AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 1, 1999

                                                      REGISTRATION NO. 333-
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--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
                               MORTGAGE.COM, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                       <C>                                       <C>
                FLORIDA                                     6162                                   65-0435281
    (STATE OR OTHER JURISDICTION OF             (PRIMARY STANDARD INDUSTRIAL          (I.R.S. EMPLOYER IDENTIFICATION NO.)
     INCORPORATION OR ORGANIZATION)             CLASSIFICATION CODE NUMBER)
</TABLE>

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

                               MORTGAGE.COM, INC.
                      8751 BROWARD BOULEVARD, FIFTH FLOOR
                           PLANTATION, FLORIDA 33324
                                 (954) 452-0000
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------

                                 SETH S. WERNER
                            CHIEF EXECUTIVE OFFICER
                               MORTGAGE.COM, INC.
                      8751 BROWARD BOULEVARD, FIFTH FLOOR
                           PLANTATION, FLORIDA 33324
                                 (954) 452-0000
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
                            ------------------------

                                   Copies to:

<TABLE>
<S>                                         <C>                                         <C>
       LUTHER F. SADLER, JR., ESQ.                    JOHN M. HESSION, ESQ.                       MICHAEL BRENNER, ESQ.
        JEFFREY M. MCFARLAND, ESQ.                    JOHN M. MUTKOSKI, ESQ.                     CHAN BRYANT ABNEY, ESQ.
             FOLEY & LARDNER                     TESTA, HURWITZ & THIBEAULT, LLP                    MORTGAGE.COM, INC.
             200 LAURA STREET                            125 HIGH STREET                   8751 BROWARD BOULEVARD, FIFTH FLOOR
       JACKSONVILLE, FLORIDA 32202                       BOSTON, MA 02110                       PLANTATION, FLORIDA 33324
             (904) 359-2000                              (617) 248-7000                              (954) 452-0000
</TABLE>

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

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /        :

     If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /                      .

     If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /                      .

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /

                        CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
   TITLE OF EACH CLASS OF SECURITIES                  PROPOSED MAXIMUM                             AMOUNT OF
            TO BE REGISTERED                    AGGREGATE OFFERING PRICE(1)                     REGISTRATION FEE
<S>                                       <C>                                       <C>
Common Stock, $.01 par value............                $112,125,000                               $31,170.75
</TABLE>

(1) In accordance with Rule 457(o) under the Securities Act of 1933, the number
    of shares of common stock being registered and the proposed maximum offering
    price per share are not included in this table. The proposed maximum
    aggregate offering price is estimated solely for the purpose of calculating
    the registration fee pursuant to Section 6(b) and Rule 457(o) of the
    Securities Act of 1933.

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

     The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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<PAGE>

The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.


                   SUBJECT TO COMPLETION, DATED JUNE 1, 1999

                                               SHARES

                                     [LOGO]

                                  COMMON STOCK

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

     Mortgage.com is selling shares of common stock. Prior to this offering,
there has been no public market for the common stock. The initial public
offering price is expected to be between $            and $          per share.
We have applied to list the common stock on The Nasdaq Stock Market's National
Market under the symbol "MDCM."

     Mortgage.com has granted the underwriters an option to purchase a maximum
of             additional shares of common stock to cover over-allotments of
shares.

  INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON
                                    PAGE 5.

<TABLE>
<CAPTION>
                                                                  UNDERWRITING
                                          PRICE TO               DISCOUNTS AND              PROCEEDS TO
                                           PUBLIC                 COMMISSIONS               MORTGAGE.COM

<S>                               <C>                       <C>                       <C>
Per Share.......................             $                         $                         $
Total...........................             $                         $                         $
</TABLE>

     Delivery of the shares of common stock will be made on or about
            , 1999.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON

                                 BT ALEX. BROWN

                                                      U.S. BANCORP PIPER JAFFRAY

                       PROSPECTUS DATED            , 1999
<PAGE>

     [The graphic appearing here represents the process through which a mortgage
loan is originated, funded and closed with Mortgage.com.

     Beginning at the top of the picture, symbols represent the avenues through
which Mortgage.com receives applications. These applications flow through the
CLOser software system represented in the picture. Moving down the picture, a
series of boxes representing steps in the mortgage process and the associated
Mortgage.com service are represented]

<PAGE>
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                              ----
<S>                                                                                                           <C>
PROSPECTUS SUMMARY.........................................................................................      3
RISK FACTORS...............................................................................................      6
USE OF PROCEEDS............................................................................................     15
DIVIDEND POLICY............................................................................................     15
CAPITALIZATION.............................................................................................     16
DILUTION...................................................................................................     17
SELECTED CONSOLIDATED FINANCIAL DATA.......................................................................     18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................     19
BUSINESS...................................................................................................     31
MANAGEMENT.................................................................................................     48
CERTAIN TRANSACTIONS.......................................................................................     55
PRINCIPAL STOCKHOLDERS.....................................................................................     57
DESCRIPTION OF CAPITAL STOCK...............................................................................     59
SHARES ELIGIBLE FOR FUTURE SALE............................................................................     64
UNDERWRITING...............................................................................................     66
NOTICE TO CANADIAN RESIDENTS...............................................................................     68
LEGAL MATTERS..............................................................................................     69
EXPERTS....................................................................................................     69
ADDITIONAL INFORMATION.....................................................................................     69
INDEX TO FINANCIAL STATEMENTS..............................................................................    F-1
</TABLE>

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

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

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

     Until             , 1999 (25 days after the commencement of this offering),
all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.

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

     We have obtained federal registration of the trademark "CLOser."
"Mortgage.com" and the Mortgage.com logo, "Openclose" and "SmartQuote" are our
trademarks and service marks. Other trademarks and service marks appearing in
this prospectus are the property of their respective holders.

                                       2
<PAGE>
                               PROSPECTUS SUMMARY

     This summary highlights information that we present more fully in the rest
of this prospectus. The summary is not complete and does not contain all the
information you should consider before buying shares of common stock. You should
read the entire prospectus carefully. Except where we state otherwise, all
information in this prospectus assumes (1) the conversion of the outstanding
convertible note and all shares of convertible preferred stock (other than
Special Preferred Stock (Northern California Division)), into an aggregate of
3,906,407 shares of common stock upon the closing of this offering, (2) a waiver
of Credit.com's right to convert receivables into shares of our common stock and
(3) no exercise of the underwriters' over-allotment option. Of the 1,000
outstanding shares of Special Preferred Stock (Northern California Division),
660 shares will convert, upon closing of this offering, to the number of shares
of common stock as is obtained by dividing $2,640,000 by the initial public
offering price.

                                  MORTGAGE.COM

     Mortgage.com is a leading provider of online mortgage services to consumers
and businesses. We have developed state-of-the-art technology called CLOser that
leverages the Internet to offer origination, processing, underwriting, closing
and secondary marketing of mortgage loans. We offer these mortgage services
directly to consumers at our www.mortgage.com Web site and retail locations. We
also use our technology to provide online mortgage services to our
business-to-business clients, including mortgage brokers, mortgage banks,
financial institutions, Realtors and homebuilders. Through this multifaceted
strategy, we aspire to "touch every mortgage."

     According to the Mortgage Banker's Association, approximately $1.5 trillion
in mortgage loans were originated in 1998. Despite its lengthy history and
numerous refinements, the mortgage purchasing process remains arduous for most
borrowers. Many borrowers are dissatisfied with the complexity and inefficiency
of the borrowing process, time delays related to the manual collection and
transfer of information, and the inability to monitor the status of loans. Even
though these are the types of bottlenecks that the Internet is expected to
alleviate, Forrester Research reported that less than 1% of mortgages funded in
1998 were originated online. We believe that this is mainly because traditional
mortgage industry participants lack technological capabilities and, until very
recently, both borrowers and lenders have been reluctant to embrace new online
customer contact channels. In light of the recent development of online mortgage
services, Forrester Research expects that by 2003, online mortgage loan volume
will grow to nearly 10% of all mortgage loans funded, exceeding $91 billion.

     At Mortgage.com, we offer borrowers a more satisfying and efficient
mortgage purchasing experience, both directly and through our more than 50
business-to-business clients, including Intuit Lender Services, GE Capital
Mortgage Services and Fleet Mortgage. Borrowers can select from a wide range of
loan products at our Web site, www.mortgage.com, at our branch
office facilities and through our mortgage professionals at locations where
homes are purchased. Borrowers can also visit any of our 22 private label or
co-branded client Web sites to satisfy their mortgage needs.

     Our mortgage financing services provide borrowers with widespread benefits,
including:

     o Convenient access to the mortgage lending process--through the Internet,
       by e-mail, by telephone, or at the locations where homes are sold;

     o Interactive selection from a comprehensive suite of mortgage products and
       services;

     o Personalized services and products tailored to individual needs;

     o Faster applications and pre-qualifications;

     o Immediate interest rate lock; and

     o Constant monitoring of loan status.

     For the year ended 1998, we originated and closed $2.0 billion of mortgage
loans, of which approximately 21% were originated online. For the three months
ended March 31,1999, we originated and closed $751.6 million of mortgage loans,
of which approximately 39% were originated online.

     We are located at www.mortgage.com, our address is 8751 Broward Boulevard,
Plantation, FL 33324 and our telephone number is (954) 452-0000. We were
incorporated in Florida in 1993 as First Mortgage Network, Incorporated,
commenced operations in April 1994 and changed our name to Mortgage.com, Inc. in
January 1999.

                                       3
<PAGE>
                               RECENT FINANCINGS

     In May 1999 we issued a 12% Senior Subordinated Convertible Note in the
principal amount of $27.5 million to Intuit, which is convertible at Intuit's
election into common stock. Also in May 1999, we completed a private placement
of $15.0 million of preferred stock.

                                  THE OFFERING

<TABLE>
<S>                                                                                 <C>
Common stock offered.............................................................   shares
Common stock to be outstanding after the offering................................   shares
Use of proceeds..................................................................   For working capital and other
                                                                                    general corporate purposes.
Proposed Nasdaq National Market symbol...........................................   MDCM
</TABLE>

     These share numbers are based on shares outstanding on May 28, 1999. The
share numbers exclude:

     o 1,808,888 shares of common stock issuable upon exercise of options
       outstanding under our stock option plan, 538,582 of which are exercisable
       at a weighted average exercise price of $6.80;

     o 1,190,487 shares authorized but unissued under our stock option plan; and

     o 1,165,123 shares of common stock issuable upon exercise of options and
       warrants outstanding outside of our stock option plan, 1,081,107 of which
       are exercisable at a weighted average exercise price of $6.57 per share.
       Of the options and warrants outstanding, warrants to purchase 80,841
       shares of common stock become exercisable upon closing this offering at
       the initial public offering price, although the number of shares
       purchasable under those warrants may be reduced through a formula based
       upon the initial public offering price.

                                       4
<PAGE>
                             SUMMARY FINANCIAL DATA
                     (In thousands, except per share data)

     Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of the convertible note issued to Intuit in
May 1999 and all outstanding preferred stock (including shares of preferred
stock issued in May 1999) into common stock (other than Special Preferred Stock
(Northern California Division)), as if the shares had converted immediately upon
their issuance, but does not assume undeclared cumulative dividends on preferred
stock. Net loss attributable to common shareholders includes undeclared
cumulative dividends on preferred stock and is not included in the calculation
of pro forma basic and diluted net loss per share.


<TABLE>
<CAPTION>
                                                                                                          THREE MONTHS
                                                                                                              ENDED
                                                                          YEAR ENDED DECEMBER 31,          MARCH 31,
                                                                       -----------------------------    -----------------
                                                                        1996       1997       1998       1998      1999
                                                                       -------    -------    -------    ------    -------
                                                                                                           (UNAUDITED)
<S>                                                                    <C>        <C>        <C>        <C>       <C>
STATEMENT OF OPERATIONS DATA:
  Total revenue.....................................................   $ 7,516    $16,474    $35,691   $ 6,819    $13,216
  Total expenses....................................................    11,534     20,006     41,768     7,189     16,414
  Net loss..........................................................    (4,018)    (3,532)    (6,078)     (370)    (3,199)
  Net loss attributable to common shareholders......................    (4,434)    (4,485)    (8,943)     (691)    (4,130)
  Basic and diluted net loss per share..............................     (3.92)     (3.85)     (7.17)    (0.63)     (3.05)
  Shares used in computation of basic and diluted net loss per
    share...........................................................     1,132      1,166      1,247     1,099      1,356
  Unaudited proforma net loss attributable to
    common shareholders.............................................                         $(6,829)             $(3,377)
  Unaudited pro forma basic and diluted net loss per share..........                         $ (1.33)             $ (0.64)
  Shares used in computation of unaudited pro forma basic and
    diluted net loss per share......................................                           5,153                5,262
</TABLE>

     The pro forma as adjusted balance sheet data as of March 31, 1999 gives
effect to the conversion of the convertible note issued to Intuit in May 1999
and all outstanding preferred stock (including shares of preferred stock issued
in May 1999) into common stock (other than Special Preferred Stock (Northern
California Division)) and has been adjusted to give effect to the sale of
           shares of common stock offered hereby at an assumed initial public
offering price of $           per share (the mid-point of the range) after
deducting underwriting discounts and commissions and estimated offering
expenses.

<TABLE>
<CAPTION>
                                                                                                   MARCH 31, 1999
                                                                            DECEMBER 31,        -----------------------
                                                                         -------------------                PRO FORMA
                                                                          1997        1998       ACTUAL     AS ADJUSTED
                                                                         -------    --------    --------    -----------
                                                                                                      (UNAUDITED)
<S>                                                                      <C>        <C>         <C>         <C>
BALANCE SHEET DATA:
  Cash and cash equivalents...........................................   $ 1,680    $  3,412    $  6,251
  Working capital (deficit)...........................................     1,353       2,204       6,142
  Total assets........................................................    81,927     193,438     188,805
  Total long-term debt, net of current portion........................         0           0       7,623
  Convertible preferred stock.........................................    11,823      26,473      26,473
  Stockholders' equity................................................     3,797      13,136      10,993
</TABLE>

                                       5
<PAGE>
                                  RISK FACTORS

     This offering involves a high degree of risk. You should carefully consider
the following risks relating to our business and our common stock, together with
the other information described elsewhere in this prospectus. If any of the
following risks actually occur, our business, results of operations and
financial condition could be materially affected, the trading price of our
common stock could decline, and you might lose all or part of your investment.

WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES AND WE MAY NOT BECOME
  PROFITABLE.

     We have incurred substantial net losses in every fiscal period since we
began operations. As of March 31, 1999, we had an accumulated deficit of
approximately $21.8 million. We incurred net losses of nearly $6.4 million for
the year ended December 31, 1998 and approximately $3.5 million for the three
months ended March 31, 1999. Net losses have increased for each fiscal year
since 1996 and this trend may continue. We may not become profitable. If we do
achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis. We expect to increase our research and
development, general and administrative, and marketing expenses. As a result, we
will need to generate significant additional revenues to achieve and maintain
profitability. Although we have experienced strong revenue growth in the last
several quarters, we anticipate further quarterly and annual losses for the
foreseeable future.

WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO EVALUATE OUR PROSPECTS.

     We commenced operations in April 1994 and did not begin our
Internet-related business until the summer of 1997. Our Web site was not
identified as "www.mortgage.com" until January 1999. Accordingly, we have a
limited operating history on which you can base your evaluation of our business
and prospects. Our prospects are subject to the risks, expenses and
uncertainties frequently encountered by companies in the early stages of
development in new and evolving markets for online financial services. These
risks include:

     o our ability to develop further our unproven online business model;

     o our ability to further develop awareness and loyalty for our Mortgage.com
       brand;

     o our ability to maintain funding sources for mortgage loans;

     o our ability to attract and retain qualified personnel; and

     o our ability to anticipate and adapt to the changes in the evolving
       electronic commerce market.

     In addition, our Internet-related business has never operated during a
downturn in the mortgage market and we cannot assure you we will be successful
in such a market.

CHANGES IN INTEREST RATES CAN REDUCE OUR REVENUES.

     Changes in interest rates can have a variety of effects on our business,
including:

     We will originate and sell fewer mortgage loans if interest rates rise.  In
periods of rising interest rates, demand for mortgage loans typically declines.
During those periods we will likely originate and fund fewer mortgage loans,
which will adversely affect our revenues.

     Our net interest income is affected by fluctuations in intermediate-term
and short-term interest rates.  We earn net interest income or suffer net
interest losses from the time a mortgage loan is funded until it is delivered to
an investor in the secondary market. Whether we earn net interest income or
suffer net interest losses depends on the difference between the interest rates
on mortgage loans we fund and the interest rates on the money we borrow to fund
those mortgage loans.

     The interest rates on mortgage loans we fund are affected by
intermediate-term rates in the United States. The interest rates on the money we
borrow to fund mortgage loans are affected by short-term rates based on the
London Interbank Offered Rate (LIBOR). When intermediate-term interest rates in
the United States approach the LIBOR rate, our net interest income is reduced,
which decreases our revenues.

     Our gains and losses on sales of mortgage loans in the secondary market are
affected by rising interest rates.  Our ability to generate net gains on the
sale of loans in the secondary market

                                       6
<PAGE>
may be adversely affected by increases in interest rates. We typically establish
interest rates on mortgage loans we originate at the same time we obtain
commitments from the anticipated purchasers of the loans. The mortgage loan
purchase commitments we obtain are contingent upon delivery of the loans to the
purchasers within specified periods. If we are unable to deliver closed loans on
time and interest rates increase, we may experience no gain, or even a loss, on
the sale of these loans. We currently do not use derivative financial
instruments to hedge these risks and are therefore exposed to losses caused by
rising interest rates. Management is currently evaluating hedging strategies.

FLUCTUATIONS MAY OCCUR IN OUR OPERATING RESULTS DUE TO SEASONALITY AND OTHER
  FACTORS, ANY OF WHICH MAY REDUCE THE PRICE OF OUR COMMON STOCK.

     Our revenue is subject to seasonal fluctuations. These trends reflect the
general pattern of home sales, which typically peak during the spring and fall
seasons and decline in the summer and winter.

     Our operating results may fluctuate significantly in the future as a result
of a variety of other factors, many of which are outside our control. These
factors include:

     o a decline in residential home buying that decreases the demand for
       purchase mortgage loans;

     o an increase in interest rates that decreases the demand for refinancing
       existing mortgage loans; and

     o the number of applications generated through our Web site and those sites
       we create and maintain for clients.

     Due to these factors, our operating results during any given period may
suffer, which could result in a reduction in the trading price of our common
stock.

WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH.

     We have been experiencing a period of rapid growth that has been placing a
significant strain on our resources. We have maintained a significant online
presence only since April 1998. The number of our employees increased from 255
on December 31, 1997, to 594 on March 31, 1999. In addition, we recently hired a
new chief financial officer and other key members of management. To manage
future growth effectively, we must integrate these and other new personnel,
manage our expanded operations, invest in our technology infrastructure and
obtain additional space to house our operations. If we fail to manage our future
growth effectively, the quality of our services will be impaired and our
financial performance will suffer.

OUR ABILITY TO FUND MORTGAGE LOANS DEPENDS UPON THE AVAILABILITY OF FUNDING
  SOURCES.

     Our ability to fund mortgage loans depends to a large extent upon our
ability to secure financing on acceptable terms. We currently fund most of the
loans we originate through warehouse lines of credit or under collateralized
loan repurchase agreements. Several commercial banks and institutional investors
provide these funding sources. Most of these financing arrangements have
one-year terms and some are cancellable by the lenders at any time.

     If we are not successful in renewing our borrowings or in arranging new
financing with terms as favorable as the terms of our current financing
arrangements, we may have to curtail our origination and funding activities,
which would reduce our revenue.

     All of the financing arrangements we use to fund mortgage loans are subject
to financial covenants and other restrictions. Because we are an early stage
company that is actively investing in growth, we are at times in default under
those covenants and restrictions and rely on waivers from the various lenders.
If we are unable to operate within the covenants or obtain waivers, all amounts
that we owe under the financing arrangements could become immediately payable.
The loss of a financing arrangement with a lender, or the acceleration of our
debt, would have a significant negative effect on our business.

LOSS OF OUR RELATIONSHIP WITH INTUIT LENDER SERVICES WOULD ADVERSELY AFFECT OUR
  REVENUE.

     We believe a significant amount of our revenue will be generated through
our agreements with Intuit Lender Services, and the termination of one or more
of those agreements would adversely affect our revenue.

     The processing, underwriting and funding services we provide to
participating lenders on www.quickenmortgage.com are subject to performance
standards relating to the number of applications and inquiries we convert to
funded loans and the level of customer service we provide. We currently are not
meeting the performance standards which relate to converting applications and
inquiries to closed loans. If we continue to fail to meet these performance
standards, Intuit Lender Services may cancel the agreement. A cancellation of
the agreement would have a negative effect on our online loan originations and
our business as a whole.

WE FACE SIGNIFICANT COMPETITION FROM INTERNET COMPANIES AND MORTGAGE BANKING
  COMPANIES.

     Internet-Related Competition.  The market for Internet products and
services is highly competitive. There are no substantial barriers to entry in
these markets, and we expect that competition will continue to intensify.

     As we expand the scope of our Internet services, we will compete directly
with a greater number of Internet sites and other online providers

                                       7
<PAGE>
of financial services who offer competitive products or services addressing
mortgage lending on the Internet. Increased competition in Internet mortgage
loan originations and services may reduce our access to borrowers and clients,
and thus reduce our revenues.

     Mortgage Banking Competition.  The mortgage banking business also is highly
competitive. We compete with other mortgage banking companies, commercial banks,
savings associations, credit unions, insurance companies and other financial
institutions in every aspect of our business. Many of these companies and
financial institutions are larger, more experienced and have greater financial
resources than we do. Consequently, they may be able to respond more quickly to
take advantage of new or changing opportunities, technologies and customer
requirements. They may also be able to undertake more extensive promotional
activities, offer more attractive terms to borrowers and adopt more aggressive
pricing policies. Accordingly, we may not be able to successfully compete with
these companies and financial institutions.

OUR BUSINESS IS DEPENDENT UPON THE AVAILABILITY OF AN ACTIVE SECONDARY MARKET.

     Our ability to sell mortgage loans to institutional investors in the
secondary market is largely dependent upon the continuation of programs
administered by Fannie Mae, Freddie Mac, Ginnie Mae and private mortgage
investors. These entities facilitate the sale of mortgage loans and
mortgage-backed securities through the secondary market. Any discontinuation or
reduction in the operation of those programs and any significant impairment of
our eligibility to participate in those programs would hurt our financial
performance. Also, any significant adverse change in the secondary market level
of activity or the underwriting criteria of Fannie Mae, Freddie Mac, Ginnie Mae
or other private mortgage investors would reduce our revenues.

THE LOSS OF OUR RELATIONSHIP WITH FANNIE MAE WOULD HAVE AN ADVERSE EFFECT ON OUR
  BUSINESS.

     We have an agreement with Fannie Mae that allows us to provide mortgage
brokers and mortgage bankers with use of Fannie Mae's Desktop Underwriter
software through www.openclose.com. If Fannie Mae terminates the agreement, our
plans for www.openclose.com would be interrupted, and possibly discontinued,
which could reduce our revenue.

USE OF OUR WEB SITES IS DEPENDENT ON THE CONTINUED GROWTH OF THE INTERNET.

     Our ability to originate mortgage loans on the Internet and provide clients
with Internet-based mortgage services is dependent upon continued growth in
Internet usage. Web-based mortgage lending is relatively new, and we cannot
predict whether there will be growth in mortgage loans generated on the
Internet.

     The Internet may not prove to be a viable commercial marketplace for a
number of reasons, including lack of acceptable security technologies,
inadequate development of the Internet infrastructure or slow or inadequate
development of performance improvements.

     Mortgage borrowers are accustomed to traditional means of obtaining
mortgage financing. For us to be successful, these borrowers must accept the use
of the Internet to conduct financial transactions and exchange information
online.

OUR BUSINESS MAY BE SIGNIFICANTLY AFFECTED BY THE ECONOMIES OF FLORIDA AND
  CALIFORNIA.

     Approximately 12.0% of our funded loan volume for the year ended
December 31, 1998 was derived from borrowers or properties in Florida and
approximately 67.2% was derived from borrowers or properties in California. From
January 1, 1999 through March 31, 1999, our funded loan volume from Florida
accounted for approximately 8.5% and our funded loan volume from California
accounted for approximately 57.0% of our total loan volume.

                                       8
<PAGE>
Consequently, although we expect our mortgage loan business to have a greater
national scope in the future, our short-term results of operations and financial
condition will be negatively affected by poor economic conditions in Florida and
California, particularly in their residential real estate markets.

THE SUCCESS OF OUR BUSINESS DEPENDS UPON SYSTEM INTEGRITY.

     The performance of our Web site and the Web sites we maintain for our
clients is important to our reputation, our ability to attract customers and our
ability to achieve market acceptance of our services. Any system failure that
causes an interruption or an increase in response time of our services could
result in fewer loan applications through our Web sites and those we maintain
for clients. System failures, if prolonged, could reduce the attractiveness of
our services to borrowers and clients.

     Our operations are susceptible to outages due to fire, floods, power loss,
telecommunications failures, break-ins, and similar events. Our primary
Internet-related computer and communications hardware is currently located in
New Jersey. Although we plan to fully duplicate our New Jersey hardware in a
Florida plant, we currently do not have backup facilities in the event of any
widespread outages in New Jersey.

     In addition, despite our implementation of network security measures, our
servers are vulnerable to computer viruses, break-ins, and similar disruptions
from unauthorized tampering with our computer systems.

     We do not carry sufficient insurance to compensate for losses that may
occur as a result of any of these events.

WE FACE RISKS ASSOCIATED WITH GOVERNMENTAL REGULATION OF OUR MORTGAGE BANKING
  BUSINESS.

     Our mortgage banking business is subject to the rules and regulations of
various federal, state and local regulatory agencies in connection with
originating, processing, underwriting and selling mortgage loans. These rules
and regulations, among other things, impose licensing obligations on us,
prohibit discrimination, establish underwriting guidelines and mandate
disclosures and notices to borrowers. We also are required to comply with each
regulatory entity's financial requirements.

     Mortgage origination activities are subject to the provisions of various
federal and state statutes including the Equal Credit Opportunity Act, the
Federal Truth-in-Lending Act, the Fair Credit Reporting Act, Real Estate
Settlement Procedures Act and the Fair Housing Act. We also must comply with
state usury laws. Failure to comply with these laws can lead to civil and
criminal liability, loss of approved status, demands for indemnification or loan
repurchases from investors in the secondary market, class action lawsuits and
administrative enforcement actions.

     Regulatory and legal requirements are subject to change and may become more
restrictive, making our compliance more difficult or expensive or otherwise
restricting our ability to conduct our business as it is now conducted. Changes
in these regulatory and legal requirements could adversely impact our financial
performance.

     Many states prohibit non-employees of a licensed mortgage company from
conducting business under that licensed mortgage company's name. Many of our
clients hire us to provide back office functions, such as processing and
underwriting. Because providing these back office services is a relatively new
concept in the industry, most state regulations do not specifically address the
provision of back office services. As state regulators become more familiar with
these practices, it is possible that they may interpret current regulations or
enact new regulations to restrict our ability to perform these back office
services for our clients, either of which would adversely affect our financial
performance.

IF WE FAIL TO MAINTAIN MORTGAGE BANKING AUTHORITY IN THE STATES WHERE WE DO
  BUSINESS, WE MAY INCUR LIABILITY.

     We are authorized to originate first lien mortgage loans in 48 states and
the District of Columbia. If we fail to maintain our licensing approvals and
exemptions in those jurisdictions, we may incur liability and may be unable to
transact business in those jurisdictions.

     Although our license applications are pending, we currently are not
licensed to originate mortgage loans in New York or New Jersey in our own name.
Loan applications and inquiries we receive from New Jersey and New York are
originated through NetB@nk. NetB@nk can terminate our arrangement at any time.
If NetB@nk terminates the arrangement, we will not be able to originate and fund
mortgage loans in New York and New Jersey unless we develop a similar
arrangement

                                       9
<PAGE>
with another mortgage lender or become licensed. For the year ended
December 31, 1998, approximately 2.6% of the mortgage loans we funded were from
New York and New Jersey. For the three months ended March 31, 1999,
approximately 5.2% of the mortgage loans we funded were from New York and New
Jersey.

     We have authority to originate subordinate lien mortgage loans in 44
states. In those states in which we do not have authority, or in which our
authority is limited, we do not originate subordinate lien mortgage loans. If we
were to originate a subordinate lien mortgage loan in a state without authority
to do so, we might incur liability.

     To maintain our authority to originate mortgage loans, some states require
us to obtain prior approval before any change of control. Change of control is
generally defined as the acquisition by any person or entity of 10% or more of
our voting stock. A state's approval may be conditioned on the stockholder
meeting criteria based on personal and business information about the
stockholder. The stockholder also may be required to periodically file
information with the state.

     Because we will be a public company following this offering, we may not
have advance notice of a change of control occasioned by a stockholder's
purchase of our stock in the open market. We also will not be able to control
who purchases our voting stock in the open market. If any person holding 10% or
more of our stock fails to meet a state's criteria, or refuses to comply with
state regulatory requirements, we could lose our authority to originate mortgage
loans in that state, which could have an adverse effect on our business, results
of operations and financial condition.

WE FACE LEGAL UNCERTAINTIES ASSOCIATED WITH THE INTERNET AND ELECTRONIC
  COMMERCE.

     Our operations on the Internet are not currently subject to direct
regulation by any government agency in the United States beyond mortgage-related
regulations and regulations applicable to businesses generally.

     A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, including:

     o online content;

     o user privacy;

     o taxation;

     o access charges;

     o liability for third-party activities; and

     o jurisdiction.

     In addition, the applicability to the Internet of existing laws is
uncertain. The adoption of new laws or the application of existing laws may
decrease the use of the Internet, which would decrease the demand for our
services, increase our cost of doing business or otherwise have an adverse
effect on our business.

     The tax treatment of the Internet and electronic commerce is currently
unsettled. A number of proposals have been made that could impose taxes on the
sale of goods and services and certain other Internet activities. Recently, the
Internet Tax Information Act was signed into law placing a three-year moratorium
on new state and local taxes on Internet commerce. However, we cannot assure you
that future laws imposing taxes or other regulations would not substantially
impair the growth of our business and our financial condition.

     Certain local telephone carriers claim that the increasing popularity of
the Internet has burdened the existing telecommunications infrastructure and
that many areas with high Internet use are experiencing interruptions in
telephone service. These carriers have petitioned the Federal Communications
Commission to impose access fees on Internet service providers. If these access
fees are imposed, the costs of communicating on the Internet could increase,
which could decrease demand for our services and increase our cost of doing
business.

OUR SUCCESS DEPENDS ON OUR ABILITY TO ADAPT TO TECHNOLOGICAL CHANGES.

     The market for Internet products and services is characterized by rapid
technological developments, evolving industry standards, and frequent new
products and enhancements. If faster Internet access becomes more widely
available through cable modems or other technologies, we may be required to make
significant changes to the design and content of our Web site and the Web sites
we maintain for clients to compete effectively.

     As the number of Web pages and users increase, we will need to modify the
Internet infrastructure, our Web site and the Web sites we

                                       10
<PAGE>
maintain for our clients to accommodate increased traffic. If we cannot modify
our computer systems, we may experience:

     o system disruptions;

     o slower response times;

     o impaired quality and speed of application processing; and

     o delays in reporting accurate interest rate information.

     If we fail to effectively adapt to increased usage of the Internet or new
technological developments, our business will be adversely affected.

OUR EFFORTS TO ENHANCE BRAND AWARENESS MAY BE UNSUCCESSFUL, WHICH WOULD AFFECT
  OUR FINANCIAL PERFORMANCE.

     We believe that establishing and maintaining the Mortgage.com brand name
and its reputation is an important aspect of our efforts to attract and expand
our technology services and mortgage lending business. We also believe that the
importance of brand recognition will increase due to the growing number of
Internet sites and the relatively low barriers to entry. If we fail to
adequately promote and maintain our brand name, our financial performance will
suffer.

     To maintain and enhance the Mortgage.com brand, we must provide
high-quality products and services, particularly on the Internet. If any breach
or alleged breach of security or privacy involving our online services occurs,
or if we are unable to otherwise successfully promote and maintain our brand,
our business will suffer.

     There are thousands of Internet Web site addresses, or "domain names,"
containing the word "mortgage," such as "1mortgage.com" and "1mortgage1.com,"
that have been registered to other users. To the extent consumers confuse other
Web sites with ours, our reputation could be harmed and our business could
suffer.

ONLINE SECURITY RISKS MAY HARM OUR BUSINESS OPERATIONS.

     A significant barrier to online commerce is the secure transmission of
confidential information over public networks. We rely on encryption and
authentication technology licensed from third parties to effect secure
transmission of confidential information, such as that required on a mortgage
loan application. Advances in computer capabilities, new discoveries in
cryptography, or other developments may result in a breach of the algorithms we
use to protect customer data. If any compromise of our security occurs, it would
injure our reputation, and could impact the success of our business.

WE RELY ON THE DEPENDABILITY OF SOFTWARE LICENSED TO US BY THIRD PARTIES.

     Our products and services rely on software licensed to us by third parties.
We believe there are other sources for most of the specialized software we
license and that we could replicate the functionality of this software. However,
because our products incorporate software developed and maintained by third
parties, and because we license from third parties certain industry standard
software products that cannot be replicated, we depend on those third parties
to:

     o deliver and support reliable products;

     o enhance their current products;

     o develop new products on a timely and cost-effective basis; and

     o respond to emerging industry standards and other technological changes.

     In addition, the third party software currently used in our products and
the delivery of our services may become obsolete or incompatible with the
products and services we offer in the future.

     If we have to replace third-party software for any of those reasons, our
business could suffer during the replacement period.

WE FACE RISKS THAT OUR INTELLECTUAL PROPERTY IS NOT ADEQUATELY PROTECTED AND
  THAT WE MAY BE SUBJECT TO CLAIMS FROM THIRD PARTIES FOR INFRINGEMENT.

     Our copyrights, trademarks, trade dress, trade secrets, and similar
intellectual property are critical to our success. We have obtained federal
trademark registration for CLOser, and have registered the Web site domain names
we use, which prevents any other person from using those names for their Web
sites.

     Some of our trademarks and service marks, such as Mortgage.com, may be
considered too generic to qualify for federal trademark registration.
Accordingly, it is possible that neither we nor anyone else is entitled to the
exclusive use of those

                                       11
<PAGE>
trade names. Other persons may use those trade names in a way that damages our
reputation or otherwise creates confusion in the market, all of which would
injure our financial performance if it took place on a large enough scale.

     Our success and ability to compete are substantially dependent upon our
internally developed technology, which we protect through a combination of
copyright, trade secret and trademark law. However, we have no patents issued or
applied for on our technology. Unauthorized parties may attempt to copy or to
otherwise obtain and use our services or technology and we cannot be certain
that the steps we have taken and will take in the future will prevent them from
misappropriating or infringing upon our technology. The costs associated with
enforcing our rights to technology could adversely affect our financial
performance.

     Mortgage-related Internet technologies are rapidly being developed. As a
result, we believe that disputes regarding the ownership of these technologies
are likely to arise in the future. Third parties may assert infringement claims
against us. We may incur substantial costs in defending against third-party
infringement claims regardless of the merit of those claims. We also cannot
guarantee that we would be able to license comparable technology if our use was
found to infringe on someone else's rights. If we were unable to license
comparable technology, our business could suffer.

WE MAY NOT BE ABLE TO HIRE AND RETAIN SUFFICIENT TECHNICAL AND SUPPORT PERSONNEL
  THAT WE NEED TO SUCCEED.

     Competition for qualified technical and support personnel is intense, and
we may not be able to hire and retain sufficient numbers of qualified technical
and support personnel. If we fail to hire and retain sufficient numbers of
technical and support personnel, our business and results of operations would be
adversely affected.

EARLY PAYMENT MORTGAGE LOAN DEFAULTS MAY CAUSE LOSSES.

     If borrowers default in the first few months after the loan is originated,
we may be required to repurchase those loans from the secondary market investors
to whom we sold those loans. We may not be able to resell those loans in the
secondary market. Our financial performance may be adversely affected during
economic downturns when the frequency of loan defaults tends to increase.

WE MAY BE REQUIRED TO REPURCHASE LOANS OR INDEMNIFY INVESTORS IF WE BREACH
  REPRESENTATIONS AND WARRANTIES.

     When we sell a mortgage loan to a secondary market investor, we make
representations and warranties about certain characteristics of the mortgage
loan, the borrower and the underlying property. If we breach any of these
representations and warranties, we may be required to repurchase the loan from
the investor or indemnify the investor for any damages caused by the breach.
With some loan sales, we may be required to return a portion of the premium paid
by the investor for the loan if the loan is prepaid within the first year after
its sale. If we are regularly required to repurchase loans, indemnify investors
or return loan premiums, it would have an adverse effect on our financial
performance. A delay in the receipt of services from third parties may adversely
affect our business.

     We rely on third party sources for certain information used in the mortgage
loan underwriting process, including credit reports, appraisals and title
searches. Any interruptions or delays in obtaining these services may cause
delays in our processing and closing of mortgage loans, which could create
customer dissatisfaction and adversely affect our business.

WE MAY BE AFFECTED BY UNEXPECTED YEAR 2000 PROBLEMS.

     Many existing computer systems and software products do not properly
recognize dates after December 31, 1999. This Year 2000 problem could result in
data corruption, system failures or disruptions of operations. We are subject to
potential Year 2000 problems affecting our products and services, our internal
systems, and the systems of third parties on whom we rely. We believe that the
technology underlying our products and services is Year 2000 compliant. However,
we may discover errors or defects in our internal systems that may be
unresolvable or that may result in material costs to us. Internal Year 2000
problems could negatively affect our business, operating results and financial
condition.

     We use third-party equipment, software and content that may not be Year
2000 compliant. Although we typically receive assurances from third parties that
they are Year 2000 compliant, we do

                                       12
<PAGE>
not independently verify their Year 2000 compliance. If third parties on whom we
rely are not Year 2000 compliant, our business could be adversely affected.

     We have not yet fully developed a comprehensive contingency plan to address
situations that may result if we encounter Year 2000 problems. The cost of
developing and implementing a contingency plan may itself be material, and we
cannot assure you that our contingency plans will be adequate. For more
information on how we are addressing the Year 2000 problem, see "Management's
Discussion and Analysis--Year 2000 Readiness Disclosure Statement."

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND ADDITIONAL FINANCING MAY NOT BE
  AVAILABLE.

     We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least the next 12
months. We may need to raise additional capital, however, to fund more rapid
expansion, to develop new and to enhance existing services to respond to
competitive pressures, and to acquire complementary business or technologies.

     We raised capital through the issuance of securities four times during 1998
and five times during 1999. If we raise additional funds through further
issuances of equity or convertible debt securities, the percentage ownership of
our current stockholders will be reduced and holders of those new securities may
have rights, preferences and privileges senior to those of our current
stockholders, including stockholders purchasing shares in this offering.

     In addition, we may not be able to obtain additional financing on terms
favorable to us, if at all. If adequate funds are not available or are not
available on terms favorable to us, our business, results of operations and
financial condition could be adversely affected.

YOU WILL BE SUBJECT TO MARKET RISKS TYPICALLY ASSOCIATED WITH INITIAL PUBLIC
  OFFERINGS.

     Prior to the offering, there has been no public market for our common
stock. After the offering, an active trading market may not develop or continue.
You will pay a price for the common stock that was not established in a
competitive market. Rather, you will pay a price that we negotiated with the
representatives of the underwriters. The price of the common stock that will
prevail in the market after the offering may be higher or lower than the price
you pay.

     The stock market in general has recently experienced extreme price and
volume fluctuations. The market prices of technology companies, particularly
Internet-related companies, have experienced fluctuations unrelated or
disproportionate to the operating performance of those companies. These broad
market fluctuations could adversely affect the market price of our common stock.

     Recently, when the market price of a stock has been volatile, holders of
that stock have often instituted securities class action litigation against the
company that issued the stock. If that were to happen to us, we could incur
substantial costs defending the lawsuit. The lawsuit also could divert the time
and attention of our management team. Both could have a negative impact on our
financial performance.

YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION UPON COMPLETION OF THIS PUBLIC
  OFFERING.

     The initial public offering price of our common stock is substantially
higher than the book value per outstanding share of common stock. Accordingly,
you will suffer an immediate and substantial dilution in net tangible book value
per share of the common stock from the initial public offering price in the
amount of $     per share (based upon an assumed initial offering price of
$     per share.) You will experience additional dilution upon exercise of
outstanding options and warrants.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

     After this offering, we will have             shares of common stock
outstanding. Sales of a substantial number of shares of common stock in the
public market following this offering could adversely affect the market price of
our common stock. All the shares sold in this offering will be freely tradable.
The remaining shares of common

                                       13
<PAGE>
stock outstanding after this offering will be available for sale in the public
market as follows:

<TABLE>
<CAPTION>
DATE OF AVAILABILITY FOR SALE                SHARES
-----------------------------------------   ---------
<S>                                         <C>
Date of this prospectus..................           0
90 days after the date
  of this prospectus.....................         625
180 days or more after the date of this
  prospectus.............................   5,298,406
</TABLE>

     In addition, there are 1,808,888 shares of common stock issuable upon
exercise of options issued under our stock option plan, and there are
1,161,948 shares of common stock issuable upon exercise of exercisable options
and warrants otherwise outstanding.

WE WILL HAVE BROAD DISCRETION IN USING THE NET PROCEEDS OF THIS OFFERING.

     We expect to use the net proceeds from the sale of our common stock to
develop and market the brand name mortgage.com and for other corporate purposes.
We will have significant flexibility in applying the net proceeds of this
offering. You will not have the opportunity to evaluate the economic, financial
or other information on which we base our decisions on how to use the net
proceeds. If we fail to apply the net proceeds effectively, our business could
be negatively affected.

YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE UNCERTAIN.

     This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipate," "believe," "expect," "future,"
"plan" and "intend," and similar expressions, to identify forward-looking
statements. You should not place undue reliance on these forward-looking
statements. Our actual results could differ materially from those anticipated in
forward-looking statements for many reasons, including the risks described in
this section and elsewhere in this prospectus.

                                       14
<PAGE>
                                USE OF PROCEEDS

     The proceeds we receive after deducting underwriting discounts, commissions
and estimated offering expenses from the sale of the common stock are estimated
to be approximately $          million (assuming an initial public offering
price of $            ). If the underwriters' over-allotment option is exercised
in full, we estimate our net proceeds will be approximately $             . The
primary purposes of this offering are to obtain additional capital, create a
public market for our common stock and facilitate future access to public
capital markets.

     We expect to use the net proceeds of this offering for corporate purposes,
including funding an advertising and promotional campaign to enhance awareness
of our Mortgage.com brand, technology research and development and expanding our
funding sources for mortgage loans. In addition, we expect to use approximately
$13 million of the net proceeds to redeem warrants to purchase 300,000 shares of
common stock held by Superior Bank, which we are required to redeem under an
agreement with Superior Bank. We expect to use $40.5 million of the net proceeds
to retire $13 million in 12% Senior Subordinated Notes issued in February and
April 1999 and a $27.5 million 12% Senior Subordinated Convertible Note issued
in May 1999. The holder of the Convertible Note may instead elect to convert the
principal amount into common stock at $60 per share. In addition, Credit.com has
the right to require us to redeem its 20,000 shares of common stock following
the offering at the initial public offering price per share.

     Other than as described above, we have no present plans or commitments and
are not currently engaged in any negotiations with respect to the use of the net
proceeds of this offering. Until the net proceeds are used, we will invest them
in short-term, investment grade securities or money market instruments.

                                DIVIDEND POLICY

     We have never declared or paid any cash dividends on our common stock. We
anticipate that any earnings will be retained for development and expansion of
our business and we do not anticipate paying any cash dividends in the
foreseeable future. Our board of directors has sole discretion to pay cash
dividends based on our financial condition, results of operation, capital
requirements, contractual obligations and other relevant factors. Our warehouse
lines of credit may also restrict our ability to pay dividends.

                                       15
<PAGE>
                                   CAPITALIZATION

     The following table sets forth our capitalization as of March 31, 1999,
(1) on an actual basis, (2) on a pro forma basis giving effect to the conversion
of the Convertible Note issued to Intuit in May 1999 and all outstanding shares
of preferred stock (including shares of preferred stock issued in May 1999) into
common stock, other than the Special Preferred Stock (Northern California
Division) and (3) on a pro forma as adjusted basis to reflect the sale of
            shares of common stock offered through this prospectus at an assumed
initial offering price of $             per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses. The
table does not include 2,999,375 shares of common stock reserved for issuance
under our stock option plan and does not include common stock reserved for
issuance upon exercise of options and warrants outstanding outside of our stock
option plan. The pro forma and pro forma as adjusted columns do not include
common stock issuable upon conversion of the Special Preferred Stock (Northern
California Division). Of the 1,000 outstanding shares of Special Preferred Stock
(Northern California Division), 660 shares will convert, upon closing of this
offering, to the number of shares of common stock as is obtained by dividing
$2,640,000 by the initial public offering price. All numbers are in thousands,
except share and per share data.

<TABLE>
<CAPTION>
                                                                                          MARCH 31, 1999
                                                                               ------------------------------------
                                                                                                        PRO FORMA
                                                                                ACTUAL     PRO FORMA    AS ADJUSTED
                                                                               --------    ---------    -----------
                                                                                           (UNAUDITED)
<S>                                                                            <C>         <C>          <C>
Long-term obligations, net of current portion...............................   $  8,000    $  8,000
Notes payable, net of current portion.......................................        380         380
Stockholders equity (deficit):
  Common stock, $.01 par value: 30,000,000 shares authorized; 1,362,730
     shares issued and outstanding actual, 5,299,031 shares issued and
     outstanding pro forma and            shares issued and outstanding pro
     forma as adjusted......................................................         14          46
  Convertible preferred stock, $.01 par value: 15,000,000 shares authorized;
     3,199,073 issued and outstanding actual; 1,000 shares issued and
     outstanding pro forma and pro forma as adjusted........................         32           0
Unearned compensation.......................................................    (15,187)    (15,187)
Additional paid-in capital..................................................     47,403      47,403
Accumulated deficit.........................................................    (21,269)    (21,269)
                                                                               --------    ---------     ---------
Total stockholders' equity (deficit)........................................     10,993      10,993
                                                                               --------    ---------     ---------
Total capitalization........................................................   $ 19,373    $ 19,373
                                                                               --------    ---------     ---------
                                                                               --------    ---------     ---------
</TABLE>

                                       16
<PAGE>
                                    DILUTION

     If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering. We calculate net tangible book value per
share by calculating the total assets less intangible assets and total
liabilities, and dividing it by the number of outstanding shares of common
stock.

     After giving effect to the conversion of the convertible note issued in May
1999 and all shares of preferred stock (including shares of preferred stock
issued in May 1999) into common stock, other than the Special Preferred Stock
(Northern California Division), as though they occurred on March 31, 1999, the
net tangible book value of our common stock as of March 31, 1999 would have been
$47,934,471, or approximately $9.10 per share. After giving effect to the sale
of            shares of common stock at an assumed initial public offering price
of $          per share (less estimated underwriting discounts and commissions
and estimated expenses), our pro forma net tangible book value as of March 31,
1999 would have been $          , or $            per share. This represents an
immediate increase in the pro forma as adjusted net tangible book value of
$             per share to existing stockholders and an immediate dilution of
$          per share to you, as illustrated in the following table:

<TABLE>
<S>                                                                                       <C>      <C>
Assumed initial public offering price per share........................................            $
Pro forma net tangible book value per share at March 31, 1999..........................   $9.10
Increase per share attributable to new investors.......................................
                                                                                          -----
Pro forma net tangible book value per share after this offering........................
                                                                                                   -----
Dilution per share to new investors....................................................            $
                                                                                                   -----
                                                                                                   -----
</TABLE>

     The following table shows on a pro forma basis at March 31, 1999, the total
number of shares of common stock purchased, the total consideration paid to us
and the average price per share paid by existing stockholders and purchasers of
shares in this offering, assuming the conversion of the convertible note issued
in May 1999 and all shares of preferred stock (including shares of preferred
stock issued in May 1999) into common stock and assuming an initial public
offering price of $           per share:

<TABLE>
<CAPTION>
                                                         SHARES PURCHASED       TOTAL CONSIDERATION
                                                       --------------------    ----------------------    AVERAGE PRICE
                                                        NUMBER      PERCENT      AMOUNT       PERCENT    PER SHARE
                                                       ---------    -------    -----------    -------    -------------
<S>                                                    <C>          <C>        <C>            <C>        <C>
Existing stockholders...............................   5,269,137               $74,555,209                  $ 14.15
New investors.......................................
                                                       ---------      ---      -----------      ---
  Totals............................................                  100%                      100%
                                                       ---------      ---      -----------      ---
                                                       ---------      ---      -----------      ---
</TABLE>

     You will experience additional dilution upon exercise of outstanding
options and warrants. See "Stock Option Plan" and "Options and Warrants."

