New York . . . . . . . . . . . . . . .          6.56     Other                    5.83
    New Jersey . . . . . . . . . . . . . .          4.66

  Occupancy status:. . . . . . . . . . . .                 Loan purpose:
    Owner occupied . . . . . . . . . . . .         83.77%    Purchase                56.25%
    Second home. . . . . . . . . . . . . .         11.30     Cash out refinance      25.76
    Investor . . . . . . . . . . . . . . .          4.93     Rate & term refinance   17.99

  Documentation type:. . . . . . . . . . .                 Periodic Cap:
    Full/Alternative . . . . . . . . . . .         95.46%    None                    57.99%
    Other. . . . . . . . . . . . . . . . .          4.54     3.00%                    0.13
                                                             2.00%                   40.15
  Average effective original . . . . . . .                   1.00%                    0.51
  loan-to-value: . . . . . . . . . . . . .         67.77%    0.50%                    1.22
</TABLE>

On  May  15,  1999,  the  Company  commenced the operations of its correspondent
lending  program  under which the Company acquires ARM and Hybrid ARM loans that
have  been originated in conformance with the Company's criteria by a network of
correspondent  mortgage  lenders  approved  by  the  Company.   The  Company has
selectively approved ten correspondents and is currently either in discussion or
considering  the  application  of  sixteen  others.  The  Company  reviews  the
financial strength, the past ability to originate ARM and Hybrid ARM products as
well  as  the  credit  performance  and  prepayment  characteristics  of  past
originations  of a prospective correspondent in making its decision to approve a
correspondent.  The  Company's  underwriting  guidelines  specify that borrowers
must  be  "A"  quality only and are generally more restrictive than current FNMA
guidelines,  other  than  the  size of the loan.  Over time, the Company expects
that  most  of the loans acquired through the correspondent lending program will
be  non-conforming  or "Jumbo" loans based on the size of the loan.  (Currently,
any  loan  over $240,000 is non-conforming or a "Jumbo" loan).  However, most of
the  loans  acquired  to  date  through  this program have been conforming.  The
Company  believes  that one of the benefits of the correspondent lending program
will  be  the acquisition of loans at prices close to par.  In fact, the average
price  of  the  loans  acquired to date has been at a discount price.  Acquiring
loans  at  or below par eliminates the risk of having to write-off the remaining
premium  balance  if  a  loan  prepays  sooner  than expected and should help to
stabilize  the  Company's  net  income during periods of rapid prepayment of ARM
assets.

During  the quarter ended June 30, 1999, the Company purchased $839.4 million of
ARM  assets,  99.4%  of  which  were  High  Quality assets.  Of these ARM assets
acquired,  $273.5  million  of  them were Hybrid ARM loans that were securitized
into  AAA  securities  as part of the purchase transaction and $2.0 million were
Hybrid  ARM  loans  acquired through the Company's correspondent lending program
that commenced operations during the quarter.  Of the ARM assets acquired during
the  three  months ended June 30, 1999, approximately 55% were Hybrids ARMs, 24%
were  indexed to LIBOR, 19% were indexed to U.S. Treasury bill rates and 2% were
indexed  to  a  Cost  of  Funds  index.

                                       21
<PAGE>
During  the six months ended June 30, 1999, the Company purchased $939.1 million
of  ARM  assets,  97.9%  of  which  were High Quality assets.  Of the ARM assets
acquired  during  the  first  six  months of 1999, approximately 49% were Hybrid
ARMs,  29%  were  indexed to LIBOR, 20% were indexed to U.S. Treasury bill rates
and  the  remaining  2%  were  indexed  to  a  Cost  of  Funds  index.

As  of  June 30, 1999, the Company had commitments to purchase $176.3 million of
ARM  securities,  $103.8  million  of  which  are  ARM  loans  which  are  being
securitized  as  part  of  the purchase agreement.  In addition, the Company had
commitments  to  purchase  $10.3 million of loans through its correspondent loan
program.

During  both  the  three  and six month periods ended June 30, 1999, the Company
sold  only  one  asset in the amount of $6.5 million for a gain of $35,000.  The
Company acquires ARM assets for investment purposes only and therefore generally
does  not  realize  significant  gains and losses from the sale of assets in the
normal  course  of its business.  The Company does sell selected assets at times
for  the  purpose of improving long-term portfolio characteristics or to improve
liquidity,  as  part  of  its  ARM  portfolio  management.

For  the  quarter  ended June 30, 1999, the Company's ARM assets paid down at an
approximate  average  annualized constant prepayment rate of 26% compared to 34%
for  the  quarter  ended June 30, 1998 and 29% for the prior quarter ended March
31,  1999.  When  prepayment experience exceeds expectations, the Company has to
amortize  its  premiums over a shorter time period, resulting in a reduced yield
to  maturity  on  the  Company's  ARM  assets.  Conversely, if actual prepayment
experience  is less than the assumed constant prepayment rate, the premium would
be amortized over a longer time period, resulting in a higher yield to maturity.
The  Company  monitors  its prepayment experience on a monthly basis in order to
adjust  the  amortization  of  the  net  premium,  as  appropriate.

The  fair  value  price of the Company's portfolio of ARM securities improved by
0.79%  from  a  negative adjustment of 2.62% of the portfolio as of December 31,
1998,  to  a  negative  adjustment  of  1.83% as of June 30, 1999.  The negative
adjustment also improved from March 31, 1999 when the price adjustment was 1.99%
of  the  portfolio  of  ARM  securities,  although  the fair value adjustment on
certain assets, particularly Hybrid ARM assets, decreased during the quarter due
to  concern over rising interest rates.  This price improvement from year-end is
primarily  the result of an improved market for mortgage products in general, as
buying  and  selling  activity has picked up during 1999 with the improvement in
the outlook regarding prepayments and the financing of mortgage assets, compared
to  the end of 1998.  The amount of the negative adjustment to the fair value of
the  ARM  securities  decreased  from  $83.2 million as of December 31, 1998, to
$64.5  million  as  of  June  30,  1999.

The  Company has purchased Cap Agreements in order to hedge exposure to changing
interest rates.  The majority of the Cap Agreements have been purchased to limit
the  Company's exposure to risks associated with the lifetime interest rate caps
of  its ARM assets should interest rates rise above specified levels.  These Cap
Agreements act to reduce the effect of the lifetime or maximum interest rate cap
limitation.  These  Cap Agreements purchased by the Company will allow the yield
on  the  ARM assets to continue to rise in a high interest rate environment just
as the Company's cost of borrowings would continue to rise, since the borrowings
do  not  have  any  interest  rate  cap  limitation.  At  June 30, 1999, the Cap
Agreements  owned  by  the  Company  that  are designated as a hedge against the
lifetime  interest  rate  cap  on ARM assets had a remaining notional balance of
$3.425  billion  with  an  average  final  maturity  of 2.2 years, compared to a
remaining  notional  balance of $4.026 billion with an average final maturity of
2.3  years at December 31, 1998.  Pursuant to the terms of these Cap Agreements,
the  Company  will  receive  cash  payments  if  the  one-month,  three-month or
six-month LIBOR index increases above certain specified levels, which range from
7.10%  to  13.00% and average approximately 9.91%.  The Company has also entered
into  $154.3 million of Cap Agreements in connection with hedging the fixed rate
period  of  certain  of  its  Hybrid  ARM  assets.  In  doing  so,  the  Company
establishes a maximum cost of financing the Hybrid ARM assets during the term of
the  designated  Cap Agreements which generally corresponds to the initial fixed
rate term of Hybrid ARM assets.  The Cap Agreements hedging Hybrid ARM assets as
of  June 30, 1999 would receive cash payments if one-month LIBOR increases above
certain  specified levels, which range from 5.75% to 6.00%, and have a remaining
average  term  of  3.9  years.  The  fair  value of Cap Agreements also tends to
increase  when  general  market interest rates increase and decrease when market
interest  rates  decrease, helping to partially offset changes in the fair value
of  the Company's ARM assets.  At June 30, 1999, the fair value of the Company's
Cap  Agreements  was  $5.1 million, $2.0 million less than the amortized cost of
the  Cap  Agreements.

