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                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:     MARCH 31, 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  April  28,  1999

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

<PAGE>
                      THORNBURG MORTGAGE ASSET CORPORATION
                                    FORM 10-Q



<TABLE>
<CAPTION>
                                         INDEX


                                                                                   Page
                                                                                   ----
<S>           <C>                                                                  <C>
PART I.       FINANCIAL INFORMATION

  Item 1.     Financial Statements

              Consolidated Balance Sheets at March 31, 1999 and December 31, 1998     3

              Consolidated Statements of Operations for the three months ended
              March 31, 1999 and March 31, 1998                                       4

              Consolidated Statement of Shareholders' Equity for the three months
              ended March 31, 1999                                                    5

              Consolidated Statements of Cash Flows for the three months ended
              March 31, 1999 and March 31, 1998                                       6

              Notes to Consolidated Financial Statements                              7

  Item 2.     Management's Discussion and Analysis of
              Financial Condition and Results of Operations                          16



PART II.      OTHER INFORMATION

  Item 1.     Legal Proceedings                                                      31

  Item 2.     Changes in Securities                                                  31

  Item 3.     Defaults Upon Senior Securities                                        31

  Item 4.     Submission of Matters to a Vote of Security Holders                    31

  Item 5.     Other Information                                                      31

  Item 6.     Exhibits and Reports on Form 8-K                                       31


  SIGNATURES                                                                         32
</TABLE>


<PAGE>
PART  I.     FINANCIAL  INFORMATION

ITEM  1.     FINANCIAL  STATEMENTS

THORNBURG  MORTGAGE  ASSET  CORPORATION  AND  SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED  BALANCE  SHEETS
(Amounts  in  thousands)


                                                               March 31, 1999    December 31, 1998
                                                              ----------------  -------------------
<S>                                                           <C>               <C>
ASSETS
  Adjustable-rate mortgage ("ARM") assets: (Notes 2 and 3)
    ARM securities                                            $     2,872,394   $        3,094,657 
    Collateral for collateralized notes                             1,072,773            1,147,350 
    ARM loans held for securitization                                  21,236               26,410 
                                                              ----------------  -------------------
                                                                    3,966,403            4,268,417 
                                                              ----------------  -------------------

  Cash and cash equivalents                                            47,342               36,431 
  Accrued interest receivable                                          29,868               37,939 
  Prepaid expenses and other                                            5,366                1,846 
                                                              ----------------  -------------------
                                                              $     4,048,979   $        4,344,633 
                                                              ================  ===================


LIABILITIES

  Reverse repurchase agreements (Note 3)                      $     2,643,849   $        2,867,207 
  Collateralized notes (Note 3)                                     1,052,429            1,127,181 
  Other borrowings (Note 3)                                             1,946                2,029 
  Accrued interest payable                                             11,368               31,514 
  Dividends payable (Note 5)                                            1,670                1,670 
  Accrued expenses and other                                            2,740                3,209 
                                                              ----------------  -------------------
                                                                    3,714,002            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                                          341,822              341,756 
  Accumulated other comprehensive income (loss)                       (57,046)             (82,148)
  Notes receivable from stock sales                                    (4,632)              (4,632)
  Retained earnings (deficit)                                          (6,526)              (4,512)
  Treasury stock: at cost, 500 and 500 shares, respectively            (4,666)              (4,666)
                                                              ----------------  -------------------
                                                                      334,977              311,823 
                                                              ----------------  -------------------

                                                              $     4,048,979   $        4,344,633 
                                                              ================  ===================
</TABLE>


See  Notes  to  Consolidated  Financial  Statements.

<PAGE>
THORNBURG  MORTGAGE  ASSET  CORPORATION  AND  SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED  STATEMENTS  OF  OPERATIONS
 (In  thousands,  except  per  share  data)


                                              Three  Months  Ended
                                                   March  31,
                                                1999       1998
                                              ---------  ---------
<S>                                           <C>        <C>

Interest income from ARM assets and cash      $ 59,645   $ 76,315 
Interest expense on borrowed funds             (53,079)   (64,889)
                                              ---------  ---------
     Net interest income                         6,566     11,426 
                                              ---------  ---------

Gain (loss) on sale of ARM assets                    -      1,528 
Provision for credit losses                       (686)      (387)
Management fee (Note 7)                         (1,018)    (1,028)
Performance fee (Note 7)                             -       (759)
Other operating expenses                          (263)      (284)
                                              ---------  ---------

     NET INCOME                               $  4,599   $ 10,496 
                                              =========  =========


Net income                                    $  4,599   $ 10,496 
Dividend on preferred stock                     (1,670)    (1,670)
                                              ---------  ---------

Net income available to common shareholders   $  2,929   $  8,826 
                                              =========  =========

Basic earnings per share                      $   0.14   $   0.42 
                                              =========  =========

Diluted earnings per share                    $   0.14   $   0.42 
                                              =========  =========

Average number of common shares outstanding     21,490     20,797 
                                              =========  =========
</TABLE>


See  Notes  to  Consolidated  Financial  Statements.

