FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES


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


                                   FORM 10-QSB


[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
             For the quarterly period ended September 30, 2001

[ ]   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 0-17771



                   FRANKLIN CREDIT MANAGEMENT CORPORATION
    (Exact name of small business issuer as specified in its charter)


                            Delaware
     (State or other jurisdiction of incorporation or organization)

                           75-2243266
                   (I.R.S. Employer identification No.)


                         Six Harrison Street
                       New York, New York 10013
                            (212) 925-8745

 (Address of principal executive offices, including zip code, and
  telephone number, including area code)




         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act of 1934 during the past 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 .

         Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes X No .

As of November 14, 2001 the issuer had 5,916,527 of shares of Common Stock, par
value $0.01 per share, outstanding.


<PAGE>


                     FRANKLIN CREDIT MANAGEMENT CORPORATION


                                   FORM 10-QSB

                               September 30, 2001


                                 C O N T E N T S


PART I. FINANCIAL INFORMATION                                          Page
                                                                       ----

Item 1.
Financial Statements

 Consolidated Balance Sheets September 30, 2001 (unaudited) and
 December 31, 2000                                                       3

 Consolidated Statements of Operations (unaudited) for the three
 months and nine months ended September 30, 2001 and 2000                4

 Consolidated Statements of Stockholders' Equity for the nine
 months ended September 30, 2001(Unaudited)                              5

 Consolidated Statements of Cash Flows (unaudited) for the nine
 months ended September 30, 2001 and 2000                                 6

 Notes to Consolidated Financial Statements (unaudited)                7-11


Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations                                             12-19

PART II.     OTHER INFORMATION

Item 1.  Legal Proceedings                                               20

Item 2.  Changes in Securities                                           21

Item 3.  Defaults Upon Senior Securities                                 21

Item 4.  Submission of Matters to a Vote of Security Holders             21

Item 5.  Other Information                                               21

Item 6.  Exhibits and Reports on Form 8-K                                22

SIGNATURES                                                               23

<PAGE>


<TABLE>
<CAPTION>

FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2001 AND DECEMBER 31, 2000
-------------------------------------------------------------------------------
<S>                                            <C>                <C>

ASSETS                                       9/30/2001          12/31/2000
                                             Unaudited
                                           ----------------------------------

CASH AND CASH EQUIVALENTS                      $ 9,543,459       $ 7,212,346

RESTRICTED CASH                                    758,928           932,574

NOTES RECEIVABLE:
 Principal                                     325,975,291       255,055,677
 Purchase discount                             (24,548,359)      (23,392,400)
 Allowance for loan losses                     (30,057,424)      (24,086,322)
                                              -------------     -------------

  NET NOTES RECEIVABLE                         271,369,508       207,576,955

LOANS HELD FOR SALE                             24,201,400         8,670,691

ACCRUED INTEREST RECEIVABLE                      4,909,070         3,396,405

OTHER REAL ESTATE OWNED                          3,776,312         5,290,053

OTHER RECEIVABLES                                2,158,135         1,934,443

DEFERRED TAX ASSET                               1,701,775         3,481,002

OTHER ASSETS                                     2,017,680         1,442,687

BUILDING, FURNITURE AND FIXTURES - Net           1,023,168           868,471

DEFERRED FINANCING COSTS- Net                    3,160,505         2,429,661
                                                 ----------        ---------

TOTAL ASSETS                                 $ 324,619,940     $ 243,235,288
                                             ==============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
 Accounts payable and accrued expenses         $ 3,972,690       $ 2,932,611
 Financing agreements                            6,252,341         2,021,334
 Notes payable                                 306,911,642       231,050,485
 203(k) rehabilitation escrows payable                   -             2,186
 Subordinated debentures                            36,393            72,525
 Notes payable, affiliates and stockholders              -           146,835
 Deferred tax liability                          1,781,834         3,561,061
                                                 ----------        ---------

   TOTAL LIABILITIES                           318,954,900       239,787,037
                                              ------------       -----------


STOCKHOLDERS' EQUITY
 Common stock, $.01 par value, 10,000,000
 authorized shares; issued and
 outstanding: 5,916,527 and 5,916,527              59,167            59,167
 Additional paid-in capital                     6,985,968         6,985,968
 Accumulated deficit                           (1,380,095)       (3,596,884)
                                              ------------       ----------

   TOTAL STOCKHOLDERS' EQUITY                   5,665,040         3,448,251
                                              -----------        ----------

TOTAL LIABILITIES AND STOCKHOLDERS'
 EQUITY                                     $ 324,619,940     $ 243,235,288
                                            ==============    =============

</TABLE>




<PAGE>



CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>

<S>                           <C>           <C>           <C>           <C>
                              Three Months Ended           Nine Months Ended
                            09/30/2001   09/30/2000    09/30/2001    09/30/2000
                           -----------   ----------    ----------   -----------
REVENUES:
 Interest Income           $7,586,034   $5,142,778    $20,320,114   $14,776,326
 Purchase discount earned   1,007,499      909,735      2,978,578     2,795,343
 Gain on sale of portfolios    69,839            0        948,966       575,756
 Gain on sale of originated
 loans                        176,926       83,142        391,417       167,996
 Gain on sale of other real
 estate owned                 273,088      174,175      1,119,699       348,970
 Rental income                 72,838      156,793        269,605       512,574
 Other                        358,722      241,355      1,011,308       699,228
                           ----------   ----------     ----------    ----------
                            9,544,946    6,707,978     27,039,687    19,876,193
                           ----------   ----------    -----------   -----------

OPERATING EXPENSES:
 Interest expense           5,227,237    4,739,756    15,349,371     13,527,550
 Collection,general and
 administrative             2,646,750    2,072,169     7,538,419      6,031,234
 Provision for loan losses    414,000      164,342     1,103,963        336,047
 Amortization of deferred
 financing costs              205,979       93,893       672,873        376,586
 Depreciation                  70,169       42,177       158,272        106,029
                            ---------    ---------    ----------     ----------
                            8,564,135    7,112,337    24,822,898     20,377,446
                            ---------    ---------   -----------    -----------

NET INCOME (LOSS)            $980,811   $(404,359)    $2,216,789     $(501,253)
                            =========   ==========    ==========    ===========

NET INCOME (LOSS) PER
COMMON SHARE:
 Basic                          $0.17      $(0.07)         $0.37        $(0.08)
 Diluted                        $0.17      $(0.07)         $0.37        $(0.08)
                           ==========   ==========    ==========    ===========
WEIGHTED AVERAGE NUMBER
OF SHARES                   5,916,527    5,916,527     5,916,527      5,916,527
 OUTSTANDING
                           ==========   ==========   ===========    ===========



</TABLE>

<PAGE>



<TABLE>
<CAPTION>



CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 2001
-------------------------------------------------------------------------------
<S>                 <C>        <C>       <C>             <C>           <C>
                                          Additional      Retained
                      Common Stock         Paid-In        Earnings
                      ------------
                     Shares    Amount      Capital       (Deficit)     Total
-------------------------------------------------------------------------------