                                       22
<PAGE>
The  following  table  presents  information  about  the Company's Cap Agreement
portfolio  that  is designated as a hedge against the lifetime interest rate cap
on  ARM  assets  as  of  June  30,  1999:

<TABLE>
<CAPTION>
                    CAP AGREEMENTS STRATIFIED BY STRIKE PRICE
                          (Dollar amounts in thousands)

  Hedged      Weighted   Cap Agreement     Weighted
 ARM Assets    Average      Notional        Average
Balance (1)   Life Cap      Balance      Strike Price   Remaining Term
------------  ---------  --------------  -------------  --------------
<S>           <C>        <C>             <C>            <C>
$     25,909      8.00%  $       26,000          7.10%       3.8 Years
     411,837      8.79          409,218          7.50        0.8
     523,431     10.12          526,781          8.00        2.8
     169,195     11.00          168,932          8.50        0.7
     252,722     11.34          252,738          9.00        0.5
     139,325     11.39          138,471          9.50        1.3
     296,578     11.89          297,776         10.00        2.9
     319,867     12.27          319,352         10.50        1.9
     178,917     12.45          178,570         11.00        5.0
     537,902     12.89          538,035         11.50        3.0
     392,262     13.53          391,647         12.00        2.3
      93,535     14.19           93,896         12.50        1.6
     104,958     16.07           83,508         13.00        0.6
------------  ---------  --------------  -------------  --------------
$  3,446,438     11.71%  $    3,424,924          9.91%       2.2 Years
============  =========  ==============  =============  ==============
<FN>
-------------------
(1)  Excludes  ARM  assets  that  do  not have life caps or are hybrids that are
match  funded  during  a  fixed  rate  period,  in accordance with the Company's
investment  policy.
</TABLE>

As  of  June 30, 1999, the Company was a counterparty to seventeen interest rate
swap  agreements  ("Swaps")  having  an  aggregate  notional  balance  of $733.7
million.  As of June 30, 1999, these Swaps had a weighted average remaining term
of 3.4 years.  In accordance with these Swaps, the Company will pay a fixed rate
of  interest  during  the  term of these Swaps and receive a payment that varies
monthly  with the one-month LIBOR rate.  All of these Swaps were entered into in
connection  with  the  Company's  acquisition  of Hybrid ARMs and commitments to
acquire  Hybrid  ARMs.  Generally,  as  the  Company enters into a commitment to
purchase  a  Hybrid  ARM  asset,  the  Company  will simultaneously enter into a
transaction  to  hedge  the  financing of the Hybrid ARM to achieve a fixed rate
during  a  substantial  period  of the Hybrid ARMs fixed rate period.  At times,
since  there is a period of time between the commitment date and the actual cash
purchase  date of the Hybrid ARM, the Company will enter into a short-term hedge
transaction  on  the  commitment date in order to achieve a cost of financing on
the  cash  settlement  date  that  approximates  the  Company's expected cost of
financing  at  the  time  it entered into the commitment.  The Company generally
does this by entering into a commitment to sell similar duration fixed-rate FNMA
MBS  on  the  trade  date  and  settles  the  commitment  by purchasing the same
fixed-rate  FNMA  MBS  on  the  purchase  date.  Realized  gains  and losses are
deferred  and  amortized as a yield adjustment over the fixed rate period of the
financing.  The  Swaps  hedge  the  cost  of  financing  Hybrid  ARMs  during  a
substantial  period of their fixed rate term, generally three to ten years.  The
average  remaining fixed rate term of the Company's Hybrid ARM assets as of June
30,  1999  was  3.7  years.  The  Company has also entered into one delayed Swap
Agreement  that  becomes  effective  for  a one year term, beginning in April of
2002.  This delayed Swap Agreement has a notional balance of $100 million and is
designated  to  hedge  the  interest rate exposure of Hybrid ARM assets upon the
termination  of  certain  other Swap Agreements.  As of June 30, 1999, the Swaps
had  a  fair  value  of  $4.5  million  which was $6.0 million higher than their
carrying  value.  Since  the  Swaps  are  designated  a  liability  hedge,  the
unrealized  gain of $6.0 million is off balance sheet and is not recorded by the
Company  as  Other  Comprehensive  Income as part of the Company's shareholders'
equity.  As  of  March  31,  1999,  the  Swaps had a fair value of negative $2.2
million which was $2.1 million less than their carrying value.  This improvement
in  the  fair  value of the Company's Swaps is a result of rising interest rates
and is comparable to the decline in the fair value of the Company's portfolio of
Hybrid  ARMs.

                                       23
<PAGE>
RESULTS  OF  OPERATIONS  FOR  THE  THREE  MONTHS  ENDED  JUNE  30,  1999

For the quarter ended June 30, 1999, the Company's net income was $7,034,000, or
$0.25  per  share  (Basic  and  Diluted  EPS),  based  on  a weighted average of
21,490,000  shares outstanding.  That compares to $7,475,000, or $0.27 per share
(Basic  and  Diluted  EPS),  based  on  a  weighted average of 21,796,000 shares
outstanding  for  the  quarter ended June 30, 1998.  Net interest income for the
quarter  totaled $9,072,000, compared to $7,776,000 for the same period in 1998.
Net  interest  income  is  comprised  of  the interest income earned on mortgage
investments  less  interest  expense  from  borrowings.  During the three months
ended  June 30, 1999, the Company recorded $35,000 of gains from the sale of one
ARM  security  compared  to  a  net gain of $1,497,000 during the same period of
1998.  Additionally,  during  the first quarter of 1999, the Company reduced its
earnings  and  the  carrying  value  of its ARM assets by reserving $689,000 for
potential credit losses, compared to $453,000 during the second quarter of 1998.
During  the  second  quarter of 1999, the Company incurred operating expenses of
$1,384,000,  consisting  of  a  base  management  fee  of  $1,020,000  and other
operating  expenses  of  $364,000.  During  the same period of 1998, the Company
incurred  operating  expenses of $1,345,000, consisting of a base management fee
of  $1,048,000  and  other  operating  expenses  of  $297,000.

The  Company's  return  on average common equity was 6.60% for the quarter ended
June 30, 1999 compared to 6.83% for the quarter ended June 30, 1998 and compared
to  3.60%  for  the prior quarter ended March 31, 1999.  The Company's return on
equity  improved  in  this  past quarter compared to the prior quarter primarily
because  the Company's net interest income, the Company's core source of income,
improved.