                                       17
<PAGE>
                      SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected financial data has been derived from our
consolidated financial statements. Our financial statements for the years ended
December 31, 1996, 1997 and 1998 have been audited by KPMG LLP, independent
auditors. Those financial statements and KPMG LLP's report on those financial
statements are included in this prospectus, and the information below for those
periods is qualified by reference to their report. The financial statements for
the periods ended March 31, 1995, December 31, 1995 and the three month periods
ended March 31, 1998 and 1999 are unaudited. The unaudited financial statements
have been prepared on the same basis as the audited financial statements. In the
opinion of management, all adjustments of a normal recurring nature which are
necessary to present a fair statement of the results for the interim periods
have been made. The unaudited results of operations for the interim periods are
not necessarily indicative of the results for the full year or any future
period. Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of the convertible note issued to Intuit in
May 1999 and all outstanding preferred stock (including shares of preferred
stock issued in May 1999) into common stock (other than Special Preferred Stock
(Northern California Division)), as if the shares had converted immediately upon
their issuance but does not assume undeclared cumulative dividends on preferred
stock. Net loss attributable to common shareholders includes undeclared
cumulative dividends on preferred stock, and is not included in the calculation
of pro forma basic and diluted net loss per share.


<TABLE>
<CAPTION>
                                                                                                                     THREE
                                                                                                                     MONTHS
                                                                                                                     ENDED
                                                   APR. 15, 1994    NINE MONTHS                                      MARCH
                                                   (INCEPTION)        ENDED            YEAR ENDED DECEMBER 31,        31,
                                                    THROUGH          DEC. 31,       -----------------------------    ------
                                                   MAR. 31, 1995       1995          1996       1997       1998       1998
                                                   -------------    ------------    -------    -------    -------    ------
                                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                            (UNAUDITED)                                              (UNAUDITED)
<S>                                                <C>              <C>             <C>        <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
  Secondary marketing revenue, net..............      $    77         $    942      $ 4,101    $11,595    $28,598    $5,407
  Loan production and processing fees, net......          384              778          821      2,347      5,338       922
  Management, technical and other fees..........           40            1,422        2,577      2,032      1,868       546
  Net interest (expense) income.................          (17)             (92)          17        500       (113)      (56)
                                                      -------         --------      -------    -------    -------    ------
      Total revenue.............................          484            3,050        7,516     16,474     35,691     6,819
                                                      -------         --------      -------    -------    -------    ------
Expenses:
  Compensation and employee benefits............        1,515            2,542        6,527     13,083     26,075     4,928
  Marketing.....................................           33               36           95        238      1,335        85
  Research and development......................           --               --          497      1,079      2,888       433
  Depreciation and amortization.................          235              296          652        480      1,873       154
  General and administrative....................          919            1,470        3,764      5,126      9,597     1,589
                                                      -------         --------      -------    -------    -------    ------
      Total expenses............................        2,702            4,344       11,534     20,006     41,768     7,189
                                                      -------         --------      -------    -------    -------    ------
Net loss........................................      $(2,218)        $ (1,294)     $(4,018)   $(3,532)   $(6,078)   $ (370)
Net loss attributable to common shareholders....      $(2,218)        $ (1,294)     $(4,934)   $(4,485)   $(8,943)   $ (691)
                                                      -------         --------      -------    -------    -------    ------
Basic and diluted net loss per share............      $ (2.71)        $  (1.14)     $ (3.92)   $ (3.85)   $ (7.17)   $(0.63)
Shares used in computation of basic and diluted
  net loss per share............................          818            1,132        1,132      1,166      1,245     1,098
Unaudited pro forma basic and diluted net loss
  per share attributable to common
  shareholders..................................                                                          $ (1.37)
                                                                                                          -------
                                                                                                          -------
Shares used in computation of unaudited pro
  forma basic and diluted net loss per share....                                                            4,445
                                                                                                          -------
                                                                                                          -------

<CAPTION>

                                                   1999
                                                  -------

<S>                                                <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
  Secondary marketing revenue, net..............  $ 8,600
  Loan production and processing fees, net......    2,598
  Management, technical and other fees..........    1,991
  Net interest (expense) income.................       26
                                                  -------
      Total revenue.............................   13,216
                                                  -------
Expenses:
  Compensation and employee benefits............    9,645
  Marketing.....................................    1,536
  Research and development......................      776
  Depreciation and amortization.................      698
  General and administrative....................    3,759
                                                  -------
      Total expenses............................   16,414
                                                  -------
Net loss........................................  $(3,199)
Net loss attributable to common shareholders....  $(4,130)
                                                  -------
Basic and diluted net loss per share............  $ (3.05)
Shares used in computation of basic and diluted
  net loss per share............................    1,356
Unaudited pro forma basic and diluted net loss
  per share attributable to common
  shareholders..................................  $ (0.70)
                                                  -------
                                                  -------
Shares used in computation of unaudited pro
  forma basic and diluted net loss per share....    4,554
                                                  -------
                                                  -------
</TABLE>

     The pro forma as adjusted balance sheet data as of March 31, 1999 reflects
the conversion of the convertible note issued to Intuit in May 1999 and all
outstanding preferred stock (including shares of preferred stock issued in May
1999), into common stock upon the closing of this offering (other than Special
Preferred Stock (Northern California Division)). The pro forma as adjusted
balance sheet data also has been adjusted to give effect to the sale of
            shares of common stock offered through this prospectus at an assumed
initial public offering price of $     per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses.

<TABLE>
<CAPTION>
                                                                                                                MARCH
                                                                                                                 31,
                                                                                      DECEMBER 31,              1999
                                                                  DEC. 31,    -----------------------------    -------
                                                MARCH 31, 1995      1995       1996       1997       1998      ACTUAL
                                                --------------    --------    -------    -------    -------    -------
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                       (UNAUDITED)                                             (UNAUDITED)
<S>                                             <C>               <C>         <C>        <C>        <C>        <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................       $  541        $    222    $ 2,008    $ 1,680    $ 3,412    $ 6,251
Working capital..............................          213            (850)     2,283      1,353      2,240      6,142
Total assets.................................        3,253          11,684     30,711     81,927    193,438    188,805
Total long-term debt, net of current
  portion....................................           --              --          0          0          0      7,623
Convertible preferred stock..................        1,000           1,000      8,278     11,823     26,476     26,473
Stockholders' equity.........................          912             347      3,283      3,797     13,136     10,993

<CAPTION>
                                               PRO FORMA
                                               AS ADJUSTED
                                               -----------
<S>                                             <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................
Working capital..............................
Total assets.................................
Total long-term debt, net of current
  portion....................................
Convertible preferred stock..................
Stockholders' equity.........................
</TABLE>

                                       18
<PAGE>
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     This prospectus includes "forward-looking" statements that reflect our
current views with respect to future events and financial performance. We use
words such as "anticipate," "believe," "expect," "future," "plan" and "intend,"
and similar expressions, to identify forward-looking statements. You should be
aware that actual results may differ materially from our expressed expectations
because of risks and uncertainties inherent in future events, particularly those
risks identified in the "Risk Factors" section of this prospectus, and you
should not unduly rely on these forward looking statements. We will not
necessarily update the information in this prospectus if any forward-looking
statement later turns out to be inaccurate.

OVERVIEW

     We are a provider of mortgage services to consumers and to other businesses
and a leading provider of such services on the Internet. We have developed
state-of-the-art technology to support the origination, processing,
underwriting, closing and secondary marketing of mortgage loans. We use this
technology as a platform to provide mortgage financing directly to borrowers and
to enable our clients, such as mortgage brokers, mortgage banks, Realtors and
homebuilders, to improve the efficiency and effectiveness of their operations.

     We commenced operations in April 1994 in Florida as First Mortgage Network,
a wholesale mortgage lender providing independent mortgage brokers with various
support services, including processing, closing and funding services for their
loans. In April 1995, we acquired a software system from Morbank Financial
Systems that was designed to automate mortgage origination, processing,
underwriting and closing functions in traditional mortgage lending operations.
We enhanced this software and named it CLOser, our proprietary technology
platform that supports all of the services we provide. By the end of 1995, we
were using the CLOser software system to enable financial institutions and
non-traditional mortgage originators, such as Realtors and homebuilders, to
originate mortgages as an ancillary service. These "network members" paid
monthly membership fees for the use of the CLOser software system and
transaction fees for our other services.

     In the summer of 1996, we expanded our membership network by acquiring
Western American Mortgage, the mortgage affiliate of Mason-McDuffie Real Estate,
a major real estate brokerage company in northern California. In June 1997, we
acquired OnLine Capital, a mortgage lender also located in northern California,
with more than 25 loan counselors at the point-of-sale of homes, three Realtor
business-to-business relationships and requisite back office personnel. We
deployed these acquired resources to support and expand our member business in
California.

     In the spring of 1998, we acquired American Finance and Investment (AFI), a
former subsidiary of Virginia First Savings Bank, and moved its operations to
Florida. AFI was one of the first companies to originate mortgages through the
Internet. We integrated this acquired Internet technology with our CLOser
software system, enabling us to establish various relationships with other
Internet-based businesses and to originate mortgage applications online on a
national basis. In January 1999, we acquired the URL www.mortgage.com and
changed our corporate name to Mortgage.com, Inc. We believe this name change
more accurately reflects our business of re-engineering the mortgage process
through technology such as the Internet.

     We currently provide origination, processing, underwriting, closing,
funding and post-closing services for mortgages originated directly with
borrowers. We originate mortgages directly with borrowers through
www.mortgage.com and several other Web sites or through point-of-sale loan
counselors stationed in the offices of our network members. We also provide one
or more of these services, or the technology to support these services, to other
mortgage industry participants. We enable these business clients to efficiently
conduct the mortgage process by providing them with co-branded mortgage
services, private label mortgage services, back office services and licenses of
our proprietary technology. We have also developed www.openclose.com, a Web site
where participating mortgage lenders, brokers and loan correspondents can
exchange lender product and pricing information, automated underwriting data,
mortgage insurance certificates and borrower

                                       19
<PAGE>
application information in a neutral environment. We expect www.openclose.com to
be available for commercial use in August 1999.

     Loans that we originate directly from borrowers or through one of our
business clients generate loan origination fees. Loans that we fund, including
loans originated by our business partners and clients, generate gains or losses
when we sell the loans to independent mortgage investors in the secondary
market. When we sell a loan in the secondary market we achieve a net gain or
suffer a net loss equal to the difference between the amount we funded or paid
for the loan and the price at which the loan is sold to the secondary market
investor. Typically, we obtain commitments from investors to buy loans on a
loan-by-loan basis at the same time we lock an interest rate for the borrower.
We have sold, and intend to continue to sell, all loans, together with the
associated servicing rights, in the secondary market. Origination fees, or
"points," and secondary marketing gains or losses are included in "Secondary
marketing revenue, net" in our financial statements.

     Other services, including loan underwriting and processing, and obtaining
appraisals and credit reports, generate fees payable by the borrower at closing.
These fees are offset against amounts paid to third parties for the provision of
some of these services and, along with underwriting and closing fees, are
reflected in "Loan production and processing fees, net" in our financial
statements.

     Fees for the use of our technology and related support services, including
technology licensing and maintenance fees and fees earned from creating and
maintaining private label Web sites, are reflected in "Management, technical and
other fees" in our financial statements.

     The cost of funds under our financing arrangements is based on short-term
interest rates, while in today's market the interest rates we charge borrowers
on mortgage loans are based generally on intermediate-term interest rates. We
generate net interest income on mortgage loans if the intermediate-term interest
rate paid by the borrower on the mortgage loan exceeds the short-term interest
rate we are charged under our financing arrangements. Conversely, we suffer net
interest losses if the short-term interest rate under our financing arrangements
exceeds the intermediate-term interest rate paid by the borrower on the mortgage
loan. We try to minimize the length of time between closing of the loan and
delivery of the loan to secondary market investors, which is especially
important when intermediate-term rates have declined to the levels of short-term
rates. The difference between the interest we earn on the loans we fund and the
interest we pay under our financing arrangements, along with other net interest
income or expense, is recorded as "Net interest (expense) income" in our
financial statements. "Net interest (expense) income" also includes interest
expense related to subordinated debt.

     We have experienced substantial losses since inception and, as of
March 31, 1999, have an accumulated deficit of $21.3 million. These net losses
and the accumulated deficit are a result of investments in our technology
infrastructure and personnel in anticipation of growth in loan volumes from both
our direct-to-consumer and business-to-business channels.

     We plan to extend our brand position and leverage our technology
infrastructure as we scale up loan production volumes. Accordingly, we intend to
invest heavily in branding programs, marketing and promotional campaigns, new
partnerships and strategic alliances, our operating infrastructure and launching
www.openclose.com. We expect to have net losses for the foreseeable future.

     We will incur a non-cash expense over the next five years for the
amortization of unearned stock-based compensation resulting from granting stock
options to employees from October 1998 through April 1999. These deferred
compensation costs represent the difference between the exercise price of the
options and the deemed fair market value of the underlying common stock at the
time of grant of the options.

     Our limited operating history makes it difficult to forecast future
operating results. Although our revenue has grown significantly in recent
quarters, we cannot assure you that we will be able to sustain revenue growth or
achieve and maintain profitability. Even if we were to achieve profitability, we
expect material fluctuations in quarterly revenue and earnings to result from a
number of factors, including:

          o changes in interest rates;

          o loss of strategic relationships;

                                       20
<PAGE>
          o changes in competitive pressures on pricing or quality of service;

          o seasonal variations in demand for mortgages;

          o general economic conditions;

          o system failures or Internet down time;

          o changes in state or federal government regulations and their
            interpretations, especially with respect to the mortgage and
            Internet industries;

          o our ability to enhance our information technology to keep pace with
            changes in the industry; and

          o changes in attitudes of consumers doing business over the Internet.

     As a result, we do not believe that our historical results are necessarily
indicative of results to be expected in any future period.

RESULTS OF OPERATIONS

     The following table sets forth the percentage of total revenue of certain
line items included in our statement of operations for the periods indicated:

<TABLE>
<CAPTION>
                                                                                                            THREE MONTHS
                                                                                YEAR ENDED DECEMBER 31,        ENDED
                                                                                                             MARCH 31,
                                                                                -----------------------    --------------
                                                                                1996     1997     1998     1998     1999
                                                                                -----    -----    -----    -----    -----
                                                                                                            (UNAUDITED)
<S>                                                                             <C>      <C>      <C>      <C>      <C>
REVENUE:
    Secondary marketing revenue, net.........................................    54.6%    70.4%    80.1%    79.3%    65.1%
    Loan production and processing fees, net.................................    10.9     14.2     15.0     13.5     19.7
    Management and technical fees and other..................................    34.3     12.3      5.2      8.0     15.0
    Interest, net............................................................     0.2      3.1    (0.3)    (0.8)       .2
                                                                                -----    -----    -----    -----    -----
Total revenue................................................................   100.0    100.0    100.0    100.0    100.0
                                                                                -----    -----    -----    -----    -----
EXPENSE:
    Compensation and employee benefits.......................................    86.8     79.4     73.1     72.2     73.0
    Marketing................................................................     1.3      1.4      3.7      1.3     11.6
    Research and development.................................................     6.6      6.6      8.2      6.4      5.9
    Depreciation and amortization............................................     8.7      2.9      5.2      2.2      5.3
    General and administrative...............................................    50.1     31.1     26.9     23.3     28.4
                                                                                -----    -----    -----    -----    -----
Total expenses...............................................................   153.5    121.4    117.1    105.4    124.2
                                                                                -----    -----    -----    -----    -----
Net loss.....................................................................   (53.5)%  (21.4)%  (17.1)%   (5.4)%  (24.2)%
                                                                                -----    -----    -----    -----    -----
                                                                                -----    -----    -----    -----    -----
</TABLE>

  THREE MONTHS ENDED MARCH 31, 1998 AND 1999

  REVENUE

     Total revenue increased 94% to $13.2 million for the three months ended
March 31, 1999 from $6.8 million in the comparable period in 1998. This growth
resulted primarily from our acquisition of AFI in April 1998, the related loan
volume generated by our Web sites and from new strategic alliances with online
partners and Realtors.

     Secondary marketing revenue, net.  Gains and other revenue from the
origination and secondary marketing of mortgage loans increased 59% to
$8.6 million for the three months ended March 31, 1999 from $5.4 million in the
comparable period in 1998. This increase resulted primarily from the increase in
the total dollar amount of loans we originated, funded and sold. The total
dollar amount of closed loans that we originated increased to $751.6 million for
the three months ended March 31, 1999 from $348.3 million in the comparable
period in 1998. Of these originations, we funded and sold in the secondary
market $615.1 million

                                       21
<PAGE>
in loans as compared to $241.8 million in the first quarter of last year. Loans
that we originated but chose not to fund were funded by other mortgage lenders.
The increase in loan volumes and related revenue resulted primarily from our
introduction of additional Internet origination channels in April 1998 and an
increase in Realtor affiliations.

     Loan production and processing fees, net.  Total loan production and
processing fees, less amounts paid to third parties for certain processing
services, increased 181% to $2.6 million for the three months ended March 31,
1999 from $0.9 million in the comparable period in 1998. This increase in
production and processing fees resulted from an overall increase in loan volume
and from new strategic alliances that produce fees for processing loans for
third parties and other mortgage lenders.

     Management, technology and other fees.  Total revenue from management,
technology and other fees increased 264% to $2.0 million for the three months
ended March 31, 1999 from $0.5 million in the comparable period in 1998. The
1999 amount includes recognition of $1.0 million in previously deferred revenue
from the sale of software that we no longer use in our business. The remaining
increase was primarily attributable to fees earned from business affiliations
for management services and technology.

     Net interest (expense) income.  The net contribution of interest to revenue
increased to a net interest income of $26,000 for the three months ended
March 31, 1999 from a net interest expense of $56,000 in the comparable period
in 1998. This increase was primarily related to higher net cash positions
resulting from equity investments we received in the last three quarters of
1998, and from an improvement in the difference between the interest revenue we
received from borrowers and our cost of funds.

  EXPENSES

     Compensation and employee benefits.  Compensation and employee benefits
consist primarily of management and employee salaries, bonuses and commissions
and related costs as well as the cost of consultants and personnel from
temporary agencies. Total compensation and benefit costs increased 96% to
$9.6 million for the three months ended March 31, 1999, or 73.0% of revenue,
from $4.9 million in the comparable period in 1998, or 72.2% of revenue. The
dollar increase in total compensation and benefit costs resulted primarily from
an increase in personnel from 295 at March 31, 1998 to 594 at March 31, 1999 to
support our new Internet origination volumes and related technical and
administrative support services. The increase was also a result of increased
commissions paid to loan originators commensurate with increased loan volumes.
We expect total compensation and employee benefits to increase in absolute
dollars as we continue to expand our business by hiring additional personnel.
Total compensation and benefit costs increased as a percentage of revenue due to
training periods involved in expanding our call center capacity to meet
increasing Internet loan demand.

     Included in "Compensation and employee benefits" is the amortization of
unearned compensation which resulted when stock options we granted during 1998
and the first quarter of 1999 were subsequently deemed to have exercise prices
less than the estimated fair market value of our common stock at the time of
grant. As of March 31, 1999, we have recorded approximately $15.4 million in
deferred compensation and we amortized approximately $193,000 of that amount to
expense in the three months ended March 31, 1999. An additional $1.3 million
will be recorded in the second quarter of 1999. As our stock option plan has a
five-year vesting requirement, the remaining deferred compensation cost will be
amortized at approximately $837,000 per quarter through the fourth quarter of
2003. Stock-based compensation is a non-cash expense.

     Marketing.  Marketing expenses consist primarily of the cost of leads
generated through Internet marketing and distribution agreements or co-branding
arrangements, as well as the cost of direct advertising and trade-show
participation. Marketing expenses also include fees paid to other Web sites and
business partners for lead generation. Marketing expenses increased to
$1.5 million for the three months ended March 31, 1999, or 11.6% of revenue,
from $85,000 in the comparable period in 1998, or 1.3% of revenue. These
increases were directly related to new online distribution agreements and online
advertising designed to increase the exposure of our Web site. We believe that
marketing expenses will increase, both in absolute dollars and as a percentage
of revenue, as we expand our strategic partnerships with other Web sites to
drive more traffic to our Web site and to increase brand awareness.

                                       22
<PAGE>
     Research and development.  Research and development costs consist primarily
of compensation and benefit costs of development personnel, materials, computer
equipment and supplies consumed in software development and related facility
costs. Research and development expenses increased 79% to $777,000 for the three
months ended March 31, 1999, or 5.9% of revenue, from $433,000 in the comparable
period in 1998, or 6.4% of revenue. These increases were primarily due to the
addition of product development personnel to integrate CLOser with
newly-acquired Internet technology and third-party software and Web platforms.
We believe additional investment in research and development is essential to our
success and we expect these expenses will increase in future periods.

     Depreciation and amortization.  Depreciation and amortization consists of
depreciation of capital equipment, amortization of goodwill related to
acquisitions and amortization of capitalized software development costs.
Depreciation and amortization expenses increased to $698,000 for the three
months ended March 31, 1999, or 5.3% of revenue, from $154,000 in the comparable
period in 1998, or 2.2% of revenue. These increases were a result of increased
expenditures for an expansion of our Internet infrastructure, acquisition of
capital equipment to support call center operations, additions to goodwill
from the AFI acquisition and payments relating to the Online Capital
acquisition. We expect these expenses will increase in absolute dollars as a
result of our exercise of an option to repurchase our CLOser software system
from a third party in May 1999 for $3.5 million and our commitment to maintain
state-of-the-art technology to support our Internet operations.

     General and administrative.  General and administrative costs include
telephone and communication costs, rent and other occupancy costs, equipment
leases, certain loan transfer fees and consulting and professional expenses.
General and administrative expenses increased 138% to $3.8 million for the three
months ended March 31, 1999, or 28.4% of revenue, from $1.6 million in the
comparable period in 1998, or 23.3% of revenue. The increase in general and
administrative expenses resulted from additional rent, communication costs and
other expenses related to call center operations and the addition of
administrative personnel in anticipation of becoming a public company. We expect
general and administrative expenses to increase in absolute dollars as we
continue to grow but decrease as a percentage of revenue as mortgage loan volume
increases.

  YEARS ENDED DECEMBER 31, 1997 AND 1998

  REVENUE

     Total revenue increased 116% to $35.7 million in 1998 from $16.5 million in
1997. This growth resulted primarily from our acquisition of AFI in April 1998
and the loan volume generated by our Web sites, a full year of operations of
OnLine Capital acquired in the summer of 1997, strategic alliances with online
partners that generated increased loan volume for us and an increase in
refinancing activities resulting from relatively low interest rates.

     Secondary marketing revenue, net.  Gains and other revenue from the
origination and secondary marketing of mortgage loans increased 147% to
$28.6 million in 1998 from $11.6 million in 1997. This increase resulted
primarily from the increase in the total dollar amount of loans we originated,
funded and sold. The total dollar amount of loans that we originated increased
to $2.0 billion in 1998 from $808.7 million in 1997. We funded and sold in the
secondary market $1.5 billion of these loans in 1998 and $562.0 million in 1997.
The increase in loan volumes and related revenue resulted primarily from our
introduction of additional Internet origination channels in April 1998 and a
full year of operations of OnLine Capital. The increase was also attributable to
increased refinancing activity by borrowers resulting from relatively low
interest rates.

     Loan production and processing fees, net.  Total loan production and
processing fees, less amounts paid to third parties for certain processing
services, increased 130% to $5.3 million in 1998 from $2.3 million in 1997. This
increase in production and processing fees resulted from an overall increase in
loan volume.

     Management, technology and other fees.  Total revenue from management,
technology and other fees decreased 5% to $1.9 million in 1998 from
$2.0 million in 1997. This decrease was primarily attributable to the refocusing
of our resources in 1998 on internal development of expanded Internet
capabilities.

                                       23
<PAGE>
     Net interest (expense) income.  The net contribution of interest to revenue
declined to a net interest expense of $113,000 in 1998 as compared to net
interest income of $500,000 in 1997. This decline was primarily related to a
convergence of short and intermediate-term market interest rates. This results
in circumstances where the rates of certain loans funded by us during the year
were equal to or less than our borrowing cost, producing a net interest loss
during the period of time we held these loans prior to delivery to secondary
market investors.

  EXPENSES

     Compensation and employee benefits.  Total compensation and benefit costs
increased 99% to $26.1 million in 1998, or 73.1% of revenue, from $13.1 million
in 1997, or 79.4% of revenue. The dollar increase in total compensation and
benefit costs resulted primarily from an increase in personnel from 158 at
December 31, 1997 to 486 at December 31, 1998 to support our new Internet
origination volumes and related technical support services. The increase was
also a result of increased commissions paid to loan originators commensurate
with increased loan volumes. We expect total compensation and employee benefits
to increase in absolute dollars as we continue to expand our business by hiring
additional personnel. Total compensation and benefit costs decreased as a
percentage of revenue.

     Marketing.  Marketing expenses also include fees paid to other Web sites
and business partners for lead generation. Marketing expenses increased 550% to
$1.3 million in 1998, or 3.7% of revenue, from $238,000 in 1997, or 1.4% of
revenue. These increases were directly related to new online distribution
agreements and online advertising designed to increase the exposure of our Web
site.

     Research and development.  Research and development expenses increased 164%
to $2.9 million in 1998, or 8.2% of revenue, from $1.1 million in 1997, or 6.6%
of revenue. These increases were primarily due to the addition of product
development personnel to integrate CLOser with newly-acquired Internet
technology and third-party software and Internet platforms.

     Depreciation and amortization.  Depreciation and amortization expenses
increased 280% to $1.9 million in 1998, or 5.2% of revenue, from $480,000 in
1997, or 2.9% of revenue. These increases were a result of increased
expenditures for an expansion of our Internet infrastructure and acquisition of
capital equipment to support call center operations, and a shortening of the
period that we amortize capitalized software development costs from five years
to three years. We capitalized an additional $832,000 in software development
costs in 1998 and $518,000 in 1997.

     General and administrative.  General and administrative expenses increased
88% to $9.6 million in 1998, or 26.9% of revenue, from $5.1 million in 1997, or
31.1% of revenue. The increase in general and administrative expenses resulted
from additional rent, communication costs and other expenses related to call
center operations and the addition of administrative personnel in anticipation
of becoming a public company. These expenses declined as a percentage of revenue
due to increased mortgage loan originations.

  YEARS ENDED DECEMBER 31, 1996 AND 1997

  REVENUE

     Total revenue increased 120% to $16.5 million in 1997 as compared to
$7.5 million in 1996.

     Secondary marketing revenue, net.  Gains and other revenue from the
origination and secondary marketing of mortgage loans we originated increased
183% to $11.6 million for 1997 from $4.1 million in 1996. The total dollar
amount of loans we originated increased to $808.7 million in 1997 as compared to
$330.8 million in 1996, a 144% increase. We funded and sold in the secondary
market $562.0 million in loans in 1997 and $180.0 million in 1996. The increase
in loan volumes and related revenue resulted primarily from the acquisition of
OnLine Capital, as well as expansion of our member business.

                                       24
<PAGE>
     Loan production and processing fees, net.  Total loan production and
processing fees, less amounts paid to third parties for certain processing
services, increased 180% to $2.3 million in 1997 from $820,000 in 1996. This
increase in production and processing fees resulted from an overall increase in
loan volume.

     Management, technology and other fees.  Total revenue from management,
technology and other fees decreased 23% to $2.0 million for 1997 from
$2.6 million in 1996. This decrease was primarily attributable to the refocusing
of our resources on the conversion of our technology platform from MS-DOS to
Windows 95.

     Net interest (expense) income.  The net contribution of interest to revenue
increased to $500,000 for 1997 as compared to $17,000 in 1996. This increase was
due primarily to higher loan volumes and an improvement in the difference
between the interest revenue we received from borrowers and our cost of funds.

  EXPENSES

     Compensation and employee benefits.  Total compensation and benefit costs
increased 102% to $13.1 million in 1997, or 79.4% of revenue, from $6.5 million
in 1996, or 86.8% of revenue. The dollar increase was primarily attributable to
the acquisition of OnLine Capital.

     Marketing.  Marketing expenses increased 151% to $238,000 in 1997, or 1% of
revenue, from $95,000 in 1996, or 1% of revenue. These increases were directly
related to promotional activities and participation in trade shows designed to
increase brand awareness.

     Research and development.  Research and development expenses increased 121%
to $1.1 million in 1997, or 7% of revenue, from $497,000 in 1996, or 7% of
revenue. The dollar increase was primarily related to our decision to convert
CLOser to the Microsoft Windows 95 operating system.

     Depreciation and amortization.  Depreciation and amortization expenses
decreased 26% to $480,000 in 1997, or 3% of revenue, from $652,000 in 1996, or
9% of revenue. This decrease was primarily the result of the $263,000
amortization of the remaining organizational costs in 1996.

     General and administrative.  General and administrative expenses increased
34% to $5.1 million in 1997, or 31% of revenue, from $3.8 million in 1996, or
50% of revenue. The dollar increase was primarily related to the additional
rent, communication costs and equipment costs attributable to the OnLine Capital
operation, while the percentage decrease was attributable to the higher loan
volumes from those operations.

QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth certain unaudited quarterly consolidated
statement of operations data for each of the nine quarters ended March 31, 1999.
This information has been prepared substantially on the same basis as the
audited consolidated financial statements appearing elsewhere in this
prospectus, and all necessary adjustments, consisting only of normal recurring
adjustments, have been included in the amounts stated below to present fairly
the quarterly results. The quarterly data should be read in conjunction with our
audited consolidated financial statements and unaudited consolidated financial
statements and the notes to those statements appearing elsewhere in this
prospectus. As a result of our limited operating history and numerous factors
beyond management's control, we may experience material fluctuations in revenue
and

                                       25
<PAGE>
earnings in future quarters. Accordingly, the operating results of any quarter
may not be indicative of the results that may be expected for any future period.

<TABLE>
<CAPTION>
                                                                            QUARTER ENDED
                                  ------------------------------------------------------------------------------------------------
                                  MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,  SEPT. 30,  DEC. 31,   MAR. 31,
                                    1997      1997        1997       1997       1998       1998       1998       1998       1999
                                  --------   --------   ---------   --------   --------   --------  ---------  --------   --------
                                                                            (IN THOUSANDS)
<S>                               <C>        <C>        <C>         <C>        <C>        <C>       <C>        <C>        <C>
STATEMENTS OF OPERATIONS DATA:
Revenue:
  Secondary marketing revenue,
    net.......................... $   997     $2,116     $ 4,052     $4,430     $5,407     $6,620    $ 7,632   $  8,938   $  8,600
  Loan production and processing
    fees, net....................     300        521         685        842        922      1,278      1,329      1,809      2,598
  Management, technology and
    other fees...................     416        359         707        551        546        649        539        134      1,991
  Net interest (expense)
    income.......................     144        137         155         63        (56)       (22)       108       (143)        26
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
    Total revenue................   1,857      3,133       5,599      5,886      6,819      8,525      9,608     10,738     13,215
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
Expenses:
  Compensation and employee
    benefits.....................   1,754      2,534       4,067      4,728      4,927      5,892      6,653      8,602      9,645
  Marketing......................      26         49          79         84         85        258        454        539      1,536
  Research and development.......     162        216         269        432        434        578        722      1,155        776
  Depreciation and
    amortization.................     110        123         143        105        154        268        337      1,114        698
  General and administrative.....     869      1,205       1,574      1,478      1,589      2,292      2,721      2,994      3,759
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
    Total Expenses...............   2,921      4,127       6,132      6,827      7,189      9,288     10,887     14,404     16,414
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
Net loss......................... $(1,064)    $ (994)    $  (533)    $ (941)    $ (370)    $ (763)   $(1,279)  $ (3,666)  $ (3,199)
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
  Secondary marketing revenue,
    net..........................    53.7%      67.5%       72.4%      75.3%      79.3%      77.7%      79.5%      83.3%      65.1%
  Loan production and processing
    fees, net....................    16.2       16.6        12.2       14.3       13.5       15.0       13.8       16.8       19.7
  Management, technology and
    other fees...................    22.4       11.5        12.6        9.3        8.0        7.6        5.6        1.2       15.0
Net interest (expense) income....     7.7        4.4         2.8        1.1       (0.8)      (0.3)       1.1       (1.3)        .2
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
  Total revenue..................   100.0      100.0       100.0      100.0      100.0      100.0      100.0      100.0      100.0
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
Expenses:
  Compensation and employee
    benefits.....................    94.5       80.9        72.7       80.3       72.2       69.1       69.2       80.1       73.0
  Marketing......................     1.4        1.6         1.3        1.4        1.3        3.0        4.8        5.0       11.6
  Research and development.......     8.7        6.9         4.8        7.4        6.4        6.8        7.5       10.8        5.9
  Depreciation and
    amortization.................     5.9        3.9         2.6        1.8        2.2        3.1        3.5       10.4        5.3
  General and administrative.....    46.8       38.4        28.1       25.1       23.3       26.9       28.3       27.8       28.4
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
    Total expenses...............   157.3      131.7       109.6      116.0      105.4      108.9      113.3      134.1      124.2
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
Net loss.........................   (57.3)%    (31.7)%      (9.6)%    (16.0)%     (5.4)%     (8.9)%    (13.3)%    (34.1)%    (24.2)%
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
</TABLE>

     Our quarterly growth in revenue has resulted from a growth in loan volumes.
The growth rate during the nine quarters has been significant enough to obscure
any seasonality that we may have experienced. However, the mortgage industry
usually experiences stronger demand in the summer than in the winter. Our
acquisition in June 1997 of OnLine Capital and our acquisition in March 1998 of
AFI boosted revenue growth in the subsequent quarters.

     The following chart shows our total volume of loans originated, whether
funded by us or other mortgage lenders, for each of the nine quarters ended
March 31, 1999. As seen in the chart, our quarterly loan volume has grown by
958% over the last nine quarters, from approximately $71 million in the first
quarter of 1997 to more than $750 million in the first quarter of 1999.

                                       26
<PAGE>
                         MORTGAGE.COM TOTAL LOAN VOLUME
                                 (IN MILLIONS)

                        [The chart appearing here shows
                          the growth in our total loan
                          volume, in dollars, for each
                          of the last nine quarters].

     Apart from our amortization of unearned compensation, our compensation
costs reflect a general downward trend as a percentage of revenue over the nine
quarters due to efficiency of scale and the efficiency of originating loans
through the Internet. We have increased our marketing expense both in absolute
dollars and as a percentage of revenue in an effort to increase loan volumes
generated through the Internet. We intend to increase our marketing expenditures
further in 1999 as we continue to direct traffic to our Web site and embark on a
brand recognition program. Our general and administrative expenses have declined
as a percentage of revenue due to economies of scale.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have funded operations primarily through net cash
proceeds from private placements of preferred stock of approximately
$26.5 million through December 31, 1998. As of December 31, 1998, we had cash
and cash equivalents of $3.4 million. In February and April 1999, we received
gross proceeds from the issuance of subordinated notes totaling $13.0 million.
In May 1999, we received an additional $27.5 million from the issuance of a
convertible subordinated note, which is either payable, or convertible to common
stock, upon completion of this offering. We also received $15.0 million from the
sale of shares of Series F Preferred Stock.

     Our primary need for operating capital is for the funding of mortgage loans
between closing and eventual delivery to secondary market investors. We fund
these loans through warehouse lines of credit and collateralized loan purchase
agreements with banks and other financial institutions. We have a $70.0 million
warehouse line of credit with Residential Funding Corporation, a $60.0 million
warehouse line of credit with Bank United and a $25.0 million warehouse line of
credit with Cooper River Funding. We also have loan purchase agreements with
Superior Bank FSB and Greenwich Capital. Our aggregate borrowing limits are
currently set at approximately $220.0 million. These financing arrangements
generally provide from 97% to 99% of the principal amounts needed to fund
mortgage loans and are collateralized by the underlying mortgages. The average
time between funding closed mortgages and receipt of loan sale proceeds from
investors was approximately 25 days during 1998.

     We have entered into a letter of intent with Telebanc Financial Corp. to
provide a committed $200.0 million repurchase agreement which will allow us to
sell our closed mortgage loans to Telebanc instead of holding them in our
warehouse lines of credit. The net effect of this arrangement should be to
provide us with lower financing costs between closing and ultimate sale and
delivery to investors in the secondary market. In addition, the letter of intent
outlines the parameters for the development of an electronic mortgage conduit
with the intent of streamlining the financing process. Telebanc would work with
us to create a dedicated e-commerce platform that will enable the efficient
transmission of loan information from originators to the secondary market.
Although we expect this financing arrangement to become available by

                                       27
<PAGE>
the end of July 1999, we cannot assure you that it will be available at that
time, if at all, nor can we assure you that the development of the e-commerce
platform will happen as anticipated.

     Net cash used for operating activities for the year ended December 31, 1998
totaled $102.7 million. We used this cash primarily to fund loans held for sale
to investors, offset by reductions in other working capital requirements and
non-cash charges. For the quarter ended March 31, 1999, net cash provided by
operating activities totaled $6.1 million. This cash was generated primarily
from a reduction in mortgage loans held for sale, offset by operating losses.

     Net cash used in investing activities for the year ended December 31, 1998
totaled $7.6 million, $2.7 million of which was used for the purchase of AFI. We
used the remaining $4.9 million primarily for the purchase of computers,
workstations, servers and other equipment to support our growth in technology
support services and call center operations and costs related to software
development. Net cash used in investing activities for the quarter ended
March 31, 1999 totaled $1.6 million, $500,000 of which we used to purchase
computers and equipment and $700,000 of which we used for software development
costs.

     Net cash provided by financing activities for the year ended December 31,
1998 totaled $112.1 million. Warehouse facilities provided $99.6 million of this
amount and we received an additional $12.4 million as proceeds from the sale of
Series D Preferred Stock. We repaid $200,000 in subordinated notes during the
year. Net cash used by financing activities for the quarter ended March 31, 1999
totaled $1.7 million, as $10.0 million in proceeds from the issuance of
subordinated notes were used for general corporate purposes.

     As of December 31, 1998, we had net operating loss carryforwards of
approximately $16.1 million available to reduce future taxable income, which
carryforwards expire on various dates from 2010 to 2014.

     Since inception, we have significantly increased our operating costs and we
anticipate that we will continue to experience significant increases in our
operating costs for the foreseeable future. In addition, we may use cash
resources, including a portion of the net proceeds of this offering, to fund
acquisitions or investments in joint ventures, businesses, technologies and
products or services complementary to our business. Increased loan volume also
requires additional cash to fund the loans. We believe that net proceeds of this
offering coupled with the expected increase of our warehouse credit lines and
mortgage repurchase facilities will be sufficient to meet anticipated cash
requirements over the next twelve months. If cash generated from operations in
future periods remains insufficient to satisfy our liquidity requirements, we
may sell additional equity or debt securities, or obtain additional credit
facilities. The issuance of additional equity or convertible debt securities
could result in additional dilution to our stockholders.

RECENT ACCOUNTING PRONOUNCEMENTS

  COMPREHENSIVE INCOME

     On January 1, 1998, we adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 established standards for reporting and presentation of
comprehensive income and its components in a full set of financial statements.
Comprehensive income consists of net income and net unrealized gains (losses) on
securities and is presented in the consolidated statements of shareholders'
equity and comprehensive income. The Statement requires only additional
disclosures in the consolidated financial statements; it does not affect our
consolidated balance sheets or statements of operations. The adoption of SFAS
No. 130 has had no effect on our consolidated financial statements.

  SEGMENT REPORTING

     In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 established standards for
the way that a public enterprise reports 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
shareholders. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997, and requires restatement of earlier periods presented. The
adoption of SFAS No. 131 has not had a significant impact on our consolidated
financial statements.

                                       28
<PAGE>
  SOFTWARE REVENUE RECOGNITION

     In March 1998, the AICPA issued Statement of Position 98-4, "Deferral of
the Effective Date of a Provision of SOP 97-2" ("SOP 98-4"). SOP 98-4 defers for
one year the application of certain provisions of Statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2"). Different informal and
unauthoritative interpretations of certain provisions of SOP 97-2 have arisen
and, as a result, the AICPA is deliberating amendments to SOP 97-2, so it can
issue interpretations regarding the applicability and the method of application
of those provisions. We have adopted SOP 97-2. The adoption of SOP 97-2 has not
had a material impact on our consolidated statements of operations, balance
sheets or cash flows.

  DERIVATIVES

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. As we do not currently engage in derivative or
hedging activities, there has been no impact on our consolidated statements of
operations, balance sheets or cash flows upon the adoption of this standard. If
we engage in derivative or hedging activities in the future, we will apply SFAS
No. 133.

  DISCLOSURES ABOUT MARKET RISK

     Interest rate movements significantly impact our volume of closed loans.
Interest rate movements represent the primary component of market risk to us. In
a higher interest rate environment, borrower demand for mortgage loans,
particularly refinancing of existing mortgages, declines. Interest rate
movements affect the interest income earned on loans we hold for sale in the
secondary market, interest expense on our warehouse lines, the value of mortgage
loans we hold for sale in the secondary market and ultimately the gain on the
sale of those mortgage loans. In addition, in an increasing interest rate
environment, the volume of mortgage loans that our clients originate declines.

     We originate mortgage loans and manage the market risk related to these
loans by pre-selling them on a best efforts basis to the anticipated secondary
market investors at the same time that we establish the borrowers' interest
rates. If we can deliver mortgage loans within the time frames established by
the secondary market investors, we have no interest rate risk exposure on those
loans. However, if the loan closes but we cannot deliver the loan within those
time frames, and if interest rates increase, we may experience a reduced gain or
may even incur a loss on the sale of the loan.

     We sell more than 90% of the loans we sell through best efforts
commitments, which means we do not suffer a penalty if the loans do not close.
We sell some loans, including sub-prime loans, on a mandatory delivery basis. We
earn a higher sale price on these, but we have risk if the loans do not close.

     We also do not currently maintain a trading portfolio. As a result, we are
not exposed to market risk as it relates to trading activities. Our entire loan
portfolio is held for sale. Accordingly, we must perform market valuations of
our pipeline, our mortgage portfolio held for sale and the related sale
commitments in order to properly record the portfolio and the pipeline at the
lower of cost or market. Therefore, we measure the interest rates of our loan
portfolio against prevailing interest rates in the market.

     Because we pre-sell our mortgage loan commitments, we believe that a 1%
increase or decrease in long-term interest rates would not have a significant
adverse effect on our earnings from interest rate sensitive assets. We pay off
warehouse lines when the loans are sold in the secondary market. Because the
loans are held in the warehouse lines for a short period of time, we do not
expect to incur significant losses from an increase in interest rates on the
warehouse lines. However, since a significant percentage of our closed loan
volume is from refinancing mortgage loans, our future operating results may be
more sensitive to interest rate movements.

     In the future, if we do not pre-sell the mortgage loans to secondary market
investors or if we do not rely on best-efforts commitments, our market risk
could change significantly.

                                       29
<PAGE>
YEAR 2000 READINESS DISCLOSURE STATEMENT

     Many currently installed computer systems and software products are
designed to accept only two digit entries in the date code field. As a result,
they may have problems properly recognizing 1/1/00 as January 1, 2000. In less
than a year, computer systems and software may need to be upgraded to comply
with "Year 2000" requirements. Significant uncertainty exists concerning the
potential effects associated with the Year 2000 issue on business operations.

     In early 1998, we began reviewing the Year 2000 compliance status of our
technology platforms licensed to others, the software and systems used in our
internal business processes and other systems and services on which we rely. We
have completed the assessment phase and the research and strategy phases of the
program and are beginning to implement these strategies, which will include
developing contingency plans for potential third party Year 2000 compliance
problems that we deem critical to our business continuity. We cannot assure you
that the program will anticipate or identify all potential Year 2000 effects on
our business or that our contingency plans will be effective.

     We have fully integrated Year 2000 testing into the development of our own
software. We believe that the entire technology platform on which we operate and
which we provide to clients is generally Year 2000 compliant. Accordingly, the
use or occurrence of dates on or after January 1, 2000 and the occurrence of
leap years will not affect the performance of our systems with respect to their
ability to correctly create, store, process and output information related to
such data.

     We are in the process of contacting our major customers and critical
suppliers of components, equipment and services to determine whether products
and services we obtain from them are Year 2000 compliant. Our suppliers and
customers are under no obligation to provide such information to us. We intend
to continue monitoring the Year 2000 compliance of suppliers and major
customers.

     Based on the information available to date, we believe we will be able to
complete our Year 2000 compliance modifications and contingency plans, if
necessary, in the last quarter of 1999. We are prioritizing our efforts to focus
on Year 2000 discrepancies that would significantly impact operations.
Nevertheless, to the extent we are relying on vendors or suppliers to notify us
or resolve Year 2000 issues within their own products, we may experience delays
in implementing such changes. If key systems, or a significant number of systems
fail as a result of Year 2000 problems, we could incur substantial costs and
disruption of our business, which potentially would have a material adverse
effect on our results of operations. In addition, because we heavily rely on
communications and Internet service providers, failure of any such providers to
adequately address issues relating to Year 2000 may have a material adverse
effect on our business, financial condition and results of operations.

     In certain circumstances, we have warranted to customers that the use or
occurrence of dates on or after January 1, 2000 will not adversely affect the
performance of our systems with respect to the ability to create, store, process
and output information related to such data. If any of these customers
experience Year 2000 problems in connection with use of our systems, they could
assert claims for damages against us.

     To date we have not maintained a complete budget for investigating and
remedying issues related to Year 2000 compliance of our own software and
underlying systems used in our internal operations. We have incorporated the
costs of our Year 2000 initiative into existing workloads and budgets within our
technology group, and we do not expect them to be material to our results of
operations or financial position. Management is developing a contingency plan
based upon the results of supplier and customer readiness reviews. To the extent
we have not adequately assessed our Year 2000 compliance deficiencies,
additional and possibly significant resources may be spent on investigating and
remedying Year 2000 issues. The expenditure of such resources may have a
material adverse effect on our business, financial condition and results of
operations.

                                       30
<PAGE>
                                    BUSINESS

MORTGAGE.COM

     We are a leading provider of online mortgage services to consumers and
businesses. We have developed state-of-the-art technology to support the
origination, processing, underwriting, closing and secondary marketing of
mortgage loans. We use this proprietary technology to provide mortgage financing
directly to borrowers. We also enable our clients, such as mortgage brokers,
mortgage banks, financial institutions, Realtors and homebuilders, to improve
the efficiency and effectiveness of their mortgage operations.

     We believe that borrowers are generally dissatisfied with the traditional
mortgage lending process. This dissatisfaction stems from the complexity of the
process, inefficiencies and delays related to the manual collection and transfer
of information and the borrower's inability to monitor the status of his loan.
Mortgage lending on the Internet can offer borrowers an easier, faster and less
expensive way to obtain mortgage loans and has the potential to eliminate many
of the borrower's frustrations found in traditional mortgage lending. We believe
companies that provide these benefits to borrowers will gain a competitive
advantage.

     We offer borrowers a more satisfying, less frustrating mortgage experience.
We use our Internet platform and other proprietary technologies to make the
mortgage lending process more efficient, whether for our own direct-to-consumer
mortgage banking operation or in support of the mortgage operations of our
business-to-business clients.

     In 1998, we originated and closed mortgage loans with a total principal
amount of $2.0  billion, of which approximately 21% were originated through the
Internet. We funded and sold $1.5 billion of those loans. For the three months
ended March 31, 1999, we originated and closed mortgage loans with a total
principal amount of $751.6 million, of which approximately 37% were originated
through the Internet. We funded and sold $615.1 million of those loans.

     As of April 30, 1999, we were providing private label and co-branded Web
sites for 22 clients, including NetB@nk and Southtrust Mortgage. We have enabled
non-lenders, such as Intuit through its Quickenmortgage Web site, to provide its
customers with access to efficient mortgage services. As of April 30, 1999, we
also were providing mortgage banking services to 23 mortgage brokerage
companies, mortgage bankers and financial institutions. At the point-of-sale of
homes, we have business relationships with 20 homebuilders and Realtors,
including franchisees of Century 21 and Prudential Real Estate, enabling
borrowers to obtain mortgage loans at the same locations at which they arrange
for the purchase or building of a home.

INDUSTRY BACKGROUND

  Overview

     The Mortgage Bankers Association of America, or MBA, estimates that the
mortgage industry originated approximately $1.5 trillion in mortgages in 1998
compared to $834.0 billion in 1997. The MBA estimates that another $1.2 trillion
in mortgages will be originated in 1999.

