<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  September  30,  1998

                                       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                    (IRS 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 November 13, 1998, there were 6,531,311 shares of the registrant's Common
Stock,  no  par  value,  outstanding.
<PAGE>

<TABLE>
<CAPTION>

<S>                                                           <C>
TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION . . . . . . . . . . . . . . .   3
Item 1.  Financial Statements. . . . . . . . . . . . . . . .   3
Three Months Ended . . . . . . . . . . . . . . . . . . . . .   4
Nine Months Ended. . . . . . . . . . . . . . . . . . . . . .   4

INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . .   6

FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . .   6

PART II.  OTHER INFORMATION. . . . . . . . . . . . . . . . .  32
Item 1. Legal Proceedings. . . . . . . . . . . . . . . . . .  32
Item 2. Changes in Securities and Use of Proceeds. . . . . .  33
Item 3.  DEFAULTS UPON SENIOR SECURITIES . . . . . . . . . .  34
Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  34
Item 5.  OTHER INFORMATION . . . . . . . . . . . . . . . . .  34

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . .  35

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . .  37

EXHIBIT 10.40. . . . . . . . . . . . . . . . . . . . . . . .  38
EXHIBIT 10.41. . . . . . . . . . . . . . . . . . . . . . . .  39
EXHIBIT 10.42. . . . . . . . . . . . . . . . . . . . . . . .  40
EXHIBIT 27.1 . . . . . . . . . . . . . . . . . . . . . . . .  41

</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                PART I - FINANCIAL INFORMATION
ITEM  1.  FINANCIAL  STATEMENTS

                       AUTOBOND ACCEPTANCE CORPORATION AND SUBSIDIARIES
                                  CONSOLIDATED BALANCE SHEETS
                                                                               (UNAUDITED)
                                                               DECEMBER 31,    SEPTEMBER  30,
                                                                   1997             1998
                                                              --------------  ----------------
<S>                                                           <C>             <C>
ASSETS
------------------------------------------------------------                                  

Cash and cash equivalents. . . . . . . . . . . . . . . . . .  $     159,293   $     7,804,822 
Restricted funds . . . . . . . . . . . . . . . . . . . . . .      6,904,264               153 
Finance contracts held for sale, net . . . . . . . . . . . .      1,366,114         5,783,445 
Collateral acquired, net . . . . . . . . . . . . . . . . . .        150,908            22,339 
Retained interest in securitizations . . . . . . . . . . . .     32,016,649        17,000,966 
Debt issuance costs. . . . . . . . . . . . . . . . . . . . .        605,847           828,751 
Due from affiliates. . . . . . . . . . . . . . . . . . . . .        176,963           471,722 
Property, Plant, and Equipment, net. . . . . . . . . . . . .      1,148,559         1,179,344 
Deferred income taxes. . . . . . . . . . . . . . . . . . . .              -            47,754 
Other assets . . . . . . . . . . . . . . . . . . . . . . . .        681,851           772,130 
Total assets . . . . . . . . . . . . . . . . . . . . . . . .  $  43,210,448   $    33,911,426 
                                                              ==============  ================

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

Liabilities:
Notes Payable. . . . . . . . . . . . . . . . . . . . . . . .  $   9,841,043   $    14,249,233 
Revolving Credit Facilities. . . . . . . . . . . . . . . . .      7,639,201                 - 
Accounts payable and accrued liabilities . . . . . . . . . .      3,386,685           938,810 
Bank overdraft . . . . . . . . . . . . . . . . . . . . . . .      2,936,883         1,799,474 
Payable to affiliates. . . . . . . . . . . . . . . . . . . .        554,233                 - 
Deferred income taxes. . . . . . . . . . . . . . . . . . . .      3,504,249                 - 
Total liabilities. . . . . . . . . . . . . . . . . . . . . .  $  27,862,294   $    16,987,517 
                                                              --------------  ----------------

Commitments and contingencies

Shareholders' equity:
Preferred stock, no par value; 5,000,000 shares authorized;.  $           -   $    10,856,000 
1,125,000 shares of 15% Series A cumulative preferred
stock, $10 liquidation preference, issued and outstanding,
at September 30, 1998
Common stock, no par value; 25,000,000 shares authorized,. .          1,000             1,000 
6,531,311 shares issued and outstanding at December 31,
1997 and  September 30, 1998
Capital in excess of stated capital. . . . . . . . . . . . .      8,781,669         9,475,207 
Due from shareholders. . . . . . . . . . . . . . . . . . . .        (10,592)          (10,592)
Accumulated other comprehensive income . . . . . . . . . . .      1,049,256 
Retained earnings (accumulated deficit). . . . . . . . . . .      5,526,821        (2,897,706)
Investment in common stock agreement . . . . . . . . . . . .              -          (500,000)
Total shareholders' equity . . . . . . . . . . . . . . . . .  $  15,348,154   $    16,923,909 
                                                              --------------  ----------------

Total liabilities and shareholders' equity . . . . . . . . .  $  43,210,448   $    33,911,426 
                                                              ==============  ================

<FN>

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

<PAGE>
<TABLE>
<CAPTION>

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


                                                      THREE MONTHS ENDED                      NINE MONTHS ENDED
                                                        SEPTEMBER 30,                           SEPTEMBER 30,
                                                             1997                1998               1997               1998
                                                     --------------------  ----------------  -------------------  --------------
<S>                                                  <C>                   <C>               <C>                  <C>
Revenues:
Interest income . . . . . . . . . . . . . . . . . .  $         1,313,304   $       468,726   $        3,107,402   $   2,134,508 
Gain on sale of finance contracts . . . . . . . . .            4,840,620         3,456,303           13,532,765      10,093,123 
Servicing income. . . . . . . . . . . . . . . . . .              225,482           798,368              659,791       2,116,310 
Other income (loss) . . . . . . . . . . . . . . . .               (9,554)              -0-              (62,323)        (79,715)
Total revenues. . . . . . . . . . . . . . . . . . .  $         6,369,852   $     4,723,397   $       17,237,635   $  14,264,226 
                                                     --------------------  ----------------  -------------------  --------------
Expenses:
Provision for credit losses . . . . . . . . . . . .  $           125,000   $           -0-   $          125,000   $     100,000 
Interest expense. . . . . . . . . . . . . . . . . .            1,101,829         1,015,794            2,930,592       3,391,600 
Salaries and benefits . . . . . . . . . . . . . . .            2,140,420         2,601,865            5,413,045       7,468,197 
General and administrative. . . . . . . . . . . . .            1,722,689         1,523,132            4,481,846       4,398,016 
Impairment of retained interest in securitizations.                  -0-         1,637,190              467,926       7,515,015 
Other operating expenses. . . . . . . . . . . . . .              483,140         1,044,853            1,265,830       2,573,723 
Total expenses. . . . . . . . . . . . . . . . . . .  $         5,573,078   $     7,822,834   $       14,684,239   $  25,446,551 
                                                     --------------------  ----------------  -------------------  --------------
Income (loss) before income taxes . . . . . . . . .  $           796,774       ($3,099,437)  $        2,553,396    ($11,182,325)
Provision (benefit) for income taxes. . . . . . . .              284,960    (    1,047,961)             895,685     ( 3,775,923)
                                                     --------------------  ----------------  -------------------  --------------
Net income (loss) . . . . . . . . . . . . . . . . .  $           511,814       ($2,051,476)  $        1,657,711     ($7,406,402)

Weighted average number of common shares basic. . .            6,512,500         6,531,311            6,512,500       6,531,311 
Weighted average number of common shares diluted. .            6,543,320         6,531,311            6,538,032       6,531,311 
Net income available to common shareholders . . . .  $           511,814       ($2,473,351)  $        1,657,711     ($8,424,527)
                                                     ====================  ================  ===================  ==============
Earnings/(Loss)per common share:
 Basic. . . . . . . . . . . . . . . . . . . . . . .  $              0.08            ($0.38)  $             0.25          ($1.29)
                                                     ====================  ================  ===================  ==============
Diluted . . . . . . . . . . . . . . . . . . . . . .  $              0.08            ($0.38)  $             0.25          ($1.29)
                                                     ====================  ================  ===================  ==============
Other comprehensive income, net of tax:
Unrealized gain(loss)on  retained interest in
securitizations . . . . . . . . . . . . . . . . . .  $           306,342       ($1,416,628)  $        1,265,971     ($1,049,256)
Other comprehensive income (loss) . . . . . . . . .  $           306,342       ($1,416,628)  $        1,265,971     ($1,049,256)
Comprehensive income (loss) . . . . . . . . . . . .  $           818,156       ($3,468,104)  $        2,923,682     ($8,455,658)
                                                     ====================  ================  ===================  ==============


<FN>

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

<PAGE>

<TABLE>
<CAPTION>

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


                                                                  NINE MONTHS ENDED
                                                                  SEPTEMBER 30, 1998
                                                                  ------------------        
                                                              SHARES           AMOUNT
<S>                                                     <C>                 <C>
Preferred stock:
Beginning balance. . . . . . . . . . . . . . . . . . .                   -  $         - 
Issuance of preferred stock in public offering . . . .           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. . . . . . . . . . . . . . . . . . .                        8,781,669 
Issuance cost of preferred stock. . . . . . . . . . .                        (1,224,593)
Issuance of common stock warrants. . . . . . . . . . .                        1,918,131 
Ending balance . . . . . . . . . .  . . . . . . . . .                         9,475,207 


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

Accumulated other comprehensive income, net of tax:
Beginning balance . . . . . . . . . .  . . . . . . . .                        1,049,256 
Realized  loss on retained interest in securitizations                       (1,049,256)
Ending balance . . . . . . . . . .  . . . . . . . . . .                               - 

Accumulated Deficit
Beginning balance . . . . . . . . . .  . . . . . . . .                        5,526,821 
Dividends . . . . . . . . . .  . . . . . . . . . . . .                       (1,018,125)
Net loss . . . . . . . . . .  . . . . . . . . . . . .                        (7,406,402)
Ending balance . . . . . . . . . .  . . . . . . . . .                        (2,897,706)

Investment in common stock agreement
Beginning balance . . . . . . . . . .  . . . . . . . .                                - 
Investment in common stock agreement . . . . . . . . .                         (500,000)
Ending balance . . . . . . . . . .  . . . . . . . . .                          (500,000)

Total shareholders' equity . . . . . . . . . .  . . .                       $16,923,909 
                                                                            ============