The  table below highlights the historical trend and the components of return on
average  common  equity  (annualized) and the 10-year U S Treasury average yield
during  each  respective  quarter  which is applicable to the computation of the
performance  fee:

<TABLE>
<CAPTION>
                                     COMPONENTS OF RETURN ON AVERAGE COMMON EQUITY (1)

                                                                                                                 ROE in
                                                                                                                Excess of
                  Net                 Gain (Loss)                                           Net      10-Year     10-Year
               Interest    Provision    on ARM       G & A      Performance   Preferred   Income/   US Treas.   US Treas.
   For The      Income/   For Losses/   Sales/   Expense (2)/       Fee/      Dividend/    Equity    Average     Average
Quarter Ended   Equity       Equity     Equity      Equity         Equity       Equity     (ROE)      Yield       Yield
-------------  ---------  ------------  -------  -------------  ------------  ----------  --------  ----------  ----------
<S>            <C>        <C>           <C>      <C>            <C>           <C>         <C>       <C>         <C>
Mar 31, 1997.     18.85%         0.32%    0.01%          1.65%         1.43%       2.07%    13.40%       6.55%       6.85%
Jun 30, 1997.     19.48%         0.34%    0.03%          1.81%         1.25%       2.67%    13.45%       6.71%       6.74%
Sep 30, 1997.     17.66%         0.30%    0.45%          1.64%         1.24%       2.23%    12.70%       6.26%       6.44%
Dec 31, 1997.     15.62%         0.33%    1.06%          1.59%         1.01%       2.12%    11.63%       5.92%       5.71%
Mar 31, 1998.     14.13%         0.48%    1.89%          1.62%         0.94%       2.06%    10.91%       5.60%       5.31%
Jun 30, 1998.      9.15%         0.53%    1.76%          1.58%            -        1.96%     6.83%       5.60%       1.23%
Sep 30, 1998.      6.82%         0.66%    0.89%          1.54%            -        1.97%     3.54%       5.24%      -1.70%
Dec 31, 1998.      7.27%         0.76%   -4.88%          1.57%            -        2.01%    -1.95%       4.66%      -6.61%
Mar 31, 1999.      8.07%         0.84%       -           1.58%            -        2.05%     3.60%       4.98%      -1.38%
Jun 30, 1999.     11.17%         0.85%    0.04%          1.70%            -        2.05%     6.60%       5.54%       1.06%
<FN>
-------------------
(1)     Average  common  equity  excludes  unrealized  gain  (loss)  on  available-for-sale  ARM  securities.
(2)     Excludes  performance  fees.
</TABLE>

The  Company's  return on common equity in the second quarter of 1999, although,
as  a  whole, was comparable to the second quarter of 1998, reflects significant
improvement  in  core earnings.  A significant component of the Company's return
on  common  equity  in the second quarter of 1998 was the result of gains in the
amount  of $1,479,000 realized on the sale of ARM securities compared to $35,000
in  the  second  quarter  of  1999.  As  presented  in the table below, the most
significant  improvement  in core earnings resulted from the lower cost of funds
which  improved  net  interest  income by $11.2 million.  Coupon interest income
also  decreased  with lower market interest rates by $14.4 million, but this was
partially  offset  by  the  decrease  in  the  amortization of net premium which
declined  by  $4.4 million resulting in a net decrease in interest income on ARM
assets  of $10.0 million.  The decline in the amortization of the net premium is
primarily  the  result of the following three items: (1) a slow down in the rate
of  ARM asset prepayments (26% rate of prepayments in the second quarter of 1999
versus  34%  in  the  second  quarter  of 1998);  (2) the decline in the average
interest  coupon  of  the  ARM  portfolio (6.85% versus 7.44%) resulting in less

                                       24
<PAGE>
gross  interest income to adjust to an appropriate yield; and (3) the cumulative
effect of recent purchases at lower prices such that there is less premium to be
amortized  over  the remaining expected life of the portfolio.  During 1999, the
average  purchase  price  of newly acquired ARM assets has been approximately 1%
above  par  as  compared to the portfolio average remaining purchase price as of
December 31, 1998 of 2.47%.  As of June 30, 1999, the average remaining purchase
price  of  the  ARM portfolio is 2.18% and is expected to decline further as the
Company  realizes  the  benefits  of  its  newly  created  correspondent lending
business,  the  continued  purchase  of  bulk loans and continues to selectively
purchase  other  ARM and Hybrid ARM assets at prices below the current portfolio
average.

The following table presents the components of the Company's net interest income
for  the  quarters  ended  June  30,  1999  and  1998:

<TABLE>
<CAPTION>
                   COMPARATIVE NET INTEREST INCOME COMPONENTS
                          (Dollar amounts in thousands)

                                          1999      1998
                                        --------  --------
<S>                                     <C>       <C>
  Coupon interest income on ARM assets  $71,586   $86,034
  Amortization of net premium. . . . .   (7,837)  (12,228)
  Amortization of Cap Agreements . . .   (1,377)   (1,375)
  Amort. of deferred gain from hedging      263       549
  Cash and cash equivalents. . . . . .      452        39
                                        --------  --------
    Interest income. . . . . . . . . .   63,087    73,019
                                        --------  --------

  Reverse repurchase agreements. . . .   38,470    65,096
  AAA notes payable. . . . . . . . . .   14,292         -
  Other borrowings . . . . . . . . . .       35       170
  Interest rate swaps. . . . . . . . .    1,218       (23)
                                        --------  --------
    Interest expense . . . . . . . . .   54,015    65,243
                                        --------  --------

  Net interest income. . . . . . . . .  $ 9,072   $ 7,776
                                        ========  ========
</TABLE>

The  following  table  presents  the  average  balances for each category of the
Company's  interest  earning  assets  as  well as the Company's interest bearing
liabilities,  with  the  corresponding effective rate of interest annualized for
the  quarters  ended  June  30,  1999  and  1998:

<TABLE>
<CAPTION>
                                        AVERAGE BALANCE AND RATE TABLE
                                        (Dollar amounts in thousands)

                                             For the Quarter Ended    For the Quarter Ended
                                                 June 30, 1999            June 30, 1998
                                            -----------------------  ------------------------
                                              Average    Effective     Average     Effective
                                              Balance       Rate       Balance       Rate
                                            -----------  ----------  -----------  -----------
<S>                                         <C>          <C>         <C>          <C>
  Interest Earning Assets:
    Adjustable-rate mortgage assets. . . .  $4,374,336        5.73%  $4,913,708         5.94%
    Cash and cash equivalents. . . . . . .      30,940        5.85        4,581         3.40
                                            -----------  ----------  -----------  -----------
                                             4,405,276        5.73    4,918,289         5.94
                                            -----------  ----------  -----------  -----------
  Interest Bearing Liabilities:
    Borrowings . . . . . . . . . . . . . .   4,034,856        5.35    4,528,635         5.76
                                            -----------  ----------  -----------  -----------
  Net Interest Earning Assets and Spread .  $  370,420        0.38%  $  389,654         0.18%
                                            ==========  ===========  ===========  ===========

  Yield on Net Interest Earning Assets (1)                    0.82%                     0.63%
                                                        ===========               ===========
<FN>
(1)     Yield  on  Net  Interest Earning Assets is computed by dividing annualized net interest
income by the average  daily  balance  of  interest  earning  assets.
</TABLE>

As  a  result of the yield on the Company's interest-earning assets declining to
5.73%  during  the  second  quarter of 1999 from 5.94% during the same period of
1998  and  the Company's cost of funds decreasing to 5.35% from 5.76% during the
same  time  periods, net interest income increased by $1,345,000.  This increase
in  net interest income is primarily a favorable rate variance, partially offset

                                       25
<PAGE>
by  an  unfavorable volume variance.  There was a net favorable rate variance of
$2,078,000,  composed  of a favorable rate variance on borrowings that increased
net interest income by $4,673,000 and an unfavorable rate variance of $2,594,000
on  the  Company's  ARM assets portfolio and other interest-earning assets.  The
decreased  average  size of the Company's portfolio during the second quarter of
1999  compared  to  the same period in 1998 decreased net interest income in the
amount  of  $733,000.  The  average  balance  of  the Company's interest-earning
assets  was $4.405 billion during the second quarter of 1999, compared to $4.918
billion  during  the  second  quarter of 1998 -- a decrease of 10%.  The Company
allowed  its  portfolio to decrease during the first quarter of 1999 in order to
increase liquidity in anticipation of calling its collateralized AAA notes.  The
Company  completed the negotiation of the modification of the Notes in the first
quarter of 1999 and commenced acquiring assets at a pace comparable to the first
half  of  1998.  During  the second quarter of 1999, the Company acquired $839.4
million  of  ARM  assets and ended the quarter with total assets of $4.6 billion
compared  to  $4.0  billion  as  of  March  31,  1999.

