-- i --
<PAGE>


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q


(Mark One)

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

For the quarterly period ended June 30, 1999

OR

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

For the transition period from _______ to _______

Commission file number 000-21673

AutoBond Acceptance Corporation

(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>



<S>                                                 <C>

                                   TEXAS . . . . .           75-2487218


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


          100 CONGRESS AVENUE, AUSTIN, TEXAS . . .                78701


          (Address of principal executive offices)           (Zip Code)

</TABLE>


                                 (512) 435-7000

               Registrant's telephone number, including area code

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

Yes  ___X___    No  _____

As  of  August  16, 1999, there were 6,531,311 shares of the registrant's Common
Stock,  no  par  value,  outstanding.

                                    -- ii --
<PAGE>

<TABLE>
<CAPTION>

<S>                                                                                              <C>
TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
Item 1.  Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   1
Item 2.  Management's Discussion And Analysis Of Financial Condition And  Results Of Operations  13
PART II.  OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
Item 1.  Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
Item 2.  Changes in Securities and use of Proceeds. . . . . . . . . . . . . . . . . . . . . . .  34
Item 3.  Defaults upon  Senior  Securities. . . . . . . . . . . . . . . . . . . . . . . . . . .  34
Item 4.  Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . .  34
Item 5.  Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  35
Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . .  36
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  39
EXHIBIT 27.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  40
</TABLE>
                                    -- iii --
<PAGE>



                         PART I - FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS
<TABLE>
<CAPTION>

                      AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                                CONSOLIDATED BALANCE SHEETS

<S>                                                           <C>             <C>
                                                              DECEMBER 31,    JUNE 30,
                                                                       1998           1999
                                                              --------------  -------------
    (UNAUDITED)
ASSETS
------------------------------------------------------------

Cash and cash equivalents. . . . . . . . . . . . . . . . . .  $   5,170,969   $    372,374
Receivable from Dynex Capital, Inc.. . . . . . . . . . . . .      6,573,107              -
Finance contracts held for sale, net . . . . . . . . . . . .        867,070      5,680,606
Collateral acquired, net . . . . . . . . . . . . . . . . . .         70,957        106,700
Retained interest in securitizations - Trading . . . . . . .      4,586,908      3,419,684
Retained interest in securitizations - Available for Sale. .      9,286,443      6,421,763
Debt issuance costs. . . . . . . . . . . . . . . . . . . . .        729,206        552,824
Due from affiliates. . . . . . . . . . . . . . . . . . . . .        396,015        416,187
Property, plant, and equipment, net. . . . . . . . . . . . .      1,187,421      1,117,358
Other assets . . . . . . . . . . . . . . . . . . . . . . . .      1,463,046      1,060,255
                                                              --------------  -------------
     Total assets. . . . . . . . . . . . . . . . . . . . . .  $  30,331,142   $ 19,147,751
                                                              ==============  =============


LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------------------------------

Liabilities:
  Notes Payable. . . . . . . . . . . . . . . . . . . . . . .  $  10,166,969   $ 10,239,641
  Non-recourse debt. . . . . . . . . . . . . . . . . . . . .      3,185,050      2,017,826
  Payables and accrued liabilities . . . . . . . . . . . . .      1,324,951      1,087,278
  Deferred income taxes. . . . . . . . . . . . . . . . . . .        101,800              -
                                                              --------------  -------------
     Total liabilities . . . . . . . . . . . . . . . . . . .  $  14,778,770   $ 13,344,745
                                                              --------------  -------------

Commitments and contingencies

Shareholders' equity:
Preferred stock, no par value; 5,000,000 shares authorized;.  $  10,856,000   $ 10,856,000
1,125,000 shares of 15% Series A cumulative preferred
stock, $10 liquidation preference, issued and outstanding,
(Dividends in arrears of $843,750)
Common stock, no par value; 25,000,000 shares authorized;. .          1,000          1,000
6,531,311 shares issued and outstanding
Capital in excess of stated capital. . . . . . . . . . . . .      8,291,481      8,291,481
Due from shareholders. . . . . . . . . . . . . . . . . . . .        (10,592)       (10,592)
(Accumulated deficit). . . . . . . . . . . . . . . . . . . .     (3,057,602)   (12,806,968)
Investment in common stock agreement . . . . . . . . . . . .       (527,915)      (527,915)
                                                              --------------  -------------
     Total shareholders' equity. . . . . . . . . . . . . . .  $  15,552,372   $  5,803,006
                                                              --------------  -------------

          Total liabilities and shareholders' equity . . . .  $  30,331,142   $ 19,147,751
                                                              ==============  =============

<FN>

   The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

                                    -- 1 --
<PAGE>

<TABLE>
<CAPTION>


                                AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                                                   (UNAUDITED)


                                                        THREE MONTHS ENDED JUNE30,     SIX MONTHS ENDED JUNE 30,
                                                         ------------  ------------  ------------  -------------
                                                             1998          1999          1998          1999
                                                         ------------  ------------  ------------  -------------
<S>                                                      <C>           <C>           <C>           <C>
Revenues:
  Interest income . . . . . . . . . . . . . . . . . . .  $   527,284   $   616,391   $ 1,665,782   $  1,080,377
  Gain on sale of finance contracts . . . . . . . . . .    2,768,879       215,099     6,636,820      1,754,285
  Servicing income. . . . . . . . . . . . . . . . . . .      811,348       979,366     1,317,942      1,985,140
  Other income. . . . . . . . . . . . . . . . . . . . .     (205,864)       77,803       (79,716)       853,795
                                                         ------------  ------------  ------------  -------------
     Total revenues . . . . . . . . . . . . . . . . . .    3,901,647     1,888,659     9,540,828      5,673,597
                                                         ------------  ------------  ------------  -------------
Expenses:
  Provision for credit losses . . . . . . . . . . . . .            -             -       100,000         60,465
  Interest expense. . . . . . . . . . . . . . . . . . .    1,085,401       804,750     2,375,806      1,518,120
  Salaries and benefits . . . . . . . . . . . . . . . .    2,468,567     2,664,660     4,866,332      5,813,691
  General and administrative. . . . . . . . . . . . . .    1,790,620     1,817,064     2,874,884      3,686,387
Impairment of retained interest in securitizations. . .    5,589,802     1,520,750     5,877,825      2,572,207
  Other operating expenses. . . . . . . . . . . . . . .      879,815       873,028     1,528,869      1,873,893
                                                         ------------  ------------  ------------  -------------
     Total expenses . . . . . . . . . . . . . . . . . .   11,814,205     7,680,252    17,623,716     15,524,763
                                                         ------------  ------------  ------------  -------------
Loss before income taxes. . . . . . . . . . . . . . . .   (7,912,558)   (5,791,593)   (8,082,888)    (9,851,166)
(Benefit) provision for income taxes. . . . . . . . . .   (2,678,770)    1,497,100    (2,727,962)      (101,800)
                                                         ------------  ------------  ------------  -------------
            Net loss. . . . . . . . . . . . . . . . . .   (5,233,788)   (7,288,693)   (5,354,926)    (9,749,366)

Income attributable to preferred stock. . . . . . . . .      411,318       421,875       596,250        843,750
                                                         ------------  ------------  ------------  -------------
Net loss attributable to common shareholders. . . . . .  $(5,645,106)  $(7,710,568)  $(5,951,176)  $(10,593,116)
                                                         ============  ============  ============  =============

Weighted average number of common shares:
            Basic . . . . . . . . . . . . . . . . . . .    6,531,311     6,531,311     6,531,311      6,531,311
            Diluted . . . . . . . . . . . . . . . . . .    6,531,311     6,531,311     6,531,311      6,531,311
Loss per common share:
           Basic. . . . . . . . . . . . . . . . . . . .  $     (0.86)  $     (1.18)  $     (0.91)  $      (1.62)
           Diluted. . . . . . . . . . . . . . . . . . .  $     (0.86)  $     (1.18)  $     (0.91)  $      (1.62)

Net Loss. . . . . . . . . . . . . . . . . . . . . . . .  $(5,233,788)  $(7,288,693)  $(5,354,926)  $ (9,749,366)
Other comprehensive income, net of tax:
Unrealized gain on retained interests in securitization      405,753             -       367,372              -
                                                         ------------  ------------  ------------  -------------
Comprehensive loss. . . . . . . . . . . . . . . . . . .  $(4,828,035)  $(7,288,693)  $(4,987,554)  $ (9,749,366)
                                                         ============  ============  ============  =============

<FN>
        The  accompanying  notes  are  an  integral  part  of  the  consolidated  financial  statements.

</TABLE>

                                    -- 2 --
<PAGE>
<TABLE>
<CAPTION>


                AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                   (UNAUDITED)


                                             SIX MONTHS ENDED
                                               JUNE 30, 1999
                                              ----------------
<S>                                    <C>               <C>
                                              SHARES            AMOUNT
                                       ----------------  -------------
Preferred stock:
  Beginning balance . . . . . . . . .         1,125,000  $ 10,856,000
  Ending balance. . . . . . . . . . .         1,125,000    10,856,000

Common stock:
  Beginning balance . . . . . . . . .         6,531,311         1,000
  Ending balance. . . . . . . . . . .         6,531,311         1,000

Capital in excess of stated capital:
  Beginning balance                                         8,291,481
  Ending balance                                            8,291,481


Due (from) shareholders:
  Beginning balance                                           (10,592)
  Ending balance                                              (10,592)

Accumulated Deficit:
  Beginning balance                                        (3,057,602)
  Net loss                                                 (9,749,366)
                                                         -------------
  Ending balance                                          (12,806,968)

Investment in common stock agreement:
  Beginning balance                                          (527,915)
  Ending balance                                             (527,915)
                                                         -------------
Total shareholders' equity                               $  5,803,006
                                                         =============

<FN>
     The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

                                    -- 3 --
<PAGE>
<TABLE>
<CAPTION>



                       AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                         (UNAUDITED)



                                                                      SIX MONTHS ENDED
                                                                          JUNE 30,
                                                                    1998             1999
                                                             ------------------  ------------
<S>                                                          <C>                 <C>
OPERATING ACTIVITIES:
  Net loss. . . . . . . . . . . . . . . . . . . . . . . . .  $      (5,354,926)  $(9,749,366)
  Reconcile net loss to net cash from operating activities:
    Depreciation and amortization . . . . . . . . . . . . .            897,659       493,123
    Provision for credit losses . . . . . . . . . . . . . .            100,000        60,465
    Market impairment of finance contracts held for sale. .                  -       878,886
    Impairment of retained interest in securitizations. . .          5,589,801     2,572,207
    Gain on sale of finance contracts . . . . . . . . . . .         (6,636,820)   (1,754,285)
    Deferred income taxes . . . . . . . . . . . . . . . . .         (2,727,962)     (101,800)
  Changes in operating assets and liabilities:
    Increase in restricted funds. . . . . . . . . . . . . .          5,532,255             -
    Receivable from Dynex . . . . . . . . . . . . . . . . .                  -     6,573,107
    Finance contracts held for sale . . . . . . . . . . . .          5,103,550    (4,034,345)
    Retained interest in securitizations. . . . . . . . . .         (6,060,154)      334,327
    Due to(from) affiliate. . . . . . . . . . . . . . . . .           (868,095)      (20,172)
    Prepaids and other assets . . . . . . . . . . . . . . .           (868,157)      395,521
    Accounts payable and accrued liabilities. . . . . . . .           (687,320)     (237,673)
                                                             ------------------  ------------
             Cash used by operating activities. . . . . . .         (5,980,169)   (4,590,005)
INVESTING ACTIVITIES:
    Decrease in due from shareholders . . . . . . . . . . .            176,963
    Proceeds from disposal of collateral acquired . . . . .            120,010             -
    Purchases of property, plant and equipment. . . . . . .                  -      (197,308)
                                                             ------------------  ------------
             Cash provided (used) by investing activities .            296,973      (197,308)
FINANCING ACTIVITIES:
    Net payments on revolving credit facilities . . . . . .         (7,639,201)            -
    Payments for debt issuance costs. . . . . . . . . . . .         (2,345,462)            -
    Proceeds from notes payable . . . . . . . . . . . . . .         10,650,000             -
    Payments on notes payable . . . . . . . . . . . . . . .         (3,451,001)      (11,282)
    Decrease in bank overdraft. . . . . . . . . . . . . . .         (2,337,288)            -
    Proceeds from public offering of preferred stock, net .          9,631,407             -
    Dividends paid on preferred stock . . . . . . . . . . .           (596,250)            -
    Proceeds from issuance of common stock warrants . . . .          1,918,131             -
                                                             ------------------  ------------
               Cash provided (used) by financing activities          5,830,336       (11,282)
                                                             ------------------  ------------
Increase (decrease) in cash . . . . . . . . . . . . . . . .            147,140    (4,798,595)
Beginning cash balance. . . . . . . . . . . . . . . . . . .            159,293     5,170,969
                                                             ------------------  ------------
ENDING CASH BALANCE . . . . . . . . . . . . . . . . . . . .  $         306,433   $   372,374
                                                             ==================  ============

<FN>
    The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

                                    -- 4 --
<PAGE>

                AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.     Basis  of  Presentation

     The  consolidated  financial  statements of AutoBond Acceptance Corporation
(the  "Company")  included  herein  are  unaudited  and  have  been  prepared in
accordance  with  generally  accepted accounting principles ("GAAP") for interim
financial  reporting and Securities and Exchange Commission ("SEC") regulations.
Certain  information  and  footnote  disclosures  normally included in financial
statements  prepared  in  accordance  with  GAAP  have been condensed or omitted
pursuant  to regulations. In the opinion of management, the financial statements
reflect all adjustments (consisting only of a normal and recurring nature) which
are  necessary  to present fairly the financial position, results of operations,
changes  in shareholders' equity and cash flows for the interim periods. Results
for  interim  periods  are  not necessarily indicative of the results for a full
year.  For  further  information,  refer to the audited financial statements and
footnotes  thereto  included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1998, (SEC File Number 000-21673). Certain data from the
prior  year  has  been  reclassified  to  conform  to  the  1999  presentation.


2.     Earnings  per  Share

     Basic  earnings  per  share excludes potential dilution of potential shares
and  is  computed  by  dividing  income  available to common shareholders by the
weighted-average  number  of  common  shares outstanding for the period. Diluted
earnings  per  share  reflects  the  potential  dilution  that  could  occur  if
securities  or other contracts to issue common stock were exercised or converted
into  common  stock or resulted in the issuance of common stock that then shared
in  the  earnings  of  the  Company unless such issuance would be anti-dilutive.


3.     Finance  Contracts  Held  for  Sale
<TABLE>
<CAPTION>

          The  following amounts are included in finance contracts held for sale
as  of:


                                 December 31, 1998    June 30, 1999
                                -------------------  ---------------
<S>                             <C>                  <C>
Unpaid principal balance . . .  $          944,830   $    7,073,261
Contract acquisition discounts             (64,067)        (513,769)
Allowance for market loss. . .                   -         (878,886)
Allowance for credit losses. .             (13,693)               0
                                -------------------  ---------------
                                $          867,070   $    5,680,606
                                ===================  ===============
</TABLE>




4.     Retained  Interests  In  Securitizations

     The  Company's  retained interests in securitizations represent the present
value  of  expected  future  cash  flows  to  the  Company from sales of finance
contracts.  The  amount  of  these  retained  interests  may  be  increased  by
additional sales or securitizations.  The amount of these retained interests may
decrease  in  the case of impairments caused by a revaluation of the future cash
flows.  Retained  interests  in  securitizations  will  also decrease due to the
Company's  receipt  of  cash  flows  from  their  investment.

     The  Company  utilizes  a  financial model to project the cash flows from a
pool  of  finance  contracts.  This  model  projects  cash flows for contractual
parties  including  investors,  trustees and servicers, as well as the Company's
retained  interests.  As  is  the  case  with  most  financial  models,  its
effectiveness  is primarily driven by the performance over time of key financial
model  assumptions,  including:  default  rates;  delinquency  rates; prepayment
<PAGE>
rates;  discount  rates; initial, ongoing and minimum cash reserve requirements;
the  interest rates earned on cash reserves; recovery amounts for repossessions;
repossession  recovery  lags;  insurance  claims  recovery  amounts;  insurance
recovery  lags; and on-going servicing/trustee fees. Periodically, the Company's
financial models and related assumptions have been updated to reflect the actual
performance  characteristics  of  the  finance  contracts.  All  valuations  are
conducted  on  a  disaggregated  basis.  Impairment  of  retained  interest  in
securitizations  for  the  quarter  ended  June  30,  1999  was  $1,520,750.

     The  Company's  term  securitizations have involved the placement of excess
spread  backed  notes,  sometimes  referred to as "B Pieces", with institutional
investors.  All  assumptions  used  to  size  and  sell  these  "B  Pieces" were
identical  to  the  initial  gain-on-sale  assumptions  the Company applied with
respect to retained interests. The discount rates applied for retained interests
ranged  from  15% to 17%.  The non-vector equivalent of annualized default rates
typically  ranged  from  10%  to 12%. The default rate assumptions are estimated
based  on the historical static pool results. Repossession recovery ratios, with
deficiency  insurance  proceeds  reflected,  typically  ranged  from 80% to 90%.