<FN>

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

<PAGE>

<TABLE>
<CAPTION>

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


                                                                                NINE MONTHS ENDED
                                                                                  SEPTEMBER 30,
                                                                             1997              1998
                                                                      -------------------  -------------
<S>                                                                   <C>                  <C>
OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . .  $        1,657,711    ($7,406,402)
Adjustments to Reconcile Net Income to Net Cash
Amortization of finance contract acquisition discount and insurance.             (58,849)      (126,215)
Amortization of debt issuance costs and discount . . . . . . . . . .             246,058        887,357 
Provision for credit losses. . . . . . . . . . . . . . . . . . . . .             125,000        100,000 
Depreciation and amortization. . . . . . . . . . . . . . . . . . . .             197,203        350,684 
Impairment of trust and interest -only strip receivables . . . . . .             467,926      7,515,015 
Gain on sale of finance contracts. . . . . . . . . . . . . . . . . .         (13,532,765)   (10,093,123)
  Changes in Assets and Liabilities
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . .            (370,285)    (3,552,003)
Restricted funds . . . . . . . . . . . . . . . . . . . . . . . . . .          (3,183,334)     6,904,111 
Finance contracts held for sale. . . . . . . . . . . . . . . . . . .          12,641,330      5,702,007 
Retained interest in securitizations . . . . . . . . . . . . . . . .          (3,514,274)     6,451,412 
Due from affiliates. . . . . . . . . . . . . . . . . . . . . . . . .             274,977       (294,759)
Prepaid and other assets . . . . . . . . . . . . . . . . . . . . . .          (5,023,154)      (471,748)
Accounts payable and accrued liabilities . . . . . . . . . . . . . .           1,596,687     (2,447,875)
Payable to affiliates. . . . . . . . . . . . . . . . . . . . . . . .             (75,146)      (554,233)

CASH  (USED) PROVIDED BY OPERATIONS. . . . . . . . . . . . . . . . .         ($8,550,915)  $  2,964,228 
                                                                      -------------------  -------------

INVESTING ACTIVITIES
Proceeds from disposal of collateral . . . . . . . . . . . . . . . .            (274,445)       128,569 

CASH  (USED) PROVIDED  BY INVESTING ACTIVITIES . . . . . . . . . . .           ($274,445)  $    128,569 
                                                                      -------------------  -------------

FINANCING ACTIVITIES
Net proceeds (payments) on revolving credit facilities . . . . . . .           4,240,208     (7,639,201)
Payments for debt issue costs. . . . . . . . . . . . . . . . . . . .                   -     (1,110,261)
Proceeds from notes payable. . . . . . . . . . . . . . . . . . . . .                   -     10,650,000 
Payments on notes payable. . . . . . . . . . . . . . . . . . . . . .             105,255     (6,241,810)
Increase(decrease) in bank overdraft . . . . . . . . . . . . . . . .             445,137     (1,137,409)
Proceeds from public offering of preferred stock, net. . . . . . . .                   -      9,631,407 
Dividends on preferred stock . . . . . . . . . . . . . . . . . . . .                   -     (1,018,125)
   Proceeds from issuance of common stock warrants . . . . . . . . .              87,000      1,918,131 
Payment for common stock aggreement . . . . . . . . . . . . . . . . .                  -       (500,000)

CASH  PROVIDED BY  FINANCING ACTIVITIES. . . . . . . . . . . . . . .  $        4,877,600   $  4,552,732 
                                                                      -------------------  -------------
   Increase (decrease) in cash . . . . . . . . . . . . . . . . . . .         ($3,947,760)  $  7,645,529 
    Cash and cash equivalents at beginning of period . . . . . . . .           4,121,342        159,293 
CASH AND CASH EQUIVALENTS AT END OF PERIOD . . . . . . . . . . . . .  $          173,582   $  7,804,822 
                                                                      ===================  =============

<FN>

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

<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  (the  "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  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  Form 10-K for the year ended December 31, 1997, as
amended  (SEC  File Number 000-21673). Certain data from the prior year has been
reclassified  to  conform  to  1998  presentation.


2.     Earnings  per  Share

     The  Company  adopted  Financial  Accounting  Standards  Board Statement of
Financial  Accounting  Standards  No. 128, "Earnings Per Share" ("SFAS No. 128")
which  specifies  the computation, presentation, and disclosure requirements for
earnings  per  share.  Basic  earnings  per share excludes potential dilution of
incremental  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  was
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, 1997    September 30, 1998
                                -------------------  --------------------
                                                         (Unaudited)
<S>                             <C>                  <C>
Unpaid principal balance . . .  $        1,946,135   $         6,462,015 
Contract acquisition discounts            (129,899)             (544,508)
Allowance for credit losses. .            (450,122)             (134,062)
                                $        1,366,114   $         5,783,445 
                                ===================  ====================

</TABLE>

4.     Retained  Interest  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 the revaluation due to changed valuation assumptions.  The
amount  of these retained interests of finance contracts may decrease due to the
Company's  receipt  of  cash  flows from their investment. Retained interests in
securitizations  will  also  decrease  in  the  case  of impairments caused by a
revaluation  of  the  future  cash  flows.

     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
rates;  discount  rates;  initial,  ongoing  and  minimum  cash  reserve

<PAGE>
 requirements;  the  interest rate 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  subtleties  of  the  actual  performance  characteristics  of  the  finance
contracts.  All  valuations are conducted on a disaggregated basis. 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 now estimated based on the historical static pool
results.  Repossession  recovery  ratios,  with  deficiency  insurance  proceeds
reflected,  typically  ranged  from  80%  to  90%.

     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  sized  and  sell  these  "B Pieces" were
identical  to  the  initial  gain-on-sale  assumptions  the Company applied with
respect  to  retained  interests.

     There  were  two  primary  causes  of  the  impairment  charges to retained
interest in securitizations during the nine months ended September 30, 1998. 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  immediate impact of the loss of cash
flow  from Progressive was the necessity to draw funds from the applicable trust
cash  reserves.  Specifically,  the  reserves were reduced by approximately $9.2
million  through September 30, 1998.  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 certificate holders and ultimately to the Company.
The  depletion  and  expected delay in receiving any ultimate cash flows reduced
the  value  of  the  retained  interests in the second and third quarters.  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.  Additional  impairment  may  occur  if Progressive continues to not pay
claims  or  if  the  Company  does  not  prevail  in  its  litigation.

     The second additional 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, pertaining to
breaches  of its servicing obligations.  As the Company assumed all servicing it
accelerated the rate of charge-offs as compared with prior periods.  Accelerated
charge-offs result in any available cash flow going to the senior investors that
otherwise  would  go  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  taken  place.  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.  Given  the  accelerated charge-offs and the Company's decision in May
1998  to  commit  to  Moody's  to  withhold monies from the B Pieces there was a
direct  impact  on the valuation of the retained interests during the first nine
months  of 1998.  A total of eight securitizations were impacted by this action.

<PAGE>


     The  following table presents the valuation and impairment of the Company's
retained  interest  in  securitizations  from  December  31,  1997,  by quarter:

<TABLE>
<CAPTION>

<S>                    <C>                 <C>              <C>             <C>                   <C>
                                                                                                  Total Impairment through
                       December 31, 1997   March 31, 1998   June 30, 1998   September 30, 1998        September 30, 1998
                       ------------------  ---------------  --------------  --------------------  -------------------------
Valuations of . . . .  $       32,016,649  $    35,643,756  $   33,043,626  $     17,000,966(**)                        N/A
retained interest
in securitizations(*)
Impairment. . . . . .  N/A                 $       288,022  $    5,589,802  $          1,637,191  $               7,515,015
                       ------------------  ---------------  --------------  --------------------  -------------------------
<FN>

      *Assets  are  continuously  acquired  and  sold  and  therefore  the  retained  interest  in  securitizations  can
         demonstrate  increases  while  realizing  impairments
     **The  reduction  of  the  Company's  retained  interest  in  securitizations  at  September  30,  1998  versus  the
          prior  periods  is  primarily  as  a  result  of  increased  monetization  through  the Dynex warehouse facility.
</TABLE>


     Retained  interests  also  decreased during the nine months ended September
30,  1998  because  of  higher  cash  advance  rates from the Dynex Warehouse as
described  below.

     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  10,  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 "Warehouse Financing").  The
terms  of  the  Warehouse  Financing  were  modified on June 30, October 20, and
October  28, 1998. Under the prior terms of the Warehouse Financing, the Company
transferred finance contracts to AutoBond Master Funding Corporations V ("Master
Funding  V"),  a  qualified unconsolidated special purpose subsidiary, and Dynex
provided  warehouse  credit facilities in the amount equal to 104% of the unpaid
principal balance of the finance contracts (the "Advance Rate"), the proceeds of
such  facilities  are  received by the Company.  Under the modified terms of the
Warehouse  Financing,  the  Advance  Rate  was  reduced  from 104% to 88% for an
interim  period (the "Interim Period") ending on the earlier of (a) December 31,
1998  and  (b)  the  settlement date of a securitization by Dynex of any finance
contracts  originated  by  the  Company.  At  the end of the Interim Period, the
Advance  Rate  will  revert  to  104%  and  Dynex will advance to the Company an
additional  amount  equal  to  16%  of  the  unpaid principal balance of finance
contracts  financed  by  Dynex  during the Interim Period, less any amounts that
otherwise  would  have  been  paid  as principal on the Notes (as defined below)
during  such  period.  Advances under the Warehouse Financing are limited to $25
million  per month after June 1998 until the commitment termination date.  Under
the modified terms of the Warehouse Financing, the commitment terminates on July
31,  1999  (provided that 90 days' prior written notice from Dynex is given), or
if  such  notice  is  not  given,  July  31,  2000.  At the Company's option the
commitment  termination  date  can  be  extended  an  additional  four months to
November  30,  1999  (provided  that 90 days' prior written notice from Dynex is
given),  or  if such notice is not given, November 30, 2000.  Advances under the
Warehouse  Financing  are  evidenced by Class A and Class B Notes (collectively,
the  "Notes") issued by Master Funding V to Dynex.  The Class A Notes are 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 Treasury note on the closing date for each such advance
(equal  to an average of 7.38% as of September 30, 1998); provided however, that
during the Interim Period, the interest rate on the Company's Class A Notes will
equal  One-Month  LIBOR plus 1.50%.  The Class B Notes are 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 special purpose
entities  have  been  recognized  as sales under SFAS No. 125.  At September 30,
1998,  advances  under  the  Dynex  Warehouse  financing totaled $100.2 million.

<PAGE>
     At  September  30,  1998, the Company had no outstanding balance on a $10.0
million  revolving credit facility (the "Sentry Facility") with Sentry Financial
Corporation  ("Sentry"),  which  expires on December 31, 2000. The proceeds from
borrowings  under  the Sentry Facility are used to acquire finance contracts, to
pay  applicable  credit  default  insurance  premiums  and to make deposits to a
reserve  account  with Sentry. The Company pays a utilization fee of up to 0.21%
per  month  on  the  average  outstanding balance under the Sentry Facility. The
Sentry  Facility also requires the Company to pay up to 0.62% per quarter on the
average  unused  balance. Interest is payable monthly and accrues at a per annum
rate of prime plus 1.75% (10.00% at September 30, 1998). During 1998, the Sentry
Facility  was amended to allow the Company, at its election, to transfer finance
contracts  into  qualified  unconsolidated  special  purpose  subsidiaries.  The
Sentry  Facility  contains  certain conditions and imposes certain requirements,
including,  among  other  things, minimum net worth and cash and cash equivalent
balances  in  the  reserve  accounts.  Under  the  Sentry  Facility, the Company
incurred  interest  expense  of $189,985 for the nine months ended September 30,
1998.  The  Sentry  Facility  was  amended  in  May  1998  to  add  additional
representations,  covenants,  a  general  release  of  Sentry,  the guarantee of
William  O.  Winsauer,  and the right of Sentry to refuse future advances at its
discretion.