The  following  table  highlights  the components of net interest spread and the
annualized  yield  on  net interest-earning assets as of each applicable quarter
end:

<TABLE>
<CAPTION>
               COMPONENTS OF NET INTEREST SPREAD AND YIELD ON NET INTEREST EARNING ASSETS (1)
                                        (Dollar amounts in millions)

                                      ARM Assets
                Average   ------------------------------------  Yield on                            Yield on
               Interest     Wgt. Avg.     Weighted              Interest                    Net     Interest
  As of the     Earning   Fully Indexed    Average     Yield    Earning      Cost of     Interest   Earning
Quarter Ended   Assets        Coupon       Coupon    Adj. (2)    Assets       Funds       Spread     Assets
-------------  ---------  --------------  ---------  ---------  --------  -------------  ---------  --------
<S>            <C>        <C>             <C>        <C>        <C>       <C>            <C>        <C>
Mar 31, 1997.  $ 2,950.6           7.93%      7.53%      0.89%     6.65%          5.67%      0.98%     1.54%
Jun 30, 1997.    3,464.1           7.75%      7.57%      0.90%     6.67%          5.77%      0.90%     1.39%
Sep 30, 1997.    4,143.7           7.63%      7.65%      1.07%     6.58%          5.79%      0.79%     1.22%
Dec 31, 1997.    4,548.9           7.64%      7.56%      1.18%     6.38%          5.91%      0.47%     0.96%
Mar 31, 1998.    4,859.7           7.47%      7.47%      1.23%     6.24%          5.74%      0.50%     0.92%
Jun 30, 1998.    4,918.3           7.51%      7.44%      1.50%     5.94%          5.81%      0.13%     0.56%
Sep 30, 1998.    4,963.7           6.97%      7.40%      1.52%     5.88%          5.78%      0.09%     0.46%
Dec 31, 1998.    4,526.2           6.79%      7.28%      1.42%     5.86%          5.94%     -0.08%     0.61%
Mar 31, 1999.    4,196.4           6.85%      7.03%      1.31%     5.71%          5.36%      0.35%     0.63%
Jun 30, 1999.    4,405.3           7.10%      6.85%      1.11%     5.74%          5.40%      0.34%     0.82%
<FN>
--------------
(1)     Yield  on  Net Interest Earning Assets is computed by dividing annualized net interest income by the
average  daily  balance  of  interest  earning  assets.
(2)     Yield  adjustments  include  the  impact  of  amortizing premiums and discounts, the cost of hedging
activities,  the  amortization of deferred gains from hedging activities and the impact of principal payment
receivables.  The following table presents these components of the yield adjustments for the dates presented
in  the  table  above:
</TABLE>

<TABLE>
<CAPTION>
                COMPONENTS OF THE YIELD ADJUSTMENTS  ON ARM ASSETS

                          Impact of                     Amort. of
               Premium/    Principal                   Deferred Gain     Total
As of the      Discount    Payments       Hedging      from Hedging      Yield
Quarter Ended   Amort.    Receivable      Activity       Activity     Adjustment
-------------  ---------  -----------  --------------  -------------  -----------
<S>            <C>        <C>          <C>             <C>            <C>
Mar 31, 1997.      0.63%        0.13%           0.19%        (0.07)%        0.89%
Jun 30, 1997.      0.66%        0.13%           0.16%        (0.05)%        0.90%
Sep 30, 1997.      0.85%        0.12%           0.15%        (0.05)%        1.07%
Dec 31, 1997.      0.94%        0.14%           0.14%        (0.04)%        1.18%
Mar 31, 1998.      0.98%        0.16%           0.13%        (0.04)%        1.23%
Jun 30, 1998.      1.24%        0.17%           0.13%        (0.04)%        1.50%
Sep 30, 1998.      1.25%        0.18%           0.13%        (0.04)%        1.52%
Dec 31, 1998.      1.18%        0.14%           0.14%        (0.04)%        1.42%
Mar 31, 1999.      1.09%        0.10%           0.15%        (0.03)%        1.31%
Jun 30, 1999.      0.87%        0.13%           0.13%        (0.02)%        1.11%
</TABLE>

                                       26
<PAGE>
As  of June 30, 1999, the Company's yield on its ARM assets portfolio, including
the  impact  of the amortization of premiums and discounts, the cost of hedging,
the  amortization  of  deferred  gains  from  hedging activity and the impact of
principal  payment  receivables,  and  its  cash and cash equivalents was 5.74%,
compared to 5.71% as of March 31, 1999-an increase of 0.03%.  The Company's cost
of  funds as of June 30, 1999, was 5.40%, compared to 5.36% as of March 31, 1999
-  an  increase  of  0.04%.  As  a  result  of  these changes, the Company's net
interest spread as of June 30, 1999 was 0.34%, compared to 0.35% as of March 31,
1999.  The slight decrease in the net interest spread is largely attributable to
the  impact of rising interest rates as of the end of the quarter as a result of
Federal  Reserve  Board  action.

The  Company's  spreads  and  net  interest income have been negatively impacted
since  early  1998  by  the  spread relationship between U.S. Treasury rates and
LIBOR.  This  spread  relationship has negatively impacted the Company because a
portion of the Company's ARM portfolio is indexed to U.S. Treasury rates and the
interest rates on all of the Company's borrowings tend to change with changes in
LIBOR.  During  this period of time, U.S. Treasury rates decreased significantly
whereas LIBOR did not decrease to the same degree.  As a result, the Company had
been reducing its exposure to ARM assets that are indexed to U.S. Treasury rates
through  the  product  mix  of its sales and acquisitions in order to reduce the
negative impact of this situation.  Over recent months, the relationship between
U.S.  Treasury  rates and LIBOR has improved, although the Company does not know
if  this  improvement  will  continue  or  revert  back to the relationship that
existed  during  1998.  The  following  table presents historical data since the
year  the  Company  commenced  operations regarding this relationship as well as
data  regarding  the  percent  of the Company's ARM portfolio that is indexed to
U.S.  Treasury  rates.  As presented in the table below, the Company has reduced
the  proportion  of  its ARM portfolio that is indexed to U.S. Treasury rates to
32.5%  at  June  30,  1999  from  49.0%  as  of the end of 1997.  The data is as
follows:

<TABLE>
<CAPTION>
           ONE-YEAR U.S. TREASURY RATES COMPARED TO ONE- AND THREE-MONTH LIBOR RATES

                                                           Average Spread
                                                           Between 1 Year
                                                           U.S. Treasury      Percent of ARM
                       Average 1 Year   Average 1 and 3   Rates and 1 & 3   Portfolio Index to
                        U.S. Treasury     Month LIBOR       Month LIBOR        1 Year U.S.
For the Year Ended      Rates During      Rates During      Rates During    Treasury Rates at
December 31,               Period            Period            Period         End of Period
---------------------  ---------------  ----------------  ----------------  ------------------
<S>                    <C>              <C>               <C>               <C>

1993. . . . . . . . .            3.43%             3.25%             0.18%                20.9
1994. . . . . . . . .            5.32              4.61              0.71                 15.5
1995. . . . . . . . .            5.94              6.01             -0.07                 19.3
1996. . . . . . . . .            5.52              5.48              0.04                 45.4
1997. . . . . . . . .            5.63              5.69             -0.06                 49.0
1998. . . . . . . . .            5.05              5.57             -0.52                 34.7

For the Quarter Ended
---------------------
Mar 31, 1998. . . . .            5.32              5.66             -0.34                 44.3
Jun 30, 1998. . . . .            5.41              5.68             -0.27                 38.8
Sep 30, 1998. . . . .            5.10              5.62             -0.52                 37.5
Dec 31, 1998. . . . .            4.39              5.32             -0.93                 34.7
Mar 31, 1999. . . . .            4.67              4.98             -0.31                 34.8
Jun 30, 1999. . . . .            4.88              5.02             -0.14                 32.5
</TABLE>

The  Company's  provision for losses has increased with the acquisition of whole
loans.  The provision for loan losses is based on an annualized rate of 0.15% on
the  outstanding  principal  balance  of  loans as of each month-end, subject to
certain  adjustments  as  discussed  above.  As  of June 30, 1999, the Company's
whole  loans,  including  those held as collateral for the AAA notes payable and
those  that  have  been  securitized  by  the  Company for which the Company has
retained credit loss exposure, accounted for 27.3% of the Company's portfolio of
ARM  assets compared to 12.3% as of June 30, 1998.  To date, the Company has not
experienced any actual losses in its whole loan portfolio, but based on industry
standards, losses are expected and are being reserved for as the portfolio ages.