     In traditional mortgage lending, a borrower obtains a mortgage loan by
contacting a mortgage originator, such as a mortgage banker, mortgage broker or
a financial institution. After a borrower has selected a mortgage originator, an
employee or commissioned loan officer of the mortgage originator collects
information about the borrower and completes a loan application by hand, while
the borrower waits. These mortgage originators often have business hours that
are not convenient for a borrower who works during the day, and a borrower may
have to make several trips to provide all of the information for the
application. In addition, these mortgage originators' offices may be located far
from the borrower's home. The borrower may have to wait weeks while credit
reports, appraisals and other third party verifications are ordered. For these
reasons, we believe that borrowers are generally dissatisfied with this process.

     We also believe that borrowers lack knowledge about the mortgage process,
including the costs associated with obtaining a mortgage loan. Consequently, it
is difficult for a borrower to determine whether

                                       31
<PAGE>
he is getting the right mortgage loan, at the right cost, in a timely fashion.
In addition, a borrower is dependent upon the mortgage loan originator to keep
him informed about the status of the loan application.

     Some of a borrower's frustration and dissatisfaction stems from
inefficiencies and delays in the application, processing and underwriting phases
of the mortgage lending process. Manual collection and transfer of information
from the application process through the processing and underwriting phases
increases loan approval time and results in a greater number of human errors.
Many mortgage originators and mortgage lenders do not have the technical
expertise or financial resources to automate the origination, processing and
underwriting of mortgage loans to achieve greater efficiency. Continuing
inefficiencies make it difficult for mortgage originators and mortgage lenders
to adequately keep borrowers informed and satisfied.

GROWTH OF THE INTERNET AND ONLINE FINANCIAL SERVICES

     The Internet has emerged as a global medium for communication, content
delivery and electronic commerce, and Internet use continues to increase
rapidly. International Data Corporation, or IDC, estimates that the number of
users worldwide will increase from 142 million in 1998 to over 400 million in
2002. As consumers have become increasingly adept at using the Internet for
evaluating and purchasing a wide variety of goods, the dollar volume of online
commerce transactions has risen dramatically. IDC estimates that the volume of
goods and services purchased through the Web will increase from $50 billion in
1998 to more than $734 billion in 2002.

     The Internet provides companies with additional ways to reach potential
customers along with the opportunity to transact business with them in a more
efficient and low-cost manner than business transacted through traditional
channels. In addition, the Internet offers companies flexibility, permitting
them to adjust features, presentations and prices in response to competition.
Consumers benefit from improved overall convenience, low-cost access to
information regarding available products and services, ease of use, numerous
choices and often more competitive pricing.

     Financial services is one of the more prominent industries that has taken
advantage of the Internet. The information potential of the Internet and the
potential lower costs associated with conducting business electronically
underlie the success of financial services Web sites. For example, Forrester
Research reports that 25% of all retail stock trades are now executed online.
Many of these financial services companies have undertaken aggressive marketing
campaigns to establish their online brands. We believe that consumers will
become more willing to conduct financial transactions online, including mortgage
transactions, as Internet use increases, Internet brands are established and
concerns about security and privacy are alleviated.

ONLINE MORTGAGE SERVICES

     Online mortgage lending is particularly well-suited to the Internet
platform. Mortgage lending on the Internet can offer borrowers an easier,
faster, less expensive way to obtain mortgage loans and has the potential to
eliminate many of borrowers' frustrations found in traditional mortgage lending.
The same principles that make online mortgage lending an easier, faster and less
expensive process for the borrower can also benefit mortgage providers. Mortgage
providers can increase their access to borrowers by offering Web-enabled
services that are accessible at any time. Online mortgage lending can also
reduce costs and eliminate inefficiencies, resulting in a more satisfying
experience for borrowers.

     Based on a recent report from Forrester Research, less than 1% of the $1.5
trillion in mortgages funded in 1998 were originated online. However, Forrester
Research estimates online mortgage loan volume will reach $91.2 billion by 2003,
constituting nearly 10% of all mortgage loans funded in 2003.

     We believe that very few of the largest mortgage loan originators have
capitalized on the mortgage lending opportunities on the Internet. Most mortgage
originators lack the expertise to develop their own Internet technologies and
have been slow to address the online market. We believe the majority of the
prominent mortgage originators use the Internet primarily as an advertising
medium and to provide contact information. Even among originators that offer
online applications, we believe that many still have problems seamlessly
integrating their Internet applications with the systems that assist in
processing, underwriting and

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closing the mortgage loans. As a result, mortgage originators have not been
leveraging the Internet as a means to increase borrowers' satisfaction and
reduce overall costs.

     We believe that to maximize the potential of computer-related technology in
the mortgage industry, a company must be able to provide borrowers with:

          o numerous channels from which to obtain mortgage loans;

          o faster loan applications and loan pre-qualifications;

          o greater choice among numerous loan products and rates;

          o the opportunity to obtain lower cost mortgages; and

          o the ability to monitor the status of their loans from origination
     through closing.

     We believe companies that are able to provide these benefits to borrowers
will gain a competitive advantage.

THE MORTGAGE.COM SOLUTION

     We use our Internet platform and other internally-developed, proprietary
technologies to maximize efficiency in the mortgage lending process, whether for
our own mortgage banking operation or in support of the mortgage operations of
our clients, such as mortgage bankers, mortgage brokers, financial institutions,
Realtors and homebuilders. As a result of these efficiencies, borrowers find the
mortgage experience more satisfying and less frustrating because they benefit
from:

          o convenient access to the mortgage lending process through the
            Internet, by e-mail, by telephone or in person at location where
            homes are sold;

          o interactive selection from a comprehensive suite of mortgage
            products and services;

          o personalized services and products tailored to individual needs;

          o faster applications and pre-qualifications;

          o interest rate locks; and

          o constant monitoring of loan status.

     We provide these benefits to borrowers through both direct-to-consumer and
business-to-business channels. Our direct-to-consumer channels consist of our
Web site at www.mortgage.com and the loan counselors using our proprietary
CLOser technology in our OnLine Capital operations. Throughout the mortgage
process, borrowers are supported by customer service representatives in our call
centers or by our OnLine Capital loan counselors.

     Through our business-to-business channels, we leverage our technology to
enable our clients to better satisfy their borrowers. Borrowers can access our
clients through customized "private label" mortgage lending Web sites we create
and maintain for clients who need technical expertise and other resources to
establish and maintain a comprehensive online presence. Borrowers also can get
efficient mortgage services at the point-of-sale of homes, where we enable
Realtors and homebuilders to enter the mortgage lending business with a minimum
initial investment and with low overhead. We also offer dedicated Internet-based
call center services to our clients so they can provide a high-level of customer
service for their borrowers.

     When we process, underwrite and fund mortgage loans for our mortgage
banking operations or for our clients, borrowers have constant and convenient
access through the Internet to monitor the status of their loan applications.
After the mortgage loans close, we sell those mortgage loans in the secondary
market to investors who will be responsible for servicing the mortgage loans.
Servicing consists of collecting from the borrower debt service and escrow funds
for property taxes and insurance, paying debt service to loan investors, paying
property taxes and insurance premiums and supervising foreclosures for defaulted
loans.

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<PAGE>
MORTGAGE.COM STRATEGY

     Our objective is to touch every mortgage, either directly or through our
business-to-business channels. We intend to do this by leveraging the Internet
and our proprietary technology to efficiently originate, fund and sell mortgage
loans, and enable our clients to efficiently originate, fund and sell mortgage
loans. Key elements of our strategy are:

     Establishing and Enhancing Brand Awareness.  We seek to make Mortgage.com
the household name for mortgage services. We believe that our Mortgage.com brand
name will become synonymous with better, faster and more convenient mortgage
loans, which will bring potential borrowers to our Web site and will help
establish us as the premier technology enabler in the mortgage industry. We have
budgeted a significant amount of money for advertising and promotion of the
Mortgage.com brand name during 1999 and beyond, with a focus on advertising
through leading Web sites and other media, co-branding with leading financial
information sites and developing additional business alliances. We have also
planned a direct marketing campaign designed to attract additional borrowers to
www.mortgage.com, which will increase our share of the online mortgage business.
This direct marketing campaign will target all current and potential home buyers
in the United States.

     Expanding Our Ability to Serve Borrowers and Clients.  We intend to
continue to devote substantial resources to the development and acquisition of
innovative Internet and software solutions so that we can better serve our
clients and mortgage borrowers. We are currently developing and testing
improvements to CLOser and its Internet interface that will increase its
versatility and automate additional portions of the mortgage process. For
example, we intend to implement automated underwriting systems to enhance the
sub-prime lending portion of www.mortgage.com. We intend to continually modify
and upgrade our software, Internet servers and high-speed transmission lines to
increase bandwidth, expand services and reduce costs. We are also continually
evaluating strategic acquisitions of technology leaders in ancillary service
areas, such as appraisal and credit report services. In this way we and our
clients will be able to provide borrowers with convenient, high-value and
low-cost services.

     Addressing Underserved Markets.  Because online commerce is still in its
infancy, there are a number of online markets for mortgage lending that are
currently underserved. We recently have developed a new segment of our
www.mortgage.com Web site specifically tailored to borrowers of sub-prime loans.
We also intend to continue to provide solutions to Realtors and homebuilders, so
that potential borrowers at the point-of-sale of homes have convenient access to
efficient, cost-effective mortgage financing. We believe that enhancing our
presence at the point-of-sale will strengthen our position in the purchase
mortgage market, which is less sensitive to changes in interest rates than the
refinancing mortgage market.

     Reengineering the Mortgage Process with Advanced Technologies.  CLOser was
one of the first portable computer software systems in the industry and remains
one of the most comprehensive systems for performing and linking all functions
in the mortgage process. We believe that our CLOser technology and its Internet
interface give us a competitive advantage in the mortgage banking industry. We
are currently testing www.openclose.com, which will serve as a virtual market
place for industry participants to communicate and exchange borrower and loan
information. We believe that www.openclose.com will provide yet another way to
more quickly and cost-effectively enhance the mortgage process. We intend to
continue to develop technological solutions that will reengineer and automate
the mortgage process and make our technology the easiest, most efficient and
most cost-effective way to facilitate mortgage transactions, whether through
online or offline channels.

PRODUCTS AND SERVICES

     We make home financing easier, faster and less expensive for borrowers
through both direct-to-consumer channels and business-to-business channels. Our
direct-to-consumer channels include providing borrowers with access to low-cost
mortgage financing through the Internet and telephone and e-mail inquiries
generated by our Web site, and through loan counselors in our Florida and
California offices. We then process the mortgage loans to closing, provide
funding for the mortgages through our credit facilities, and sell the loans in
the secondary market to institutional investors.

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<PAGE>
     Through our business-to-business channels we:

          o create Web sites for our clients that borrowers can access 24 hours
            a day, 7 days a week;

          o provide automated processing, closing, underwriting and funding
            services to mortgage industry participants;

          o enable Realtors and homebuilders to provide borrowers with access to
            mortgage financing at the point-of-sale of homes; and

          o will administer a Web site that mortgage lenders and mortgage
            brokers can use to communicate and share borrower and loan
            information electronically.

     We offer clients the opportunity to use our services at any stage of the
mortgage process, from marketing, to online applications, processing,
underwriting, closing and selling mortgage loans in the secondary market.

     Our direct-to-consumer channels and business-to-business channels are
linked, enhanced and supported by our Internet platform and proprietary CLOser
software system which we develop and maintain. Use of this technology
streamlines the mortgage process by allowing us and our clients to
electronically obtain, analyze and transmit information. We believe this
ultimately results in a more satisfying experience for borrowers.

     The financial statements included in this prospectus contain financial
information for the direct-to-consumer and business-to-business segments of our
business for the years ended December 31, 1996, 1997 and 1998, and the three
months ending March 31, 1998 and 1999.

DIRECT-TO-CONSUMER CHANNELS

     Our direct-to-consumer channels include our www.mortgage.com Web site,
which is linked to our call centers and our OnLine Capital operations. During
the three months ended March 31, 1999, our direct-to-consumer channel originated
and closed $171.2 million of mortgage loans, 34.9% of which were originated
through the Internet. We funded $128.8 million of those loans.

     Online Mortgage Origination Through www.mortgage.com

          Our flagship Internet Web site is www.mortgage.com, which serves as
     our online origination source for mortgage loans. Borrowers can access our
     Web site 24 hours a day, 7 days a week, to:

          o research and evaluate mortgage products and services;

          o select the most suitable mortgage loan with interactive assistance;

          o apply for a mortgage loan;

          o lock in an interest rate; and

          o monitor the status of their loans.

          Originating mortgage loans directly on the Internet results in reduced
     costs and time to the borrower. The Internet also continues to provide us
     with greater access to a tremendous number of potential borrowers, which
     increases the number of mortgage loans that we expect to fund and sell in
     the secondary market.

          Prime Mortgage Loans.  Prime mortgage loans include residential
     mortgage loans that meet Fannie Mae's or Freddie Mac's secondary marketing
     guidelines. These loans generally meet the agencies' guidelines because the
     borrowers are credit-worthy and the loans have appropriate loan-to-value
     ratios and principal amounts. Prime mortgage loans also include loans made
     to credit-worthy borrowers that would otherwise meet Fannie Mae's or
     Freddie Mac's underwriting guidelines, but have a principal amount which
     exceeds the amounts permitted by Fannie Mae or Freddie Mac.

          The prime mortgage loan portion of our Web site first provides a
     borrower with knowledge about the mortgage lending process. It then
     provides the borrower with the opportunity to use "SmartQuote," a loan
     program search system we developed to make choosing a mortgage simple.
     SmartQuote prompts the user for information and then searches the database
     for all of the loan programs meeting the borrower's criteria. After
     obtaining information on pricing and the right type of loan for the
     borrower's

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<PAGE>
     situation, the borrower has an opportunity to securely apply online for a
     mortgage loan in about 20 minutes. The borrower then can monitor the
     progress of the loan through closing.

          This portion of our Web site also includes a feature that allows a
     user to specify the conditions under which he would be interested in
     refinancing his mortgage loan. CLOser then stores this information and
     provides the user with an automatic e-mail notification when a suitable
     loan program becomes available.

          To increase our access to borrowers, we participate as a mortgage
     lender on high-profile multi-lender Web sites such as Intuit's
     Quickenmortgage, Microsoft's Home Advisor and The Lending Tree. Our
     presence on these sites provides borrowers with a convenient avenue to
     access our technologically efficient mortgage services, which increases our
     opportunity to originate, process and fund mortgage loans, and then sell
     them in the secondary market.

          Sub-prime Mortgage Loans.  Sub-prime mortgage loans have
     characteristics that make them generally ineligible for sale to Fannie Mae
     or Freddie Mac in the secondary market for reasons other than an excessive
     principal amount. Those characteristics might include the credit history of
     the borrower, the debt-to-income ratio, the loan-to-value ratio, the
     property type, the lien position or other factors. Because borrowers of
     sub-prime loans have often been denied financing, they are more likely to
     be dissatisfied with the traditional sub-prime lending process. Our goal is
     to provide these borrowers with an unintimidating, informative and
     confidential way to obtain a mortgage. Our Web site and customer service
     representatives try to simplify the borrowing process and give borrowers
     answers within a short period of time. In most cases, a borrower knows
     within 3 hours whether he is approved for a mortgage loan.

          Commensurate with the higher credit risk, we charge borrowers higher
     interest rates on sub-prime mortgages, which allows us to generate higher
     origination fees and higher gains on sale in the secondary market than
     prime mortgage loans. The higher interest rate also allows us to generate a
     greater spread between the interest rate we charge the borrower and the
     interest rate we pay to lenders for the financing arrangements we use to
     fund the mortgage loans.

          Call Center Support.  Our call center operations are integrated with
     our Web site to provide customer service to visitors to www.mortgage.com.
     For those borrowers who have submitted a complete online application, our
     automatic call distribution software, CLOserLink, electronically imports
     all of the borrower's data into our CLOser software system. In addition,
     artificial intelligence software that we license from a third party
     provides an automated, customized e-mail response to confirm the
     application and make immediate contact with the potential borrower. We then
     follow up with frequent telephone calls and e-mails to keep the borrower
     informed of the mortgage loan's approval status.

          When a partial online application is submitted, or when a borrower
     calls or e-mails us based on contact information on our Web site, a
     customer service representative in our call center is assigned to that
     potential borrower for the duration of the origination process. The
     customer service representative works with the potential borrower to
     explain portions of the mortgage lending process, provide rate and product
     information and assist the borrower with obtaining a mortgage loan. The
     customer service representative can enter data into an electronic loan
     application through CLOser, which efficiently manages the remainder of the
     mortgage transaction.

  OnLine Capital Loan Counselors

          In addition to our Internet site, we also maintain our own sales force
     that originates prime and sub-prime mortgage loans directly with borrowers.
     This sales force consists of loan counselors operating under the trade name
     OnLine Capital in offices we have established in Florida and California. We
     provide each loan counselor with a personalized Web page at
     www.onlinecap.com which they use to extend their access to borrowers.
     OnLine Capital loan counselors then use their personal Web sites and CLOser
     on a portable computer to conduct the mortgage origination process more
     efficiently.

          Our proprietary CLOser software system operates on portable and
     desktop computers connected through a secure nationwide communications
     network. CLOser includes the following features:

          o full integration with Web sites we have developed;

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<PAGE>
          o automated loan applications and interest rate locks;

          o daily updated loan rates and more than 100 loan products;

          o in-depth loan tracking;

          o high-speed dedicated connections to automated underwriting systems
            at Fannie Mae and Freddie Mac;

          o automatic generation of disclosure and closing documents tailored to
            the loan product, property and local laws; and

          o contact information, reminders of critical deadlines, e-mail, fax
            services and custom printing of promotional material.

          CLOser allows the user to input information from a prospective
     borrower once, pre-qualify the borrower, and evaluate numerous loan
     programs in light of the borrower's individual financial situation. It
     automatically downloads credit reports and obtains other third party
     verifications electronically. All information about a borrower and the
     borrower's loan is electronically transferred through CLOser to third-party
     automated underwriting systems or to our processing and underwriting
     personnel over our secure wide area network. By automating virtually every
     stage of the mortgage process, CLOser potentially reduces paperwork and the
     time it takes the borrower to obtain a mortgage loan. Also, because CLOser
     is fully integrated with our Web site, borrowers can monitor the status of
     their loans on the Internet at any time.

BUSINESS-TO-BUSINESS CHANNELS

     In addition to our direct-to-consumer channels, we enable mortgage bankers,
mortgage brokers, financial institutions, Realtors and homebuilders to
efficiently participate in the online mortgage industry at low cost. We have
developed an Internet platform integrated with our CLOser software system that
we license to other mortgage industry participants, as well as a Web site,
www.openclose.com, which is designed to permit mortgage bankers, mortgage
brokers, mortgage insurance companies and loan correspondents to communicate and
exchange information more effectively. We also provide our CLOser software
system to clients who become network members. We automate the origination
process and provide support services to network members whose own processing and
underwriting systems are not as efficient as our systems. We also enable certain
network members to provide automated origination services at the point-of-sale
of homes. These products and services enable our clients to provide more
efficient mortgage services to borrowers.

     The same call centers that we use to support our direct-to-consumer
channels are used to support our online business-to-business channels, including
clients for whom we have created private label Web sites, those with whom we
have co-branding relationships and Intuit Lender Services. This allows our
clients to provide their borrowers with remote counseling through e-mail and the
telephone and the ability to apply for a mortgage loan at a convenient time and
place. Accordingly, our services are often used in support of, or as a
replacement for, a traditional retail loan officer staff. When clients hire us,
they no longer need to manage data centers, maintain technology help desks,
purchase, install or develop software or hire and manage technical personnel. We
have an e-mail address and a toll-free number assigned to each client, so that
inquiries are answered in the name of the client by a group of customer service
representatives dedicated to that client's potential borrowers.

     During 1998, our business-to-business channel originated and closed $1.2
billion of mortgage loans, 14% of which were originated through the Internet. We
funded $934.7 million of those loans. For the three months ended March 31, 1999,
our business-to-business channel originated and closed $579.5 million, 38% of
which were originated through the Internet. We funded $485.9 million of those
loans.

    "Private Label" Web Sites for Mortgage Lenders

          We create and maintain private label Web sites for mortgage lenders,
     including banks, thrifts and credit unions of any size or sophistication.
     These private label Web sites are operated in the name of the client, while
     we provide the technology and management support in the background through
     CLOser. We create and maintain prime and sub-prime private label Web sites
     for such clients as SouthTrust

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<PAGE>
     Mortgage and NetB@nk, and the mortgage companies owned by CPS Realty,
     Arvida Homebuilders and Keyes Realty.

          The Web sites we create are custom-tailored to our clients and offer
     online applications, full integration with processing and underwriting
     systems and call center support. Just as with our own www.mortgage.com Web
     site, the private label Web sites we create for clients allow borrowers the
     opportunity to shop and apply for mortgage loans at their convenience. They
     also allow borrowers constant access to the status of their loans.

    "Co-Branded" Web Sites

          We have entered into marketing agreements that provide for advertising
     and promotion of our mortgage.com brand and Internet links to
     www.mortgage.com, through established home and financial information Web
     sites such as www.homefair.com, www.financenter.com and
     www.homepricecheck.com. When a potential borrower is browsing one of these
     sites for home buying or financial information, he is presented with an
     opportunity to apply for a mortgage online, without having to search for a
     separate Web site. The borrower can click on a link that takes him to a
     version of our Web site that displays both our mortgage.com brand and the
     brand of the information site that provided the link. We refer to these Web
     sites as "co-branded."

          Through these relationships, our co-branding partners can provide
     their customers with more than mere home buying and financial information.
     Those customers will gain access to convenient online mortgage financing
     through www.mortgage.com, including our call center support and the ability
     to monitor the status of their loans through closing. We process,
     underwrite and fund the mortgage loans and then sell them in the secondary
     market.

    Relationship with Intuit Lender Services and Participating Lenders on
www.quickenmortgage.com

          Some of our clients, such as First Union Capital Markets Group, Fleet
     Mortgage and GE Capital Mortgage Services, are provided online marketing
     and application capabilities through www.quickenmortgage.com, which is a
     multi-lender Web site operated by Intuit Lender Services. These clients
     recognize that we have the expertise to fully integrate the information
     they receive online with their own call centers and internal processing and
     underwriting systems. We provide them with call center support, as well as
     processing, underwriting, funding and secondary marketing services as their
     back office solution.

          The processing, underwriting and funding services we provide to
     participating lenders on www.quickenmortgage.com are subject to performance
     standards relating to the number of applications and inquiries we convert
     to funded loans and the level of customer service we provide. We currently
     are not meeting the performance standards which relate to converting
     applications and inquiries to closed loans. If we continue to fail to meet
     these performance standards, Intuit Lender Services may cancel the
     agreement. A cancellation of the agreement would have a negative effect on
     our online loan originations and our business as a whole. We believe we
     will either be able to meet the conversion ratios in the future or reach an
     appropriate accommodation with Intuit Lender Services so that we may
     continue providing services on www.quickenmortgage.com.


          We are also a participating lender on www.quickenmortgage.com. After a
     potential borrower on the www.quickenmortgage.com Web site chooses one of
     our or our clients' loan products, the information collected about the
     borrower is transferred to us through an electronic link to the CLOser
     software system. Information about a potential borrower may come to us at
     any stage of the process, from a mere inquiry initiated through
     www.quickenmortgage.com, to a potential borrower that has pre-qualified on
     the site, to a potential borrower that has filled out an application on the
     site. Regardless of the stage at which borrower information is transferred
     to us, our call center personnel complete the origination process. If the
     borrower chooses one of our loan products, we process, underwrite, fund
     with our own warehouse lending arrangements and close the loan in our name.
     We then sell the loan in the secondary market. If the borrower chooses one
     of our clients' loan products, we also fund the loan with our own warehouse
     lending arrangements and close the loan in our name. Then, we immediately
     sell the mortgage loan to our client along with the servicing rights.


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    Point-of-Sale Access to Borrowers

          We have developed strategic alliances with Realtors and homebuilders
     so that borrowers have access to efficient mortgage services at the
     point-of-sale of homes, much like a car buyer can get financial services in
     the showroom of an auto dealer. This saves borrowers the extra visits and
     phone calls to lenders that are necessary in traditional mortgage lending.
     It also allows us to increase our share of the more stable purchase
     mortgage business and gives our clients the ability to offer home buyers
     point-of-sale mortgage financing. We provide these services through a
     membership structure.

          Princeton Capital, Advantage Financial and Western America
     Mortgage.  A significant portion of our point-of-sale business operates
     under the trade names Princeton Capital, Advantage Financial and Western
     America Mortgage. In each case, our loan counselors are located in the
     office of a network member. These loan counselors use CLOser to improve the
     application and pre-qualification process. CLOser electronically handles
     credit reports and other third party approvals and electronically transmits
     the resulting information to our processing and underwriting departments,
     saving time and reducing paperwork and errors. Because CLOser is integrated
     with our Web site, point-of-sale borrowers have access to our Web site 24
     hours a day, 7 days a week to monitor the status of their loans.

          The network member for whom we employ our Western America Mortgage
     loan counselors is Mason-McDuffie Real Estate, which does business in
     northern California as Prudential California Realty. Our Western America
     Mortgage loan counselors service 20 Prudential California Realty offices in
     northern California. Through our Princeton Capital operations, we have loan
     counselors stationed in 14 Century 21 real estate offices in the San
     Francisco Bay area. Through our Advantage Financial operations, we have
     loan counselors positioned in 23 Coldwell Banker real estate offices. We
     also have a relationship with Cendant Mortgage by which Cendant has waived
     its exclusive rights to market in certain real estate offices so that our
     Princeton Capital and Advantage Financial loan counselors can originate
     mortgage loans through those offices. We pay Cendant a monthly fee and have
     agreed to sell a certain number of loans to them.

          Establishing Separate Mortgage Brokerage Entities for Clients.  In
     some cases, we assist Realtors and homebuilders in establishing separate
     mortgage brokerage entities by providing them with licensing, recruiting,
     formation and management services. These entities become network members
     and use CLOser over a secure wide area network because they generally do
     not have the expertise and financial resources to keep up with complex
     mortgage lending regulations, to develop automated origination, processing
     and underwriting systems or to handle all of the administrative and
     managerial aspects of the mortgage business. We provide the expertise and
     resources without requiring network members to disclose that we are the
     provider for their mortgage services.

          Major homebuilders and real estate companies that have formed mortgage
     brokerage affiliates and have become network members include Arvida, one of
     Florida's largest homebuilders, Keyes Realty, one of Florida's largest
     realty firms, and CPS Realty, a California realty firm.

          Technology Correspondent Member Relationships.  We have additional
     strategic alliances with one of 1998's top Prudential Real Estate
     franchises in the nation, based on home sales, and a large mortgage broker
     in San Diego. Under our agreements with these mortgage lenders, they will
     process mortgage loans using CLOser, fund the loans in their own names and
     then sell the loans to us, so that we can then resell them in the secondary
     market. Technology correspondent member arrangements allow us to provide
     mortgage companies fully automated point-of-sale services and support while
     we incur very little overhead.

Openclose.com

     We are developing, in cooperation with Fannie Mae, a new Web site where
participating mortgage lenders, brokers and loan correspondents can exchange
lender product and pricing information, automated underwriting data, mortgage
insurance certificates and borrower application information in a neutral
environment. This Web site, www.openclose.com, is designed to expand the
availability of important underwriting information, which results in faster
transactions, cost savings for borrowers, brokers and lenders by eliminating
unnecessary paperwork, and improved communications between lenders and their
customers.

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<PAGE>
The site also offers lenders access to a greater number of brokers and
correspondents. The Web site is currently being tested and we expect to expand
its availability beginning in August 1999.

     As of April 30, 1999, eight mortgage bankers have agreed to participate in
the www.openclose.com pilot program. We expect more will participate when we
expand www.openclose.com to a nationwide operation. Participating mortgage
bankers will pay us a fee for each mortgage loan sent to them through
openclose.com for their review, a loan transfer fee and an access fee for each
of the mortgage brokerage offices that access participating mortgage banker
sections of the Web site. In addition, participating mortgage bankers will pay
us a fee for each sub-prime mortgage loan transmitted through www.openclose.com
for review. The fees we charge participating mortgage bankers for each viewing
of the mortgage banker's page on the Web site by brokers are split equally
between us and GHR Information Systems, from whom we license some of the tools
available on www.openclose.com.

     We expect to begin marketing to brokers on a wide scale basis in June.
Mortgage brokers will pay us a fee for each loan submitted to www.openclose.com
for review by lenders. There are no monthly participation fees charged to
mortgage brokers.

     We pay Fannie Mae a licensing fee for Desktop Underwriter based on the
volume of mortgage loans submitted for automated underwriting.

CUSTOMERS

     Our direct-to-consumer customers consist of borrowers who contact us
through www.mortgage.com and our OnLine Capital loan counselors. We provided
4,317 home buyers and home owners with mortgage financing totaling more than
$798 million in 1998 through these channels.

     Our business-to-business client base consists of mortgage banks, mortgage
brokers, banks, thrifts, credit unions, Realtors and homebuilders throughout the
United States. Mortgage banks, mortgage brokers, banks, thrifts and credit
unions look to us primarily to establish an online presence or to provide
integrated call centers and back office support for their current online
systems. Realtors and homebuilders look to us primarily for turnkey solutions
that allow them to make mortgage services available to their customers with very
little cost. Through us our clients can get increased access to borrowers, call
center support and efficient processing, underwriting, funding, closing and
secondary marketing services. Among our representative clients and key
relationships are:

Arvida Home Builders
Cendant Mortgage
Century 21 Filer Realty
Consumer Finance Network
CPS Real Estate
First Union Capital Markets
Fleet Mortgage
GE Capital Mortgage Services
Intuit Lender Services
Mason-McDuffie Real Estate (doing business as Prudential California Realty in
northern California)
NetB@nk
Pickford Realty (doing business as Prudential California Realty in southern
California)
Southtrust Bank
Superior Bank FSB

     Our relationship with Mason-McDuffie Real Estate accounted for 10% or more
of our total revenues in 1998.

     The chart on the following page demonstrates a few of the ways that we can
solve the mortgage lending problems faced by our clients:

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<PAGE>
                          SELECTED CLIENT APPLICATIONS

<TABLE>
<CAPTION>
CLIENTS                 PROBLEM                                       SOLUTION
----------------------  --------------------------------------------  --------------------------------------------
<S>                     <C>                                           <C>

Arvida Home Builders    Arvida is one of Florida's largest            We assisted Arvida in forming a mortgage
                        homebuilders. It wanted to offer its          brokerage subsidiary which became a member
                        customers the opportunity to obtain mortgage  of our network using CLOser at the
                        financing on-site. However, as a              point-of-sale of Arvida homes in conjunction
                        homebuilder, Arvida had limited experience    with loan counselor's personal Web sites. We
                        in the mortgage business and did not have     perform all of the origination, processing,
                        the technical expertise to automate the       underwriting, funding and secondary
                        mortgage process.                             marketing services they need to provide
                                                                      Arvida home buyers with home financing.

Valley National Bank    Valley National Bank is a Super Regional      Valley National Bank engaged us to provide a
                        Community Bank with 105 branches              private label prime loan Web site and the
                        concentrated in Northern New Jersey. Valley   complete CLOser system package to support
                        National Bank supports multi-state mortgage   its own call center and mortgage lending
                        origination through a marketing agreement     systems.
                        with a national insurance company's
                        independent insurance agents. It is large
                        enough to attract a significant number of
                        potential mortgage loan borrowers, but too
                        small to carry out its own technical
                        development of mortgage banking systems.
</TABLE>

SALES AND MARKETING

     We market our products and services to consumers through targeted online
advertising, such as mortgage and real estate banners on Internet portals and
Web site sponsorship opportunities, as well as through more traditional means,
such as direct mail. Our marketing efforts focus on what we believe customers
want most, namely:

     o secure online transactions;

     o the ability to compare rates and get current information;

     o availability of human assistance through a toll-free number; and

     o a trusted brand.

Our marketing campaigns have an overall goal of increasing the general awareness
of the Mortgage.com brand and the products and services we provide.

     We have a sales team dedicated to marketing our online and call center
business-to-business services, including our private label Web sites. We have
licensed to GHR Information Systems the computer

                                       41
<PAGE>
programming code that underlies our prime mortgage loan Web site platform so
that it can create private label Web sites for lenders. We receive a portion of
the installation, transaction, software maintenance and other fees GHR receives
from the creation of private label Web sites based on our "prime" Web site
product. GHR also markets our other mortgage banking services.

     We have a separate sales team dedicated solely to www.openclose.com. We are
developing a national marketing plan to build awareness among mortgage brokers,
mortgage lenders and mortgage insurance companies. The plan includes direct mail
advertising with promotional CD-Roms included, direct sales, lender
sponsorships, online advertising and free trial offers. We also intend to
participate in numerous industry trade shows, including regional trade shows in
Florida and California, and the trade shows held for the National Association of
Mortgage Brokers and the Mortgage Bankers Association.

     We currently rely primarily on management to market our services to
Realtors, homebuilders and other potential network members, such as financial
planners. We intend to hire an internal sales force so that our network and
technology correspondent memberships can expand geographically.

OPERATIONS

  PRODUCTION OF MORTGAGE LOANS

     At the initiation of the mortgage banking process is the generation of
leads and the completion of loan applications. We perform this function
(1) online, (2) through loan counselors that we employ, (3) through network
members and (4) through mortgage lenders acting as loan correspondents. In the
case of the first three, we evaluate the loan applications and fund those loans
that meet our underwriting criteria. We then sell the mortgage loans in the
secondary market. In the fourth case, we will underwrite and purchase mortgage
loans from loan correspondents and sell the mortgage loans in the secondary
market.

     As a step to evaluating mortgage loan applications, our processing
department evaluates credit reports and property appraisals when required,
verifies borrowers' income and assets and obtains any additional third party
verifications relating to the borrowers and the mortgaged properties. We
maintain processing centers in Walnut Creek, California, Los Gatos, California
and Plantation, Florida, where as of March 31, 1999, 162 employees execute the
processing functions. Our operations managers approve and monitor third party
sources who have originated the loans, and third parties from whom we receive
credit reports, appraisals and similar verifications, based on criteria
established by our chief underwriter.

     We underwrite mortgage loans based on criteria established by secondary
market investors. Underwriting criteria may include the borrower's credit
standing and repayment ability and the value and adequacy of the mortgaged
property as collateral. Our underwriting department consists of a team of
17 underwriters in Plantation, Florida, Walnut Creek, California and Los Gatos,
California. The underwriting evaluation is done primarily through our CLOser
software system and through links to the automated underwriting systems of
Fannie Mae and Freddie Mac.

     CLOser acts as a pre-funding quality control department because it will not
generate closing documents for a mortgage loan that does not meet the
underwriting criteria. If a mortgage loan meets the underwriting criteria,
CLOser automatically generates closing documents tailored to the loan product,
the borrower, secondary marketing requirements and state laws and regulations.

  SECONDARY MARKETING OF MORTGAGE LOANS

     We originate all of our mortgage loans with the intent of selling those
loans in the secondary market. Our secondary marketing department monitors the
prices secondary market investors are willing to pay for various loan products.
We then add an appropriate profit margin to the interest rate for the loan and
publish our price for that loan on our Web site, in CLOser and on various
industry databases and price sheets. Our price includes a premium that we charge
investors for the value of the servicing rights associated with the mortgage
loans we sell in the secondary market. When we sell a loan in the secondary
market, we achieve a net gain, or suffer a net loss, equal to the difference
between the amount we paid for the loans and the price at which the loans are
sold to secondary market investors.

                                       42
<PAGE>
     We obtain commitments from secondary market investors for the purchase of
substantially all the prime mortgage loans we fund on the same day that we lock
in a rate for a borrower. This protects us against changes in interest rates
between the date we issue a loan commitment at a locked-in interest rate to the
borrower and the date we sell the loan in the secondary market. Our obligations
to sell to secondary market investors are generally on a "best efforts" basis,
which means we are required to sell the loan to a committed secondary market
investor only if the loan closes within an agreed upon time period. However,
occasionally a borrower will elect to not lock an interest rate until the
closing. In those cases, we may choose to sell the loan on a short-term
"mandatory" basis, which means we are required to sell the loan to a secondary
market investor within a specified number of days after the closing. We sell
loans on a mandatory basis only when we are confident that the loan will close.

     We also accumulate sub-prime mortgage loans for sale in pools of between
$1 million and $3 million. While this entails additional credit risk because we
hold the mortgage loan for a longer period of time, sales of these pooled
sub-prime loans typically bring higher net gains than the net gains earned on
the sale of prime loans. If we are particularly concerned about the credit risk
on a sub-prime mortgage loan, we will obtain an investor commitment in advance,
which reduces our credit risk but decreases the amount we receive on the sale of
the mortgage loan to secondary market investors.

     The following list shows some of the secondary market investors who
commonly purchase mortgage loans from us:

<TABLE>
<S>                                                  <C>
Norwest Funding                                      Fleet Mortgage
Cendant Mortgage                                     GE Capital Mortgage Services
Residential Funding Corporation                      Interfirst Mortgage
Citicorp Mortgage
</TABLE>

     In most cases when we sell a mortgage loan in the secondary market, there
is no recourse to us. However, inaccuracies in loan documents, information about
the borrower or information about the mortgaged property may require us to
repurchase the mortgage loans from the investors and indemnify them for any
damages caused by the inaccuracies. Since our inception, mortgage loans that we
have repurchased from investors have represented an insignificant percentage of
our total mortgage loan originations.

  FUNDING MORTGAGE LOANS

     After a mortgage loan has been approved for funding, we generally borrow
from one of our warehouse lines of credit or other financing vehicles to fund
and close the mortgage loan. We currently have warehouse lending or loan
repurchase arrangements with five large financial entities. Our aggregate
borrowing limits are currently set at approximately $220 million.

     After we borrow funds to fund a mortgage loan, we must pledge the mortgage
loan to the lender as security for our repayment of the borrowed money. During
the time a mortgage loan is pledged to the lender, it is considered
"warehoused." A mortgage loan is warehoused until we sell it in the secondary
market, at which time we repay the lender and the pledge is released. Prime
mortgage loans are warehoused for an average of approximately 25 days. Sub-prime
mortgage loans are warehoused for an average of approximately 40 days. In cases
where we hold loans for more than 30 days, we perform some interim servicing on
those loans using computer software licensed from a third party.

     We have entered into a letter of intent with Telebanc Financial Corp. to
provide a committed $200.0 million repurchase agreement which will allow us to
sell our closed mortgage loans to Telebanc instead of holding them in our
warehouse lines of credit. The net effect of this arrangement should be to
provide us with lower financing costs between closing and ultimate delivery to
investors. In addition, the letter of intent outlines the parameters for the
development of an electronic mortgage conduit with the intent of streamlining
the financing process. Telebanc would work with us to create a dedicated
e-commerce platform that will enable the efficient transmission of loan
information from originators to the secondary market. Although we expect this
financing arrangement to become available by the end of July 1999, we cannot
assure you that it will be available at that time, if at all.

                                       43
<PAGE>
  POST-CLOSING QUALITY CONTROL

     After we have funded and closed a mortgage loan, we submit 10% of funded
loans for a post-funding review. A post-funding review includes a
re-verification of credit, employment income and source of funds, as well as a
review of closing documentation. These reviews also include procedures designed
to detect evidence of fraudulent documentation or unacceptable activities during
the processing, funding or selling of the mortgage loan. We have hired an
independent third party to handle post-funding reviews and to recommend internal
corrective actions.

TECHNOLOGY

     The CLOser software system encompasses an Internet platform, local and wide
area networks, back office modules for processing, underwriting, closing and
secondary marketing, automated call and e-mail distribution links and
computer-based training. As of March 31, 1999, we employed 35 software
developers who are continually working towards developing new technological
solutions for the mortgage industry. As of that date, we employed 31 systems
support and operations personnel who provide communications and infrastructure
support for our direct-to-consumer and business-to-business channels and
training services for clients who use our technology. We also employed 15
customer service employees who provide technical help desk services. Last year
we spent approximately $2.9 million on research and development and we intend to
continue devoting substantial resources toward that end.

  TECHNOLOGY INFRASTRUCTURE AND SECURITY

     We have 80 computer servers which house all of our computer-based
technology, from our Internet Web sites to our e-mail capabilities. All of our
server hardware is provided by Dell Computer Corp. and our routers and switches
are provided by Cisco Systems. Our servers run on the Microsoft Windows NT
operating system software. We have redundant high-speed data lines from multiple
vendors for Internet access. We stock additional hardware parts and have
designed system and power supply redundancies to ensure that there are no
interruptions in service based on hardware failures. In addition, we monitor our
servers to ensure that we have sufficient space to handle software upgrades and
that at least 35% of our disk drive space is free for performance
considerations. All software and data in the system is backed up to magnetic
tape each night, which is stored off-site.

     Our technology security systems are designed to prevent unauthorized access
to internal systems and illegal third-party access to our data. Internally, log
in identifications and passwords are maintained for all systems, and personnel
have access only to those areas they are responsible for. We rely on encryption
and authentication technology licensed from third parties to provide secure
transmission of confidential information, such as employment and income items
submitted with online applications. Our servers are protected by firewalls and
no outside access is permitted.

     Our technology must accommodate a large number of users and must deliver
frequently updated information. Some components of our technology have
experienced outages or slower response times in the past, but none have had a
material effect on our business.

  OTHER LICENSED TECHNOLOGY

     Our www.openclose.com Web site will use a wide range of internally
developed software, as well as the Desktop Underwriter(Registered) software,
which we license from Fannie Mae. Our Desktop Underwriter(Registered) license
expires October 15, 2003, with provision for automatic year to year renewals.
Fannie Mae can amend our license by issuing a bulletin. If we object to the
amendment, Fannie Mae can terminate our license.

     We license from GHR Information Systems, Inc. portions of their
PremierSuite software, which we use to publish our prices on quickenmortgage.com
and which we use to access pricing information for participating lenders on
quickenmortgage.com who are our clients. Our license for this software expires
February 29, 2000, with successive one year automatic renewals unless one party
decides not to renew.

                                       44
<PAGE>
     [The chart appearing here represents the types of customers in each of the
two segments of Mortgage.com's business across the top of the page. Down the
side of the page are the Mortgage and technology services Mortgage.com offers.
Dots in the table represent the specific services utilized the corresponding
customer.]

COMPETITION

     Many of our business-to-business clients also compete with us for mortgage
loan originations. We compete with other mortgage bankers, mortgage brokers and
financial institutions such as Norwest Bank, Countrywide Mortgage, Chase
Mortgage, Headlands Mortgage, Cendant Mortgage, Citibank and Fleet Mortgage for
the origination and funding of mortgage loans directly with borrowers. Many of
our competitors have branch offices in the same areas where our loan counselors
and network members operate. We also compete with mortgage companies whose focus
is on telemarketing, such as The Money Store.

     Our online competition also is substantial. In addition to the traditional
mortgage companies and financial institutions who have or are developing an
online presence, we compete with other online financial service providers, such
as Intuit's Quickenmortgage, iOwn, E-LOAN and Finet. Our primary competitors for
business-to-business mortgage banking technology solutions are FiServ, Inc. and
Alltel Corporation.

     We believe that the principal competitive factors in our markets are:

     o brand recognition;

     o ability to attract borrowers;

     o a broad selection of mortgage loan products;

     o access to low cost financing arrangements;

     o comprehensiveness of information services;

     o quality and responsiveness of customer service; and

     o ease of use of computer technology.

     We must continue to enhance our mortgage.com brand and enhance our
technology to effectively compete. Many of our current and potential competitors
are profitable, have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial resources than we do. In
addition, other financial-related businesses with these characteristics are
likely to enter into the online mortgage origination business. We cannot be sure
that we will be able to compete successfully against current and future
competitors.

INTELLECTUAL PROPERTY

     We regard substantial elements of our Web sites and underlying technology
as proprietary and attempt to protect them by relying on trademark, service
mark, copyright and trade secret laws and restrictions on disclosure. We also
generally enter into confidentiality agreements with all technical employees and
consultants, and with third parties in connection with our license agreements.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our proprietary information without our authorization.
Third parties may also develop similar technology independently from us.

     We have registered CLOser as a federal trademark. We also have registered
the Internet domain names "mortgage.com," "openclose.com" and other domain names
we use. This gives us the exclusive rights to use these names as the addresses
for our Web sites. We have pledged the domain name "mortgage.com" to Credit.com
to secure our obligations to Credit.com resulting from our purchase of the
domain name "mortgage.com."

     We may not be able to register "mortgage.com" and certain other of our
trade names as federal trademarks because those names may be too generic to
qualify for federal trademark protection. Accordingly, we may not be able to
prevent other people from using those names in their businesses. It is possible
that others could use "mortgage.com" and our other trade names in such a way as
to damage our reputation, which could ultimately affect our revenues.

                                       45
<PAGE>
     Legal standards relating to the validity, enforceability and scope of
protection of our proprietary rights are uncertain and are still evolving,
especially as they relate to Internet-related rights. In addition, the laws of
some foreign countries may not protect our rights to the same degree as the
United States. For these reasons, we cannot be sure that the steps we take will
adequately protect our proprietary rights. We also may be required to litigate
to enforce our intellectual property rights or to determine the validity and
scope of the proprietary rights of others. This could create substantial costs
and a diversion of management's attention.

REGULATION

     Our mortgage banking business is subject to the rules and regulations of
the Department of Housing and Urban Development, Federal Housing Administration,
Veteran's Administration, Federal National Mortgage Association, Federal Home
Loan Mortgage Corporation, Government National Mortgage Association and other
regulatory agencies in connection with originating, processing, underwriting and
selling mortgage loans. These rules and regulations, among other things, impose
licensing obligations on us, prohibit discrimination and establish underwriting
guidelines. We also are required to comply with each regulatory entity's
financial requirements.

     Mortgage origination activities are further subject to the provisions of
various federal and state statutes including the Equal Credit Opportunity Act,
the Fair Housing Act, the Federal Truth-in-Lending Act, the Fair Credit
Reporting Act and the Real Estate Settlement Procedures Act. The Equal Credit
Opportunity Act and the Fair Housing Act prohibit us from discriminating against
applicants on the basis of race, color, religion, national origin, familial
status, sex, age, marital status or other prohibited characteristics. It also
requires us to disclose certain matters to applicants, such as the reason for
any credit denial. The Truth-in-Lending Act requires us to provide borrowers
with uniform, understandable information about the terms and conditions of
mortgage loans so that they can compare credit terms. It also guarantees
borrowers a three-day right to cancel certain credit transactions. If we fail to
comply with Truth-in-Lending, aggrieved customers could have the right to
rescind their loan transaction with us and to demand the return of finance
charges paid to us. The Fair Credit Reporting Act requires us to supply loan
applicants with a name and address of the credit reporting agency we use when
the applicant is denied credit or when the rate or charge for a loan increases
as a result of information we obtained from a credit reporting agency.

     Some of our client relationships are "affiliated business arrangements"
that must comply with complex limitations under the Real Estate Settlement
Procedures Act and to regulation by the Department of Housing and Urban
Development. Affiliated business arrangements permit companies to refer real
estate settlement business to us without violating the Real Estate Settlement
Procedures Act's prohibition on "kickbacks" to the referring company. There are
limitations on the types of payments that can be made to the referring company
and disclosures that are required to be made to borrowers. The Real Estate
Settlement Procedures Act also requires us to collect certain applicant
information and file an annual report with the Department of Housing and Urban
Development. Failure to comply with the Real Estate Settlement Procedures Act
could result in administrative enforcement actions which could eliminate
important revenue sources for us and could lead to demands for indemnification
or loan repurchases.

     Industry participants are frequently named as defendants in class-action
and other litigation involving alleged violations of federal and state consumer
lending laws and regulations. Some of the practices which have been the subject
of lawsuits against other companies include:

          o "add on" fees;

          o truth in lending calculations and disclosures;

          o escrow and adjustable rate mortgage calculations;

          o private mortgage insurance calculations and disclosures;

          o forced-placed hazard, flood and optional insurance; and

          o unfair lending practices.

                                       46
<PAGE>
If a significant judgment were rendered against us in connection with any
litigation, it could have a material adverse effect on our business and results
of operations.

     Although our operations on the Internet are not currently regulated by any
government agency in the United States beyond the mortgage-related regulations
described above and regulations applicable to businesses generally, it is likely
that a number of laws and regulations may be adopted governing the Internet. In
addition, existing laws may be interpreted to apply to the Internet. There may
be claims that our services violate those laws.

     Regulatory and legal requirements are subject to change and may become more
restrictive, making our compliance more difficult or expensive or otherwise
restricting our ability to conduct our business as it is now conducted. Such
changes could hurt our business.