<PAGE>
THORNBURG  MORTGAGE  ASSET  CORPORATION  AND  SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED  STATEMENT  OF  SHAREHOLDERS'  EQUITY

Three  Months  Ended  March  31,  1999
(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, 1998    $    65,805  $    220  $  341,756  $ (82,148)  $ (4,632)  $  (4,512)  $(4,666)            $  311,823
Comprehensive income:
  Net income                                                                                4,599             $ 4,599        4,599
   Other comprehensive income:
   Available-for-sale assets:
     Fair value adjustment, net
     of amortization                    -         -           -     25,340          -           -         -    25,340       25,340
   Deferred gain on sale of
     hedges, net of amortization        -         -           -       (238)         -           -         -      (238)        (238)
                                                                                                              --------
  Other comprehensive income                                                                                  $29,701
                                                                                                              ========
Interest from notes receivable
   fromstock sales                                           66                                                                 66
Dividends declared on preferred
   stock - $0.605 per share             -         -           -          -          -      (1,670)        -                 (1,670)
Dividends declared on common
   stock - $0.23 per share              -         -           -          -          -      (4,943)        -                 (4,943)
                              -----------  --------  ----------  ----------  ---------  ----------  --------            -----------
Balance, March 31, 1999       $    65,805  $    220  $  341,822  $ (57,046)  $ (4,632)  $  (6,526)  $(4,666)            $  334,977
                              ===========  ========  ==========  ==========  =========  ==========  ========            ===========

</TABLE>

See  Notes  to  Consolidated  Financial  Statements.

<PAGE>
THORNBURG  MORTGAGE  ASSET  CORPORATION  AND  SUBSIDIARIES

<TABLE>
<CAPTION>
CONSOLIDATED  STATEMENTS  OF  CASH  FLOWS
(In  thousands)
                                                                Three  Months  Ended
                                                                     March  31,
                                                                  1999        1998
                                                               ----------  ----------
<S>                                                            <C>         <C>
Operating Activities:
  Net Income                                                   $   4,599   $  10,496 
  Adjustments to reconcile net income to
    net cash provided by operating activities:
      Amortization                                                10,796      10,107 
      Net (gain) loss from investing activities                      686      (1,141)
      Change in assets and liabilities:
        Accrued interest receivable                                8,071        (898)
        Prepaid expenses and other                                (3,520)     (2,382)
        Accrued interest payable                                 (20,146)    (21,622)
        Accrued expenses and other                                  (469)         (3)
                                                               ----------  ----------
          Net cash provided by (used in) operating activities         17      (5,443)
                                                               ----------  ----------

Investing Activities:
  Available-for-sale ARM securities:
    Purchases                                                    (99,707)   (693,744)
    Proceeds on sales                                                  -     191,825 
    Proceeds from calls                                                -      54,879 
    Principal payments                                           338,460     330,536 
  Held-to-maturity ARM securities:
    Principal payments                                                 -      16,152 
  Collateral for collateralized notes:
    Principal payments                                            73,258           - 
ARM loans:
    Purchases                                                          -    (120,025)
    Principal payments                                             5,092      11,234 
Purchase of interest rate cap agreements                          (1,469)       (294)
                                                               ----------  ----------
      Net cash provided by (used in) investing activities        315,634    (209,437)
                                                               ----------  ----------

Financing Activities:
  Net borrowings from (repayments of) reverse
     repurchase agreements                                      (223,358)    199,929 
  Repayments of collateralized notes                             (74,752)          - 
  Repayments of other borrowings                                     (83)       (857)
  Proceeds from common stock issued                                    -      16,290 
  Dividends paid                                                  (6,613)    (11,756)
  Interest from notes receivable from stock sales                     66           - 
                                                               ----------  ----------
          Net cash provided by (used in) financing activities   (304,740)    203,606 
                                                               ----------  ----------

Net increase (decrease) in cash and cash equivalents              10,911     (11,274)

Cash and cash equivalents at beginning of period                  36,431      13,780 
                                                               ----------  ----------
Cash and cash equivalents at end of period                     $  47,342   $   2,506 
                                                               ==========  ==========

Supplemental disclosure of cash flow information
and non-cash activities are included in Note 3.
</TABLE>


See  Notes  to  Consolidated  Financial  Statements

<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 five 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  assets  are recorded when all significant
uncertainties regarding the characteristics of the assets are removed, generally
shortly  before  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
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

<PAGE>
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.

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 five 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.

<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.

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.

Following  is  information  about the computation of the earnings per share data
for  the three month periods ended March 31, 1999 and 1998 (amounts in thousands
except  per  share  data):

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

Three Months Ended March 31, 1999
---------------------------------                                
Net income                         $   4,599 

Less preferred stock dividends        (1,670)
                                   ----------                    

Basic EPS, income available to
 common shareholders                   2,929   21,490  $     0.14
                                                       ==========

Effect of dilutive securities:

 Stock options                             -        -
                                   ----------  ------

Diluted EPS                        $   2,929   21,490  $     0.14
                                   ==========  ======  ==========

Three Months Ended March 31, 1998
---------------------------------                                
Net income                         $  10,496 

Less preferred stock dividends        (1,670)
                                   ----------                    

Basic EPS, income available to
 common stockholders                   8,826   20,797  $     0.42
                                                       ==========

Effect of dilutive securities:

 Stock options                             -       18
                                   ----------  ------

Diluted EPS                        $   8,826   20,815  $     0.42
                                   ==========  ======  ==========
</TABLE>

<PAGE>
The Company did not grant any options to purchase shares of the Company's common
stock to directors or officers or to employees of the Manager during the quarter
ended  March  31, 1999.  The Company did grant options to directors and officers
of  the Company and employees of the Manager to purchase 32,763 shares of common
stock at an average price of $16.52 per share during the quarter ended March 31,
1998.  The  conversion of preferred stock was not included in the computation of
diluted  EPS  because  such  conversion  would  increase  the  diluted  EPS.