As a REIT, the Company is required to declare dividends amounting to 85% of each
year's  taxable  income  by  the  end of each calendar year and to have declared
dividends  amounting  to  95% of its taxable income for each year by the time it
files  its  applicable  tax  return  and,  therefore,  generally  passes through

                                       27
<PAGE>
substantially  all of its earnings to shareholders without paying federal income
tax  at  the  corporate level.  Since the Company, as a REIT, pays its dividends
based  on  taxable  earnings,  the  dividends  may at times be more or less than
reported  earnings.  The  following  table provides a reconciliation between the
Company's earnings as reported based on generally accepted accounting principles
and  the  Company's  taxable  income  before  its'  common  dividend  deduction:

<TABLE>
<CAPTION>
           RECONCILIATION OF REPORTED NET INCOME TO TAXABLE NET INCOME
                          (Dollar amounts in thousands)

                                            Quarters Ending June 30,
                                            ------------------------
                                                 1999      1998
                                               --------  --------
<S>                                            <C>       <C>
Net income. . . . . . . . . . . . . . . . . .  $ 7,034   $ 7,475
 Additions:
 Provision for credit losses. . . . . . . . .      689       453
 Net compensation related items . . . . . . .       96       (98)
   Deductions:
        Dividend on Series A Preferred Shares   (1,670)   (1,670)
        Capital loss carryover from 1998. . .      (35)        -
       Actual credit losses on ARM securities     (323)     (411)
                                               --------  --------
Taxable net income. . . . . . . . . . . . . .  $ 5,791   $ 5,749
                                               ========  ========
</TABLE>

For  the  quarter ended June 30, 1999, the Company's ratio of operating expenses
to average assets was 0.12% compared to 0.10% for the same quarter in 1998.  The
Company's  expense  ratios  are  among  the  lowest  of any company investing in
mortgage  assets,  giving  the  Company  what  it  believes  to be a significant
competitive  advantage  over  more  traditional  mortgage  portfolio  lending
institutions  such  as  banks and savings and loans.  This competitive advantage
enables  the Company to operate with less risk, such as credit and interest rate
risk,  and still generate an attractive long-term return on equity when compared
to  these more traditional mortgage portfolio lending institutions.  The Company
pays  the  Manager  an  annual  base  management fee, generally based on average
shareholders'  equity as defined in the Management Agreement, payable monthly in
arrears  as  follows:  1.1%  of  the first $300 million of Average Shareholders'
Equity,  plus  0.8%  of  Average Shareholders' Equity above $300 million.  Since
this  management  fee  is based on shareholders' equity and not assets, this fee
increases  as  the  Company  successfully  accesses  capital  markets and raises
additional  equity  capital  and  is,  therefore,  managing  a  larger amount of
invested  capital  on  behalf  of its shareholders.  In order for the Manager to
earn  a  performance fee, the rate of return on the shareholders' investment, as
defined  in  the  Management  Agreement,  must  exceed the average ten-year U.S.
Treasury rate during the quarter plus 1%.  During the second quarter of 1999 and
1998,  the  Company did not pay the Manager a performance fee in accordance with
the terms of the Management Agreement.  As presented in the following table, the
performance  fee is a variable expense that fluctuates with the Company's return
on  shareholders'  equity  relative  to  the average 10-year U.S. Treasury rate.

                                       28
<PAGE>
The  following  table  highlights the quarterly trend of operating expenses as a
percent  of  average  assets:

<TABLE>
<CAPTION>
                       ANNUALIZED OPERATING EXPENSE RATIOS

               Management Fee &         Total
For The         Other Expenses/   Performance Fee/   G & A Expense/
Quarter Ended   Average Assets     Average Assets    Average Assets
-------------  -----------------  -----------------  ---------------
<S>            <C>                <C>                <C>
Mar 31, 1997.              0.14%              0.11%            0.25%
Jun 30, 1997.              0.13%              0.09%            0.22%
Sep 30, 1997.              0.12%              0.09%            0.21%
Dec 31, 1997.              0.12%              0.05%            0.17%
Mar 31, 1998.              0.10%              0.06%            0.16%
Jun 30, 1998.              0.10%                 -             0.10%
Sep 30, 1998.              0.10%                 -             0.10%
Dec 31, 1998.              0.11%                 -             0.11%
Mar 31, 1999.              0.12%                 -             0.12%
Jun 30, 1999.              0.12%                 -             0.12%
</TABLE>

RESULTS  OF  OPERATIONS  FOR  THE  SIX  MONTHS  ENDED  JUNE  30,  1999

For  the  six  months  ended  June  30,  1999,  the  Company's  net  income  was
$11,633,000,  or  $0.39  per  share (Basic and Diluted EPS), based on a weighted
average  of  21,490,000  shares  outstanding.  That  compares to $17,972,000, or
$0.69  per  share  (Basic  and  Diluted  EPS),  based  on  a weighted average of
21,299,000  shares  outstanding  for  the  six  months ended June 30, 1998.  Net
interest income for the quarter totaled $15,638,000, compared to $19,203,000 for
the  same  period  in  1998.  Net  interest  income is comprised of the interest
income  earned  on  mortgage  investments less interest expense from borrowings.
During  the first six months of 1999, the Company recorded a gain on the sale of
ARM  securities  of  $35,000 as compared to a gain of $3,025,000 during the same
period  of  1998.  Additionally,  during  the  first  half  of 1999, the Company
reduced  its  earnings  and  the  carrying  value of its ARM assets by reserving
$1,357,000  for  potential  credit losses, compared to $841,000 during the first
half  of  1998.  During the six months ended June 30, 1999, the Company incurred
operating  expenses  of  $2,665,000,  consisting  of  a  base  management fee of
$2,038,000  and other operating expenses of $627,000.  During the same period of
1998,  the  Company  incurred  operating expenses of $3,415,000, consisting of a
base management fee of $2,075,000, a performance-based fee of $759,000 and other
operating  expenses  of  $581,000.

The  Company's return on average common equity was 5.1% for the six months ended
June  30,  1999  compared  to  8.8% for the six months ended June 30, 1998.  The
primary  reasons  for  the  lower  return on average common equity is a slightly
lower  interest  rate  spread,  as  discussed  below,  the  lower level of gains
recorded  during  this six month period on the sale of ARM assets as compared to
the same period during 1998 and the higher level of provisions for credit losses
commensurate  with  the  increased  size  of the Company's whole loan portfolio.