     The  Company  and its wholly owned subsidiary, AutoBond Funding Corporation
II,  entered  into  a  $50  million  revolving  warehouse  facility  (the "Daiwa
Facility")  with Daiwa Finance Corporation ("Daiwa") effective as of February 1,
1997.  Advances  under  the  Daiwa  Facility  matured  as of March 31, 1998. The
proceeds  from  the  borrowings  under  the  Daiwa Facility were used to acquire
finance  contracts and to make deposits to a reserve account. The Daiwa Facility
was  collateralized  by  the  finance  contracts  acquired  with the outstanding
advances.  Interest  was payable at the lesser of (x) 30 day LIBOR plus 1.15% or
(y)  11%  per annum. The Company paid a non-utilization fee of .25% per annum on
the  unused  amount  of  the line of credit. Pursuant to the Daiwa Facility, the
Company  paid a $243,750 commitment fee. The debt issuance cost was amortized as
interest expense on a straight line basis through March 1998. The Daiwa Facility
contained  certain  covenants  and  representations  similar  to  those  in  the
agreements  governing  the  Company's  existing securitizations including, among
other  things, delinquency and repossession triggers. These notes were repaid on
July  1,  1998  through  the  Warehouse  Financing  with  Dynex.

     On  December  31, 1997, the Company entered into a warehouse/securitization
arrangement  with  Credit  Suisse First Boston Mortgage Capital L.L.C. ("CSFB"),
whereby  $12.5  million  of  finance  contracts  were  sold  to  a  qualifying
unconsolidated  special  purpose subsidiary, AutoBond Master Funding Corporation
II.  These  finance  contracts  secured  variable  funding notes, in the initial
amount  of  $11.3  million,  which  were  repaid  on  June  30, 1998 through the
Warehouse  Financing  with  Dynex.

     On  March  31,  1998,  the  Company entered into a warehouse/securitization
arrangement  with  Infinity Investors Limited ("Infinity"), whereby $7.2 million
of  finance  contracts  were sold to a qualifying unconsolidated special purpose
subsidiary,  AutoBond  Master  Funding  Corporation  IV. These finance contracts
collateralized  variable funding notes bearing interest at 10% per annum through
May 31, 1998 and thereafter at 17% per annum. In connection with the transaction
with  Infinity, the Company issued a warrant to purchase up to 100,000 shares of
Common  Stock,  at an exercise price of $8.73 per share. These notes were repaid
on  June  30,  1998  through  the  Warehouse  Financing  with  Dynex.

<PAGE>

6.     Notes  Payable

<TABLE>
<CAPTION>

          The  following  amounts  are  included  in  notes  payable  as  of:


                                                                    December 31,    September 30,
                                                                        1997            1998
                                                                    -------------  ---------------
                                                                                     (Unaudited)
<S>                                                                 <C>            <C>
Non-recourse notes payable, collateralized by Class B Certificates  $   7,783,219  $     4,960,611
Subordinated notes payable . . . . . . . . . . . . . . . . . . . .              -        7,500,000
Convertible notes payable. . . . . . . . . . . . . . . . . . . . .      2,000,000        3,000,000
Other notes payable. . . . . . . . . . . . . . . . . . . . . . . .         57,824           27,969
                                                                    $   9,841,043  $    15,488,580
                                                                    -------------  ---------------
</TABLE>

     Pursuant to an agreement (the "Securities Purchase Agreement") entered into
on  June  30,  1997,  the  Company  issued  by  private  placement $2,000,000 in
aggregate  principal  amount  of  senior secured convertible notes ("convertible
notes"). Interest is payable quarterly at a rate of 18% per annum until maturity
on  June  30,  2000.  The convertible notes, collateralized by the interest-only
strip receivables from the Company's first four securitizations, are convertible
into  shares  of common stock of the Company upon the earlier to occur of (x) an
event  of  default  on  the convertible notes and (y) June 30, 1998, through the
close  of  business  on  June 30, 2000, subject to prior redemption. The Company
paid  off  the  convertible  notes  in  February  1998.  Also  pursuant  to  the
Securities  Purchase  Agreement, the Company issued warrants which upon exercise
allow the holders to purchase up to 200,000 shares of common stock at $4.225 per
share.  The  warrants are exercisable to the extent the holders thereof purchase
up  to  $10,000,000 of the Company's subordinated asset-backed securities before
June  30,  1998.  The holders  purchased $5,800,000 of subordinated asset-backed
securities.  The  total  value  assigned  to  these  warrants  was approximately
$154,000  which  is  included as an adjustment of the gain (loss) on sale of the
related  finance  contracts.

     In  January 1998, the Company privately placed with BankBoston Investments,
Inc.  ("BankBoston")  $7,500,000 in aggregate principal amount of its 15% senior
subordinated  convertible  notes  (the  "Subordinated  Notes").  Interest on the
Subordinated  Notes is payable quarterly until maturity on February 1, 2001. The
Subordinated Notes are convertible at the option of the holder for up to 368,462
shares of common stock of the Company, 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 restricted 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 earnings 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 BankBoston. The Company capitalized debt issuance
costs  of  $594,678,  and  recorded  a  discount  of  $1,462,837  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.


<PAGE>
     Due  principally  to  the  impairment  of  the  Company's  interest  in
securitizations,  the  Company  was  in breach, as of September 30, 1998, of the
minimum  net  worth  and  the  minimum  ratio  of earnings to interest covenants
contained  in  the  Indenture.  On  November  13,  1998,  the Company received a
one-time  waiver  of  such  covenants  from  BankBoston,  N.A.

     On  June  10,  1998,  the  Company  sold  to Dynex at par $3 million of the
Company's  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 may be converted 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.



7.  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
$10,125,000.  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.
Preferred  Stock  dividends  of $596,250 and $421,875 were paid on June 30, 1998
and  September  30,  1998,  respectively.

     If  dividends  on  the  Preferred  Stock  are  in arrears for two quarterly
dividend  periods,  holders  of the Preferred Stock will have the right to elect
three  additional  directors to serve on the Company's Board until such dividend
arrearage  is  eliminated.  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 may not be
sold,  transferred,  pledged  or  hypothecated  for  a  period  of one year from
February  17,  1998,  except  to  the  officers or partners of Tejas and dealers
participating  in  the  offering and their respective partners and officers. 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 value of the warrant was considered additional issuance cost of the
preferred  stock  resulting  in  no  net adjustment to capital in excess of par.

     In  June  1997, the Company issued $2,000,000 in aggregate principal amount
of  its  18%  senior Secured Promissory Notes (which have been redeemed in full)
and  Common  Stock  Purchase  Warrants,  dated  June  30,  1997  (the "June 1997
Warrants"),  to  Infinity  Investors Limited. The June 1997 Warrants entitle the
holders  of  such  Warrants, upon exercise thereof, to purchase from the Company
200,000  shares  of  its

<PAGE>
common  stock  at $4.225 per share. The exercise price per share may be adjusted
over  time  pursuant  to  standard  antidilution  provisions.

     In  connection  with  the  issuance  of the Company's Subordinated Notes in
January 1998, the Company issued to BankBoston a warrant (the "Subordinated Note
Warrant").  The  Subordinated Note Warrant entities the holder, upon exercise of
the Warrant, to purchase from the Company that number of shares of the Company's
common stock, up to 368,462, which were available for conversion at the maturity
of  the  Subordinated  Notes on February 1, 2001.  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 Warrant to the
Company  at  the  difference  between  the  current market price and the warrant
exercise  price.  The  Company  has  the  option to redeem the Subordinated Note
Warrant  under  certain circumstances.  The Subordinated Note Warrant expires on
January  31,  2005.

     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  BankBoston  pursuant to which the Principals granted to BankBoston 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 (the "Dresner 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) a warrant (expiring
January  12,  2000)  held  by  Stephen  Bischoff exercisable for 7,500 shares of
common  stock  of  the  Company  at  a  price  of $4.00 per share (the "Bischoff
Warrant"),  (b)  a  warrant  (expiring  August  30,  2002) held by Preston Paine
exercisable  for  30,000  shares  of  common  stock of the Company at a price of
$4.225  per  share  (the "Paine Warrant"), and (c) a warrant (expiring March 31,
2002)  held  by  Infinity  Investors  Limited  exercisable for 100,000 shares of
common  stock  of  the  Company  at  a  price  of $8.73 per share (the "Infinity
Warrant").

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 only deliver such final notice 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 (a) on
which  total  purchases  by  Promethean  under  the  Investment  Agreement total
$20,000,000, (b) which is two years after the effective date of the registration
statement  relating  to the common stock covered by the Investment Agreement, or
(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  to  Promethean on August 19, 1998, an amount equal to $500,000 in
cash  which  was  recorded  as  an  investment  in a common stock agreement as a
separate  component  of  stockholders'  equity.

<PAGE>
8.  Commitments  and  Contingencies

     The  Company  is  required  to  represent  and warrant certain matters with
respect  to  the  finance  contracts  sold  to  the securitization trusts, which
generally  duplicate the substance of the representations and warranties made by
the  dealers in connection with the Company's purchase of the finance contracts.
In  the  event of a breach by the Company of any representation or warranty, the
Company is obligated to repurchase the finance contracts from the securitization
trusts  at  a  price equal to the remaining principal plus accrued interest. The
Company  repurchased  finance  contracts totaling $619,520 from a securitization
trust  during  1997. Of the total amount of these repurchased finance contracts,
$190,320  was purchased from one dealer. Although the Company has requested that
this  dealer  repurchase such contracts, the dealer has refused. The Company has
commenced  litigation  against  such  dealer.

     As  a  result  of  the  attempt  by  Progressive Northern Insurance Company
("Progressive")  (the  provider  of  credit  default insurance for the Company's
1997-B  and 1997-C securitizations) 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 interest 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.

     In  connection  with  the 1997-B and 1997-C securitization, $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.


<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.  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. Results for interim periods are not necessarily
indicative of the results for a full year. 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, 1997 (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; 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  servicing  and  collection  function  for finance
contracts  using  its own servicing and collections department. The Company also
acquires  finance contracts from third parties other than dealers, for which the
Company  re-underwrites  and  collects such finance contracts in accordance with
the  Company's standard guidelines. The Company sells portfolios of these retail
automobile installment 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
with  five  pricing  tiers  to  automobile  dealers  which adheres to consistent
underwriting  guidelines  involving  the  purchase  of primarily late-model used
vehicles. The Company has experienced significant growth in its finance contract
portfolio  since  it  commenced  operations  in  August  1994.

     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 capital 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.  Although the Company's
assumption  of  all  servicing  functions  in  late 1997 has increased servicing
income,  it  is  uncertain  when  the  Company  will  begin  to  realize overall
improvements  in  net  income  as  the  growth  in acquisition volume continues,
especially  in  view  of  the  high  cost  of  capital.