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>
March  31,  1999:

                                  Available-
                                   for-Sale       Collateral for
                                ARM Securities    Notes Payable     ARM Loans      Total
                               ----------------  ----------------  -----------  -----------
<S>                            <C>               <C>               <C>          <C>
Principal balance outstanding  $     2,837,503   $     1,057,507   $   21,068   $3,916,078 
Net unamortized premium                 78,723            16,367          251       95,341 
Deferred gain from hedging                (526)                -            -         (526)
Allowance for losses                    (1,373)           (1,101)         (83)      (2,557)
Cap agreements                           8,447               410            -        8,857 
Principal payment receivable             7,290               242            -        7,532 
                               ----------------  ----------------  -----------  -----------
  Amortized cost, net                2,930,064         1,073,425       21,236    4,024,725 
                               ----------------  ----------------  -----------  -----------
Gross unrealized gains                   2,448             1,182           29        3,659 
Gross unrealized losses                (60,770)           (7,083)         (63)     (67,916)
                               ----------------  ----------------  -----------  -----------
  Fair value                   $     2,871,742   $     1,067,524   $   21,202   $3,960,468 
                               ================  ================  ===========  ===========

  Carrying value               $     2,871,742   $     1,073,425   $   21,236   $3,966,403 
                               ================  ================  ===========  ===========

December 31, 1998:
                                  Available-
                                   for-Sale       Collateral for
                                ARM Securities    Notes Payable     ARM Loans      Total
                               ----------------  ----------------  -----------  -----------
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  March  31,  1999,  the Company did not sell any ARM
securities.  During  the same period of 1998, the Company realized $1,786,000 in
gains  and  $258,000  in losses on the sale of $190.3 million of ARM securities.
All  of  the  ARM  securities  sold  were  classified  as  available-for-sale.

<PAGE>
As  of  March  31,  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 $1,373,000.  At March 31, 1999, the Company is
providing  for  potential  future  credit  losses  on  two  assets  that have an
aggregate carrying value of $11.3 million, which represent less than 0.3% 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 three months
of  1999,  the  Company,  in  accordance  with  its  credit policies, recorded a
$380,000  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 March 31,
1999  and  December  31,  1998  (dollar  amounts  in  thousands):

<TABLE>
<CAPTION>
March 31, 1999
------------------
                    Loan      Loan      Percent of    Percent of
Delinquency Status  Count    Balance     ARM Loans   Total Assets
------------------  -----  -----------  -----------  -------------
<S>                 <C>    <C>          <C>          <C>
30 to 59 days           3  $     1,045        0.10%          0.03%
60 to 89 days           1          131        0.01           0.00 
90 days or more         2        3,550        0.36           0.09 
In foreclosure          4          817        0.08           0.02 
Real estate owned       1           55        0.01           0.00 
                    -----  -----------  -----------  -------------
                       11  $     5,598        0.56%          0.14%
                    =====  ===========  ===========  =============

December 31, 1998
------------------
Loan                Loan   Percent of   Percent of
Delinquency Status  Count  Balance      ARM Loans    Total Assets
------------------  -----  -----------  -----------  -------------
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
March  31,  1999  and  1998  (dollar  amounts  in  thousands):

<TABLE>
<CAPTION>
                       1999   1998
                      ------  -----
<S>                   <C>     <C>
Beginning balance     $  804  $  42
Provision for losses     380     59
Charge-offs, net           -      -
                      ------  -----
Ending balance        $1,184  $ 101
                      ======  =====
</TABLE>

As  of March 31, 1999, the Company had commitments to purchase $470.0 million of
ARM  assets.

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 5.72% as
of  March  31,  1999  and  5.86%  as  of  December  31,  1998.

As  of  March  31,  1999  and  December  31, 1998, the Company had purchased Cap
Agreements  with  a  remaining  notional  amount  of  $3.795  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  7.10%  to  13.00%  and average approximately 9.89%.  Of the Cap Agreements
owned  by  the  Company as of March 31,1999, $95 million are hedging the cost of
financing  Hybrid ARMs and $3.700 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 11.79%.  The Cap Agreements had an average maturity of 2.4
years  as  of  March 31, 1999.  The initial aggregate notional amount of the Cap

<PAGE>
Agreements  declines  to  approximately  $3.336  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  March  31,  1999,  the Company had outstanding $2.644 billion of reverse
repurchase  agreements  with  a  weighted  average borrowing rate of 5.10% and a
weighted average remaining maturity of 1.6 months.  As of March 31, 1999, $993.4
million  of  the Company's borrowings were variable-rate term reverse repurchase
agreements  with  original maturities that range from three months to two years.
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 March 31, 1999 were collateralized by ARM assets with a
carrying  value  of  $2.801  billion,  including  accrued  interest.

At March 31, 1999, the reverse repurchase agreements had the following remaining
maturities  (dollar  amounts  in  thousands):

<TABLE>
<CAPTION>
<S>                 <C>
Within 30 days      $1,367,232
31 to 89 days          839,198
90 days or greater     437,419
                    ----------
                    $2,643,849
                    ==========
</TABLE>

As  of  March 31, 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.  The  Company  had  no  balance borrowed against this
facility  as  of  March  31,  1999.  This  facility  matures on January 8, 2000.
During  April  1999,  the Company entered into an additional one-year whole loan
financing  facility  with  an  uncommitted  capacity  of  $300  million.

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 March 31,
1999,  the Notes had a net balance of $1.052 billion, an effective interest cost
of 5.52% and were collateralized by ARM loans with a principal balance of $963.6
million  and  ARM securities with a balance of $126.5 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.

<PAGE>
As  of  March 31, 1999, the Company was a counterparty to fourteen interest rate
swap  agreements  ("Swaps")  having  an  aggregate  notional  balance  of $499.8
million.  As  of  March  31,  1999, these Swaps had a weighted average remaining
term of 2.9 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,  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 26 days to 189 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 five years.  The
Swaps  at March 31, 1999 were collateralized by ARM assets with a carrying value
of  $0.9  million,  including  accrued  interest.