EMPLOYEES

     At March 31, 1999, we had 594 full-time employees. Management expects to
hire an additional 150 employees in 1999, primarily to support our online
direct-to-consumer channels. Our success depends upon our ability to attract,
train and retain qualified personnel. We have a comprehensive training program
which explains our customer service philosophies and techniques, and we have
developed a sophisticated computer-based training program for CLOser and its
Internet component. To date, our attrition rate has been low. However, as we
develop new business alliances that increase the mortgage loan volumes we handle
through our call centers and processing centers, finding personnel to
participate in these training programs may become more difficult. We cannot be
sure that we will be able to find qualified personnel who can be trained in
sufficient time to handle increased mortgage loan volumes.

     None of our employees are represented by a union. We believe we have a good
relationship with our employees.

FACILITIES

     We are headquartered in Plantation, Florida, where we currently lease
approximately 53,300 square feet of space. Our lease for the building which
houses our executive offices and a portion of our call centers expires in 2007.
A second building houses the remainder of our call centers under a lease that
expires in 2002. Our California operations are contained in several locations in
the San Jose/San Francisco metropolitan area, totaling approximately 29,200
square feet. A majority of our technology personnel reside primarily in
approximately 15,000 square feet of space in Montvale, New Jersey. Our Montvale
office sub-lease expires in 2002 and without provision for extension and
renewal. We also have a 2,500 square foot office in Santa Rosa, California and a
1,000 square foot office in Reno, Nevada.

     We are currently negotiating to obtain approximately 100,000 square feet of
additional office space in Sunrise, Florida, with an option for 50,000 square
feet of expansion. If obtained, our executive offices and call centers would be
relocated to this building in September 1999 at a cost of approximately
$1 million. We then would sublease our current executive offices. If we are able
to obtain this new space for our executive offices and call centers, we believe
our facilities will be satisfactory for our current needs. If we are unable to
obtain that space upon favorable terms, we will actively seek alternative
arrangements to accommodate the growth in our direct-to-consumer business and
personnel. However, as our business grows, we anticipate needing additional
space for our direct-to-consumer business. We believe we will be able to secure
additional space on commercially reasonable terms.

LEGAL PROCEEDINGS

     We are not a party to any material litigation.

                                       47
<PAGE>
                                   MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

     Each member of our board of directors serves for a one-year term and until
their successors are elected and qualified. Our executive officers and directors
are as follows:

<TABLE>
<CAPTION>
NAME                                               AGE   POSITION
------------------------------------------------   ---   ------------------------------------------------
<S>                                                <C>   <C>
Seth S. Werner(1)(2)............................   53    Chairman of the Board; President; and Chief
                                                           Executive Officer
John J. Hogan(1)................................   37    Executive Vice President and Director
David W. Larson(1)..............................   48    Executive Vice President and Director
John Buscema....................................   42    Executive Vice President
Stephen L. Green(2)(3)..........................   48    Director
Edwin Johnson...................................   42    Chief Financial Officer and Senior Vice
                                                           President
Michael K. Lee(2)(3)............................   42    Director
George A. Naddaff...............................   69    Vice Chairman of the Board
John T. Rodgers.................................   37    Executive Vice President
</TABLE>

------------------
(1) The employment agreement for this officer requires us to nominate him for
    election to the board of directors at each annual meeting.

(2) Member of the Compensation Committee.

(3) Mr. Green and Mr. Lee have been elected to the board of directors under the
    terms of the Series B Preferred Stock. Those terms provide that each holder
    or affiliated group of holders of 363,000 or more shares of Series B
    Preferred Stock have the right to elect one director to our board of
    directors. All of the outstanding shares of Series B Preferred Stock will
    automatically convert to common stock upon completion of this offering, at
    which time the rights to elect one director cease.

     Seth S. Werner founded our company in September 1993, has served as
Chairman of the Board and Chief Executive Officer since the company's inception,
and as President from 1993 to 1997 and again in 1999. From 1973 to 1995,
Mr. Werner was the President and Chief Executive Officer of Werner Capital
Corporation, a Miami-based real estate investment banking firm which served as a
consultant to some of the largest financial institutions in the United States
and to the United States government on matters concerning its real estate
portfolios. He also was founder, Chairman and Chief Executive Officer of First
Capital Financial Corporation, a national real estate investment banking firm,
from 1974 through 1984. He is a director and President of SSW, Inc., general
partner of Kendall Racquetball Investments, Ltd., and a director, President,
Secretary and Treasurer of Harbour Real Estate Corporation.

     John J. Hogan has been an Executive Vice President and a member of our
board of directors since July 1997. Mr. Hogan heads our mortgage banking group.
From February 1995 to June 1997, he served as the President of OnLine Capital,
which merged into our company in June 1997. From March 1986 to February 1995,
Mr. Hogan served in several capacities, including Vice President of Loan
Administration, Senior Vice President of Mortgage Operations and Senior Vice
President and Chief Financial Officer of First Franklin Financial Corporation in
San Jose, California.

     David W. Larson has been a member of our board of directors since 1997 and
served as President from June 1997 through December 1998. Mr. Larson now is an
Executive Vice President who heads our broker services group. From January 1989
to October 1996, Mr. Larson served as the President and Chief Executive Officer
of B.F. Saul Mortgage Company, a $10 billion mortgage bank in Chevy Chase,
Maryland. Prior to that, Mr. Larson was the President of San Jacinto Savings and
Loan in Houston, Texas.

     John Buscema has been an Executive Vice President since April 1995, and
heads our advanced technology group. Mr. Buscema was responsible for developing
the ParEx software module, an integral part of our CLOser

                                       48
<PAGE>
software system. From 1990 to April 1995, he served as President of Morbank
Financial Systems, Inc., the company which developed the ParEx module, and also
oversaw all MIS-related issues for Globe Mortgage Company.

     Stephen L. Green has been a director since March 1996. Since 1991,
Mr. Green has served as a general partner of Canaan Partners, a principal
shareholder in our company. He serves on the boards of directors of Advance
Paradigm, Inc., a provider of pharmacy benefit management services, Chartwell Re
Corporation, an insurance holding company, and Suiza Foods Corporation, a
manufacturer and distributor of dairy products and plastic packaging, as well as
a number of private companies.

     Edwin D. Johnson has been Senior Vice President and Chief Financial Officer
since November 1998. From June 1998 through October 1998, Mr. Johnson was a
principal in JR Capital, Inc., an acquisition firm. From March 1996 to June
1998, Mr. Johnson was Chief Financial Officer of MasTec, Inc., a
telecommunications infrastructure company. From January 1995 to March 1996, he
was a private real estate consultant and from October 1984 to January 1995
Mr. Johnson was worldwide Chief Financial Officer for Attwoods, plc, an
international services company.

     Michael K. Lee has been a director since March 1996. In 1985 Mr. Lee
founded Dominion Ventures, Inc., a venture capital firm specializing in emerging
growth companies, and has served as its President and Chief Executive Officer
since its founding. Affiliates of Dominion Ventures, Inc. are principal
stockholders in our company, and Mr. Lee is the managing general partner of
those affiliates. He serves on the boards of directors of Advanced Access,
Gateway Insurance Co., Online Resources & Communications Corp., a provider of
financial e-commerce hubs, Paragon Acceptance Corp. and Relax the Back Corp.

     George A. Naddaff is Vice Chairman of our board of directors and has been a
director since September 1995. Mr. Naddaff is the controlling shareholder and a
director of Business Expansion Capital Corporation, a venture capital firm he
founded in 1987. From 1994 to 1996, he served as a director and Chairman of Food
Trends Acquisition Corporation, a publicly-traded corporation. Mr. Naddaff also
is the Chairman and Chief Executive Officer of Ranch 1, Inc. which has operated
a chain of sandwich shops since November 1997, and since June 1997, Mr. Naddaff
has been Chairman of Frame King Express, Inc. which sells framed art. He
currently is a consultant to Jreck Subs Group, Inc. Mr. Naddaff also is a
consultant to, and a director of, numerous private companies.

     John T. Rodgers has been an Executive Vice President since April 1998 and
heads our consumer services group. In 1993 Mr. Rodgers co-founded American
Finance and Investment and served as its President until April 1998 when it was
merged into our company. He also serves as a member of Microsoft's Real Estate
Advisory Board.

COMMITTEES OF THE BOARD OF DIRECTORS

     The audit committee of the board of directors will be established
immediately following the completion of this offering and will consist of three
directors, Michael Lee, Stephen Green and George Naddaff, two of whom are
independent directors. The audit committee will review and recommend outside
auditors and compensation paid to outside auditors, review results and
recommendations in each external audit, assist external auditors in connection
with the preparation of financial statements, review the procedures we use to
prepare financial statements and related management commentary and meet
periodically with management to review our major financial risk exposures.

     The compensation committee of the board of directors will be re-constituted
immediately following the completion of this offering and will consist of two
non-employee directors, Stephen Green and George Naddaff. The compensation
committee will oversee and review all decisions regarding the compensation of
executive officers and directors and the granting of stock options under our
stock option plan.

DIRECTORS' COMPENSATION

     After this offering, each non-employee director will be reimbursed for
expenses incurred in attending the meetings. No director who is an employee will
receive separate compensation for services rendered as a director. Non-employee
directors are eligible to participate in our stock option plan.

                                       49
<PAGE>
EXECUTIVE COMPENSATION

     The following table summarizes the compensation we paid or accrued for
services rendered for the year ended December 31, 1998, to our Chief Executive
Officer and each of the four other most highly compensated executive officers
who earned more than $100,000 in salary and bonus for the year ended
December 31, 1998:

<TABLE>
<CAPTION>
                                                                                       LONG-TERM
                                                                                  COMPENSATION AWARDS
                                                                                  -------------------
                                                            ANNUAL COMPENSATION     NUMBER OF
                                                            -------------------    SECURITIES           ALL OTHER
NAME AND PRINCIPAL POSITION                                  SALARY     BONUS     UNDERLYING OPTIONS    COMPENSATION
----------------------------------------------------------  --------   --------   -------------------   ------------
<S>                                                         <C>        <C>        <C>                   <C>
Seth S. Werner, Chief Executive Officer...................  $190,000   $100,000          50,000           $ 26,165(1)
David Larson, Executive Vice President....................   190,000    100,000          50,000             53,841(2)
John J. Hogan, Executive Vice President...................   161,347    100,000          20,000             22,248(3)
John Buscema, Executive Vice President....................   161,465     10,000           5,500              3,925(4)
John T. Rodgers, Executive Vice President.................   142,536         --              --              6,576(5)
</TABLE>

------------------
(1) Consists of an $18,000 car allowance, $5,000 in matching company
    contributions to the 401(k) plan and $3,165 in life insurance premiums.

(2) Consists of an $18,000 car allowance, $3,633 in matching company
    contributions to the 401(k) plan, $1,808 in life insurance premiums and a
    $30,400 relocation allowance.

(3) Consists of an $18,000 car allowance and $4,248 in matching company
    contributions to the 401(k) plan.

(4) Consists of $3,925 in matching company contributions to the 401(k) plan.

(5) Consists of a $4,500 car allowance and $2,076 in matching company
    contributions to the 401(k) plan.

EMPLOYMENT AGREEMENTS

     We have entered into employment agreements with most of our executive
officers. Each employment agreement entitles the executive officer to
participate in our company's benefits plans, including health insurance plans,
401(k) plan and stock option plan. Each also prohibits the executive officer
from making any unauthorized disclosures of our confidential information.

     Mr. Werner's employment agreement requires him to be our President and
Chief Executive Officer and also requires us to nominate him for the board of
directors at each annual meeting. His employment agreement expires December 31,
2003, with provision for annual one year renewals. Effective January 1, 1999,
his base salary is $350,000 per year, subject to annual increases. He is
entitled to bonuses based on merit and on the financial performance of our
company. We also pay premiums on a life insurance policy of which Mr. Werner is
the beneficiary. If Mr. Werner is terminated without cause or if he quits for
good reason, we must pay him a lump sum cash severance amount.

     Mr. Werner's employment agreement contains provisions to provide him
economic security after a change of control. Mr. Werner may terminate his
employment for good reason any time within two years after a change of control.
If that happens, or if we terminate him without cause within two years after a
change of control, Mr. Werner is entitled to a lump sum cash payment equal to
three times his base salary and three times his bonuses. Mr. Werner also may
terminate his employment for any reason after 120 days have passed since the
change of control. If that happens, Mr. Werner is entitled to a lump sum cash
payment equal to his base salary and his average bonus over the three prior
years. In either case, he is entitled to immediate vesting of all of his stock
options and the deadline for exercise of those options may be extended. To the
extent Mr. Werner incurs any federal excise taxes on the severance amount or the
value of the accelerated stock options, Mr. Werner is entitled to be reimbursed
by us for those tax consequences.

     If we terminate Mr. Werner for cause or if he terminates his employment for
good reason within two years after a change of control, he is prohibited from
competing with the company for three years following the date of his
termination. If we terminate Mr. Werner without cause, or if he terminates his
employment without good reason after 120 days have passed since a change of
control, he is prohibited from competing with the company for one year following
the date of his termination. In addition, if we terminate Mr. Werner for cause
or if he

                                       50
<PAGE>
leaves voluntarily, he is prohibited from soliciting our employees or any of the
businesses with whom we have business relationships for a period of two years
after the date of termination.

     Mr. Hogan's employment agreement requires him to be an executive vice
president and to head our mortgage banking group. The agreement also requires us
to nominate him for the board of directors at each annual meeting during the
term of his employment agreement. His employment agreement expires by its terms
on December 31, 2001, with provision for annual one year renewals. Effective
January 1, 1999, Mr. Hogan's base salary is $250,000 per year, subject to annual
increases. Mr. Hogan is entitled to merit bonuses at the discretion of the board
of directors. We also pay premiums on a life insurance policy of which he is the
beneficiary. If Mr. Hogan is terminated without cause or if he quits for good
reason, we must pay him a lump sum cash severance amount.

     Mr. Hogan's employment agreement contains change of control provisions
substantially similar to the change of control provisions in Mr. Werner's
employment agreement. In addition, the non-competition and non-solicitation
provisions in Mr. Hogan's agreement are substantially similar to Mr. Werner's
agreement.

     Mr. Larson's employment agreement requires him to head our broker services
group, which administers openclose.com. The agreement also requires us to
nominate him for the board of directors at each annual meeting. His employment
agreement expires February 28, 2002, with provision for annual one year
renewals. Mr. Larson is entitled to merit bonuses based on the number of lenders
and brokers who have committed to openclose.com. We also pay premiums on a life
insurance policy of which he is the beneficiary. If Mr. Larson is terminated
without cause, we must pay him a lump sum cash severance amount and all of
Mr. Larson's stock options become fully vested.

     As additional incentive compensation, Mr. Larson is entitled to receive,
beginning on January 1, 2001, a portion of the pre-tax net profits earned by
openclose.com. His percentage interest peaks at 10% on January 1, 2004.
Mr. Larson may, for 90 days after the earlier of January 1, 2001 or the date his
employment is terminated by us, elect to trade his interest in openclose.com for
(1) cash or common stock in an amount equal to the then current market price of
the common stock less the aggregate exercise price of options to purchase 50,000
shares of common stock which Mr. Larson has foregone in consideration of
receiving a portion of the pre-tax net profits of openclose.com or (2) cash or
common stock equal to the amount of the appraised value of his interest in
openclose.com. After that 90 day period, he may elect to trade his interest in
openclose.com for cash or stock equal to the appraised value of his interest in
openclose.com. Until December 31, 2001, or in the event we sell the assets of
openclose.com, we may redeem his interest in openclose.com for cash equal to the
appraised value of his interest in openclose.com. Mr. Larson's employment
agreement further provides that (1) if the openclose.com assets are distributed
to a separate entity controlled by us and such entity raises money in a debt or
equity financing from unaffiliated third parties, then Mr. Larson will be
entitled to the same percentage of the net proceeds as he is entitled to of the
pre-tax net profits earned by openclose.com and (2) if we discontinue operating
openclose.com, he may elect to have us assign to him all broker and lender
contracts for openclose.com, as well as the then current contract with Fannie
Mae.

     Vesting of the unvested stock options Mr. Larson has been granted under the
stock option plan accelerate to 20% vesting each 6 months following the initial
public offering. If Mr. Larson is terminated for any reason, he is prohibited
from competing with the company for one year following the date of his
termination. In addition, if Mr. Larson is terminated for cause or if he quits
voluntarily, he is prohibited from soliciting our employees or any of the
businesses with whom we have business relationships for a period of one year
after the date of termination.

     In connection with the acquisition of our CLOser software system, we
entered into employment terms with John Buscema. Mr. Buscema is required to be
the president of a division of the company. If we fail to renew his employment
each year, we are required to purchase Mr. Buscema's stock options for 25,000
shares of common stock at a price of $5.00 per share. If Mr. Buscema is
terminated for any reason, he is prohibited from competing with the company for
one year following the date of his termination. In addition, if Mr. Buscema is
terminated for any reason, he is prohibited from soliciting our employees or any
of the businesses with whom we have business relationships for a period of one
year after the date of termination.

     Our employment arrangement with John T. Rodgers makes him an executive vice
president and the head of our consumer services group. Effective April 1, 1999,
his base salary is $200,000. Mr. Rodgers is entitled to

                                       51
<PAGE>
bonuses based on merit and on the financial performance of our company. If
Mr. Rodgers is terminated for any reason, he is prohibited from competing with
the company for one year following the date of his termination. In addition, if
Mr. Rodgers is terminated for any reason, he is prohibited from soliciting our
employees or any of the businesses with whom we have business relationships for
a period of one year after the date of termination.

STOCK OPTION PLAN

     We have adopted a stock option plan as of April 24, 1996 to assist us in
attracting and retaining highly competent people to serve as employees,
directors and advisors who will contribute to our success and the success of the
members of our network. We also seek to motivate those people to achieve
long-term objectives which will benefit our stockholders. The following groups
of people are eligible to receive options under the stock option plan:

     o employees

     o directors

     o advisors and consultants, including former employees who have become
       members of our network or have become employees of members of our
       network, at our request

     The compensation committee administers the stock option plan and has wide
discretion to award options. Subject to the provisions of the stock option plan,
the compensation committee determines who will be granted options, the type and
timing of options to be granted, vesting schedules and other terms and
conditions of options, including the exercise price. All of our employees are
granted options. The number of options awarded to a person is based on the
person's potential ability to contribute to our company's success, the person's
position with our company and, in certain instances, length of service. The
compensation committee makes its granting decisions monthly.

     The compensation committee may award "incentive" options or "non-qualified"
options. We have granted both incentive and non-qualified options under the
stock option plan. If the holder of an incentive option exercises the option and
holds the shares of common stock he receives for the holding periods required by
the Internal Revenue Code, the exercise of the option does not result in taxable
income to the holder. We are therefore not entitled to a corresponding tax
deduction. The incentive options we grant under the stock option plan are
designed to meet the requirements of the Internal Revenue Code, including a
requirement that the exercise price is at least 100% of the fair market value of
our common stock on the date we grant the option and that the option has a term
no longer than ten years.

     By contrast, if the holder of a non-qualified option exercises the option,
the holder will be required to recognize taxable income on the date of exercise.
The taxable income is equal to the difference between the fair market value of
the shares acquired by exercising the option and the exercise price of the
option. We are then entitled to a corresponding tax deduction.

     We have reserved 3,000,000 shares of common stock for issuance through our
stock option plan. Only options that are vested may be exercised. The options
terminate after a period of time following the termination of employment.
Options that expire unexercised or that are forfeited become available again for
issuance under the stock option plan. All of the option agreements contain
customary anti-dilution adjustments which provide for adjustments to the
exercise price and number of shares subject to the warrants upon certain events,
such as stock splits, stock dividends and consolidations. The vesting of many of
the options accelerates upon a change of control of the company.

     The compensation committee may not grant options if the granting of the
options would make the total number of shares issuable upon exercise of all
outstanding options exceed 30% of the then outstanding shares of common stock
(including any convertible preferred on an "as if converted" basis). However, a
higher percentage may be approved by at least two-thirds of the outstanding
shares entitled to vote.

                                       52
<PAGE>
     We have awarded the following options under the stock option plan during
the last fiscal year to the executive officers named in the summary compensation
table:

                             OPTION GRANTS IN 1998

<TABLE>
<CAPTION>
                                                 INDIVIDUAL GRANTS
                              -------------------------------------------------------
                                          % OF TOTAL              ASSUMED
                                          OPTIONS                 MARKET                POTENTIAL REALIZABLE VALUE AT
                                          GRANTED TO               VALUE                 ASSUMED RATES OF STOCK PRICE
                               SHARES     EMPLOYEES IN              ON                 APPRECIATION FOR OPTION TERM(3)
                              COVERED BY   FISCAL       EXERCISE   GRANT   EXPIRATION  --------------------------------
NAME                          OPTIONS(1)  YEAR(2)        PRICE     DATE      DATE       0%($)      5%($)       10%($)
----------------------------- ----------  ------------  --------  -------  ----------  --------  ----------  ----------
<S>                           <C>         <C>           <C>       <C>      <C>         <C>       <C>         <C>
Seth Werner..................   50,000         8.0%      $11.50   $11.50     5/20/08         --  $  361,614  $  916,402
David Larson.................   50,000         8.0        11.50    11.50     5/20/08         --     361,614     916,402
John J. Hogan................   20,000         3.2        11.50    15.00    10/31/08   $ 70,000     258,668     548,123
John Buscema.................    3,000          .5         7.50    11.50     5/20/08     12,000      33,697      66,984
John Buscema.................    2,500          .4        11.50    15.00    10/31/08      8,750      32,334      68,515
John T. Rodgers..............       --          --           --       --          --         --          --          --
</TABLE>

------------------
(1) All options are either incentive stock options or nonqualified stock options
    and generally vest over five years at the rate of 20% of the shares on each
    anniversary of the date of grant. Options expire ten years from the date of
    grant.

(2) Based on options to purchase a total of 628,667 shares of common stock
    granted under the stock option plan in 1998.

(3) Potential realizable values are computed by (1) multiplying the number of
    shares of common stock subject to a given option by the assumed market value
    on the date of grant, (2) assuming that the aggregate stock value derived
    from that calculation compounds at the annual 0%, 5% or 10% rates shown in
    the table for the entire ten-year term of the option and (3) subtracting
    from that result the aggregate option exercise price. The 0%, 5% and 10%
    assumed annual rates of stock price appreciation are mandated by the rules
    of the Securities and Exchange Commission and do not represent our estimate
    or projection of future common stock prices.

     In February 1999, we granted to named executive officers options to
purchase an additional 150,000 shares of common stock at an exercise price of
$15.00 per share and in April 1999, we granted to an executive officer options
to purchase 15,000 shares of common stock at an exercise price of $30.00 per
share.

     None of the named executive officers or directors who have been granted
options under the stock option plan exercised any of the options in fiscal year
1998. The following table sets forth information regarding exercisable and
unexercisable stock options held as of December 31, 1998 by the named executive
officers. There was no public trading market for the common stock as of December
31, 1998. Accordingly, as permitted by the rules of the Securities and Exchange
Commission, the value of unexercised in-the-money options has been calculated by
determining the difference between the exercise price per share payable upon
exercise of such options and an assumed initial public offering price of
$            .

                    AGGREGATED FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                                  NUMBER OF SECURITIES            VALUE OF UNEXERCISED
                                                                 UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS AT
                                                               OPTIONS AT FISCAL YEAR-END           FISCAL YEAR END
                                                              ----------------------------    ----------------------------
NAME                                                          EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
-----------------------------------------------------------   -----------    -------------    -----------    -------------
<S>                                                           <C>            <C>              <C>            <C>
Seth Werner................................................      50,000          50,000
David Larson...............................................      30,000         170,000
John J. Hogan..............................................      25,000          20,000
John Buscema...............................................      10,500          12,500
John T. Rodgers............................................          --              --              --              --
</TABLE>

                                       53
<PAGE>
401(K) SAVINGS PLAN

     We maintain a 401(k) savings plan which is intended to satisfy the tax
qualification requirements of the Internal Revenue Code of 1986, as amended. All
of our employees aged 18 or older are eligible to participate in the
401(k) plan after two months of service with us. The 401(k) plan permits
participants to contribute up to 15% of their annual compensation. We match up
to 50% of an employee's contributions to the 401(k) plan, not to exceed 2.5% of
their annual compensation. We contributed $341,000 to the 401(k) plan in 1998.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Prior to this offering, the compensation committee of the board of
directors consisted of Seth S. Werner, Stephen Green and Michael Lee. The
compensation committee historically recommended to the board of directors
appropriate executive officer compensation and the granting of stock options
under the stock option plan. Mr. Werner did not participate in making
recommendations to the board of directors when his compensation was being
reviewed and approved. The board of directors historically made all final
decisions regarding executive officer compensation and the granting of stock
options under the stock option plan.

                                       54
<PAGE>
                              CERTAIN TRANSACTIONS

VENTURE CAPITAL FINANCINGS

     Each share of preferred stock described in this section will be converted
to common stock upon completion of this offering, and will receive one share of
common stock upon conversion.

     In January 1998, we sold $2,000,000 of Senior Subordinated Convertible
Notes due January 31, 2003 to Canaan Equity, L.P. and Dominion Fund III. In
connection with that sale, we issued warrants to purchase an aggregate of 66,667
shares of our common stock at an exercise price of $7.50 per share. In May 1998,
the principal of the Senior Subordinated Convertible Notes was converted into an
aggregate of 173,912 shares of Series D Preferred Stock based on a conversion
value of $11.50 per share.

     Also in May 1998, we sold an aggregate of 6,520 shares of Series D
Preferred Stock to directors Stephen Green and Michael K. Lee for $11.50 per
share. The aggregate consideration was $74,980. In August 1998, Stephen Green
purchased an additional 8,695 shares of Series D Preferred Stock for $11.50 per
share, for aggregate consideration of $99,992.50.

     In April 1998, we entered into a settlement agreement with FMN Associates
Limited Partnership. FMN Associates was the sole holder of the Series A
Preferred Stock which will convert to common stock upon the closing of this
offering. Under an earlier agreement with FMN Associates, we agreed to become a
licensed insurance agent and pay FMN Associates a portion of the profits we
generated from that business. In consideration of foregoing this right,
FMN Associates received in the settlement agreement warrants to purchase 36,000
shares of our common stock at an exercise price of $11.50 per share.
FMN Associates has since distributed those warrants to its partners.

     In February 1999, we sold $2,000,000 of Senior Subordinated Notes due
February 9, 2000 to Canaan Equity, L.P., Intuit, Inc., Dominion Fund IV, which
is an affiliate of Dominion Fund III, and Technology Crossover Venture funds,
each of whom are principal shareholders. In connection with that sale we issued
warrants to purchase an aggregate of 6,668 shares of common stock at an exercise
price equal to the initial public offering price in this offering. Later the
same month, we sold $8,000,000 of Senior Subordinated Notes due February 26,
2001 to Intuit, Dominion Fund IV and Technology Crossover Ventures. In
connection with that sale we issued warrants to purchase an aggregate of 53,344
shares of common stock at an exercise price equal to the initial public offering
price in this offering. The number of shares of common stock issuable under the
warrants we issued in these financings may be reduced pursuant to a formula
based on the initial public offering price of our common stock and will be
reduced by 26,672 shares upon application of the net proceeds of this offering
to retirement of all the debt held by the holders of these warrants.

     In May 1999, we sold $27.5 million of Senior Subordinated Convertible Notes
due May 5, 2001 to Intuit Inc. The Notes are convertible at Intuit's option into
common stock upon completion of this initial public offering at a conversion
value of $60 per share.

     In May 1999, we sold 250,001 shares of Series F Preferred Stock to Dominion
Fund IV, L.P., Canaan Equity, L.P., and nine funds operated by Technology
Crossover Ventures. The Series F Preferred Stock was sold for $60 per share, for
aggregate consideration of $15.0 million. Each of the purchasers is a principal
stockholder of our company.

     We believe that each of these transactions were completed on terms no less
favorable to us than would have been obtained from unrelated third parties.

TRANSACTIONS WITH SUPERIOR BANK FSB

     We are a party to a sales and marketing agreement with Superior Bank FSB,
which beneficially owns more than 5% of our outstanding securities prior to the
offering. In 1998, we earned approximately $1.6 million in management,
technology and other fees under this sales and marketing agreement.

     In May 1999, we agreed with Superior Bank to redeem their warrants to
purchase 400,000 shares of common stock with exercise prices of $5.00 per share
and a warrant to purchase 100,000 shares of common

                                       55
<PAGE>
stock with an exercise price of $7.50 per share. The aggregate redemption price
for the warrants is $25 million. On May 10, 1999 we paid the first $6 million
installment for the warrants. Another $6 million is due on June 30, 1999, with
the remainder due upon the closing of this offering. We also agreed to purchase
from Superior certain rights to CLOser and the related intellectual property for
an aggregate purchase price of $3.5 million. This purchase was completed on
May 10, 1999.

     We believe that the terms of these transactions are no less favorable to us
than would have been obtained in arm's length transactions.

TRANSACTIONS WITH DOMINION VENTURES, INC.

     We have obtained a lease line of credit from Dominion Ventures, Inc., an
affiliate of two of our principal stockholders: Dominion Fund III and Dominion
Fund IV, L.P. Dominion Ventures has agreed to acquire computer and office
equipment when we request it, and to lease the equipment to us. Upon signing the
agreement we were required to pay Dominion Ventures advance rent of
approximately $89,667. In addition, each time Dominion Ventures leases us
equipment, we are required to make monthly rental payments equal to 2.81% of the
cost of the equipment. Prior to the end of the lease term on each piece of
equipment, we have an option to purchase the equipment for its fair market
value. The total value of the equipment leased under the lease line of credit
cannot exceed $1,595,500.

     In consideration of Dominion Ventures providing us with the lease line of
credit, we issued to Dominion Fund III a warrant to purchase 9,800 shares of our
Series D Preferred Stock at an exercise price of $11.50 per share and issued to
Dominion Capital Management LLC a warrant to purchase 8,850 shares of our
Series D Preferred Stock at an exercise price of $11.50 per share. Upon closing
of this offering, those warrants will become warrants to purchase 18,650 shares
of our common stock at an exercise price of $11.50 per share. We believe that
the lease line of credit we obtained from Dominion Ventures contains rental
rates and terms no less favorable to us than would have been obtained in an
arm's length transaction with another lease line of credit provider.

TRANSACTIONS WITH INTUIT LENDER SERVICES

         On May 26, 1999, we entered into a distribution, marketing, facilities
and services agreement with Intuit Lender Services, a wholly-owned subsidiary of
Intuit Inc., which is a principal stockholder in our company. Under the
agreement, we will provide sub-prime mortgage support services to Intuit Lender
Services and will pay it fees for services and facilities. We also will pay an
exclusivity fee on August 10, 1999 if Intuit Lender Services has begun sub-prime
services by that date, and will pay an additional annual exclusivity fee. We
believe this agreement contains terms no less favorable to us than would have
been obtained in an arm's-length transaction.

TRANSACTIONS WITH EXECUTIVE OFFICERS

     In 1997, we merged OnLine Capital into our company and paid for the merger
with a combination of cash and common stock for an approximate aggregate
purchase price of $780,000. In addition, we entered into an employment agreement
with John Hogan, who was the sole shareholder of OnLine Capital and who is now
an executive vice president and a member of our board of directors. In 1998, we
revised Mr. Hogan's compensation. In consideration of the revisions, Mr. Hogan,
or any entity designated by Mr. Hogan, is entitled to receive cash in an amount
equal to a percentage of the quarterly pre-tax profits of our mortgage services
group and Mr. Hogan received 100,000 shares of common stock. The amount of cash
which can be earned is capped at $3,400,000 and Mr. Hogan's right to earn the
cash consideration ends on June 30, 2001. Mr. Hogan has designated
J.J.H. Financial, LLC, a company principally owned by him, as the recipient of
the cash consideration. Through the date of this prospectus, we have paid
J.J.H. Financial $1,634,000. We believe that the revised terms are no less
favorable to us than would have been obtained in an arm's length transaction.

                                       56
<PAGE>
                             PRINCIPAL STOCKHOLDERS

     The following table sets forth information regarding the beneficial
ownership of our common stock as of May 28, 1999, and as adjusted as if the
convertible notes and all of the preferred stock, other than the Special
Preferred Stock (Northern California Division), had converted to common stock
and the sale of the common stock we are offering had already taken place. As of
that date, there were 43 holders of record of our common stock. We have listed
each person that beneficially owns more than 5% of the outstanding common stock,
each of our directors and executive officers identified in the executive
compensation table who beneficially owns any common stock and all directors and
executive officers as a group. Unless otherwise indicated, each of the
stockholders has sole voting and investment power with respect to the shares
beneficially owned. Unless otherwise noted in the footnotes, the address for
each principal stockholder is 8751 Broward Boulevard, Fifth Floor, Plantation,
FL 33324.

     For purposes of calculating amounts beneficially owned before the offering,
the number of shares deemed outstanding includes (1) 1,392,624 shares of common
stock outstanding as of May 28, 1999; (2) 3,906,407 shares of common stock
issuable upon conversion of convertible notes and preferred stock, other than
the Special Preferred Stock (Northern California Division); and (3) the shares
of common stock subject to options or warrants held by that person that are
currently exercisable within 60 days after May 28, 1999. It excludes shares of
common stock issuable upon conversion of the Special Preferred Stock (Northern
California Division) upon closing of this offering. Of the 1,000 outstanding
shares of Special Preferred Stock (Northern California Division), 660 shares
will convert, upon closing of this offering, to the number of shares of common
stock as is obtained by dividing $2,640,000 by the initial public offering
price. The remaining 340 shares will remain outstanding.

     For purposes of calculating the percentage beneficially owned after the
offering, the number of shares deemed outstanding includes (1) all shares deemed
to be outstanding before the offering and (2) shares being sold in this
offering, assuming no exercise of the underwriters' overallotment option.

<TABLE>
<CAPTION>
                                                                                            PERCENT OF COMMON STOCK
                                                                NUMBER OF SHARES OF    ---------------------------------
NAME AND ADDRESS                                                 COMMON STOCK          BEFORE OFFERING    AFTER OFFERING
-------------------------------------------------------------   -------------------    ---------------    --------------
<S>                                                             <C>                    <C>                <C>
Stephen Green(1),(2).........................................        1,226,519               22.8%
Canaan Partners(2)...........................................        1,215,647               22.6
Intuit Inc.(3)...............................................        1,015,079               20.0
Michael K. Lee(4),(5)........................................          896,361               16.7
Dominion Ventures(5).........................................          892,014               16.6
Technology Crossover Ventures(6).............................          646,741               12.2
Superior Bank, FSB(7)........................................          400,000                7.3
Seth S. Werner(8)............................................          257,500                5.0
George A. Naddaff(9).........................................          232,455                4.5
John Hogan(10)...............................................          166,168                3.3
David Larson(11).............................................           70,000                1.4
John T. Rodgers(12)..........................................           35,561                  *
John Buscema(13).............................................           34,600                  *
All directors and executive officers as a group
  (9 persons)................................................        2,919,164               50.3
</TABLE>

------------------
*   Represents less than 1%.

(1)  Mr. Green is a member of our board of directors and is a partner in Canaan
     Partners. Mr. Green has shared voting power with respect to the shares
     owned by Canaan Partners and shared investment power with respect to the
     shares and warrants owned by Canaan Partners. See footnote (2).

(2)  Includes 55,769 shares beneficially owned by Canaan Capital Limited
     Partnership; 465,444 shares beneficially owned by Canaan Capital Offshore
     Limited Partnership, C.V.; 51,733 shares beneficially owned by Canaan
     Ventures II Limited Partnership; 81,600 shares beneficially owned by Canaan
     Ventures II Offshore, C.V.; and 476,101 shares beneficially owned by Canaan
     Equity, L.P. Canaan Equity, L.P. also holds warrants to purchase common
     stock in the following amounts and at the following prices: (a) 1,667 at
     the initial public offering price, though the number of shares subject to
                            the warrant may be reduced by a formula based on the

                                              (Footnotes continued on next page)

                                       57
<PAGE>
(Footnotes continued from previous page)
     initial offering price; and (b) 83,333 at $7.50 per share. The address for
     each of these entities is 105 Rowayton Avenue, Rowayton, Connecticut 06853.

(3)  Includes 521,739 shares of common stock beneficially owned by Intuit Inc.,
     458,333 shares of common stock issuable to Intuit upon conversion of the
     12% Senior Subordinated Convertible Notes due May 5, 2001 and warrants to
     purchase 35,007 shares of common stock at the initial public offering
     price, though the number of shares subject to the warrant may be reduced by
     a formula based on the initial offering price and will be further reduced
     by 16,670 shares upon application of the net proceeds of this offering to
     retirement of debt held by Intuit Inc. The address for Intuit Inc. is 2535
     Garcia Avenue, Mountain View, California 94043.

(4)  Mr. Lee is a member of our board of directors and is a principal in the
     general partner of the Dominion Ventures entities. Mr. Lee has sole voting
     power with respect to the shares owned by Dominion Ventures and has shared
     investment power with respect to the shares and warrants owned by Dominion
     Ventures. See footnote (5).

(5)  Includes 766,693 shares beneficially owned by Dominion Fund III and 58,334
     shares beneficially owned by Dominion Fund IV, L.P. Dominion Fund III holds
     a warrant to purchase 9,800 shares of Series D Preferred Stock at $11.50
     per share and Dominion Capital Management LLC holds a warrant to purchase
     8,850 shares of Series D Preferred Stock at $11.50 per share. Those
     warrants will become warrants to purchase 18,650 shares of common stock at
     $11.50 per share upon closing of this offering. Dominion Fund III also
     holds warrants to purchase 33,334 shares of common stock at $7.50 per
     share. Dominion Fund IV, L.P. holds warrants to purchase 15,003 shares of
     common stock at the initial public offering price, though the number of
     shares subject to the warrant may be reduced by a formula based on the
     initial offering price and will be further reduced by 6,668 shares upon
     application of the net proceeds of this offering to retirement of the debt
     held by Dominion Fund IV, L.P. The address for Dominion Fund III, Dominion
     Capital Management LLC and Dominion Fund IV, L.P. is 44 Montgomery Street,
     #4200, San Francisco, California 94104.

(6)  Consists of 257,559 shares beneficially owned by Technology Crossover
     Ventures II, L.P. and warrants to purchase 3,987 shares of common stock at
     the initial public offering price; 8,367 shares beneficially owned by TCV
     II, V.O.F. and warrants to purchase 130 shares of common stock at the
     initial public offering price; 198,019 shares beneficially owned by TCV II
     (Q), L.P. and warrants to purchase 3,065 shares of common stock at the
     initial public offering price; 35,141 shares beneficially owned by TCV II
     Strategic Partners, L.P. and warrants to purchase 545 shares of common
     stock at the initial public offering price; 39,324 shares beneficially
     owned by Technology Crossover Ventures II, C.V. and warrants to purchase
     608 shares of common stock at the initial public offering price; and
     100,000 shares beneficially owned by TCV III (GP), TCV III L.P., TCV III
     (Q) and TCV III Strategic Partners, L.P. (collectively, the "TCV Funds").
     The number of shares subject to warrants held by the TCV Funds may be
     reduced by a formula based on the initial offering price and will be
     further reduced by 3,334 shares upon application of the net proceeds of
     this offering to retirement of debt held by the TCV Funds. These entities
     also have an option to purchase up to $3 million of our common stock from
     the underwriters in this offering at the initial public offering price per
     share. Jay C. Hoag and Richard H. Kimball are the sole managing members of
     Technology Crossover Management II, L.L.C. ("TCM II"), the general partner
     of each of the TCV Funds. Consequently, TCM II and Messrs. Hoag and Kimball
     may each be deemed to beneficially own all of the shares held by the TCV
     Funds. TCM II and Messrs. Hoag and Kimball each disclaim beneficial
     ownership of such shares, except to the extent of their pecuniary interests
     in those shares. The address for each of these entities is 575 High Street,
     Suite 400, Palo Alto, California 94301.

(7)  Consists of 400,000 shares of common stock issuable pursuant to presently
     exercisable warrants. On June 30, 1999, we expect to repurchase 100,000 of
     the warrants from Superior Bank for an aggregate price of $6 million. In
     addition, a portion of the net proceeds of this offering is expected to be
     used to repurchase the remaining warrants for an aggregate price of
     $13 million. The address for Superior Bank, FSB is One Lincoln Centre,
     Oakbrook Terrace, Illinois 60181.

(8)  Consists of 197,500 shares of common stock beneficially owned by The Seth
     Werner Revocable Trust dated October 1, 1996, presently exercisable options
     to purchase 50,000 shares of common stock at $5.50 per share and presently
     exercisable options to purchase 10,000 shares of common stock at $11.50 per
     share.

(9)  Consists of 72,727 shares of common stock, presently exercisable options to
     purchase 50,000 shares of common stock at $5.50 per share, presently
     exercisable options to purchase 36,576 shares of common stock at $8.00 per
     share, presently exercisable options to purchase 36,576 shares of common
     stock at $10.50 per share and presently exercisable options to purchase
     36,576 shares of common stock at $13.00 per share, each held by FirstMN,
     LLC, of which George A. Naddaff, a member of our board of directors, is 50%
     owner.

(10) Consists of 141,168 shares of common stock and presently exercisable
     options to purchase 25,000 shares of common stock at $7.50 per share.

(11) Consists of presently exercisable options to purchase 60,000 shares of
     common stock at $5.50 per share and presently exercisable options to
     purchase 10,000 shares of common stock at $11.50 per share.

(12) Consists of 27,540 shares of common stock and presently exercisable
     warrants to purchase 8,021 shares of common stock at $7.50 per share.

(13) Consists of presently exercisable warrants to purchase 20,000 shares of
     common stock at $5.00 per share, presently exercisable options to purchase
     6,000 shares of common stock at $5.50 per share and presently exercisable
     options to purchase 8,600 shares of common stock at $7.50 per share.

                                       58
<PAGE>
                          DESCRIPTION OF CAPITAL STOCK

GENERAL

     We are authorized to issue up to 30,000,000 shares of common stock, $.01
par value per share, and 15,000,000 shares of preferred stock, $.01 par value
per share. At the date of this prospectus, 1,392,624 shares of common stock and
3,449,074 shares of preferred stock were issued and outstanding. All of the
outstanding capital stock is and will be, fully paid and non-assessable.

COMMON STOCK

     Holders of common stock are entitled to one vote per share. All actions
submitted to a vote of stockholders are voted on by holders of common stock
voting together as a single class. Holders of common stock are not entitled to
cumulative voting in the election of directors.

     Holders of common stock are entitled to receive dividends in cash or in
property on an equal basis, if and when dividends are declared on the common
stock by our board of directors, subject to any preference in favor of
outstanding shares of preferred stock, if there are any.

     In the event of liquidation of our company, all holders of common stock
will participate on an equal basis with each other in our net assets available
for distribution after payment of our liabilities and payment of any liquidation
preferences in favor of outstanding shares of preferred stock, if there are any.

     Holders of common stock are not entitled to preemptive rights and the
common stock is not subject to redemption.

     The rights of holders of common stock are subject to the rights of holders
of any preferred stock which we designate or have designated. The rights of
preferred stockholders may adversely affect the rights of the common
stockholders.

PREFERRED STOCK

     Our board of directors has the ability to issue up to 15,000,000 shares of
preferred stock in one or more series, without stockholder approval. The board
of directors may designate for the series (1) the number of shares and name of
the series, (2) the voting powers of the series, including the right to elect
directors, if any, (3) the dividend rights and preferences, if any,
(4) redemption terms, if any, (5) liquidation preferences and the amounts
payable on liquidation or dissolution, (6) the terms upon which such series may
be converted into any other series or class of our stock, including the common
stock and (7) any other terms that are not prohibited by law.

     It is impossible for us to state the actual effect it will have on common
stock holders if the board of directors designates a new series of preferred
stock. The effects of such a designation will not be determinable until the
rights accompanying the series have been designated. The issuance of preferred
stock could adversely affect the voting power, liquidation rights or other
rights held by owners of common stock or other series of preferred stock. The
board of directors' authority to issue preferred stock without shareholder
approval could make it more difficult for a third party to acquire control of
our company, and could discourage any such attempt. We have no present plans to
issue any additional shares of preferred stock.

     All outstanding shares of preferred stock (other than Special Preferred
Stock (Northern California Division)) will automatically convert into an
aggregate of 3,448,074 shares of common stock upon closing of this offering.

  SPECIAL PREFERRED STOCK (NORTHERN CALIFORNIA DIVISION)

     Of the 1,000 outstanding shares of Special Preferred Stock (Northern
California Division) 660 shares will convert, upon closing of this offering, to
the number of shares of common stock as is obtained by dividing $2,640,000 by
the initial public offering price. We currently are negotiating with the holder
of all of the outstanding shares of Special Preferred Stock (Northern California
Division) to convert all of the outstanding Special Preferred Stock to the
number of shares of common stock as is obtained by dividing

                                       59
<PAGE>
$2,040,000 by the initial public offering price, pursuant to a recapitalization
agreement. If we are unable to successfully negotiate a 100% conversion of the
Special Preferred Stock, 340 shares will remain outstanding following closing of
this offering.

     The rights, preferences and limitations of the Special Preferred Stock are
summarized below. Because it is a summary, you should refer to our Articles of
Incorporation, which contain the complete designation of the rights, preferences
and limitations of the Special Preferred Stock.

  Voting Rights

     The holder of Special Preferred Stock is entitled to vote on any action
that would (1) change any rights of the Special Preferred Stock or increase or
decrease the number of authorized shares of Special Preferred Stock, (2) create
any new series or class of stock that is senior to or on a parity with the
Special Preferred Stock, (3) create any obligations that would be convertible
into or exchangeable for shares of stock senior to or on a parity with the
Special Preferred Stock, (4) create any option rights to purchase shares of
stock senior to or on a parity with the Special Preferred Stock or
(5) reclassify any class or series of common stock into shares of stock senior
to or on a parity with the Special Preferred Stock. The Special Preferred Stock
carries no additional voting rights beyond those required by Florida law.

  Dividends

     Upon conversion of 660 shares of Special Preferred Stock, the holder of
Special Preferred Stock will be entitled to receive quarterly dividends in cash
equal to 6.8% of the net profits of our Northern California Division, which
includes the operations of Advantage Financial, Princeton Capital and Western
America Mortgage. This dividend has a preference over any other dividend payable
to holders of our capital stock. The holder is not entitled to any other
dividends.

  Liquidation Rights

     Upon liquidation of the company or the Northern California Division, the
holder of Special Preferred Stock will be entitled to receive the following
before any payment or distribution on any class or series of stock is made:
(1) 6.8% of the fair market value of the Northern California Division, (2) an
assignment of all of our rights to mortgage loans that have been originated and
processed through the joint efforts of our company and the holder, but which
have not yet been closed and (3) a return of the holder's capital contributions
provided to the Northern California Division (presently $20,000). Such amounts
are payable solely from the assets of the Northern California Division, and not
from any other of our assets.

  Redemption Rights

     If (1) we and the holder of the Special Preferred Stock mutually agree to
terminate our relationship within the Northern California Division, (2) we fail
to pay a dividend to the holder within 45 days after our board of directors has
legally approved the dividend or (3) we fail to maintain sufficient financing
arrangements, such as warehouse lines of credit, to carry out our obligations in
the Northern California Division, then we are required to redeem the Special
Preferred Stock. The redemption price is payable in cash or assets equal to 6.8%
of the fair market value of the Northern California Division.

                                       60
<PAGE>
OPTIONS AND WARRANTS

     As of May 27, 1999, 1,808,888 options were outstanding under our stock
option plan and 1,190,487 options were available for issuance under our stock
option plan. In addition to options granted through the stock option plan, the
following options and warrants were outstanding as of May 27, 1999 and except as
noted below are presently exercisable for shares of common stock:

<TABLE>
<CAPTION>
NUMBER OF SHARES PURCHASABLE              EXERCISE PRICE
----------------------------     --------------------------------
<S>                              <C>
           572,500(1)                         $ 5.00
            62,484                             5.50
           281,745(2)                          7.50
            36,576                             8.00
            36,576                            10.50
            54,650(3)                         11.50
            36,576                            13.00
            84,016(4)            Offering price in this offering
</TABLE>

------------------
(1) Includes warrants to purchase 100,000 shares of common stock held by
    Superior Bank which we are required to redeem for $6 million by June 30,
    1999. Also includes warrants to purchase 200,000 shares of common stock held
    by Superior Bank which we will redeem from the net proceeds of this
    offering.

(2) Includes warrants to purchase 100,000 shares of common stock held by
    Superior Bank which we will redeem from the net proceeds of this offering.

(3) Includes warrants to purchase 18,650 shares of Series D Preferred Stock at
    $11.50 per share which will become warrants to purchase 18,650 shares of
    common stock at $11.50 per share upon closing of this offering.

(4) The number of shares subject to warrants having an exercise price equal to
    the offering price in this offering may be reduced by a formula based on the
    offering price. In addition, the number of shares subject to these warrants
    will be further reduced by 36,674 shares upon application of the net
    proceeds of the offering to retirement of all the debt held by certain
    holders of these warrants. Warrants to purchase 3,175 shares of common stock
    are not presently exercisable.