<PAGE>

REVENUES

     The  Company's  primary  sources  of  revenues consist of three components:
interest  income,  gain  on  sale  of  finance  contracts  and servicing 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 (a) the annual percentage rate of the finance contracts acquired,
(b)  the  aggregate  principal  balance of finance contracts acquired and funded
through  the  Company's  warehouse  and  other  credit  facilities  prior  to
securitization,  and  (c)  the  length  of time such contracts are funded by the
warehouse  and  other  credit  facilities.


          Gain  on  Sale  of  Finance  Contracts.

     The Company implemented Statement of Financial Accounting Standards No. 125
"Transfer  and  Servicing of Financial Assets and Extinguishment of Liabilities"
("SFAS No. 125") as of January 1, 1997. SFAS No. 125 provides new accounting and
reporting  standards  for  transfers  and  servicing  of  financial  assets  and
extinguishment of liabilities. This statement also provides consistent standards
for  distinguishing  transfers of financial assets that are sales from transfers
that  are  secured  borrowings  and  requires  that  liabilities and derivatives
incurred or obtained by transferors as part of a transfer of financial assets be
initially  measured  at fair value. For transfers that result in the recognition
of  a  sale,  SFAS  No.  125 requires that the newly created assets obtained and
liabilities  incurred  by  the  transferors as a part of a transfer of financial
assets  be  initially  measured  at fair value. Interests in the assets that are
retained  are  measured by allocating the previous carrying amount of the assets
between  the  interests sold and interests retained based on their relative fair
values  at  the  date  of  the transfer. The amounts initially assigned to these
financial  components is a determinant of the gain or loss from a securitization
transaction  under  SFAS  No.  125.

     The  retained  interests  in  securitizations are carried at estimated fair
value with unrealized gains (losses) recorded in stockholders' equity as part of
accumulated  other  comprehensive  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  interest  in  securitizations is
performed  quarterly by calculating 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 approximately 15%. To the extent
that  the  Company  deems  the  asset  to  be  permanently impaired, the Company
transfers  the  unrealized  loss  in accumulated other comprehensive income to a
realized  loss  with  a  charge  against earnings. The Company recorded a charge
against  earnings  of $7,515,015 during the nine months ended September 30, 1998
as  a  result  of  the  impairment  review.  See  also  Notes 4 and 8 to interim
financial  statements  regarding  the  impairment  of  retained  interests.  The
Company's  cost  basis  in  finance contracts sold has varied from approximately
91.91%  to 103% of the value of the principal balance of such 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. The gain recognized on the sale
of  finance  contracts  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
interest  income  prior to securitization) necessarily results in less available
cash  flow  from  the  securitization.

<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   September 30,                          Gross
Securitization                 Securitized     Rate          1998       Ratings(2)   Rate    Spread(3)
-----------------------------  ------------  ---------  --------------  ----------  -------  ---------
<S>                            <C>           <C>        <C>             <C>         <C>      <C>
AutoBond Receivables
Trust 1995-A. . . . . . . . .  $ 26,261,009      18.9%  $    6,019,329  Ba1            7.2%      11.7%

Trust 1996-A. . . . . . . . .    16,563,366      19.7%       5,416,372  Ba1            7.2%      12.5%

Trust 1996-B. . . . . . . . .    17,832,885      19.7%       6,671,800  Ba1            7.7%      12.0%

Trust 1996-C. . . . . . . . .    22,296,719      19.7%      10,436,867  Ba1            7.5%      12.2%

Trust 1996-D. . . . . . . . .    25,000,000      19.5%      12,446,374  Ba1            7.4%      12.1%

Trust 1997-A (4). . . . . . .    28,037,167      20.8%      13,862,448  Ba1            7.8%      13.0%

Trust 1997-B. . . . . . . . .    34,725,196      19.9%      22,936,843  B2             7.7%      12.2%

Trust 1997-C. . . . . . . . .    34,430,079      20.0%      24,455,075  B2             7.6%      12.4%
AutoBond Master Funding
Corporation V Trust Dynex (4)   100,310,063      20.0%      90,323,369           -  7.4%(5)      12.6%
Total . . . . . . . . . . . .  $305,456,484             $  192,568,477
                               ============             ==============                                

<FN>

1  Data  refers  to  finance  contracts  at  time  of  securitization.
2  Indicates  ratings  by  Moody's  Investors  Service,  Inc  as  of  September  30,  1998.
3  Difference  between  weighted  average rate of finance contracts securitized and senior certificate
rate.
4  Includes  $26  million  of  finance  contracts  from  securitizations  previously  retired.
5  Weighted  average  of  senior  investor  coupon  rates
</TABLE>

     The  gross  spread  is  utilized  to  pay subordinated investor securities,
servicing  and  trustee  fees,  to  build  required cash reserves, and to absorb
losses  and  provide  liquidity  with  respect  to  delinquencies.

     Servicing  Income.  The  Company  earns  substantially all of its servicing
income  on  the  contracts  it  services  on  behalf  of  securitization trusts.
Servicing  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) fees are passed through as
excess,  not recorded as income which are earned whether or not a securitization
has  occurred.

<PAGE>

<TABLE>
<CAPTION>

FINANCE  CONTRACT  ACQUISITION  ACTIVITY

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


                                                         Nine Months Ended
                                                           September 30,
                                                         1997            1998
                                                  ------------------  -----------
<S>                                               <C>                 <C>
Number of finance contracts acquired . . . . . .               9,091        6,723
Principal balance of finance contracts acquired.  $      103,248,512  $76,330,699
Number of active dealerships (1) . . . . . . . .                 839          840
Number of enrolled dealerships . . . . . . . . .               1,804        1,797
<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 SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30,  1997

NET  INCOME

     In  the  three months ended September 30, 1998, net income (loss) decreased
$2,563,290  to  ($2,051,476)  from $511,814 for the three months ended September
30,  1997.  The decrease in net income was primarily attributable to an increase
in  infrastructure  costs  to  support  higher  anticipated  finance  contract
acquisition  and  servicing  volumes, impairment charges on retained interest in
securitizations,  and  actual  decreases  in  acquisition  volume. The principal
balance  of  finance contracts acquired decreased $11.7 million to $23.6 million
for  the  three months ended September 30, 1998 from $35.3 million for the three
months  ended September 30, 1997, due to the delay between the expiration of the
Daiwa  warehouse  facility on March 31, 1998 and the implementation of the Dynex
Warehouse  Financing  in  June  1998, which had a continuing impact in the third
quarter.  This  delay  forced  the  Company  to  slow its acquisition of finance
contracts  in  the second quarter.  Third quarter acquisitions improved over the
second  quarter,  but  nonetheless  had  not  yet  returned  to  earlier levels.
Increased hiring of qualified personnel as they became available during the past
year  added  to  the  growth in salary and benefit expenses for the three months
ended  September  30,  1998.


Total  Revenues

     Total  revenues  decreased  $1,646,455  to  $4,723,397 for the three months
ended  September  30,  1998 from $6,369,852 for the three months ended September
30,  1997  due  to a slow down in the Company's finance contract acquisition and
securitization  activities.  The  Company  expects  contract acquisitions in the
fourth  quarter  1998  to  exceed  that  for  the  third  quarter.

     Interest  Income.  Interest  income  decreased $844,578 to $468,726 for the
three months ended September 30, 1998 from $1,313,304 for the three months ended
September  30,  1997  due  to  the  decline  in  and  timing of finance contract
acquisitions.

     Gain  on  Sale  of  Finance  Contracts.  The  Company realized gain on sale
totaling $3,456,303 on finance contracts carried at $23.3 million (14.8%) during
the  three  months  ended  September  30,  1998.  Gain  on  sale

<PAGE>
amounted  to $4,840,620 on finance contracts carried at $29.7 million (16.3%) in
the  comparable  1997  period.

     Servicing Income. The Company reports servicing income only with respect to
finance  contracts that are sold. For the three months ended September 30, 1998,
servicing income was $798,368, consisting of contractual administrative fees and
servicer  fees. Servicing income increased from the three months ended September
30, 1997 as a result of the Company's assumption of servicer responsibilities in
December 1997. The ratio of annualized servicing income to the average principal
balance of finance contracts outstanding increased during the three months ended
September  30, 1998. The Company also was subjected to withholding and waiver in
servicing  income  during the three months ended September 30, 1998.  The result
of such withholding and waiver is the deferral and/or subordination to investors
of  the  Company's  ultimate  receipt  of  such  fees.  See  Item  5 of Part II.


Total  Expenses

     Total  expenses  of  the Company increased $2,249,756 to $7,822,834 for the
three months ended September 30, 1998 from $5,573,078 for the three months ended
September  30,  1997,  due  primarily  to  impairment  of  retained  interest in
securitizations  of $1,637,190 for the three months ended September 30, 1998, as
well  as  increases  in  salaries  and  benefits  and  other  expenses.

     Provision  for  Credit  Losses.  No  provision for credit losses on finance
contracts held by the Company was necessary for the three months ended September
30,  1998  compared  to  $125,000 for the three months ended September 30, 1997.

     Interest  Expense.  Interest  expense  fell  to $1,015,794 for three months
ended  September  30,  1998 from $1,101,829 for three months ended September 30,
1997 as a result of a lower average balance of finance contracts being financed.

      Salaries  and  Benefits.  Salaries  and  benefits  increased  $461,445  to
$2,601,865 for the three months ended September 30, 1998 from $2,140,420 for the
three  months  ended  September  30, 1997. This increase was due primarily to an
increase  in  the number of the Company's employees in anticipation of increased
contract  acquisition  volume,  and the servicing and collection activities on a
growing  portfolio  of  finance  contracts.  As  of December 1, 1997 the Company
completed  the  transfer  of  certain  servicer  functions  from LSE to in-house
personnel  and equipment. The number of employees of the Company increased by 17
to  215  employees at September 30, 1998, compared to 198 employees at September
30,  1997.  The annualized salary and benefit cost per employee averaged $52,037
during  the  three  months ended September 30, 1998, representing an increase of
$6,976  (15.48%)  over  the  prior  year  period.

     General  and  Administrative  Expenses. General and administrative expenses
decreased  $199,557  to $1,523,132 for the three months ended September 30, 1998
from  $1,722,689  for  the  three  months ended September 30, 1997. Professional
services  decreased  $37,180  to  $343,793  during  the  current  period  due to
decreased  legal  and accounting costs.  The Company expects reduced legal costs
for  the  remainder  of  1998  due to decreased capital market activities.  Rent
increased  $150,020  to $206,391 due to costs associated with the Company's home
office  relocation.  Depreciation  and amortization increased $9,129 to $116,874
reflecting  increased  investment  in  equipment.  Marketing  commissions  paid
decreased  $269,591  to  $96,459  due  to  lower  loan originations. General and
administrative  expenses  consist principally of office, furniture and equipment
leases,  professional  fees,  non-employee  marketing  commissions  and  office
expenses.