                   ------------------------------------------------------------
Balance,December 31,
2000               5,916,527  $59,167    $6,985,968    $(3,596,884)  $3,448,251
                   ============================================================

Net Income
(Unaudited)                                              2,216,789    2,216,789
                  -------------------------------------------------------------
Balance,September
30,2001(Unaudited) 5,916,527  $59,167    $6,985,968   $(1,380,095)   $5,665,040

                  =============================================================

See notes to consolidated financial statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
-------------------------------------------------------------------------------
<S>                                               <C>                <C>
                                                 09/30/2001       09/30/2000

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)                               $2,216,789         $(501,253)
 Adjustments to reconcile net income (loss)to
  Net cash used by operating activities:
   Depreciation                                    158,272            106,029
   Amortization                                    672,873            376,586
   Purchase discount earned                     (2,978,578)        (2,795,343)
   Gain on sale of other real estate owned      (1,119,699)          (348,970)
   Provision for loan losses                     1,103,963           336,047
   (Increase) decrease in:
    Accrued interest receivable                 (1,512,665)          (957,648)
    Loans held for sale                        (15,530,709)        (3,560,281)
    Other receivables                             (223,692)         1,338,109
    Other assets                                  (574,993)          (241,925)
  Increase (decrease) in:
   Accounts payable and accrued expenses         1,040,079           (444,688)
   203(k) rehabilitation escrow                     (2,186)           (16,505)
   Notes payable affiliates and stockholders      (146,835)           (74,628)
                                               ------------        -----------
   Net cash used by operating activities       (16,897,381)        (6,784,472)
                                               ------------        -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition and loan fees                     (1,549,218)           (935,840)
  Acquisition of notes receivable              129,832,488)        (71,487,021)
  Proceeds from sale of other real
  estate owned                                   6,890,412           6,528,549
  Proceeds from the sale of notes               17,681,875                   0
  Reclassification of notes receivable for
  foreclosures                                           0           3,208,193
  Acquisition of furniture & fixtures             (312,969)            (68,351)
  Principal collection on notes receivable      46,121,205          32,854,573
  Decrease (Increase) in restricted cash           173,645            (603,347)
                                              -------------        ------------
 Net cash used by investing activities         (60,827,538)        (30,503,244)
                                              ------------         ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Payments on subordinated debentures               (36,132)           (248,059)
 Payments on financing agreements              (18,966,885)         (3,911,820)
 Proceeds from financing agreements             23,197,892           5,413,656
 Proceeds from notes payable                   132,494,867          73,736,141
 Payments on notes payable                     (56,633,710)        (38,733,813)
                                               ------------        ------------
Net cash provided by financing activities       80,056,032          36,256,105
                                               -----------         ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS        2,331,113           1,031,611

CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD                                        7,212,346           6,015,567
                                                ----------          -----------

CASH, AND CASH EQUIVALENTS, BEGINNING
OF END OF PERIOD                                $9,543,459          $7,047,178
                                              ============         ===========



</TABLE>









<PAGE>



     FRANKLIN CREDIT MANAGEMENT CORPORATION AND SUBSIDIARIES
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
     QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2001(Unaudited)

     1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

     Nature of Business - Franklin Credit Management Corporation (the
     "Company"), is incorporated under the laws of the State of Delaware,
     acquires performing, subperforming, nonperforming, nonconforming notes
     receivable and promissory notes from financial institutions, and mortgage
     and finance companies. The Company services and collects such notes
     receivable through enforcement of terms of the original note,
     modificationof the original note terms and, if necessary, liquidation of
     the underlying collateral.

     In January 1997, a wholly owned subsidiary was formed to originate or
     purchase sub prime residential mortgage loans to individuals whose credit
     histories, income and other factors cause them to be classified as
     nonconforming borrowers.

     Summary of the Company's significant accounting policies:

     Basis of Consolidation - The consolidated financial statements include
     the accounts of the Company and its wholly-owned subsidiaries. All
     significant intercompany accounts and transactions have been eliminated in
     consolidation.

     Condensed Consolidated Financial Statements - Certain information and
     footnote disclosure normally included in financial statements prepared in
     accordance with accounting principles generally accepted in the United
     States of America (hereafter "generally accepted accounting principles)
     have been condensed or omitted. These condensed consolidated financial
     statements are unaudited but, in the opinion of management, contain all
     adjustments (consisting only of normal recurring adjustments) necessary
     for fair presentation and should be read in conjunction with the financial
     statements and footnotes thereto included in the Company's annual form
     10-KSB for the year ended December 31, 2000 as filed with the Securities
     and Exchange Commission (the "SEC"). The results of operations for the
     nine months ended September 30, 2001 are not necessarily indicative of
     operating results for the year ending December 31, 2001.

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

     Cash and Cash Equivalents - Cash and cash equivalents include all cash
     accounts, with the exception of restricted cash, and money market funds.
     The Company maintains amounts due from banks, which at times may exceed
     federally insured limits. The Company has not experienced any losses from
     such concentrations.

     Notes Receivable and Income Recognition - The notes receivable portfolio
     consists primarily of secured real estate mortgage loans purchased from
     financial institutions, and mortgage and finance companies. Such notes
     receivable are generally performing, and in some cases nonperforming or
     underperforming at the time of purchase and, accordingly, are usually
     purchased at a discount from the principal balance remaining. Notes
     receivable are stated at the amount of unpaid principal, reduced by
     purchase discount and an allowance for loan losses. The Company has the
     ability and intent to hold its notes until maturity, payoff or liquidation
     of collateral. Impaired notes are measured based on the present value of
     expected future cash flows discounted at the note's effective interest
     rate or, as a practical expedient, at the observable market price of the
     note receivable or the fair value of the collateral if the note is
     collateral dependent. A note receivable is impaired when it is probable
     the Company will be unable to collect all contractual principal and
     interest payments due in accordance with the terms of the note agreement.

     In general, interest on the notes receivable is calculated based on
     contractual interest rates applied to daily balances of the principal
     amount outstanding using the simple-interest method. Accrual of interest
     on notes receivable, including impaired notes receivable, is discontinued
     when management believes, after considering economic and business
     conditions and collection efforts, that the borrower's financial
     conditionis such that collection of interest is doubtful. When interest
     accrual is discontinued, all unpaid accrued interest is reversed.
     Subsequent recognition of income occurs only to the extent payment is
     received subject to management's assessment of the collectibility of the
     remaining interest and principal. A nonaccrual note is restored to an
     accrual status when it is no longer delinquent and collectibility of
     interest and principal is no longer in doubt and past due interest is
     recognized at that time.