     Holders of options and warrants do not have any of the rights or privileges
of our stockholders, including voting rights, prior to exercise of the options
and warrants. We have reserved sufficient shares of authorized common stock to
cover the issuance of common stock subject to the options and warrants.

CERTAIN STATUTORY PROVISIONS AND PROVISIONS OF OUR ARTICLES OF INCORPORATION AND
BYLAWS

     The following provisions of the Florida Business Corporation Act and our
articles of incorporation and bylaws could have the effect of preventing or
delaying a person from acquiring or seeking to acquire a substantial equity
interest in, or control of, our company.

  STATUTORY PROVISIONS

     We are subject to several anti-takeover provisions under Florida law that
apply to public corporations organized under Florida law unless the corporation
has elected to opt out of those provisions in its articles of incorporation or
its bylaws. We have not elected to opt out of these provisions.

     The Florida Business Corporation Act prohibits the voting of shares in a
publicly held Florida corporation that are acquired in a "control share
acquisition" unless (1) the board of directors approves the control share
acquisition or (2) the holders of a majority of the corporation's voting shares
(not counting shares held by officers of the corporation, inside directors or
the acquiring party) approve the granting of voting rights to the acquiring
party. A "control share acquisition" is defined as an acquisition that
immediately thereafter entitles the acquiring party, directly or indirectly, to
vote in the election of directors within any of the following ranges of voting
power:

          o 1/5 or more but less than 1/3

          o 1/3 or more but less than a majority

          o a majority or more

                                       61
<PAGE>
     There are some exceptions to the "control share acquisition" rules.

     The Florida Business Corporation Act also contains an "affiliated
transaction" provision that prohibits a publicly-held Florida corporation from
engaging in a broad range of business combinations or other extraordinary
corporate transactions with an "interested shareholder" unless

          o the transaction is approved by a majority of disinterested directors
            before the person becomes an interested shareholder

          o the corporation has not had more than 300 stockholders of record
            during the past three years

          o the interested shareholder has owned at least 80% of the
            corporation's outstanding voting shares for at least five years

          o the interested shareholder is the beneficial owner of at least 90%
            of the voting shares (excluding shares acquired directly from the
            corporation in a transaction not approved by a majority of the
            disinterested directors)

          o consideration is paid to the holders of the corporation's shares
            equal to the highest amount per share paid by the interested
            shareholder for the acquisition of the corporation's shares in the
            last two years or fair market value, and certain other conditions
            are met or

          o the transaction is approved by the holders of two-thirds of the
            Company's voting shares other than those owned by the interested
            shareholder.

     An "interested shareholder" is defined as a person who, together with
affiliates and associates, beneficially owns more than 10% of a company's
outstanding voting shares. The Florida Business Corporation Act defines
"beneficial ownership" in more detail.

  INDEMNIFICATION AND LIMITATION OF LIABILITY

     The Florida Business Corporation Act authorizes Florida corporations under
certain circumstances to indemnify any person who was or is a party to any
proceeding (other than an action by, or in the right of, the corporation), by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation. The indemnity also applies to any person who is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation or other entity. The indemnification applies against
liability incurred in connection with such a proceeding, including any appeal
thereof, if the person acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation. To
be eligible for indemnity with respect to any criminal action or proceeding, the
person must have had no reasonable cause to believe his conduct was unlawful.

     In the case of an action by or on behalf of a corporation, indemnification
may not be made if the person seeking indemnification is found liable, unless
the court in which the action was brought determines such person is fairly and
reasonably entitled to indemnification.

     The indemnification provisions of the Florida Business Corporation Act
require indemnification if a director, officer, employee or agent has been
successful in defending any action, suit or proceeding to which he was a party
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation. The indemnity covers expenses actually and reasonably
incurred in defending the action.

     The indemnification authorized under Florida law is not exclusive and is in
addition to any other rights granted to officers and directors under the
articles of incorporation or bylaws of the corporation or any agreement between
officers and directors and the corporation. Each of our directors and executive
officers, other than John Buscema, has signed an indemnification agreement. The
indemnification agreements provide for full indemnification under Florida law.
The indemnification agreements also provide that we will indemnify the officer
or director against liabilities and expenses incurred in a proceeding to which
the officer or director is a party or is threatened to be made a party, or in
which the officer or director is called upon to testify as a witness or
deponent, in each case arising out of actions of the officer or director in his
official capacity. Exceptions to this additional indemnification include
criminal violations by the officer or director,

                                       62
<PAGE>
transactions involving an improper personal benefit to the officer or director,
unlawful distributions of our assets under Florida law and wilful misconduct or
conscious disregard for our best interests.

     Our bylaws provide for the indemnification of directors, former directors
and officers to the maximum extent permitted by Florida law and for the
advancement of expenses incurred in connection with the defense of any action,
suit or proceeding that the director or officer was a party to by reason of the
fact that he is or was a director or officer of our corporation, or at our
request, a director, officer, employee or agent of another corporation. Our
bylaws also provide that we may purchase and maintain insurance on behalf of any
director against liability asserted against the director in such capacity.

     Under the Florida Business Corporation Act, a director is not personally
liable for monetary damages to us or to any other person for acts or omissions
in his capacity as a director except in certain limited circumstances. Those
circumstances include certain violations of criminal law and transactions in
which the director derived an improper personal benefit. As a result,
stockholders may be unable to recover monetary damages against directors for
actions taken by them which constitute negligence or gross negligence or which
are in violation of their fiduciary duties, although injunctive or other
equitable relief may be available.

TRANSFER AGENT AND REGISTRAR

     The transfer agent for our common stock is                    .

                                       63
<PAGE>
                        SHARES ELIGIBLE FOR FUTURE SALE

     Prior to this offering there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect the market price of our common stock. Furthermore, since only a
limited number of shares will be available for sale shortly after this offering
because of certain contractual and legal restrictions on resale, sales of
substantial amounts of common stock in the public market after the restrictions
lapse could adversely affect the market price of our common stock and our
ability to raise capital in the future.

     Upon completion of this offering, we will have outstanding
                      shares of common stock, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options or
warrants, based on shares outstanding as of May 28, 1999. Of these shares, the
                 shares of common stock sold in this offering will be freely
tradable, unless shares are purchased by an existing "affiliate". Our affiliates
are people or entities that directly or indirectly control our company, are
controlled by our company, or are under common control with our company. For
instance, our directors, executive officers and principal stockholders are
deemed to control our company, and thus are affiliates.

     The remaining                   outstanding shares of common stock will be
"restricted" securities within the meaning of Rule 144 under the Securities Act
of 1933, as amended, and may not be sold in the absence of registration under
the securities laws unless an exemption from registration is available.

     One of those exemptions is Rule 144. In general, Rule 144 allows a
shareholder (including an affiliate) who has beneficially owned restricted
shares for at least one year to sell within any three-month period shares which
do not exceed the greater of (1) 1% of the outstanding shares of common stock of
the company or (2) the average weekly trading volume during the four calendar
weeks preceding the sale. Sales under Rule 144 also must be sold through brokers
or "market makers" and there must be current public information about the
company available. Shares properly sold in reliance on Rule 144 to persons who
are not affiliates become freely tradable without restriction or registration
under the securities laws. The Rule 144 restrictions are not applicable to a
person who has beneficially owned shares for at least two years (including
"tacked on" holding periods) and who is not an affiliate of the company.

     Another exemption is Rule 701 of the Securities Act of 1933. Subject to
certain limitations on the aggregate offering price of a transaction and other
conditions, Rule 701 may be relied upon by stockholders with respect to the
resale of securities originally purchased by employees, directors, officers and
consultants under stock options issued under our stock option plan. To be
eligible for resale under Rule 701, shares must have been issued pursuant to
written compensatory benefit plans or written contracts relating to the
compensation of such persons. In addition, the Securities and Exchange
Commission has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, including exercises after the date of this
offering. Securities issued in reliance on Rule 701 are restricted securities.
Subject to the contractual restrictions described below, securities may be sold
under Rule 701 beginning 90 days after the date of this prospectus by affiliates
if they comply with Rule 144, other than the holding period requirement, and by
non-affiliates, subject only to the manner of sale provisions of Rule 144.

     All of the executive officers and directors and certain stock holders and
option holders have signed lock-up agreements in favor of the underwriters which
prohibit them from selling or otherwise disposing of any shares of common stock
or convertible securities for a period of 180 days after the date of this
prospectus. Credit Suisse First Boston currently has no plans to release any
portion of the securities subject to these lock-up agreements. When determining
whether or not to release shares from lock-up agreements, Credit Suisse First
Boston will consider, among other factors, the stockholder's reasons for
requesting the release, the number of shares for which the release is being
requested and market conditions at the time.

     Following this offering, we intend to file registration statements covering
approximately 1,800,000 shares of common stock issued pursuant to the exercise
of stock options issued under our stock option plan. Accordingly, shares to be
registered in this manner will be available for sale in the open market, except
to the extent the shares are subject to the lock-up agreements. Affiliates will
still be required to comply with Rule 144.

                                       64
<PAGE>
     As a result of Rule 144, Rule 701, the lock-up agreements and our intention
to file registration statements covering shares of common stock subject to
outstanding stock options under our stock option plan, approximately
shares will be eligible for sale in the public market during the 180 days after
the date of this prospectus. In addition, approximately       shares will become
eligible for sale in the public market upon expiration of the lock-up agreements
180 days after the date of this prospectus.

                                       65
<PAGE>
                                  UNDERWRITING

     Under the terms and subject to the conditions contained in an underwriting
agreement dated                   , the underwriters named below for whom Credit
Suisse First Boston Corporation, BT Alex. Brown Incorporated and U.S. Bancorp
Piper Jaffray are acting as representatives, have severally but not jointly
agreed to purchase from Mortgage.com the following respective numbers of shares
of common stock:

<TABLE>
<CAPTION>
                                                                                   NUMBER OF
                                  UNDERWRITERS                                       SHARES
--------------------------------------------------------------------------------   ----------
<S>                                                                                <C>
Credit Suisse First Boston Corporation..........................................
BT Alex. Brown Incorporated.....................................................
U.S. Bancorp Piper Jaffray......................................................

                                                                                   ----------
     Total......................................................................
                                                                                   ----------
                                                                                   ----------
</TABLE>

     The underwriting agreement provides that the underwriters are subject to
certain conditions and that the underwriters will be obligated to purchase all
of the shares of the common stock offered hereby (other than those shares
covered by the over-allotment option described below) if any are purchased. The
underwriting agreement provides that, in the event of a default by an
underwriter, in certain circumstances the purchase commitments of non-defaulting
underwriters may be increased or the underwriting agreement may be terminated.

     Mortgage.com has granted to the underwriters an option, expiring on the
30th day after the date of this prospectus, to purchase up to
additional shares of common stock at the initial public offering price, less
underwriting discounts and commissions, all as set forth on the cover page of
this prospectus. Such option may be exercised only to cover over-allotments in
the sale of shares of common stock. To the extent such option is exercised, each
underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of common stock as
it was obligated to purchase pursuant to the underwriting agreement.

     Mortgage.com has been advised by the representatives that the underwriters
propose to offer the shares of common stock to the public initially at the
public offering price set forth on the cover page of this prospectus and,
through the representatives, to certain dealers (who may include the
underwriters) at such price less a concession of $     per share, and the
underwriters and such dealers may allow a discount of $     per share on sales
to certain other dealers. After the offering, the public offering price and
concession and discount to dealers may be changed by the representatives.

     The following table summarizes the compensation to be paid to the
underwriters by Mortgage.com and the expenses payable by Mortgage.com:

<TABLE>
<CAPTION>
                                                                                          TOTAL
                                                                             --------------------------------
                                                                              WITHOUT             WITH
                                                                PER SHARE    OVER-ALLOTMENT    OVER-ALLOTMENT
                                                                ---------    --------------    --------------
<S>                                                             <C>          <C>               <C>
Underwriting discounts and commissions.......................
Expenses payable.............................................
</TABLE>

     The representatives have informed Mortgage.com that they do not expect
discretionary sales by the underwriters to exceed 5% of the shares being offered
hereby.

     Mortgage.com, its officers and directors, and certain other existing
stockholders and optionholders of Mortgage.com have agreed that they will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or, in the case of Mortgage.com, file with the Securities and
Exchange Commission, a registration statement relating to any shares of common
stock or securities exhangeable or exercisable for or convertible into shares of
common stock or publicly disclose the intention to do any of the foregoing
without

                                       66
<PAGE>
the prior written consent of Credit Suisse First Boston for a period of
180 days after the date of this prospectus, except under certain circumstances.

     Of the       shares of common stock to be sold in this offering, the
underwriters have reserved for sale, at the price to public set forth on the
cover page of this prospectus, up to       shares as follows: (1) at
Mortgage.com's request, up to       shares for Mortgage.com's directors,
officers, employees and business associates and (2) up to an additional
      shares for a holder of Mortgage.com's preferred stock in connection with a
pre-existing contractual agreement between Mortgage.com and such holder. As a
result, the number of shares of common stock available for sale to the general
public will be reduced to the extent such persons purchase the reserved shares.
The underwriters will offer to the general public, on the same basis as the
other shares to be sold in this offering, any reserved shares that are not so
purchased.

     Mortgage.com has agreed to indemnify the underwriters against certain
liabilities, including civil liabilities under the Securities Act, or contribute
to payments which the underwriters may be required to make in respect thereof.

     Mortgage.com has applied to list the shares of common stock on The Nasdaq
Stock Market's National Market under the symbol "MDCM."

     Prior to the offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between Mortgage.com and the representatives. The principal factors considered
in determining the public offering price will include:

     o the information set forth in this prospectus and otherwise available to
       the representatives;

     o the history of, and the prospects for, Mortgage.com and the mortgage
       banking industry;

     o an assessment of Mortgage.com's management;

     o the prospects for, and the timing of, future earnings of Mortgage.com;

     o the present state of Mortgage.com's development and its current financial
       condition;

     o the general condition of the securities markets at the time of the
       offering;

     o the recent market prices of, and the demand for, publicly-traded common
       stock of companies in businesses similar to those of Mortgage.com;

     o market conditions for initial public offerings; and

     o other relevant factors.

     There can be no assurance that an active trading market will develop for
the common stock or that the common stock will trade in the market subsequent to
the offering at or above the initial public offering price.

     The representatives, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
shares of the common stock in the open market after the distribution has been
completed to cover syndicate short positions. Penalty bids permit the
underwriters' representatives to reclaim a selling concession from a syndicate
when shares of the common stock originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

                                       67
<PAGE>
                          NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

     The distribution of the common stock in Canada is being made only on a
private placement basis and is exempt from the requirement that we prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws which
will vary depending on the relevant jurisdiction, and which may require resales
to be made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.

REPRESENTATIONS OF PURCHASERS

     Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that:

     o such purchaser is entitled under applicable provincial securities laws to
       purchase such common stock without the benefit of a prospectus qualified
       under such securities laws,

     o where required by law, that such purchaser is purchasing as principal and
       not as agent, and

     o such purchaser has reviewed the text above under "Resale Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

     The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

     All of the issuer's directors and officers as well as the experts named in
this prospectus may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada upon
the issuer or such persons. All or a substantial portion of the assets of the
issuer and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or such persons in
Canada or to enforce a judgment obtained in Canadian courts against such issuer
or persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

     A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to the offering. Such a report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

     Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

                                       68
<PAGE>
                                 LEGAL MATTERS

     The validity of the shares of common stock issued in this offering will be
passed upon for us by the law firm of Foley & Lardner, Jacksonville, Florida. An
individual attorney at Foley & Lardner beneficially owns 4,347 shares of our
common stock. Certain legal matters in connection with this offering will be
passed upon for the underwriters by the law firm of Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts.

                                    EXPERTS

     Our financial statements as of December 31, 1997 and 1998, and for each of
the three years in the period ended December 31, 1998, have been included in
this prospectus and in the Registration Statement filed with the Securities and
Exchange Commission in reliance upon the report of KPMG LLP, independent
certified public accountants, upon its authority as experts in accounting and
auditing. KPMG LLP's report on the financial statements can be found at the end
of this prospectus and in the Registration Statement.

                             ADDITIONAL INFORMATION

     We have filed with the Securities and Exchange Commission a Registration
Statement (of which this prospectus is a part) under the Securities Act of 1933,
as amended, relating to the common stock we are offering. This prospectus does
not contain all the information that is in the Registration Statement. Certain
portions of the Registration Statement have been omitted as allowed by the rules
and regulations of the Securities and Exchange Commission. Statements in this
prospectus which summarize documents are not necessarily complete, and in each
case you should refer to the copy of the document filed as an exhibit to the
Registration Statement. For further information regarding our company and our
common stock, please see the Registration Statement and its exhibits and
schedules. You may examine the Registration Statement free of charge at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission at Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661 and 7 World Trade Center, Thirteenth Floor, New York, New York
10048. Copies of the Registration Statement may also be obtained from the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, or by calling the Commission at 1-800-SEC-0330, at prescribed rates.
In addition, the Registration Statement and other public filings can be obtained
from the Commission's Web site at http://www.sec.gov.

     We intend to furnish our stockholders written annual reports containing
audited financial statements certified by an independent public accounting firm.

                                       69
<PAGE>
                               MORTGAGE.COM, INC.
                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                              PAGE
                                                                                                              ----
<S>                                                                                                           <C>
Independent Auditors' Report...............................................................................    F-3
Consolidated Balance Sheets as of December 31, 1998, 1997 and March 31, 1999 (unaudited)...................    F-4
Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996, and for the
  three months ended March 31, 1999 (unaudited) and 1998 (unaudited).......................................    F-5
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1998, 1997 and
  1996, and for the three months ended March 31, 1999
  (unaudited)..............................................................................................    F-6
Consolidated Statements of Cash Flow for the years ended December 31, 1998, 1997 and 1996, and for the
  three months ended March 31, 1999 (unaudited) and 1998 (unaudited).......................................    F-7
Notes to Consolidated Financial Statements.................................................................   F-10
</TABLE>

                                      F-1
<PAGE>
                               MORTGAGE.COM, INC.
                       CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998, 1997 AND 1996
                                      AND
                      MARCH 31, 1999 AND 1998 (UNAUDITED)
                  (WITH INDEPENDENT AUDITORS' REPORT THEREON)

                                      F-2
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Mortgage.com, Inc.

We have audited the accompanying consolidated balance sheets of Mortgage.com,
Inc. (formerly known as First Mortgage Network, Inc.) (the "Company") as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the years
in the three year period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

As discussed in note 12 to the accompanying consolidated financial statements,
the Company is currently in discussions with a number of venture-capital firms
to provide additional capital for the operations and growth of the Company. The
Company's ability to function at or beyond their current level and achieve their
growth strategy may be affected by the amount of capital available to it.

In our opinion, the consolidated financial statements referred to above presents
fairly, in all material respects, the financial position of Mortgage.com, Inc.
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.

March 26, 1999
  except for
  note 2
  which is as of
  May 26, 1999

                                      F-3
<PAGE>
                               MORTGAGE.COM, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     DECEMBER 31,                MARCH 31,
                                                             -----------------------------      ------------
                                                                 1998             1997              1999
                                                             ------------      -----------      ------------
                                                                                                (UNAUDITED)
<S>                                                          <C>               <C>              <C>
ASSETS
Cash and cash equivalents...............................     $  3,412,283      $ 1,679,722      $  6,250,720
Mortgage loans available for sale, net..................      176,372,516       73,737,933       166,149,185
Accounts and notes receivable, net......................        1,243,571        1,228,762         1,939,110
Private placement receivables...........................               --        2,000,000                --
Accrued interest receivable.............................          196,943          197,659           231,041
Prepaid expenses and deposits...........................        1,280,133          639,100         1,761,451
Property and equipment, net.............................        5,265,877        1,339,237         5,597,006
Capitalized software development costs..................          978,261          639,123         1,317,903
Intangible asset........................................               --               --           873,630
Goodwill, net...........................................        4,688,125          465,434         4,685,117
                                                             ------------      -----------      ------------
     Total assets.......................................     $193,437,709      $81,926,970      $188,805,163
                                                             ------------      -----------      ------------
                                                             ------------      -----------      ------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Warehouse notes payable.................................     $171,777,572      $72,223,912      $159,650,534
Accounts payable, accrued expenses and other
  liabilities...........................................        5,538,021        1,908,303         5,957,345
Notes payable...........................................          288,701           70,833           386,980
Capital lease obligations...............................        1,565,778               --         2,074,831
Lines of credit.........................................               --          395,899                --
Subordinated debt, net of discount......................          100,000        2,500,000         9,722,774
Deferred revenue........................................        1,011,987        1,011,987                --
Deferred rent...........................................           19,481           19,481            19,481
                                                             ------------      -----------      ------------
     Total liabilities..................................      180,301,540       78,130,415       177,811,945
                                                             ------------      -----------      ------------
Shareholders' equity:
  Preferred stock, $.01 par value. Authorized 15,000,000
     shares, issued and outstanding 3,199,073, 1,925,175
     and 3,199,073 shares at December 31, 1998 and 1997,
     and March 31, 1999, respectively...................           31,991           19,252            31,991
  Common stock, $.01 par value. Authorized 15,000,000
     shares, issued and outstanding 1,342,610, 1,098,610
     and 1,362,730 shares at December 31, 1998 and 1997
     and March 31, 1999, respectively...................           13,426           10,985            13,627
  Unearned compensation.................................         (631,000)              --       (15,187,000)
  Additional paid-in capital............................       31,612,112       14,828,493        47,403,353
  Accumulated deficit...................................      (17,890,360)     (11,062,175)      (21,268,753)
                                                             ------------      -----------      ------------
     Total shareholders' equity.........................       13,136,169        3,796,555        10,993,218
                                                             ------------      -----------      ------------
Commitments and contingencies...........................
                                                             ------------      -----------      ------------
     Total liabilities and shareholders' equity.........     $193,437,709      $81,926,970      $188,805,163
                                                             ------------      -----------      ------------
                                                             ------------      -----------      ------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
                               MORTGAGE.COM, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                         THREE MONTHS ENDED
                                                YEARS ENDED DECEMBER 31,                     MARCH 31,
                                        -----------------------------------------    --------------------------
                                           1998           1997           1996           1999           1998
                                        -----------    -----------    -----------    -----------    -----------
                                                                                            (UNAUDITED)
<S>                                     <C>            <C>            <C>            <C>            <C>
Revenue:
  Secondary marketing revenue, net...   $28,597,825    $11,594,660    $ 4,101,341    $ 8,599,974    $ 5,407,489
  Loan production and processing
     fees, net.......................     5,337,625      2,347,321        820,469      2,598,337        921,584
  Management, technology and other
     fees............................     1,868,202      2,032,428      2,577,296      1,991,360        545,795
  Interest income....................     6,998,242      3,549,599        921,825      2,676,232      1,068,976
  Interest expense...................    (7,111,344)    (3,049,591)      (904,622)    (2,650,395)    (1,125,060)
                                        -----------    -----------    -----------    -----------    -----------
     Net interest (expense) income...      (113,102)       500,008         17,203         25,837        (56,084)
                                        -----------    -----------    -----------    -----------    -----------
Total revenue........................    35,690,550     16,474,417      7,516,309     13,215,508      6,818,784
                                        -----------    -----------    -----------    -----------    -----------
Expenses:
  Compensation and employee
     benefits........................    26,074,914     13,083,250      6,527,303      9,645,103      4,927,394
  Marketing..........................     1,335,494        237,868         94,541      1,536,187         85,295
  Research and development...........     2,888,159      1,079,257        496,568        776,565        433,224
  Depreciation and amortization......     1,873,119        480,338        652,136        697,759        153,633
  General and administrative.........     9,596,652      5,125,570      3,763,936      3,758,804      1,589,398
                                        -----------    -----------    -----------    -----------    -----------
Total expenses.......................    41,768,338     20,006,283     11,534,484     16,414,418      7,188,944
                                        -----------    -----------    -----------    -----------    -----------
Net loss.............................   $(6,077,788)   $(3,531,866)   $(4,018,175)   $(3,198,910)   $  (370,160)
                                        -----------    -----------    -----------    -----------    -----------
                                        -----------    -----------    -----------    -----------    -----------
Net loss per share, basic and
  diluted............................   $     (7.17)   $     (3.85)   $     (3.92)   $     (3.05)   $     (0.63)
                                        -----------    -----------    -----------    -----------    -----------
                                        -----------    -----------    -----------    -----------    -----------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>
                               MORTGAGE.COM, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
               AND THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
                                                        ADDITIONAL
                                  PREFERRED   COMMON      PAID-IN       UNEARNED     ACCUMULATED    TREASURY
                                   STOCK       STOCK      CAPITAL     COMPENSATION     DEFICIT        STOCK         TOTAL
                                  ---------   -------   -----------   ------------   ------------   ---------    ------------
<S>                               <C>         <C>       <C>           <C>            <C>            <C>          <C>
Balance at December 31, 1995
  (unaudited)...................   $ 2,252    $10,319   $ 3,846,219   $        --    $(3,512,134)   $      --    $    346,656
  Issuance of preferred stock...    12,273        --      6,698,413            --             --           --       6,710,686
  Issuance of common stock......        --     1,000        533,024            --             --           --         534,024
  Issuance of common stock
    warrants....................        --        --        260,000            --             --           --         260,000
  Purchase of treasury stock....        --        --             --            --             --     (550,000)       (550,000)
  Net loss......................        --        --             --            --     (4,018,175)          --      (4,018,175)
                                   -------    -------   -----------   ------------   ------------   ---------    ------------

Balance at December 31, 1996....    14,525    11,319     11,337,656            --     (7,530,309)    (550,000)      3,283,191
  Issuance of preferred stock...     4,727        --      3,495,273            --             --           --       3,500,000
  Issuance of common stock......        --       716        536,794            --             --           --         537,510
  Issuance of common stock
    warrants....................        --        --          7,720            --             --           --           7,720
  Retirement of treasury
    stock.......................        --    (1,050)      (548,950)           --             --      550,000              --
  Net loss......................        --        --             --            --     (3,531,866)          --      (3,531,866)
                                   -------    -------   -----------   ------------   ------------   ---------    ------------

Balance at December 31, 1997....    19,252    10,985     14,828,493            --    (11,062,175)          --       3,796,555
  Issuance of preferred stock...    12,739        --     14,208,914            --             --           --      14,221,653
  Issuance of common stock......        --     2,441      1,827,560            --             --           --       1,830,001
  Issuance of common stock
    warrants....................        --        --         87,145            --             --           --          87,145
  Stock option plan
    compensation................        --        --        660,000      (660,000)            --           --              --
  Amortization of unearned
    compensation................        --        --             --        29,000             --           --          29,000
  Dividends paid................        --        --             --            --       (750,397)          --        (750,397)
  Net loss......................        --        --             --            --     (6,077,788)          --      (6,077,788)
                                   -------    -------   -----------   ------------   ------------   ---------    ------------

Balance at December 31, 1998....   $31,991    13,426    $31,612,112      (631,000)   (17,890,360)          --      13,136,169
  Costs ascribed to issuance of
    preferred stock.............        --        --         (1,538)           --             --           --          (1,538)
  Issuance of common stock......        --       201        646,699            --             --           --         646,900
  Issuance of common stock
    warrants....................        --        --        397,080            --             --           --         397,080
  Stock option plan
    compensation................        --        --     14,749,000   (14,749,000)            --           --              --
  Amortization of unearned
    compensation................        --        --             --       193,000             --           --         193,000
  Dividends paid................        --        --             --            --       (179,483)          --        (179,483)
  Net loss......................        --        --             --            --     (3,198,910)          --      (3,198,910)
                                   -------    -------   -----------   ------------   ------------   ---------    ------------

Balance at March 31, 1999
  (unaudited)...................   $31,991    $13,627   $47,403,353   $(15,187,000)  $(21,268,753)  $      --    $ 10,993,218
                                   -------    -------   -----------   ------------   ------------   ---------    ------------
                                   -------    -------   -----------   ------------   ------------   ---------    ------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>
                               MORTGAGE.COM, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                        THREE MONTHS ENDED
                                                           YEARS ENDED DECEMBER 31,                         MARCH 31,
                                                ----------------------------------------------    ------------------------------
                                                    1998             1997             1996            1999              1998
                                                -------------    -------------    ------------    -------------      -----------
                                                                                                           (UNAUDITED)
<S>                                             <C>              <C>              <C>             <C>                <C>
Net cash flows from operating activities:
  Net loss...................................   $  (6,077,788)   $  (3,531,866)   $ (4,018,175)   $  (3,198,910)     $  (370,160)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
    Depreciation and amortization............       1,873,119          480,338         652,136          697,759          153,633
    Amortization of unearned compensation....          29,000               --              --          193,000               --
    Provision for losses.....................         898,593          133,499          27,170          111,278               --
    Amortization of discount on subordinated
      debt...................................              --               --              --           19,854               --
  (Increase) decrease in mortgage loans
    available for sale, net..................    (102,703,406)     (36,490,196)    (15,972,647)      10,211,703        6,232,290
  Changes in operating assets and
    liabilities:
    (Increase) decrease in accounts and notes
      receivable, net........................        (939,570)         684,498      (1,473,091)        (795,180)          27,558
    Decrease in private placement
      receivables............................       2,000,000        1,000,000              --               --        2,000,000
    (Increase) decrease in accrued interest
      receivable.............................         (53,403)         247,382         (49,350)         (34,098)         101,026
    Increase in prepaid expenses and
      deposits...............................        (644,710)         (86,233)        (59,521)        (481,318)      (1,978,785)
    Increase (decrease) in accounts payable,
      accrued expenses and other
      liabilities............................       2,911,531       (4,263,100)      1,802,139          419,324          434,650
    (Decrease) increase in deferred
      revenue................................              --          (20,078)      1,032,065       (1,011,987)              --
    (Decrease) increase in deferred rent.....              --         (169,329)        188,812               --               --
                                                -------------    -------------    ------------    -------------      -----------
        Net cash (used in) provided by
          operating activities...............    (102,706,634)     (42,015,085)    (17,870,462)       6,131,425        6,600,212
                                                -------------    -------------    ------------    -------------      -----------
Cash flows from investing activities:
  Additions to capitalized software
    development costs........................        (831,559)        (517,955)       (218,745)        (500,776)        (133,724)
  Additions to property and equipment........      (4,146,001)      (1,065,482)       (146,522)        (767,367)        (197,622)
  Purchase of companies, net of cash
    acquired.................................      (2,650,321)         366,035              --          (91,455)              --
  Purchase of intangible asset...............              --               --              --         (233,563)              --
                                                -------------    -------------    ------------    -------------      -----------
        Net cash used in investing
          activities.........................      (7,627,881)      (1,217,402)       (365,267)      (1,593,161)        (331,346)
                                                -------------    -------------    ------------    -------------      -----------
Cash flows from financing activities:
  Proceeds from and cost ascribed to common
    stock warrants...........................              --            7,720         260,000               --               --
  (Repayment of) proceeds from issuance of
    subordinated debentures..................        (200,000)       1,500,000      (1,134,625)      10,000,000               --
  Payment of notes payable...................         (70,832)         (31,095)             --           (1,721)              --
  Proceeds from notes payable................              --               --              --          100,000               --
  Proceeds from issuance of common stock.....              --               --         534,424              900               --
  Proceeds from issuance of preferred
    stock....................................      12,364,766        2,000,000       6,582,411           (1,538)          15,440
  Proceeds from capital lease obligations....       1,565,778               --              --          509,053               --
  (Payment of) proceeds from lines of
    credit...................................        (395,899)         395,899              --               --          (21,667)
  Dividends paid.............................        (750,397)              --              --         (179,483)         (15,438)
  Purchase of treasury stock.................              --               --        (550,000)              --               --
  Proceeds from (reduction of) warehouse
    notes payable............................      99,553,660       39,031,320      14,330,094      (12,127,038)      (6,924,374)
                                                -------------    -------------    ------------    -------------      -----------
        Net cash provided by (used in)
          financing activities...............     112,067,076       42,903,844      20,022,304       (1,699,827)      (6,946,039)
                                                -------------    -------------    ------------    -------------      -----------
        Net increase (decrease) in cash and
          cash equivalents...................       1,732,561         (328,643)      1,786,575        2,838,437         (677,173)

Cash and cash equivalents at beginning of
  year.......................................       1,679,722        2,008,365         221,790        3,412,283        1,679,722
                                                -------------    -------------    ------------    -------------      -----------
Cash and cash equivalents at end of year.....   $   3,412,283    $   1,679,722    $  2,008,365    $   6,250,720      $ 1,002,549
                                                -------------    -------------    ------------    -------------      -----------
                                                -------------    -------------    ------------    -------------      -----------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-7
<PAGE>
                               MORTGAGE.COM, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                THREE MONTHS ENDED
                                                            YEARS ENDED DECEMBER 31,                 MARCH 31,
                                                      ------------------------------------    -----------------------
                                                         1998         1997         1996          1999         1998
                                                      ----------   ----------   ----------    ----------   ----------
                                                                                                    (UNAUDITED)
<S>                                                   <C>          <C>          <C>           <C>          <C>
Supplemental disclosures of cash flow information:

  Cash paid during the period for interest..........  $6,731,503   $2,749,196   $1,125,753    $2,738,066   $1,094,177
                                                      ----------   ----------   ----------    ----------   ----------
                                                      ----------   ----------   ----------    ----------   ----------
  Cash paid during the period for income taxes......  $   26,356   $       --   $    1,986    $      827   $    4,941
                                                      ----------   ----------   ----------    ----------   ----------
                                                      ----------   ----------   ----------    ----------   ----------
</TABLE>

Supplemental disclosures of noncash investing and financing activities:

          During the three months ended March 31, 1999 (unaudited), in
     conjunction with the issuance of subordinated debt of $2,000,000 and
     $8,000,000, the Company issued 6,668 and 26,672, respectively, of common
     stock warrants which are convertible to common stock at $30 per share.

         During the three months ended March 31, 1999 (unaudited), in
    conjunction with the Internet domain name purchase of www.mortgage.com, the
    Company issued 20,000 shares of common stock at $32.30 per share.

         During the three months ended March 31, 1999 (unaudited), an employee
    exercised stock options for 120 shares of common stock at $7.50 per share.

         During June 1998, the Company issued 44,000 shares of common stock at a
    value of $7.50 to a brokerage firm in payment for the facilitation of
    capital investments in the Company by unaffiliated firms.

         During April 1998, the Company purchased all of the outstanding common
    stock of RM Holdings, Inc. In conjunction with the acquisition, fair value
    of assets acquired and liabilities assumed were as follows:

<TABLE>
<S>                                                           <C>
Fair value of assets.......................................   $   427,219
Goodwill...................................................     2,112,629
Accounts payable and accrued expenses......................    (1,230,101)
                                                              -----------
Cash paid, net of cash received............................   $ 1,309,747
                                                              -----------
                                                              -----------
</TABLE>

         In conjunction with this purchase, the Company issued 100,000 shares of
    common stock at a price of $7.50 to the shareholders of RM Holdings, Inc.

         During 1997, the Company purchased all of the outstanding common stock
    of Online Capital. In conjunction with the acquisition, fair value of assets
    acquired and liabilities assumed were as follows:

<TABLE>
<S>                                                          <C>
Fair value of assets......................................   $ 13,799,201
Goodwill..................................................        325,696
Accounts payable and accrued expenses.....................    (13,758,862)
                                                             ------------
Cash received, net of cash paid...........................   $    366,035
                                                             ------------
                                                             ------------
</TABLE>

         In conjunction with this purchase, the Company issued 71,668 shares of
    common stock at a price of $7.50 to the sole shareholder of Online Capital
    during 1997. As an adjunct to this purchase, the Company entered into an
    earnout agreement in 1998 providing for payments to the shareholder of a
    percentage of the profits over the next three years of the division of the
    Company that he directs and the issuance of 100,000 shares of common stock
    at a price of $7.50. The payments under the earnout agreement will cease
    once a maximum of $3,400,000 is paid. The payments and stock issuance during
    1998 were:

<TABLE>
<S>                                                            <C>
Additions to goodwill.......................................   $2,402,694
Stock issued................................................     (750,000)
Accounts payable............................................     (312,120)
                                                               ----------
Cash paid under earnout agreement...........................   $1,340,574
                                                               ----------
                                                               ----------
</TABLE>

                                      F-8
<PAGE>
                               MORTGAGE.COM, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 AND
                   THREE MONTHS ENDED MARCH 31, 1999 AND 1998

         Land and building was acquired in satisfaction of a note receivable
    owed to the Company. The book value of assets acquired was $419,800 at
    December 31, 1998. The building is subject to a mortgage of $288,701 at
    December 31, 1998.

         In the fourth quarter of 1998, the board of directors granted incentive
    stock options for 162,026 shares of common stock to employees at a price of
    $11.50 per share. The fair value of stock options was esimated to be greater
    than the issue price of $11.50. Accordingly, the Company recorded unearned
    compensation as the excess of fair value over the issuance price. The
    Company is recognizing unearned compensation as compensation expense over
    the vesting period of the options.

         During 1998 and 1997, $2,200,000 and $1,500,000 of subordinated debt
    converted to 193,471 and 206,000 shares of Series D and C preferred stock at
    a price of $11.50 and $7.50, respectively.

         On December 31, 1997, the Company entered into a subscription
    receivable agreement with a venture capital firm, where the venture-capital
    firm subscribed for the purchase of $2,000,000 of the Company's 12% senior
    subordinated convertible notes due January 31, 2003. The proceeds were
    received in January 1998.

         During 1997, the Company retired 105,000 shares of outstanding treasury
    stock.

         On December 31, 1996, the Company sold $1,000,000 of 12% cumulative
    Series C preferred stock in a private placement offering. The Company
    received final payment from this sale in March 1997.

         During 1996, the Company sold $5,150,000 of 12% cumulative Series B
    preferred stock in a private placement offering. Net proceeds from this
    transaction were $4,581,600. In addition, $127,875 of subordinated debt was
    converted to Series B preferred stock. The remaining $1,134,625 of
    subordinated debt was redeemed for cash in 1996.

          See accompanying notes to consolidated financial statements.

                                      F-9
<PAGE>
                               MORTGAGE.COM, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) Description of Business

     Mortgage.com, Inc., (formerly known as First Mortgage Network, Inc.) (the
"Company"), is incorporated in Florida and provides online mortgage services to
consumers and to other businesses. The Company has developed state-of-the-art
technology to support its own loan origination, processing, underwriting,
closing and secondary marketing of mortgage loans and is using this technology
as a platform to enable other industry participants to improve the efficiency
and effectiveness of their operations.

     The Company commenced operations in 1994 as a wholesale mortgage lender
providing independent mortgage brokers with various support services, including
processing and closing services, as well as a source of funding for their loans.
In 1995, the Company acquired a software system designed to support mortgage
origination, processing, underwriting and closing operations. This system, known
as CLOser, became the platform that supports all of the services provided. The
system provides management, processing and other back-office services to
realtors and homebuilders on an outsource basis and provides funding for the
mortgages originated by the Company. The system is marketed to other mortgage
industry participants, providing technology and technical support services,
including private label web sites, on an outsource basis to numerous banks and
real estate related entities.

  (b) Consolidation

     The consolidated financial statements of the Company include all of its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.

  (c) Basis of Presentation

     The financial statements of the Company have been prepared on the accrual
basis of accounting. A summary of the major accounting policies followed in the
preparation of the accompanying financial statements, which conform to generally
accepted accounting principles, is presented below.

  (d) Unaudited Interim Consolidated Financial Statements

     The consolidated financial statements for the three month periods ended
March 31, 1999 and 1998 are unaudited. The unaudited consolidated financial
statements have been prepared on the same basis as the audited consolidated
financial statements. In the opinion of management, all adjustments of a
recurring nature which are necessary to present a fair statement of results for
the interim periods have been made. The unaudited results of operations for the
interim periods are not necessarily indicative of the results for the full year
or any future period.

  (e) Acquisitions

     On January 7, 1999, the Company purchased the Internet domain name of
www.Mortgage.com from an unaffiliated party and has changed the name of the
Company to Mortgage.com, Inc. The purchase price of the transaction was $200,000
in cash and 20,000 shares of common stock at a value of $32.30 per share.

     Effective April 1, 1998, the Company purchased RM Holdings, Inc., an
internet-based mortgage lender and call center and merged its operations into a
division of the Company. The fair market value of assets acquired was $427,219.
Under the terms of the agreement, the stockholders of RM Holdings, Inc. received
100,000 shares of common stock at $7.50 per share and $1,471,000 in cash. This
transaction was accounted for under the purchase method of accounting. Under
this method of accounting, the purchase price is allocated to the respective
assets acquired and liabilities assumed based on their estimated fair values.
Goodwill recorded in conjunction with this purchase was $2,112,629.

                                      F-10
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
     Effective June 2, 1997, the Company purchased Online Capital, a mortgage
lender located in San Jose, California, with net assets of $268,755. Under the
terms of the agreement, the sole shareholder of Online Capital received 35,834
shares of common stock and $255,672 in cash. An additional 35,834 shares of
common stock were issued to the shareholder during December 1997, based on
certain profitability criteria being met. In 1998, the Company finalized certain
contingent payment terms related to the transaction. An additional 100,000
shares of common stock were issued to the seller, and an agreement was entered
into which provides for contingent consideration of up to $3,400,000 as
calculated based upon a percentage of the profits of the division, payable
quarterly until the limit is reached or until June 30, 2001, whichever comes
first. Contingent consideration is added to the purchase price as earned. These
transactions were accounted for under the purchase method of accounting. Under
this method of accounting, the purchase price is allocated to the respective
assets acquired and liabilities assumed based on their estimated fair values.
Goodwill recorded under the 1998 contingent consideration agreement and the 1997
purchase of Online Capital was $2,402,694 and $476,475, respectively, through
December 31, 1998. An additional $91,455 of goodwill was recorded under the
contingent consideration agreement during the three months ended March 31, 1999.

  (f) Cash and Cash Equivalents

     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

  (g) Mortgage Loans Available For Sale, Net

     Mortgage loans available for sale, net of discounts and deferred fees, are
carried at the lower of cost or market as determined by outstanding commitments
from investors or current investor yield requirements calculated on the
aggregate loan basis. The net deferred fees and costs are credited to income
when the related loans are sold. The loans are secured by one to four family
residential real estate located throughout the United States.

  (h) Accounts and Notes Receivable, Net

     The Company entered into an agreement on December 5, 1996, to sell
internally developed software to an investment firm. As a condition to the
agreement, the Company entered into a ten-year distribution and profit sharing
agreement for the software with the same investment firm. The purchase price of
the software was $10,800,000 of which $1,080,000 was received as of December 31,
1996, and $533,222 was received as of March 31, 1997. The proceeds from the
transaction, net of related costs, were recorded as deferred revenue. Due to
contract contingencies, whereby the deferred revenue could be refundable, the
Company elected to recognize the revenue when the remaining $9,180,000 note
becomes due. The note becomes due on or before November 30, 2006, and bears
interest at 5%. The note, included in accounts and notes receivable on the
balance sheets, has been discounted to its net present value and has been fully
reserved at December 31, 1998 and 1997. On March 31, 1999, this software profit
sharing agreement was sold to an unrelated company as part of a sale of a
subsidiary of the Company. The Company has been relieved of any further
obligations.

  (i) Private Placement Receivables

     Private placement receivables at December 31, 1997, consisted of a
subscription agreement between the Company and a venture-capital firm. Under
this agreement, the venture-capital firm subscribed for and purchased $2,000,000
of the Company's 12% senior subordinated convertible notes due January 31, 2003,
and warrants to purchase up to an aggregate of 66,667 shares of the Company's
common stock at a price of $7.50 per share. Net proceeds of $2,000,000 were
received during January 1998.

                                      F-11
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
  (j) Property and Equipment, Net

     Property and equipment, consisting of computer hardware and software,
furniture and fixtures, assets under capital leases and telephone equipment are
recorded at cost. Depreciation is recorded on the straight-line method over the
estimated useful lives of the assets, which are 3 to 30 years.

  (k) Capitalized Software Development Costs

     Costs incurred internally in creating computer software products are
charged to expense when incurred as research and development costs, until
technological feasibility has been established for the product. Thereafter,
software production costs are capitalized and subsequently reported at the lower
of cost or net realizable value. Capitalized costs are amortized based on
current and future revenue for each product over three years. Prior to 1998,
capitalized costs were amortized over five years. Amortization of the
capitalized costs commences when individual products become available for
general release.

  (l) Goodwill, Net

     Upon the Company's acquisitions of Online Capital in 1997 and RM Holdings,
Inc. in 1998, the purchase price exceeded the fair value of the assets acquired
less liabilities assumed, thereby creating goodwill. In addition, payments due
under the contingent consideration agreement described in Note 1(c) above are
added to goodwill when incurred. Goodwill is being amortized using the
straight-line method over 15 years.

  (m) Income Taxes

     The Company records income taxes using the method required by Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Accordingly, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. SFAS 109 requires companies to set up a valuation
allowance for that component of net deferred tax assets which does not meet the
more likely than not criterion for realization.

     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. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

  (n) Allowance for Losses

     The Company provides for losses relating to the origination and sale of
mortgage loans and accounts receivable. The allowance for losses is based on
management's evaluation of various factors, including potential for
repurchase-related expenses and contractual recourse obligations relating to
loans sold in the secondary market. While management uses the information
available to make evaluations, future adjustments to the allowance may be
necessary if future economic conditions differ substantially from the
assumptions used in making the evaluations. Management has considered all events
and/or transactions that are subject to reasonable and normal methods of
estimations, and the financial statements reflect that consideration.

     Management, considering current information and events regarding the
borrowers' ability to repay their obligations, considers a loan to be impaired
when it is probable that the Company will be unable to collect all amounts due
according to the contractual terms of the loan. When a loan is considered to be
impaired, the amount of the impairment is measured based on the present value of
expected future cash flows discounted at the note's effective interest rate.
Impairment losses are included in the allowance for losses through a charge to
the provision.

     The Company has agreements with several unaffiliated investors, whereby all
loans that are originated and funded are sold on an individual loan basis. The
agreements include clauses whereby loans that fail to meet specific criteria
require repurchase by the Company. Loans that are repurchased are usually resold
to

                                      F-12
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
other investors once the specific deficiencies are resolved. The impact of such
repurchases has not been significant to date.

  (o) Secondary Marketing Revenue, Net

     Gains or losses on sales of mortgage loans are recognized based upon the
difference between the selling price and the carrying value of the related
mortgage loans. Loan origination fees and direct loan origination costs on one
to four family residential mortgage loans are deferred until the loans are sold
to permanent investors and are considered part of the carrying value of a loan.
Deferred origination fees and expenses, net of commitment fees paid in
connection with the sale of the loans, are recognized when the related loans are
sold.

  (p) Loan Production and Processing Fees, Net

     Loan production and processing fees, which are received for underwriting,
processing and preparing documents for loans originated, are recorded when the
loans are closed. Any disbursements incurred in originating the loans, such as
for credit reports, appraisals and flood certifications, are charged as an
offset against this revenue.

  (q) Management, Technology and Other Fees

     Revenue from software sales to unaffiliated third parties is recorded as
revenue in the period during which the sale occurs, when there are no further
obligations on behalf of the Company and no right of return exists. Maintenance
fees are recorded as revenue in the period when services are rendered.

     Software sales, development, maintenance and user fees of approximately
$1,638,000, $1,854,000 and $1,966,800 were earned from one customer for the
years ended December 31, 1998, 1997 and 1996, respectively. (See note 13 for
warrants issued in conjunction with revenue generated by the Company.)

     Research and development expenses are charged to operations in the year
incurred and are comprised of the compensation and general and administrative
expenses directly related to such activities.

  (r) Use of Estimates

     In preparation of the financial statements, management has considered all
events and/or transactions that are subject to reasonable and normal methods of
estimation, and the financial statements reflect that consideration.

     Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

                                      F-13
<PAGE>
                               MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)

  (s) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of

     The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value, less costs to sell.

  (t) Reclassifications

     Certain prior year balances have been reclassified to conform to current
year presentation.

  (u) Stock-Based Compensation

     In 1997, the Company adopted the disclosure provisions of Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-based Compensation." The Company has
elected to continue accounting for stock-based compensation issued to employees
using Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and, accordingly, pro forma disclosures required under
SFAS No. 123 have been presented (See Note 15). Under APB No. 25, compensation
expense is based on the difference, if any, on the date of the grant, between
the fair value of the Company's stock and the exercise price. Stock issued to
non-employees has been accounted for in accordance with SFAS No. 123 and valued
using the Black-Scholes model.

  (v) Unearned Compensation

     Unearned compensation resulted when stock options were granted at prices
that were subsequently determined to be less than their estimated fair value.
The Company has recorded an estimate of the excess of fair value over the issue
price as unearned compensation as a separate component of shareholders' equity.