As  of  March  31,  1999, the Company had financed a portion of its portfolio of
interest rate cap agreements with $1.9 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 13.9 months. The other borrowings financing cap agreements
at March 31, 1999 were collateralized by ARM securities with a carrying value of
$2.9  million,  including  accrued  interest.  The aggregate maturities of these
other  borrowings  are  as  follows  (dollars  in  thousands):

<TABLE>
<CAPTION>
<S>   <C>
1999  $ 1,314
2000      632
      -------
      $ 1,946
      =======
</TABLE>

The  total  cash  paid  for  interest was $68.8 million during the quarter ended
March  31,  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 March 31, 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>
                                    March 31, 1999         December 31, 1998
                                ----------------------  -----------------------
                                 Carrying      Fair      Carrying       Fair
                                  Amount      Value       Amount       Value
                                ----------  ----------  -----------  ----------
Assets:
<S>                             <C>         <C>         <C>          <C>
 ARM assets                     $3,963,199  $3,957,264  $4,266,497   $4,259,374
 Cap Agreements                      3,204       3,204       1,920        1,920

Liabilities:
 Callable collateralized notes   1,052,429   1,057,749   1,127,181    1,127,181
 Other borrowings                    1,946       1,979       2,029        2,077
 Swap agreements                        76       2,205         (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 aggregated characteristics of groups of
loans  such  as,  but  not limited to, collateral type, index, margin, life cap,
periodic  cap, underwriting standards, age and delinquency experience.  The fair
value  of  the Company's long-term debt and interest rate swap agreements, which

<PAGE>
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 quarter ended March 31,1999.  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  April  15, 1999, the Company declared a first quarter 1999 dividend of $0.23
per  common  share  which will be paid on May 18, 1999 to common shareholders of
record  as  of  April  30,  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 also paid on April 12, 1999 to preferred shareholders of record
as  of  March  31,  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, options not so qualified
("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.

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  quarter  ended  March  31,  1999, there were not any options to buy
common  shares  or  DERs granted.  As of March 31, 1999, the Company had 612,402
options  outstanding  at exercise prices of $9.375 to $22.625 per share, 496,482
of  which  were exercisable.  The weighted average exercise price of the options
outstanding  was  $17.55 per share.  As of the March 31, 1999, there were 86,012
DERs granted, of which 57,032 were vested, and 7,071 PSRs granted.  In addition,
the Company recorded an expense associated with the DERs and the PSRs of $18,000
for  the  quarter  ended  March  31,  1999.

<PAGE>
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 March 31, 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  March 31, 1999 and 1998, the Company paid the Manager
$1,018,000  and  $1,028,000, respectively, in base management fees in accordance
with  the  terms  of  the  Agreement.

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  quarter  ended  March  31,  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  quarter  ended  March  31,  1998,  the Company paid the Manager $759,000 in
performance  based  compensation  in accordance with the terms of the Agreement.

<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.  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 5 years, and then
convert to an adjustable-rate for the balance of the term of the Hybrid ARM.  It
is  the Company's policy to fund the Hybrid ARMs with long-term debt obligations
such  that  the  debt  obligations  mature  within one year or less of the first
interest rate reset date of the Hybrid ARMs.  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.

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 will not invest more
than  30%  of  its  ARM  assets  in Hybrid ARMs and will limit 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  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
(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 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 portfolio, comprising not more than 30% of
total  assets,  may  consist  of  Other  Investment  assets,  which may include:

<PAGE>
(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  5%,  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  March  31,  1999,  the  Company  held total assets of $4.049 billion, $3.966
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  March  31,  1999,  95.3%  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,  89.1%  are  in  the  form  of
adjustable-rate  pass-through  certificates  or  ARM  loans.  The  remainder are
floating  rate classes of CMOs (6.3%) or investments in floating rate classes of
CBOs  (4.6%)  backed  primarily  by  mortgaged-backed  securities.

<PAGE>
The  following  table  presents a schedule of ARM assets owned at March 31, 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)


                                    March 31, 1999          December 31, 1998
                             ---------------------------  -------------------------
                                Carrying     Portfolio     Carrying     Portfolio
                                  Value         Mix          Value         Mix
                             ---------------  ----------  -------------  ----------
<S>                          <C>              <C>         <C>            <C>
HIGH QUALITY:
 FHLMC/FNMA                  $  1,872,394          47.2%  $2,072,871          48.6%
 Privately Issued:
   AAA/Aaa Rating               1,316,780(1)       33.2    1,398,659(1)       32.8
   AA/Aa Rating                   570,034          14.4      597,493          14.0
                             ---------------  ----------  -------------  ----------
     Total Privately Issued     1,886,814          47.6    1,996,152          46.8
                             ---------------  ----------  -------------  ----------

                             ---------------  ----------  -------------  ----------
     Total High Quality         3,759,208          94.8    4,069,023          95.4
                             ---------------  ----------  -------------  ----------

OTHER INVESTMENT:
 Privately Issued:
   A Rating                        54,833           1.4       40,591           1.0
   BBB/Baa Rating                  87,035           2.2       88,273           2.1
   BB/Ba Rating and Other          44,091(1)        1.1       44,120(1)        0.9
 Whole loans                       21,236           0.5       26,410           0.6
                             ---------------  ----------  -------------  ----------
     Total Other Investment       207,195           5.2      199,394           4.6
                             ---------------  ----------  -------------  ----------