<PAGE>

     Loan purchase discount is amortized to income using the interest method
     over the period to maturity. The interest method recognizes income by
     applying the effective yield on the net investment in the loans to the
     projected cash flows of the loans. Discounts are amortized if the
     projected payments are probable of collection and the timing of such
     collections is reasonably estimable. The projection of cash flows for
     purposes of amortizing purchase loan discount is a material estimate,
     which could change significantly, in the near term. Changes in the
     projected payments are accounted for as a change in estimate and the
     periodic amortization is prospectively adjusted over the remaining life of
     the loans. Should projected payments not exceed the carrying value of the
     loan, the periodic amortization is suspended and either the loan is
     written down or an allowance for uncollectibility is recognized.

     Allowance for Loan Losses - The allowance for loan losses, a material
     estimate which could change significantly in the near-term, is initially
     established by an allocation of the purchase loan discount based on the
     management's assessment of the portion of purchase discount that
     represents uncollectable principal. Subsequently, increases to the
     allowance are made through a provision for loan losses charged to expense
     and the allowance is maintained at a level that management considers
     adequate to absorb potential losses in the loan portfolio.

     Management's judgment in determining the adequacy of the allowance is
     based on the evaluation of individual loans within the portfolios, the
     known and inherent risk characteristics and size of the note receivable
     portfolio, the assessment of current economic and real estate market
     conditions, estimates of the current value of underlying collateral, past
     loan loss experience and other relevant factors. Notes receivable,
     including impaired notes receivable, are charged against the allowance for
     loan losses when management believes that the collectibility of principal
     is unlikely based on a note-by-note review. Any subsequent recoveries are
     credited to the allowance for loan losses when received. In connection
     with the determination of the allowance for loan losses, management
     obtains independent appraisals for significant properties, when considered
     necessary.

     The Company's real estate notes receivable are collateralized by real
     estate located throughout the United States with a concentration in the
     Northeast. Accordingly, the collateral value of a substantial portion of
     the Company's real estate notes receivable and real estate acquired
     through foreclosure is susceptible to changes in market conditions.

     Management believes that the allowance for loan losses is adequate. While
     management uses available information to recognize losses on notes
     receivable, future additions to the allowance or write-downs may be
     necessary based on changes in economic conditions.

     Loans Held for Sale- The loans held for sale consists primarily of secured
     real estate first and second mortgages originated by the Company. Such
     loans held for sale are performing and are carried at the lower of cost or
     market.

     Other Real Estate Owned - Other real estate owned consisting of properties
     acquired through, or in lieu of, foreclosure or other proceedings are held
     for sale and are carried at the lower of cost or fair value less estimated
     costs of disposal. Any write-down to fair value , less cost to sell, at
     the time of acquisition is charged to the allowance for loan losses.
     Subsequent write-downs are charged to operations based upon management's
     continuing assessment of the fair value of the underlying collateral.
     Property is evaluated regularly to ensure that the recorded amount is
     supported by current fair values and valuation allowances are recorded as
     necessary to reduce the carrying amount to fair value less estimated cost
     to dispose. Revenue and expenses from the operation of other real estate
     owned and changes in the valuation allowance are included in operations.
     Costs relating to the development and improvement of the property are
     capitalized, subject to the limit of fair value of the collateral, while
     costs relating to holding the property are expensed. Gains or losses are
     included in o perations upon disposal.

     Building, Furniture and Fixtures - Building, furniture and fixtures are
     recorded at cost net of accumulated depreciation. Depreciation is computed
     using the straight-line method over the estimated useful lives of the
     assets, which range from 3 to 40 years. Gains and losses on dispositions
     are recognized upon realization. Maintenance and repairs are expensed as
     incurred.

     Deferred Financing Costs - Debt financing costs, which include loan
     origination fees incurred by the Company in connection with obtaining
     financing, are deferred and are amortized based on the principal reduction
     of the related loan.


     Retirement Plan - The Company has a defined contribution retirement plan
     covering all full-time employees who have completed one month of service.
     Contributions to the plan are made in the form of payroll deductions based
     on employees' pretax wages. Currently, the Company offers a company match
     of 50% of the first 3% of the employees' contributions.
<PAGE>

     Income Taxes - The Company recognizes income taxes under an asset and
     liability method. Under this method, deferred tax assets are recognized
     for deductible temporary differences and operating loss or tax credit
     carryforwards and deferred tax liabilities are recognized for taxable
     temporary differences. Temporary differences are the differences between
     the financial statement carrying amounts of existing assets and
     liabilities and their respective basis. Deferred tax assets and
     liabilities are measured using enacted tax rates expected to apply to
     taxable income in the years in which those temporary differences are
     expected to be recovered or settled. Deferred tax assets are reduced by a
     valuation allowance when management determines that it is more likely than
     not that, some portion or all of the deferred tax assets will not be
     realized. Deferred tax assets and liabilities are adjusted for the effects
     of changes in tax laws and rates on the date of the enactment. As of
     September 30, 2001, the Company had approximately $2.0 million of net
     operating loss carry forwards remaining.

     Fair Value of Financial Instruments - Statement of Financial Accounting
     Standards No. 107, Disclosures About Fair Value of Financial Instruments,
     requires disclosure of fair value information about financial instruments,
     whether or not recognized in the balance sheet for which it is practical
     to estimate that value. In cases where quoted market prices are not
     available, fair values are based on estimates using present value or other
     valuation techniques. Those techniques are significantly affected by the
     assumptions used, including the discount rate and estimates of future cash
     flows. In that regard, the derived fair value estimates cannot be
     substantiated by comparison to independent markets and, in many cases,
     could not be realized in immediate settlement of the instruments.
     Statement No. 107 excludes certain financial instruments and all
     nonfinancial assets and liabilities from its disclosure requirements.
     Accordingly, the aggregate fair value amounts do not represent the
     underlying value of the Company.

     The following methods and assumptions were used by the Company in
     estimating the fair value of its financial instruments:
     a. Cash and Cash Equivalents,  Restricted Cash, Accrued Interest
        Receivable, Other Receivable and Accrued Interest Payable - The
        carrying values reported in the balance sheet are a reasonable estimate
        of fair value.
     b. Notes Receivable - Fair value of the net note receivable portfolio is
        estimated by discounting the future cash flows using the interest
        method. The carrying amounts of the notes receivable approximate fair
        value.
     c. Short-Term Borrowings - The carrying amounts of the financing agreement
        and other short-term borrowings approximate their fair value.
     d. Long-Term Debt - Fair value of the Company's long-term debt(including
        notes payable, subordinated debentures and notes payable, affiliate) is
        estimated using discounted cash flow analysis based on the Company's
        current incremental borrowing rates for similar types of borrowing
        arrangements. The carrying amounts reported in the balance sheet
        approximate their fair value.
     Comprehensive Income - SFAS No. 130, Reporting Comprehensive Income
     defines comprehensive income as the change in equity of a business
     enterprise during a period from transactions and other events and
     circumstances, excluding those resulting from investments by and
     distributions to stockholders. The Company had no items of other
     comprehensive income in 2001 and 2000; therefore net income (loss) was the
     same as its comprehensive income (loss).

     Comparative Balance- Certain prior balances have been reclassified to
     conform with current period presentation.