  (w) Net Loss Per Share

     The Company computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share," and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under
the provisions of SFAS No. 128 and SAB 98, basic net loss per share is computed
by dividing the net loss available to common stockholders for the period by the
weighted average number of common shares outstanding during the period. Diluted
net loss per share is computed by dividing the net loss for the period by the
weighted average number of common and common equivalent shares outstanding
during the period. Common equivalent shares, composed of unvested restricted
common stock and incremental common shares issuable upon the exercise of stock
options and warrants and upon conversion of Special Preferrred Stock (Northern
California Division), Series B, Series C, and Series D convertible preferred
stock, are included in the diluted net loss per share computation to the extent
such shares are dilutive.

                                      F-14
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                             -----------------------------    MARCH 31,    MARCH 31,
                                                              1998       1997       1996        1999         1998
                                                             -------    -------    -------    ---------    ---------
                                                               (IN THOUSANDS, EXCEPT PER           (UNAUDITED)
                                                                    SHARE AMOUNTS)
<S>                                                          <C>        <C>        <C>        <C>          <C>
Numerator:
  Net Loss................................................   $(6,078)   $(3,532)   $(4,018)    $(3,199)     $  (370)
  Dividends paid on special preferred stock...............      (751)        --         --        (178)          --
     Cumulative dividends on Series B convertible
       preferred stock....................................      (618)      (618)      (413)       (153)        (155)
     Cumulative dividends on Series C convertible
       preferred stock....................................      (665)      (335)        (3)       (164)        (166)
     Cumulative dividends on Series D convertible
       preferred stock....................................      (831)        --         --        (436)          --
                                                             -------    -------    -------     -------      -------
  Net loss attributable to common shareholders............   $(8,943)   $(4,485)   $(4,434)    $(4,130)     $  (691)
                                                             -------    -------    -------     -------      -------

Denominator:
  Weighted average shares--basic and diluted..............     1,247      1,166      1,132       1,356        1,098
                                                             -------    -------    -------     -------      -------
  Net loss per share--basic and diluted...................   $ (7.17)   $ (3.85)   $ (3.92)    $ (3.05)     $ (0.63)
                                                             -------    -------    -------     -------      -------
                                                             -------    -------    -------     -------      -------
</TABLE>

     Since the Company reported a net loss, the computation does not consider
the convertible preferred stock, common stock options and warrants due to the
anti-dilutive effect on net loss per share.

  (x) Comprehensive Income

     On January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 established standards for reporting and
presentation of comprehensive income and its components in a full set of
financial statements. Comprehensive income consists of net income and net
unrealized gains (losses) on securities and is presented in the consolidated
statements of shareholders' equity and comprehensive income. The Statement
requires only additional disclosures in the consolidated financial statements;
it does not affect the Company's consolidated balance sheets or statements of
operations. The adoption of SFAS No. 130 has had no effect on the Company's
consolidated financial statements.

  (y) Segment Reporting

     In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 established standards for
the way that a public enterprise reports 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
shareholders. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997, and requires restatement of earlier periods presented.
Segment information is presented in note 21.

  (z) Software Revenue Recognition

     In March 1998, the AICPA issued Statement of Position 98-4, "Deferral of
the Effective Date of a Provision of SOP 97-2" ("SOP 98-4"). SOP 98-4 defers for
one year the application of certain provisions of Statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2"). Different informal and
unauthoritative interpretations of certain provisions of SOP 97-2 have arisen
and, as result, the AICPA is deliberating amendments to SOP 97-2, so they can
issue interpretations regarding the applicability and the method of application
of those provisions. The adoption of SOP 97-2 has not had a material impact on
the Company's consolidated statements of operations, balance sheets or cash
flows.

                                      F-15
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
  (aa) Derivatives

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Financial Accounting Standards Board has
issued an exposed draft to delay the implementation of the Standard, however, it
is not presently known if such implementation will be delayed. As the Company
does not currently engage or plan to engage in derivative or hedging activities,
there will be no impact to the Company's consolidated statements of operations,
balance sheets or cash flows upon the adoption of this standard.

(2) RESTATEMENT

     In preparation of the consolidated financial statements, management
considered all events and/or transactions that were subject to reasonable and
normal methods of estimation to determine a fair value of the Company's common
stock in order to estimate the unearned compensation amounts.

     Subsequent to the issuance of the Company's financial statements as of and
for the year ended December 31, 1998, certain transactions were executed which
caused the Company's estimate of the fair value of its common stock to decrease.
Accordingly, the Company's 1998 financial statements have been restated to
reflect the impact of this decrease in fair value. The effect of this
restatement is a reclass between additional paid-in capital and unearned
compensation, thus having no effect on total shareholder's equity. In addition,
the amortization related to unearned compensation was decreased to reflect this
change.

<TABLE>
<CAPTION>
                                                                      DECEMBER 31, 1998
                                                                 ----------------------------
                                                                      AS
                                                                  PREVIOUSLY
                                                                   REPORTED        RESTATED
                                                                 ------------    ------------
<S>                                                              <C>             <C>
Consolidated Balance Sheet:
  Unearned compensation.......................................   $ (6,095,000)   $   (631,000)
  Additional paid-in capital..................................   $ 37,352,112    $ 31,162,112
  Accumulated deficit.........................................   $(18,166,360)   $(17,890,360)
  Total shareholder's equity..................................   $ 13,136,169    $ 13,136,169

Consolidated Statement of Operations:
  Compensation and benefits...................................   $ 26,350,914    $ 26,074,914
  Net loss....................................................   $ (6,353,788)   $ (6,077,788)
</TABLE>

(3) MORTGAGE LOANS AVAILABLE FOR SALE, NET

     Mortgage loans available for sale, net are carried on the books at lower of
cost or market and consist of the following at December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                                 ---------------------------
                                                                     1998           1997
                                                                 ------------    -----------
<S>                                                              <C>             <C>
Mortgage loans available for sale.............................   $175,683,013    $73,037,135
Loan broker premiums, origination points and
  discounts, net..............................................        185,933        572,618
Deferred loan origination costs...............................        503,570        128,180
                                                                 ------------    -----------
Mortgage loans available for sale, net........................   $176,372,516    $73,737,933
                                                                 ------------    -----------
                                                                 ------------    -----------
</TABLE>

                                      F-16
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(4) ACCOUNTS AND NOTES RECEIVABLE, NET

     Accounts and notes receivable, net, consist of the following at December
31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                                   --------------------------
                                                                      1998           1997
                                                                   -----------    -----------
<S>                                                                <C>            <C>
Notes receivable................................................   $ 6,158,654    $ 5,898,901
Broker fee receivables..........................................       672,209        669,235
Other...........................................................       880,409        598,310
                                                                   -----------    -----------
     Subtotal...................................................     7,711,272      7,166,446
Less: allowance for losses......................................    (6,467,701)    (5,937,684)
                                                                   -----------    -----------
                                                                   $ 1,243,571    $ 1,228,762
                                                                   -----------    -----------
                                                                   -----------    -----------
</TABLE>

     The activity in the allowance for losses account was as follows at
December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                     ------------------------
                                                                        1998          1997
                                                                     ----------    ----------
<S>                                                                  <C>           <C>
Allowance at beginning of period..................................   $5,937,684    $5,893,929
Recoveries, transfers and charge offs, net........................     (299,753)      (89,744)
Provision for losses..............................................      829,770       133,499
                                                                     ----------    ----------
Allowance at end of period........................................   $6,467,701    $5,937,684
                                                                     ----------    ----------
                                                                     ----------    ----------
</TABLE>

                                      F-17
<PAGE>
                               MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(5) PROPERTY AND EQUIPMENT, NET

     Property and equipment, net consists of the following at December 31, 1998
and 1997:

<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                                    -------------------------
                                                                       1998           1997
                                                                    -----------    ----------
<S>                                                                 <C>            <C>
Land.............................................................   $   132,000    $       --
Building.........................................................       287,800            --
Computer hardware and software...................................     3,515,647     1,523,408
Furniture and fixtures...........................................       729,222       295,939
Assets under capital leases......................................     2,058,436       310,231
Leasehold improvements...........................................       346,056       148,579
Telephone equipment..............................................       216,034            --
Vehicle..........................................................        12,063            --
                                                                    -----------    ----------
                                                                      7,297,258     2,278,157
                                                                    -----------    ----------
Less accumulated depreciation....................................    (2,031,381)     (938,920)
                                                                    -----------    ----------
Property and equipment, net......................................   $ 5,265,877    $1,339,237
                                                                    -----------    ----------
                                                                    -----------    ----------
</TABLE>

     Useful lives for property and equipment are as follows:

<TABLE>
<S>                                                               <C>
Building.......................................................   30 years
Computer hardware and software.................................   3 years
Furniture and fixtures, telephone equipment and vehicle........   5 years
</TABLE>

     The land and building were acquired in satisfaction of a note receivable
owed to the Company by an individual who subsequently became an employee of the
Company. The building is occupied by, and leased to, an auto maintenance
franchise that pays the Company rent of $4,000 monthly under a lease that
expires in 2015, with three subsequent five-year renewal periods. During 1998,
$24,000 in revenue was recorded under the lease.

     Depreciation expense for the years ended 1998, 1997 and 1996 $1,092,000,
$331,000 and $573,000, respectively.

(6) CAPITALIZED SOFTWARE DEVELOPMENT COSTS

     Capitalized software costs at December 31, 1998, 1997 and 1996, were net of
accumulated amortization of $666,253, $173,832 and $250,000, respectively.

     Information related to net capitalized software costs is as follows:

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                         --------------------
                                                                           1998        1997
                                                                         --------    --------
<S>                                                                      <C>         <C>
Balance at beginning of year..........................................   $639,123    $250,000
Capitalized costs.....................................................    831,559     517,955
Amortization..........................................................   (492,421)   (128,832)
                                                                         --------    --------
                                                                         $978,261    $639,123
                                                                         --------    --------
                                                                         --------    --------
</TABLE>

                                      F-18
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(7) GOODWILL, NET

     Goodwill, net consists of the following at December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                       ----------------------
                                                                          1998         1997
                                                                       ----------    --------
<S>                                                                    <C>           <C>
Online Capital, Inc. acquisition....................................   $  476,475    $476,475
RM Holdings, Inc. acquisition.......................................    2,112,629          --
Online Capital, Inc. earnout agreement..............................    2,402,694          --
                                                                       ----------    --------
                                                                        4,991,798     476,475
Less accumulated amortization.......................................     (303,673)    (11,041)
                                                                       ----------    --------
Goodwill, net.......................................................   $4,688,125    $465,434
                                                                       ----------    --------
                                                                       ----------    --------
</TABLE>

     Goodwill is amortized on a straight-line basis over 15 years. The
amortization of goodwill in the years ended 1998, 1997 and 1996 was $293,000,
$21,000 and $0, respectively.

(8) WAREHOUSE NOTES PAYABLE

     Under the terms of the Company's warehouse agreements, all mortgage loans
available for sale are pledged as collateral for the warehouse notes payable.

     The Company had warehouse lines of credit totaling $205,000,000,
$90,000,000 and $195,000,000 at December 31, 1998 and 1997 and March 31, 1999
(unaudited), respectively, from unaffiliated entities. These lines are used to
support the funding of mortgage loans as follows:

          (a) The Company has a $75,000,000 credit line at March 31, 1999. This
              credit line was $65,000,000 at December 31, 1998, and was
              temporarily increased from $45,000,000 to $75,000,000 during 1998.
              At December 31, 1998 and 1997 and March 31, 1999 (unaudited),
              $71,918,148, $37,890,528 and $69,432,892, respectively, were
              outstanding on this facility, with a weighted average interest
              rate of 7.60%, 8.47% and 7.01%, respectively. The line of credit
              is collateralized by a portion of the Company's mortgage loans
              available for sale, which amounted to $73,931,690, $48,120,268 and
              $72,300,119 at December 31, 1998 and 1997 and March 31, 1999,
              respectively. The line of credit requires the Company to maintain
              certain financial covenants, which were not met at December 31,
              1998. The lender has provided the Company with a waiver of this
              default pending the receipt of additional capital, which was
              received in February and March 1999. The Company met the financial
              covenants at March 31, 1999.

          (b) The Company has a $60,000,000 credit line with an entity, which
              temporarily was increased to $70,000,000 for December 31, 1998.
              This credit line was increased from $35,000,000 during 1998. At
              December 31, 1998 and 1997 and March 31, 1999 (unaudited),
              $62,486,268, $20,209,540 and $55,298,564, respectively, was
              outstanding on this facility, with a weighted average interest
              rate of 7.33%, 8.65% and 6.82%, respectively. The line of credit
              is collateralized by a portion of the Company's mortgage loans
              available for sale, which amounted to $67,518,557, $19,551,770 and
              $60,390,766 at December 31, 1998 and 1997 and March 31, 1999
              (unaudited), respectively. The line of credit requires the Company
              to maintain certain financial covenants, which were not met at
              December 31, 1998 or March 31, 1999. The lender has provided the
              Company with a waiver of this default pending the receipt of
              additional capital, which was received in February, March and
              April 1999.

          (c) The Company received a $25,000,000 credit line with an entity
              during 1998. At December 31, 1998 and March 31, 1999 (unaudited),
              $24,417,181 and $25,628,993, respectively, was outstanding on this
              facility, with a weighted average interest rate of 7.29% and
              6.74%, respectively. The line of credit is collateralized by a
              portion of the Company's mortgage loans

                                      F-19
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(8) WAREHOUSE NOTES PAYABLE--(CONTINUED)
          available for sale, which amounted to $26,320,308 and $26,690,321 at
              December 31, 1998 and March 31, 1999 (unaudited), respectively.
              The line of credit requires the Company to maintain certain
              financial covenants, which were not met at December 31, 1998. The
              lender has provided the Company with a waiver of this default
              pending the receipt of additional capital, which was received in
              February and March 1999. The Company met the financial covenants
              at March 31, 1999.

          (d) The Company received a $25,000,000 repurchase credit line from an
              entity during 1998. At December 31, 1998 and March 31, 1999
              (unaudited), there was no outstanding amount on this facility.

          (e) Since 1996, the Company has had a $10,000,000 line of credit by an
              entity. The line of credit bears interest at prime less 0.25% and
              has no maturity date. At December 31, 1998 and 1997 and March 31,
              1999 (unaudited), $7,367,831, $5,123,845 and $6,422,858,
              respectively, were outstanding on this facility. This line of
              credit is collateralized by a portion of the Company's mortgage
              loans available for sale, which amounted to $7,067,801, $5,167,405
              and $6,300,955 at December 31, 1998 and 1997 and March 31, 1999
              (unaudited), respectively. Under the terms of the Company's
              warehouse agreements, all mortgage loans available for sale are
              pledged as collateral for the warehouse notes payable.

     The warehouse lines of credit described in (a) through (c) above were in
default as to requirements for ratios of tangible net worth and leverage at
December 31, 1998. The creditors have given the Company waivers on these
requirements pending receipt of additional capital, which was received as
described in note 13. The additional capital received in the form of
Subordinated Debt eliminated the defaults as of February 28, 1999. However, the
line of credit described in (b) above was in default again at March 31, 1999.
The creditor has given the Company a waiver on these requirements due to the
receipt of additional capital.

(9) NOTE PAYABLE

     A note payable in the amount of $291,456 with an interest rate of 9.25% was
assumed through the acquisition of the land and building described in note 4. At
December 31, 1998, this note payable has an outstanding balance of $288,701 and
matures on April 10, 2002.

     The note payable in the amount of $70,833 at December 31, 1997, arose
through the Online Capital acquisition in the amount of $99,999 and had an
interest rate of 10%. The note was paid in full when it matured in 1998.

(10) LINES OF CREDIT

     The Company has three lines of credit with entities under which furniture
and equipment are leased. One line of credit is with the unaffiliated financing
subsidiary of a computer manufacturer and is accounted for as an operating
lease. No equipment at December 31, 1998, was under lease in this line of
credit. The Company accounts for the other two lease lines as capital leases.
One of these lease credit lines is with an affiliated entity and has an
available limit of $1,595,000 in equipment value, bears interest at
approximately 10% per annum and had an outstanding balance of $996,610 at
December 31, 1998. The other lease credit line is with an unaffiliated entity
and has no stated limit, bears interest at varying rates according to the
purchase amount of the underlying equipment and had an outstanding balance of
$520,167 at December 31, 1998. (See note 19 for capital lease obligation).

     During 1998 and 1997, the Company had a line of credit of $110,000 from an
unaffiliated financial institution for the use of purchasing equipment, which
had an outstanding balance of $49,001 and $85,668 at

                                      F-20
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(10) LINES OF CREDIT--(CONTINUED)
December 31, 1998 and 1997, respectively. The note matures on August 18, 2002,
and bears interest at the prime rate, which was 8.25% at December 31, 1998.

     During 1997, the Company opened a $200,000 working capital line of credit
with an unaffiliated financial institution. At December 31, 1998 and 1997, there
was no balance outstanding.

(11) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses consist of the following at
December 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                     ------------------------
                                                                        1998          1997
                                                                     ----------    ----------
<S>                                                                  <C>           <C>
Accounts payable..................................................   $3,225,450    $1,143,321
Accrued expenses..................................................    1,488,223       471,637
Profit distribution payable.......................................      312,120       160,958
Warehouse line interest payable...................................      512,228       132,387
                                                                     ----------    ----------
     Total accounts payable and accrued expenses..................   $5,538,021    $1,908,303
                                                                     ----------    ----------
                                                                     ----------    ----------
</TABLE>

(12) LIQUIDITY AND CAPITAL RESOURCES

     Since inception, the Company has funded operations primarily through net
cash proceeds from private placements of preferred and common stock totaling
$36 million through December 31, 1998. As of December 31, 1998, the Company had
cash and cash equivalents of $3.4 million. During the three month period ended
March 31, 1999 (unaudited), the Company has raised an additional $10 million in
cash through the issuance of senior subordinated debentures, and is currently in
discussion with various potential investors to provide additional capital for
the operations and growth of the Company. The Company's primary need for
operating capital is for the funding of mortgage loans between closing and
eventual sale to investors, which is accomplished through the use of warehouse
lines of credit and the funding of operating losses. There can be no assurance
that the Company will be able to continue raising capital sufficient to fund its
operations or obtain sufficient warehouse borrowing capacity to maintain current
operating levels.

(13) SUBORDINATED DEBT, NET OF DISCOUNT

     Subordinated debt, net of discount at March 31, 1999 (unaudited), of
$9,622,774, consists of convertible debentures at a fixed rate of interest of
12%, $2,000,000 of which matures on February 9, 2000 and $8,000,000 matures on
February 26, 2001. The holders of these notes received 6,668 and 26,672,
respectively of common stock warrants that are convertible to common stock at
$30 per share at any time prior to or upon maturity.

     Subordinated debt at December 31, 1998 of $100,000 consists of convertible
debentures, at a fixed rate of interest of 12%, which mature May 1, 1999.
Interest is due and payable monthly through maturity. At the option of the
holders, the debt can be converted to equity at the rate of $15 per share in
multiples of $15,000 at any time prior to or upon maturity. The debentures are
subordinated to any future indebtedness of the Company that is wholly secured by
first mortgage loans.

     During December 1997, the Company issued $2,400,000 of convertible
subordinated debt, of which $2,200,000 subsequently converted to preferred stock
at $11.50 per share during 1998. The remaining $200,000 was redeemed for cash
during 1998.

     During August 1997, the Company issued $1,500,000 of convertible
subordinated debt, which subsequently converted to preferred stock at $7.50 per
share during December 1997.

                                      F-21
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(14) SHAREHOLDERS' EQUITY

  (a) Common Stock Transactions

     During January 1999, the Company issued 20,000 shares of common stock at a
value of $32.30 per share in connection with the acquisition of the Internet
domain name www.mortgage.com as described in note 1(c).

     Options to purchase 120 shares of common stock were exercised during the
three-month period ending March 31, 1999.

     During April 1998, the Company issued 100,000 shares of common stock at a
value of $7.50 per share in connection with the acquisition of RM Holdings, Inc.
as described in note 1(c).

     During March 1998, the Company issued 100,000 shares of common stock at a
value of $7.50 per share in accordance with the contingent consideration
agreement as described in note 1(c).

     During June 1998, the Company issued 44,000 shares of common stock at a
value of $7.50 per share to a brokerage firm in consideration for the
facilitation of capital investments in the Company by unaffiliated firms.

     During 1997, the Company issued 71,668 shares of common stock at a value of
$7.50 per share in connection with the acquisition of Online Capital as
described in note 1(c).

  (b) Preferred Stock Transactions

     During 1998, the Company issued 1,273,898 shares of $.01 par value Series D
preferred stock at a price of $11.50 per share. Of these shares, 191,301 were
issued upon conversion of $2,200,000 of subordinated debt. Net proceeds from the
issuance of preferred stock, other than those converted from subordinated debt,
were $12,224,971. All Series D preferred stock will automatically convert into
common stock if the Company sells shares of its stock in an initial public
offering meeting certain specific criteria and the shareholders have not
redeemed their shares or upon the consent of holders of two-thirds of the
outstanding Series D preferred shares. These shares are entitled to voting
rights equal to those of the common stock of the Company and have liquidation
preference to all other shares of stock.

     During 1997 and 1996, the Company issued 472,668 and 133,333 shares,
respectively, of $.01 par value Series C preferred stock at a price of $7.50 per
share. Of these shares, 206,000 were issued upon conversion of $1,500,000 of
subordinated debt. Net proceeds from the issuance of preferred stock, other than
those converted from subordinated debt, were $2,000,000. All Series C preferred
stock will automatically convert into common stock if the Company sells shares
of its stock in an initial public offering meeting certain specific criteria and
the shareholders have not redeemed their shares or upon the consent of holders
of two-thirds of the outstanding Series C preferred shares. These shares are
entitled to voting rights equal to those of the common stock of the Company and
have liquidation preference to all other shares of stock.

                                      F-22
<PAGE>
                               MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(14) SHAREHOLDERS' EQUITY--(CONTINUED)

     During 1996, the Company sold $5,150,000 of 12% cumulative Series B
preferred stock in a private-placement offering. Net proceeds from this
transaction were $4,581,600. In addition, $127,875 of the 14% subordinated debt
was converted to Series B preferred stock. The remaining $1,134,625 of the 14%
subordinated debt was subsequently redeemed for cash in May 1996. All Series B
preferred stock will convert into common stock if the Company sells it's stock
in an initial public offering. These shares are also redeemable, at the
discretion of the holders, if the Company sells shares of its stock in an
initial public offering or private offering meeting certain specified criteria.
These shares are entitled to voting rights equal to those of the common stock of
the Company and have liquidation preference to all other shares of stock.

     Pursuant to the acquisition of Western American Mortgage, Inc. ("WAM") in
1996, the Company issued a class of preferred stock with special dividend
requirements equal to 50% of the net profits, as defined, of the WAM operations.
In July 1997, in conjunction with the acquisition of Online Capital, Inc., the
operations of WAM were integrated with other California operations of the
Company and the dividend requirements were amended to 20% of the net profit of
the Company's Northern California Division. Dividends paid for the year ending
December 31, 1998 and 1997 and the three month period ending March 31, 1999
(unaudited) to holders of this class of preferred stock amounted to $750,397, $0
and $179,483, respectively.

     Cumulative dividends, not declared, on the Series B preferred stock totaled
$1,649,129, $1,031,129 and $1,801,513 as of December 31, 1998 and 1997 and
March 31, 1999 (unaudited), respectively. Cumulative dividends, not declared, on
the Series C preferred stock totaled $1,002,924, $337,522 and $1,166,996 as of
December 31, 1998 and 1997 and March 31, 1999 (unaudited), respectively.
Cumulative dividends, not declared, on the Series D preferred stock totaled
$831,342, $-0- and $1,264,816 as of December 31, 1998 and 1997 and March 31,
1999 (unaudited), respectively. No liability has been established for the
cumulative dividends, inasmuch as they have not been declared.

     The Company's preferred stock has a liquidation preference to common stock.

  (c) Stock Warrant Transactions

     During the three month period ending March 31, 1999, 25,000 common stock
warrants converted to common stock options at $5.00 per share.

     In connection with certain operational and capital transactions, the
Company issued 175,650, 50,000, 363,000 and 33,340 common and preferred stock
warrants during 1998, 1997 and 1996 and the three months ended March 31, 1999
(unaudited), respectively. Total warrants outstanding as of December 31, 1998
and March 31, 1999 were 1,179,314 and 1,187,654 shares, respectively, with
exercise prices on the warrants ranging from $5.00 to $30.00 per share. The
Company has agreed to repurchase 500,000 of these warrants in the event that the
Company issues equity rights, either through a public or private placement of
shares, of 25% or more of the then outstanding total equity of the Company or if
the Company sells substantially all of its assets. Subsequent to March 31, 1999,
under this agreement the Company repurchased 100,000 of these warrant and
expects to repurchase the remaining 400,000 warrants by June 30, 1999.

  (d) Other

     During 1997, the Company retired 105,000 shares of outstanding treasury
stock.

                                      F-23
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(14) SHAREHOLDERS' EQUITY--(CONTINUED)
     The following summarizes the activity in the number of shares outstanding
at December 31, 1998 and 1997 and March 31, 1999 (unaudited):

<TABLE>
<CAPTION>
                                                                                              COMMON      PREFERRED
                                                                    COMMON      PREFERRED      STOCK       STOCK
                                                                     STOCK        STOCK      WARRANTS     WARRANTS
                                                                   ---------    ---------    ---------    ---------
<S>                                                                <C>          <C>          <C>          <C>
Balance at December 31, 1996....................................   1,131,942    1,452,507      953,664          --
  Issuance of common stock......................................      71,668           --           --          --
  Issuance of preferred stock...................................          --      472,668           --          --
  Common stock warrants granted.................................          --           --       50,000          --
  Preferred stock warrants granted..............................          --           --           --          --
  Retirement of treasury stock..................................    (105,000)          --           --          --
                                                                   ---------    ---------    ---------     -------
Balance at December 31, 1997....................................   1,098,610    1,925,175    1,003,664          --
  Issuance of common stock......................................     244,000           --           --          --
  Issuance of preferred stock...................................          --    1,273,898           --          --
  Common stock warrants granted.................................          --           --      157,000          --
  Preferred stock warrants granted..............................          --           --           --      18,650
                                                                   ---------    ---------    ---------     -------
Balance at December 31, 1998....................................   1,342,610    3,199,073    1,160,664      18,650
  Issuance of common stock......................................      20,120           --           --          --
  Common stock warrants granted.................................          --           --       33,340          --
  Warrants converted to options.................................          --           --      (25,000)         --
                                                                   ---------    ---------    ---------     -------
Balance at March 31, 1999 (unaudited)...........................   1,362,730    3,199,073    1,169,004      18,650
                                                                   ---------    ---------    ---------     -------
                                                                   ---------    ---------    ---------     -------
</TABLE>

(15) STOCK OPTION PLANS

     The Company's 1996 Employee Stock Option Plan (the "Plan") covered 350,000
shares of the Company's common stock and has been amended in 1997 and 1998 to
include a total of 1,190,000 shares. Subsequent to 1998, the Plan was amended to
increase the total shares to 1,590,000. Under the terms of the Plan, officers,
directors, key employees and consultants of the Company are eligible to receive
incentive as well as nonqualified stock options. Incentive stock options granted
under the Plan vest 40% on the second anniversary from the date of grant and 20%
in each of three years thereafter, except that California residents vest 20% on
the first anniversary. The options are exercisable for a period of up to ten
years from the date of grant at an exercise price which is not less than the
fair market value of the Company's common stock on the date of the grant. For
any stockholder owning more than 10% of the outstanding common stock, incentive
stock options are exercisable for a period of up to ten year exercise price
which is not less than 110% of the fair market value of the Company's common
stock on the date of the grant. Nonqualified options vest at 40% after the
second anniversary of the date of first service as an employee or consultant to
the Company and then equally over three years on the anniversary date of
service, and are granted on terms determined by the Company's board of
directors.

     The Company's Directors' 1996 Stock Option Plan (the "Directors' Plan")
covers 60,000 shares of the Company's common stock and provides for the grant of
nonqualified stock options to the Company's nonemployee directors. Stock options
granted under the Directors' Plan vest 66.67% on the second anniversary of the
date of first service as a director of the Company and entirely on the third
anniversary and are exercisable for a period of up to 3 1/2 years from the date
of grant at an exercise price which is not less than the fair market value of
the Company's common stock on the date of grant. The Directors' Plan is
administered by the board of directors or a committee appointed by the board of
directors consisting of at least three of its members.

                                      F-24
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(15) STOCK OPTION PLANS--(CONTINUED)
     The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations in
accounting for its employee and non-employee directors' stock options.
Accordingly, no compensation expense has been recognized for the options, as the
exercise price equals or exceeds the market price of the underlying stock on the
date of grant.

     Stock option activity during the periods indicated is as follows:

<TABLE>
<CAPTION>
                                                                                                WEIGHTED-
                                                                                                AVERAGE
                                                                                                EXERCISE
                                                                                    OPTIONS      PRICE
                                                                                   ---------    ---------
<S>                                                                                <C>          <C>
Outstanding at December 31, 1995................................................          --     $    --
  Granted.......................................................................     392,000        5.50
  Exercised.....................................................................          --          --
  Forfeited.....................................................................     (17,500)       5.50
                                                                                   ---------     -------
Outstanding at December 31, 1996................................................     374,500        5.50
  Granted.......................................................................     233,000        7.47
  Exercised.....................................................................          --          --
  Forfeited.....................................................................     (49,100)       6.34
                                                                                   ---------     -------
Outstanding at December 31, 1997................................................     558,400        6.33
  Granted.......................................................................     628,677       10.30
  Exercised.....................................................................          --          --
  Forfeited.....................................................................     (66,125)       8.12
                                                                                   ---------     -------
Outstanding at December 31, 1998................................................   1,120,952        8.45
  Granted.......................................................................     649,296       15.13
  Exercised.....................................................................        (120)       7.50
  Forfeited.....................................................................     (14,760)      13.63
                                                                                   ---------     -------
Outstanding at March 31, 1999 (unaudited).......................................   1,755,368     $ 10.72
                                                                                   ---------     -------
                                                                                   ---------     -------
</TABLE>

     Weighted-average fair value of options granted during 1998, 1997, 1996 and
1999 (unaudited) were $2.56, $0.69, $0.26 and $22.70, respectively.

                                      F-25
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(15) STOCK OPTION PLANS--(CONTINUED)
     The following table summarizes information about stock options outstanding
at December 31, 1998:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING
-------------------------------------------------------------------------            OPTIONS EXERCISABLE
                                        WEIGHTED-                             ---------------------------------
                      NUMBER             AVERAGE           WEIGHTED-            NUMBER           WEIGHTED-
                   OUTSTANDING AT       REMAINING           AVERAGE           OUTSTANDING AT      AVERAGE
EXERCISE PRICE       12/31/98         CONTRACTUAL LIFE     EXERCISE PRICE      12/31/98          EXERCISE PRICE
---------------    --------------     ----------------     --------------     --------------     --------------
<S>                <C>                <C>                  <C>                <C>                <C>
  $5.50-11.50         1,120,952         9.26 years             $ 8.45             399,117            $ 6.20
</TABLE>

     The following table summarizes information about stock options outstanding
at December 31, 1997:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING
-------------------------------------------------------------------------            OPTIONS EXERCISABLE
                                        WEIGHTED-                             ---------------------------------
                      NUMBER             AVERAGE           WEIGHTED-            NUMBER           WEIGHTED-
                   OUTSTANDING AT       REMAINING           AVERAGE           OUTSTANDING AT      AVERAGE
EXERCISE PRICE       12/31/97         CONTRACTUAL LIFE     EXERCISE PRICE      12/31/97          EXERCISE PRICE
---------------    --------------     ----------------     --------------     --------------     --------------
<S>                <C>                <C>                  <C>                <C>                <C>
  $5.50-7.50            558,400            9 years             $ 6.33             233,000            $ 6.34
</TABLE>

     The following table summarizes information about stock options outstanding
at December 31, 1996:

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING
-------------------------------------------------------------------------            OPTIONS EXERCISABLE
                                        WEIGHTED-                             ---------------------------------
                      NUMBER             AVERAGE           WEIGHTED-            NUMBER           WEIGHTED-
                   OUTSTANDING AT       REMAINING           AVERAGE           OUTSTANDING AT      AVERAGE
EXERCISE PRICE       12/31/96         CONTRACTUAL LIFE     EXERCISE PRICE      12/31/96          EXERCISE PRICE
---------------    --------------     ----------------     --------------     --------------     --------------
<S>                <C>                <C>                  <C>                <C>                <C>
     $5.50              374,500           7.8 years            $ 5.50             148,502            $ 5.50
</TABLE>

    The following table summarizes information about stock options outstanding
    at March 31, 1999 (unaudited):

<TABLE>
<CAPTION>
                           OPTIONS OUTSTANDING
-------------------------------------------------------------------------            OPTIONS EXERCISABLE
                                        WEIGHTED-                             ---------------------------------
                      NUMBER             AVERAGE           WEIGHTED-            NUMBER           WEIGHTED-
                   OUTSTANDING AT       REMAINING           AVERAGE           OUTSTANDING AT      AVERAGE
EXERCISE PRICE       3/31/99          CONTRACTUAL LIFE     EXERCISE PRICE       3/31/99          EXERCISE PRICE
---------------    --------------     ----------------     --------------     --------------     --------------
<S>                <C>                <C>                  <C>                <C>                <C>
 $5.50-$30.00         1,755,368           9.0 years            $10.72             506,652            $ 6.31
</TABLE>

     Aggregate proceeds realizable upon the exercise of all options outstanding
at December 31, 1998, 1997, 1996 and March 31, 1999 (unaudited) approximates
$9.5 million, $3.5 million, $2.1 million and $18.8 million, respectively.

                                      F-26
<PAGE>
                               MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(15) STOCK OPTION PLANS--(CONTINUED)

     Pro forma information regarding results of operations had compensation
expense been recorded at the grant date for awards consistent with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") has been determined as if the Company had
accounted for the employee and nonemployee directors' stock options granted
during the years ended December 31, 1998 and 1997, under the fair value method
of SFAS No. 123. The fair value of each employee stock option grant has been
estimated on the date of grant with the following assumptions for the years
ended December 31, 1998, 1997 and 1996 and the three month period ending
March 31, 1999 (unaudited):

<TABLE>
<CAPTION>
                                                               DECEMBER 31,                MARCH 31,
                                                  --------------------------------------  ------------
                                                      1998         1997         1996          1999
                                                  ------------  -----------  -----------  ------------
                                                                                          (UNAUDITED)
<S>                                               <C>           <C>          <C>          <C>
Weighted-average risk-free interest rate........   4.42-5.74%   6.12-6.73%      6.46%     4.63%-5.30%
Dividend yield..................................       --           --           --            --
Weighted-average expected option life...........    6 years      5 years     4-10 years     5 years
Fair market value of the common stock...........  $7.50-25.40      $5.00        $5.00     $32.30-42.40
</TABLE>

     The Black-Scholes Model was used in estimating the fair market value of
options and warrants and a discount for lack of marketability was used as the
warrants and options are not traded on a public market. Management of the
Company has reviewed both internal and external factors which influence the
value of the warrants and options. Internal factors include, among other things,
the Company's financial position, results of its operations and the size and
marketability of the interest being valued. External factors include, among
other things, the status of the industry, the position of the Company relative
to the industry and the local, national and international economic environment.
For the purposes of pro forma disclosure, the estimated fair value of the
options is amortized over the options' vesting period.

     Had compensation cost for the Company's stock option plan been determined
based on the fair value at the grant date for awards in 1998, 1997 and 1996 and
the three month period ending March 31, 1999 (unaudited), consistent with the
provisions of SFAS 123, the Company's net loss and basic and diluted net loss
per share would have been increased to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,             THREE MONTHS
                                                           -----------------------------       ENDED
                                                            1998       1997       1996      MARCH 31, 1999
                                                           -------    -------    -------    --------------
                                                                                            (UNAUDITED)
<S>                                                        <C>        <C>        <C>        <C>
Net Loss--attributable to common shareholders...........   $(8,943)   $(4,485)   $(4,433)      $ (4,133)
Net Loss--atrributable to common shareholders--as
  adjusted..............................................   $(9,077)   $(4,524)   $(4,445)      $ (4,488)
Basic and diluted net loss per share--as reported.......   $ (7.17)   $ (3.85)   $ (3.92)      $  (3.05)
Basic and diluted net loss per share--as adjusted.......   $ (7.28)   $ (3.88)   $ (3.93)      $  (3.31)
</TABLE>

     The effects of applying SFAS 123 in this disclosure are not indicative of
future amounts. Additional grants in future years are anticipated.

(16) INCOME TAXES

     No current or deferred provision for income taxes was recorded for the
years ended December 31, 1998 and 1997, due to the Company's operating losses in
the respective periods.

                                      F-27
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(16) INCOME TAXES--(CONTINUED)
     At December 31, 1998, the Company had approximately $16.1 million of tax
net operating loss carryforwards. The net operating loss carryforwards will
expire as follows:

<TABLE>
<CAPTION>
YEAR                                                            AMOUNT
-----------------------------------------------------------   -----------
<S>                                                           <C>
2010.......................................................   $ 2,200,000
2011.......................................................     2,900,000
2012.......................................................     1,900,000
2013.......................................................     3,100,000
2018.......................................................     6,000,000
                                                              -----------
Total......................................................   $16,100,000
                                                              -----------
                                                              -----------
</TABLE>

     Utilization of these carryforwards is dependent on the future profitability
of the Company and may be limited if certain changes in ownership occur. If
certain substantial changes in the Company's ownership should occur, or have
already occurred, there would be an annual limitation in the amount of tax net
operating loss carryforwards which could be utilized.

     The composition of net deferred tax assets at December 31, 1998 and 1997,
is as follows:

<TABLE>
<CAPTION>
                                                  1998           1997
                                               -----------    -----------
<S>                                            <C>            <C>
Deferred tax assets:
     Tax net operating loss carryforward....   $ 6,052,874    $ 3,568,212
     Software sale..........................       607,055        607,055
     Organization costs.....................        29,881         59,682
     Provision for losses...................       181,969         71,340
     Property and equipment.................        37,650         57,533
     Other..................................        10,915         67,042
                                               -----------    -----------
                                                 6,920,344      4,430,864
Valuation allowance.........................    (6,479,601)    (4,190,362)
                                               -----------    -----------
     Net deferred tax asset.................       440,743        240,502
Deferred tax liabilities:
     Capitalized software development
       costs................................       440,743        240,502
                                               -----------    -----------
          Total.............................   $        --    $        --
                                               -----------    -----------
                                               -----------    -----------
</TABLE>

     A 100 percent valuation allowance was established against the net deferred
tax asset at December 31, 1998 and 1997.

(17) RELATED PARTIES

     The Company has a consulting agreement with a consulting firm of which the
two principle owners are shareholders of the Company. Total consulting fees
expensed related to this consulting firm were $604,600, $300,100 and $266,000
for the years ended December 31, 1998, 1997 and 1996, respectively. As of
December 31, 1998, total unpaid fees for services rendered during 1998 under
such agreement totaled $115,000.

(18) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     SFAS 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 practicable to
estimate fair value.

                                      F-28
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(18) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)
     Financial instruments include such items as mortgage loans available for
sale, warehouse notes payable and other instruments.

     Fair value estimates are made as of a specific point in time based on the
characteristics of the financial instruments and the relevant market
information. Where available, quoted market prices are used. In other cases,
fair values are based on estimates using other valuation techniques, such as
discounting estimated future cash flows using a rate commensurate with the risks
involved or other acceptable methods. These techniques involve uncertainties and
are significantly affected by the assumptions used and the judgements made
regarding risk characteristics of various financial instruments, prepayments,
discount rates, estimates of future cash flows, future expected loss experience,
and other factors. Changes in assumptions could significantly affect these
estimates. Derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in an immediate
sale of the instrument. Also, because of differences in methodologies and
assumption used to estimate fair value, the Company's fair values should not be
compared to those of other companies.

     Under the Statement, fair value estimates are based on existing financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Accordingly, the aggregate fair value amount presented
does not represent the underlying value of the Company. For certain assets and
liabilities, the information required under the Statement is supplemental with
additional information relevant to an understanding of the fair value.

     The methods and assumptions used to estimate the fair values of each class
of financial instruments are as follows:

     Cash and Cash Equivalents

          The carrying amount reported in the balance sheet approximates fair
     value.

     Mortgage Loans Available For Sale, Net

          Fair values are based on the estimated value at which the loans could
     be sold in the secondary market. These loans are priced to be sold with
     servicing rights released, as is the Company's normal business practice.

     Accounts and Notes Receivable, Net

          Carrying amounts are considered to approximate fair value. All amounts
     that are assumed to be uncollectible within a reasonable time are written
     off and or reserved.

     Warehouse Notes Payable

          The carrying amount of warehouse notes payable reported in the balance
     sheet approximates its fair value.

     Note Payable

          Fair value of note payable is estimated by discounting estimated
     future cash flows using a rate commensurate with the risks involved.

     Subordinated Debt

          Fair value is estimated using the estimated fair value of the
     preferred stocks into which the subordinated debt can be converted.

     Lines of Credit

          The carrying amount of amounts outstanding on lines of credit is
     estimated by discounting estimated future cash flows using a rate
     commensurate with the risks involved.

                                      F-29
<PAGE>
                               MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(18) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)

     The estimated fair values of the Company's financial investments are as
follows:

<TABLE>
<CAPTION>
                                                DECEMBER 31, 1998              DECEMBER 31, 1997
                                           ----------------------------    --------------------------
                                             CARRYING          FAIR         CARRYING         FAIR
                                              AMOUNT          VALUE          AMOUNT          VALUE
                                           ------------    ------------    -----------    -----------
<S>                                        <C>             <C>             <C>            <C>
ASSETS
Cash and cash equivalents...............   $  3,412,283    $  3,412,283    $ 1,679,722    $ 1,679,722
Mortgage loans available for sale, net..    176,372,516     177,167,458     73,737,933     74,316,028
Accounts and notes receivable, net......      1,243,571       1,243,571      1,228,762      1,228,762

LIABILITIES
Warehouse notes payable.................   $171,777,572    $171,777,572    $72,223,912    $72,223,912
Note payable............................        288,701         295,934         70,833         70,833
Lines of credit.........................      1,565,778       1,565,778        395,899        395,899
Subordinated debt.......................        100,000         333,350      2,500,000      2,500,000
</TABLE>

(19) COMMITMENTS AND CONTINGENCIES

  (a) Leases

     The Company is obligated under various operating lease agreements relating
to branch and executive offices and equipment. Lease terms expire during the
years 1998 to 2003, subject to renewal options. The following is a schedule of
future minimum rental payments under non-cancelable operating leases for office
space and equipment as of December 31, 1998:

<TABLE>
<CAPTION>
YEAR                                                             AMOUNT
------------------------------------------------------------   ----------
<S>                                                            <C>
1999........................................................   $2,342,000
2000........................................................    1,940,000
2001........................................................    1,449,000
2002........................................................    1,089,000
2003 and thereafter.........................................      896,000
                                                               ----------
     Total minimum payments.................................   $7,716,000
                                                               ----------
                                                               ----------
</TABLE>

     Beginning in 1998, the Company is obligated under various capital lease
agreements relating to computer equipment, furniture and leasehold improvements.
Lease terms are from 36 to 42 months and expire from 1999 to 2002, subject to
renewal options.

     At December 31, 1998 and 1997, the gross amount of equipment, furniture and
leasehold improvements and related accumulated amortization recorded under
capital leases is as follows:

<TABLE>
<CAPTION>
                                                                            DECEMBER 31,
                                                                       ----------------------
                                                                          1998         1997
                                                                       ----------    --------
<S>                                                                    <C>           <C>
Computer hardware and software......................................   $1,101,804    $310,231
Furniture and fixtures..............................................      322,420          --
Telephone equipment.................................................      526,947          --
Leasehold improvements..............................................      107,265          --
                                                                       ----------    --------
                                                                        2,058,436     310,231
Less: accumulated amortization......................................     (397,089)         --
                                                                       ----------    --------
                                                                       $1,661,347    $310,231
                                                                       ----------    --------
                                                                       ----------    --------
</TABLE>

                                      F-30
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(19) COMMITMENTS AND CONTINGENCIES--(CONTINUED)
     The following is a schedule of future minimum rental payments under capital
leases as of December 31, 1998:

<TABLE>
<CAPTION>
YEAR                                                             AMOUNT
------------------------------------------------------------   ----------
<S>                                                            <C>
1999........................................................   $  829,000
2000........................................................      704,000
2001........................................................      447,000
2002........................................................       70,000
2003 and thereafter.........................................           --
                                                               ----------
Total minimum lease payments................................    2,050,000
Less amount representing interest at 12%....................     (502,000)
                                                               ----------
Present value of net minimum capital lease payments.........    1,548,000
Less current installments of obligations under capital
  leases....................................................     (665,000)
                                                               ----------
Obligations under capital leases excluding current
  installments..............................................   $  883,000
                                                               ----------
                                                               ----------
</TABLE>

     Rent expense for the years ended December 31, 1998, 1997 and 1996 was
$1,343,053, $739,805 and $453,029, respectively. Included in the rent for 1998
is $647,577 relating to the capital leases.

  (b) Litigation

     The Company is a defendant in various lawsuits arising during the ordinary
course of business. Management has consulted with legal counsel and is of the
opinion, based on legal counsel's advice, that none of these matters will have a
material adverse effect on the financial position of the Company. Where
appropriate, the Company has adequately reserved for fees and costs.

  (c) Software Rights

     The Company sold its CLOser software to a customer under a financing
arrangement whereby the Company retained licensing rights to the software and a
repurchase option. Under certain events, including a public offering of stock in
the Company, the Company is required to repurchase the CLOser software for $3.5
million.

  (d) Other

     On December 3, 1996, the Company entered into a partnership agreement whose
primary function is the ownership of rental office space in Plantation, Florida.
The Company had a 25% interest in this partnership and entered into a ten-year
lease for approximately 22% of the rentable space in the partnership's office
building. In addition, the partnership committed to reimburse the Company for
approximately $146,000 in rental expense in 1997 attributable to the Company's
prior leased headquarters. During 1997, the Company sold its investment in the
partnership for $247,000.

     The Company has entered into arrangements with certain employees and third
parties which provide for profit sharing based on results of operations of
specified products or divisions of the Company. In conjunction with these
arrangements, the Company has also entered into employment and noncompetitive
agreements with certain individuals.

(20) SUBSEQUENT EVENTS

     During the three month period ended March 31, 1999 (unaudited), the
Company's Board of Directors authorized management of the Company to file a
Registration Statement with the Securities and Exchange Commission permitting
the Company to sell shares of its common stock to the public.

                                      F-31
<PAGE>
                               MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(21) YEAR 2000

     Many currently installed computer systems and software products are
designed to accept only two digit entries in the date code field. As a result,
they may have problems properly recognizing 1/1/00 as January 1, 2000. In less
than a year, computer systems and/or software used by many companies may need to
be upgraded to comply with "Year 2000" or "Y2K" requirements. Significant
uncertainty exists concerning the potential effects associated with the Year
2000 issue on business operations.

     In early 1998, the Company commenced a program to review the Y2K compliance
status of the software and systems used in its internal business processes, its
technology platforms licensed to others and other systems and services provided
by third-party vendors on which the Company is reliant. The assessment and the
research and strategy phases of the program have been completed and strategies
are being implemented, including the development of contingency plans for
potential third-party Y2K compliance problems that management believes could
affect business continuity. There can be no assurance that all potential Y2K
effects on the Company's business will be anticipated or identified by the
program or that contingency plans developed will be effective.

     The Company has fully integrated Y2K testing into the development process
for all of its own software. The Company believes that the entire technology
platform on which it operates and which provides for use by clients is generally
Y2K compliant. In certain circumstances, the Company has warranted to customers
that the use or occurrence of dates on or after January 1, 2000, will not
adversely affect the performance of the Company's systems with respect to the
ability to create, store, process and output information related to such data.
If any of these customers experience Y2K problems, such customers could assert
claims for damages against the Company.

     To date the Company has not maintained a complete and separate budget for
investigation and remediation related to Y2K compliance of its own software and
underlying systems used in internal operations. The costs of the Company's Y2K
initiative have been incorporated into existing workloads and budgets within the
technology group and are not expected to be material to the Company's results of
operations or financial position. Management will develop a contingency plan in
the second and third quarter of 1999 based upon the results of supplier and
customer readiness reviews. To the extent the Company has not adequately
assessed its Y2K compliance deficiencies, additional and possibly significant
Company resources may be spent on investigating and remedying Y2K issues. The
expenditure of such resources may have a material adverse effect on the
Company's business, financial condition and results of operations.