     Three primary causes led to the impairment charges to retained interests in
securitizations.  The  Company  has  been engaged in litigation with Progressive
Northern  Insurance  Company  ("Progressive")  regarding  the  interpretation of
default  insurance  coverage the Company acquired to enhance recoveries.  During
the  earlier  stages  of  the  dispute,  Progressive  continued  to  pay claims.
However,  in April 1998 Progressive stopped paying claims. The loss of cash flow
from  Progressive  necessitated  drawing  funds  from  the applicable trust cash
reserves  to  pay  senior investors.  The Company is the ultimate beneficiary of
the  cash  reserves,  and  such reserves will need to be replenished before cash
flows  may  resume  to  the  other investors and ultimately to the Company.  The
depletion  and  expected  delay in receiving any ultimate cash flows reduced the
value  of  the  retained  interests.  The  Company  has continued to include the
expected  cash flows from Progressive in its cash flows models.  Even though the
Company  and  its  legal counsel are optimistic that the Company will prevail in
its  litigation,  at  this  time, Progressive has not resumed payment of claims.
Should  the  Company's  interpretation  be  incorrect, the Company would need to
reassess  the  carrying value of its retained interests in securitizations under
new  assumptions  and  the  result  of  this  revaluation  could  be  material.

     The  second  primary  factor was the transfer of servicing functions to the
Company  from a third party service provider, Loan Servicing Enterprise ("LSE").
In  March 1998, the Company commenced litigation against LSE, alleging, in part,
that  LSE breached its servicing obligations.  After assuming all servicing, the
Company  accelerated  the  rate  of  charge-offs as compared with prior periods.
Accelerated  charge-offs resulted in the diversion of any available cash flow to
the  senior  investors  that otherwise would flow to subordinate investors or to
the  benefit  of  the Company.  In attempting to resolve certain of these issues
with  Moody's  Investors  Service  ("Moody's"),  the  agency  rating  the senior
securities,  the  Company  committed  to  Moody's  in May 1998 that it would not
release  monies  to  the  "B  Piece"  investors  until all charge-offs have been
reflected  in the cash flows attributable to the senior investors.  The delay of
payments  to the subordinated investors causes accretion of the principal amount
of  their  high  interest  rate  B  Pieces and a corresponding impairment of the
Company's  retained  interest.  The  accelerated  charge-offs  and the Company's
decision  in  May  1998 to commit to Moody's to withhold monies from the B Piece
investors  resulted  in  a  direct  impact  on  the  valuation  of  the retained
interests.  A  total  of  eight  securitizations  were  affected by this action.

     The  third primary factor was the change in the VSI deductible for the pool
of  loans  purchased  by  Dynex.

     The  Company  has engaged counsel to perform a deal-by-deal analysis of the
structural  and  legal  integrity of these transactions and resolve the concerns
raised  by  Moody's.  In  the  meantime,  the  Company  has been notified by the
trustees  on  certain  of the securitizations that the action of Moody's and the
alleged  causes  constituted  events  of  servicer  termination  under  such
transactions.  The trustees have threatened to remove the Company as servicer on
certain  transactions,  and  have  withheld  administrator  fees and expenses of
approximately  $ 0.5 million as of June 30, 1999, due to the Company.  Since the
Company is of the view that no events of servicing termination have occurred and
that the transactions documents did not intend for servicing compensation to the
Company  to  be  cut  off  where  the cause of an event of default is due to the
actions  of Progressive and LSE (the former servicer), the Company is seeking to
resolve  those  issues  to  the
                                    -- 5 --
<PAGE>
satisfaction of all parties.  See Note  8  below  for  a  discussion  of further
contingencies with respect to the Company's  interests  in  securitizations.


5.     Revolving  Credit  Facilities

     On June 9, 1998, the Company and Dynex Capital, Inc. ("Dynex") entered into
an  arrangement whereby the Company obtained a commitment from Dynex to purchase
all  currently  warehoused  and  future automobile finance contract acquisitions
through  at  least  May  31,  1999  (the "Funding Agreement").  The terms of the
Funding  Agreement  were  modified on June 30, October 20, and October 28, 1998.
Under  the prior terms of the Funding Agreement, the Company transferred finance
contracts  to  AutoBond  Master  Funding  Corporation  V ("Master Funding V"), a
qualified  unconsolidated  special purpose subsidiary, and Dynex provided credit
facilities  in  an  amount  equal to 104% of the unpaid principal balance of the
finance  contracts  (the  "Advance  Rate"). The Company received the proceeds of
such  credit facilities. The modified terms of the Funding Agreement reduced the
Advance  Rate  from  104%  to  88%  for an interim period (the "Interim Period")
ending  December  31,  1998.  At the end of the Interim Period, the Advance Rate
reverted  to  104%  and  Dynex  was to advance to Master Funding V an additional
amount  equal  to  16%  of  the  unpaid  principal  balance of finance contracts
financed  by Dynex during the Interim Period.  This additional amount receivable
from  Dynex  totaled  $6.5  million  at  December 31, 1998, and was collected in
January and February 1999. Advances under the Funding Agreement are evidenced by
Class  A  Notes  and  Class B Notes (collectively, the "Notes") issued by Master
Funding  V  to Dynex.  The Class A Notes were issued in a principal amount equal
to  94.0%  of  the  unpaid principal balance of the finance contracts (88.0% for
advances  funded during the Interim Period) and bear interest at a rate equal to
190  basis  points  over  the  corporate bond equivalent yield on the three-year
U.S.  Treasury note on the closing date for each such advance. The Class B Notes
were issued in a principal amount equal to 10.0% of the unpaid principal balance
of  the  finance  contracts (0.0% for advances funded during the Interim Period)
and  bear  interest  at  a  rate  equal to 16% per annum.  The Company retains a
subordinated  interest  in  the  pooled finance contracts.  Transfers of finance
contracts  to the qualified special purpose entity have been recognized as sales
under  SFAS No. 125. No finance contracts were transferred by the Company during
the  quarter  ended June 30, 1999. At June 30, 1999, advances by Dynex under the
Funding  Agreement  totaled  $  169.2  million. See Note 8 for the status of the
Dynex  Funding  Agreement.



1.     Notes  Payable  and  Non-Recourse  Debt

<TABLE>
<CAPTION>

     The  following  amounts  are  included  in  notes  payable  and  non-recourse  debt  as of:

<S>                                                                 <C>             <C>
                                                                        December 31,    June 30,
                                                                             1998          1999
                                                                                     (Unaudited)
                                                                    -------------   ------------
Non-recourse notes payable, collateralized by Class B Certificates  $   3,185,050   $ 2,017,826
Convertible Senior Notes . . . . . . . . . . . . . . . . . . . . .      3,000,000     3,000,000
Convertible Subordinated Notes . . . . . . . . . . . . . . . . . .      7,500,000     7,500,000
Other notes payable. . . . . . . . . . . . . . . . . . . . . . . .         23,342        12,060
Discount on subordinated notes payable . . . . . . . . . . . . . .       (356,373)     (272,419)
                                                                    -------------   ------------
                                                                    $  13,352,019   $12,257,467
                                                                    ==============  ============

</TABLE>

     On  June  9,  1998,  the Company sold to Dynex at par $3 million of its 12%
Convertible  Senior Notes due 2003 (the "Senior Notes").  Interest on the Senior
Notes  is payable quarterly in arrears, with the principal amount due on June 9,
2003.  The Senior Notes were convertible at the option of Dynex on or before May
31,  1999  into  shares  of  the Company's common stock at a conversion price of
$6.00 per share.  Demand and "piggyback" registration rights with respect to the
underlying  shares  of  common  stock  were  granted.  The  Company has made all
interest  payments  due on the Senior Notes and expects to continue to meet such
obligations.  Dynex  also  has  purported  to  accelerate  the Senior Notes. The
Company  disputes  the  validity  of  such  acceleration.

     In  January 1998, the Company privately placed with BancBoston Investments,
Inc.  ("BancBoston")  $7,500,000 in aggregate principal amount of its 15% Senior
Subordinated  Convertible Notes due 2001 (the "Subordinated Notes"). Interest on
<PAGE>
the  Subordinated  Notes  is payable quarterly, with the principal amount due on
February  1,  2001.  The Subordinated Notes are convertible at the option of the
holder  for  up to 368,462 shares of the Company's common stock, at a conversion
price  of  $3.30  per  share, subject to adjustment under standard anti-dilution
provisions.  The  Company  also  granted BancBoston a warrant to purchase common
stock  exercisable  to the extent the debt represented by the Subordinated Notes
is not converted (See Note 7).  In the event of a change of control transaction,
the  holder  of the Subordinated Notes may require the Company to repurchase the
Subordinated  Notes  at  100% of the principal amount plus accrued interest. The
Subordinated  Notes are redeemable at the option of the Company on or after July
1, 1999 at redemption prices starting at 105% of the principal amount, with such
premium  reducing  to  par on and after November 1, 2000, plus accrued interest.
The Subordinated Notes were issued pursuant to an Indenture, dated as of January
30,  1998  (the "Indenture") between the Company and BankBoston, N.A., as agent.
The  Indenture  contains  certain  restrictive  covenants  including:  (i)  a
consolidated  leveraged  ratio  not  to  exceed  2  to 1 (excluding non-recourse
warehouse  debt  and  securitization debt); (ii) limitations on payments such as
dividends  (but excluding, so long as no event of default has occurred under the
Indenture,  dividends or distributions on the Preferred Stock (as defined below)
of the Company); (iii) limitations on sales of assets other than in the ordinary
course  of  business;  and (iv) certain financial covenants, including a minimum
consolidated  net  worth of $12 million (plus proceeds from equity offerings), a
minimum  ratio  of  EBITA  to  interest  of  1.5  to 1, and a maximum cumulative
repossession  ratio  of  27%.  Events  of  default  under  the Indenture include
failure  to  pay, breach of covenants, cross-defaults in excess of $1 million or
material  breach  of  representations  or covenants under the purchase agreement
with  BancBoston.  The  Company capitalized debt issuance costs of $594,688, and
recorded  a  discount  of  $507,763  on  the  debt representing the value of the
warrants  issued.  The  debt  issuance  cost  and discount is being amortized as
interest  expense  on  the  interest  method through February 2001.  At June 30,
1999,  the  Company  did  not  meet  certain  of  its financial covenants, which
constitutes  an  event of default on the Subordinated Notes.  The ability of the
Company  to  meet such covenants is dependent upon future earnings. To date, the
Company  has  made  all payments due on its Subordinated Notes. The Subordinated
Notes  have  not  been  formally  accelerated  by  BancBoston;  however, if such
acceleration  were  made, BancBoston could declare such amounts immediately due.


1.     Income  taxes

     Management  has reduced the deferred tax asset by a valuation allowance due
to  uncertainty  of realizing certain tax loss carry-forwards and other deferred
tax  assets.  The  valuation  allowance  has  been  increased  by  approximately
$3,050,000  in  the  three  month  period  ended  June  30,  1999.


2.     Stockholders'  Equity

Preferred  Stock
     In February 1998, the Company completed the underwritten public offering of
1,125,000  shares of its 15% Series A Cumulative Preferred Stock (the "Preferred
Stock"), with a liquidation preference of $10 per share. The price to the public
was $10 per share, with net proceeds to the Company of approximately $9,631,000.
Such net proceeds have been utilized for working capital purposes, including the
funding  of  finance  contracts. Dividends on the Preferred Stock are cumulative
and  payable quarterly on the last day of March, June, September and December of
each  year,  commencing  on  June  30, 1998, at the rate of 15% per annum. After
three  years  from  the date of issuance, the Company may, at its option, redeem
one-sixth of the Preferred Stock each year, in cash at the liquidation price per
share  (plus  accrued and unpaid dividends), or, if in common stock, that number
of  shares  equal to $10 per share of Preferred Stock to be redeemed, divided by
85%  of  the  average  closing sale price per share for the common stock for the
five  trading  days  prior  to  the redemption date.  The Preferred Stock is not
redeemable  at  the  option  of  the  holder  and  has  no  stated  maturity.

     Because  the Company is not in compliance with the certain of the financial
covenants  of  its  Subordinated  Notes,  the  Company did not pay the quarterly
dividend on its Preferred Stock, otherwise payable on each of March 31, 1999 and
June  30, 1999.  Because dividends on the Preferred Stock are in arrears for two
quarterly  dividend periods, holders of the Preferred Stock have exercised their
right  to  call a special meeting of the Preferred Stock holders for the purpose
of  electing  two  additional  directors  to  serve  on  the  Company's Board of
                                    -- 6 --
<PAGE>
Directors until such dividend arrearage is eliminated. Such meeting is currently
scheduled  for  October  1,  1999.  In  addition,  certain  changes  that  could
materially  affect  the  holders  of  Preferred  Stock,  such as a merger of the
Company,  cannot  be  made  without  the  affirmative  vote  of  the  holders of
two-thirds  of  the  shares  of Preferred Stock, voting as a separate class. The
Preferred  Stock ranks senior to the common stock with respect to the payment of
dividends  and  amounts  upon  liquidation,  dissolution  or  winding  up.


Warrants
     In  connection  with  the  issuance of Preferred Stock, the Company sold to
Tejas  Securities  Group,  Inc.  ("Tejas"),  for  $100,  a  warrant  (the "Tejas
Warrant")  to  purchase up to 100,000 shares of the Company's common stock at an
exercise  price equal to $7.75 per share. The Tejas Warrant is exercisable for a
period of four years commencing February 17, 1999.  The Tejas Warrant includes a
net  exercise  provision  permitting the holder, upon consent of the Company, to
pay  the exercise price by cancellation of a number of shares with a fair market
value  equal  to the exercise price of such Tejas Warrant. The Tejas Warrant was
valued  at  $394,000,  which  was  recorded  as  additional issuance cost of the
Preferred  Stock.

     In  connection  with  the  issuance  of the Company's Subordinated Notes in
January 1998, the Company issued to BancBoston a warrant (the "Subordinated Note
Warrant").  The Subordinated Note Warrant entities the holder, upon the exercise
thereof,  to  purchase  from  the Company that number of shares of the Company's
common  stock, up to 368,462 shares,, which were available for conversion at the
maturity  of  the  Subordinated Notes on February 1, 2001. The holder may either
convert  the  debt  represented  by  the  Subordinated  Notes  or  exercise  the
Subordinated  Note Warrant, but not both. The Subordinated Note Warrant contains
customary  anti-dilution  provisions,  as well as certain demand and "piggyback"
registration  rights.  In addition, if certain major corporate events (such as a
change  in  control  or  major stock offering) do not occur prior to February 1,
2001,  then  the holder will have the right to put the Subordinated Note Warrant
to  the  Company  at  the  difference  between  the current market price and the
exercise  price  of  the Subordinated Note Warrant. Based on the market price at
June  30,  1999,  no  amount  would be payable at such date. The Company has the
option to redeem the Subordinated Note Warrant under certain circumstances.  The
Subordinated  Note  Warrant  expires  on January 31, 2005. The Subordinated Note
Warrant  was  valued  at  $375,831, which was recorded as a discount on the debt
represented  by  the  Subordinated  Note.

     In  connection  with  the  placement  of  the  Subordinated  Notes  and the
Subordinated  Note  Warrant,  the  Company,  William  O.  Winsauer  and  John S.
Winsauer,  as  principals  (the  "Principals")  entered  into  a  Shareholders'
Agreement with BancBoston pursuant to which the Principals granted to BancBoston
certain  "tag-along  rights"  in  connection  with  sales of common stock by the
Principals.  Also,  the  Company  paid  a  placement  fee of 5% of the principal
amount of the Subordinated Notes to Dresner Investment Services, Inc. and issued
to  the  placement  agent a warrant to purchase 65,313 shares of common stock of
the  Company  at  an  exercise  price  of  $6.30  per  share.

     The  Company's  remaining  outstanding  warrants  are  a  warrant (expiring
January 12, 2000) held by an individual exercisable for 7,500 common shares at a
price  of  $4.00 per share, a warrant (expiring March 31, 2002) held by Infinity
Investors  Limited exercisable for 100,000 common shares at a price of $8.73 per
share,  a  warrant  held  by an individual to purchase 30,000 common shares at a
price  of  $4.225 per share, and a warrant held by Infinity Investors Limited to
purchase  200,000  common  shares  at  a  price  of  $4.225  per  share.

Common  Stock  Investment  Agreement
     On  May  20,  1998,  the  Company  and  Promethean Investment Group, L.L.C.
("Promethean") entered into a common stock investment agreement (the "Investment
Agreement")  and related registration rights agreement whereby Promethean agreed
to  purchase from the Company, on the terms and conditions outlined below, up to
$20  million  (subject  to increase up to $25 million at Promethean's option) of
the Company's common stock. The Company must deliver a preliminary notice of its
intention  to  require Promethean to purchase its common shares at least ten but
not  more  than thirty days prior to the Company's delivery of its final notice.
The Company may deliver such final notice only if (i) the dollar volume-weighted
price  of  its common stock reported on the business day of such final notice is
at  least  $3.25 per share, (ii) at all times during the period beginning on the
date  of  delivery  of  the  preliminary  notice and ending on and including the
closing  date  (a)  a registration statement covering the resale of no less than
                                    -- 7 --
<PAGE>
150%  of  the shares to be sold to Promethean under the Investment Agreement has
been declared and remains effective and (b) shares of the Company's common stock
are  at  such time listed on a major national securities exchange, and (iii) the
Company  has  not  delivered  another  final  notice  to  Promethean  during the
preceding  twenty-five  business  days  preceding delivery of such final notice.
Following receipt of a final notice, Promethean's purchase obligation will equal
the lowest of (i) the amount indicated in such final notice, (ii) $5,000,000 and
(iii)  20%  of  the  aggregate  of the daily trading dollar volume on the twenty
consecutive  business days following delivery of the put notice. Promethean may,
in  its  sole  discretion,  increase  the  amount  purchasable  in the preceding
sentence  by  125%.  Promethean  must  conclude all required purchases of common
shares  within  twenty-five  business  days  of receipt of the final notice. The
purchase price for the Company's shares will be equal to 95% of the lowest daily
dollar  volume-weighted  average  price  during the six consecutive trading days
ending  on  and  including the date of determination. Promethean's obligation to
purchase  shares under the Investment Agreement shall end either upon the mutual
consent  of  the  parties  or automatically upon the earliest of the date (i) on
which  total  purchases  by  Promethean  under  the  Investment  Agreement total
$20,000,000,  (ii)  which  is  two  years  after  the  effective  date  of  the
registration  statement  relating  to the common stock covered by the Investment
Agreement,  and (c) which is twenty-seven months from the date of the Investment
Agreement.  In  consideration  of  Promethean's obligations under the Investment
Agreement,  the  Company  paid  $527,915  in  cash on August 19, 1998, which was
treated  as  an  investment  in  a  common  stock  agreement.