One  primary  reason  for  the  decline  in  the ARM portfolio yield is that the
average  interest  rate  of  the  ARM  portfolio  at  June 30, 1999 was 6.85% as
compared  to  7.44%  a year earlier.  Based on market interest rates on June 30,
1998,  the  ARM  portfolio  average  rate of 7.44% was within 0.06% of being the
fully  indexed  rate  whereas the ARM portfolio average rate of 6.85% as of June
30, 1999 is 0.25% from the fully indexed rate of 7.10%.  The Company expects the
ARM  portfolio average interest rate to increase over the next several months as
the  portfolio  assets  have  an opportunity to reset to current interest rates.
This  lower  average  interest rate of the ARM portfolio was partially offset by
lower  cost of funds which has also declined since June 30, 1998.  The Company's
cost  of funds as of June 30, 1998 was 5.81% and has declined to 5.40%, a  0.41%
decrease  compared  to  the 0.59% decrease in the ARM portfolio average interest
rate.  One  of  the reasons why the Company's cost of funds has not decreased as
much  as the yield on the Company's ARM assets is that the Company has shortened
the  average  mismatch between the interest rate repricing of its ARM assets and
its  borrowings.  As  of  June 30, 1998, the mismatch was 53 days and as of June
30,  1999,  the  mismatch  was  37  days.

                                       29
<PAGE>
The  following  table  reflects  the  average  balances for each category of the
Company's  interest  earning  assets  as  well as the Company's interest bearing
liabilities,  with  the  corresponding effective rate of interest annualized for
the  six  month  periods  ended  June  30,  1999  and  1998:

<TABLE>
<CAPTION>
                                        AVERAGE BALANCE AND RATE TABLE
                                        (Dollar amounts in thousands)

                                              For  the  Six  Month     For  the  Six  Month
                                                 Period  Ended            Period  Ended
                                                 June 30, 1999            June 30, 1998
                                            -----------------------  ------------------------
                                              Average    Effective     Average     Effective
                                              Balance       Rate       Balance       Rate
                                            -----------  ----------  -----------  -----------
<S>                                         <C>          <C>         <C>          <C>
  Interest Earning Assets:
    Adjustable-rate mortgage assets. . . .  $4,270,323        5.71%  $4,880,450         6.11%
    Cash and cash equivalents. . . . . . .      30,492        5.87        8,564         4.15
                                            -----------  ----------  -----------  -----------
                                             4,300,815        5.71    4,889,014         6.11
                                            -----------  ----------  -----------  -----------
  Interest Bearing Liabilities:
    Borrowings . . . . . . . . . . . . . .   3,925,409        5.46    4,503,922         5.78
                                            -----------  ----------  -----------  -----------
  Net Interest Earning Assets and Spread .  $  375,407        0.25%  $  385,092         0.33%
                                            ==========  ===========  ===========  ===========

  Yield on Net Interest Earning Assets (1)                    0.73%                     0.79%
                                                        ===========               ===========
<FN>
(1)     Yield  on Net Interest Earning Assets is computed by dividing annualized net interest
income by the average  daily  balance  of  interest  earning  assets.
</TABLE>

As  a net result of the yield on the Company's interest-earning assets declining
to  5.71% during the first half of 1999 from 6.11% during the first half of 1998
and  the  Company's  cost  of  funds decreasing to 5.46% from 5.78% for the same
respective  time periods, its net interest income decreased by $3,564,000.  This
decrease  in  net interest income is primarily the result of a  rate variance as
well  as  a  less significant volume variance.  There was a net unfavorable rate
variance of $2,583,000, which consisted of an unfavorable variance of $9,838,000
resulting  from  the lower yield on the Company's ARM assets portfolio and other
interest-earning  assets and a favorable variance of $7,255,000 resulting from a
decrease  in  the  Company's  cost  of funds.  The decreased average size of the
Company's portfolio during the first half of 1999 compared to the same period of
1998  also  contributed  to lower net interest income in the amount of $981,000.
The  average balance of the Company's interest-earning assets was $4.301 billion
during  the  first half of 1999 compared to $4.889 billion during the first half
of  1998  --  a  decrease  of  12%.

During  the first half of 1999, the Company realized a net gain from the sale of
one  ARM  security in the amount of $35,000 as compared to $3,025,000 during the
first  half  of  1998.  The  Company considers selling assets as a portfolio and
liquidity  management  tool  and not a core source of earnings.  During 1998 the
Company  was  focused  on  repositioning  its  portfolio  into  less  prepayment
sensitive ARM assets and selling assets that were prepaying faster than expected
for  which  the  Company  could  get a good value from a sale.  As a result, the
Company  was  more  active  in selling a few selected assets in 1998 than it has
been  year  to date in 1999.  In 1999, especially during the second quarter, the
Company  has been focused on fully utilizing its capital capacity after allowing
the  Company's  assets to decrease during the latter part of 1998 and early 1999
and  has, therefore, not been seeking opportunities to sell assets.  The Company
recorded an expense for credit losses in the amount of $1,375,000 during the six
months ended June 30, 1999, compared to $841,000 during the same period of 1998.
The  increase  in the provision reflects the increased size of the Company's ARM
loan  portfolio  which  includes  loans  held  for securitization, loans held as
collateral  for  AAA  notes and securitized loans for which the Company retained
all  of  the  classes  of  securities created upon securitization, including the
first  loss  classes,  although  the  Company  has  acquired  third-party credit
insurance  that has reduced or capped the Company's exposure to credit losses on
securitized loans.  To date, the Company has not experienced any losses from its
loan  portfolio  and  the  loans  that  are  currently  delinquent  appear to be
adequately  secured by the collateral value so that the Company does not believe
it  will  experience  any loss from the loans currently delinquent.  The one REO
property  that the Company owned at June 30, 1999 has subsequently been sold for
an  amount  above  the  Company's  carrying  value.

                                       30
<PAGE>
For  the  six  months  ended  June  30,  1999,  the Company's ratio of operating
expenses to average assets was 0.12% as compared to 0.13% for the same period of
1998.  The  primary reason for the decline in operating expenses is the variable
nature  of  the performance based fee paid to the Manager, which is based on the
performance  of  the  Company relative to the average 10-year U.S. Treasury rate
during  the  applicable  period.  During the first half of 1999, the Manager did
not  earn a performance fee as compared to earning a performance fee of $759,000
during  the  same  period  of  1998.

LIQUIDITY  AND  CAPITAL  RESOURCES

The  Company's  primary  source  of  funds  for  the quarter ended June 30, 1999
consisted  of  reverse  repurchase agreements, which totaled $3.212 billion, and
callable  AAA notes, which had a balance of $989.8 million.  The Company's other
significant  source  of  funds  for the quarter ended June 30, 1999 consisted of
payments  of  principal and interest from its ARM assets in the amount of $374.2
million.  In  the  future, the Company expects its primary sources of funds will
consist  of  borrowed funds under reverse repurchase agreement transactions with
one-  to  twelve-month  maturities,  capital  market  financing  transactions
collateralized  by  ARM  and Hybrid ARM loans, proceeds from monthly payments of
principal  and  interest on its ARM assets portfolio and occasional asset sales.
The  Company's liquid assets generally consist of unpledged ARM assets, cash and
cash  equivalents.

Total  borrowings outstanding at June 30, 1999, had a weighted average effective
cost  of  5.27%.  The  reverse  repurchase  agreements  had  a  weighted average
remaining  term  to  maturity  of  3.8  months  and the collateralized AAA notes
payable  had  a final maturity of January 25, 2029, but will be paid down as the
ARM assets collateralizing the notes are paid down.  As of June 30, 1999, $1.757
billion  of  the Company's borrowings were variable-rate term reverse repurchase
agreements.  Term  reverse  repurchase  agreements are committed financings with
original  maturities  that  range  from  three  months  to fourteen months.  The
interest rates on these term reverse repurchase agreements are indexed to either
the  one-  or three-month LIBOR rate and reprice accordingly.  The interest rate
on  the  collateralized  AAA notes adjusts monthly based on changes in one-month
LIBOR.