<PAGE>




BUSINESS SEGMENTS

      The Company has two reportable operating segments: (i) portfolio asset
acquisition and resolution; and (ii) mortgage banking. The portfolio asset
acquisition and resolution segment acquires performing, nonperforming,
nonconforming and sub performing notes receivable and promissory notes from
financial institutions, mortgage and finance companies, and services and
collects such notes receivable through enforcement of terms of original note,
modification of original note terms and, if necessary, liquidation of the
underlying collateral. The mortgage-banking segment originates or purchases,sub
prime residential mortgage loans for individuals whose credit histories, income
and other factors cause them to be classified as nonconforming borrowers.

The Company's management evaluates the performance of each segment based on
profit or loss from operations before unusual and extraordinary items and i
ncome taxes. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies (see Note 1).


<TABLE>
<CAPTION>
<S>                                   <C>     <C>             <C>      <C>
MORTGAGE BANKING
                                    Nine Months Ended       Nine Months Ended

                                        9/30/2001              9/30/2000
                                        Unaudited              Unaudited
CONSOLIDATED REVENUE
 Portfolio asset acquisition and
 resolution                           $ 25,353,546           $ 19,628,659
 Mortgage banking                        1,686,141                247,533
 Consolidated Revenue                 $ 27,039,687           $ 19,876,192

CONSOLIDATED NET INCOME (LOSS)
 Portfolio asset acquisition and
 resolution                            $ 2,063,161             $ (383,673)
 Mortgage banking                          153,628               (117,580)
 Consolidated Net Income (Loss)        $ 2,216,789             $ (501,253)


</TABLE>



<PAGE>


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

General

       Forward-Looking Statements. When used in this report, press releases and
elsewhere by the Company from time to time, the words "believes", "anticipates"
,and "expects" and similar expressions are intended to identify forward-looking
statements that involve certain risks and uncertainties. Additionally, certain
statements contained in this discussion and the Form 10-QSB may be deemed
forward-looking statements that involve a number of risks and uncertainties.
Among the factors that could cause actual results to differ materially are the
following: unanticipated changes in the U.S. economy, business conditions and
interest rates and the level of growth in the finance and housing markets, the
availability for purchase of additional loans and the quality of such
additional loans, the status of relations between the Company and its Senior
Debt Lender, the status of relations between the Company and its sources for
loan purchases, unanticipated difficulties in collections under loans in the
Company's portfolio, prepayments of notes in the Company's portfolio and other
risks detailed from time to time in the Company's SEC reports. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date thereof. The Company undertakes no obligation
to release publicly the results on any events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.

       Loan and OREO Acquisitions. During the nine months ended September 30,
2001, the Company purchased 2,961 loans consisting primarily of first and
second mortgages, with an aggregate face value of $146.8 million at an
aggregate purchase price of $129.8 million or 88% of the face value, compared
with the purchase during the nine months ended September 30, 2000 of 2,245
loans with an aggregate face value of $83.4 million at an aggregate purchase
price of $73.2 million or 88% of aggregate face value. Acquisition of these
portfolios was fully funded through Senior Debt in the amount equal to the
purchase price plus a 1% loan origination fee.

       The Company believes these acquisitions of high yielding coupon loans
will result in increases in the level of interest income during future periods.
Payments streams are generated once the loans are incorporated into the
Company's loan tracking system.

       Management intends to continue to expand the Company's earning asset
base through the acquisition of additional loans including performing first and
second mortgages at a positive interest rate spread based upon the Company's
cost of funds. The Company believes that its current infrastructure is adequate
to service additional loans without any material increases in collection,
general and administrative expenses excluding personnel expenses. There can be
no assurance the Company will be able to acquire any additional loans on
favorable terms or at all.


       Single-Family Residential Lending. In January 1997, the Company formed a
wholly owned subsidiary, Tribeca Lending Corp. ("Tribeca"), to originate
primarily sub prime residential mortgage loans made to individuals whose credit
histories, income and other factors cause them to be classified as
non-conforming borrowers. Management believes that lower credit quality
borrowers present an opportunity for the Company to earn superior returns for
the risks assumed. Tribeca provides first and second mortgages that are
originated on a retail basis through marketing efforts that include utilization
of the Company's database. Tribeca is currently licensed as a mortgage banker
in Alabama, California, Colorado, Connecticut, District of Columbia, Florida,
Georgia, Kentucky, Illinois, Maryland, Massachusetts, Michigan, Missouri,
Mississippi, New York, New Jersey, North Carolina, Ohio, Oklahoma, Oregon,
Pennsylvania, South Carolina, Tennessee, Texas, Virginia, Washington State, and
West Virginia and is a Department of Housing and Urban Development FHA Title I
and Title II approved lender. Tribeca originated loans are typically expected
to be sold in the secondary market through whole-loan, servicing-released sales.
Tribeca anticipates holding certain of its mortgages in its portfolio when it
believes that the return from holding the mortgage, on a risk-adjusted basis,
outweighs the return from selling the mortgage in the secondary market.
<PAGE>

      During the nine months ending September 30, 2001, Tribeca originated 264
mortgages with an aggregate initial principal amount of $11.9 million compared
to 80 mortgages with an aggregate principal amount of $5.0 million in mortgages
during the nine months ending September 30 2000. During the nine months ending
September 30, 2001, Tribeca generated operating income of $153,628 compared to
an operating loss of $117,580 during the nine months ended September 30, 2000.
The increase in originations was achieved through the use of the Company's
database as a source of refinancing leads and thereby help the Company retain
loans that would otherwise be lost to competitors. As of September 30, 2001,
Tribeca had approximately $24.5 million face value of loans held for sale.
Revenues and expenses related to such loans, other than periodic interest
payments, and fee income are expected to be realized upon sale of such loans.

      Cost of Funds. The decreases in the prime rate during the three months
ending September 30, 2001, from 7.5% to 6.5%, decreased the benchmark rate for
the cost of funds on notes payable ("Senior Debt") used to fund loan portfolio
acquisitions directly increasing net income. The weighted average interest rate
on borrowed funds for the Senior Debt based on the balances as of September 30,
2001 and September 30, 2000 were 6.72% and 9.2%, respectively. As of September
30, 2001, the Company had Senior Debt outstanding with an aggregate principal
balance of $306 million. Additionally, the Company has financing agreements
with the Senior Debt Lender, which had an outstanding balance of $6.1 million
at September 30, 2001. The cost of funds on these financing agreements is prime
plus 2%.

      The majority of the loans purchased by the Company bear interest at a
fixed rate, Senior Debt Financing is at a variable rate adjusted with the prime
rate. Consequently, changes in market interest rate conditions have caused
direct corresponding changes in interest income. Management and its Senior Debt
lender have agreed to a variable rate on Senior Debt based on prime, for the
12-month period April 1, 2001 through March 31, 2002. Any increases in the
prime rate during this period will negatively impact the net income of the
Company.