3.     Commitments  and  Contingencies

     On  February 8, 1999, the Company, AutoBond Master Funding Corporation V, a
wholly-owned  subsidiary  of  the  Company  ("Master  Funding  V"),  William  O.
Winsauer,  the  Chairman  and  Chief  Executive  Officer of the Company, John S.
Winsauer,  a  Director  and  the  Secretary of the Company, and Adrian Katz, the
Vice-Chairman,  Chief  Financial  Officer  and  Chief  Operating  Officer of the
Company  (collectively,  the  "Plaintiffs")  commenced an action in the District
Court  of Travis County, Texas (250th Judicial District) against Dynex and James
Dolph  (collectively,  the "Defendants"). This action is hereinafter referred to
as  the "Texas Action". The Company and the other Plaintiffs assert in the Texas
Action  that  Dynex  breached  the terms of the Funding Agreement. Such breaches
include delays and shortfalls in funding the advances required under the Funding
Agreement and ultimately the refusal by Dynex to fund any further advances under
the Funding Agreement. Plaintiffs also allege that Dynex and Mr. Dolph conspired
to  misrepresent  and mischaracterize the Company's credit underwriting criteria
and its compliance with such criteria with the intention of interfering with and
causing  actual  damage  to  the  Company's  business,  prospective business and
contracts.  The Plaintiffs assert that Dynex' funding delays and ultimate breach
of  the  Funding  Agreement were intended to force the Plaintiffs to renegotiate
the  terms  of  their  various  agreements  with  Dynex  and  related  entities.
Specifically,  the Plaintiffs assert that Dynex intended to force the Company to
accept  something less than Dynex' full performance of its obligations under the
Funding Agreement. Further, Dynex intended to force the controlling shareholders
of  the  Company  to  agree  to  sell  their stock in the Company to Dynex or an
affiliate  at  a  share price substantially lower than the $6.00 per share price
specified  in the Stock Option Agreement, dated as of June 9, 1998, by and among
Messrs. William O. Winsauer, John S. Winsauer and Adrian Katz (collectively, the
"Shareholders")  and Dynex Holding, Inc.  Plaintiffs in the Texas Action request
declaratory  judgement  that  (i)  Dynex  has  breached  and is in breach of its
various  agreements  and contracts with the Plaintiffs, (ii) Plaintiffs have not
and are not in breach of their various agreements and contracts with Defendants,
(iii)  neither  the Company nor Master Funding V has substantially or materially
violated or breached any representation or warranty made to Dynex, including but
not  limited  to  the  representation and warranty that all or substantially all
finance  contracts funded or to be funded by Dynex comply in full with, and have
been  acquired  by  the  Company  in  accordance  with,  the Company's customary
underwriting  guidelines and procedures, and (iv) Dynex is obligated to fund the
Company  in  a  prompt  and  timely  manner  as required by the parties' various
agreements.  In  addition  to actual, punitive and exemplary damages.  The Texas
Action  has  been  set for trial in December 1999. Dynex's motion to dismiss the
Texas  Action  was  denied  by  the  court.

     On March 1, 1999, the Company and the other Plaintiffs filed an application
in  the  Texas  Action  for  a  temporary  injunction  enjoining  Dynex (i) from
continuing  to  suspend  or  withhold funding pursuant to the Funding Agreement,
(ii)  from  removing  or attempting to remove the Company as servicer, and (iii)
from  making  any  further  false  or defamatory public statements regarding the
Plaintiffs.  A  hearing was held on the Company's application during the week of
August 2, 1999. The court has denied the Company's application on points (i) and
                                    -- 8 --
<PAGE>
(iii)  and has taken point (ii) under advisement, along with Dynex' request that
a  temporary  injunction  be granted removing the Company as servicer. The court
has  indicated  that  it  will  announce  its  ruling  on  August  30,  1999.

     On  February  9, 1999, Dynex commenced an action against the Company in the
United  States  District  Court  for  the Eastern District of Virginia (Richmond
District)  (the  "Virginia Action") seeking declaratory relief that Dynex is (i)
not  obligated  to advance funds to Master Funding V under the Funding Agreement
because  the  conditions  to funding set forth in the Funding Agreement have not
been  met, and (ii) entitled to access to all books, records and other documents
of  Master  Funding V, including all finance contract files. Specifically, Dynex
alleges  that  as  a  result of a partial inspection of certain finance contract
files  by  Mr.  Dolph  and  Virgil  Baker  &  Associates  in January 1999, Dynex
concluded  that  a  significant  number  of  such  contracts  contained material
deviations  from  the  applicable  credit  criteria  and procedures, an apparent
breach  of  the  Funding Agreement. Dynex also alleges that on February 8, 1999,
the Company refused to permit Mr. Dolph and representatives from Dynex access to
the  books,  records  and finance contract files of the Company. Dynex concludes
that  as  a  result  of  such  alleged  breaches, it is not obligated to provide
advances  under  the  Funding  Agreement.  Dynex  also  seeks to recover damages
resulting  from the Company's alleged breach of the parties' various agreements,
which alleged breach the Company vigorously denies. The Company, Messrs. William
O.  Winsauer,  John  S.  Winsauer and Adrian Katz filed a responsive pleading on
March  25,  1999.  The Virginia Action (including the matters transferred in the
New  York  Action (discussed below)), by a judge's order dated May 17, 1999, was
transferred  to  Texas  federal  court.

     On  February  22,  1999,  the same day that Dynex notified the Company of a
purported  servicing termination, Dynex filed another action against the Company
in  the  United States District Court for the Southern District of New York (the
"New  York  Action"),  seeking  damages  and injunctive relief for the Company's
alleged  breaches  under  the  servicing  agreement among the Company, Dynex and
Master  Funding  V.  The  Company  was not notified of the New York Action until
March  1,  1999,  when  Dynex  sought  a temporary restraining order against the
Company.  After  hearing  argument  from  counsel  for both sides, the temporary
restraining  order  was  denied.  On  March  23, 1999, the court issued an order
transferring the action to the Federal District Court in the Eastern District of
Virginia  without prejudice.  The Company remains the servicer and is performing
in  its  capacity  as  servicer.

     Dynex  has  purportedly  accelerated  all amounts due under the Senior Note
Agreement  dated June 9, 1998, by and between Dynex and the Company. The Company
disputes  such  purported  acceleration.

     In  connection  with the 1997-B and 1997-C securitizations, $5.8 million in
Class  B  Notes are exchangeable (at a rate of 117.5% of the principal amount of
Class  B  Notes  exchanged) for the Company's 17% Convertible Notes, solely upon
the occurrence of a delinquency ratio trigger relating to the securitized pools.
As of June 30, 1999, such trigger event has not occurred.

     In  March  1998,  after  Progressive  Northern  Insurance  ("Progressive")
purported  to cancel the vendor's single interest ("VSI") and deficiency balance
insurance  policies  issued  in  favor  of  the  Company  (collectively,  the
"Policies"),  the  Company  sued  Progressive,  its  affiliate  United Financial
Casualty  Co.  and  their  agent in Texas, Technical Risks, Inc. in the District
Court  of  Harris  County, Texas. The action seeks declaratory relief confirming
the Company's interpretation of the Policies as well as claims for damages based
upon  breach  of  contract,  bad  faith  and fraud. The Company has received the
defendants'  answers, denying the Company's claims, and discovery is proceeding.
Progressive stopped paying claims during the second quarter of 1998. As a result
of the attempt by Progressive to cancel its obligations and its refusal to honor
claims  after  March  1998,  the  Company  has  suffered  a  variety of damages,
including  impairment  of its retained interests in securitizations. The Company
is  vigorously  contesting  the  legitimacy  of  Progressive's  actions  through
litigation.  Although  a  favorable  outcome  cannot  be assured, success in the
litigation  could  restore at least some of the value of the Company's interests
in  such securitizations.  Conversely, if the court were to uphold Progressive's
position,  further  impairment of the Company's interests could occur, resulting
in  an adverse effect on the Company's financial position, results of operations
and  cash  flows.  This  matter  is  currently set for trial during the two-week
period  beginning  September  20,  1999.

     Also  in  March  1998,  the  Company  commenced an action in Travis County,
Texas,  against  Loan  Servicing  Enterprise ("LSE"), alleging LSE's contractual
breach  of its servicing obligations on a continuing basis. LSE has commenced an
                                    -- 9 --
<PAGE>
action  against  the  Company  in  Texas  state  court seeking recovery from the
Company  of  putative  termination fees in connection with termination of LSE as
servicer. The Company expects the two actions to be consolidated. If the Company
prevails  against  LSE, some of the value of the Company's retained interests in
securitizations  could  be  restored. Both suits have been voluntarily suspended
pursuant  to  an  agreement  negotiated  by  the  parties.

     The  Company's carrier for the credit deficiency insurance obtained through
1996,  Interstate  Fire & Casualty Co. ("Interstate") determined in late 1996 to
no  longer  offer  such  coverage  to  the  auto finance industry, including the
Company.  In  connection  with  Interstate's  attempt  to no longer offer credit
deficiency  coverage  for  contracts originated after December 1996, the Company
commenced an action in the United States District Court for the Western District
of  Texas,  Austin Division, seeking a declaratory judgment that (i) the Company
was  entitled  to 180 days' prior notice of cancellation and (ii) Interstate was
not  entitled  to  raise  premiums  on  finance contracts for which coverage was
obtained  prior  to  the  effectiveness of such cancellation, as well as seeking
damages  for  Interstate's  alleged  deficiencies  in  paying  claims.  Prior to
receiving  the  Company's  complaint in the Texas action, Interstate commenced a
similar  action  for  declaratory  relief  in  the  United  States Court for the
Northern  District  of Illinois. Both suits have been voluntarily dismissed, and
Interstate  and  the  Company  have to date acted on the basis of a cancellation
date  of May 12, 1997 (i.e., no finance contracts presented after that date will
be  eligible for credit deficiency coverage by Interstate, although all existing
contracts  for which coverage was obtained will continue to have the benefits of
such  coverage),  no  additional  premiums  have  been demanded or paid, and the
claims-paying process has been streamlined. In particular, in order to speed the
claims-paying  process,  Interstate  has  paid  lump  sums  to the Company as an
estimate  of  claims  payable  prior  to  completion  of processing. Pending the
Company's determination of the appropriate beneficiary for such claims payments,
the  Company  has  deposited  and  will  continue  to  deposit such funds into a
segregated  account.

     The  Company is the plaintiff or the defendant in several legal proceedings
that  its  management  considers  to  be the normal kinds of actions to which an
enterprise  of  its  size and nature might be subject, and not to be material to
the  Company's overall business or financial condition, results of operations or
cash  flows.

     The  Company  has  taken actions to provide that their computer systems are
capable  of  processing  for  the periods in the year 2000 and beyond. The costs
associated  with  this  are  not expected to significantly affect operating cash
flow;  however, the nature of their business requires that they rely on external
vendors  and services who may not be Year 2000 compliant. Therefore, there is no
assurance  that  the  Company's  actions  in  this  regard  will  be successful.

     On  March  31, 1999, a suit naming as defendants the Company and William O.
Winsauer,  Adrian Katz, and John S. Winsauer (in their capacities as controlling
shareholders  of  the  Company),  (collectively, the "Defendants") as defendants
(the  "Defendants"),  was  filed on March 31, 1999 in the United States District
Court  for  the Western District of Texas (Austin Division) by Bruce Willis (the
"Plaintiff"),  a  holder  of  the  Company's Preferred Stock.  The suit alleges,
among other things, that the Defendants violated Section 10(b) of the Securities
and  Exchange  Act of 1934 (and Rule 10b-5 promulgated thereunder) in failing to
disclose  adequately  and  in  causing  misstatements  concerning the nature and
condition  of  the Company's financing sources.  The suit also alleges that such
actions  constituted  statutory  fraud under the Texas Business Corporation Act,
common  law  fraud  and  negligent misrepresentation.  The Plaintiff seeks class
action  certification.  The  Plaintiff  also  seeks, among other things, actual,
special,  consequential, and exemplary damages in an unspecified sum, as well as
costs  and  expenses incurred in connection with pursuing the action against the
Company.  The  Company believes that it has consistently and accurately informed
the  public  of  its  business  and  operations,  including the viability of its
funding sources, and, as a consequence believes the suit to be without merit and
intends  to  vigorously  defend  against  this  action.

                                    -- 10 --
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS


     The following analysis of the financial condition and results of operations
of  the  Company  should  be read in conjunction with the Company's Consolidated
Financial  Statements  and  Notes  thereto and the other financial data included
herein. Certain of the financial information set forth below has been rounded in
order  to  simplify  its  presentation.  However, the ratios and percentages set
forth below are calculated using the detailed financial information contained in
the  Financial Statements and the Notes thereto, and the financial data included
elsewhere  in  this  Form  10-Q.  For  further information, refer to the audited
consolidated  financial  statements  and  footnotes  thereto  included  in  the
Company's  Form  10-K  for  the  year  ended  December 31, 1998 (SEC File Number
000-21673).

     The  Company  is  a  specialty  consumer  finance  company  engaged  in
underwriting, acquiring, servicing and securitizing retail installment contracts
("finance  contracts") originated by franchised automobile dealers in connection
with  the  sale  of  used  and,  to  a  lesser  extent, new vehicles to selected
consumers  with  limited  access  to  traditional  sources of credit ("sub-prime
consumers").  Sub-prime  consumers generally are borrowers unable to qualify for
traditional  financing  due  to  one  or more of the following reasons: negative
credit  history  (which  may  include  late payments, charge-offs, bankruptcies,
repossessions  or unpaid judgments); insufficient credit; sporadic employment or
residence  histories;  or high debt-to-income or payment-to-income ratios (which
may  indicate  payment  or  economic  risk).

     The Company acquires finance contracts generally from franchised automobile
dealers, makes credit decisions using its own underwriting guidelines and credit
personnel  and  performs the collection function for finance contracts using its
own  collections  department.  The  Company also acquires finance contracts from
third  parties  other  than  dealers,  for  which  the Company reunderwrites and
collects  such  finance  contracts  in  accordance  with  the Company's standard
guidelines. The Company has securitized portfolios of these finance contracts to
efficiently  utilize  limited  capital  to allow continued growth and to achieve
sufficient finance contract volume to allow profitability. The Company markets a
single finance contract acquisition program to automobile dealers, which adheres
to  consistent  underwriting  guidelines  involving  the  purchase  of primarily
late-model  used  vehicles.

     The  continued  acquisition and servicing of sub-prime finance contracts by
an  independent finance company under current market conditions is a capital and
labor intensive enterprise. Capital is needed to fund the acquisition of finance
contracts  and to effectively securitize them so that additional capital is made
available  for  acquisition activity. While a portion of the Company's financing
has  been  obtained  with  investment  grade  ratings at relatively low interest
rates, the remainder is difficult to obtain and requires the Company to pay high
coupons,  fees  and other issuance expenses, with a negative impact on earnings.
The underwriting and servicing of a growing sub-prime finance contract portfolio
requires  a  higher  level  of  experienced  personnel  than that required for a
portfolio  of  higher  credit-quality consumer loans. Accordingly, the Company's
growth  in  finance  contract  volume  since  inception  has corresponded with a
significant  increase  in  expenses  related  to  building  the  infrastructure
necessary for effective underwriting and servicing.  The Company's assumption of
all  servicing functions in late 1997 has increased servicing income. In view of
the Dynex situation and the high cost of capital, the Company does not expect to
see  profitability until alternate funding is obtained. The Company has begun to
strategically  reduce  staff  in  order  to  conserve  capital.


                                    -- 11 --
<PAGE>
REVENUES

     The  Company's  primary  sources  of  revenues consist of three components:
interest  income,  gain  on  sale of finance contracts and servicing fee income.

     Interest  Income.  Interest  income  consists  of  the  sum  of two primary
components: (i) interest income earned on finance contracts held for sale by the
Company  and  (ii)  interest  income  earned  on  retained  interests  in
securitizations.  Other  factors  influencing  interest  income  during  a given
fiscal  period  include  (i) the annual percentage rate of the finance contracts
acquired, (ii) the aggregate principal balance of finance contracts acquired and
funded  through  the  Company's  warehouse  and other credit facilities prior to
securitization,  and  (iii)  the length of time such contracts are funded by the
warehouse  and  other  credit  facilities.

     Gain  on  Sale of Finance Contracts. For transfers of financial assets that
result  in  the  recognition  of  a  sale, the newly created assets obtained and
liabilities  incurred  by  the  transferor  as a part of a transfer of financial
assets  are  initially  measured  at fair value. Interest in the assets that are
retained  are  measured by allocating the previous carrying amount of the assets
(e.g.,  finance  contracts)  between  the  interest  sold  (e.g.,  investor
certificates)  and  interest retained based on their relative fair values at the
date  of  the  transfer.  The  amounts  initially  assigned  to  these financial
components  are  a  determinant  of  the  gain  or  loss  from  a securitization
transaction.

     The retained interests in securitizations available for sale are carried at
estimated  fair  value  with unrealized gains (losses) recorded in stockholders'
equity as part of accumulated other comprehensive income and those classified as
trading  are  carried  at  estimated  fair  value  with unrealized gain (losses)
recorded  currently  in  income.  The  fair  value  of the retained interests in
securitizations is determined by discounting expected cash flows at a rate based
on  assumptions  that  market  participants  would  use  for  similar  financial
instruments  subject  to prepayment, default, collateral value and interest rate
risks.  The  Company's  retained  interests  are  subordinated  to  other  trust
securities,  consequently  cash  flows are paid by the securitization trustee to
the  investor  security holders until such time as all accrued interest together
with  principal  have  been paid in full. Subsequently, all remaining cash flows
are  paid  to  the  Company.