     Impairment  of  Retained  Interest  in  Securitizations.  The  Company
periodically reviews the fair value of the retained interest in securitizations.
The Company recorded a charge against earnings for impairment of these assets of
$1,637,190  for  the  three  months ended September 30, 1998.  No impairment was
recorded  for  the  three  months  ended  September  30,  1997.  This impairment
reflects  the  revaluation  of  expected  future  cash flows to the Company from
securitizations.  This  revaluation  was  precipitated  in part by reductions in
cash reserve account balances, the charge-off criteria of delinquencies being no
greater  than  60  days  for  the Dynex funding arrangements thereby forcing the
Company  to  take  such  loans  out  of the securitization, and generally a more
adverse  market  environment  for  financial  asset  valuations.  As the Company
assumed  all  servicing  functions,  it  accelerated  the rate of charge-offs as
compared  with  previous

<PAGE>
periods,  thereby  allocating  additional  cash  collections and reserve account
balances  to paying down the senior investor securities.  The effect of this was
to  stop  payments  of  interest  on  subordinated  securities  issued  in  the
securitizations,  thereby causing acceleration in the principal balances of such
securities,  resulting in reduced residual cash flows to the Company.  See Notes
4  and  8  to  the  Notes  to  Consolidated  Financial  Statements.

     Other  Operating Expenses. Other operating expenses (consisting principally
of servicer fees, credit bureau reports, communications and insurance) increased
$561,713  to  $1,044,853  for  the  three  months  ended September 30, 1998 from
$483,140 for the three months ended September 30, 1997. The Company incurred VSI
insurance  premiums  totaling  $402,832 for loans placed in warehouse facilities
during  the  period  compared  to  none  in  the  prior  year  period.


NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997

NET  INCOME

     In  the  nine  months ended September 30, 1998, net income (loss) decreased
$9,064,113  to  ($7,406,402) from $1,657,711 for the nine months ended September
30,  1997.  The  decrease  in net income was primarily attributable to an actual
decrease  in  acquisition volume, an increase in infrastructure costs to support
higher  anticipated  finance  contract  acquisition  and  servicing volumes, and
impairment  charges  on the retained interest in securitizations.  The principal
balance  of  finance contracts acquired decreased $26.9 million to $76.3 million
for  the  nine  months ended September 30, 1998 from $103.2 million for the nine
months  ended September 30, 1997, due to the delay between the expiration of the
Daiwa  warehouse  facility  in  March  1998  and the implementation of the Dynex
Warehouse  Financing  in  June 1998.  This delay forced the Company to slow down
its  acquisition  of  finance  contracts  in the first nine months of 1998.  The
Company added qualified personnel as they became available during the past year,
and  this added to the growth in salary and benefit expenses for the nine months
ended  September  30,  1998.


Total  Revenues

     Total  revenues  decreased  $2,973,409  to  $14,264,226 for the nine months
ended  September  30,  1998 from $17,237,635 for the nine months ended September
30,  1997  due  to a slow down in the Company's finance contract acquisition and
securitization  activities.

     Interest  Income.  Interest income decreased $972,894 to $2,134,508 for the
nine  months  ended September 30, 1998 from $3,107,402 for the nine months ended
September  30,  1997  due  to  the  decline  in  and  timing of finance contract
acquisitions.  The  Company  acquired  finance  contracts totaling $76.3 million
during  the  nine  months ended September 30, 1998 compared to $103.2 million in
the  comparable  1997  period.

     Gain  on  Sale  of  Finance  Contracts.  The  Company realized gain on sale
totaling  $10,093,123  on  finance  contracts  carried  at $66.2 million (15.2%)
during  the  nine  months  ended  September  30,  1998. Gain on sale amounted to
$13,532,765  on  finance  contracts  carried  at  $93.3  million  (14.5%) in the
comparable  1997  period.  Accordingly,  gain  on sale of finance contracts fell
$3,439,642  during  the nine months ended September 30, 1998 over the comparable
1997  period.

     Servicing Income. The Company reports servicing income only with respect to
finance  contracts  that are sold. For the nine months ended September 30, 1998,
servicing  income  was $2,116,310, consisting of contractual administrative fees
and servicer fees. Servicing income increased by $1,456,519 from the nine months
ended  September  30,  1997  as a result of the Company's assumption of servicer
responsibilities  in  December  1997.  Contractual  servicer  fees  contributed
$886,378  to the increase over the past period. The ratio of servicing income to
the  average  principal  balance of finance contracts outstanding increased from
 .9%  for the nine months ended September 30, 1997 to 2.2% during the nine months
ended  September  30,  1998.  The  Company  also was subjected to withholding or
waiver in servicing income during the nine months ended September 30, 1998.  The
result of such withholding or waiver is the deferral and/or subordination to the
Company's  ultimate  receipt  of  such  fees.

<PAGE>
Total  Expenses

     Total  expenses of the Company increased $10,762,312 to $25,446,551 for the
nine  months ended September 30, 1998 from $14,684,239 for the nine months ended
September  30,  1997,  due  primarily  to impairment of the retained interest in
securitizations  of  $7,515,015  for  the  nine months ended September 30, 1998.

     Provision  for  Credit  Losses.  Provision  for  credit  losses  on finance
contracts  held  by  the  Company declined to $100,000 for the nine months ended
September  30, 1998 compared to $125,000 for the nine months ended September 30,
1997.

     Interest  Expense.  Interest expense rose to $3,391,600 for the nine months
ended  September  30,  1998  from $2,930,592 for nine months ended September 30,
1997.

     Salaries  and  Benefits.  Salaries  and  benefits  increased  $2,055,152 to
$7,468,197  for the nine months ended September 30, 1998 from $5,413,045 for the
nine  months  ended  September  30,  1997. This increase was due primarily to an
increase  in  the  number  of  the  Company's  employees necessary to handle the
increased contract acquisition volume and the collection activities on a growing
portfolio  of  finance  contracts. As of December 1, 1997, the Company completed
the  transfer  of  certain  servicer  functions  from  a third party to in-house
personnel  and equipment. The number of employees of the Company increased by 17
to  215  employees at September 30, 1998, compared to 198 employees at September
30,  1997.

     General  and  Administrative  Expenses. General and administrative expenses
decreased  $83,830  to  $4,398,016  for the nine months ended September 30, 1998
from  $4,481,846  for  the  nine  months  ended September 30, 1997. Professional
services  increased  $146,376  to  $1,112,099  during  the  current  period  due
primarily  to  increased  legal  costs  during  the  first  quarter  of  1998.
Depreciation  and  amortization  increased  $153,481  to  $350,684  reflecting
increased  investment  in  equipment  associated  with servicer operations. Rent
increased  $235,685  to $407,049 due to costs associated with the Company's home
office relocation. Marketing commissions paid decreased $731,896 to $415,359 due
to  lower  loan  originations.  General  and  administrative  expenses  consist
principally  of  office,  furniture  and  equipment  leases,  professional fees,
non-employee  marketing  commissions  and  office  expenses.

     Impairment  of  retained  interest  in  securitizations.  The  Company
periodically reviews the fair value of the retained interest in securitizations.
The Company recorded a charge against earnings for impairment of these assets of
$7,515,015  for  the  nine  months  ended  September  30,  1998, representing an
increase  of  $7,047,089  from  $467,926 for the nine months ended September 30,
1997.  This impairment reflects the revaluation of expected future cash flows to
the  Company  from securitizations.  This revaluation was precipitated, in part,
by  the  loss  of  cash  flow from the refusal of Progressive Northern Insurance
Company  ("Progressive") to pay default insurance claims after early April 1998,
reductions  in  cash  reserve  balances,  and  the  charge-off  criteria  of
delinquencies  being  no greater than 60 days for the Dynex funding arrangement.
As  the  Company  assumed  all  servicing  functions, it accelerated the rate of
charge-offs  as  compared  with  previous periods, thereby allocating additional
cash collections and reserve account balances to paying down the senior investor
securities.  The effect of this was to stop payments of interest on subordinated
securities  issued  in  the  securitizations,  thereby  causing  higher  average
principal  balances of such securities, resulting in reduced residual cash flows
to  the  Company.  The  disposition  of the Progressive litigation could further
affect  the  valuation  of  these  assets.  See  Notes  4 and  8 to the Notes to
Consolidated  Financial  Statements.

     Other  Operating Expenses. Other operating expenses (consisting principally
of servicer fees, credit bureau reports, communications and insurance) increased
$1,307,893  to  $2,573,723  for  the  nine  months ended September 30, 1998 from
$1,265,830  for  the  nine months ended September 30, 1997. The Company incurred
VSI  insurance  premiums  totaling  $928,115  for  loans  placed  in  warehouse
facilities  during  the  period  compared  to  none  in  the  prior year period.

<PAGE>

FINANCIAL  CONDITION

     Restricted  Cash.  Restricted  cash  decreased  $6.9  million  to  $153  at
September  30,  1998  from  $6.9  million  at  December 31, 1997, reflecting the
elimination  of cash reserve accounts in the new Warehouse Financing with Dynex.
In  accordance with the Company's previous revolving credit facilities, proceeds
advanced  by the lender for purchase of finance contracts were held by a trustee
until the Company delivered qualifying collateral to release the funds, normally
in  a  matter of days.  The Company was also required to maintain a cash reserve
with  its  lenders  up  to  10% of the proceeds received from the lender for the
origination  of  the  finance contracts. Access to these funds was restricted by
the  lender;  however, such funds may be released in part upon the occurrence of
certain  events  including  payoffs  of  finance  contracts.

     Finance  Contracts Held for Sale, Net. Finance contracts held for sale, net
of  allowance  for  credit  losses,  increased  $4.4  million to $5.8 million at
September  30,  1998,  from  $1.4  million  at December 31, 1997. 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 securitizes
finance  contracts  on  a  regular  basis through the Dynex Warehouse Financing.

     The  cash  reserve  accounts  are part of the proceeds that are expected to
ultimately  be  paid  to  the  Company  as  part  of  its  retained interests in
securitization.


DELINQUENCY  EXPERIENCE
<TABLE>
<CAPTION>

The  following  table  reflects  the delinquency experience of the Company's finance contract portfolio including loans
sold  and  serviced  by  the  Company:


                                                          December 31, 1997                 September 30, 1998
                                                         -------------------               --------------------
<S>                                                 <C>          <C>                  <C>          <C>
Principal balance of finance contracts outstanding               $      187,098,957                $       192,138,429 
Delinquent finance contracts (1):
30-59 days past due. . . . . . . . . . . . . . . .   21,484,450               11.48%   19,752,568                10.28%
60-89 days past due. . . . . . . . . . . . . . . .   10,941,753                5.85%    6,260,872                 3.26%
90 days past due and over. . . . . . . . . . . . .    8,368,493                4.47%    7,314,090                 3.81%
Total. . . . . . . . . . . . . . . . . . . . . . .  $40,794,696               21.80%  $33,327,530                17.35%
                                                    ===========  ===================  ===========  ====================


<FN>

1  Percentage  based  upon  outstanding  balance.  Delinquency balance outstanding includes finance contracts where the
underlying  vehicle  is  repossessed  (but  subject to redemption), the borrower is in bankruptcy, a dealer buy back is
expected  or  where  insurance  claims  are  filed  and  pending.
</TABLE>


CREDIT  LOSS  EXPERIENCE

     An  allowance  for credit losses is maintained for 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.