The Company has arrangements to enter into reverse repurchase agreements with 25
different  financial  institutions and on June 30, 1999, had borrowed funds with
13  of  these  firms.  Because  the Company borrows money under these agreements
based  on the fair value of its ARM assets and because changes in interest rates
can  negatively  impact  the  valuation  of  ARM assets, the Company's borrowing
ability  under these agreements could be limited and lenders may initiate margin
calls  in  the  event  interest  rates  change or the value of the Company's ARM
assets  decline  for  other reasons.  Additionally, certain of the Company's ARM
assets  are  rated  less than AA by the Rating Agencies (approximately 4.0%) and
have  less  liquidity  than  assets that are rated AA or higher.  Other mortgage
assets  which  are rated AA or higher by the Rating Agencies derive their credit
rating based on a mortgage pool insurer's rating.  As a result of either changes
in  interest  rates,  credit  performance of a mortgage pool or a downgrade of a
mortgage  pool  issuer, the Company may find it difficult to borrow against such
assets  and, therefore, may be required to sell certain mortgage assets in order
to  maintain  liquidity.  If required, these sales could be at prices lower than
the carrying value of the assets, which would result in losses.  The Company had
adequate  liquidity  throughout  the  quarter ended June 30, 1999.  Further, the
Company  believes  it  will  continue  to  have sufficient liquidity to meet its
future  cash  requirements from its primary sources of funds for the foreseeable
future  without  needing  to  sell  assets.

As of June 30, 1999, the Company had $989.8 million of  AAA collateralized notes
outstanding, which are not subject to margin calls.  Due to the structure of the
collateralized notes, their financing is not based on market value or subject to
subsequent  changes  in  mortgage  credit markets, as is the case of the reverse
repurchase  agreement  arrangements.

As  of  June  30, 1999, the Company had one whole loan financing facility with a
committed  borrowing  capacity  of $150 million, with an option to increase this
amount  to  $300 million.  This facility matures on January 8, 2000.  During the
second  quarter  of  1999,  the  Company  entered into two additional whole loan
financing  facilities.  One  with an uncommitted amount of borrowing capacity of
$300  million  and  one  with  an  unspecified  amount  of uncommitted borrowing
capacity.

In  December 1996, the Company's Registration Statement on Form S-3, registering
the  sale  of  up  to $200 million of additional equity securities, was declared
effective  by  the  Securities  and  Exchange  Commission.  This  registration
statement  includes  the  possible  issuances  of common stock, preferred stock,
warrants  or  shareholder  rights.  As  of  June  30, 1999, the Company had $109
million  of  its  securities  registered for future sale under this Registration
Statement.

                                       31
<PAGE>
During  1998,  the Board of Directors approved a common stock repurchase program
of up to 1,000,000 shares at prices below book value, subject to availability of
shares  and  other market conditions.  The Company did not repurchase any shares
during  the  first  six  months  of  1999.  To date, the Company has repurchased
500,016  shares  at  an  average  price  of  $9.28  per  share.

The  Company  has  a  Dividend  Reinvestment and Stock Purchase Plan (the "DRP")
designed to provide a convenient and economical way for existing shareholders to
automatically  reinvest their dividends in additional shares of common stock and
for  new  and  existing  shareholders to purchase shares, as defined in the DRP.
During  the  first  six months of 1999, the Company purchased shares in the open
market  on  behalf  of the participants in its DRP instead of issuing new shares
below  book  value.  In accordance with the terms and conditions of the DRP, the
Company  pays  the  brokerage  commission  in  connection  with these purchases.

EFFECTS  OF  INTEREST  RATE  CHANGES

Changes  in interest rates impact the Company's earnings in various ways.  While
the  Company  only  invests  in ARM assets, rising short-term interest rates may
temporarily  negatively  affect  the  Company's  earnings and conversely falling
short-term interest rates may temporarily increase the Company's earnings.  This
impact  can  occur  for  several  reasons  and  may  be  mitigated  by portfolio
prepayment  activity  as  discussed below.  First, the Company's borrowings will
react  to changes in interest rates sooner than the Company's ARM assets because
the  weighted average next repricing date of the borrowings is usually a shorter
time  period.  Second,  interest  rates on ARM loans are generally limited to an
increase  of  either 1% or 2% per adjustment period (commonly referred to as the
periodic  cap)  and  the  Company's  borrowings do not have similar limitations.
Third,  the  Company's  ARM  assets lag changes in the indices due to the notice
period  provided  to  ARM  borrowers  when the interest rates on their loans are
scheduled  to change.  The periodic cap only affects the Company's earnings when
interest  rates  move  by  more  than  1%  per  six-month period or 2% per year.

Interest  rate  changes  may also impact the Company's ARM assets and borrowings
differently  because  the  Company's  ARM  assets are indexed to various indices
whereas  the  interest  rate  on  the  Company's  borrowings generally move with
changes in LIBOR.  Although the Company has always favored acquiring LIBOR based
ARM assets in order to reduce this risk, LIBOR based ARMs are not generally well
accepted  by  home owners in the U.S.  As a result, the Company has acquired ARM
assets indexed to a mix of indices in order to diversify its exposure to changes
in  LIBOR  in  contrast  to  changes  in  other indices.  During times of global
economic  instability, U.S. Treasury rates generally decline because foreign and
domestic  investors  generally  consider  U.S. Treasury instruments to be a safe
haven  for investments.  The Company's ARM assets indexed to U.S. Treasury rates
then  decline  in  yield  as  U.S. Treasury rates decline, whereas the Company's
borrowings  and  other  ARM assets may not be affected by the same factors or to
the  same  degree.  As  a  result, the Company's income can increase or decrease
depending on the relationship between the various indices to which the Company's
ARM  assets  are  indexed,  compared  to changes in the Company's cost of funds.

The rate of prepayment on the Company's mortgage assets may increase if interest
rates  decline,  or  if the difference between long-term and short-term interest
rates diminishes.  Increased prepayments would cause the Company to amortize the
premiums  paid  for  its mortgage assets faster, resulting in a reduced yield on
its mortgage assets.  Additionally, to the extent proceeds of prepayments cannot
be reinvested at a rate of interest at least equal to the rate previously earned
on  such  mortgage  assets,  the  Company's  earnings may be adversely affected.

Conversely, the rate of prepayment on the Company's mortgage assets may decrease
if  interest  rates  rise, or if the difference between long-term and short-term
interest  rates  increases.  Decreased  prepayments  would  cause the Company to
amortize  the  premiums  paid  for  its  ARM  assets  over a longer time period,
resulting  in  an  increased yield on its mortgage assets.  Therefore, in rising
interest  rate  environments where prepayments are declining, not only would the
interest rate on the ARM assets portfolio increase to re-establish a spread over
the  higher  interest  rates,  but  the  yield  also  would  rise  due to slower
prepayments.  The  combined  effect  could significantly mitigate other negative
effects  that  rising  short-term  interest  rates  might  have  on  earnings.

Lastly,  because  the Company only invests in ARM assets and approximately 8% to
10%  of  such  mortgage  assets  are  purchased  with  shareholders' equity, the
Company's  earnings  over  time  will  tend  to  increase following periods when
short-term  interest  rates  have  risen  and  decrease  following  periods when
short-term  interest  rates have declined.  This is because the financed portion
of  the  Company's  portfolio of ARM assets will, over time, reprice to a spread
over  the  Company's cost of funds, while the portion of the Company's portfolio
of ARM assets that are purchased with shareholders' equity will generally have a
higher  yield in a higher interest rate environment and a lower yield in a lower
interest  rate  environment.