     An  impairment  review  of  the  retained  interests  in securitizations is
performed  quarterly by calculating the net present value of the expected future
excess  spread  cash  flows after giving effect to changes in assumptions due to
market  and  economic  changes  and  the  performance  of the loan pool to date.
Impairment  is  determined  on  a  disaggregated  basis consistent with the risk
characteristics  of  the underlying finance contracts as well as the performance
of  the  pool  to  date.  To  the  extent that the Company deems the asset to be
permanently  impaired,  the  Company  would record a charge against earnings and
write  down  the  asset  accordingly. The Company recorded a charge to income of
$2,572,207  during  the  six  months  ended  June  30,  1999  as a result of the
impairment  review.  See  Note  4  to  the  Consolidated  Financial  Statements.

     The  Company's  cost  basis  in  finance  contracts  sold  has  varied from
approximately  92% to 103% of the value of the principal balance of such finance
contracts. This portion of recognized gain on sale varies based on the Company's
cost  of insurance covering the finance contracts and the discount obtained upon
acquisition  of  the  finance  contracts.  Generally,  the  Company has acquired
finance contracts from dealers at a greater discount than with finance contracts
acquired  from  third parties. Additionally, costs of sale reduce the total gain
recognized.

     Further,  the retained interest component of recognized gain is affected by
various factors, including most significantly, the coupon on the senior investor
securities  and  the  age  of  the  finance contracts in the pool, as the excess
spread  cash  flow  from a pool of aged, as opposed to new, finance contracts is
less.  The  aging (capture of excess spread prior to securitization) necessarily
results  in  less  available  excess  spread  cash flow from the securitization.

                                    -- 12 --
<PAGE>

     The  gain  on  sale  of  finance  contracts  is  affected  by the aggregate
principal  balance  of  contracts  securitized  and the gross interest spread on
those  contracts.  The following table illustrates the gross interest spread for
each  of  the  Company's  securitizations:

<TABLE>
<CAPTION>

                               Finance Contracts(1)     Senior Investor Certificates
                               --------------------     ----------------------------
                             Principal    Weighted     Balance
                               Amount      Average     June 30,               Gross
Securitization              Securitized     Rate         1999       Rate    Spread(2)
--------------------------  ------------  ---------  ------------  -------  ---------
<S>                         <C>           <C>        <C>           <C>      <C>
AutoBond Receivables
  Trust 1995-A . . . . . .  $ 26,261,009      18.9%  $  3,709,394     7.2%      11.7%

  Trust 1996-A . . . . . .    16,563,366      19.7%     3,673,925     7.2%      12.5%

  Trust 1996-B . . . . . .    17,832,885      19.7%     4,676,091     7.7%      12.0%

  Trust 1996-C . . . . . .    22,296,719      19.7%     7,344,277     7.5%      12.2%

  Trust 1996-D . . . . . .    25,000,000      19.5%     8,542,587     7.4%      12.1%

  Trust 1997-A (4) . . . .    28,037,167      20.8%     8,254,776     7.8%      13.0%

  Trust 1997-B . . . . . .    34,725,196      19.9%    16,570,197     7.7%      12.2%

  Trust 1997-C . . . . . .    34,430,079      20.0%    17,402,411     7.6%      12.4%
AutoBond Master Funding
  Corporation V (Dynex)(3)   153,092,410      20.0%   115,631,352  7.4%(3)      12.6%
                            ------------             ------------
        Total. . . . . . .  $358,238,831             $185,805,010
                            ============             ============
-------------------------------------------------------------------------------------
<FN>

1  Refers  only  to  balances  on  senior  investor  certificates.
2  Difference  between  weighted average contract rate and investor certificate rate.
3  Includes  $26 million of finance contracts from securitizations previously retired
4  Weighted  average  of  senior  investor  coupon  rates.
</TABLE>


     Servicing  Income. The Company earns substantially all of its servicing fee
income  on  the  contracts  it  services  on  behalf  of  securitization trusts.
Servicing  fee  income consists of: (i) contractual administrative fees received
through  securitizations, equal to $7.00 per month per contract included in each
trust  (excluding  amounts  paid  to  third-party  servicers by the trust); (ii)
contractual  servicing fees received through securitizations, equal to $8.00 per
month  per  contract  included  in  each  trust;  and (iii) fee income earned as
servicer for such items as late charges and documentation fees, which are earned
whether  or  not  a  securitization  has  occurred.

     In  May  1999,  the  Company  agreed to transfer servicing of the Company's
1997-B  and  1997-C  securitizations  to  a  successor  servicer. In return, the
Company  received  approximately  $800,000 in past due servicing fees previously
withheld  from  the  Company.

     In  June  1999, the trustee for the 1997-A securitization, at the purported
direction  of  the  Class  A  Noteholder,  attempted to terminate the Company as
servicer for the securitization. Pursuant to discovery obtained in the Company's
litigation with Dynex, the Company determined that the Class A Noteholder was in
fact  a  corporation  wholly-owned  by Dynex, and that a purchase money security
interest  in the Class A Notes was given by the Dynex subsidiary to the previous
holder,  Daiwa  Finance  Corporation.  The  Company has disputed this attempt to
terminate  servicing,  and  in its capacity as the Class B Noteholder has, along
with  the  Class  C Noteholder, instructed the trustee not to follow the Class A
Noteholder's  instructions.

                                    -- 13 --
<PAGE>
     In  August  1999,  the  Company  reached agreement with the trustee and the
investors  in  the  Company's  1996  securitization  transactions  to  amend the
relevant  documents  to  provide  for,  among other things, the appointment of a
back-up  servicer.



FINANCE  CONTRACT  ACQUISITION  ACTIVITY

<TABLE>
<CAPTION>

The  following table sets forth information about the Company's finance contract
acquisition  activity:

                                                          Six Months Ended
                                                              June 30,
<S>                                               <C>          <C>
                                                         1998         1999
                                                  -----------  -----------

Number of finance contracts acquired . . . . . .        2,637        1,586
Principal balance of finance contracts acquired.  $29,775,406  $20,336,852
Number of active dealerships (1) . . . . . . . .          578          466
Number of enrolled dealerships . . . . . . . . .        1,789        2,332
--------------------------------------------------------------------------
<FN>

(1)  Dealers  who  have sold at least one finance contract to the Company during
the  period.

</TABLE>

RESULTS  OF  OPERATIONS

     Period-to-period  comparisons  of  operating results may not be meaningful,
and  results  of  operations  from prior periods may not be indicative of future
results.  The  following  discussion  and analysis should be read in conjunction
with  the  Company's  Consolidated  Financial  Statements and the Notes thereto.



THREE  MONTHS  ENDED  JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 1998

NET  LOSS

     In  the three months ended June 30, 1999, the net loss was $7,288,693 which
represents  an  increase of $2,054,905 over the three months ended June 30, 1998
net  loss  of  $5,233,788.  The  increase  in  net  loss was precipitated by the
cessation  of  funding  by  Dynex  under  the Funding Agreement which forced the
Company  to discontinue acquisition of finance contracts as of February 9, 1999.
A  valuation  allowance was established for the Company's deferred tax assets of
$3,050,776.

Total  Revenues

     Total  revenues  for  the  three  months  ended June 30, 1999 of $1,888,659
represent  a  decrease  of  $2,012,988 from the three months ended June 30, 1998
revenues  of  $3,901,647.  The  decrease  was  due primarily to the reduction in
volume  of  finance  contract  sales  activity  for  the  second  quarter.

     Interest  Income.  Interest income for the three months ended June 30, 1999
of  $616,391  represents  a increase of $89,107 from the three months ended June
30,  1998  interest  income  of  $527,284  due to the timing of finance contract
acquisitions  and  the  period  held  before  sale.

     Gain  on  Sale  of  Finance  Contracts.  The  Company realized gain on sale
totaling $215,099 during the three months ended June 30, 1999.  The gain was the
result  of  final  transactions  related  to  the  Dynex  sales. The decrease of
$2,553,780  was  due  to  the  reduction  in  volume of sales as a result Dynex'
refusal  to  perform  under  the  Funding  Agreement.

     Servicing  Fee  Income.  The Company reports servicing fee income only with
respect  to finance contracts that are securitized or sold. For the three months
ended June 30, 1999 servicing fee income was $979,366, consisting of contractual
administrative  fees  and  servicer  fees.  Servicing  fee  income  increased by
$168,018  from  the  three  months  ended  June 30, 1998 servicing fee income of
$811,348  as  a  result  of  the  increased  volume of contracts being serviced.

                                    -- 14 --
<PAGE>
     Other  Income.  For  the  three  months  ended  June 30, 1999, other income
amounted  to  $77,803  compared  with a loss of $205,864 for the comparable 1998
period.

Total  Expenses

     Total  expenses  for  the  three  months  ended June 30, 1999 of $7,680,252
represent  a  decrease  of  $4,133,953 from the three months ended June 30, 1998
total expenses of $11,814,205. Impairment of the Company's retained interests in
securitizations  during  the second quarter of 1998 was approximately $4,070,000
greater  than  the  second  quarter  of  1999.

     Interest Expense. Interest expense for the three months ended June 30, 1999
of  $804,750  represents a decrease of $280,651 from the three months ended June
30,  1998 interest expense of $1,085,401. The decrease resulted from elimination
of  borrowing  under  the  revolving  credit  facilities.

     Salaries  and  Benefits.  Salaries  and benefits for the three months ended
June  30,  1999  of  $2,664,660 represent an increase of $196,093 from the three
months  ended  June  30,  1998 salaries and benefits of $2,468,567.  The Company
began strategic layoffs during the second quarter of 1999 compared to increasing
staff  during  the  second  quarter  of  1998.  Despite  such  strategic  staff
reductions,  salaries  and benefits increased due mainly to the increased health
claims  by  employees  from  the  Company's  employee  benefit  program.

     General  and  Administrative  Expenses. General and administrative expenses
for  the three months ended June 30, 1999 of $1,817,064 represent an increase of
$26,444  from  the  three  months ended June 30, 1998 general and administrative
expense of $1,790,620. Despite the Company's continuing efforts to reduce costs,
general  and  administrative  expenses  increased  due  to  higher  professional
expenses  relating  to  the  Company's retention of legal counsel to protect its
interest  in  its  litigation  with  Dynex.

     Impairment  of  Retained  Interests  in  Securitizations.  The  Company
periodically  reviews  the  carrying  value  of  the  retained  interests  in
securitizations.  The  Company recorded a charge against earnings for impairment
of  these  assets  of  $1,520,750  for  the  three months ended June 30, 1999 as
compared  with  an  impairment of $5,589,802 for the three months ended June 30,
1998.  This impairment reflects the revaluation of expected future cash flows to
the  Company  from  securitizations.  See  Note  4 to the Consolidated Financial
Statements.

     Other  Operating Expenses. Other operating expenses (consisting principally
of  servicer  fees, credit bureau reports, communications and insurance) for the
three  months ended June 30, 1999 of 873,028 represent a decrease of $6,787 from
the  three months ended June 30, 1998 other operating expenses of $879,815.  The
decrease  was  mainly  due to reimbursement of trust expenses and a reduction in
loan  insurance  premium  which  was  offset  by  the  establishment of a market
valuation  allowance  for  finance  contracts  held  for  sale.

     Income  Tax. Income tax expense for the three months ended June 30, 1999 of
$1,497,100 represents an increase of $4,175,870 from the three months ended June
30,  1998  income  tax  benefit  of  $2,678,770  due  to  the establishment of a
valuation  allowance  for  the  Company's  deferred  tax  assets  of $3,050,776.


SIX  MONTHS  ENDED  JUNE  30,  1999  COMPARED  TO SIX MONTHS ENDED JUNE 30, 1998


NET  INCOME


In  the  six  months  ended  June  30,  1999,  the net loss was $9,749,366 which
represents  an increase in loss of $4,394,440 over the six months ended June 30,
1998  net  loss  of $5,354,926. The increase in net loss was precipitated by the
cessation  of  funding  by  Dynex  under  the Funding Agreement which forced the
Company  to discontinue acquisition of finance contracts as of February 9, 1999.

                                    -- 15 --
<PAGE>
Total  Revenues

     Total  revenues  for  the  six  months  ended  June  30, 1999 of $5,673,597
represent  a  decrease  of  $3,867,231  from  the six months ended June 30, 1998
revenues  of  $9,540,828.  The  decrease  was  due primarily to the reduction in
volume  of  finance  contract  sales  activity  for  the  second  quarter.

     Interest Income.  Interest income for the six months ended June 30, 1999 of
$1,080,377  represents a decrease of $585,405 from the six months ended June 30,
1998  interest  income  of  $1,665,782  due  to  the  timing of finance contract
acquisitions  and  the  period  held  before  securitization.

     Gain  on  Sale  of  Finance  Contracts.  The  Company realized gain on sale
totaling  $1,754,285  during the six months ended June 30, 1999. The decrease of
$4,882,535  was primarily due to the reduction in volume of sales as a result of
the  termination  of  the  Dynex  Funding  Agreement.

     Servicing  Fee  Income.  The Company reports servicing fee income only with
respect  to  finance  contracts that are securitized or sold. For the six months
ended  June  30,  1999  servicing  fee  income  was  $1,985,140,  consisting  of
contractual  administrative  fees  and  servicer  fees.  Servicing  fee  income
increased  by  $667,198  from  the  six months ended June 30, 1998 servicing fee
income  of  $1,317,942  as  a  result of the increased volume of contracts being
serviced.

     Other  Income.  For  the  six  months  ended  June  30,  1999, other income
amounted  to  $853,795  compared  with a loss of $79,716 for the comparable 1998
period.  The  increase  was mainly attributable to settlement of litigation with
Charlie  Thomas  Ford,  Inc.  on  favorable  terms.  See  "Legal  Proceedings".

Total  Expenses

     Total  expenses  for  the  six  months  ended  June 30, 1999 of $15,524,763
represent a decrease of $2,098,953 from the six months ended June 30, 1998 total
expenses  of  $17,623,716.  Impairment  of  the  Company's retained interests in
securitizations  during  the second quarter of 1998 was approximately $4,070,000
greater  than  the  second  quarter  of  1999.

     Interest  Expense.  Interest expense for the six months ended June 30, 1999
of  $1,518,120  represents a decrease of $857,686 from the six months ended June
30,  1998 interest expense of $2,375,806. The decrease resulted from elimination
of  borrowing  under  the  revolving  credit  facilities.

     Salaries  and Benefits. Salaries and benefits for the six months ended June
30,  1999  of  $5,813,691  represent an increase of $947,359 from the six months
ended  June  30,  1998  salaries  and  benefits of $4,866,332. The Company began
strategic layoffs during the second quarter of 1999 compared to increasing staff
during  the  second  quarter  of 1998.  Despite such strategic staff reductions,
salaries  and  benefits  increased  due mainly to the increased health claims by
employees  from  the  Company's  employee  benefit  program.

     General  and  Administrative  Expenses. General and administrative expenses
for  the  six  months ended June 30, 1999 of $3,686,387 represent an increase of
$811,503  from  the  six  months  ended June 30, 1998 general and administrative
expense of $2,874,884. Despite the Company's continuing efforts to reduce costs,
general  and  administrative  expenses  increased  due  to  higher  professional
expenses  relating  to  the  Company's retention of legal counsel to protect its
interest in its litigation with Dynex. The Company relocated its headquarters to
a  larger  facility  June  15,  1998  and  had a corresponding higher facilities
expense.

     Impairment  of  Retained  Interest  in  Securitizations.  The  Company
periodically  reviews  the  carrying  value  of  the  retained  interest  in
securitizations.  The  Company recorded a charge against earnings for impairment
of these assets of $2,572,207 for the six months ended June 30, 1999 as compared
with  an  impairment of $5,877,825 for the six months ended June 30, 1998.  This
impairment reflects the revaluation of expected future cash flows to the Company
from  securitizations.  See  Note  4  to  the Consolidated Financial Statements.

     Other  Operating Expenses. Other operating expenses (consisting principally
of  servicer  fees, credit bureau reports, communications and insurance) for the
six  months  ended June 30, 1999 of $1,873,893 represent an increase of $345,024
from  the six months ended June 30, 1998 other operating expenses of $1,528,869.
                                    -- 16 --
<PAGE>
The  increase  was  mainly  due  to  a  market  valuation  allowance for finance
contracts  held  for  sale.

     Income  Tax. Income tax benefit for the six months ending June 30, 1999 was
$101,800  which  represents a decrease of $2,626,162 compared with an income tax
benefit  of  $2,727,962  for  the  six  months  ended  June  30, 1998 due to the
establishment  of a valuation allowance for the Company's deferred tax assets of
$3,050,776.


FINANCIAL  CONDITION

     Cash  and  Cash Equivalents. Cash and cash equivalents decreased $4,798,595
to  $372,374 at June 30, 1999 from $5,170,969 at December 31, 1998. The decrease
in  cash  and  cash  equivalents  was largely the result of an operating loss of
$6,145,274  primarily  caused  by  the  termination  by  Dynex  of  the  Funding
Agreement.  Other  decreases  in  cash  and  cash equivalents were the result of
purchases  of  finance  contracts.  These  declines were partially offset by the
receipt  of  $6,573,107  in  the  first  quarter  of  1999 from Dynex, which was
outstanding  at  December  31,  1998.