     Total ARM Portfolio     $  3,966,403         100.0%  $4,268,417         100.0%
                             ===============  ==========  =============  ==========
<FN>
(1)   AAA  Rating  category  includes  $946.5  million  and $1.020 billion as of
      March 31, 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  March  31,  1999,  the  Company  had  reduced  the cost basis of its ARM
securities  by  $1,373,000  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
$11.3  million,  which represent less than 0.3% 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 March 31, 1999, the Company recorded
a $380,000 provision for potential credit losses on its loan portfolio, although
no  actual losses have been realized in the loan portfolio to date.  As of March
31,  1999,  the  Company's  ARM  loan  portfolio  included  seven loans that are
considered  seriously  delinquent (60 days or more delinquent) with an aggregate
balance  of  $4.5  million.  The  ARM  loan portfolio also includes one property
("REO")  that  the  Company acquired 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  on  these  eight  delinquent  loans  and REO is
approximately  60%.  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  individual  loans  and REO and, therefore, the
Company  does  not  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.

<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)

                                              March 31, 1999          December 31, 1998
                                           ----------------------  ----------------------
                                            Carrying   Portfolio    Carrying   Portfolio
                                             Value        Mix        Value        Mix
                                           ----------  ----------  ----------  ----------
<S>                                        <C>         <C>         <C>         <C>
ARM ASSETS:
    INDEX:
     One-month LIBOR                       $  563,759       14.2%  $  556,574       13.0%
     Three-month LIBOR                        181,390        4.6      181,143        4.2 
     Six-month LIBOR                          832,135       21.1      939,824       22.0 
     Six-month Certificate of Deposit         279,369        7.0      313,268        7.3 
     Six-month Constant Maturity Treasury      44,771        1.1       49,023        1.2 
     One-year Constant Maturity Treasury    1,380,349       34.8    1,479,054       34.7 
     Cost of Funds                            247,285        6.2      268,486        6.3 
                                           ----------  ----------  ----------  ----------
                                            3,529,058       89.0    3,787,372       88.7 
                                           ----------  ----------  ----------  ----------

HYBRID ARM ASSETS                             437,345       11.0      481,045       11.3 
                                           ----------  ----------  ----------  ----------
                                           $3,966,403      100.0%  $4,268,417      100.0%
                                           ==========  ==========  ==========  ==========
</TABLE>

The  portfolio had a current weighted average coupon of 7.03% at March 31, 1999.
This  consisted  of  an  average  coupon  of  6.94% on the hybrid portion of the
portfolio  and  an average coupon of 7.04% on the rest of the portfolio.  If the
non-hybrid  portion of the portfolio had been "fully indexed" on March 31, 1999,
the  weighted  average  coupon  of the non-hybrid portion of the portfolio would
have  been  approximately  6.84%,  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  ARM  Hybrids  and  7.32% on the remainder of the ARM
portfolio.  The  lower  average coupon on the ARM portfolio as of March 31, 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  March  31,  1999,  the  current yield of the ARM assets portfolio was 5.72%,
compared  to  5.86%  as  of  December 31, 1998, with an average term to the next
repricing  date  of  243  days  as of March 31, 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 4.1
years  as of March 31, 1999.  The non-hybrid portion of the ARM portfolio has an
average  next repricing term of 89 days as of March 31, 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 0.14% as of March 31, 1999,  compared to December
31,  1998,  is  due  to  a  number  of factors including a 0.25% decrease in the
weighted  average coupon and an increase in the cost of hedging by 0.02%.  These
two  factors  were  partially  offset  by less amortization of purchase premiums
which improved by 0.09% and the impact of non-interest earning principal payment
receivable  improved  by  0.04%.

<PAGE>
The  following  table  presents various characteristics of the Company's ARM and
Hybrid  ARM  loan  portfolio as of March 31, 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   $258,707   $3,450,000   $1,000 
Coupon rate on loans           7.52%        9.63%    5.13%
Pass-through rate              7.16%        9.23%    4.73%
Pass-through margin            2.19%        5.06%    0.48%
Lifetime cap                  13.02%       16.75%    9.75%
Original Term (months)          327          476      117 
Remaining Term (months)         311          347       89 
</TABLE>

<TABLE>
<CAPTION>
<S>                                       <C>                     <C>
Geographic Distribution (Top 5 States):   Property type:
     California                   21.33%  Single-family           64.71%
     Florida                      13.08   DeMinimus PUD           20.63 
     Georgia                       7.13   Condominium              9.88 
     New York                      6.98   Other                    4.78 
     Colorado                      4.58 

Occupancy status:                         Loan purpose:
     Owner occupied               83.81%  Purchase                57.67%
     Second home                  11.58   Cash out refinance      23.66 
     Investor                      4.61   Rate & term refinance   18.67 

Documentation type:                       Periodic Cap:
     Full/Alternative             95.32%  None                    48.58%
     Other                         4.68                    3.00%   0.19 
                                                           2.00%  49.57 
Average effective original                                 0.50%   1.66 
     loan-to-value:                 79%
</TABLE>

During  the quarter ended March 31, 1999, the Company purchased $99.7 million of
ARM  securities,  84.9%  of  which  were High Quality assets.  Of the ARM assets
acquired  during  the first three months of 1999, approximately 69% were indexed
to  LIBOR and 31% were indexed to U.S. Treasury bill rates.  Additionally, as of
March  31,  1999,  the  Company has commitments to purchase approximately $470.0
million  of  Hybrid  ARM  loans.  The Company did not sell any assets during the
quarter  ended  March  31,  1999.