       Inflation. Inflation had no impact on the Company's operations during
 the nine months ended September 30, 2001 and 2000.



Three Months Ended September 30, 2001 Compared to Three Months Ended September
 30, 2000.

      Total revenue, which is comprised of interest income, purchase discount
earned, gains on bulk sale of notes, gain on sale of notes receivable
originated, gain on sale of other real estate owned, rental income and other
income, increased by $2,836,968 or 42%, to $9,544,946 during the three months
ended September 30, 2001, from $6,707,978 during the three months ended
September 30, 2000.

      Interest income on notes receivable increased by $2,443,256 or 48%, to
$7,586,034 during the three months ended September 30, 2001 from $5,142,778
during the three months ended September 30, 2000. The Company recognizes
interest income on notes included in its portfolio based upon three factors:
(i)interest on performing notes, (ii) interest received or committed with
settlement payments on non-performing notes and (iii) the balance of
settlements in excess of the carried face value. This increase resulted
primarily from the $177 million in high yielding performing notes acquired by
the Company between October 2000 through September 2001, which was only
partially offset by collections, prepayments, and loan sales.


      Purchase discount earned increased by $97,764 or 11%, to $1,007,499
during the three months ended September 30, 2001, from $909,735 during the
three months ended September 30, 2000. Purchase discount increased at a lower
rate than the growth in the portfolio due to the maturation of the portfolio,
and the purchase of performing assets for yield spread as opposed to purchase
discount during the three months ended September 30, 2001.

<PAGE>

      Gain on bulk sale of notes receivable increased to $69,839 during the
three months ended September 30, 2001 from $ 0 during the three months ended
September 30, 2000. The Company consummated one bulk sales totaling $4.3
million during the three months ending September 30, 2001. The Company did not
have a bulk sale of loans during the three months ending September 30, 2000.

      Gain on sale of notes originated by Tribeca increased by $93,784 or 113%
to $176,926 during the three months ended September 30, 2001, from $83,142
during the three months ended September 30, 2000. This increase reflected an
increase in the number of Tribeca loans originated and sold and higher margins
on sales during the three months ending September 30, 2001, as compared to the
three months ending September 30, 2000.

      Gain on sale of OREO increased by $98,913 or 57% to $273,088 during the
three months ended September 30, 2001 from $174,175 during the three months
ended September 30, 2000. This increase reflected increases in both the volume
of OREO properties sold and the increased gain realized on the sale of rental
OREO properties. The Company sold 32 and 27 OREO properties during the three
months ended September 30, 2001 and September 30, 2000.

       Rental income decreased by $83,955 or 54% to $72,838 during the three
months ended September 30, 2001, from $156,793 during the three months ended
September 30, 2000. Rental income decreased due to the sale of several rental
properties where it was more advantageous to sell than continue to hold for
rent, during the three months ended September 30, 2001 as compared to the three
months ended September 30, 2000. The Company had 30 and 59 rental properties
during the three months ended September 30, 2001 and September 30, 2000.

      Other income increased by $117,367 or 49%, to $358,722 during the three
months ended September 30, 2001 from $241,355 during the three months ended
September 30, 2000. This increase reflected increases in prepayment penalties
due to an increase in the rate of prepayments, and loan fees associated with
Tribeca loans sold.

      Total operating expenses increased by $1,451,798 or 20% to $8,564,135
during the three months ended September 30, 2001 from $7,112,337 during the
three months ended September 30, 2000. Total operating expenses includes
interest expense, collection, general and administrative expenses, provisions
for loan losses, amortization of deferred financing costs and depreciation
expense.

      Interest expense increased by $487,481 or 10%, to $5,227,237 during the
three months ended September 30, 2001, from $4,739,756 during the three months
ended September 30, 2000. This increase resulted primarily from an increase in
debt, which was partially offset by reductions in costs of funds due to
decreases in the prime rate. Costs of funds were 6.72% and 9.2% during the
three months ended September 30, 2001 and September 30, 2000, respectively.
Total debt increased by $91 million or 41%, to $313 million as of September 30,
2001, from $222 million as of September 30, 2000. Total debt consists
principally of Senior Debt, and also includes debentures, financing agreements
and loans from affiliates.

       Collection, general and administrative expenses increased by $574,580 or
28% to $2,646,750 during the three months ended September 30, 2001 from
$2,072,169 during the three months ended September 30, 2000. Collection,
general and administrative expense consists primarily of personnel expense, and
all other collection expenses including OREO related expense, litigation
expense, and miscellaneous collection expense.

       Personnel expenses increased by $291,391 or 28% to $1,330,339 during the
three months ended September 30, 2001 from $1,038,949 during the three months
ended September 30, 2000. This increase resulted largely from increases in
staffing in Tribeca and increases in commission expense. All other collection,
and general administrative expenses increased by $283,189 to $1,316,411 during
the three months ended September 30, 2001 from $1,033,220 during the three
months ended September 30, 2000. This increase resulted primarily from
additional rent and office expense associated with new office space at 6
Harrison Street, increased travel for marketing, increased legal fees due to
the growth in the portfolio and an accrual of state taxes due to the increase
in income.
<PAGE>

      Provisions for loan loss increased by $249,658 or 152% to $414,000 from
$164,342 due to two large legal loans that require reserve increases and the
maturation of older portfolios where there is no longer purchase discount
available to increase reserves.

      Amortization of deferred financing costs increased by $112,086 or 119% to
$205,979 during the three months ended September 30, 2001, from $93,893 during
the three months ended September 30, 2000. This increase resulted primarily
from an increase in prepayments, and increased collections due to the growth of
the portfolio. On September 30, 2001 and September 30, 2000, deferred financing
costs, as a percentage of Senior Debt outstanding was 1.03% and 1.05% ,
respectively

       Depreciation expense increased by $27,992 or 66%, to $70,169 during the
three months ended September 30, 2001, from $42,177 during the three months
ended September 30, 2000. This increase resulted from the purchase of computer
equipment, and the renovations of office space for the Company's subsidiary
Tribeca.

       Operating income increased by $1,385,170 to $980,811 during the three
months ended September 30, 2001 from a loss of $404,359 during the three months
ended September 30, 2000.

       During the three months ended September 30, 2001 and September 30, 2000,
there was no provision for income tax due to the utilization of the loss
carry-forward.

       Net income increased by $1,385,170 to $980,811 during the three months
ended September 30, 2001 from a loss of $404,359 during the three months ended
September 30, 2000.


Nine months Ended September 30, 2001 Compared to Nine months Ended September 30,
2000.

      Total revenue increased by $7,163,494 or 36%, to $27,039,687 during the
nine months ended September 30, 2001, from $19,876,193 during the nine months
ended September 30, 2000.

      Interest income on notes receivable increased by $5,543,788 or 38%, to
$20,320,114 during the nine months ended September 30, 2001 from $14,776,326
during the nine months ended September 30, 2000. This increase resulted
primarily from the $177 million in high yielding performing notes acquired by
the Company between October 2000 and September 30, 2001, which was only
partially offset by collections, prepayments, and loan sales.