     Finance  Contracts  Held  for Sale. Finance contracts held for sale, net of
allowance  for  losses,  increased $4.8 million to $5.7 million at June 30, 1999
from  $0.9  million  at  December  31, 1998. The number and principal balance of
contracts  held  for  sale are largely dependent upon the timing and size of the
Company's  securitizations.  The  Company  securitized  finance  contracts  on a
regular  basis  through  the Dynex Funding Agreement until February 9, 1999. The
balance  in  finance  contracts  held  for  sale  outstanding  at  June 30, 1999
consisted  of  loans  originated  with  intent  to  sell to Dynex. In July 1999,
$5,960,346  in  outstanding  finance  contracts  were  sold  for  proceeds  of
$5,006,690. Future acquisitions of finance contracts for securitization and sale
are  uncertain.

     The Company maintains an allowance for, and reports a provision for, losses
on  finance  contracts held for sale. Management evaluates the reasonableness of
the  assumptions  employed  by  reviewing credit loss experience, delinquencies,
repossession  trends,  the  size  of  the finance contract portfolio and general
economic conditions and trends. If necessary, assumptions will be changed in the
future  to  reflect  historical  experience to the extent it deviates materially
from  that  which  was  assumed.

     Other  Assets.  Other  assets  decreased $402,791 to $1,060,255 at June 30,
1999  from  $1,463,046  at December 31, 1998. The Company received approximately
$0.8  million of withheld administrator fees and expenses. Certain trustees have
continued to withhold administrator fees and expenses and to deposit same into a
separate  bank account earning interest. The total amount withheld and deposited
into a separate account is approximately  $ 0.5 million as of June 30, 1999, due
to  the  Company.

     Retained Interests in Securitizations. An impairment review of the retained
interests  in  securitizations  is  performed  quarterly  by  estimating the net
present  value  of the expected future cash flows after giving effect to changes
in  assumptions  due  to  market and economic changes and the performance of the
loan pool to date. The discount rate used is an estimated market rate, currently
15%  to  17%.  To  the extent that the Company deems the asset to be permanently
impaired,  the Company records a charge against earnings. The Company recorded a
charge  against earnings of $2,572,207 during the six months ended June 30, 1999
as  a  result  of  the  impairment  review  of  the  retained  interests  in
securitizations.

     Prior  to the Dynex Funding Agreement, at the time a securitization closed,
the  Company's  securitization  subsidiary  was  required to fund a cash reserve
account  within  the  trust  to provide additional credit support for the senior
investor  securities.  Additionally,  depending  on  the  structure  of  the
securitization,  a portion of the future excess spread cash flows from the trust
is  required to be deposited in the cash reserve account to increase the initial
deposit  to  a  specified  level.  A  portion  of  excess spread cash flows will
increase such reserves until they reach a target reserve level (initially 6%) of
the outstanding balance of the senior investor securities. The trust receivables
are  ultimately  payable  to  the Company as owner of retained interests and are
included in the estimated cash flow of such retained interests. (i.e., the "cash
out"  method).
                                    -- 17 --
<PAGE>
<TABLE>
<CAPTION>

The  following  amounts are included in retained interests in securitizations as
of:

                                            December 31, 1998   June 30, 1999
                                            ------------------  --------------
<S>                                         <C>                 <C>
Trust receivable . . . . . . . . . . . . .  $        2,236,362  $      985,321
Class B notes receivable . . . . . . . . .           4,586,908       3,419,684
Interest only strip receivable . . . . . .           7,050,081       5,436,442
Total retained interest in securitizations  $       13,873,351  $    9,841,447
                                            ==================  ==============

         Trading . . . . . . . . . . . . .  $        4,586,908  $    3,419,684
         Available for sale. . . . . . . .  $        9,286,443  $    6,421,763
</TABLE>



Notes  Payable  and  Non-Recourse  Debt


<TABLE>
<CAPTION>


     The  following  amounts  are  included  in  notes  payable  and  non-recourse debt as of:


                                                                    December 31,    June 30,
                                                                        1998          1999
                                                                    -------------  -----------
<S>                                                                 <C>            <C>
Non-recourse notes payable, collateralized by Class B Certificates  $   3,185,050  $ 2,017,826
Convertible Senior Notes . . . . . . . . . . . . . . . . . . . . .      3,000,000    3,000,000
Convertible Subordinated Notes, net of discount. . . . . . . . . .      7,143,627    7,227,581
Other notes payable. . . . . . . . . . . . . . . . . . . . . . . .         23,342       12,060
                                                                    -------------  -----------
                                                                    $  13,352,019  $12,257,467
                                                                    =============  ===========
</TABLE>


DELINQUENCY  EXPERIENCE

<TABLE>
<CAPTION>
     The  following  table  reflects  the  delinquency  experience of the Company's finance contract
portfolio:
                                                    December 31, 1998     June 30, 1999
                                                    -----------------     -------------
<S>                                                 <C>           <C>     <C>          <C>
Principal balance of finance contracts outstanding  $210,947,939          $153,197,215
Delinquent finance contracts (1):
Two payments past due. . . . . . . . . . . . . . .  $ 20,689,671   9.81%  $13,161,950   8.59%
Three payments past due. . . . . . . . . . . . . .     7,901,166   3.75%    4,082,873   2.67%
Four or more payments past due . . . . . . . . . .     5,214,162   2.47%    2,524,413   1.65%
                                                    ------------  ------  -----------  ------
Total. . . . . . . . . . . . . . . . . . . . . . .  $ 33,804,999  16.03%  $19,769,236  12.90%
                                                    ============  ======  ===========  ======
---------------------------------------------------------------------------------------------
<FN>

(1)  Percentage  based  upon  outstanding balance. Delinquency balances outstanding excludes finance
contracts  where the underlying vehicle is repossessed, where a dealer (seller) buyback is expected,
where  a  skip  claim  is  paid  and  where  a  primary  insurance  claim  is  filed.
</TABLE>



CREDIT  LOSS  EXPERIENCE

     If  a  delinquency  exists  and  a  default  is  deemed  inevitable  or the
collateral  is  in  jeopardy,  and  in  no  event  later  than  the  90th day of
delinquency, the Company's Collections Department will initiate the repossession
of  the financed vehicle. Bonded, insured outside repossession agencies are used
to  secure  involuntary  repossessions.  In  most  jurisdictions,  notice to the
borrower of the Company's intention to sell the repossessed vehicle is required,
whereupon  the  borrower  may  exercise  certain  rights to cure the default and
redeem  the  automobile. Following the expiration of the legally required notice
period,  the  repossessed  vehicle  is  sold  at a wholesale auto auction (or in
limited  circumstances,  through  dealers),  usually  within  60  days  of  the
repossession.  The  Company  closely  monitors the condition of vehicles set for
auction,  and procures an appraisal under the relevant VSI policy prior to sale.
Liquidation  proceeds are applied to the borrower's outstanding obligation under
the  finance  contract  and  insurance  claims  under  the  VSI  policy  and, if
applicable,  the  deficiency  balance  is  then  filed.

     Because  of  the  Company's limited operating history, its finance contract
portfolio  is somewhat unseasoned. This effect on the delinquency statistics can
be  observed  in  the  comparison  of  1999 versus 1998 delinquency percentages.
Accordingly,  delinquency  and  charge-off  rates in the portfolio may not fully
                                    -- 18 --
<PAGE>
reflect  the  rates  that  may apply when the average holding period for finance
contracts  in  the  portfolio  is  longer.  Increases  in the delinquency and/or
charge-off  rates  in the portfolio would adversely affect the Company's ability
to  obtain  credit  or  securitize  its  receivables.

REPOSSESSION  EXPERIENCE  -  STATIC  POOL  ANALYSIS

     Because  the Company's finance contract portfolio is unseasoned, management
does  not  manage  losses  on the basis of a percentage of the Company's finance
contract  portfolio,  because  percentages  can  be  favorably affected by large
balances  of  recently  acquired  finance  contracts. Management monitors actual
dollar  levels  of  delinquencies  and  charge-offs  and  analyzes the data on a
"static  pool"  basis.

     The following tables provide static pool repossession frequency analysis in
dollars  of  the  Company's  portfolio from inception through June 30, 1999. All
finance  contracts  have  been  segregated  by  quarter  of  acquisition.  All
repossessions  have  been  segregated  by  the  quarter in which the repossessed
contract was originally acquired by the Company. Cumulative repossessions equals
the  ratio  of  repossessions  as a percentage of finance contracts acquired for
each segregated quarter. Annualized repossessions equals an annual equivalent of
the  cumulative  repossession  ratio  for  each  segregated  quarter. This table
provides  information regarding the Company's repossession experience over time.
For  example,  recently  acquired  finance  contracts  demonstrate  very  few
repossessions  because  properly  underwritten  finance  contracts  to sub-prime
consumers  generally  do  not  normally  default  during the initial term of the
contract.  Between  approximately one year and 18 months of seasoning, frequency
of  repossessions  on  an  annualized  basis appear to reach a plateau. Based on
industry  statistics  and  the  performance  experience of the Company's finance
contract  portfolio,  the  Company  believes  that finance contracts seasoned in
excess  of  approximately  18  months  will  start  to  demonstrate  declining
repossession  frequency.  The  Company believes this may be due to the fact that
the  borrower  perceives  that  he or she has equity in the vehicle. The Company
also  believes  that  the finance contracts generally amortize more quickly than
the  collateral  depreciates,  and  therefore  losses  and/or repossessions will
decline  over  time.

                                    -- 19 --
<PAGE>


<TABLE>
<CAPTION>

ALL  INCLUSIVE  (3)


                                              Repossession Frequency
                                              ----------------------

                             Principal Balance at
                               Default of Failed                                    Original Principal
     Year and                      Loans by           Cumulative    Annualized          Balance of
     Quarter of Acquisition    Quarter Acquired     Percentage (1)  Percentage (2)  Contracts Acquired
-------------------------------------------------------------------------------------------------------
<C>  <S>                     <C>                    <C>             <C>             <C>
     1994
  1  Q3 . . . . . . . . . .  $              22,046          21.79%           4.36%  $           101,161
  2  Q4 . . . . . . . . . .                636,413          26.11%           5.50%            2,437,674
     1995
  3  Q1 . . . . . . . . . .              1,935,911          30.68%           6.82%            6,310,421
  4  Q2 . . . . . . . . . .              1,820,416          30.01%           7.06%            6,190,596
  5  Q3 . . . . . . . . . .              2,243,380          30.99%           7.75%            7,239,813
  6  Q4 . . . . . . . . . .              4,311,271          35.37%           9.43%           12,188,863
     1996
  7  Q1 . . . . . . . . . .              5,361,438          34.68%           9.91%           15,460,823
  8  Q2 . . . . . . . . . .              6,968,381          37.63%          11.58%           18,520,410
  9  Q3 . . . . . . . . . .              7,957,266          28.32%           9.44%           28,098,899
 10  Q4 . . . . . . . . . .              8,892,738          36.38%          13.23%           24,442,500
     1997
 11  Q1 . . . . . . . . . .             12,552,449          35.99%          14.40%           34,875,869
 12  Q2 . . . . . . . . . .             11,541,094          32.69%          14.53%           35,305,817
 13  Q3 . . . . . . . . . .              9,778,673          28.24%          14.12%           34,629,616
 14  Q4 . . . . . . . . . .              9,769,261          22.14%          12.65%           44,120,029
     1998
 15  Q1 . . . . . . . . . .              5,731,710          19.33%          12.89%           29,650,808
 16  Q2 . . . . . . . . . .              3,839,579          16.76%          13.41%           22,911,290
 17  Q3 . . . . . . . . . .              2,250,941           9.57%           9.57%           23,528,924
 18  Q4 . . . . . . . . . .              2,250,171           5.23%           6.98%           43,006,049
     1999
 19  Q1 . . . . . . . . . .                677,154           3.33%           6.66%           20,336,852
<FN>

(1)     For  each  quarter,  cumulative  loss  frequency equals the gross principal loss divided by the
gross  amount  financed  of  the  contracts  acquired  during  that  quarter.
(2)     Annualized  loss  frequency converts cumulative loss frequency into an annual equivalent (e.g.,
for Q4 1997, principal balance of $9,769,261 in losses divided by $44,120,029 in amount financed of the
contracts  acquired,  divided  by  7  quarters  outstanding  times 4 equals an annual loss frequency of
12.65%).

(3)     Included  are  the  loans  that were repossessed, paid by customers' primary insurance, paid by
skip  claim,  paid  by  dealer  and  charged  off  due  to  certain  reasons.

</TABLE>


                                    -- 20 --
<PAGE>

<TABLE>
<CAPTION>

REPO  AND  SKIP  (3)

                                       Repossession Frequency
                                       ----------------------


     Year and       Principal Balance at      Cumulative      Annualized    Original Principal
     Quarter of   Default of Failed Loans   Percentage (1)  Percentage (2)      Balance of
     Acquisition    by Quarter Acquired                                     Contracts Acquired
-----------------------------------------------------------------------------------------------
<C>  <S>          <C>                       <C>             <C>             <C>
     1994
  1  Q3. . . . .  $                 22,046          21.79%           4.36%  $           101,161
  2  Q4. . . . .                   628,707          25.79%           5.43%            2,437,674
     1995
  3  Q1. . . . .                 1,727,566          27.38%           6.08%            6,310,421
  4  Q2. . . . .                 1,709,949          27.62%           6.50%            6,190,596
  5  Q3. . . . .                 2,002,237          27.66%           6.91%            7,239,813
  6  Q4. . . . .                 3,904,417          32.03%           8.54%           12,188,863
     1996
  7  Q1. . . . .                 4,970,809          32.15%           9.19%           15,460,823
  8  Q2. . . . .                 6,261,014          33.81%          10.40%           18,520,410
  9  Q3. . . . .                 7,029,555          25.02%           8.34%           28,098,899
 10  Q4. . . . .                 8,012,253          32.78%          11.92%           24,442,500
     1997
 11  Q1. . . . .                11,303,310          32.41%          12.96%           34,875,869
 12  Q2. . . . .                10,515,491          29.78%          13.24%           35,305,817
 13  Q3. . . . .                 8,825,061          25.48%          12.74%           34,629,616
 14  Q4. . . . .                 8,561,356          19.40%          11.09%           44,120,029
     1998
 15  Q1. . . . .                 5,073,198          17.11%          11.41%           29,650,808
 16  Q2. . . . .                 3,404,642          14.86%          11.89%           22,911,290
 17  Q3. . . . .                 1,944,803           8.27%           8.27%           23,528,924
 18  Q4. . . . .                 1,838,142           4.27%           5.70%           43,006,049
     1999
 19  Q1. . . . .                   542,360           2.67%           5.33%           20,336,852
<FN>

(1)     For  each quarter, cumulative loss frequency equals the gross principal loss divided by
the  gross  amount  financed  of  the  contracts  acquired  during  that  quarter.
(2)     Annualized  loss frequency converts cumulative loss frequency into an annual equivalent
(e.g.,  for Q4 1997, principal balance of $8,561,356 in losses divided by $44,120,029 in amount
financed  of the contracts acquired, divided by 7 quarters outstanding times 4 equals an annual
loss  frequency  of  11.09%).
(3)     Included  are  the  loans  that  were  repossessed,  and  paid  by  skip  claim.
</TABLE>



                                    -- 21 --
<PAGE>

NET  LOSS  PER  REPOSSESSION

     Upon  initiation of the repossession process, it is the Company's intent to
complete  the  liquidation  process  as  quickly  as  possible.  The majority of
repossessed  vehicles  are sold at wholesale auction. The Company is responsible
for  the  costs  of  repossession, transportation and storage. The Company's net
charge-off  per repossession equals the unpaid balance less the auction proceeds
(net  of  associated  costs) and less proceeds from insurance claims. As less of
the  Company's  finance contracts are acquired with credit deficiency insurance,
the  Company  expects  its  net loss per repossession to increase. The following
table  demonstrates  the  net  charge-off  per  repossessed  automobile  since
inception:


<TABLE>
<CAPTION>


From August 1, 1994 (Inception) to June 30, 1999                     Loans with        Loans        All Loans
                                                                       Default        Without
                                                                      Insurance       Default
                                                                                     Insurance
                                                                    -----------   -------------   -------------
<S>                                                                 <C>            <C>            <C>
Number of finance contracts acquired                                                                    34,967
Number of vehicles repossessed . . . . . . . . . . . . . . . . . .         6,670          3,093          9,763
Repossessed units disposed of. . . . . . . . . . . . . . . . . . .         4,021          2,404          6,425
Repossessed units awaiting disposition (1) . . . . . . . . . . . .         2,649            689          3,338
Cumulative gross charge-offs . . . . . . . . . . . . . . . . . . .  $ 40,008,976   $ 24,934,329   $ 64,943,305
Costs of repossession. . . . . . . . . . . . . . . . . . . . . . .     1,859,105      1,056,317      2,915,422
Recoveries:
  Proceeds from auction, physical damage insurance and refunds (2)   (22,284,570)   (14,111,805)   (36,396,375)
  Deficiency insurance settlement received . . . . . . . . . . . .   (10,346,549)             0    (10,346,549)
                                                                    -------------  -------------  -------------
Net charge-offs. . . . . . . . . . . . . . . . . . . . . . . . . .  $  9,236,962   $ 11,878,841   $ 21,115,803
                                                                    =============  =============  =============
Net charge-offs per unit disposed. . . . . . . . . . . . . . . . .  $      2,297   $      4,941   $      3,287
Net charge-offs as a percentage of cumulative gross charge-offs. .         23.09%         47.64%         32.51%
Recoveries as a percentage of cumulative gross charge-offs . . . .         81.56%         56.60%         71.97%
                                                                    -------------  -------------  -------------
<FN>

(1)  The  vehicles  may  have  been  sold at auction; however the Company might not have received all insurance
proceeds  as  of  June  30,  1999.
(2)  Amounts  are based on actual liquidation and repossession proceeds (including insurance proceeds) received
on  units  for  which  the  repossession  process  had  been  completed  as  of  June  30,  1999.
</TABLE>

LIQUIDITY  AND  CAPITAL  RESOURCES

     The  Company  requires access to significant sources and amounts of cash to
fund  its  operations  and  to  acquire  and  securitize finance contracts.  The
Company's  primary  operating  cash  requirements include the funding of (i) the
acquisition  of finance contracts prior to securitization, (ii) the initial cash
deposits  to  reserve  accounts  in  connection  with  the  warehousing  and
securitization  of contracts in order to obtain such sources of financing, (iii)
fees and expenses incurred in connection with the warehousing and securitization
of  contracts and (iv) ongoing administrative and other operating expenses.  The
Company  has  traditionally  obtained  these  funds in three ways: (a) loans and
warehouse  financing  arrangements,  pursuant  to  which  acquisition of finance
contracts  are  funded  on  a  temporary  basis; (b) securitizations or sales of
finance contracts, pursuant to which finance contracts are funded on a permanent
basis;  and  (c) general working capital, which if not obtained from operations,
may  be  obtained  through  the  issuance of debt or equity.  Failure to procure
funding  from  all  or  any  one  of these sources could have a material adverse
effect  on  the  Company.