     If  a  loan  (including  finance  contracts  sold and serviced) 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  his  or  her  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

<PAGE>
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 policy are then filed.

     Because  of  the  Company's limited operating history, its finance contract
portfolio  of  loans (including finance contracts sold and serviced) is somewhat
unseasoned.  This  effect  on  the delinquency statistics can be observed in the
comparison  of  1998  versus 1997 delinquency percentages since the portfolio is
tangibly  more  seasoned  as of September 30, 1998. Accordingly, delinquency and
charge-off rates in the portfolio may not fully 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 sell its
receivables.


REPOSSESSION  EXPERIENCE  -  STATIC  POOL  ANALYSIS

     Because  the  Company's  finance  contract  portfolio  of  loans (including
finance  contracts  sold and serviced) is continuing to grow rapidly, 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  table  provides static pool repossession frequency analysis
(in  dollars)  of  the  Company's  portfolio  performance from inception through
September 30, 1998. In this table, 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  few  repossessions because properly underwritten finance
contracts  to  sub-prime  consumers  generally do not default during the initial
months  of the contract. After approximately one year to 18 months, 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 in part 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.

<PAGE>


<TABLE>
<CAPTION>

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

Year and     Principal Balance of                                 Principal Balance
Quarter of     Repossessions by                                      of Contracts
Acquisition    Quarter Acquired     Cumulative(1)  Annualized(2)       Acquired
-----------  ---------------------  -------------  -------------  ------------------
<S>          <C>                    <C>            <C>            <C>
1994
Q3           $              22,046         21.79%          5.13%  $          101,161
Q4                         624,674         25.63%          6.41%           2,437,674
1995
Q1                       1,846,860         29.27%          7.80%           6,310,421
Q2                       1,788,535         28.89%          8.25%           6,190,596
Q3                       2,137,610         29.53%          9.08%           7,239,813
Q4                       3,992,815         32.76%         10.92%          12,188,863
1996
Q1                       4,982,611         32.23%         11.72%          15,460,823
Q2                       6,286,352         33.94%         13.58%          18,520,410
Q3                       6,791,324         24.17%         10.74%          28,098,899
Q4                       7,030,908         28.77%         14.38%          24,442,500
1997
Q1                       9,429,190         27.04%         15.45%          34,875,869
Q2                       8,541,419         24.19%         16.13%          35,305,817
Q3                       6,223,275         17.97%         14.38%          34,629,616
Q4                       5,196,954         11.78%         11.78%          44,120,029
1998
Q1                       2,135,060          7.17%          9.56%          29,775,406
Q2                         762,811          3.33%          6.66%          22,916,849
Q3                          60,927           .26%          1.04%          23,518,889
-----------  ---------------------  -------------  -------------  ------------------
<FN>

1  For  each quarter, cumulative repossession frequency equals the principal balance
of  repossessions  divided  by  the  principal  balance  of  contracts  acquired.
2  Annualized repossession frequency converts cumulative repossession frequency into
an  annual  equivalent  (e.g.,  for  Q4  1997,  principal  balance  of $5,196,954 in
repossessions  divided  by  principal  balance of $44,120,029 in contracts acquired,
divided by 4 quarters outstanding times four equals an annual repossession frequency
of  11.78%).
</TABLE>

<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 fewer of
the  Company's finance contracts are covered by credit deficiency insurance, the
Company  expects  its net loss per repossession to increase. The following table
demonstrates  the  net  charge-off  per  repossessed  automobile for its finance
contract  portfolio  including  loans  sold  and  serviced  by the Company since
inception.

<TABLE>
<CAPTION>

          From  August  1,  1994  (Inception)  to  September  30,  1998:

                                                                                  Loans
                                                                 Loans with      without
                                                                   Default       Default
                                                                  Insurance     Insurance      All Loans
                                                                -------------  ------------  -------------
<S>                                                             <C>            <C>           <C>
Number of finance contracts acquired . . . . . . . . . . . . .                                     30,098 

Number of vehicles repossessed . . . . . . . . . . . . . . . .         5,251         1,351          6,602 

Repossessed units disposed of. . . . . . . . . . . . . . . . .         2,846           649          3,495 

Repossessed units awaiting disposition (1) . . . . . . . . . .         2,405           702          3,107 
Cumulative gross charge-offs . . . . . . . . . . . . . . . . .  $ 29,107,509   $ 6,875,872   $ 35,983,381 
Costs of repossession (3). . . . . . . . . . . . . . . . . . .     1,307,589       308,715      1,616,304 
Proceeds from auction, physical damage insurance and refunds .   (16,932,690)   (4,245,608)   (21,178,298)
                                                                -------------  ------------  -------------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . .  $ 13,482,408   $ 2,938,979   $ 16,421,387 
Deficiency insurance settlement received (2) . . . . . . . . .    (8,145,075)            0     (8,145,075)
                                                                -------------  ------------  -------------
Net charge-offs (2). . . . . . . . . . . . . . . . . . . . . .  $  5,337,333   $ 2,938,979   $  8,276,312 
                                                                =============  ============  =============
Net charge-offs per unit disposed. . . . . . . . . . . . . . .  $      1,875   $     4,528   $      2,368 
Net loss as a percentage of cumulative gross charge-offs . . .         46.32%        42.74%         45.64%
Recoveries as a percentage of cumulative gross charge-offs (3)         81.66%        57.26%         77.00%
--------------------------------------------------------------  -------------  ------------  -------------
<FN>

1  The  vehicles  may have been sold at auction; however the Company might not have received all insurance
proceeds  as  of  September
   30,  1998.
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  September  30,  1998.
3  Not  including  the  costs  of  repossession  which  are  reimbursed  by  the  securitization  trusts.
</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.

<PAGE>

     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 and sales of finance contracts. Net
cash  used  in  operating activities totaled $1.1 million during the nine months
ended  September  30,  1998.  The Company used $69.2 million to purchase finance
contracts  and  $63.9  million  was  received  from  sales of finance contracts,
primarily  through  securitizations  during  the nine months ended September 30,
1998.

     At  the  time  a  securitization  closes,  the  Company's  securitization
subsidiary  is  required  to  fund  a  cash  reserve account within the trust to
provide  additional credit support for the senior investor securities. Under the
financial  structures  the  Company  has  used  to  date in its securitizations,
certain  cash  flows  generated  by the finance contracts are retained in a cash
reserve  or "spread" account to provide liquidity and credit enhancement.  While
the  specific terms and mechanics of the cash reserve account can vary depending
on  each transaction, the relevant agreement generally provides that the Company
is  not  entitled  to  receive certain cash flows unless certain reserve account
balances  have  been  attained  and  the  delinquency  or  losses related to the
contracts  in  the  pool  are  below certain predetermined levels.  In the event
delinquencies  and  losses on the contracts exceed such levels, the terms of the
warehouse  facility or securitization may require increased cash reserve account
balances to be accumulated for the particular pool or, in certain circumstances,
may  require  the  transfer  of  the  Company's  servicing  function  to another
servicer.  The  imposition  of  any  of  the  above-referenced  conditions could
materially  adversely  affect  the  Company's liquidity and financial condition.


      The  current  cash  reserve  accounts  for  the  Company's  outstanding
securitizations  follow:
<TABLE>
<CAPTION>

                                            Senior Investor          Cash
                                              Certificate         Reserve at
Securitization                                Amount (1)      September 30,1998
-----------------------------------------  -----------------  ------------------
<S>                                        <C>                <C>
AutoBond Receivables Trust 1995-A . . . .  $      26,261,009  $          361,160
AutoBond Receivables Trust 1996-A . . . .         16,563,366             324,982
AutoBond Receivables Trust 1996-B . . . .         17,832,885             400,308
AutoBond Receivables Trust 1996-C . . . .         22,296,719             626,212
AutoBond Receivables Trust 1996-D . . . .         25,000,000             746,782
AutoBond Receivables Trust 1997-A . . . .         28,037,167             724,926
AutoBond Receivables Trust 1997-B . . . .         34,725,196                   -
AutoBond Receivables Trust 1997-C . . . .         34,430,079             150,445
AutoBond Master Funding Corporation V (2)         94,291,459                   -
<FN>

1  Refers  only  to  balances  on  senior  investor  certificates upon issuance.
2  No  cash  reserve  account.
</TABLE>


See  Note  4  to  the  Notes  to  the  Consolidated  Financial  Statements for a
discussion  of  the  retained  interest  in  securitizations.

<PAGE>

     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
and  servicing 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 10, 1998, the Company and Dynex Capital. Inc. ("Dynex"), a Virginia
corporation  listed  on  the NYSE, entered into a financing arrangement whereby:
(i) the Company obtained non-recourse financing for all currently warehoused and
future  automobile  finance  contract acquisitions through at least May 31, 1999
(the  "Warehouse  Financing");  (ii) the Company sold to Dynex $3 million of the
Company's  12% Convertible Senior Notes due 2003 (the "Senior Notes"); and (iii)
Dynex  Holding,  Inc. an affiliate of Dynex ("Dynex Holding") received an option
(the  "Option"),  exercisable  for one year, to purchase at a price of $6.00 per
share  the  common stock of the Company held by the three principal stockholders
of  the  Company,  representing  approximately  85% of the currently outstanding
common  stock  of  the  Company.  The  terms  on  the  Warehouse  Financing were
subsequently  modified  as  summarized  below  on  October  20,  1998.