      Purchase discount earned increased by $183,235 or 7%, to $2,978,578
during the nine months ended September 30, 2001 from $2,795,343 during the nine
months ended September 30, 2000. This increase similarly reflected the growth
in size of the portfolio. Purchase discount increased at a lower rate than the
growth in the portfolio due to the maturation of the portfolio, and the
purchase of performing assets for yield spread as opposed to purchase discount
during the nine months ended September 30, 2001.

      Gain on sale of notes receivable increased by $373,210 or 65% to $948,966
during the nine months ended September 30, 2001, from $575,756 during the nine
months ended 2000. This increase reflected an increase in bulk sales during the
nine months ended September 30, 2001. The Company sold $20.7 million in loans
during the nine months ended September 30, 2001, and $1.4 million during the
nine months ended September 30, 2000.

      Gain on sale of notes originated by Tribeca increased by $223,421 or 133%
to $391,417 during the nine months from $ 167,996 during the nine months ended
September 30, 2000. This increase reflected an increase in the number of
Tribeca loans originated and sold and higher margins on sales during the nine
months ending September 30, 2001, as compared to the nine months ending
September 30, 2000.


<PAGE>

      Gain on sale of OREO increased by $770,729 or 221% to $1,119,699 during
the nine months ended September 30, 2001, from $348,970 during the nine months
ended September 30, 2000. This increase reflected increases in both the volume
of OREO properties sold and the increase gain realized on the sale of rental
OREO properties during the nine months ended September 30, 2001, as compared to
the nine months ended September 30, 2000. The Company sold 113 OREO properties
during the nine months ended September 30, 2001, and 103 OREO properties during
the nine months ended September 30, 2000.

      Rental income decreased by $242,969 or 47% to $269,605 during the nine
months ended September 30, 2001, from $512,574 during the nine months ended
September 30, 2000. This decrease reflected a decrease in the number of rental
properties during the nine months ended September 30, 2001 as compared to the
nine months ended September 30, 2000. The Company had 30 and 79 rental
properties held as of September 30, 2001 and September 30, 2000.

       Other income increased by $312,080 or 45%, to $1,011,308 during the nine
months ended September 30, 2001 from $699,228, during the nine months ended
September 30, 2000. This increase reflected increases in prepayment penalties,
and late charges, resulting from the increase in size of the Company's
portfolio and loan fees associated with Tribeca loans sold.

       Total operating expenses increased by $4,445,452 or 22%, to $24,822,898
during the nine months ended September 30, 2001, from $20,377,446 during the
nine months ended September 30, 2000.

      Interest expense increased by $1,821,821 or 13%, to $15,349,371 during
the nine months ended September 30, 2001 from $13,527,550 during the nine
months ended September 30, 2000. This increase resulted primarily from the
increase in
Senior Debt as a result of the acquisition of $177 million in notes receivables.
Total debt increased by $87 million or 39%, to $306 million as of September 30,
2001 from $220 million as of September 30, 2000. This increase in debt was
partially offset by decreases in costs of funds due to decreases in the Prime
rate costs of funds were 6.72% and 9.2% during the nine months ended September
30, 2001 and September 30, 2000. Total debt includes Senior Debt, debentures,
and financing agreements and loans from affiliates.

       Collection, general and administrative expenses increased by $1,507,185
or 25%, to $7,538,419 during the nine months ended September 30, 2001 from $
6,031,234 during the nine months ended September 30, 2000.

       Personnel expenses increased by $983,245 or 34%, to $3,861,083 during
the nine months ended September 30, 2001 from $2,877,838 during the nine months
ended September 30, 2000. This increase reflected an increase in the staffing
and the experience level of personnel in the Company's core business, increases
in the Tribeca's production and sales force and the accrual of bonus expense
necessitated by the increase in income during the nine months ended September
30, 2001. All other collection, general and administrative expenses increased
by $523,940 or 17% to $3,677,335 during the nine months ended September 30, 2001
from $3,153,395 during the nine months ended September 30, 2000. This increase
resulted primarily from additional rent and office expense associated with new
office space at 6 Harrison Street, increased travel for marketing, increased
legal fees due to the growth in the portfolio and an accrual of state taxes due
to the increase income.
<PAGE>

      Provisions for loan loss increased by $767,916 or 228% to $1,103,963
during the nine months ended September 30, 2001 from $336,047 during the nine
months ended September 30, 2000. This was due to two large legal loans that
require reserve increases and the maturation of older portfolios where there is
no longer purchase discount available to increase reserves. Provision for loan
losses are incurred as soon as the valuation of the asset diminishes and there
is no unamortized discount remaining associated with that asset.

      Amortization of deferred financing costs increased by $296,287 or 79%, to
$672,873 during the nine months ended September 30, 2001, from $376,586 during
the nine months ended September 30, 2000. This increase resulted primarily from
increased collections due to prepayments, and an increase in the number and
dollar amount of assets sold, which sales generally accelerate the amortization
of financing costs and increased collections due to the growth of the portfolio.

      Depreciation expense increased by $52,243 or 49%, to $158,272 during nine
months ended September 30, 2001, from $106,029 during the nine months ended
September 30, 2000. This increase resulted from the purchase of computer
equipment, and the renovations of office space for the Company's subsidiary
Tribeca.

      Operating income increased by $2,718,043 to a gain of $2,216,789 during
the nine months ended September 30, 2001, from a loss of $501,253 during the
nine months ended September 30, 2000.

       During the nine months ended September 30, 2001 or the nine months ended
September 30,2000, there were no provisions for income taxes due to the
utilization of the operating loss carry-forward.

        Net income increased by $2,718,043 to gain of $2,216,789 during the
nine months ended September 30, 2001 from a loss of $501,253 during the nine
months ended September 30, 2000.



Liquidity and Capital Resources

        General. During the nine months ended September 30, 2001 the Company
purchased 2,961 loans with an aggregate face value of $146.8 million at an
aggregate purchase price of $129.8 million or 88% of face value. During the
nine months ended September 30, 2000 the Company purchased 2,245 loans in
twenty-four portfolios with an aggregate face value of $83.4 million at an
aggregate purchase price of $73.2 million or 88% of aggregate face value. The
Company's portfolio acquisitions during the nine months ended September 30,
2001 included $56.3 million in purchased loans from two sources. This increase
in acquisitions was due to increased marketing by the Company and lower cost
of funds which enabled the Company to be more competitive in the bidding
process.

       The Company's portfolio of notes receivable at September 30, 2001 had a
face value of $326 million and included net notes receivable of approximately
$271 million as compared with a face value of $242.4 million and net notes
receivable of approximately $196.9 million as of September 30, 2000. Net notes
receivable are stated at the amount of unpaid principal, net of purchase
discount and allowance for loan losses. The Company has the ability and intent
to hold its notes until maturity, payoff or liquidation of collateral or, where
deemed to be economically advantageous, sale.