     Since  early February 1999, the Company's management has been attempting to
procure  alternative  sources  of  funding  and other strategic alternatives, in
order  to  mitigate  the  situation  with  Dynex.  The  Company  is currently in
discussions  with  several  investment bankers and direct sources regarding such
alternatives,  which  may  include  joint ventures, or changes in control of the
Company.  While  management  hopes  that  an  alternative  opportunity  will  be
consummated,  the  Company  has suspended origination of finance contracts until
alternative  funding  sources  are  obtained. However, there can be no assurance
that such funding will be obtained. On July 19, 1999, the Company announced that
it  had  entered  into  an agreement to originate finance contracts on behalf of
                                    -- 22 --
<PAGE>
another  company.  The  Company expects to receive $400 per originated contract.
The Company currently is finalizing the operational details of the agreement. As
a  consequence,  the  Company is reporting a loss for the second quarter of 1999
and  did not pay the quarterly dividend on its Preferred Stock otherwise payable
on  each of March 31, 1999 and June 30, 1999. Until financing or other strategic
alternatives  are  consummated,  the  Company  is  taking  steps  to  reduce its
personnel  and  operating expenses associated with origination activities. Also,
parties  to the Company's various securitization transactions could request that
the  Company  surrender  servicing,  although  management  does not believe such
parties  have  the right to terminate servicing under the respective agreements.
The  Company  expects  to  continue  its  servicing  operations.  See  "
Revenues-Servicing  Income"  above.

     Management  believes  the  Company  has  sufficient  liquidity  to meet its
current  obligations  and  continue  its  servicing activities through year-end.
Subsequent  liquidity  will  need  to  be  obtained  through alternative funding
sources  or  favorable  results  in  the  Company's  litigations  with Dynex and
Progressive.

     Cash  Flows.  Significant  cash  flows  related  to the Company's operating
activities  include the use of cash for purchases of finance contracts, and cash
provided by payments on finance contracts, collections on retained interests and
sales  of  finance contracts. Net cash used by operating activities totaled $4.6
million  during  the  six  months  ended  June 30, 1999.  Significant activities
comprising  cash  flows  used  by investing activities consisted of purchases of
property,  plant  and  equipment.  There  were  no  significant  cash flows from
financing  activities  during  the  six  months  ended  June  30,  1999.

     Revolving  Credit  Facilities.  The  Company  historically  obtained  a
substantial  portion  of  its  working  capital  for  the acquisition of finance
contracts  through  revolving credit facilities. Under a warehouse facility, the
lender generally advances amounts requested by the borrower on a periodic basis,
up to an aggregate maximum credit limit for the facility, for the acquisition of
finance  contracts or other similar assets. Until proceeds from a securitization
transaction are used to pay down outstanding advances, as principal payments are
received  on  the  finance contracts the principal amount of the advances may be
paid  down  incrementally  or  reinvested  in  additional finance contracts on a
revolving  basis.

     On June 9, 1998, the Company and Dynex Capital, Inc. ("Dynex") entered into
an  arrangement whereby the Company obtained a commitment from Dynex to purchase
all  currently  warehoused  and  future automobile finance contract acquisitions
through  at  least  May  31,  1999  (the "Funding Agreement").  The terms of the
Funding  Agreement  were  modified on June 30, October 20, and October 28, 1998.
Under  the prior terms of the Funding Agreement, the Company transferred finance
contracts  to  AutoBond  Master  Funding  Corporation  V ("Master Funding V"), a
qualified  unconsolidated  special purpose subsidiary, and Dynex provided credit
facilities  in  an  amount  equal to 104% of the unpaid principal balance of the
finance  contracts  (the  "Advance  Rate"). The Company received the proceeds of
such facilities. The modified terms of the Funding Agreement reduced the Advance
Rate  from  104%  to  88%  for  an  interim period (the "Interim Period") ending
December  31, 1998.  At the end of the Interim Period, the Advance Rate reverted
to  104% and Dynex was to advance to Master Funding V an additional amount equal
to  16%  of  the unpaid principal balance of finance contracts financed by Dynex
during the Interim Period.  This additional amount receivable from Dynex totaled
$6.5  million  at  December  31, 1998, and was collected in January and February
1999.  Advances  under  the Funding Agreement are evidenced by Class A Notes and
Class  B  Notes (collectively, the "Notes") issued by Master Funding V to Dynex.
The Class A Notes were issued in a principal amount equal to 94.0% of the unpaid
principal balance of the finance contracts (88.0% for advances funded during the
Interim  Period)  and bear interest at a rate equal to 190 basis points over the
corporate  bond  equivalent  yield  on  the three-year U.S. Treasury note on the
closing date for each such advance. The Class B Notes were issued in a principal
amount  equal  to 10.0% of the unpaid principal balance of the finance contracts
(0.0% for advances funded during the Interim Period) and bear interest at a rate
equal  to  16%  per  annum.  The  Company retains a subordinated interest in the
pooled  finance  contracts.  Transfers  of  finance  contracts  to the qualified
special  purpose  entity  have  been recognized as sales under SFAS No. 125.  At
June  30,  1999  advances  by  Dynex  under the Funding Agreement totaled $169.2
million.  See  "Legal  Proceedings.

                                    -- 23 --
<PAGE>

     William  O.  Winsauer, Chief Executive Officer and Chairman of the Board of
Directors  of  the  Company (the "Board"), Adrian Katz, Chief Operating Officer,
Chief  Financial  Officer  and  Vice Chairman of the Board and John S. Winsauer,
Secretary  and a member or the Board (collectively, the "Shareholders"), entered
into a Stock Option Agreement (the "Stock Option Agreement") with Dynex Holding,
Inc.  ("Dynex  Holding")  wherein  the  Shareholders granted to Dynex Holding an
option  (the  "Option")  to  purchase  all of the shares of the Company's common
stock  owned  by  the  Shareholders  (approximately 85% of the Company's current
outstanding  common  stock)  at  a  price  of  $6.00  per share.  The Option was
exercisable  in  whole  and  not in part at anytime up to and including July 31,
1999.  If  the  Company  elected to exercise its option to extend the commitment
termination  date under the Funding Agreement, the expiration date of the Option
would  have  been  extended  to  match such commitment termination date.  In the
event  that Dynex Holding exercised its Option, the exercise price of the Option
would  have  been  payable  in  shares  of  a newly issued series of convertible
preferred stock of Dynex Capital, Inc. ("Dynex Preferred").  The number of Dynex
Preferred shares to be issued would have been equal to the product of the number
of shares of the Company's common stock subject to the Option and $6.00, divided
by  115%  of  the average of the closing prices per share of the common stock of
Dynex Capital, Inc. ("Dynex Common") for the ten consecutive trading days ending
immediately  prior  to the exercise of the Option.  Upon exercise of the Option,
Dynex  Holding  would  have delivered to each of the Shareholders 80% of his pro
rata  share  of the Dynex Preferred shares, with the balance to be held by Dynex
Holding  subject  to  certain  terms  and  conditions  contained  in  the Option
Agreement  and in each Shareholder's employment agreement with Dynex.  The Dynex
Preferred  would  have  paid  dividends  at  9%  per  annum  and would have been
convertible into shares of Dynex Common at an initial conversion rate of 1 to 1.
As  a  result  of  the termination by Dynex of its obligations under the Funding
Agreement,  the  Shareholders have terminated the Option granted under the Stock
Option  Agreement.  See  "Legal  Proceedings".

     In  January 1998, the Company privately placed with BancBoston Investments,
Inc.  ("BancBoston")  $7,500,000 in aggregate principal amount of its 15% Senior
Subordinated Convertible Notes due 2001 (the "Subordinated Notes").  Interest on
the  Subordinated  Notes  is payable quarterly, with the principal amount due on
February  1,  2001.  The Subordinated Notes are convertible at the option of the
holder  for  up to 368,462 shares of the Company's common stock, at a conversion
price  of  $3.30  per  share, subject to adjustment under standard anti-dilution
provisions.  In  the event of a change of control transaction, the holder of the
Subordinated  Notes may require the Company to repurchase the Subordinated Notes
at  100%  of the principal amount plus accrued interest.  The Subordinated Notes
are  redeemable  at  the  option  of  the  Company  on  or after July 1, 1999 at
redemption  prices  starting  at 105% of the principal amount, with such premium
reducing  to  par  on  and  after  November 1, 2000, plus accrued interest.  The
Subordinated Notes were issued pursuant to an Indenture, dated as of January 30,
1998  (the "Indenture") between the Company and BankBoston, N.A., as agent.  The
Indenture  contains  certain  restrictive covenants including (i) a consolidated
leveraged  ratio not to exceed 2 to 1 (excluding non-recourse warehouse debt and
securitization  debt),  (ii)  limitations  on  payments  such  as dividends (but
excluding,  so  long  as  no  event of default has occurred under the Indenture,
dividends  or  distributions  on  the  Preferred  Stock  of  the Company), (iii)
limitations on sales of assets other than in the ordinary course of business and
(iv)  certain financial covenants, including a minimum consolidated net worth of
$12  million (plus proceeds from equity offerings), a minimum ratio of EBITDA to
interest  of  1.5  to  1,  and  a  maximum cumulative repossession ratio of 27%.
Events  of  default  under  the  Indenture  include  failure  to  pay, breach of
covenants,  cross-defaults  in  excess  of  $1  million  or  material  breach of
representations  or covenants under the purchase agreement with BancBoston.  Net
proceeds  from  the  sale  of the Subordinated Notes were used to pay short-term
liabilities,  with  the  remainder available to provide for the repayment of the
Company's  18%  Convertible  Secured Notes and for working capital.  The Company
capitalized debt issuance costs of $594,688, and recorded a discount of $507,763
on  the  debt representing the value of warrants issued in connection therewith.
The  debt  issuance  cost and discount is being amortized as interest expense on
the  interest  method  through  February  2001.

     At  June  30,  1999  the  Company  did  not  meet  certain of its financial
covenants  on  the  Subordinated Notes, which constitutes an event of default on
the  Subordinated  Notes.  The  ability of the Company to meet such covenants is
dependent  upon  future  earnings.  The Company has made all payments due on its
Subordinated  Notes  and  expects  to  continue  to  meet such obligations.  The
Subordinated  Notes have not been formally accelerated by BancBoston; however if
such  acceleration  were made, BancBoston could declare such amounts immediately
due.

                                    -- 24 --
<PAGE>
     On  June  9,  1998,  the Company sold to Dynex at par $3 million of its 12%
Convertible  Senior Notes due 2003 (the "Senior Notes").  Interest on the Senior
Notes  is payable quarterly in arrears, with the principal amount due on June 9,
2003.  The Senior Notes were convertible at the option of Dynex on or before May
31,  1999  into  shares  of  the Company's common stock at a conversion price of
$6.00 per share.  Demand and "piggyback" registration rights with respect to the
underlying  shares  of  common stock were granted.  Dynex claims that the Senior
Notes are now in default due, among other things, to the impairment of the Stock
Option,  an assertion which the Company disputes.  To date, the Company has made
all  interest  payments  due  on  the  Senior  Notes.

     Securitization Program.  In its securitization transactions through the end
of  1996,  the  Company  sold  pools  of  finance contracts to a special purpose
subsidiary, which then assigned the finance contracts to a trust in exchange for
cash  and  certain  retained  beneficial  interests in future excess spread cash
flows.  The  trust  issued  two  classes  of fixed income investor certificates:
"Class  A  Certificates"  which  were sold to investors, generally at par with a
fixed  coupon,  and  subordinated  excess  spread  certificates  ("Class  B
Certificates"),  representing a senior interest in excess spread cash flows from
the  finance  contracts,  which  were  typically  retained  by  the  Company's
securitization  subsidiary  and which collateralize borrowings on a non-recourse
basis.  The  Company  also  funded  a  cash reserve account that provides credit
support  to  the Class A Certificates. The Company's securitization subsidiaries
also  retained a "Transferor's Interest" in the contracts that is subordinate to
the  interest  of  the  senior  certificate  holders.

     In  the  Company's  March 1997, August 1997 and October 1997 securitization
transactions,  the Company sold a pool of finance contracts to a special purpose
subsidiary,  which  then assigned the finance contracts to an indenture trustee.
Under  the  trust indenture, the special purpose subsidiary issued three classes
of  fixed income investor notes, which were sold to investors, generally at par,
with  fixed  coupons.  The  subordinated  notes  represent  a senior interest in
certain  excess  spread  cash flows from the finance contracts. In addition, the
securitization  subsidiary  retained  rights to the remaining excess spread cash
flows. The Company also funded cash reserve accounts that provide credit support
to  the  senior  class  or  classes.

     The retained interests entitle the Company to receive the future cash flows
from  the  trust  after payment to investors, absorption of losses, if any, that
arise  from  defaults  on  the  transferred finance contracts and payment of the
other  expenses  and  obligations  of  the  trust.

     The  Company has relied significantly on a strategy of periodically selling
finance contracts through asset-backed securitizations. The Company's ability to
access  the  asset-backed  securities market is affected by a number of factors,
some  of  which  are  beyond  the Company's control and any of which could cause
substantial  delays  in  securitization  including,  among  other  things,  the
requirements  for  large cash contributions by the Company into securitizations,
conditions  in the securities markets in general, conditions in the asset-backed
securities  market  and  investor demand for sub-prime auto paper. Additionally,
gain  on  sale  of  finance  contracts  represents  a significant portion of the
Company's  total  revenues  and,  accordingly,  net  income. If the Company were
unable  to  sell  finance  contracts or account for any securitization as a sale
transaction  in  a  financial reporting period, the Company would likely incur a
significant  decline  in total revenues and net income or report a loss for such
period. Moreover, the Company's ability to monetize excess spread cash flows has
been an important factor in providing the Company with substantial liquidity. If
the  Company  were  unable  to  sell  its  finance  contracts  and  did not have
sufficient  credit  available,  either under warehouse credit facilities or from
other sources, the Company would have to sell portions of its portfolio directly
to  whole  loan  buyers  or curtail its finance contract acquisition activities.

     On  May  19,  1998,  Moody's  announced  that  the  ratings  on  the senior
securities  issued  in the Company's term securitization were reduced to Bal (B2
for  the  1997-B and 1997-C transactions), expressing concerns including (i) the
alleged  non-adherence  to  the  transaction documents with regard to charge-off
policy  and the calculation of delinquency and loss triggers, (ii) the Company's
procedures for allocating prepaid insurance among the trusts, (iii) instances of
the  Company  waiving  fees and making cash contributions to the transactions to
enhance  their  performance,  and  (iv)  "instances  of commingled collections."
While  the  Company was not requested by Moody's to provide legal guidance as to
whether or not these factors would as a matter of law "increase the uncertainty"
with respect to the transactions, the Company does note the following:  (i) with
                                    -- 25 --
<PAGE>
the  transfer of servicing from  LSE now completed, the Company believes that it
is  servicing  in  accordance  with  the  documentation;  (ii)  the  transaction
documents  did  not  contemplate  the  allocation of prepaid insurance claims, a
phenomenon brought about by the Company's prevailing upon Interstate to speed up
the  payment  of  claims  for  the benefit of the trusts in a manner the Company
believes  is fair to the trusts; (iii) the transaction documents do not prohibit
fee  waivers  and  explicitly  permit  the  Company  to  make  voluntary capital
contributions  to the trusts; and (iv) at the insistence of the former servicer,
collections  have  always been directed to omnibus lockboxes in the name of, and
under  the control of, the former servicer and the transaction trustees and, the
trustee  is  holding  cash  that  is  to  be  paid  to  certificate holders upon
reconciliation  instructions  from  LSE.

     The  Company  has  engaged  counsel  who  is  presently  performing  the
deal-by-deal  analysis  of  the  structural  and  legal  integrity  of  these
transactions  to  resolve  the concerns raised by Moody's.  In the meantime, the
Company has been notified by the trustees on certain of the securitizations that
the  action  of  Moody's  and  the alleged causes constituted events of servicer
termination under such transactions.  The trustees have threatened to remove the
Company  as  servicer  on certain transactions, and have withheld servicing fees
due  to  the  Company.  Since  the  Company  is  of  the  view that no events of
servicing  termination have occurred and that the transactions documents did not
intend  for  servicing compensation to the Company to be cut off where the cause
of  an event of default is due to the actions of Progressive and LSE (the former
servicer), the Company is seeking to resolve those issues to the satisfaction of
all  parties.