                                       32
<PAGE>
YEAR  2000  ISSUES

The  Year  2000 issues involve both hardware design flaws in which many computer
systems,  and machines that use computer chips, will not correctly recognize the
date  beginning  in  the  Year 2000 and, additionally, software applications and
compilers that do not use a four-digit reference to years which might not behave
as  intended once the Year 2000 is reached.  Three general areas of concern are:
1)  clocks built into computers and computer chips that will rollover to 1900 or
1980  instead  of  2000,  2) purchased software that does not recognize the Year
2000 as a leap year or that does not use a four-digit reference to years, and 3)
internally  developed  applications  that  do not store the year as a four-digit
year.  The  Company invests in assets and enters into agreements that employ the
use  of  dates  and  is, therefore, concerned about the ability of equipment and
computer  programs  to  interpret  dates  or  recognize  dates  accurately.

In  consideration  of the Year 2000 issues, the Manager has reviewed the ability
of  its  own  computers  and  computer programs to properly recognize and handle
dates in the Year 2000.  Through the normal upgrading of computer equipment, the
Manager  has  already  replaced all computers that were not Year 2000 compliant.
The  primary  software  used  by the Company has been internally developed using
products  that  are Year 2000 compliant.  Other software that has been purchased
has also been certified to be Year 2000 compliant.  The Manager has reviewed all
the date fields embedded in its internally developed spreadsheets, databases and
other  programs  and  has determined that all such programs are using four-digit
years  in  references to dates.  Therefore, the Company believes that all of its
equipment  and  internal  systems  are  ready  for  the Year 2000.  To date, the
Manager  has  incurred  all  costs  in  order  for  the  Company to be Year 2000
compliant.

The  Company believes that most of its exposure to Year 2000 issues involves the
readiness of third parties such as, but not limited to, loan servicers, security
master servicers, security paying agents and trustees, its stock transfer agent,
its securities custodian, the counterparties on its various financing agreements
and  hedging  contracts  and  vendors.  The Manager, at its expense, conducted a
survey,  which  was  completed  during the first half of 1999, of all such third
parties  to  try to determine the readiness of such third parties to handle Year
2000  dates  and  to  try to determine the potential impact of Year 2000 issues.
All  surveyed parties have either certified that they are Year 2000 compliant or
that  they  are  in the testing stage and expect to be Year 2000 compliant.  All
third  parties  that indicated they are in the testing stage will be re-surveyed
by  early  in the fourth quarter.  The Company cannot be certain that the survey
fully  identified all Year 2000 issues to fully access the potential problems or
loss  associated  with Year 2000 issues or that any failure by these other third
parties  to  resolve  Year  2000  issues would not have an adverse effect on the
Company's  operations  and  financial  condition.  The  Company  and the Manager
believe that they are spending the appropriate and necessary resources to try to
identify  Year 2000 issues and to resolve them or to mitigate the impact of them
to  the  best  of  their  ability  as  they  are  identified.

The  Company  has developed a contingency plan for what it believes to be likely
worst  case  scenarios.  The  Company  believes  that the most likely worst case
scenarios  all  impact  the  availability  and cost of financing ARM assets over
year-end.  For  this  reason,  the  Company  has  already entered into financing
arrangements  that  finances  over  60%  of  the  Company's  ARM  portfolio over
year-end.  In  addition,  the  Company  has decided to increase its liquidity as
year-end  approaches  by  de-emphasizing  the acquisition of ARM assets over the
balance  of the year.  As an additional precaution, the Company is reviewing the
appropriateness  of selling a few selected assets that may prove to be difficult
to  finance  over year-end, if acceptable financing arrangements for such assets
can  not  or  are  not  expected  to be consummated by the end of the year.  The
Company  is also discussing the financing of its agency payment receivables with
other  financial  institutions  as  another  possible  source of liquidity.  The
Company  believes that these steps, as part of its contingency plan, are prudent
measures  in light of the uncertainty related to Year 2000 issues.  Further, the
Company  believes that these steps will be sufficient to address the most likely
worst  case  scenarios,  but the Company can provide no certainty that such will
prove  to  be  the  case.

OTHER  MATTERS

As  of  June  30,  1999,  the  Company  calculates its Qualified REIT Assets, as
defined  in  the  Internal  Revenue Code of 1986, as amended (the "Code"), to be
99.0% of its total assets, as compared to the Code requirement that at least 75%
of  its total assets must be Qualified REIT Assets.  The Company also calculates
that  99.3%  of its 1999 revenue  for the first six months qualifies for the 75%
source  of  income  test and 100% of its revenue qualifies for the 95% source of
income  test  under  the REIT rules.  The Company also met all REIT requirements
regarding  the  ownership  of  its common stock and the distributions of its net
income.  Therefore,  as  of  June  30,  1999,  the Company believes that it will
continue  to  qualify  as  a  REIT  under  the  provisions  of  the  Code.

                                       33
<PAGE>
The  Company  at  all  times intends to conduct its business so as not to become
regulated as an investment company under the Investment Company Act of 1940.  If
the  Company  were  to  become  regulated  as  an  investment  company, then the
Company's  use  of  leverage  would  be  substantially  reduced.  The Investment
Company  Act  exempts  entities  that  are "primarily engaged in the business of
purchasing  or otherwise acquiring mortgages and other liens on and interests in
real  estate"  ("Qualifying  Interests").  Under  current  interpretation of the
staff  of  the  SEC,  in  order  to qualify for this exemption, the Company must
maintain  at  least  55%  of  its  assets  directly in Qualifying Interests.  In
addition,  unless  certain  mortgage  securities  represent all the certificates
issued with respect to an underlying pool of mortgages, such mortgage securities
may  be  treated  as securities separate from the underlying mortgage loans and,
thus,  may  not  be  considered  Qualifying  Interests  for  purposes of the 55%
requirement.  The  Company  calculates  that  it  is  in  compliance  with  this
requirement.


PART  II.     OTHER  INFORMATION

Item  1.     Legal  Proceedings
               At  June  30, 1999,  there were no pending legal proceedings to
               which  the  Company  was  a  party  or  of  which  any  of  its
               property  was  subject.

Item  2.     Changes  in  Securities
               Not  applicable

Item  3.     Defaults  Upon  Senior  Securities
               Not  applicable

Item  4.     Submission  of  Matters  to  a  Vote  of  Security  Holders
               (a)  The Annual Meeting of Shareholders of the Company was held
                    on April 29,  1999.

               (c)  The  following  matters were voted on at the Annual Meeting:
                    (1)  Election  of  Directors

                                              Votes
                                      --------------------
                         Nominee         For      Withheld
                    ----------------  ----------  --------
                    Owen  M.  Lopez   18,872,510   267,253
                    James  H.  Lorie  18,868,379   271,384

Item  5.     Other  Information
               None

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

               (a)  Exhibits
                    See  "Exhibit  Index"

               (b)  Reports  on  Form  8-K
                    None

                                       34
<PAGE>
                                   SIGNATURES

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

                                     THORNBURG  MORTGAGE  ASSET  CORPORATION



Dated:     August  4,  1999          By:  /s/  Larry  A.  Goldstone
                                          --------------------------
                                          Larry  A.  Goldstone
                                          President and Chief Operating Officer
                                          (authorized  officer  of  registrant)




Dated:     August  4,  1999          By:  /s/  Richard  P.  Story
                                          -----------------------
                                          Richard  P.  Story,
                                          Chief Financial Officer and Treasurer
                                          (principal accounting officer)

                                       35
<PAGE>
<TABLE>
<CAPTION>
                                  Exhibit Index

                                                                            Sequentially
                                                                              Numbered
Exhibit Number               Exhibit  Description                               Page
--------------  ----------------------------------------------------------  --------------
<S>             <C>                                                         <C>
     10.1       Management Agreement between the Registrant and Thornburg
                  Mortgage Advisory Corporation dated July 15, 1999               37

     10.3.2     Amendment dated April 15, 1999 to the amended and restated
                  1992 Stock Option and Incentive Plan                            52

     27         Financial Data Schedule

</TABLE>
                                       36
<PAGE>