       During the nine months ended September 30, 2001, the Company used cash
in the amount of $16.9 million in its operating activities primarily for
interest expense, and increased infrastructure in the Company's core business,
litigation expense incidental to its ordinary collection activities and for the
foreclosure and improvement of OREO. The Company used $60.8 million in its
investing activities, primarily reflecting purchases of notes receivable which
purchases were only partially offset by principal collections upon its notes
receivable and proceeds from sales of loans and OREO. The amount of cash used
in operating and investing activities was funded by $80 million of net cash
provided by financing activities, including primarily, a net increase in Senior
Debt of $75.9 million. The above activities resulted in a net increase in cash
at September 30, 2001 over December 31, 2000 of $2.3 million.
<PAGE>

        In the ordinary course of its business, the Company accelerates and
forecloses upon real estate securing non-performing notes receivable included
in its portfolio. As a result of such foreclosures and selective direct
purchases of OREO, at September 30, 2001 and 2000, the Company held OREO
recorded on the financial statements at $3.8 million and $6.3 million,
respectively. OREO is recorded on the financial statements of the Company at
the lower of cost or fair market value. The Company estimates, based on third
party appraisals and broker price opinions, that the OREO inventory held at
September 30, 2001, in the aggregate, had a net realizable value (market value
less estimated commissions and legal expenses associated with the disposition
of the asset) ofapproximately $4.0 million. There can be no assurance, however
, that such estimate is substantially correct or that an amount approximating
such amount would actually be realized upon liquidation of such OREO. The
Company generally holds OREO as rental property or sells such OREO in the
ordinary course of business when it is economically beneficial to do so.


Cash Flow

     Substantially all of the assets of the Company are invested in its
portfolios of notes receivable and OREO. Primary sources of the Company's cash
flow for operating and investing activities are borrowings under its Senior Debt
facilities, collections on notes receivable and gain on sale of notes and OREO
properties.

     At September 30, 2001, the Company had unrestricted cash, cash equivalents
and marketable securities of $9.5 million.

     Management believes that sufficient cash flow from the collection of notes
receivable will be available to repay the Company's secured obligations, and
that sufficient additional cash flows will exist through collections of notes
receivable, the bulk sale of performing loan portfolios, sales and rental of
OREO, continued modifications to the secured debt credit agreements or
additional borrowing, to repay the current liabilities arising from operations
and to repay the long term indebtedness of the Company.

Financing Activities

      Senior Debt.  As of  September  30,  2001,  the Company owed an aggregate
of $307 million to the Lender of Senior Debt,  under 144 loans.

      The Senior Debt is collateralized by first liens on the respective loan
portfolios for the purchase of which the debt was incurred and is guaranteed by
the Company. The monthly payments on the Senior Debt have been, and the Company
intends for such payments to continue to be, met by the collections from the
respective loan portfolios. The loan agreements for the Senior Debt call for
minimum interest and principal payments each month and accelerated payments
based upon the collection of the notes receivable securing the debt during the
preceding month. The Senior Debt accrues interest at variable rates between 0%,
and 2.00% over the prime rate. The accelerated payment provisions of the Senior
Debt are generally of two types: the first requires that all collections from
notes receivable, other than a fixed monthly allowance for servicing operations
, be applied to reduce the Senior Debt, and the second requires a further amount
to be applied toward additional principal reduction from available cash after
scheduled principal and interest payments have been made. As a result of the
accelerated payment provisions, the Company is repaying the amounts due on the
Senior Debt at a rate faster than the minimum scheduled payments. While the
Senior Debt remains outstanding, these accelerated payment provisions may limit
the cash flow that is available to the Company.
<PAGE>

       Certain of the Senior Debt credit agreements required establishment of
restricted cash accounts, funded by an initial deposit at the loan closing and
additional deposits based upon monthly collections up to a specified dollar
limit. The restricted cash is maintained in an interest bearing account, held by
the Company's Senior Debt Lender. Restricted cash may be accessed by the Senior
Debt Lender only upon the Company's failure to meet the minimum monthly payment
due if collections from notes receivable securing the loan are insufficient to
satisfy the installment due. Historically, the Company has not called upon these
reserves. The aggregate balance of restricted cash in such accounts was $758,928
and $991,319 on September 30, 2001 and September 30, 2000 respectively. The
decrease in the balance of restricted cash at September 30, 2001, was due to
funds used to place bid deposits on perspective new portfolio acquisitions. Such
deposits are returned to restricted cash when the new acquisitions fund, by the
Senior Debt Lender.

        Total Senior Debt availability was approximately $400 million at
September 30, 2001, of which approximately $306 million had been drawn down as
of such date. Additionally the Senior Debt Lender has verbally informed the
Company that it will not deem approximately $4 million of Senior Debt that it
had syndicated to other banks as of such date as outstanding for purposes of
determining availability under of Senior Debt. As a result, the Company has
approximately $98 million available to purchase additional portfolios of notes
receivable and OREO.

         The Company's Senior Debt Lender has provided the Company with a
warehouse financing agreement of $7 million. At September 30, 2001, the Company
had drawn down $ 6.1 million on the line. This warehouse agreement allows the
Company to convert this debt into a Senior Debt whenever the line approaches
maximum capacity.



Harrison First Corporation 12% Debentures. In connection with the acquisition of
a loan portfolio during 1995, the Company offered to investors $800,000 of
subordinated debentures of which $555,000 were issued. As of September 30, 2001
and December 31, 2000, $36,393 and $72,525, respectively, of these debentures
were outstanding. The Harrison 1st 12% Debentures bear interest at the rate of
12% per annum and were payable in quarterly installments. The principal was
repaid over three years in ten equal quarterly installments of $22,200 which
payments commenced on September 30, 1997 with the remaining balloon payment of
$333,000 due September 30, 2000. On September 30, 2000 the Company made a
balloon payment of $232,952 funded through the incurrence of Senior Debt and
agreed with the holders of $97,048 of 12% Debentures to the extension of payment
of such principal amount to December 31, 2001. The Harrison 1st 12% Debentures
are secured by a lien on the Company's interest in certain notes receivable and
are subordinated to the Senior Debt encumbering the loan portfolio.



OREO Line of Credit. The Company has a line of credit with the Senior Debt
Lender permitting it to borrow a maximum of approximately $1,500,000 at a rate
equal to such lender's prime rate plus two percent per annum. Principal
repayment of the lines is due nine months from the date of each cash advance and
interest is payable monthly. The total amounts outstanding under the financing
agreements as of September 30, 2001 and December 31, 2000, were $53,439 and
$117,600 respectively. Advances made under the line of credit were used to
satisfy senior lien positions and fund capital improvements in connection with
foreclosures of certain real estate loans financed by the Company. Management
believes the ultimate sale of these properties will satisfy the related
outstanding financing agreements and accrued interest, as well as surpass the
collectible value of the original secured notes receivable. Management has
reached an agreement in principal with its Senior Debt Lender to increase the
availability under this credit facility to cover additional properties
foreclosed upon by the Company, which the Company may be required to hold as
rental property to maximize its return.
<PAGE>

      Additionally, the Company has opened a financing agreement with a bank.
The agreement provides the Company with the ability to borrow a maximum of
$150,000 at a rate equal to the bank's prime rate plus one percent per annum. As
of September 30, 2001 and December 31, 2000 $117,410 and $127,014 respectively,
were outstanding on the financing agreement.