     In  June 1999, Moody's reaffirmed its ratings on the senior certificates in
the  Company's  outstanding  rated  securitizations  as  follows:

<TABLE>
<CAPTION>

                       SECURITY                            RATING
------------------------------------------------------     ------
<C>                                                        <S>

26,261,009  7.23% Class A Certificates, Series 1995-A       B3

16,563,366  7.15% Class A Certificates, Series 1996-A       Caa2
17,832,885  7.73% Class A Certificates, Series 1996-B       Caa2
22,296,719  7.45% Class A Certificates, Series 1996-C       Caa2
25,000,000  7.37% Class A Certificates, Series 1996-D       Caa2

25,794,194  7.78% Class A Certificates, Series 1997-A       B3
</TABLE>



     Whole  Loan  Sales  On  July  16,  1999,  the Company sold 490 loans with a
principal  balance  of  $5,960,346  to  Crescent  Bank at 84% of the outstanding
principal  balance.  Such  loans were written down to market value prior to June
30,  1999  by  a  charge  to  other  operating  expenses. The purchase price was
$5,006,690.  The  Company  received  proceeds of $4,756,623 after deducting a 1%
commission  of  $50,067  and  a  $200,000  deposit  to  be withheld for 60 days.

     Equity Offerings.  In February 1998, the Company completed the underwritten
public  offering  of  1,125,000  shares of its 15% Series A Cumulative Preferred
Stock  (the  "Preferred Stock"), with a liquidation preference of $10 per share.
The  price  to the public was $10 per share, with net proceeds to the Company of
approximately  $9,631,000.  Such  net  proceeds  have  been utilized for working
capital  purposes,  including the funding of finance contracts. Dividends on the
Preferred  Stock  are cumulative and payable quarterly on the last day of March,
June,  September  and December of each year, commencing on June 30, 1998, at the
rate  of 15% per annum. After three years from the date of issuance, the Company
may,  at  its option, redeem one-sixth of the Preferred Stock each year, in cash
at  the  liquidation price per share (plus accrued and unpaid dividends), or, if
in Common Stock, that number of shares equal to $10 per share of Preferred Stock
to  be  redeemed, divided by 85% of the average closing sale price per share for
the  Common  Stock  for  the  5  trading  days prior to the redemption date. The
Preferred  Stock is not redeemable at the option of the holder and has no stated
maturity.

                                    -- 26 --
<PAGE>
     Because  the  Company  is  not  in compliance with certain of the financial
covenants  relating  to  its  Subordinated  Notes,  the  Company did not pay the
quarterly dividend on its Preferred Stock otherwise payable on each of March 31,
1999 and June 30, 1999.  Because dividends on the Preferred Stock are in arrears
for  two  quarterly  dividend  periods,  holders  of  the  Preferred  Stock have
exercised  their  right to call a special meeting of the Preferred Stock holders
for  the  purpose of electing two additional directors to serve on the Company's
Board  until  such  dividend  arrearage is eliminated. Such meeting is currently
scheduled  for  October  1,  1999.  In  addition,  certain  changes  that  could
materially  affect  the  holders  of  Preferred  Stock,  such as a merger of the
Company,  cannot  be  made  without  the  affirmative  vote  of  the  holders of
two-thirds  of  the  shares of Preferred Stock, voting as a separate class.  The
Preferred  Stock ranks senior to the Common Stock with respect to the payment of
dividends  and  amounts  upon  liquidation,  dissolution  or  winding  up.

     On  May  20,  1998,  the  Company  and  Promethean Investment Group, L.L.C.
("Promethean") entered into a common stock investment agreement (the "Investment
Agreement")  and related registration rights agreement whereby Promethean agreed
to  purchase from the Company, on the terms and conditions outlined below, up to
$20  million  (subject  to increase up to $25 million at Promethean's option) of
the Company's common stock. The Company must deliver a preliminary notice of its
intention  to  require Promethean to purchase its common shares at least ten but
not  more  than thirty days prior to the Company's delivery of its final notice.
The Company may deliver such final notice only if (i) the dollar volume-weighted
price  of  its common stock reported on the business day of such final notice is
at  least  $3.25 per share, (ii) at all times during the period beginning on the
date  of  delivery  of  the  preliminary  notice and ending on and including the
closing  date  (a)  a registration statement covering the resale of no less than
150%  of  the shares to be sold to Promethean under the Investment Agreement has
been declared and remains effective and (b) shares of the Company's common stock
are  at  such time listed on a major national securities exchange, and (iii) the
Company  has  not  delivered  another  final  notice  to  Promethean  during the
preceding  twenty-five  business  days  preceding delivery of such final notice.
Following receipt of a final notice, Promethean's purchase obligation will equal
the  lowest  of:  (i) the amount indicated in such final notice, (ii) $5,000,000
and  (iii) 20% of the aggregate of the daily trading dollar volume on the twenty
consecutive  business days following delivery of the put notice. Promethean may,
in  its  sole  discretion,  increase  the  amount  purchasable  in the preceding
sentence  by  125%.  Promethean  must  conclude all required purchases of common
shares  within  twenty-five  business  days  of receipt of the final notice. The
purchase price for the Company's shares will be equal to 95% of the lowest daily
dollar  volume-weighted  average  price  during the six consecutive trading days
ending  on  and  including the date of determination. Promethean's obligation to
purchase  shares under the Investment Agreement shall end either upon the mutual
consent  of  the  parties  or automatically upon the earliest of the date (i) on
which  total  purchases  by  Promethean  under  the  Investment  Agreement total
$20,000,000,  (ii)  which  is  two  years  after  the  effective  date  of  the
registration  statement  relating  to the common stock covered by the Investment
Agreement, or (iii) which is twenty-seven months from the date of the Investment
Agreement.  In  consideration  of  Promethean's obligations under the Investment
Agreement,  the  Company  paid  $527,915  in  cash on August 19, 1998, which was
treated  as  an  investment  in  a  common  stock  agreement.

IMPACT  OF  INFLATION  AND  CHANGING  PRICES

     Although  the  Company  does  not  believe  that  inflation  directly has a
material  adverse  effect  on  its financial condition or results of operations,
increases in the inflation rate generally are associated with increased interest
rates.  Because  the  Company  borrows funds on a floating rate basis during the
period  leading  up  to  a  securitization,  and in many cases purchases finance
contracts  bearing  a fixed rate nearly equal but less than the maximum interest
rate  permitted  by law, increased costs of borrowed funds could have a material
adverse  impact  on  the  Company's  profitability. Inflation also can adversely
affect  the  Company's  operating  expenses.

          Because  the Company is not currently originating or selling loans and
the  Company's  finance  contracts and borrowing are fixed rate instruments, the
Company  does  not  believe  that  inflation  and changing prices has a material
effect  on  its  financial  condition  or  results  of  operations.

                                    -- 27 --
<PAGE>
IMPACT  OF  NEW  ACCOUNTING  PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No.  133,  "Accounting for Derivative Instruments and Hedging Activities" ("SFAS
No.  133").  SFAS  No.  133 requires that an entity recognize all derivatives as
either  assets  or  liabilities  in  its balance sheet and that it measure those
instruments  at  fair  value.  The accounting for changes in the fair value of a
derivative (that is, gains and losses) is dependent upon the intended use of the
derivative  and  the resulting designation.  SFAS No. 133 generally provides for
matching  the  timing of gain or loss recognition on the hedging instrument with
the  recognition  of  (i)  the  changes in the fair value of the hedged asset or
liability  that  are attributable to the hedged risk or (ii) the earnings effect
of  the  hedged  forecast transaction.  SFAS No. 133 is effective for all fiscal
quarters  of  fiscal  years  beginning after June 15, 2000, as amended, although
earlier  application  is  encouraged.  The  Company  plans  to  comply  with the
provisions  of  SFAS No. 133 upon its initial use of derivative instruments.  As
of  June  30,  1999, no such instruments were being utilized by the Company. The
Company does not believe the implementation of SFAS No. 133 will have a material
effect  on  its  consolidated  financial  statements.


YEAR  2000  COMPLIANCE

     The  Year 2000 issue is the result of computer programs being written using
two  digits  rather  than  four to define the applicable year. Computer programs
containing  date-sensitive  code  could  recognize a date ending with the digits
"00"  as  the year 1900 instead of the year 2000.  This could result in a system
failure  or  in  miscalculations  causing  disruptions of operations, including,
among  other  things,  a  temporary  inability  to  process  transactions,  send
invoices,  or  engage  in  similar  normal  activities.

     As  a specialty consumer finance company, the Company substantially depends
on  its  computer systems and proprietary software applications in underwriting,
acquiring,  servicing  and  securitizing  finance  contracts.  As  a  result  of
initiatives  undertaken  in the development of its proprietary software systems,
all of the Company's systems and software applications have been designed around
a  'pivot'  year,  which  effectively renders the transition to the year 2000 as
innocuous  as  any year change. The efficacy of certain of the Company's systems
and  software  applications  in  handling Year 2000 issues has been demonstrated
repeatedly  in  the system's ability to calculate payments streams accurately on
finance  contracts  with  maturity  dates  that extend beyond December 31, 1999.
Based  on  its review of the likely impact of the Year 2000 on its business, the
Company  believes  that  it is working constructively toward making its critical
and  operational  applications  Year  2000  compliant.

     Nevertheless,  the  Company  may  be exposed to the risk that other service
providers may not be in compliance.  While the Company does not foresee that the
Year  2000  will  pose  significant  operational  problems,  the  failure of its
vendors, customers or financial institutions to become Year 2000 compliant could
have  a  material  adverse effect on the Company's business, financial condition
and  results  of  operations.  To  date,  the  Company  has  not  formulated any
contingency  plans  to  address  such  consequences.

                                    -- 28 --
<PAGE>

QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

     Market  risk generally represents the risk of loss that may result from the
potential  change  in  the  value  of  a  financial  instrument  as  a result of
fluctuations in interest and currency exchange rates and in equity and commodity
prices.  Market risk is inherent to both derivative and non-derivative financial
instruments.  The Company's market risk management procedures include all market
risk  sensitive  financial instruments.  The Company has no derivative financial
instruments,  exposure  to  currency  exchange  rates  or  commodity  prices.

     All of the Company's debt is fixed rate and the Company's earnings and cash
flows from retained interests in securitization and finance contracts, which are
at  fixed  rates,  are  not  impacted  by  changes in market interest rates. The
Company  manages  market  risk  by  striving  to  balance  its  finance contract
origination activities with its ability to sell such contracts in a short period
of  time.  Changes  in  the  market  value of its finance contracts and retained
interests  may  increase or decrease due to pre-payments and defaults influenced
by  changes  in  market  conditions  and  the  borrowers'  financial  condition.

RISKS  ASSOCIATED  WITH  FORWARD  LOOKING  STATEMENTS

     The statements contained in this document that are not historical facts are
forward  looking  statements.  Actual results may differ from those projected in
the  forward  looking statements. These forward looking statements involve risks
and  uncertainties,  including  but  not  limited  to  the  following  risks and
uncertainties:  changes  in  the  performance  of  the financial markets, in the
demand  for and market acceptance of the Company's loan products, and in general
economic  conditions, including interest rates, the presence of competitors with
greater  financial resources and the impact of competitive products and pricing;
the  effect  of  the  Company's  policies; and the continued availability to the
Company  of adequate funding sources. Investors are also directed to other risks
discussed  in  documents  filed  by  the  Company  with  the  SEC.

                                    -- 29 --
<PAGE>
                           PART II.  OTHER INFORMATION


Item  1.  Legal  Proceedings
     In the normal course of its business, the Company is from time to time made
a  party  to  litigation  involving consumer-law claims.  These claims typically
allege  improprieties on the part of the originating dealer and name the Company
and/or  its  assignees as subsequent holders of the finance contracts.  To date,
none  of  these actions have resulted in the payment of damages or any judgments
therefor,  by  the Company or its assignees, nor have any actions been certified
as  eligible  for  class-action  status.

     On  February 8, 1999, the Company, AutoBond Master Funding Corporation V, a
wholly-owned  subsidiary  of  the  Company  ("Master  Funding  V"),  William  O.
Winsauer,  the  Chairman  and  Chief  Executive  Officer of the Company, John S.
Winsauer,  a  Director  and  the  Secretary of the Company, and Adrian Katz, the
Vice-Chairman,  Chief  Financial  Officer  and  Chief  Operating  Officer of the
Company  (collectively,  the  "Plaintiffs")  commenced an action in the District
Court  of Travis County, Texas (250th Judicial District) against Dynex and James
Dolph  (collectively, the "Defendants").  This action is hereinafter referred to
as the "Texas Action".  The Company and the other Plaintiffs assert in the Texas
Action  that  Dynex  breached  the terms of the Funding Agreement. Such breaches
include delays and shortfalls in funding the advances required under the Funding
Agreement and ultimately the refusal by Dynex to fund any further advances under
the  Funding  Agreement.  Plaintiffs  also  allege  that  Dynex  and  Mr.  Dolph
conspired  to misrepresent and mischaracterize the Company's credit underwriting
criteria and its compliance with such criteria with the intention of interfering
with  and  causing actual damage to the Company's business, prospective business
and  contracts.  The  Plaintiffs  assert that Dynex' funding delays and ultimate
breach  of  the  Funding  Agreement  were  intended  to  force the Plaintiffs to
renegotiate  the  terms  of  their  various  agreements  with  Dynex and related
entities.  Specifically,  the Plaintiffs assert that Dynex intended to force the
Company to accept something less than Dynex' full performance of its obligations
under  the  Funding Agreement.  Further, Dynex intended to force the controlling
shareholders of the Company to agree to sell their stock in the Company to Dynex
or  an  affiliate  at a share price substantially lower than the $6.00 per share
price  specified in the Stock Option Agreement, dated as of June 9, 1998, by and
among  Messrs.  William  O.  Winsauer,  John  S.  Winsauer  and  Adrian  Katz
(collectively,  the  "Shareholders")  and Dynex Holding, Inc.  Plaintiffs in the
Texas Action request declaratory judgement that (i) Dynex has breached and is in
breach  of  its  various  agreements  and  contracts  with  the Plaintiffs, (ii)
Plaintiffs  have  not  and  are  not  in  breach of their various agreements and
contracts  with  Defendants,  (iii) neither the Company nor Master Funding V has
substantially  or materially violated or breached any representation or warranty
made to Dynex, including but not limited to the representation and warranty that
all  or  substantially  all  finance  contracts  funded or to be funded by Dynex
comply  in  full with, and have been acquired by the Company in accordance with,
the  Company's  customary underwriting guidelines and procedures; and (iv) Dynex
is  obligated  to  fund the Company in a prompt and timely manner as required by
the  parties' various agreements.  In addition to actual, punitive and exemplary
damages. The Texas Action has been set for trial in December 1999. Dynex' motion
to  dismiss  the  Texas  Action  was  denied  by  the  court.

     On March 1, 1999, the Company and the other Plaintiffs filed an application
in the Texas Action for a temporary injunction joining Dynex (i) from continuing
to  suspend  or  withhold  funding  pursuant to the Funding Agreement, (ii) from
removing  or attempting to remove the Company as servicer, and (iii) from making
any  further  false  or defamatory public statements regarding the Plaintiffs. A
hearing was held on the Company's application during the week of August 2, 1999.
The  court  has denied the Company's application on points (i) and (iii) and has
taken  point  (ii)  under advisement, along with Dynex' request that a temporary
injunction  be granted removing the Company as servicer. The court has indicated
that  it  will  announce  its  ruling  on  August  30,  1999.

     On  February  9, 1999, Dynex commenced an action against the Company in the
United  States  District  Court  for  the Eastern District of Virginia (Richmond
District)  (the  "Virginia Action") seeking declaratory relief that Dynex is (i)
not  obligated  to advance funds to Master Funding V under the Funding Agreement
because  the  conditions  to funding set forth in the Funding Agreement have not
been  met, and (ii) entitled to access to all books, records and other documents
of  Master Funding V, including all finance contract files.  Specifically, Dynex
alleges  that  as  a  result of a partial inspection of certain finance contract
files  by  Mr.  Dolph  and  Virgil  Baker  &  Associates  in January 1999, Dynex
concluded  that  a  significant  number  of  such  contracts  contained material
deviations  from  the  applicable  credit  criteria  and procedures, an apparent
                                    -- 30 --
<PAGE>
breach  of  the Funding Agreement.  Dynex also alleges that on February 8, 1999,
the Company refused to permit Mr. Dolph and representatives from Dynex access to
the  books,  records and finance contract files of the Company.  Dynex concludes
that  as  a  result  of  such  alleged  breaches, it is not obligated to provide
advances  under  the  Funding  Agreement.  Dynex  also  seeks to recover damages
resulting  from the Company's alleged breach of the parties' various agreements,
which  alleged  breach  the  Company  vigorously  denies.  The  Company, Messrs.
William  O.  Winsauer,  John  S.  Winsauer  and  Adrian  Katz filed a responsive
pleading  on  March  25,  1999.  The  Virginia  Action  (including  the  matters
transferred  in the New York Action (discussed below)), by a judge's order dated
May  19,  1999,  was  transferred  to  Texas  federal  court.

     On  February  22,  1999,  the same day that Dynex notified the Company of a
purported  servicing termination, Dynex filed another action against the Company
in  the  United States District Court for the Southern District of New York (the
"New  York  Action"),  seeking  damages  and injunctive relief for the Company's
alleged  breaches  under  the  servicing  agreement among the Company, Dynex and
Master  Funding  V.  The  Company  was not notified of the New York Action until
March  1,  1999,  when  Dynex  sought  a temporary restraining order against the
Company.  After  hearing  argument  from  counsel  for both sides, the temporary
restraining  order  was  denied.  On  March  23, 1999, the court issued an order
transferring the action to the Federal District Court in the Eastern District of
Virginia.  The Company remains the servicer and is performing in its capacity as
servicer.