For the quarter ended March 31, 1999, the Company's mortgage assets paid down at
an  approximate  average  annualized constant prepayment rate of 29% compared to
27%  for the quarter ended March 31, 1998 and 29% for the quarter ended December
31,  1998.  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
0.63%  from  a  negative adjustment of 2.62% of the portfolio as of December 31,
1998,  to  a  negative  adjustment  of  1.99%  as of March 31, 1999.  This price
improvement  was primarily the result of an improved market for mortgage product
in general as buying and selling activity picked up during the most recent three
month  period as the outlook regarding prepayments and the financing of mortgage
assets improved.  The amount of the negative adjustment to fair value on the ARM
securities  decreased  from  $83.2  million  as  of  December 31, 1998, to $58.3
million  as  of  March  31,  1999.

<PAGE>
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 March 31, 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
$3.700  billion  with  an  average  final  maturity  of 2.3 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 the 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 9.99%.  The Company has also entered
into  $95  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  March 31, 1999 would receive cash payments if one-month LIBOR exceeded 6.00%
and  have  a remaining term of 4.1 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 March 31, 1999, the fair value of the
Company's  Cap Agreements was $2.4 million, $5.7 million less than the amortized
cost  of  the  Cap  Agreements.

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  March  31,  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 (2)    Strike Price   Remaining Term
------------  ---------  ---------------  -------------  --------------
<S>           <C>        <C>              <C>            <C>
$     25,899      8.00%  $        26,000          7.10%       4.0 Years
     424,906      9.25           424,545          7.50        1.1
     527,560     10.37           531,040          8.00        3.0
     168,873     10.97           171,148          8.50        1.0
     266,892     11.37           264,404          9.00        0.7
     145,494     11.73           141,675          9.50        1.5
     305,879     12.23           307,256         10.00        3.2
     384,052     12.30           384,889         10.50        1.8
     242,675     12.70           241,757         11.00        4.0
     545,516     13.15           546,464         11.50        3.3
     251,526     14.40           413,064         12.00        2.5
      48,466     16.40           160,914         12.50        1.2
           -         -            86,513         13.00        0.9
------------  ---------  ---------------  -------------  --------------
$  3,337,738     11.78%  $     3,699,669          9.99%       2.3 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.
(2)  As of March 31, 1999, the Company was $361.9 million over hedged, primarily
because  of the ARM asset sales that occurred during the fourth quarter of 1998.
The  Company  has retained these Cap Agreements to hedge its future acquisitions
which  it  expects  to  make  during  1999.  The retained Cap Agreements have no
carrying  value.
</TABLE>

On  December  18,  1998,  the  Company  issued  $1.1 billion of Notes to finance
certain  ARM  assets,  primarily ARM loans.  Under this financing structure, the
financing  of  the  ARM  assets  that  collateralize the Notes is not subject to
margin calls as is the case when financing such assets in the reverse repurchase
agreement  market  and,  in general, such financing structures do not require as
much  capital as other financing alternatives such as whole loan financing lines
of  credit  or reverse repurchase agreements.  In December, when the Company was
issuing  the Notes, the cost of such financing was unusually high.  As a result,

<PAGE>
the  Company  negotiated a Note structure that provided the Company the right to
call  the  Notes,  at  par, on a monthly basis.  Early in 1999, as expected, the
market  for  re-issuing  the Notes improved and the Company began increasing its
liquidity  by  temporarily ceasing its asset acquisition strategies.  During the
first  quarter,  it  became  apparent  to  management  that  the  Company had an
opportunity  to  negotiate  a  modification of the Notes with the holders of the
Notes,  thereby  avoiding  the  need  for increased liquidity to call the Notes.
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% and eliminated the Company's right to call the Notes
until  the  underlying  ARM assets are paid down to 25% of their original amount
collateralizing  the  Notes.  The  modification  also  eliminated  the scheduled
step-up  in  the  interest  rate  that  was  to take effect after November 1999.

As  of  March 31, 1999, the Company was a counterparty to fourteen interest rate
swap  agreements  ("Swaps")  having  an  aggregate  notional  balance  of $499.8
million.  As  of  March  31,  1999, these Swaps had a weighted average remaining
term of 2.9 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.  The  Swaps  hedge  the cost of financing Hybrid ARMs
during  their  fixed  rate  term,  generally  three  to five years.  The average
remaining  fixed  rate  term  of the Company's Hybrid ARM assets as of March 31,
1999  was  4.1  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 the other Swap Agreements.  These other swap agreements terminate
on  average  in  2.9  years  during the remaining fixed term of the Hybrid ARMs,
which  is  approximately one additional year beyond the average termination date
of  the  Swap  Agreements  that  were  in  effect  as  of  March  31,  1999.

RESULTS  OF  OPERATIONS  FOR  THE  THREE  MONTHS  ENDED  MARCH  31,  1999

For  the  quarter ended March 31, 1999, the Company's net income was $4,599,000,
or  $0.14  per  share  (Basic  and  Diluted EPS), based on a weighted average of
21,490,000 shares outstanding.  That compares to $10,496,000, or $0.42 per share
(Basic  and  Diluted  EPS),  based  on  a  weighted average of 20,797,000 shares
outstanding  for  the quarter ended March 31, 1998.  Net interest income for the
quarter totaled $6,566,000, compared to $11,426,000 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 three
months of 1999, the Company did not record any gain or loss from the sale of ARM
securities  compared  to  a  gain  of $1,528,000 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 $686,000 for potential
credit  losses,  compared  to $387,000 during the first quarter of 1998.  During
the  first  quarter  of  1999,  the  Company  incurred  operating  expenses  of
$1,281,000,  consisting  of  a  base  management  fee  of  $1,018,000  and other
operating  expenses  of  $263,000.  During  the same period of 1998, the Company
incurred  operating  expenses of $2,071,000, consisting of a base management fee
of  $1,028,000, a performance-based fee of $759,000 and other operating expenses
of  $284,000.  Total  operating  expenses  decreased  as a percentage of average
assets to 0.12% for the three months ended March 31, 1999, compared to 0.16% for
the  same  period  of  1998.