                            Part II Other Information

Item 1.  Legal Proceedings

Asset Purchase Agreement Dispute. On August 19, 1997, the Company commenced a
civil action in the United States District Court for the Southern District of
New York against Preferred Credit Corporation ("PCC") and certain individuals
alleging fraud, breach of contract, and unjust enrichment in connection with the
purchase by the Company of $3.7 million in face value of notes receivable from
PCC for $1.8 million. Through the Complaint, the Company sought rescission of
the asset purchase agreement or damages incurred in connection with the
purchase.

By an order dated September 22, 1999, the Court dismissed one of the Company's
fraud claims against PCC and all of the Company's claims against the individual
Defendants. On October 22, 1998, PCC filed an answer and counterclaim alleging
 a breach of the purchase agreement and seeking its costs and fees incurred in
connection with the proceeding.

Trial in this matter was held on the remaining claims during January 2000. On
February 10, 2000, the Court entered judgment in favor of the Company and
against PCC in the amount of $1.7 million plus interest from May 7, 1997. With
interest, the amount due under the judgment is approximately $2 million as of
February 10, 2000. The Company does not know if PCC has sufficient assets to
satisfy the judgment; however, it has collected $ 60,000 towards this receivable
as of December 31, 2000.



<PAGE>





Item 2.  Changes in Securities
                  None

Item 3.  Defaults Upon Senior Securities
                  None

Item 4.  Submission of Maters to a Vote of Security Holders
                  None


Item 5.  Other Information
                  None




<PAGE>






Item 6.  Exhibits and Reports on form 8-K
                           None

(a)                                                EXHIBIT TABLE
   Exhibit No.   Description
    3(a)         Restated  Certificate  of  Incorporation.  Previously  filed
                 with, and incorporated herein by reference to, the Company's
                 10-KSB, filed with the Commission on December 31, 1994.

     (b)         Bylaws of the Company. Previously filed with, and incorporated
                 herein by reference to, the Company's Registration Statement
                 on Form S-4,  No.  33-81948, filed with the Commission on
                 November 24, 1994.

    4(a)         15% Convertible Subordinate  Debentures. Previously filed with
                 , the Company's Registration Statement on Form S-4, No.
                 33-81948, filed with the Commission on November 24, 1994.

     (b)         Warrants associated with principal repayment of the 15%
                 Convertible Subordinated Debentures. Previously filed with, the
                 Company's Registration Statement on Form S-4, No.33-81948,
                 filed with the Commission on November 24, 1994.

   10(d)         Employment Agreement dated December 4,1996, between the Company
                 and Joseph Caiazzo. Previously filed with, the Company's Form
                 10K-SB, filed with the Commission on March 31, 1997.

   10(e)         Agreement dated March 29, 1997 between the Company and the
                 Citizens Banking Company. Previously filed.

   10(f)         Loan and Real Estate  Purchase  Agreement  dated September 17,
                 1998 by and among Franklin Credit Management Corporation and
                 Home Gold Financial Inc. f/k/a Emergent Mortgage Corp.
                 Previously filed with, the Company's Form 8K, filed with the
                 Commission on September 30,1998.

   10(g)         Form of  Subscription  Agreement and Investor Representation,
                 dated as of  September 8, 1998 between the Company and certain
                 subscribers. Previously filed.

   10(h)         Loan Purchase Agreement dated December 31, 1998 between the
                 Company and Thomas Axon, corporate General Partner. Previously
                 filed with, the Company's Form 10K-SB, filed with the
                 Commission on April 16,1999.

   10(i)         Promissory Note between Thomas J. Axon and the Company dated
                 December 31, 1998. Filed with the Commission on December 31,
                 1998. Previously filed with, the Company's Form 10K-SB, filed
                 with the Commission on April 16,1999.

   10(j)         Promissory Note between Steve Leftkowitz, board member, and the
                 Company dated March 31, 1999. Filed with the Commission with
                 form 10KSB on March 30,2000.

   10(l)         Employment Agreement dated July 17, 2000 between the Company
                 and Seth Cohen. Previously filed with the Commission with form
                 10KSB on March 31,2001.

   11            Earnings per share. Filed here with.





<PAGE>


                              SIGNATURES

   In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

November 14, 2001                              FRANKLIN CREDIT MANAGEMENT
                                                     CORPORATION

                                             By:      THOMAS J. AXON
                                         ----------------------------------
                                                      Thomas J. Axon
                                                  Chairman of the Board


   In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

Signature                 Title                                   Date

SETH COHEN         Chief Executive Officer                  November 14, 2001
----------                                                  ------------------
Seth Cohen             and Director
(Principal executive officer)


JOSEPH CAIAZZO     Senior Vice President,Chief Operating     November 14, 2001
--------------                                              ------------------
Joseph Caiazzo     Officer, Secretary and Director
(Secretary)


KIMBERLEY SHAW      Vice President,                          November 14, 2001
--------------                                              ------------------
Kimberley Shaw      Chief Financial Officer
(Principal financial and accounting officer)





<PAGE>


Exhibit 11.

Computation of earnings per share third quarter 2001.
<TABLE>
<CAPTION>

                                  No. of Shares          Weight
<S>                                   <C>            <C>         <C>


 12/31/00 Common stock             5,916,527
                                 -------------       25%         1,479,132
                                    5,916,527


 03/31/01 Common stock             5,916,527
                                --------------       25%         1,479,132
                                    5,916,527


 06/30/01 Common stock             5,916,527
                                ---------------      25%         1,479,132
                                    5,916,527

 09/30/01 Common stock            5,916,527
                                -------------        25%         1,479,132
                                    5,916,527

                                   23,266,108

 Weighted average number of shares                              5,916,527

Earnings per Common share:
      Net Income                   $980,811                         $.17


</TABLE>


<PAGE>


Exhibit 11.

Computation of earnings per share third quarter 2000

<TABLE>
<CAPTION>


                                    No. of Shares       Weight
<S>                                    <C>              <C>          <C>

 12/31/99 Common stock               5,916,527
                                   ------------          25%         1,479,132
                                    5,916,527

 03/31/00 Common stock               5,916,527
                                    -----------          25%         1,479,132
                                    5,916,527


 06/30/00 Common stock               5,916,527
                                   -------------         25%         1,479,132
                                    5,916,527

 09/30/00 Common stock               5,916,527
                                   -------------         25%         1,479,132
                                    5,916,527

                                   23,266,108

   Weighted average number of shares                                 5,916,527

Earnings per Common share:
      Net Income                   $(404,359)                        $   (.07)


</TABLE>