     In  March  1998,  after  Progressive  Northern  Insurance  ("Progressive")
purported  to cancel the VSI and deficiency balance insurance policies issued in
favor  of  the  Company  (collectively,  the  "Policies"),  the  Company  sued
Progressive,  its  affiliate,  United Financial Casualty Co., and their agent in
Texas,  Technical  Risks,  Inc.,  in the District Court of Harris County, Texas.
The  action  seeks declaratory relief confirming the Company's interpretation of
the  Policies  as  well as claims for damages based upon breach of contract, bad
faith  and fraud.  The Company has received the defendants' answers, denying the
Company's  claims,  and  discovery  is  proceeding.  Progressive  stopped paying
claims  during  the  second  quarter  of  1998.  As  a  result of the attempt by
Progressive  to  cancel  its  obligations  and its refusal to honor claims after
March  1998, the Company has suffered a variety of damages, including impairment
of  its  retained  interests  in  securitizations.  The  Company  is  vigorously
contesting the legitimacy of Progressive's actions through litigation.  Although
a  favorable  outcome cannot be assured, success in the litigation could restore
at  least  some of the value of the Company's interests in such securitizations.
Conversely,  if  the  court  were  to  uphold  Progressive's  position,  further
impairment  of  the  Company's  interests  could  occur, resulting in an adverse
effect  on the Company's results of operations. This matter is currently set for
trial  during  the  two-week  period  beginning  September  20,  1999.

     Also  in  March  1998,  the  Company  commenced an action in Travis County,
Texas,  against  Loan  Servicing  Enterprise ("LSE"), alleging LSE's contractual
breach of its servicing obligations on a continuing basis.  LSE has commenced an
action  against  the  Company  in  Texas  state  court seeking recovery from the
Company  of  putative  termination fees in connection with termination of LSE as
servicer.  The  Company  expects  the  two  actions  to be consolidated.  If the
Company  prevails  against  LSE,  some  of  the  value of the Company's retained
interests in securitizations could be restored. Both suits have been voluntarily
suspended  pursuant  to  an  agreement  negotiated  by  the  parties.

     The  Company's carrier for the credit deficiency insurance obtained through
1996,  Interstate  Fire & Casualty Co. ("Interstate") determined in late 1996 to
no  longer  offer  such  coverage  to  the  auto finance industry, including the
Company.  In  connection  with  Interstate's  attempt  to no longer offer credit
deficiency  coverage  for  contracts originated after December 1996, the Company
commenced an action in the United States District Court for the Western District
of  Texas,  Austin Division, seeking a declaratory judgment that (i) the Company
was  entitled  to 180 days' prior notice of cancellation and (ii) Interstate was
not  entitled  to  raise  premiums  on  finance contracts for which coverage was
obtained  prior  to  the  effectiveness of such cancellation, as well as seeking
damages  for  Interstate's  alleged  deficiencies  in  paying  claims.  Prior to
receiving  the  Company's  complaint in the Texas action, Interstate commenced a
similar  action  for  declaratory  relief  in  the  United  States Court for the
Northern  District of Illinois.  Both suits have been voluntarily dismissed, and
Interstate  and  the  Company  have to date acted on the basis of a cancellation
date  of May 12, 1997 (i.e., no finance contracts presented after that date will
be  eligible for credit deficiency coverage by Interstate, although all existing
contracts  for which coverage was obtained will continue to have the benefits of
such  coverage),  no  additional  premiums having been demanded or paid, and the
                                    -- 31 --
<PAGE>
claims-paying process having been streamlined.  In particular, in order to speed
the  claims-paying  process,  Interstate has paid lump sums to the Company as an
estimate  of  claims  payable  prior  to  completion of processing.  Pending the
Company's determination of the appropriate beneficiary for such claims payments,
the  Company  has  deposited  and  will  continue  to  deposit such funds into a
segregated  account.

     In February 1997 the Company discovered certain breaches of representations
and  warranties by certain dealers with respect to finance contracts sold into a
securitization.  The Company honored its obligations to the securitization trust
and  repurchased  finance contracts totaling $619,520 from that trust during the
three  months  ended  March  31,  1997.  Of  the  total  amount of these finance
contracts,  $190,320  were  purchased from one dealer.  Although the Company has
requested that this dealer repurchase such contracts, the dealer refused.  After
such  dealer's  refusal  to  repurchase,  the Company commenced an action in the
157th  Judicial  District  Court for Harris County, Texas against Charlie Thomas
Ford,  Inc.  to  compel  such  repurchase.  On  favorable terms, the Company has
reached  a  settlement agreement with Charlie Thomas Ford, Inc.  The Company has
received  funds  related  to  such  settlement.

     On  March  31,  1999,  a  suit  naming the Company and William O. Winsauer,
Adrian  Katz  and  John  S.  Winsauer  (in  their  capacities  as  controlling
shareholders  of  the Company) as defendants (the "Defendants") was filed in the
United States District Court for the Western District of Texas (Austin Division)
by  Bruce  Willis  (the "Plaintiff"), a holder of the Company's Preferred Stock.
The suit alleges, among other things, that the Defendants violated Section 10(b)
of  the  Securities  and  Exchange  Act  of  1934  (and  Rule  10b-5 promulgated
thereunder)  in  failing  to  disclose  adequately  and in causing misstatements
concerning  the  nature  and  condition of the Company's financing sources.  The
suit  also alleges that such actions constituted statutory fraud under the Texas
Business Corporation Act, common law fraud and negligent misrepresentation.  The
Plaintiff  seeks  class  action  certification.  The Plaintiff also seeks, among
other  things,  actual,  special,  consequential,  and  exemplary  damages in an
unspecified  sum,  as  well  as  costs  and expenses incurred in connection with
pursuing  the  action  against  the  Company.  The  Company believes that it has
consistently  and accurately informed the public of its business and operations,
including  the  viability of its funding sources, and, as a consequence believes
the  suit  to  be  without  merit  and intends to vigorously defend against this
action.

ITEM  2.  CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS

     None

ITEM  3.  DEFAULTS  UPON  SENIOR  SECURITIES

     At  June  30,  1999  the  Company  did  not  meet  certain of its financial
covenants,  which  failure  constitutes  an event of default on the Subordinated
Notes.  The  ability  of  the  company  to meet such covenants is dependent upon
future  earnings.  To  date,  the  Company  has  made  all  payments  due on its
Subordinated  Notes.  BancBoston  has  not formally accelerated the Subordinated
Notes,  however  if  such  acceleration were made, BancBoston could declare such
amounts  immediately  due.

     Dynex  has  purportedly  accelerated  all amounts due under the Senior Note
Agreement dated June 9, 1998, by and between Dynex and the Company.  The Company
disputes  such  purported  acceleration.

      Because  dividends on the Preferred Stock are in arrears for two quarterly
dividend  periods,  holders of the Preferred Stock have exercised their right to
call  a  special  meeting  of  the  Preferred  Stock  holders for the purpose of
electing  two  additional directors to serve on the Company's Board of Directors
until  such  dividend  arrearage  is  eliminated.  Such  meeting  is  currently
scheduled  for  October  1,  1999.  In  addition,  certain  changes  that  could
materially  affect  the  holders  of  Preferred  Stock,  such as a merger of the
Company,  cannot  be  made  without  the  affirmative  vote  of  the  holders of
two-thirds  of  the  shares of Preferred Stock, voting as a separate class.  The
Preferred  Stock ranks senior to the Common Stock with respect to the payment of
dividends  and  amounts  upon  liquidation,  dissolution  or  winding  up.


                                    -- 32 --
<PAGE>
ITEM  4.  SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

     The  Company's  annual  meeting of shareholders was held on May 11, 1999 at
the  Company's  headquarters  in  Austin,  Texas.  At  the  meeting,  William O.
Winsauer,  Adrian Katz, John S. Winsauer, Thomas I. Blinten, Stuart A. Jones and
Robert  Shuey III each were elected to additional one-year terms as directors of
the  Company. In addition, the annual appointment of Deloitte and Touche, LLP as
the  Company  independent  public  accountants  was  ratified

     A  total of 5,530,750 shares (representing a quorum of 84% of the Company's
outstanding  common  stock)  were  voted  at the meeting. 5,527,200 shares voted
"FOR" and 3,500 shares voted "AGAINST" the election of each William O. Winsauer,
Adrian  Katz,  John  S.  Winsauer,  Thomas  I.  Blinten,  and  Robert Shuey III.
5,529,700  shares voted "FOR" the election of Stuart A. Jones while 3,500 shares
voted "AGAINST" and 2,500 shares were withheld. 5,528,400 shares voted "FOR" the
ratification  of  the independent public accountants, 850 shares voted "AGAINST"
such  ratification  and  1,500  shares  were  withheld

     On July 13, 1999, the Company's Board of Directors approved an amendment to
the  Company's  by-laws,  increasing the maximum number of directors to nine, in
order  to  accommodate the right of the holders of the Company's Preferred Stock
to  designate  two  additional  directors, for so long as two quarterly dividend
payments on such Preferred Stock remain unpaid. As of June 30, 1999, the Company
had  not  paid  quarterly  dividends  due on each of March 31, 1999 and June 30,
1999.


ITEM  5.  OTHER  INFORMATION

     On  August  10, 1999, the Company received notice from NASDAQ-AMEX that the
Company may have fallen below certain of the AMEX' continued listing guidelines.
As  a  result,  AMEX  is  reviewing  the  Company's  listing  eligibility.

                                    -- 33 --
<PAGE>

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

<TABLE>
<CAPTION>


(A)     EXHIBITS


                                EXHIBIT NO.     DESCRIPTION OF EXHIBIT
                                -----------     ----------------------

<C>        <S>

  3.1 (1)  Restated Articles of Incorporation of the Company
  3.2 (1)  Amended and Restated Bylaws of the Company
  4.1 (1)  Specimen Common Stock Certificate
 10.1 (1)  Amended and Restated Loan Origination, Sale and Contribution Agreement dated as of
           December 15, 1995 by and between the Company and AutoBond Funding Corporation I
 10.2 (1)  Security Agreement dated as of May 21, 1996 among AutoBond Funding Corporation II,
           the Company and Norwest Bank Minnesota, National Association
 10.3 (1)  Credit Agreement and Side Agreement, dated as of May 21, 1996 among AutoBond
           Funding Corporation II, the Company and Peoples Life Insurance Company
 10.4 (1)  Servicing  Agreement dated as of May 21, 1996 among AutoBond Funding Corporation II,
           CSC Logic/MSA L.L.P., doing business  as "Loan  Servicing  Enterprise", the Company
           and Norwest Bank Minnesota, National Association
 10.5 (1)  Loan Acquisition Sale and Contribution Agreement dated as of May 21, 1996 by and
           between the Company and AutoBond Funding Corporation II
 10.6 (1)  Second Amended and Restated Secured Revolving Credit Agreement dated as of July 31,
           1995 between Sentry Financial Corporation and the Company
 10.7 (1)  Management Administration and Services Agreement dated as of January 1, 1996 between
           the Company and AutoBond, Inc.
 10.8 (1)  Employment Agreement dated November 15, 1995 between Adrian Katz and the Company
 10.9 (1)  Employment Agreement effective as of May 1, 1996 between William O. Winsauer and the
           Company
10.10 (1)  Vendor's Comprehensive Single Interest Insurance Policy and Endorsements, issued by
           Interstate Fire & Casualty Company
10.11 (1)  Warrant to Purchase Common Stock of the Company dated March 12, 1996
10.12 (1)  Employee Stock Option Plan
10.13 (1)  Dealer Agreement dated November 9, 1994, between the Company and Charlie Thomas
           Ford, Inc.
10.14 (1)  Automobile Loan Sale Agreement, dated as of September 30, 1996, among the Company,
           First Fidelity Acceptance Corp., and Greenwich Capital Financial Products, Inc.
10.15 (2)  Servicing Agreement, dated as of January 29, 1997, between CSC LOGIC/MSA L.L.P.,
           doing business as "Loan Servicing Enterprise" and the Company
10.16 (2)  Credit Agreement, dated as of February 1, 1997, among AutoBond Funding Corporation II,
           the Company and Daiwa Finance Corporation
10.17 (2)  Security Agreement, dated as of February 1, 1997, by and among AutoBond Funding
           Corporation II, the Company and Norwest Bank Minnesota, National Association
10.18 (2)  Automobile Loan Sale Agreement, dated as of March 19, 1997, by and between Credit
           Suisse First Boston Mortgage Capital L.L.C., a Delaware limited liability company, and the
           Company
10.19 (3)  Automobile Loan Sale Agreement, dated as of March 26, 1997, by and between Credit
           Suisse First Boston Mortgage Capital L.L.C., a Delaware limited liability company, and the
           Company
10.20 (4)  Credit Agreement, dated as of June 30, 1997, by and among AutoBond Master Funding
           Corporation, the Company and Daiwa Finance Corporation
10.21 (4)  Amended and Restated Trust Indenture, dated as of June 30, 1997, among AutoBond
           Master Funding Corporation, the Company and Norwest Bank
           Minnesota, National Association.
10.22 (4)  Securities Purchase Agreement, dated as of June 30, 1997, by and among the Company,
           Lion Capital Partners, L.P. and Infinity Emerging Opportunities Limited.
10.23 (6)  Credit Agreement, dated as of December 31, 1997, by and among AutoBond Master Funding
           Corporation II, the Company and Credit Suisse First Boston Mortgage Capital  L.L.P
10.24 (6)  Trust Indenture, dated as of December 31, 1997, among AutoBond Master Funding
           Corporation II, the Company and Manufacturers and Traders Trust Company
10.25 (6)  Receivables Purchase Agreement, dated as of December 31, 1997, between Credit Suisse
           First Boston Mortgage Capital L.L.P and the Company
10.26 (6)  Servicing Agreement, dated as of December 31, 1997, among the Company, AutoBond
           Master Funding Corporation II and Manufacturers and Traders Trust Company
10.27 (6)  Indenture and Note, dated January 30, 1998, between the Company and BankBoston, N.A.
10.28 (6)  Warrant, dated January 30, 1998, issued to BancBoston Investments, Inc.
10.29 (6)  Purchase Agreement, dated January 30, 1998, between the Company and BancBoston
           Investments, Inc.
10.30 (5)  Warrant, dated February 2, 1998, issued to Dresner Investments Services, Inc.
10.31 (5)  Warrant Agreement, dated February 2, 1998, issued to Tejas Securities Group, Inc.
10.32 (5)  Consulting and Employment Agreement, dated as of January 1, 1998 between Manuel A.
           Gonzalez and the Company
10.33 (5)  Severance Agreement, dated as of February 1, 1998 between Manuel A. Gonzalez and the
           Company
10.34 (7)  1998 Stock Option Plan
10.35 (7)  Third Amendment to the Secured Revolving Credit Agreement dated May 5, 1998 between
           Sentry Financial Corporation and the Company
10.36 (7)  Warrant, dated March 31, 1998, issued to Infinity Investors Limited
10.37 (7)  Credit Agreement, dated as of June 9, 1998, by and among AutoBond Master Funding
           Corporation V, the Company, and Dynex Capital, Inc.
10.38 (8)  Servicing Agreement, dated as of June 9, 1998, by and among AutoBond Master Funding
           Corporation V, the Company, and Dynex Capital, Inc.
10.39 (8)  Trust Indenture, dated as of June 9, 1998, by and among AutoBond Master Funding
           Corporation V, the Company and Dynex Capital, Inc.
10.40 (9)  Letter Agreement, dated June 30, 1998 by and between the Company and Dynex Capital,
           Inc.
10.41 (9)  Letter Agreement dated October 20, 1998 by and between the Company and Dynex Capital,
           Inc.
10.42 (9)  Letter Agreement dated October 28, 1998 by and between the Company, Dynex Holding,
           Inc., and Dynex Capital, Inc.
 21.1 (4)  Subsidiaries of the Company
 21.2 (6)  Additional Subsidiaries of the Company
21.3 (10)  Additional Subsidiaries of the Company
    27.1   Financial Data Schedule
---------
<FN>

1  Incorporated  by  reference  to the Company's Registration Statement on Form S-1 (Registration No.
333-05359).
2  Incorporated  by  reference  to  the  Company's 1996 annual report on Form 10-K for the year ended
December  31,  1996.
3  Incorporated  by  reference  to  the Company's quarterly report on Form 10-Q for the quarter ended
March  31,  1997.
4 Incorporated by reference to the Company's quarterly report on Form 10-Q for the quarter ended June
30,  1997.
5  Incorporated  by  reference  to  the  Company's 1997 annual report on Form 10-K for the year ended
December  31,  1997.
6  Incorporated  by reference from the Company's Registration Statement on Form S-1 (Registration No.
333-41257).
7  Incorporated  by  reference  to  the Company's quarterly report on Form 10-Q for the quarter ended
March  31,  1998.
8  Incorporated  by  reference  to  the  Company's  report  on  Form  8-K  filed  on  June  24, 1998.
9  Incorporated  by  reference  to  the Company's quarterly report on form 10-Q for the quarter ended
September  30,  1998.
10  Incorporated  by  reference  to  the Company's 1998 annual report on Form 10-K for the year ended
December  31,  1998.
-----------------------------------------------------------------------------------------------------

</TABLE>
                                    -- 34 --
<PAGE>


(B) Reports  of  Form  8-K

     None.

                                    -- 35 --
<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  on  August  16,  1999.


                         AUTOBOND ACCEPTANCE CORPORATION
                         -------------------------------


                                          BY:__/S/ WILLIAM O. WINSAUER__________
                                            ------------------------------------

                                      WILLIAM O. WINSAUER, CHAIRMAN OF THE BOARD
                                                     AND CHIEF EXECUTIVE OFFICER

                                    BY:__/S/ ADRIAN KATZ           _____________
                                      ------------------------------------------

                                        ADRIAN KATZ, VICE CHAIRMAN OF THE BOARD,
                                                     CHIEF OPERATING OFFICER AND
                                                         CHIEF FINANCIAL OFFICER

                                    -- 36 --
<PAGE>