     Under  the prior terms of the Warehouse Financing, Dynex provides warehouse
credit facilities to AutoBond Master Funding Corporation V ("Master Funding V"),
a wholly owned, special purpose subsidiary of the Company organized under Nevada
law,  in  an  amount  equal to 104% (the "Advance Rate") of the unpaid principal
balance of finance contracts pledged to Dynex.   Under the modified terms of the
Warehouse  Financing,  the  Advance  Rate  was  reduced  from 104% to 88% for an
interim period ( the "Interim Period") ending on the earlier of (a) December 31,
1998  and  (b)  the  settlement date of a securitization by Dynex of any finance
contracts  originated  by  the  Company.  At  the end of the Interim Period, the
Advance  Rate  will  revert  to  104%  and  Dynex will advance to the Company an
additional  amount  equal  to  16%  of  the  unpaid principal balance of finance
contracts  financed  by  Dynex  during the Interim Period, less any amounts that
otherwise  would  have  been paid as principal on the funding notes (referred to
below)  during  such period.  Advances under the Warehouse Financing are limited
to  $10  million  in the case of the initial advance, $80 million in the case of
other  advances  during  the  month of June 1998, and thereafter $25 million per
month  until  the  commitment termination date.  Under the modified terms of the
Warehouse  Financing,  the  commitment will terminate on July 31, 1999 (provided
that 90 days prior written notice from Dynex is given), or if such notice is not
given,  July  31, 2000.  At the Company's option the commitment termination date
can be extended an additional four months to November 30, 1999 (provided that 90
days  written  notice  from  Dynex  is  given),  or if such notice is not given,
November  30,  2000.  Should  the  Company exercise its option, discussed in the
immediately  preceding  sentence,  the  expiration  of  Dynex's  Option shall be
extended to match the commitment termination date.  Advances under the Warehouse
Financing  will  be  evidenced  by  Class  A  and Class B Notes issued by Master
Funding V to Dynex.  The Class A Notes are issued in a principal amount equal to
94%  of  the  unpaid  principal  balance of finance contracts  (88% for advances
during  the  Interim Period) and will bear interest at a rate equal to 190 basis
points  over the corporate bond equivalent yield on the three-year treasury note
on  the  closing  date for each such advance (equal to an average of 7.38% as of
September  30,  1998),  provided  however  that  during  the Interim Period, the
interest  rate  on  the  Company's Class A Notes will equal One-Month LIBOR plus
1.50%.  The  Class  B Notes are issued in a principal amount equal to 10% of the
unpaid  principal  balance of finance contracts (0.0% for advances funded during
the  Interim  Period)  and  will bear interest at a rate equal to 16% per annum.
Dynex  also  will  obtain  securitization  rights with respect to the warehoused
finance  contracts.

     The  Company's  primary  source of financing for the acquisition of finance
contracts  is  its  Warehouse  Financing  arrangement with Dynex.  The Warehouse
Financing  with  Dynex  funds  eligible  finance contracts thereby providing the
Company  with  significant liquidity.  Since the Warehouse Financing arrangement
constitutes a securitization under generally accepted accounting principles, the
Warehouse  Financing  also  provides  gain  on  sale  treatment  for the finance
contracts  funded.  The  Company's ability to continue to fund finance contracts
under  the  Warehouse  Financing is dependent upon its compliance with the terms
thereof,  including  the  maintenance  by  the  Company  of  certain  servicing
standards,  as well as Dynex's ability to meet its funding commitments under the
Warehouse  Financing.  There  can  be  no  assurance  that such facility will be
extended  or  that  substitute  facilities  will  be  available  on  terms

<PAGE>
acceptable to the Company.  The Company's ability to obtain a successor facility
or  similar  financing  will  depend  on, among other things, the willingness of
financial  organizations  to  participate in funding sub-prime finance contracts
and  the Company's financial condition and results of operations.  The Company's
growth  is  dependent  upon its ability to obtain sufficient financing under the
Warehouse  Financing,  and  any additional or successor facilities, at rates and
upon  terms  acceptable to the Company.  The Company will service the warehoused
finance contracts for a servicing fee of $15 per month per finance contract.  At
September  30, 1998, advances under the Dynex Warehouse Financing totaled $100.2
million.

     The  Company  and its wholly owned subsidiary, AutoBond Funding Corporation
II,  entered  into  a  $50  million  revolving  warehouse  facility  (the "Daiwa
Facility")  with Daiwa Finance Corporation ("Daiwa") effective as of February 1,
1997.  Advances  under  the  Daiwa  Facility  matured  as of March 31, 1998. The
proceeds  from  the  borrowings  under  the  Daiwa Facility were used to acquire
finance  contracts and to make deposits to a reserve account. The Daiwa Facility
was  collateralized  by  the  finance  contracts  acquired  with the outstanding
advances.  Interest  was payable at the lesser of (x) 30 day LIBOR plus 1.15% or
(y)  11%  per  annum.  The  Company  had  no credit availability under the Daiwa
Facility  after  March  31,  1998 and the total amount outstanding was repaid in
July  1998  through  the  Dynex  Warehouse  Financing.

     On  December  31,  1997,  the  Company  entered  into  a  similar
warehouse/securitization  arrangement  with  Credit Suisse First Boston Mortgage
Capital L.L.C. ("CSFB"), whereby $12.5 million of finance contracts were sold to
a  qualifying unconsolidated special purpose subsidiary, AutoBond Master Funding
Corporation  II.  These  finance contracts secured variable funding notes in the
initial  amount  of $11.3 million, which were repaid through the Dynex Warehouse
Financing  on  June  30,  1998.

On  March  31,  1998,  the  Company  entered  into  a  warehouse/securitization
arrangement  with  Infinity Investors Limited ("Infinity"), whereby $7.2 million
of  finance  contracts  were sold to a qualifying unconsolidated special purpose
subsidiary,  AutoBond  Master  Funding  Corporation  IV. These finance contracts
secured variable funding notes in the initial amount of $6.5 million, increasing
up  to $10 million.  These variable funding notes bore interest at 10% per annum
through  May  31, 1998 and thereafter at 17% per annum.  These notes were repaid
through  the Dynex Warehouse Financing on June 30, 1998.  In connection with the
transaction  with  Infinity,  the  Company  issued  a  warrant to purchase up to
100,000  shares  of  common  stock,  at  an  exercise  price of $8.73 per share.

     Notes  Payable.  Pursuant to the terms of the Senior Note Agreement between
the  Company and Dynex, Dynex purchased at par $3 million in principal amount of
the  Company's  Senior Notes.  Interest on the Senior Notes is payable quarterly
in arrears, with the principal amount due on June 9, 2003.  The Senior Notes may
be converted 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
"piggy-back" registration rights with respect to the underlying shares of common
stock  were  granted.

     Also  pursuant  to  the  Securities  Purchase Agreement, the Company issued
warrants which upon exercise allow the holders to purchase 200,000 shares of the
Company's common stock at $4.225 per share.  The warrants are exercisable to the
extent  the  holders  thereof  purchase  up  to  $10,000,000  of  the  Company's
subordinated  asset-backed  securities  before  June 30, 1998.  The holders have
purchased  $5.8  million  of  asset-backed  securities.

     In  January 1998, the Company privately placed with BankBoston Investments,
Inc.  ("BankBoston")  $7,500,000 in aggregate principal amount of its 15% senior
subordinated  convertible  notes  (the  "Subordinated  Notes").  Interest on the
Subordinated  Notes is payable quarterly until maturity on February 1, 2001. The
Subordinated Notes are convertible at the option of the holder for up to 368,462
shares of common stock of the Company, 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

<PAGE>
securitization  debt), (ii) limitations on restricted payments such as dividends
(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
test  of  $12  million (plus proceeds from equity offerings), a minimum ratio of
earnings 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 BankBoston. 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.

     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  investor  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.
The continued effectiveness of the current arrangement with Dynex will depend on
the  ability  to  securitize  or obtain other funding sources for the warehoused
portfolio.

     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  public  was  $10  per share, with net proceeds to the Company of
approximately  $10,125,000.  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

<PAGE>
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.

     If  dividends  on  the  Preferred  Stock  are  in arrears for two quarterly
dividend  periods,  holders  of the Preferred Stock will have the right to elect
three  additional  directors to serve on the Company's Board until such dividend
arrearage  is  eliminated.  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.  As of September 30, 1998, Preferred
Stock  dividends  were  current.

     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,  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 Securities and Exchange
Commission.


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.



IMPACT  OF  NEW  ACCOUNTING  PRONOUNCEMENTS

     In  June  1997,  the  Financial  Accounting Standards Board ("FASB") issued
Statement  of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments of an Enterprise and Restated Information," which establishes standards
for  the way that public business enterprises report information about operating
segments  in  annual  financial  statements  and requires that those enterprises
report  selected  information  about  operating  segments  in  interim financial
reports  issued  to  geographic  areas  and  major  customers.  SFAS  No. 131 is
effective  for  financial  statements  for  periods beginning after December 15,
1997.

     In  June  1998,  FASB  issued  SFAS  No.  133,  "Accounting  for Derivative
Instruments  and  Hedging  Activities"  ("SFAS No. 133").  SFAS No. 133 requires
than  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 (1) the
changes in the fair value of the hedged asset or liability that are attributable
to  the  hedged  risk  or  (2)  the  earnings  effect  of  the  hedged  forecast
transaction.  SFAS  No. 133 is effective for all fiscal quarters of fiscal years
beginning  after June 15, 1999, although earlier application is encouraged.  The
Company  plans  to  comply  with  the

<PAGE>
provisions  of  SFAS No. 133 upon its initial use of derivative instruments.  As
of  September  30, 1998, no such instruments were being utilized by the Company.

     The  Company  does  not believe the implementation of the recent accounting
pronouncements  will  have  a  material  effect  on  its  consolidated financial
statements,  since  the  Company  operates  in  one  business  segment.



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 formatted with
a full, four-digit date code in the database management and cash flow evaluation
software.  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.

<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.

     In  March  1998,  after  Progressive  Northern  Insurance  ("Progressive")
purported  to cancel the VSI and deficiency balance insurance policies issued in
favor  of  the  Company,  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.
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  AutoBond  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.

     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 (a) the Company
was  entitled  to  180 days' prior notice of cancellation and (b) 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 destination 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 has 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. Discovery is proceeding but no
trial  date  has  been  set.

<PAGE>
ITEM  2.  CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS

On  June  10,  1998,  AutoBond  Acceptance Corporation (the "Company") and Dynex
Capital,  Inc.,  ("Dynex"),  a  Virginia corporation listed on the NYSE, entered
into  a  financing  arrangement  whereby:  (i) the Company obtained non-recourse
financing  for  all  currently warehoused and future automobile finance contract
acquisitions  through  at  least May  31, 1999 (the "Warehouse Financing"); (ii)
the  Company  sold  to  Dynex $3 million of the Company's 12% Convertible Senior
Notes  due 2003 (the "Senior Notes"); and (iii) Dynex Holding, Inc. an affiliate
of  Dynex  ("Dynex  Holding") received an option (the "Option"), exercisable for
one  year,  to  purchase  at  a price of $6.00 per share the common stock of the
Company  held  by  the three principal stockholders of the Company, representing
approximately 85% of the currently outstanding common stock of the Company.  The
terms  of the Warehouse Financing were subsequently modified as summarized below
on  June  30,  1998,  October  20,  1998  and  October  28,  1998.