The  Company's  return  on average common equity was 3.60% for the quarter ended
March  31,  1999  compared  to  10.9%  for  the quarter ended March 31, 1998 and
compared to -1.95% for the prior quarter ended December 31, 1998.  The Company's
return  on  equity  began  to improve in this past quarter compared to the prior
quarter primarily because the Company's net interest spread has begun to improve
and  because  the  Company did not experience any losses from asset sales in the
first  quarter  of  1999 as it had in the prior quarter ended December 31, 1998.

<PAGE>
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%
<FN>
(1)     Average  common  equity  excludes  unrealized  gain  (loss)  on  available-for-sale  ARM  securities.
(2)     Excludes  performance  fees.
</TABLE>

The  decline  in  the  Company's return on common equity in the first quarter of
1999,  compared to the first quarter of 1998, is primarily due to the decline in
the  net  interest  spread  between  the  Company's  interest-earning assets and
interest-bearing liabilities, an increase in the Company's provision for losses,
and  the  lack  of any gains from the sale of ARM assets in the first quarter of
1999.  These  negative  impacts on the Company's return on equity were partially
offset  by  the  elimination  of any performance fee to the Manager and a slight
reduction  in  other  expenses.

The following table presents the components of the Company's net interest income
for  the  quarters  ended  March  31,  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  $69,991   $86,284 
Amortization of net premium            (9,768)   (9,207)
Amortization of Cap Agreements         (1,345)   (1,364)
Amort. of deferred gain from hedging      325       463 
Cash and cash equivalents                 442       139 
                                      --------  --------
     Interest income                   59,645    76,315 
                                      --------  --------

Reverse repurchase agreements          35,366    64,676 
AAA notes payable                      16,351         - 
Other borrowings                           39       188 
Interest rate swaps                     1,323        25 
                                      --------  --------
     Interest expense                  53,079    64,889 
                                      --------  --------

Net interest income                   $ 6,566   $11,426 
                                      ========  ========
</TABLE>

As  presented in the table above, the Company's net interest income decreased by
$4.9  million in the first quarter of 1999 compared to the first three months of
1998.  The  most  significant  causes  are:  (1)  the Company's average interest
coupon  on  its  ARM  portfolio  was 7.12% during the first three months of 1999

<PAGE>
compared  to  7.51%  during  the  same period in 1998; and (2) the Company's ARM
portfolio  paid off at an annualized CPR of 29% during the first quarter of 1999
compared  to 27% during the same quarter of 1998, increasing the amortization of
the  net premium.  These items were partially offset by a lower cost of funds on
the  Company's  borrowings  which  was  5.56%  during  the first quarter of 1999
compared  to  5.79%  during  the  first  quarter  of  1998.

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  quarters  ended  March  31,  1999  and  1998:

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

                                            For the Year Ended      For the Year Ended
                                              March 31, 1999          March 31, 1998
                                          ----------------------  ----------------------
                                           Average    Effective    Average    Effective
                                           Balance       Rate      Balance       Rate
                                          ----------  ----------  ----------  ----------
<S>                                       <C>         <C>         <C>         <C>
Interest Earning Assets:
     Adjustable-rate mortgage assets      $4,166,311       5.68%  $4,847,193       6.29%
     Cash and cash equivalents                30,044       5.88       12,546       4.42 
                                          ----------  ----------  ----------  ----------
                                           4,196,355       5.69    4,859,739       6.28 
                                          ----------  ----------  ----------  ----------
Interest Bearing Liabilities:
     Borrowings                            3,815,961       5.56    4,479,208       5.79 

                                          ----------  ----------  ----------  ----------
Net Interest Earning Assets and Spread    $  380,394       0.13%  $  380,531       0.49%
                                          ==========  ==========  ==========  ==========

Yield on Net Interest Earning Assets (1)                   0.63%                   0.94%
                                                      ==========              ==========
<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
5.69% during the first three months of 1999 from 6.28% during the same period of
1998  and  the Company's cost of funds decreasing to 5.56% from 5.79% during the
same  time  periods, net interest income decreased by $4,860,000.  This decrease
in  net  interest  income  is primarily a rate variance and to a lesser extent a
volume  variance.  There  was  a  net  unfavorable  rate variance of $4,668,000,
primarily due to an unfavorable rate variance of $7,252,000 on the Company's ARM
assets  portfolio  and other interest-earning assets, which was partially offset
by a favorable rate variance on borrowings that increased net interest income by
$2,584,000.  The  decreased  average  size of the Company's portfolio during the
first quarter of 1999 compared to the same period in 1998 decreased net interest
income  in  the  amount  of  $192,000.  The  average  balance  of  the Company's
interest-earning  assets  was  $4.196  billion  during the first three months of
1999,  compared  to  $4.860  billion  during the first three months of 1998 -- a
decrease of 14%.  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.  Now that the Company has negotiated a modification of
the  Notes,  the  Company  has  begun  to acquire assets in order to utilize its
unused  leverage  capacity.