     Under  the  terms  of the Warehouse Financing, Dynex will provide warehouse
credit facilities to AutoBond Master Funding Corporation V ("Master Funding V"),
a wholly-owned, special purpose subsidiary of the Company organized under Nevada
law,  in  an  amount  equal to 104% (the "Advance Rate") of the unpaid principal
balance  of  finance contracts pledged to Dynex. Under the modified terms of the
Warehouse  Financing,  the  Advance  Rate  was  reduced  from 104% to 88% for an
interim  period (the "Interim Period") ending on the earlier of (a) December 31,
1998  and  (b)  the  settlement date of a securitization by Dynex of any finance
contracts  originated  by  the  Company.  At  the end of the Interim Period, the
Advance  Rate  will  revert  to  104%  and  Dynex will advance to the Company an
additional  amount  equal  to  16%  of  the  unpaid principal balance of finance
contracts  financed  by  Dynex  during the Interim Period, less any amounts that
otherwise  would  have  been paid as principal on the Funding Notes (referred to
below)  during  such period.  Advances under the Warehouse Financing are limited
to  $10  million  in the case of the initial advance, $80 million in the case of
all  other advances during the month of June 1998 and thereafter $25 million per
month  until  the  commitment  termination  date.  Under  the modified terms the
Warehouse  Financing  commitment will terminate on July 31, 1999, (provided that
90  days'  prior  written  notice  from Dynex is given) or if such notice is not
given,  July  31,  2000. At the Company's option the commitment termination date
can be extended an additional four months to November 30, 1999 (provided that 90
days  written  notice  from  Dynex  is  given),  or if such notice is not given,
November  30,  2000.  Should  the  Company  exercise its option discussed in the
immediately  preceding  sentence,  the  expiration  of  Dynex's  Option shall be
extended to match the commitment termination date.  Advances under the Warehouse
Financing  will  be  evidenced  by  Class  A  and Class B Notes issued by Master
Funding V to Dynex. The Class A Notes will be issued in a principal amount equal
to  94%  of  the  unpaid  principal balance of finance contracts (88% during the
Interim  Period) and will bear interest at a rate equal to 190 basis paints over
the  corporate  bond  equivalent  yield  on  the three-year Treasury note on the
closing  date  for  each  such  advance.  (equal  to  an  average of 7.38% as of
September  30,  1998),  provided  however  that  during  the Interim Period, the
interest  rate  on  the  Company's Class A Notes will equal One-Month LIBOR plus
1.50%.  The  Class  B Notes are issued in a principal amount equal to 10% of the
unpaid  principal balance of finance contracts and bear interest at a fixed rate
equal to 16% per annum. Dynex also obtains securitization rights with respect to
the  warehoused  finance  contracts.  The  Company  will  service the warehoused
finance  contracts  for  a  servicing fee of $15 per month per finance contract.

     Pursuant  to the terms of the Senior Note Agreement between the Company and
Dynex,  Dynex  purchased  at par $3 million in principal amount of the Company's
Senior  Notes.  The  Company used the proceeds for working capital.  Interest on
the  Senior Notes is payable quarterly in arrears, with the principal amount due
on  June 9, 2003. The Senior Notes may be converted 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.

     William  0.  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  "Option  Agreement") with Dynex Holding
wherein  the Shareholders granted to Dynex Holding 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 may be exercised in whole and not in part at
anytime up to and including July 31, 1999. If the Company elects to exercise its
option  to  extend  the  commitment

<PAGE>
termination  date,  the expiration date of the Option shall be extended to match
the  commitment termination date.  In the event that Dynex Holding exercises its
Option,  the  exercise  price of the Option will be payable in shares of a newly
issued  series  of convertible preferred stock of Dynex ("Dynex Preferred"). The
number  of  Dynex  Preferred shares to be issued will be 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  ("Dynex  Common") for the ten consecutive trading days
ending  immediately  prior  to  the exercise of the Option. Upon exercise of the
Option,  Dynex  Holding  will deliver 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  will  pay dividends at 9% per annum and be convertible into shares of
Dynex  Common  at  an  Initial  conversion  rate  of  one  to  one.


ITEM  3.  DEFAULTS  UPON  SENIOR  SECURITIES

     None.

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

     None.

ITEM  5.  OTHER  INFORMATION

     On June 15, 1998 the Company relocated its corporate headquarters in Austin
to  100  Congress  Avenue,  Suite  600,  Austin,  Texas  78701.

     In May 1998, Coopers & Lybrand L.L.P. resigned as the Company's independent
auditor.  On  July  15,  1998, the Company appointed Deloitte & Touche L.L.P. as
its  independent  auditors  for  1998.

     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  1997B  and  1997C transactions), expressing concerns including (1) the
alleged  non-adherence  to  the  transaction documents with regard to charge-off
policy  and  the calculation of delinquency and loss triggers, (2) the Company's
procedures  for  allocating prepaid insurance among the trusts, (3) instances of
the  Company  waiving  fees and making cash contributions to the transactions to
enhance their performance, and (4) "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:  (1) with the
transfer  of servicing from Loan Servicing Enterprise ("LSE") now completed, the
Company  believes that it is servicing in accordance with the documentation; (2)
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; (3) the transaction documents
do  not prohibit fee waivers and explicitly permit the Company to make voluntary
capital  contributions  to  the  trusts; and (4) 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 to perform the 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
trustee  on  certain  of  the securitizations that the action of Moody's and the
alleged  causes  constituted  events  of  servicer  termination  under  such
transactions.  Although  the  trustee  has  not  taken  any action to remove the
Company  as servicer or to exercise remedies available upon an event of default,
the  trustee  has 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.

<PAGE>

<TABLE>
<CAPTION>

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(A)     EXHIBITS

<S>          <C>
EXHIBIT NO.  DESCRIPTION OF EXHIBIT
-----------  ------------------------------------------------------------------------------------------
3.1 * . . .  Restated Articles of Incorporation of the Company
3.2 * . . .  Amended and restated Bylaws of the Company
4.1 * . . .  Specimen Common Stock Certificate
4.2 **. . .  Specimen Preferred Stock Certificate
10.5 *. . .  Loan Acquisition Sale and Contribution Agreement dated as of May 21, 1996 by and
             between the Company and AutoBond Funding Corporation II
10.6 *. . .  Second Amended and Restated Secured Revolving Credit Agreement dated as of July 31,
             1995 between Sentry Financial Corporation and the Company
10.7 *. . .  Management Administration and Services Agreement dated as of January 1, 1996 between
             the Company and AutoBond, Inc.
10.8 *. . .  Employment Agreement dated November 15, 1995 between Adrian Katz and the Company
10.9 *. . .  Employment Agreement effective as of May 1, 1996 between William O. Winsauer and the
             Company
10.10 * . .  Vender's Comprehensive Single Interest Insurance Policy and Endorsements, issued by
             Interstate Fire & Casualty Company
10.11 * . .  Warrant to Purchase Common Stock of the Company dated March 12, 1996
10.12 * . .  Employee Stock Option Plan
10.13 * . .  Dealer Agreement dated November 9, 1994, between the Company and Charlie Thomas
             Ford, Inc.
10.14 * . .  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+. . .  Servicing Agreement, dated as of January 29, 1997, between CSC LOGIC/MSA L.P.P.,
             doing business as "Loan Servicing Enterprise" and the Company
10.16+. . .  Credit Agreement, dated as of February 1, 1997, among AutoBond Funding Corporation II,
             the Company and Daiwa Finance Corporation
10.17+. . .  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+. . .  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
10.19x. . .  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 **. .  Credit Agreement, dated as of June 30, 1997, by and among AutoBond Master Funding
             Corporation, the Company and Daiwa Finance Corporation
10.21 **. .  Amended and Restated Trust Indenture, dated as of June 30, 1997, among AutoBond
             Master Funding Corporation, AutoBond Acceptance Corporation and Norwest Bank
             Minnesota, National Association.
10.22 **. .  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 xx. .  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.C.
10.24 xx. .  Trust Indenture, dated as of December 31, 1997, among AutoBond Master Funding
             Corporation II, the Company and Manufacturers and Traders Trust Company
10.25 xx. .  Receivables Purchase Agreement, dated as of December 31, 1997, between Credit Suisse
             First Boston Mortgage Capital L.L.C. and the Company
10.26 xx. .  Servicing Agreement, dated as of December 31, 1997, among the Company, AutoBond
             Master Funding Corporation II and Manufacturers and Traders Trust Company
10.27 xx. .  Indenture and Note, dated January 30, 1998, between the Company and Bank Boston, N.A.
10.28 xx. .  Warrant, dated January 30, 1998, issued to BankBoston Investments, Inc.
10.29 xx. .  Purchase Agreement, dated January 30, 1998, between the Company and BankBoston
             Investments, Inc.
10.30 ++. .  Warrant, dated February 2, 1998, issued to Dresner Investments Services, Inc.
10.31 ++. .  Warrant Agreement and Warrant, dated February 20, 1998, issued to Tejas Securities
             Group, Inc.
10.32 ++. .  Consulting and Employment Agreement, dated as of January 1, 1998 between Manuel A.
             Gonzalez and the Company
10.33 ++. .  Severance Agreement, dated as of February 1, 1998 between Manuel A. Gonzalez and the
             Company
10.34xxx. .  1998 Stock Option Plan
10.35xxx. .  Third Amendment to the Secured Revolving Credit Agreement dated May 5, 1998 between
             Sentry Financial Corporation and the Company
10.36xxx. .  Warrant, dated March 31, 1998, issued to Infinity Investors Limited
10.37***. .  Credit Agreement, dated as of June 9, 1998, by and among AutoBond Master Funding
             Corporation V, the Company, and Dynex Capital, Inc.
10.38***. .  Servicing Agreement, dated as of June 9, 1998, by and among AutoBond Master Funding
             Corporation V, the Company, and Dynex Capital, Inc.
10.39***. .  Trust Indenture, dated as of June 9, 1998, by and among AutoBond Master Funding
             Corporation V, the Company and Dynex Capital, Inc.
10.40 . . .  Letter Agreement, dated June 30, 1998 by and between the Company and Dynex Capital,
             Inc.
10.41 . . .  Letter Agreement dated October 20, 1998 by and between the Company and Dynex Capital,
             Inc.
10.42 . . .  Letter Agreement dated October 28, 1998 by and between the Company, Dynex Holding,
             Inc., and Dynex Capital, Inc.
21.1 ** . .  Subsidiaries of the Company
21.2 xx . .  Additional Subsidiaries of the Company
27.1. . . .  Financial Data Schedule
<FN>

*  Incorporated  by  reference  from the Company's Registration Statement on Form S-1 (Registration No.
333-05359).
+  Incorporated  by  reference  to  the  Company's  1996  annual report on Form 10-K for the year ended
December  31,  1996.
x  Incorporated by reference to the Company's quarterly report on Form 10-Q for the quarter ended March
31,  1997.
**  Incorporated by reference to the Company's quarterly report on Form 10-Q for the quarter ended June
30,  1997.
++  Incorporated  by  reference  to  the  Company's  1997 annual report on Form 10-K for the year ended
December  31,  1997.
xx  Incorporated  by  reference from the Company's Registration Statement on Form S-1 (Registration No.
333-41257).
xxx  Incorporated  by  reference  to  the Company's quarterly report on Form 10-Q for the quarter ended
March  31,  1998.
***Incorporated  by  reference  to  the  Company's  report  on  Form  8-K  filed  on  June  24,  1998.

</TABLE>


(A)     REPORTS  OF  FORM  8-K

     On  July  15,  1998,  the Company filed a report on Form 8-K addressing the
engagement  of  Deloitte  &  Touch  LLP  as  its independent auditors.  No other
reports on Form 8-K were filed by the Company during the quarter ended September
30,  1998.

<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  November  13,  1998.


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