<PAGE>
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)

               Average                 ARM  Assets              Yield on                           Yield  on
                         -------------------------------------
               Interest     Wgt. Avg.     Weighted              Interest                    Net   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%
<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%
</TABLE>

As of March 31, 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, was 5.72%, compared to 5.86% as of December 31,
1998--  a  decrease of 0.14%.  The Company's cost of funds as of March 31, 1999,
was 5.36%, compared to 5.94% as of December 31, 1998 -- a decrease of 0.58%.  As
a  result  of  these  changes, the Company's net interest spread as of March 31,
1999  was  0.35%,  compared  to  negative  0.08%  as  of December 31, 1998.  The
improvement in the net interest spread is largely attributable to the decline in
the  cost  of  the  Company's  borrowings  which is primarily the result of both
negotiating a modification of the Notes that reduced their cost to a spread over
one-month LIBOR of 0.38% from 0.70% and a reduction of the cost of the Company's
reverse  repurchase  agreements  to  a  weighted  average  rate  of  5.10% as of
quarter-end from a weighted average borrowing rate of 5.62% as of 1998 year-end.
This  decrease  in  the borrowing rate on reverse repurchase agreements reflects
the  reduction  of  LIBOR  rates  since year-end.  The modification of the Notes
occurred  close  to  quarter-end,  so  the  modification of the Notes had little
effect  on the Company's cost of funds during the first quarter of 1999, but the
entire  second  quarter  of 1999 will benefit from the modification.  Net of the
amortization  of  the cost of the modification, the Company expects to realize a
benefit  of  approximately  $0.03  per common share during the second quarter of
1999.

<PAGE>
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  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 34.8% at March 31, 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       U.S. Treasury
For the Year Ended      Rates During      Rates During      Rates During     Rates at End of
December 31,               Period            Period            Period             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

</TABLE>

During  the  first three months of 1999, the Company did not sell any ARM assets
and  therefore  did  not  record  any  gain or loss from the sale of ARM assets.
During the same period of 1998, the Company realized a net gain from the sale of
ARM  assets  in  the  amount  of  $1,528,000.

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 March 31, 1999, the Company's
whole  loans,  including  those  held  as  collateral for the AAA notes payable,
accounted for 29.0% of the Company's portfolio of ARM assets compared to 4.7% as
of  March  31, 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  provided  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
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:

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

                                            Quarters Ending March 31,
                                            -------------------------
                                                 1999      1998
                                               --------  --------
<S>                                            <C>       <C>
Net income                                     $ 4,599   $10,496 
 Additions:
 Provision for credit losses                       686       387 
 Net compensation related items                     85      (280)
   Deductions:
        Dividend on Series A Preferred Shares   (1,670)   (1,670)
       Actual credit losses on ARM securities     (175)     (565)
                                               --------  --------
Taxable net income                             $ 3,525   $ 8,368 
                                               ========  ========
</TABLE>

For  the quarter ended March 31, 1999, the Company's ratio of operating expenses
to average assets was 0.12% compared to 0.16% 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 first quarter of 1999, 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.

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%
</TABLE>

<PAGE>

LIQUIDITY  AND  CAPITAL  RESOURCES

The  Company's  primary  source  of  funds  for the quarter ended March 31, 1999
consisted  of  reverse  repurchase agreements, which totaled $2.644 billion, and
callable  AAA notes, which had a balance of $1.052 billion.  The Company's other
significant  source  of  funds for the quarter ended March 31, 1999 consisted of
payments  of  principal and interest from its ARM assets in the amount of $490.6
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.

<PAGE>
Total borrowings outstanding at March 31, 1999, had a weighted average effective
cost  of  5.22%.  The  reverse  repurchase  agreements  had  a  weighted average
remaining  term  to  maturity  of  1.6  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 March 31, 1999,
$993.4  million  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 two years.
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 March 31, 1999, had borrowed funds with
12  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.  During the
first  quarter  of  1999,  the  Company increased its level of liquidity and 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 March 31, 1999, the Company had $1.1 billion 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  March 31, 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.  The  Company  had  no  balance borrowed against this
facility  as  of  March  31,  1999.  This  facility  matures on January 8, 2000.
During  April  1999,  the Company entered into an additional one-year whole loan
financing  facility  with  an  uncommitted  capacity  of  $300  million.

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  March 31, 1999, the Company had $109
million  of  its  securities  registered for future sale under this Registration
Statement.

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  three  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  quarter  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.

<PAGE>
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 pressures 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.

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

<PAGE>
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  software  used  by the Company has been internally developed using products
that are Year 2000 compliant.  The Manager has also 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, is conducting a
survey,  which is expected to be 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.  The  Company  cannot  be certain that such a survey will fully identify
all  Year  2000  issues  or  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 not
developed  likely worst case scenarios nor contingency plans for such scenarios.

OTHER  MATTERS

As  of  March  31,  1999,  the  Company calculates its Qualified REIT Assets, as
defined  in  the  Internal  Revenue Code of 1986, as amended (the "Code"), to be
98.7% 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 quarter 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  March  31,  1999, the Company believes that it will
continue  to  qualify  as  a  REIT  under  the  provisions  of  the  Code.

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.

<PAGE>
PART  II.     OTHER  INFORMATION

Item  1.  Legal  Proceedings
               At March 31, 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
               Not  applicable

Item  5.  Other  Information
               None

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

          (a)  Exhibits
                 None

          (b)  Reports  on  Form  8-K
                 None

<PAGE>
                                   SIGNATURES



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




                                THORNBURG  MORTGAGE  ASSET  CORPORATION



Dated:  April 28, 1999          By:  /s/  Larry  A.  Goldstone
                                     -------------------------
                                          Larry  A.  Goldstone
                                          President and Chief Operating Officer
                                          (authorized  officer  of  registrant)




Dated:  April 28, 1999          By:  /s/  Richard  P.  Story
                                     -----------------------
                                          Richard  P.  Story,
                                          Chief Financial Officer and Treasurer
                                          (principal  accounting  officer)

<PAGE>