(22) SEGMENT INFORMATION

     The Company operates in two reportable business segments: the Direct to
Consumer reportable Segment, which includes the Mortgage.com internet web site
and retail mortgage brokerage operations, both of which originate mortgage loans
that are subsequently sold in the secondary market; and the Business to Business
reportable Segment, which includes back-office mortgage services for lenders,
realtors, homebuilders and software and internet conduits, technology platform
licenses to mortgage industry participants and the Openclose.com website that
enables brokers, correspondents and insurance companies to conduct their
business through a neutral internet site with selected financial institutions
using automated underwriting capabilities provided by the Federal National
Mortgage Association. The Business to Business reportable Segment generates
revenues by charging fees for these services. These segments are characterized
by the nature of their customers. Summarized financial information concerning
the business segments is shown in the following table: (Certain expenses that
are not directly attributable to the business channels have been reclassified to
Overhead in these tables.)

                                      F-32
<PAGE>
                               MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(22) SEGMENT INFORMATION--(CONTINUED)

<TABLE>
<CAPTION>
                                                                                       DIRECT TO     BUSINESS TO
                                                                         TOTAL         CONSUMER       BUSINESS
                                                                      ------------    -----------    -----------
<S>                                                                   <C>             <C>            <C>
Year ended December 31, 1998
Revenue:
  Secondary marketing revenue, net.................................   $ 28,597,825    $12,571,230    $16,026,595
  Loan production and processing fees, net.........................      5,337,625      1,826,050      3,511,575
  Management, technology and other fees............................      1,868,202             --      1,868,202
  Net interest (expense) income....................................       (113,102)      (217,118)       104,016
                                                                      ------------    -----------    -----------
Total revenue......................................................     35,690,550     14,180,162     21,510,388
                                                                      ------------    -----------    -----------
Expenses:
  Compensation and employee benefits...............................     23,640,569     10,732,442     12,908,127
  Marketing........................................................      1,324,760        613,465        711,295
  Depreciation and amortization....................................        742,661        240,424        502,237
  General and administrative.......................................      7,997,176      3,007,596      4,989,580
                                                                      ------------    -----------    -----------
  Total segment expenses...........................................     33,705,166     14,593,927     19,111,239
                                                                                      -----------    -----------
  Segment (loss)/income............................................                   $  (413,765)   $ 2,399,149
                                                                                      -----------    -----------
  Research and development not allocated to segments...............      2,888,159
  Overhead expenses not allocated to segments......................      5,175,013
                                                                      ------------
Total expenses.....................................................     41,768,338
                                                                      ------------
Net loss...........................................................   $ (6,077,788)
                                                                      ------------
                                                                      ------------
Segment assets.....................................................   $176,372,516    $93,324,622    $83,047,894
                                                                      ------------    -----------    -----------
                                                                      ------------    -----------    -----------

Year ended December 31, 1997
Revenue:
  Secondary marketing revenue, net.................................   $ 11,594,660    $ 4,997,935    $ 6,596,726
  Loan production and processing fees, net.........................      2,347,321        788,358      1,558,963
  Management, technology and other fees............................      2,032,428             90      2,032,338
  Net interest (expense) income....................................        500,008         58,022        441,985
                                                                      ------------    -----------    -----------
Total revenue......................................................     16,474,417      5,844,405     10,630,012
                                                                      ------------    -----------    -----------
Expenses:
  Compensation and employee benefits...............................     12,057,725      4,781,058      7,276,667
  Marketing........................................................         57,586         51,007          6,579
  Depreciation and amortization....................................        318,704         91,236        227,468
  General and administrative.......................................      3,258,339        714,118      2,544,221
                                                                      ------------    -----------    -----------
  Total segment expenses...........................................     15,692,354      5,637,419     10,054,935
                                                                                      -----------    -----------
  Segment income...................................................                   $   206,986    $   575,077
                                                                                      -----------    -----------
  Research and development not allocated to segments...............      1,079,257
  Overhead expenses not allocated to segments......................      3,234,672
                                                                      ------------
Total expenses.....................................................     20,006,283
                                                                      ------------
Net loss...........................................................   $ (3,531,866)
                                                                      ------------
                                                                      ------------
Segment assets.....................................................   $ 73,737,933    $31,243,110    $42,494,823
                                                                      ------------    -----------    -----------
                                                                      ------------    -----------    -----------
</TABLE>

                                      F-33
<PAGE>
                               MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(22) SEGMENT INFORMATION--(CONTINUED)

<TABLE>
<CAPTION>
                                                                                     DIRECT TO     BUSINESS TO
                                                                       TOTAL         CONSUMER        BUSINESS
                                                                    ------------    -----------    ------------
<S>                                                                 <C>             <C>            <C>
Year ended December 31, 1996
Revenue:
  Secondary marketing revenue, net...............................   $  4,101,341    $ 1,466,111    $  2,635,230
  Loan production and processing fees, net.......................        820,469        256,766         563,703
  Management, technology and other fees..........................      2,577,296         (2,250)      2,579,546
  Net interest (expense) income..................................         17,203         18,826          (1,623)
                                                                    ------------    -----------    ------------
Total revenue....................................................      7,516,309      1,739,453       5,776,855
                                                                    ------------    -----------    ------------
Expenses:
  Compensation and employee benefits.............................      5,810,129      1,538,761       4,271,368
  Marketing......................................................         17,795          4,162          13,633
  Depreciation and amortization..................................         42,728          2,361          40,367
  General and administrative.....................................      2,224,406        394,214       1,830,192
                                                                    ------------    -----------    ------------
  Total segment expenses.........................................      8,095,058      1,939,498       6,155,560
                                                                                    -----------    ------------
  Segment loss...................................................                   $  (200,045)   $   (378,705)
                                                                                    -----------    ------------
  Research and development not allocated to segments.............        496,568
  Overhead expenses not allocated to segments....................      2,942,858
                                                                    ------------
Total expenses...................................................     11,534,484
                                                                    ------------
Net loss.........................................................   $ (4,018,175)
                                                                    ------------
                                                                    ------------
Segment assets...................................................   $ 24,701,486    $ 3,705,223    $ 20,996,263
                                                                    ------------    -----------    ------------
                                                                    ------------    -----------    ------------

Three months ended March 31, 1999 (unaudited)
Revenue:
  Secondary marketing revenue, net...............................   $  8,599,974    $ 2,421,061    $  6,178,913
  Loan production and processing fees, net.......................      2,598,337        533,640       2,064,697
  Management, technology and other fees..........................      1,991,360             --       1,991,360
  Net interest (expense) income..................................         25,837         12,362          13,475
                                                                    ------------    -----------    ------------
Total revenue....................................................     13,215,508      2,967,063      10,248,445
                                                                    ------------    -----------    ------------
Expenses:
  Compensation and employee benefits.............................      8,753,356      2,507,748       6,245,608
  Marketing......................................................      1,349,337        350,964         998,373
  Depreciation and amortization..................................        384,764         91,277         293,487
  General and administrative.....................................      2,987,684        505,815       2,481,869
                                                                    ------------    -----------    ------------
  Total segment expenses.........................................     13,475,141      3,455,804      10,019,337
                                                                                    -----------    ------------
  Segment (loss)/income..........................................                   $  (448,741)   $    229,108
                                                                                    -----------    ------------
  Research and development not allocated to segments.............        776,565
  Overhead expenses not allocated to segments....................      2,162,712
                                                                    ------------
Total expenses...................................................     16,414,418
                                                                    ------------
Net loss.........................................................   $  3,198,910
                                                                    ------------
                                                                    ------------
Segment assets...................................................   $166,149,185    $52,436,683    $113,712,502
                                                                    ------------    -----------    ------------
                                                                    ------------    -----------    ------------
</TABLE>

                                      F-34
<PAGE>
                               MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(22) SEGMENT INFORMATION--(CONTINUED)

<TABLE>
<CAPTION>
                                                                    DECEMBER 31,                    MARCH 31,
                                                     ------------------------------------------    ------------
                                                         1998           1997           1996            1999
                   Total Assets                      ------------    -----------    -----------    ------------
                                                                                                   (UNAUDITED)
<S>                                                  <C>             <C>            <C>            <C>
Total assets for reportable segments..............   $176,372,516    $73,737,933    $24,701,486    $166,149,185
Other assets not allocated to segments............     17,065,193      8,189,037      6,009,641      22,655,978
                                                     ------------    -----------    -----------    ------------
Total consolidated assets.........................   $193,437,709    $81,926,970    $30,711,127    $188,805,163
                                                     ------------    -----------    -----------    ------------
                                                     ------------    -----------    -----------    ------------
</TABLE>

     Assets not allocated to reportable segments include all assets other than
mortgage loans available for sale, net. All segment revenues are from external
customers. Expenses not allocated to reportable segments include corporate
overhead related to facilities, general and administrative costs and executive
salaries. Certain costs are allocated between segments based on either the
number of loans processed and/or originated. Research and development costs are
not allocated as the development efforts are primarily related to the technology
platform which is used to support activities conducted by all segments.

                                      F-35
<PAGE>
                               MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(23) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     The following table presents the Company's statements of operation on a
quarterly basis for the years ended December 31, 1998 and 1997 (amounts in
thousands):

<TABLE>
<CAPTION>
                      QUARTER ENDED:                           MARCH      JUNE     SEPTEMBER     DECEMBER
-----------------------------------------------------------   -------    ------    ----------    ---------
<S>                                                           <C>        <C>       <C>           <C>
1998:
  Revenue:
     Secondary marketing revenue, net......................   $ 5,407    $6,620     $  7,632      $ 8,938
     Loan production and processing fees, net..............       922     1,278        1,329        1,809
     Management, technology and other fees.................       546       649          539          134
     Net interest (expense) income.........................       (56)      (22)         108         (143)
                                                              -------    ------     --------      -------
       Total revenue.......................................     6,819     8,525        9,608       10,738
                                                              -------    ------     --------      -------
  Expenses:
     Compensation and employee benefits....................     4,927     5,892        6,653        8,602
     Marketing.............................................        85       258          454          539
     Research and development..............................       434       578          722        1,155
     Depreciation and amortization.........................       154       268          337        1,114
     General and administrative............................     1,589     2,292        2,721        2,994
                                                              -------    ------     --------      -------
       Total expenses......................................     7,189     9,288       10,887       14,404
                                                              -------    ------     --------      -------
  Net loss.................................................   $  (370)   $ (763)    $ (1,279)     $(3,666)
                                                              -------    ------     --------      -------
                                                              -------    ------     --------      -------
  Net loss per share, basic and dilutive...................   $ (0.83)   $(1.16)    $  (1.62)     $ (3.56)
                                                              -------    ------     --------      -------
                                                              -------    ------     --------      -------
1997:
  Revenue:
     Secondary marketing revenue, net......................   $   997    $2,116     $  4,052      $ 4,430
     Loan production and processing fees, net..............       300       521          685          842
     Management, technology and other fees.................       416       359          707          551
     Net interest (expense) income.........................       144       137          155           63
                                                              -------    ------     --------      -------
       Total revenue.......................................     1,857     3,133        5,599        5,886
                                                              -------    ------     --------      -------
  Expenses:
     Compensation and employee benefits....................     1,754     2,534        4,067        4,728
     Marketing.............................................        26        49           79           84
     Research and development..............................       162       216          269          432
     Depreciation and amortization.........................       110       123          143          105
     General and administrative............................       869     1,205        1,574        1,478
                                                              -------    ------     --------      -------
       Total expenses......................................     2,921     4,127        6,132        6,827
                                                              -------    ------     --------      -------
  Net loss.................................................   $(1,064)   $ (994)    $   (533)     $  (941)
                                                              -------    ------     --------      -------
                                                              -------    ------     --------      -------
  Net loss per share, basic and dilutive...................   $ (1.11)   $(1.06)    $  (0.67)     $ (1.02)
                                                              -------    ------     --------      -------
                                                              -------    ------     --------      -------
</TABLE>

                                      F-36
<PAGE>
     [The graphic appearing here is a picture of the real estate section of a
newspaper with the Mortgage.com logo and slogan in the middle of the page.]

<PAGE>
                                    PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the registrant in connection with the sale of
the common stock being registered. All amounts are estimates, except for the
Securities and Exchange Commission registration fee, the NASD filing fee and the
Nasdaq listing fee. All of these costs and expenses will be borne by the
registrant.

<TABLE>
<S>                                                               <C>
Securities and Exchange Commission filing fee..................   $31,171
NASD filing fee................................................    11,713
Nasdaq listing fee.............................................     5,000
Blue Sky fees and expenses.....................................          *
Transfer agent expenses and fees...............................          *
Printing and engraving.........................................          *
Accountants' fees and expenses.................................          *
Legal fees and expenses........................................          *
Miscellaneous..................................................          *
                                                                  -------
     TOTAL.....................................................   $      *
                                                                  -------
                                                                  -------
</TABLE>

               ---------------------------------
               * To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     Section 607.0850 of the Florida Business Corporation Act authorizes a court
to award, or permits a Florida corporation to grant, indemnity to present or
former directors and officers, as well as certain other persons serving at the
request of the corporation in related capacities. This permitted indemnity is
sufficiently broad to permit indemnification for liabilities arising under the
Securities Act of 1933, including reimbursement for expenses incurred.

     The indemnification authorized under Florida law is not exclusive and is in
addition to any other rights granted to officers and directors under the
Articles of Incorporation or Bylaws of the corporation or any agreement between
officers and directors and the corporation. The registrant's Bylaws provide for
the indemnification of directors, former directors and officers to the maximum
extent permitted by Florida law. The registrant's Bylaws also provide that it
may purchase and maintain insurance on behalf of a director or officer against
liability asserted against the director or officer in such capacity. In
addition, the registrant has entered into Indemnification Agreements (Exhibits
10.32, 10.33 and 10.34 hereto) with each officer and director, other than John
Buscema. The Underwriting Agreement (Exhibit 1.1) also provides for
cross-indemnification among the registrant and the Underwriters with respect to
certain matters, including matters arising under the Securities Act.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against such public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act, and will be governed by the final adjudication
of such issues.

                                      II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

     Within the past three years, the registrant has sold the following
securities which were not registered under the Securities Act. The purchases and
sales were exempt pursuant to Section 4(2) of the Securities Act (and/or
Regulation D promulgated thereunder) as transactions by an issuer not involving
a public offering, where the purchasers represented their intention to acquire
the securities for investment only, not with a view to distribution, and
received or had access to adequate information about the registrant.

     1. Between December 24, 1996 and June 30, 1997, the registrant issued
533,336 shares of Series C Preferred Stock to six accredited institutional
investors, Canaan Equity, L.P., Canaan Ventures II Limited Partnership, Canaan
Ventures II Offshore CV, Canaan Capital Limited Partnership, Canaan Capital
Offshore Limited Partnership, CV, and Dominion Fund III, for aggregate
consideration of approximately $4,000,000. In connection with this issuance and
sale, between December 24, 1996 and March 10, 1997, the registrant also issued
warrants to purchase 14,952 shares of common stock at $7.50 per share to Raymond
James and Associates, Inc. in consideration for its services as placement agent
in the sale of Series C Preferred Stock. The purchases and sales were exempt
pursuant to Rule 506 and Regulation D as transactions by an issuer not involving
a public offering, where the purchasers were accredited investors, represented
their intention to acquire the securities for investment only, not with a view
to distribution, and received or had access to adequate information about the
registrant.

     2. As of June 30, 1997, the registrant issued 35,834 shares of common stock
to John Hogan in consideration for the merger of OnLine Capital into the
registrant. On January 1, 1998, the registrant issued an additional 35,834
shares of common stock to John Hogan pursuant to a clause in the OnLine Capital
merger agreement. As of January 1, 1998, the registrant issued 100,000 shares of
common stock to John Hogan in consideration of changing John Hogan's
compensation plan.

     3. As of August 31, 1997, the registrant issued $1,500,000 in face amount
of 12% Senior Subordinated Convertible Notes due September 30, 2002 and warrants
to purchase 50,000 shares of common stock at $7.50 per share to two accredited,
institutional investors, Canaan Equity, L.P. and Dominion Fund III. The
purchases and sales were exempt pursuant to Rule 506 and Regulation D as
transactions by an issuer not involving a public offering, where the purchasers
were accredited investors, represented their intention to acquire the securities
for investment only, not with a view to distribution, and received or had access
to adequate information about the registrant.

     4. As of December 31, 1997, the registrant issued 206,000 shares of Series
C Preferred Stock to two accredited, institutional investors, Canaan Equity,
L.P. and Dominion Fund III, upon their conversion of $1,500,000 in face amount
of 12% Senior Subordinated Convertible Notes due September 30, 2002. The
purchases and sales were exempt pursuant to Rule 506 and Regulation D as
transactions by an issuer not involving a public offering, where the purchasers
were accredited investors, represented their intention to acquire the securities
for investment only, not with a view to distribution and received or had access
to adequate information about the registrant.

     5. As of January 30, 1998, the registrant issued $2,000,000 of 12% Senior
Subordinated Convertible Notes due January 31, 2003 and warrants to purchase
66,667 shares of common stock at $7.50 per share to two accredited,
institutional investors, Canaan Equity, L.P. and Dominion Fund III. The
purchases and sales were exempt pursuant to Rule 506 and Regulation D as
transactions by an issuer not involving a public offering, where the purchasers
were accredited investors, represented their intention to acquire the securities
for investment only, not with a view to distribution, and received or had access
to adequate information about the registrant.

     6. As of March 31, 1998, the registrant issued 100,000 shares of common
stock to John Rodgers, Andrew Heller and Kyle Meyer as consideration for the
merger of RM Holdings, Inc. into the registrant. The merger agreement also
contained an earn-out provision which provided for the issuance of warrants to
purchase 100,000 shares of common stock at $7.50 per share, pursuant to a
formula. On December 31, 1998, the registrant issued warrants to purchase 29,126
shares of common stock at $7.50 per share to John Rodgers, Andrew Heller and
Kyle Meyer pursuant to the earn-out provision.

     7. As of April 1, 1998 the registrant issued a warrant to purchase 300,000
shares of common stock at $5.00 per share and a warrant to purchase 100,000
shares of common stock at $7.50 per share to an accredited,

                                      II-2
<PAGE>
institutional investor, Superior Bank, FSB, in consideration of services under
the Sale and Marketing Agreement between the registrant and Superior Bank dated
as of April 28, 1995, as amended.

     8. As of April 15, 1998, the registrant issued a warrant to purchase 36,000
shares of common stock with an exercise price of $11.50 per share to FMN
Associates Limited Partnership in consideration for the settlement of a dispute.

     9. As of April 15, 1998, the registrant issued warrants to purchase 21,000
shares of common stock with an exercise price of $7.50 per share and 44,000
shares of common stock to an accredited, institutional investor, Raymond James &
Associates, Inc., in settlement of a dispute regarding services as a placement
agent in connection with the sale of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock.

     10. As of April 1, 1998, the registrant issued a warrant to purchase 9,800
shares of Series D Preferred Stock with an exercise price of $11.50 per share to
an accredited, institutional investor, Dominion Fund III, as consideration for
the establishment of an equipment lease line of credit with an affiliate of
Dominion Fund III. As of November 20, 1998, the registrant issued a warrant to
purchase 8,850 shares of Series D Preferred Stock with an exercise price of
$11.50 per share to Dominion Capital Management, LLC, an affiliate of the
lessor, for an aggregate price of $672.60 in connection with an increase of
$925,000 in the equipment lease line of credit.

     11. Between May 29, 1998 and August 31, 1998, the registrant issued
1,273,898 shares of Series D Preferred Stock to sixteen investors in exchange
for the retirement of $200,000 in face amount of 12% Senior Subordinated Notes
due January 31, 2003 and $14,900,000 in cash. The purchases and sales were
exempt pursuant to Rule 506 and Regulation D as transactions by an issuer not
involving a public offering, where the purchasers represented their intention to
acquire the securities for investment only, not with a view to distribution, and
received or had access to adequate information about the registrant.

     12. As of January 1, 1999, the registrant issued 20,000 shares of common
stock to Credit.Com, LLC as partial consideration for the acquisition of the
domain name "www.mortgage.com".

     13. As of February 9, 1999, the registrant issued an aggregate amount of
$2,000,000 of 12% Senior Subordinated Notes due February 9, 2000 and warrants to
purchase 6,668 shares common stock with an adjustable exercise price (initially
$30 per share) to eight accredited, institutional investors. The purchases and
sales were exempt pursuant to Rule 506 and Regulation D as transactions by an
issuer not involving a public offering, where the purchasers were accredited
investors, represented their intention to acquire the securities for investment
only, not with a view to distribution, and received or had access to adequate
information about the registrant.

     14. As of February 26, 1999, the registrant issued an aggregate amount of
$8,000,000 of 12% Senior Subordinated Notes due February 26, 2001 and warrants
to purchase 53,334 shares of common stock with an adjustable exercise price
(initially $30 per share) to seven accredited, institutional investors. The
purchases and sales were exempt pursuant to Rule 506 and Regulation D as
transactions by an issuer not involving a public offering, where the purchasers
were accredited investors, represented their intention to acquire the securities
for investment only, not with a view to distribution, and received or had access
to adequate information about the registrant.

     15. As of April 5, 1999, the registrant issued an aggregate amount of
$3,000,000 of 12% Senior Subordinated Notes due April 5, 1999 and a warrant to
purchase 20,004 shares of common stock with an adjustable exercise price
(initially $30 per share) to an accredited, institutional investor, TeleBanc
Capital Markets, Inc. The purchase and sale was exempt pursuant to Rule 506 and
Regulation D as a transaction by an issuer not involving a public offering,
where the purchaser was an accredited investor, represented its intention to
acquire the securities for investment only, not with a view to distribution, and
received or had access to adequate information about the registrant.

     16. As of April 15, 1999, the registrant issued warrants to purchase an
aggregate of 4,000 shares of common stock with an exercise price equal to the
initial public offering price of the common stock in consideration for the
waiver by First Capital Corporation of Los Angeles and Mortgage Loan
Specialists, Inc. of their respective conversion rights pursuant to Technology
Member Correspondent Agreements dated as of November 1, 1998.

                                      II-3
<PAGE>
     17. As of April 30, 1999, the registrant issued 6,667 shares of common
stock to Harris Friedman in conversion of a 12% Convertible Subordinated
Debenture with a principal amount of $100,000 due May 1, 1999.

     18. As of May 6, 1999, the registrant issued $27,500,000 in face amount of
12% Senior Subordinated Convertible Debentures, due May 6, 2001, convertible in
certain circumstances to common stock or Series E Preferred Stock, to an
accredited, institutional investor, Intuit Inc. The purchase and sale was exempt
pursuant to Rule 506 and Regulation D as a transaction by an issuer not
involving a public offering, where the purchaser was an accredited investor,
represented its intention to acquire the securities for investment only, not
with a view to distribution, and received or had access to adequate information
about the registrant.

     19. As of May 28, 1999, the registrant issued 250,001 shares of its
Series F Preferred Stock to three accredited institutional investors, consisting
of affiliates of Dominion Fund III, Canaan Equity, L.P. and Technology Crossover
Ventures, for aggregate consideration of $15,000,000. The purchases and sales
were exempt pursuant to Rule 506 and Regulation D as transactions by an issuer
not involving a public offering, where the purchasers were accredited investors,
represented their intention to acquire the securities for investment only, not
with a view to distribution, and received or had access to adequate information
about the registrant.

     20. Since May 1996, the registrant granted stock options to purchase
1,766,583 shares of common stock with exercise prices ranging from $5.50 to
$60.00 per share, to employees, directors, and consultants pursuant to the
registrant's employee stock option plan. As of May 1, 1997, the Registrant also
granted an option outside of the plan to an employee for 6,000 shares of common
stock with an exercise price of $5.50 per share as part of a severance
arrangement. Of these options, 625 have been exercised for an aggregate
consideration of $4,678.50. The issuance of common stock upon exercise of the
options was exempt either pursuant to Rule 701, as a transaction pursuant to a
compensatory benefit plan, or pursuant to Section 4(2) as a transaction by an
issuer not involving a public offering.

     No underwriters were employed in any of the above transactions. Appropriate
legends were affixed to the share certificates and warrants issued in the
transactions.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS.

<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER     DESCRIPTION
----------   --------------------------------------------------------------------------------------------------------
<S>          <C>
    1.1*      --   Form of Underwriting Agreement
    3.1*      --   Fourth Amended and Restated Articles of Incorporation
                   (a) Form of Amendment to Fourth Amended and Restated Articles of Incorporation
    3.2       --   Amended and Restated Bylaws
    4.1       --   $27,500,000 Note Purchase Agreement dated as of May 5, 1999
    4.2       --   $8,000,000 Note Purchase Agreement dated as of February 26, 1999
    4.3       --   $3,000,000 Note Purchase Agreement dated as of April 19, 1999
    4.4       --   Registration Rights Agreement dated March 15, 1996, between the Registrant and Mason-McDuffie Real
                   Estate, Inc.
    4.5       --   Registration Rights Agreement dated May 1, 1996, between the Registrant and Raymond James &
                   Associates, Inc.
    4.6       --   Registration Rights Agreement dated as of January 1, 1998, between the Registrant and Credit.com,
                   LLC
</TABLE>

                                      II-4
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER     DESCRIPTION
----------   --------------------------------------------------------------------------------------------------------
<S>          <C>
    4.7       --   Series B Preferred Stock Purchase Agreement dated as of March 29, 1996 among the Registrant,
                   purchasers of the Series B Preferred Stock, Purchasers of the Series C Preferred Stock, Purchasers
                   of the Series D Preferred Stock, Andrew Heller, Kyle Meyer, John T. Rodgers, TeleBanc Capital
                   Markets, Inc. and Dominion Fund IV, L.P.
                   (a) First Amendment to Series B Purchase Agreement
                   (b) Second Amendment to Series B Purchase Agreement
                   (c) Third Amendment to Series B Purchase Agreement
                   (d) Fourth Amendment to Series B Purchase Agreement
                   (e) Fifth Amendment to Series B Purchase Agreement
                   (f) Sixth Amendment to Series B Purchase Agreement
                   (g) Seventh Amendment to Series B Purchase Agreement
    4.8*      --   Specimen certificate for shares of the Registrant's common stock.
    5.1*      --   Legal Opinion of Foley & Lardner as to legality of securities
   10.1*      --   Employment Agreement between the Registrant and Seth S. Werner dated
   10.2*      --   Employment Agreement between the Registrant and John J. Hogan dated
   10.3*      --   Amended and Restated Employment Agreement between the Registrant and David Larson dated
   10.4*      --   Letter re Employment of John T. Rodgers dated May 21, 1999
                   (a) Noncompetition Agreement between the Registrant and John T. Rodgers
   10.5*      --   Noncompetition Agreement between the Registrant and John Buscema
   10.6       --   Purchase and Sale Agreement dated April 7, 1995 among the Registrant, Morbank Financial Systems,
                   Inc., Globe Mortgage Company, John Buscema, and Financial Resources Group (a) Waiver of Rights to
                   Software
   10.7       --   Amended and Restated Stock Option Plan (as of March 24, 1999)
   10.8       --   Form of Stock Option Agreements under Employee Stock Option Plan
                   (a) Mortgage.com, Inc. (f/k/a First Mortgage Network, Inc.) Non-Qualified Stock Option Agreement
                   (b) Mortgage.com, Inc. (f/k/a First Mortgage Network, Inc.) Non-Qualified Stock Option Agreement
                   (For Employees of Network Members)
                   (c) Mortgage.com, Inc. (f/k/a First Mortgage Network, Inc.) Incentive Stock Option Agreement
                   (d) Mortgage.com, Inc. Non-Qualified Stock Option Agreement (Revised April 26, 1999)
                   (e) Mortgage.com, Inc. Non-Qualified Stock Option Agreement (For Employees of Network Members
                   Revised April 26, 1999)
                   (f) Mortgage.com, Inc. Incentive Stock Option Agreement (Revised April 26, 1999)
   10.9       --   Superior Bank Warrant Repurchase Agreement between Registrant and Superior Bank, FSB dated May 4,
                   1999
   10.10      --   Agreement between Registrant and Superior Bank, FSB dated as of April 1, 1998
   10.11      --   Common Stock Warrant dated April 1, 1998 to Superior Bank, FSB to purchase 300,000 shares of
                   Common Stock at $5.00 per share
   10.12      --   Common Stock Warrant dated April 1, 1998 to Superior Bank, FSB to purchase 100,000 shares of
                   Common Stock at $7.50 per share
   10.13+     --   Amended and Restated Desktop Underwriter Seller/Servicer Software License and Subscription
                   Agreement between Registrant and Fannie Mae executed October 15, 1998
   10.14+     --   Distribution, Marketing, Facilities and Service Agreement between Registrant and Intuit Lender
                   Services, Inc. dated as of May 31, 1998, as amended
   10.15      --   Mortgage Loan Processing Agreement between the Registrant and Atlanta Internet Bank, FSB dated as
                   of April 1, 1998
</TABLE>

                                      II-5
<PAGE>
<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER     DESCRIPTION
----------   --------------------------------------------------------------------------------------------------------
<S>          <C>
   10.16      --   Atlanta Internet Bank Mortgage Center Mortgage Loan Origination, Processing, Purchase and Sale
                   Agreement between Registrant and Atlanta Internet Bank, FSB dated as of April 1, 1998
   10.17+     --   License, Staffing, Purchase and Sale Agreement between Registrant and Atlanta Internet Bank, FSB
                   dated as of April 1, 1998
   10.18      --   Letter Agreement dated May 20, 1999, between the Registrant and NetBank
   10.19      --   $2,000,000 Note Purchase Agreement dated as of February 9, 1999
   10.20      --   Form of Common Stock Warrant dated August 31, 1997 with an exercise price of $7.50 per share
                   (50,000 shares)
   10.21      --   Form of Common Stock Warrant dated January 30, 1998 with an exercise price of $7.50 per share
                   (66,667 shares)
   10.22      --   Form of Warrant dated February 9, 1999 with an exercise price of $30.00 per share (6,668 shares)
   10.23      --   Form of Warrant dated February 26, 1999 with an exercise price of $30.00 per share
                   (53,334 shares)
   10.24      --   Form of Warrant dated April 19, 1999 with an exercise price of $30.00 per share (20,004 shares)
   10.25+     --   Warehousing Credit and Security Agreement (Single-Family Mortgage Loans) between Registrant and
                   Bank United dated as of July 1, 1998
   10.26+     --   First Amended and Restated Warehousing Credit and Security Agreement (Single Family Mortgage
                   Loans) between Registrant and Residential Funding Corporation dated as of June 8, 1998
                   (a) First Amendment to First Amended and Restated Warehousing Credit and Security Agreement
                   (Single Family Mortgage Loans)
                   (b) Second Amendment to First Amended and Restated Warehousing Credit and Security Agreement
                   (Single Family Mortgage Loans)
                   (c) Third Amendment to First Amended and Restated Warehousing Credit and Security Agreement
                   (Single Family Mortgage Loans)
                   (d) Fourth Amendment to First Amended and Restated Warehousing Credit and Security Agreement
                   (Single Family Mortgage Loans)
   10.27      --   Master Lease Agreement between Dominion Ventures, Inc. and Registrant dated as of April 1, 1998
   10.28+     --   $25,000,000 Warehouse Credit Agreement among Registrant, Cooper River Funding, Inc. and GE Capital
                   Mortgage Services, Inc. dated as of August 7, 1998
   10.29      --   Amended and Restated Operating Agreement for the Northern California Division dated as of July 1,
                   1998, between the Registrant and Mason-McDuffie Real Estate, Inc.
   10.30      --   Domain Name Assignment Agreement dated as of January 1, 1999, between the Registrant and
                   Credit.com, LLC
   10.31+     --   Intuit Lender Services, Inc. Subprime Agreement for Distribution, Marketing, Facilities and
                   Services dated as of May 26, 1999, between the Registrant and Intuit Lender Services, Inc.
   10.32      --   Form of Director Indemnification Agreement dated as of April 15, 1999
   10.33      --   Form of Director/Officer Indemnification Agreement dated as of April 15, 1999
   10.34      --   Form of Officer Indemnification Agreement dated as of April 15, 1999
   21.1       --   List of Subsidiaries
   23.1       --   Consent of KPMG LLP
   23.2       --   Consent of Foley & Lardner (included in Exhibit 5.1)
   24.1       --   Power of Attorney (included on signature page hereto)
   27.1       --   Financial Data Schedule (for SEC use only)
</TABLE>

                                                        (Footnotes on next page)

                                      II-6
<PAGE>

<TABLE>
<CAPTION>
 EXHIBIT
  NUMBER     DESCRIPTION
----------   --------------------------------------------------------------------------------------------------------
<S>          <C>
</TABLE>

(Footnotes from previous page)

------------------
* To be filed by amendment
+ Confidential treatment requested


(B) FINANCIAL STATEMENT SCHEDULES.

     All schedules for which provision is made in the applicable accounting
regulations of the Securites and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

ITEM 17. UNDERTAKINGS.

     The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

     The undersigned registrant hereby undertakes that:

          (1) For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this registration statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
     or (4) or 497(h) under the Securities Act shall be deemed to be part of
     this registration statement as of the time it was declared effective.

          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

                                      II-7
<PAGE>
                                   SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PLANTATION,
STATE OF FLORIDA, ON MAY 28, 1999.

                                          MORTGAGE.COM, INC.

                                          By:     /s/ SETH S. WERNER
                                              ----------------------------------
                                                       Seth S. Werner
                                               Chairman, President and Chief
                                                    Executive Officer

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS BELOW
CONSTITUTES AND APPOINTS SETH S. WERNER, JOHN HOGAN AND EDWIN JOHNSON, AND EACH
OF THEM INDIVIDUALLY, AS HIS OR HER TRUE AND LAWFUL ATTORNEYS-IN-FACT AND
AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM OR HER AND
IN HIS OR HER NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT AND ANY RULE 462(B) REGISTRATION STATEMENT AND TO FILE THE SAME, WITH
ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN CONNECTION THEREWITH,
AS FULLY TO ALL INTENTS AND PURPOSES AS HE OR SHE MIGHT OR COULD DO IN PERSON,
HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR
ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE
TO BE DONE BY VIRTUE HEREOF.

<TABLE>
<CAPTION>
                SIGNATURE                                      TITLE                             DATE
------------------------------------------  -------------------------------------------   -------------------

<C>                                         <S>                                           <C>
            /s/ SETH S. WERNER              Chairman of the Board, President and Chief           May 28, 1999
------------------------------------------  Executive Officer
              Seth S. Werner

              /s/ JOHN HOGAN                Executive Vice President and Director                May 28, 1999
------------------------------------------
                John Hogan

           /s/ DAVID W. LARSON              Executive Vice President and Director                May 28, 1999
------------------------------------------
             David W. Larson

          /s/ GEORGE A. NADDAFF             Vice-Chairman of the Board                           May 28, 1999
------------------------------------------
            George A. Naddaff

            /s/ EDWIN JOHNSON               Senior Vice President, Chief Financial               May 28, 1999
------------------------------------------  Officer and Chief Accounting Officer
              Edwin Johnson

            /s/ STEPHEN GREEN               Director                                             May 28, 1999
------------------------------------------
              Stephen Green

            /s/ MICHAEL K. LEE              Director                                             May 28, 1999
------------------------------------------
              Michael K. Lee
</TABLE>

                                      II-8
[{"type": "S-1", "sequence": "1", "description": "INITIAL REGISTRATION STATEMENT", "secsgml_size_bytes": 486663}]
{"company-data": {"conformed-name": "MORTGAGE COM INC", "cik": "0001081182", "assigned-sic": "", "irs-number": "650435281", "state-of-incorporation": "FL", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-79757", "film-number": "99638820"}, "business-address": {"street1": "8751 BROWARD BLVD", "city": "PLANTATION", "state": "FL", "zip": "33324", "phone": "9544520000"}, "mail-address": {"street1": "8751 BROWARD BLVD.", "street2": "5TH FLOOR", "city": "PLANTATION", "state": "FL", "zip": "33324"}}
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 1, 1999

                                                      REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
                               MORTGAGE.COM, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA                                     6162                                   65-0435281
    (STATE OR OTHER JURISDICTION OF             (PRIMARY STANDARD INDUSTRIAL          (I.R.S. EMPLOYER IDENTIFICATION NO.)
     INCORPORATION OR ORGANIZATION)             CLASSIFICATION CODE NUMBER)
------------------------

                               MORTGAGE.COM, INC.
                      8751 BROWARD BOULEVARD, FIFTH FLOOR
                           PLANTATION, FLORIDA 33324
                                 (954) 452-0000
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------

                                 SETH S. WERNER
                            CHIEF EXECUTIVE OFFICER
                               MORTGAGE.COM, INC.
                      8751 BROWARD BOULEVARD, FIFTH FLOOR
                           PLANTATION, FLORIDA 33324
                                 (954) 452-0000
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
                            ------------------------

                                   Copies to:
LUTHER F. SADLER, JR., ESQ.                    JOHN M. HESSION, ESQ.                       MICHAEL BRENNER, ESQ.
        JEFFREY M. MCFARLAND, ESQ.                    JOHN M. MUTKOSKI, ESQ.                     CHAN BRYANT ABNEY, ESQ.
             FOLEY & LARDNER                     TESTA, HURWITZ & THIBEAULT, LLP                    MORTGAGE.COM, INC.
             200 LAURA STREET                            125 HIGH STREET                   8751 BROWARD BOULEVARD, FIFTH FLOOR
       JACKSONVILLE, FLORIDA 32202                       BOSTON, MA 02110                       PLANTATION, FLORIDA 33324
             (904) 359-2000                              (617) 248-7000                              (954) 452-0000
------------------------

     APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /        :

     If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /                      .

     If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /                      .

     If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /

                        CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF SECURITIES                  PROPOSED MAXIMUM                             AMOUNT OF
            TO BE REGISTERED                    AGGREGATE OFFERING PRICE(1)                     REGISTRATION FEE
Common Stock, $.01 par value............                $112,125,000                               $31,170.75
(1) In accordance with Rule 457(o) under the Securities Act of 1933, the number
    of shares of common stock being registered and the proposed maximum offering
    price per share are not included in this table. The proposed maximum
    aggregate offering price is estimated solely for the purpose of calculating
    the registration fee pursuant to Section 6(b) and Rule 457(o) of the
    Securities Act of 1933.

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

     The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.

                   SUBJECT TO COMPLETION, DATED JUNE 1, 1999

                                               SHARES

                                     [LOGO]

                                  COMMON STOCK

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

     Mortgage.com is selling shares of common stock. Prior to this offering,
there has been no public market for the common stock. The initial public
offering price is expected to be between $            and $          per share.
We have applied to list the common stock on The Nasdaq Stock Market's National
Market under the symbol "MDCM."

     Mortgage.com has granted the underwriters an option to purchase a maximum
of             additional shares of common stock to cover over-allotments of
shares.

  INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS" ON
                                    PAGE 5.
UNDERWRITING
                                          PRICE TO               DISCOUNTS AND              PROCEEDS TO
                                           PUBLIC                 COMMISSIONS               MORTGAGE.COM
Per Share.......................             $                         $                         $
Total...........................             $                         $                         $
Delivery of the shares of common stock will be made on or about
            , 1999.

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON

                                 BT ALEX. BROWN

                                                      U.S. BANCORP PIPER JAFFRAY

                       PROSPECTUS DATED            , 1999
[The graphic appearing here represents the process through which a mortgage
loan is originated, funded and closed with Mortgage.com.

     Beginning at the top of the picture, symbols represent the avenues through
which Mortgage.com receives applications. These applications flow through the
CLOser software system represented in the picture. Moving down the picture, a
series of boxes representing steps in the mortgage process and the associated
Mortgage.com service are represented]
TABLE OF CONTENTS
Page
                                                                                                              ----
PROSPECTUS SUMMARY.........................................................................................      3
RISK FACTORS...............................................................................................      6
USE OF PROCEEDS............................................................................................     15
DIVIDEND POLICY............................................................................................     15
CAPITALIZATION.............................................................................................     16
DILUTION...................................................................................................     17
SELECTED CONSOLIDATED FINANCIAL DATA.......................................................................     18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS......................     19
BUSINESS...................................................................................................     31
MANAGEMENT.................................................................................................     48
CERTAIN TRANSACTIONS.......................................................................................     55
PRINCIPAL STOCKHOLDERS.....................................................................................     57
DESCRIPTION OF CAPITAL STOCK...............................................................................     59
SHARES ELIGIBLE FOR FUTURE SALE............................................................................     64
UNDERWRITING...............................................................................................     66
NOTICE TO CANADIAN RESIDENTS...............................................................................     68
LEGAL MATTERS..............................................................................................     69
EXPERTS....................................................................................................     69
ADDITIONAL INFORMATION.....................................................................................     69
INDEX TO FINANCIAL STATEMENTS..............................................................................    F-1
------------------------

     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

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

     Until             , 1999 (25 days after the commencement of this offering),
all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This is
in addition to the obligation of dealers to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.

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

     We have obtained federal registration of the trademark "CLOser."
"Mortgage.com" and the Mortgage.com logo, "Openclose" and "SmartQuote" are our
trademarks and service marks. Other trademarks and service marks appearing in
this prospectus are the property of their respective holders.

                                       2
PROSPECTUS SUMMARY

     This summary highlights information that we present more fully in the rest
of this prospectus. The summary is not complete and does not contain all the
information you should consider before buying shares of common stock. You should
read the entire prospectus carefully. Except where we state otherwise, all
information in this prospectus assumes (1) the conversion of the outstanding
convertible note and all shares of convertible preferred stock (other than
Special Preferred Stock (Northern California Division)), into an aggregate of
3,906,407 shares of common stock upon the closing of this offering, (2) a waiver
of Credit.com's right to convert receivables into shares of our common stock and
(3) no exercise of the underwriters' over-allotment option. Of the 1,000
outstanding shares of Special Preferred Stock (Northern California Division),
660 shares will convert, upon closing of this offering, to the number of shares
of common stock as is obtained by dividing $2,640,000 by the initial public
offering price.

                                  MORTGAGE.COM

     Mortgage.com is a leading provider of online mortgage services to consumers
and businesses. We have developed state-of-the-art technology called CLOser that
leverages the Internet to offer origination, processing, underwriting, closing
and secondary marketing of mortgage loans. We offer these mortgage services
directly to consumers at our www.mortgage.com Web site and retail locations. We
also use our technology to provide online mortgage services to our
business-to-business clients, including mortgage brokers, mortgage banks,
financial institutions, Realtors and homebuilders. Through this multifaceted
strategy, we aspire to "touch every mortgage."

     According to the Mortgage Banker's Association, approximately $1.5 trillion
in mortgage loans were originated in 1998. Despite its lengthy history and
numerous refinements, the mortgage purchasing process remains arduous for most
borrowers. Many borrowers are dissatisfied with the complexity and inefficiency
of the borrowing process, time delays related to the manual collection and
transfer of information, and the inability to monitor the status of loans. Even
though these are the types of bottlenecks that the Internet is expected to
alleviate, Forrester Research reported that less than 1% of mortgages funded in
1998 were originated online. We believe that this is mainly because traditional
mortgage industry participants lack technological capabilities and, until very
recently, both borrowers and lenders have been reluctant to embrace new online
customer contact channels. In light of the recent development of online mortgage
services, Forrester Research expects that by 2003, online mortgage loan volume
will grow to nearly 10% of all mortgage loans funded, exceeding $91 billion.

     At Mortgage.com, we offer borrowers a more satisfying and efficient
mortgage purchasing experience, both directly and through our more than 50
business-to-business clients, including Intuit Lender Services, GE Capital
Mortgage Services and Fleet Mortgage. Borrowers can select from a wide range of
loan products at our Web site, www.mortgage.com, at our branch
office facilities and through our mortgage professionals at locations where
homes are purchased. Borrowers can also visit any of our 22 private label or
co-branded client Web sites to satisfy their mortgage needs.

     Our mortgage financing services provide borrowers with widespread benefits,
including:

     o Convenient access to the mortgage lending process--through the Internet,
       by e-mail, by telephone, or at the locations where homes are sold;

     o Interactive selection from a comprehensive suite of mortgage products and
       services;

     o Personalized services and products tailored to individual needs;

     o Faster applications and pre-qualifications;

     o Immediate interest rate lock; and

     o Constant monitoring of loan status.

     For the year ended 1998, we originated and closed $2.0 billion of mortgage
loans, of which approximately 21% were originated online. For the three months
ended March 31,1999, we originated and closed $751.6 million of mortgage loans,
of which approximately 39% were originated online.

     We are located at www.mortgage.com, our address is 8751 Broward Boulevard,
Plantation, FL 33324 and our telephone number is (954) 452-0000. We were
incorporated in Florida in 1993 as First Mortgage Network, Incorporated,
commenced operations in April 1994 and changed our name to Mortgage.com, Inc. in
January 1999.

                                       3
RECENT FINANCINGS

     In May 1999 we issued a 12% Senior Subordinated Convertible Note in the
principal amount of $27.5 million to Intuit, which is convertible at Intuit's
election into common stock. Also in May 1999, we completed a private placement
of $15.0 million of preferred stock.

                                  THE OFFERING
Common stock offered.............................................................   shares
Common stock to be outstanding after the offering................................   shares
Use of proceeds..................................................................   For working capital and other
                                                                                    general corporate purposes.
Proposed Nasdaq National Market symbol...........................................   MDCM
These share numbers are based on shares outstanding on May 28, 1999. The
share numbers exclude:

     o 1,808,888 shares of common stock issuable upon exercise of options
       outstanding under our stock option plan, 538,582 of which are exercisable
       at a weighted average exercise price of $6.80;

     o 1,190,487 shares authorized but unissued under our stock option plan; and

     o 1,165,123 shares of common stock issuable upon exercise of options and
       warrants outstanding outside of our stock option plan, 1,081,107 of which
       are exercisable at a weighted average exercise price of $6.57 per share.
       Of the options and warrants outstanding, warrants to purchase 80,841
       shares of common stock become exercisable upon closing this offering at
       the initial public offering price, although the number of shares
       purchasable under those warrants may be reduced through a formula based
       upon the initial public offering price.

                                       4
SUMMARY FINANCIAL DATA
                     (In thousands, except per share data)

     Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of the convertible note issued to Intuit in
May 1999 and all outstanding preferred stock (including shares of preferred
stock issued in May 1999) into common stock (other than Special Preferred Stock
(Northern California Division)), as if the shares had converted immediately upon
their issuance, but does not assume undeclared cumulative dividends on preferred
stock. Net loss attributable to common shareholders includes undeclared
cumulative dividends on preferred stock and is not included in the calculation
of pro forma basic and diluted net loss per share.
THREE MONTHS
                                                                                                              ENDED
                                                                          YEAR ENDED DECEMBER 31,          MARCH 31,
                                                                       -----------------------------    -----------------
                                                                        1996       1997       1998       1998      1999
                                                                       -------    -------    -------    ------    -------
                                                                                                           (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
  Total revenue.....................................................   $ 7,516    $16,474    $35,691   $ 6,819    $13,216
  Total expenses....................................................    11,534     20,006     41,768     7,189     16,414
  Net loss..........................................................    (4,018)    (3,532)    (6,078)     (370)    (3,199)
  Net loss attributable to common shareholders......................    (4,434)    (4,485)    (8,943)     (691)    (4,130)
  Basic and diluted net loss per share..............................     (3.92)     (3.85)     (7.17)    (0.63)     (3.05)
  Shares used in computation of basic and diluted net loss per
    share...........................................................     1,132      1,166      1,247     1,099      1,356
  Unaudited proforma net loss attributable to
    common shareholders.............................................                         $(6,829)             $(3,377)
  Unaudited pro forma basic and diluted net loss per share..........                         $ (1.33)             $ (0.64)
  Shares used in computation of unaudited pro forma basic and
    diluted net loss per share......................................                           5,153                5,262
The pro forma as adjusted balance sheet data as of March 31, 1999 gives
effect to the conversion of the convertible note issued to Intuit in May 1999
and all outstanding preferred stock (including shares of preferred stock issued
in May 1999) into common stock (other than Special Preferred Stock (Northern
California Division)) and has been adjusted to give effect to the sale of
           shares of common stock offered hereby at an assumed initial public
offering price of $           per share (the mid-point of the range) after
deducting underwriting discounts and commissions and estimated offering
expenses.
MARCH 31, 1999
                                                                            DECEMBER 31,        -----------------------
                                                                         -------------------                PRO FORMA
                                                                          1997        1998       ACTUAL     AS ADJUSTED
                                                                         -------    --------    --------    -----------
                                                                                                      (UNAUDITED)
BALANCE SHEET DATA:
  Cash and cash equivalents...........................................   $ 1,680    $  3,412    $  6,251
  Working capital (deficit)...........................................     1,353       2,204       6,142
  Total assets........................................................    81,927     193,438     188,805
  Total long-term debt, net of current portion........................         0           0       7,623
  Convertible preferred stock.........................................    11,823      26,473      26,473
  Stockholders' equity................................................     3,797      13,136      10,993
5
RISK FACTORS

     This offering involves a high degree of risk. You should carefully consider
the following risks relating to our business and our common stock, together with
the other information described elsewhere in this prospectus. If any of the
following risks actually occur, our business, results of operations and
financial condition could be materially affected, the trading price of our
common stock could decline, and you might lose all or part of your investment.

WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES AND WE MAY NOT BECOME
  PROFITABLE.

     We have incurred substantial net losses in every fiscal period since we
began operations. As of March 31, 1999, we had an accumulated deficit of
approximately $21.8 million. We incurred net losses of nearly $6.4 million for
the year ended December 31, 1998 and approximately $3.5 million for the three
months ended March 31, 1999. Net losses have increased for each fiscal year
since 1996 and this trend may continue. We may not become profitable. If we do
achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis. We expect to increase our research and
development, general and administrative, and marketing expenses. As a result, we
will need to generate significant additional revenues to achieve and maintain
profitability. Although we have experienced strong revenue growth in the last
several quarters, we anticipate further quarterly and annual losses for the
foreseeable future.

WE HAVE A LIMITED OPERATING HISTORY ON WHICH TO EVALUATE OUR PROSPECTS.

     We commenced operations in April 1994 and did not begin our
Internet-related business until the summer of 1997. Our Web site was not
identified as "www.mortgage.com" until January 1999. Accordingly, we have a
limited operating history on which you can base your evaluation of our business
and prospects. Our prospects are subject to the risks, expenses and
uncertainties frequently encountered by companies in the early stages of
development in new and evolving markets for online financial services. These
risks include:

     o our ability to develop further our unproven online business model;

     o our ability to further develop awareness and loyalty for our Mortgage.com
       brand;

     o our ability to maintain funding sources for mortgage loans;

     o our ability to attract and retain qualified personnel; and

     o our ability to anticipate and adapt to the changes in the evolving
       electronic commerce market.

     In addition, our Internet-related business has never operated during a
downturn in the mortgage market and we cannot assure you we will be successful
in such a market.

CHANGES IN INTEREST RATES CAN REDUCE OUR REVENUES.

     Changes in interest rates can have a variety of effects on our business,
including:

     We will originate and sell fewer mortgage loans if interest rates rise.  In
periods of rising interest rates, demand for mortgage loans typically declines.
During those periods we will likely originate and fund fewer mortgage loans,
which will adversely affect our revenues.

     Our net interest income is affected by fluctuations in intermediate-term
and short-term interest rates.  We earn net interest income or suffer net
interest losses from the time a mortgage loan is funded until it is delivered to
an investor in the secondary market. Whether we earn net interest income or
suffer net interest losses depends on the difference between the interest rates
on mortgage loans we fund and the interest rates on the money we borrow to fund
those mortgage loans.

     The interest rates on mortgage loans we fund are affected by
intermediate-term rates in the United States. The interest rates on the money we
borrow to fund mortgage loans are affected by short-term rates based on the
London Interbank Offered Rate (LIBOR). When intermediate-term interest rates in
the United States approach the LIBOR rate, our net interest income is reduced,
which decreases our revenues.

     Our gains and losses on sales of mortgage loans in the secondary market are
affected by rising interest rates.  Our ability to generate net gains on the
sale of loans in the secondary market

                                       6
may be adversely affected by increases in interest rates. We typically establish
interest rates on mortgage loans we originate at the same time we obtain
commitments from the anticipated purchasers of the loans. The mortgage loan
purchase commitments we obtain are contingent upon delivery of the loans to the
purchasers within specified periods. If we are unable to deliver closed loans on
time and interest rates increase, we may experience no gain, or even a loss, on
the sale of these loans. We currently do not use derivative financial
instruments to hedge these risks and are therefore exposed to losses caused by
rising interest rates. Management is currently evaluating hedging strategies.

FLUCTUATIONS MAY OCCUR IN OUR OPERATING RESULTS DUE TO SEASONALITY AND OTHER
  FACTORS, ANY OF WHICH MAY REDUCE THE PRICE OF OUR COMMON STOCK.

     Our revenue is subject to seasonal fluctuations. These trends reflect the
general pattern of home sales, which typically peak during the spring and fall
seasons and decline in the summer and winter.

     Our operating results may fluctuate significantly in the future as a result
of a variety of other factors, many of which are outside our control. These
factors include:

     o a decline in residential home buying that decreases the demand for
       purchase mortgage loans;

     o an increase in interest rates that decreases the demand for refinancing
       existing mortgage loans; and

     o the number of applications generated through our Web site and those sites
       we create and maintain for clients.

     Due to these factors, our operating results during any given period may
suffer, which could result in a reduction in the trading price of our common
stock.

WE MAY HAVE DIFFICULTY MANAGING OUR RAPID GROWTH.

     We have been experiencing a period of rapid growth that has been placing a
significant strain on our resources. We have maintained a significant online
presence only since April 1998. The number of our employees increased from 255
on December 31, 1997, to 594 on March 31, 1999. In addition, we recently hired a
new chief financial officer and other key members of management. To manage
future growth effectively, we must integrate these and other new personnel,
manage our expanded operations, invest in our technology infrastructure and
obtain additional space to house our operations. If we fail to manage our future
growth effectively, the quality of our services will be impaired and our
financial performance will suffer.

OUR ABILITY TO FUND MORTGAGE LOANS DEPENDS UPON THE AVAILABILITY OF FUNDING
  SOURCES.

     Our ability to fund mortgage loans depends to a large extent upon our
ability to secure financing on acceptable terms. We currently fund most of the
loans we originate through warehouse lines of credit or under collateralized
loan repurchase agreements. Several commercial banks and institutional investors
provide these funding sources. Most of these financing arrangements have
one-year terms and some are cancellable by the lenders at any time.

     If we are not successful in renewing our borrowings or in arranging new
financing with terms as favorable as the terms of our current financing
arrangements, we may have to curtail our origination and funding activities,
which would reduce our revenue.

     All of the financing arrangements we use to fund mortgage loans are subject
to financial covenants and other restrictions. Because we are an early stage
company that is actively investing in growth, we are at times in default under
those covenants and restrictions and rely on waivers from the various lenders.
If we are unable to operate within the covenants or obtain waivers, all amounts
that we owe under the financing arrangements could become immediately payable.
The loss of a financing arrangement with a lender, or the acceleration of our
debt, would have a significant negative effect on our business.

LOSS OF OUR RELATIONSHIP WITH INTUIT LENDER SERVICES WOULD ADVERSELY AFFECT OUR
  REVENUE.

     We believe a significant amount of our revenue will be generated through
our agreements with Intuit Lender Services, and the termination of one or more
of those agreements would adversely affect our revenue.

     The processing, underwriting and funding services we provide to
participating lenders on www.quickenmortgage.com are subject to performance
standards relating to the number of applications and inquiries we convert to
funded loans and the level of customer service we provide. We currently are not
meeting the performance standards which relate to converting applications and
inquiries to closed loans. If we continue to fail to meet these performance
standards, Intuit Lender Services may cancel the agreement. A cancellation of
the agreement would have a negative effect on our online loan originations and
our business as a whole.

WE FACE SIGNIFICANT COMPETITION FROM INTERNET COMPANIES AND MORTGAGE BANKING
  COMPANIES.

     Internet-Related Competition.  The market for Internet products and
services is highly competitive. There are no substantial barriers to entry in
these markets, and we expect that competition will continue to intensify.

     As we expand the scope of our Internet services, we will compete directly
with a greater number of Internet sites and other online providers

                                       7
of financial services who offer competitive products or services addressing
mortgage lending on the Internet. Increased competition in Internet mortgage
loan originations and services may reduce our access to borrowers and clients,
and thus reduce our revenues.

     Mortgage Banking Competition.  The mortgage banking business also is highly
competitive. We compete with other mortgage banking companies, commercial banks,
savings associations, credit unions, insurance companies and other financial
institutions in every aspect of our business. Many of these companies and
financial institutions are larger, more experienced and have greater financial
resources than we do. Consequently, they may be able to respond more quickly to
take advantage of new or changing opportunities, technologies and customer
requirements. They may also be able to undertake more extensive promotional
activities, offer more attractive terms to borrowers and adopt more aggressive
pricing policies. Accordingly, we may not be able to successfully compete with
these companies and financial institutions.

OUR BUSINESS IS DEPENDENT UPON THE AVAILABILITY OF AN ACTIVE SECONDARY MARKET.

     Our ability to sell mortgage loans to institutional investors in the
secondary market is largely dependent upon the continuation of programs
administered by Fannie Mae, Freddie Mac, Ginnie Mae and private mortgage
investors. These entities facilitate the sale of mortgage loans and
mortgage-backed securities through the secondary market. Any discontinuation or
reduction in the operation of those programs and any significant impairment of
our eligibility to participate in those programs would hurt our financial
performance. Also, any significant adverse change in the secondary market level
of activity or the underwriting criteria of Fannie Mae, Freddie Mac, Ginnie Mae
or other private mortgage investors would reduce our revenues.

THE LOSS OF OUR RELATIONSHIP WITH FANNIE MAE WOULD HAVE AN ADVERSE EFFECT ON OUR
  BUSINESS.

     We have an agreement with Fannie Mae that allows us to provide mortgage
brokers and mortgage bankers with use of Fannie Mae's Desktop Underwriter
software through www.openclose.com. If Fannie Mae terminates the agreement, our
plans for www.openclose.com would be interrupted, and possibly discontinued,
which could reduce our revenue.

USE OF OUR WEB SITES IS DEPENDENT ON THE CONTINUED GROWTH OF THE INTERNET.

     Our ability to originate mortgage loans on the Internet and provide clients
with Internet-based mortgage services is dependent upon continued growth in
Internet usage. Web-based mortgage lending is relatively new, and we cannot
predict whether there will be growth in mortgage loans generated on the
Internet.

     The Internet may not prove to be a viable commercial marketplace for a
number of reasons, including lack of acceptable security technologies,
inadequate development of the Internet infrastructure or slow or inadequate
development of performance improvements.

     Mortgage borrowers are accustomed to traditional means of obtaining
mortgage financing. For us to be successful, these borrowers must accept the use
of the Internet to conduct financial transactions and exchange information
online.

OUR BUSINESS MAY BE SIGNIFICANTLY AFFECTED BY THE ECONOMIES OF FLORIDA AND
  CALIFORNIA.

     Approximately 12.0% of our funded loan volume for the year ended
December 31, 1998 was derived from borrowers or properties in Florida and
approximately 67.2% was derived from borrowers or properties in California. From
January 1, 1999 through March 31, 1999, our funded loan volume from Florida
accounted for approximately 8.5% and our funded loan volume from California
accounted for approximately 57.0% of our total loan volume.

                                       8
Consequently, although we expect our mortgage loan business to have a greater
national scope in the future, our short-term results of operations and financial
condition will be negatively affected by poor economic conditions in Florida and
California, particularly in their residential real estate markets.

THE SUCCESS OF OUR BUSINESS DEPENDS UPON SYSTEM INTEGRITY.

     The performance of our Web site and the Web sites we maintain for our
clients is important to our reputation, our ability to attract customers and our
ability to achieve market acceptance of our services. Any system failure that
causes an interruption or an increase in response time of our services could
result in fewer loan applications through our Web sites and those we maintain
for clients. System failures, if prolonged, could reduce the attractiveness of
our services to borrowers and clients.

     Our operations are susceptible to outages due to fire, floods, power loss,
telecommunications failures, break-ins, and similar events. Our primary
Internet-related computer and communications hardware is currently located in
New Jersey. Although we plan to fully duplicate our New Jersey hardware in a
Florida plant, we currently do not have backup facilities in the event of any
widespread outages in New Jersey.

     In addition, despite our implementation of network security measures, our
servers are vulnerable to computer viruses, break-ins, and similar disruptions
from unauthorized tampering with our computer systems.

     We do not carry sufficient insurance to compensate for losses that may
occur as a result of any of these events.

WE FACE RISKS ASSOCIATED WITH GOVERNMENTAL REGULATION OF OUR MORTGAGE BANKING
  BUSINESS.

     Our mortgage banking business is subject to the rules and regulations of
various federal, state and local regulatory agencies in connection with
originating, processing, underwriting and selling mortgage loans. These rules
and regulations, among other things, impose licensing obligations on us,
prohibit discrimination, establish underwriting guidelines and mandate
disclosures and notices to borrowers. We also are required to comply with each
regulatory entity's financial requirements.

     Mortgage origination activities are subject to the provisions of various
federal and state statutes including the Equal Credit Opportunity Act, the
Federal Truth-in-Lending Act, the Fair Credit Reporting Act, Real Estate
Settlement Procedures Act and the Fair Housing Act. We also must comply with
state usury laws. Failure to comply with these laws can lead to civil and
criminal liability, loss of approved status, demands for indemnification or loan
repurchases from investors in the secondary market, class action lawsuits and
administrative enforcement actions.

     Regulatory and legal requirements are subject to change and may become more
restrictive, making our compliance more difficult or expensive or otherwise
restricting our ability to conduct our business as it is now conducted. Changes
in these regulatory and legal requirements could adversely impact our financial
performance.

     Many states prohibit non-employees of a licensed mortgage company from
conducting business under that licensed mortgage company's name. Many of our
clients hire us to provide back office functions, such as processing and
underwriting. Because providing these back office services is a relatively new
concept in the industry, most state regulations do not specifically address the
provision of back office services. As state regulators become more familiar with
these practices, it is possible that they may interpret current regulations or
enact new regulations to restrict our ability to perform these back office
services for our clients, either of which would adversely affect our financial
performance.

IF WE FAIL TO MAINTAIN MORTGAGE BANKING AUTHORITY IN THE STATES WHERE WE DO
  BUSINESS, WE MAY INCUR LIABILITY.

     We are authorized to originate first lien mortgage loans in 48 states and
the District of Columbia. If we fail to maintain our licensing approvals and
exemptions in those jurisdictions, we may incur liability and may be unable to
transact business in those jurisdictions.

     Although our license applications are pending, we currently are not
licensed to originate mortgage loans in New York or New Jersey in our own name.
Loan applications and inquiries we receive from New Jersey and New York are
originated through NetB@nk. NetB@nk can terminate our arrangement at any time.
If NetB@nk terminates the arrangement, we will not be able to originate and fund
mortgage loans in New York and New Jersey unless we develop a similar
arrangement

                                       9
with another mortgage lender or become licensed. For the year ended
December 31, 1998, approximately 2.6% of the mortgage loans we funded were from
New York and New Jersey. For the three months ended March 31, 1999,
approximately 5.2% of the mortgage loans we funded were from New York and New
Jersey.

     We have authority to originate subordinate lien mortgage loans in 44
states. In those states in which we do not have authority, or in which our
authority is limited, we do not originate subordinate lien mortgage loans. If we
were to originate a subordinate lien mortgage loan in a state without authority
to do so, we might incur liability.

     To maintain our authority to originate mortgage loans, some states require
us to obtain prior approval before any change of control. Change of control is
generally defined as the acquisition by any person or entity of 10% or more of
our voting stock. A state's approval may be conditioned on the stockholder
meeting criteria based on personal and business information about the
stockholder. The stockholder also may be required to periodically file
information with the state.

     Because we will be a public company following this offering, we may not
have advance notice of a change of control occasioned by a stockholder's
purchase of our stock in the open market. We also will not be able to control
who purchases our voting stock in the open market. If any person holding 10% or
more of our stock fails to meet a state's criteria, or refuses to comply with
state regulatory requirements, we could lose our authority to originate mortgage
loans in that state, which could have an adverse effect on our business, results
of operations and financial condition.

WE FACE LEGAL UNCERTAINTIES ASSOCIATED WITH THE INTERNET AND ELECTRONIC
  COMMERCE.

     Our operations on the Internet are not currently subject to direct
regulation by any government agency in the United States beyond mortgage-related
regulations and regulations applicable to businesses generally.

     A number of legislative and regulatory proposals under consideration by
federal, state, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, including:

     o online content;

     o user privacy;

     o taxation;

     o access charges;

     o liability for third-party activities; and

     o jurisdiction.

     In addition, the applicability to the Internet of existing laws is
uncertain. The adoption of new laws or the application of existing laws may
decrease the use of the Internet, which would decrease the demand for our
services, increase our cost of doing business or otherwise have an adverse
effect on our business.

     The tax treatment of the Internet and electronic commerce is currently
unsettled. A number of proposals have been made that could impose taxes on the
sale of goods and services and certain other Internet activities. Recently, the
Internet Tax Information Act was signed into law placing a three-year moratorium
on new state and local taxes on Internet commerce. However, we cannot assure you
that future laws imposing taxes or other regulations would not substantially
impair the growth of our business and our financial condition.

     Certain local telephone carriers claim that the increasing popularity of
the Internet has burdened the existing telecommunications infrastructure and
that many areas with high Internet use are experiencing interruptions in
telephone service. These carriers have petitioned the Federal Communications
Commission to impose access fees on Internet service providers. If these access
fees are imposed, the costs of communicating on the Internet could increase,
which could decrease demand for our services and increase our cost of doing
business.

OUR SUCCESS DEPENDS ON OUR ABILITY TO ADAPT TO TECHNOLOGICAL CHANGES.

     The market for Internet products and services is characterized by rapid
technological developments, evolving industry standards, and frequent new
products and enhancements. If faster Internet access becomes more widely
available through cable modems or other technologies, we may be required to make
significant changes to the design and content of our Web site and the Web sites
we maintain for clients to compete effectively.

     As the number of Web pages and users increase, we will need to modify the
Internet infrastructure, our Web site and the Web sites we

                                       10
maintain for our clients to accommodate increased traffic. If we cannot modify
our computer systems, we may experience:

     o system disruptions;

     o slower response times;

     o impaired quality and speed of application processing; and

     o delays in reporting accurate interest rate information.

     If we fail to effectively adapt to increased usage of the Internet or new
technological developments, our business will be adversely affected.

OUR EFFORTS TO ENHANCE BRAND AWARENESS MAY BE UNSUCCESSFUL, WHICH WOULD AFFECT
  OUR FINANCIAL PERFORMANCE.

     We believe that establishing and maintaining the Mortgage.com brand name
and its reputation is an important aspect of our efforts to attract and expand
our technology services and mortgage lending business. We also believe that the
importance of brand recognition will increase due to the growing number of
Internet sites and the relatively low barriers to entry. If we fail to
adequately promote and maintain our brand name, our financial performance will
suffer.

     To maintain and enhance the Mortgage.com brand, we must provide
high-quality products and services, particularly on the Internet. If any breach
or alleged breach of security or privacy involving our online services occurs,
or if we are unable to otherwise successfully promote and maintain our brand,
our business will suffer.

     There are thousands of Internet Web site addresses, or "domain names,"
containing the word "mortgage," such as "1mortgage.com" and "1mortgage1.com,"
that have been registered to other users. To the extent consumers confuse other
Web sites with ours, our reputation could be harmed and our business could
suffer.

ONLINE SECURITY RISKS MAY HARM OUR BUSINESS OPERATIONS.

     A significant barrier to online commerce is the secure transmission of
confidential information over public networks. We rely on encryption and
authentication technology licensed from third parties to effect secure
transmission of confidential information, such as that required on a mortgage
loan application. Advances in computer capabilities, new discoveries in
cryptography, or other developments may result in a breach of the algorithms we
use to protect customer data. If any compromise of our security occurs, it would
injure our reputation, and could impact the success of our business.

WE RELY ON THE DEPENDABILITY OF SOFTWARE LICENSED TO US BY THIRD PARTIES.

     Our products and services rely on software licensed to us by third parties.
We believe there are other sources for most of the specialized software we
license and that we could replicate the functionality of this software. However,
because our products incorporate software developed and maintained by third
parties, and because we license from third parties certain industry standard
software products that cannot be replicated, we depend on those third parties
to:

     o deliver and support reliable products;

     o enhance their current products;

     o develop new products on a timely and cost-effective basis; and

     o respond to emerging industry standards and other technological changes.

     In addition, the third party software currently used in our products and
the delivery of our services may become obsolete or incompatible with the
products and services we offer in the future.

     If we have to replace third-party software for any of those reasons, our
business could suffer during the replacement period.

WE FACE RISKS THAT OUR INTELLECTUAL PROPERTY IS NOT ADEQUATELY PROTECTED AND
  THAT WE MAY BE SUBJECT TO CLAIMS FROM THIRD PARTIES FOR INFRINGEMENT.

     Our copyrights, trademarks, trade dress, trade secrets, and similar
intellectual property are critical to our success. We have obtained federal
trademark registration for CLOser, and have registered the Web site domain names
we use, which prevents any other person from using those names for their Web
sites.

     Some of our trademarks and service marks, such as Mortgage.com, may be
considered too generic to qualify for federal trademark registration.
Accordingly, it is possible that neither we nor anyone else is entitled to the
exclusive use of those

                                       11
trade names. Other persons may use those trade names in a way that damages our
reputation or otherwise creates confusion in the market, all of which would
injure our financial performance if it took place on a large enough scale.

     Our success and ability to compete are substantially dependent upon our
internally developed technology, which we protect through a combination of
copyright, trade secret and trademark law. However, we have no patents issued or
applied for on our technology. Unauthorized parties may attempt to copy or to
otherwise obtain and use our services or technology and we cannot be certain
that the steps we have taken and will take in the future will prevent them from
misappropriating or infringing upon our technology. The costs associated with
enforcing our rights to technology could adversely affect our financial
performance.

     Mortgage-related Internet technologies are rapidly being developed. As a
result, we believe that disputes regarding the ownership of these technologies
are likely to arise in the future. Third parties may assert infringement claims
against us. We may incur substantial costs in defending against third-party
infringement claims regardless of the merit of those claims. We also cannot
guarantee that we would be able to license comparable technology if our use was
found to infringe on someone else's rights. If we were unable to license
comparable technology, our business could suffer.

WE MAY NOT BE ABLE TO HIRE AND RETAIN SUFFICIENT TECHNICAL AND SUPPORT PERSONNEL
  THAT WE NEED TO SUCCEED.

     Competition for qualified technical and support personnel is intense, and
we may not be able to hire and retain sufficient numbers of qualified technical
and support personnel. If we fail to hire and retain sufficient numbers of
technical and support personnel, our business and results of operations would be
adversely affected.

EARLY PAYMENT MORTGAGE LOAN DEFAULTS MAY CAUSE LOSSES.

     If borrowers default in the first few months after the loan is originated,
we may be required to repurchase those loans from the secondary market investors
to whom we sold those loans. We may not be able to resell those loans in the
secondary market. Our financial performance may be adversely affected during
economic downturns when the frequency of loan defaults tends to increase.

WE MAY BE REQUIRED TO REPURCHASE LOANS OR INDEMNIFY INVESTORS IF WE BREACH
  REPRESENTATIONS AND WARRANTIES.

     When we sell a mortgage loan to a secondary market investor, we make
representations and warranties about certain characteristics of the mortgage
loan, the borrower and the underlying property. If we breach any of these
representations and warranties, we may be required to repurchase the loan from
the investor or indemnify the investor for any damages caused by the breach.
With some loan sales, we may be required to return a portion of the premium paid
by the investor for the loan if the loan is prepaid within the first year after
its sale. If we are regularly required to repurchase loans, indemnify investors
or return loan premiums, it would have an adverse effect on our financial
performance. A delay in the receipt of services from third parties may adversely
affect our business.

     We rely on third party sources for certain information used in the mortgage
loan underwriting process, including credit reports, appraisals and title
searches. Any interruptions or delays in obtaining these services may cause
delays in our processing and closing of mortgage loans, which could create
customer dissatisfaction and adversely affect our business.

WE MAY BE AFFECTED BY UNEXPECTED YEAR 2000 PROBLEMS.

     Many existing computer systems and software products do not properly
recognize dates after December 31, 1999. This Year 2000 problem could result in
data corruption, system failures or disruptions of operations. We are subject to
potential Year 2000 problems affecting our products and services, our internal
systems, and the systems of third parties on whom we rely. We believe that the
technology underlying our products and services is Year 2000 compliant. However,
we may discover errors or defects in our internal systems that may be
unresolvable or that may result in material costs to us. Internal Year 2000
problems could negatively affect our business, operating results and financial
condition.

     We use third-party equipment, software and content that may not be Year
2000 compliant. Although we typically receive assurances from third parties that
they are Year 2000 compliant, we do

                                       12
not independently verify their Year 2000 compliance. If third parties on whom we
rely are not Year 2000 compliant, our business could be adversely affected.

     We have not yet fully developed a comprehensive contingency plan to address
situations that may result if we encounter Year 2000 problems. The cost of
developing and implementing a contingency plan may itself be material, and we
cannot assure you that our contingency plans will be adequate. For more
information on how we are addressing the Year 2000 problem, see "Management's
Discussion and Analysis--Year 2000 Readiness Disclosure Statement."

WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE AND ADDITIONAL FINANCING MAY NOT BE
  AVAILABLE.

     We currently anticipate that our available cash resources combined with the
net proceeds from this offering will be sufficient to meet our anticipated
working capital and capital expenditure requirements for at least the next 12
months. We may need to raise additional capital, however, to fund more rapid
expansion, to develop new and to enhance existing services to respond to
competitive pressures, and to acquire complementary business or technologies.

     We raised capital through the issuance of securities four times during 1998
and five times during 1999. If we raise additional funds through further
issuances of equity or convertible debt securities, the percentage ownership of
our current stockholders will be reduced and holders of those new securities may
have rights, preferences and privileges senior to those of our current
stockholders, including stockholders purchasing shares in this offering.

     In addition, we may not be able to obtain additional financing on terms
favorable to us, if at all. If adequate funds are not available or are not
available on terms favorable to us, our business, results of operations and
financial condition could be adversely affected.

YOU WILL BE SUBJECT TO MARKET RISKS TYPICALLY ASSOCIATED WITH INITIAL PUBLIC
  OFFERINGS.

     Prior to the offering, there has been no public market for our common
stock. After the offering, an active trading market may not develop or continue.
You will pay a price for the common stock that was not established in a
competitive market. Rather, you will pay a price that we negotiated with the
representatives of the underwriters. The price of the common stock that will
prevail in the market after the offering may be higher or lower than the price
you pay.

     The stock market in general has recently experienced extreme price and
volume fluctuations. The market prices of technology companies, particularly
Internet-related companies, have experienced fluctuations unrelated or
disproportionate to the operating performance of those companies. These broad
market fluctuations could adversely affect the market price of our common stock.

     Recently, when the market price of a stock has been volatile, holders of
that stock have often instituted securities class action litigation against the
company that issued the stock. If that were to happen to us, we could incur
substantial costs defending the lawsuit. The lawsuit also could divert the time
and attention of our management team. Both could have a negative impact on our
financial performance.

YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION UPON COMPLETION OF THIS PUBLIC
  OFFERING.

     The initial public offering price of our common stock is substantially
higher than the book value per outstanding share of common stock. Accordingly,
you will suffer an immediate and substantial dilution in net tangible book value
per share of the common stock from the initial public offering price in the
amount of $     per share (based upon an assumed initial offering price of
$     per share.) You will experience additional dilution upon exercise of
outstanding options and warrants.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.

     After this offering, we will have             shares of common stock
outstanding. Sales of a substantial number of shares of common stock in the
public market following this offering could adversely affect the market price of
our common stock. All the shares sold in this offering will be freely tradable.
The remaining shares of common

                                       13
stock outstanding after this offering will be available for sale in the public
market as follows:
DATE OF AVAILABILITY FOR SALE                SHARES
-----------------------------------------   ---------
Date of this prospectus..................           0
90 days after the date
  of this prospectus.....................         625
180 days or more after the date of this
  prospectus.............................   5,298,406
In addition, there are 1,808,888 shares of common stock issuable upon
exercise of options issued under our stock option plan, and there are
1,161,948 shares of common stock issuable upon exercise of exercisable options
and warrants otherwise outstanding.

WE WILL HAVE BROAD DISCRETION IN USING THE NET PROCEEDS OF THIS OFFERING.

     We expect to use the net proceeds from the sale of our common stock to
develop and market the brand name mortgage.com and for other corporate purposes.
We will have significant flexibility in applying the net proceeds of this
offering. You will not have the opportunity to evaluate the economic, financial
or other information on which we base our decisions on how to use the net
proceeds. If we fail to apply the net proceeds effectively, our business could
be negatively affected.

YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE UNCERTAIN.

     This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipate," "believe," "expect," "future,"
"plan" and "intend," and similar expressions, to identify forward-looking
statements. You should not place undue reliance on these forward-looking
statements. Our actual results could differ materially from those anticipated in
forward-looking statements for many reasons, including the risks described in
this section and elsewhere in this prospectus.

                                       14
USE OF PROCEEDS

     The proceeds we receive after deducting underwriting discounts, commissions
and estimated offering expenses from the sale of the common stock are estimated
to be approximately $          million (assuming an initial public offering
price of $            ). If the underwriters' over-allotment option is exercised
in full, we estimate our net proceeds will be approximately $             . The
primary purposes of this offering are to obtain additional capital, create a
public market for our common stock and facilitate future access to public
capital markets.

     We expect to use the net proceeds of this offering for corporate purposes,
including funding an advertising and promotional campaign to enhance awareness
of our Mortgage.com brand, technology research and development and expanding our
funding sources for mortgage loans. In addition, we expect to use approximately
$13 million of the net proceeds to redeem warrants to purchase 300,000 shares of
common stock held by Superior Bank, which we are required to redeem under an
agreement with Superior Bank. We expect to use $40.5 million of the net proceeds
to retire $13 million in 12% Senior Subordinated Notes issued in February and
April 1999 and a $27.5 million 12% Senior Subordinated Convertible Note issued
in May 1999. The holder of the Convertible Note may instead elect to convert the
principal amount into common stock at $60 per share. In addition, Credit.com has
the right to require us to redeem its 20,000 shares of common stock following
the offering at the initial public offering price per share.

     Other than as described above, we have no present plans or commitments and
are not currently engaged in any negotiations with respect to the use of the net
proceeds of this offering. Until the net proceeds are used, we will invest them
in short-term, investment grade securities or money market instruments.

                                DIVIDEND POLICY

     We have never declared or paid any cash dividends on our common stock. We
anticipate that any earnings will be retained for development and expansion of
our business and we do not anticipate paying any cash dividends in the
foreseeable future. Our board of directors has sole discretion to pay cash
dividends based on our financial condition, results of operation, capital
requirements, contractual obligations and other relevant factors. Our warehouse
lines of credit may also restrict our ability to pay dividends.

                                       15
CAPITALIZATION

     The following table sets forth our capitalization as of March 31, 1999,
(1) on an actual basis, (2) on a pro forma basis giving effect to the conversion
of the Convertible Note issued to Intuit in May 1999 and all outstanding shares
of preferred stock (including shares of preferred stock issued in May 1999) into
common stock, other than the Special Preferred Stock (Northern California
Division) and (3) on a pro forma as adjusted basis to reflect the sale of
            shares of common stock offered through this prospectus at an assumed
initial offering price of $             per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses. The
table does not include 2,999,375 shares of common stock reserved for issuance
under our stock option plan and does not include common stock reserved for
issuance upon exercise of options and warrants outstanding outside of our stock
option plan. The pro forma and pro forma as adjusted columns do not include
common stock issuable upon conversion of the Special Preferred Stock (Northern
California Division). Of the 1,000 outstanding shares of Special Preferred Stock
(Northern California Division), 660 shares will convert, upon closing of this
offering, to the number of shares of common stock as is obtained by dividing
$2,640,000 by the initial public offering price. All numbers are in thousands,
except share and per share data.
MARCH 31, 1999
                                                                               ------------------------------------
                                                                                                        PRO FORMA
                                                                                ACTUAL     PRO FORMA    AS ADJUSTED
                                                                               --------    ---------    -----------
                                                                                           (UNAUDITED)
Long-term obligations, net of current portion...............................   $  8,000    $  8,000
Notes payable, net of current portion.......................................        380         380
Stockholders equity (deficit):
  Common stock, $.01 par value: 30,000,000 shares authorized; 1,362,730
     shares issued and outstanding actual, 5,299,031 shares issued and
     outstanding pro forma and            shares issued and outstanding pro
     forma as adjusted......................................................         14          46
  Convertible preferred stock, $.01 par value: 15,000,000 shares authorized;
     3,199,073 issued and outstanding actual; 1,000 shares issued and
     outstanding pro forma and pro forma as adjusted........................         32           0
Unearned compensation.......................................................    (15,187)    (15,187)
Additional paid-in capital..................................................     47,403      47,403
Accumulated deficit.........................................................    (21,269)    (21,269)
                                                                               --------    ---------     ---------
Total stockholders' equity (deficit)........................................     10,993      10,993
                                                                               --------    ---------     ---------
Total capitalization........................................................   $ 19,373    $ 19,373
                                                                               --------    ---------     ---------
                                                                               --------    ---------     ---------
16
DILUTION

     If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering. We calculate net tangible book value per
share by calculating the total assets less intangible assets and total
liabilities, and dividing it by the number of outstanding shares of common
stock.

     After giving effect to the conversion of the convertible note issued in May
1999 and all shares of preferred stock (including shares of preferred stock
issued in May 1999) into common stock, other than the Special Preferred Stock
(Northern California Division), as though they occurred on March 31, 1999, the
net tangible book value of our common stock as of March 31, 1999 would have been
$47,934,471, or approximately $9.10 per share. After giving effect to the sale
of            shares of common stock at an assumed initial public offering price
of $          per share (less estimated underwriting discounts and commissions
and estimated expenses), our pro forma net tangible book value as of March 31,
1999 would have been $          , or $            per share. This represents an
immediate increase in the pro forma as adjusted net tangible book value of
$             per share to existing stockholders and an immediate dilution of
$          per share to you, as illustrated in the following table:
Assumed initial public offering price per share........................................            $
Pro forma net tangible book value per share at March 31, 1999..........................   $9.10
Increase per share attributable to new investors.......................................
                                                                                          -----
Pro forma net tangible book value per share after this offering........................
                                                                                                   -----
Dilution per share to new investors....................................................            $
                                                                                                   -----
                                                                                                   -----
The following table shows on a pro forma basis at March 31, 1999, the total
number of shares of common stock purchased, the total consideration paid to us
and the average price per share paid by existing stockholders and purchasers of
shares in this offering, assuming the conversion of the convertible note issued
in May 1999 and all shares of preferred stock (including shares of preferred
stock issued in May 1999) into common stock and assuming an initial public
offering price of $           per share:
SHARES PURCHASED       TOTAL CONSIDERATION
                                                       --------------------    ----------------------    AVERAGE PRICE
                                                        NUMBER      PERCENT      AMOUNT       PERCENT    PER SHARE
                                                       ---------    -------    -----------    -------    -------------
Existing stockholders...............................   5,269,137               $74,555,209                  $ 14.15
New investors.......................................
                                                       ---------      ---      -----------      ---
  Totals............................................                  100%                      100%
                                                       ---------      ---      -----------      ---
                                                       ---------      ---      -----------      ---
You will experience additional dilution upon exercise of outstanding
options and warrants. See "Stock Option Plan" and "Options and Warrants."

                                       17
SELECTED CONSOLIDATED FINANCIAL DATA

     The following selected financial data has been derived from our
consolidated financial statements. Our financial statements for the years ended
December 31, 1996, 1997 and 1998 have been audited by KPMG LLP, independent
auditors. Those financial statements and KPMG LLP's report on those financial
statements are included in this prospectus, and the information below for those
periods is qualified by reference to their report. The financial statements for
the periods ended March 31, 1995, December 31, 1995 and the three month periods
ended March 31, 1998 and 1999 are unaudited. The unaudited financial statements
have been prepared on the same basis as the audited financial statements. In the
opinion of management, all adjustments of a normal recurring nature which are
necessary to present a fair statement of the results for the interim periods
have been made. The unaudited results of operations for the interim periods are
not necessarily indicative of the results for the full year or any future
period. Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of the convertible note issued to Intuit in
May 1999 and all outstanding preferred stock (including shares of preferred
stock issued in May 1999) into common stock (other than Special Preferred Stock
(Northern California Division)), as if the shares had converted immediately upon
their issuance but does not assume undeclared cumulative dividends on preferred
stock. Net loss attributable to common shareholders includes undeclared
cumulative dividends on preferred stock, and is not included in the calculation
of pro forma basic and diluted net loss per share.
THREE
                                                                                                                     MONTHS
                                                                                                                     ENDED
                                                   APR. 15, 1994    NINE MONTHS                                      MARCH
                                                   (INCEPTION)        ENDED            YEAR ENDED DECEMBER 31,        31,
                                                    THROUGH          DEC. 31,       -----------------------------    ------
                                                   MAR. 31, 1995       1995          1996       1997       1998       1998
                                                   -------------    ------------    -------    -------    -------    ------
                                                                    (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                            (UNAUDITED)                                              (UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Revenue:
  Secondary marketing revenue, net..............      $    77         $    942      $ 4,101    $11,595    $28,598    $5,407
  Loan production and processing fees, net......          384              778          821      2,347      5,338       922
  Management, technical and other fees..........           40            1,422        2,577      2,032      1,868       546
  Net interest (expense) income.................          (17)             (92)          17        500       (113)      (56)
                                                      -------         --------      -------    -------    -------    ------
      Total revenue.............................          484            3,050        7,516     16,474     35,691     6,819
                                                      -------         --------      -------    -------    -------    ------
Expenses:
  Compensation and employee benefits............        1,515            2,542        6,527     13,083     26,075     4,928
  Marketing.....................................           33               36           95        238      1,335        85
  Research and development......................           --               --          497      1,079      2,888       433
  Depreciation and amortization.................          235              296          652        480      1,873       154
  General and administrative....................          919            1,470        3,764      5,126      9,597     1,589
                                                      -------         --------      -------    -------    -------    ------
      Total expenses............................        2,702            4,344       11,534     20,006     41,768     7,189
                                                      -------         --------      -------    -------    -------    ------
Net loss........................................      $(2,218)        $ (1,294)     $(4,018)   $(3,532)   $(6,078)   $ (370)
Net loss attributable to common shareholders....      $(2,218)        $ (1,294)     $(4,934)   $(4,485)   $(8,943)   $ (691)
                                                      -------         --------      -------    -------    -------    ------
Basic and diluted net loss per share............      $ (2.71)        $  (1.14)     $ (3.92)   $ (3.85)   $ (7.17)   $(0.63)
Shares used in computation of basic and diluted
  net loss per share............................          818            1,132        1,132      1,166      1,245     1,098
Unaudited pro forma basic and diluted net loss
  per share attributable to common
  shareholders..................................                                                          $ (1.37)
                                                                                                          -------
                                                                                                          -------
Shares used in computation of unaudited pro
  forma basic and diluted net loss per share....                                                            4,445
                                                                                                          -------
                                                                                                          -------
1999
                                                  -------
STATEMENT OF OPERATIONS DATA:
Revenue:
  Secondary marketing revenue, net..............  $ 8,600
  Loan production and processing fees, net......    2,598
  Management, technical and other fees..........    1,991
  Net interest (expense) income.................       26
                                                  -------
      Total revenue.............................   13,216
                                                  -------
Expenses:
  Compensation and employee benefits............    9,645
  Marketing.....................................    1,536
  Research and development......................      776
  Depreciation and amortization.................      698
  General and administrative....................    3,759
                                                  -------
      Total expenses............................   16,414
                                                  -------
Net loss........................................  $(3,199)
Net loss attributable to common shareholders....  $(4,130)
                                                  -------
Basic and diluted net loss per share............  $ (3.05)
Shares used in computation of basic and diluted
  net loss per share............................    1,356
Unaudited pro forma basic and diluted net loss
  per share attributable to common
  shareholders..................................  $ (0.70)
                                                  -------
                                                  -------
Shares used in computation of unaudited pro
  forma basic and diluted net loss per share....    4,554
                                                  -------
                                                  -------
The pro forma as adjusted balance sheet data as of March 31, 1999 reflects
the conversion of the convertible note issued to Intuit in May 1999 and all
outstanding preferred stock (including shares of preferred stock issued in May
1999), into common stock upon the closing of this offering (other than Special
Preferred Stock (Northern California Division)). The pro forma as adjusted
balance sheet data also has been adjusted to give effect to the sale of
            shares of common stock offered through this prospectus at an assumed
initial public offering price of $     per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses.
MARCH
                                                                                                                 31,
                                                                                      DECEMBER 31,              1999
                                                                  DEC. 31,    -----------------------------    -------
                                                MARCH 31, 1995      1995       1996       1997       1998      ACTUAL
                                                --------------    --------    -------    -------    -------    -------
                                                                (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                                       (UNAUDITED)                                             (UNAUDITED)
BALANCE SHEET DATA:
Cash and cash equivalents....................       $  541        $    222    $ 2,008    $ 1,680    $ 3,412    $ 6,251
Working capital..............................          213            (850)     2,283      1,353      2,240      6,142
Total assets.................................        3,253          11,684     30,711     81,927    193,438    188,805
Total long-term debt, net of current
  portion....................................           --              --          0          0          0      7,623
Convertible preferred stock..................        1,000           1,000      8,278     11,823     26,476     26,473
Stockholders' equity.........................          912             347      3,283      3,797     13,136     10,993
PRO FORMA
                                               AS ADJUSTED
                                               -----------
BALANCE SHEET DATA:
Cash and cash equivalents....................
Working capital..............................
Total assets.................................
Total long-term debt, net of current
  portion....................................
Convertible preferred stock..................
Stockholders' equity.........................
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     This prospectus includes "forward-looking" statements that reflect our
current views with respect to future events and financial performance. We use
words such as "anticipate," "believe," "expect," "future," "plan" and "intend,"
and similar expressions, to identify forward-looking statements. You should be
aware that actual results may differ materially from our expressed expectations
because of risks and uncertainties inherent in future events, particularly those
risks identified in the "Risk Factors" section of this prospectus, and you
should not unduly rely on these forward looking statements. We will not
necessarily update the information in this prospectus if any forward-looking
statement later turns out to be inaccurate.

OVERVIEW

     We are a provider of mortgage services to consumers and to other businesses
and a leading provider of such services on the Internet. We have developed
state-of-the-art technology to support the origination, processing,
underwriting, closing and secondary marketing of mortgage loans. We use this
technology as a platform to provide mortgage financing directly to borrowers and
to enable our clients, such as mortgage brokers, mortgage banks, Realtors and
homebuilders, to improve the efficiency and effectiveness of their operations.

     We commenced operations in April 1994 in Florida as First Mortgage Network,
a wholesale mortgage lender providing independent mortgage brokers with various
support services, including processing, closing and funding services for their
loans. In April 1995, we acquired a software system from Morbank Financial
Systems that was designed to automate mortgage origination, processing,
underwriting and closing functions in traditional mortgage lending operations.
We enhanced this software and named it CLOser, our proprietary technology
platform that supports all of the services we provide. By the end of 1995, we
were using the CLOser software system to enable financial institutions and
non-traditional mortgage originators, such as Realtors and homebuilders, to
originate mortgages as an ancillary service. These "network members" paid
monthly membership fees for the use of the CLOser software system and
transaction fees for our other services.

     In the summer of 1996, we expanded our membership network by acquiring
Western American Mortgage, the mortgage affiliate of Mason-McDuffie Real Estate,
a major real estate brokerage company in northern California. In June 1997, we
acquired OnLine Capital, a mortgage lender also located in northern California,
with more than 25 loan counselors at the point-of-sale of homes, three Realtor
business-to-business relationships and requisite back office personnel. We
deployed these acquired resources to support and expand our member business in
California.

     In the spring of 1998, we acquired American Finance and Investment (AFI), a
former subsidiary of Virginia First Savings Bank, and moved its operations to
Florida. AFI was one of the first companies to originate mortgages through the
Internet. We integrated this acquired Internet technology with our CLOser
software system, enabling us to establish various relationships with other
Internet-based businesses and to originate mortgage applications online on a
national basis. In January 1999, we acquired the URL www.mortgage.com and
changed our corporate name to Mortgage.com, Inc. We believe this name change
more accurately reflects our business of re-engineering the mortgage process
through technology such as the Internet.

     We currently provide origination, processing, underwriting, closing,
funding and post-closing services for mortgages originated directly with
borrowers. We originate mortgages directly with borrowers through
www.mortgage.com and several other Web sites or through point-of-sale loan
counselors stationed in the offices of our network members. We also provide one
or more of these services, or the technology to support these services, to other
mortgage industry participants. We enable these business clients to efficiently
conduct the mortgage process by providing them with co-branded mortgage
services, private label mortgage services, back office services and licenses of
our proprietary technology. We have also developed www.openclose.com, a Web site
where participating mortgage lenders, brokers and loan correspondents can
exchange lender product and pricing information, automated underwriting data,
mortgage insurance certificates and borrower

                                       19
application information in a neutral environment. We expect www.openclose.com to
be available for commercial use in August 1999.

     Loans that we originate directly from borrowers or through one of our
business clients generate loan origination fees. Loans that we fund, including
loans originated by our business partners and clients, generate gains or losses
when we sell the loans to independent mortgage investors in the secondary
market. When we sell a loan in the secondary market we achieve a net gain or
suffer a net loss equal to the difference between the amount we funded or paid
for the loan and the price at which the loan is sold to the secondary market
investor. Typically, we obtain commitments from investors to buy loans on a
loan-by-loan basis at the same time we lock an interest rate for the borrower.
We have sold, and intend to continue to sell, all loans, together with the
associated servicing rights, in the secondary market. Origination fees, or
"points," and secondary marketing gains or losses are included in "Secondary
marketing revenue, net" in our financial statements.

     Other services, including loan underwriting and processing, and obtaining
appraisals and credit reports, generate fees payable by the borrower at closing.
These fees are offset against amounts paid to third parties for the provision of
some of these services and, along with underwriting and closing fees, are
reflected in "Loan production and processing fees, net" in our financial
statements.

     Fees for the use of our technology and related support services, including
technology licensing and maintenance fees and fees earned from creating and
maintaining private label Web sites, are reflected in "Management, technical and
other fees" in our financial statements.

     The cost of funds under our financing arrangements is based on short-term
interest rates, while in today's market the interest rates we charge borrowers
on mortgage loans are based generally on intermediate-term interest rates. We
generate net interest income on mortgage loans if the intermediate-term interest
rate paid by the borrower on the mortgage loan exceeds the short-term interest
rate we are charged under our financing arrangements. Conversely, we suffer net
interest losses if the short-term interest rate under our financing arrangements
exceeds the intermediate-term interest rate paid by the borrower on the mortgage
loan. We try to minimize the length of time between closing of the loan and
delivery of the loan to secondary market investors, which is especially
important when intermediate-term rates have declined to the levels of short-term
rates. The difference between the interest we earn on the loans we fund and the
interest we pay under our financing arrangements, along with other net interest
income or expense, is recorded as "Net interest (expense) income" in our
financial statements. "Net interest (expense) income" also includes interest
expense related to subordinated debt.

     We have experienced substantial losses since inception and, as of
March 31, 1999, have an accumulated deficit of $21.3 million. These net losses
and the accumulated deficit are a result of investments in our technology
infrastructure and personnel in anticipation of growth in loan volumes from both
our direct-to-consumer and business-to-business channels.

     We plan to extend our brand position and leverage our technology
infrastructure as we scale up loan production volumes. Accordingly, we intend to
invest heavily in branding programs, marketing and promotional campaigns, new
partnerships and strategic alliances, our operating infrastructure and launching
www.openclose.com. We expect to have net losses for the foreseeable future.

     We will incur a non-cash expense over the next five years for the
amortization of unearned stock-based compensation resulting from granting stock
options to employees from October 1998 through April 1999. These deferred
compensation costs represent the difference between the exercise price of the
options and the deemed fair market value of the underlying common stock at the
time of grant of the options.

     Our limited operating history makes it difficult to forecast future
operating results. Although our revenue has grown significantly in recent
quarters, we cannot assure you that we will be able to sustain revenue growth or
achieve and maintain profitability. Even if we were to achieve profitability, we
expect material fluctuations in quarterly revenue and earnings to result from a
number of factors, including:

          o changes in interest rates;

          o loss of strategic relationships;

                                       20
o changes in competitive pressures on pricing or quality of service;

          o seasonal variations in demand for mortgages;

          o general economic conditions;

          o system failures or Internet down time;

          o changes in state or federal government regulations and their
            interpretations, especially with respect to the mortgage and
            Internet industries;

          o our ability to enhance our information technology to keep pace with
            changes in the industry; and

          o changes in attitudes of consumers doing business over the Internet.

     As a result, we do not believe that our historical results are necessarily
indicative of results to be expected in any future period.

RESULTS OF OPERATIONS

     The following table sets forth the percentage of total revenue of certain
line items included in our statement of operations for the periods indicated:
THREE MONTHS
                                                                                YEAR ENDED DECEMBER 31,        ENDED
                                                                                                             MARCH 31,
                                                                                -----------------------    --------------
                                                                                1996     1997     1998     1998     1999
                                                                                -----    -----    -----    -----    -----
                                                                                                            (UNAUDITED)
REVENUE:
    Secondary marketing revenue, net.........................................    54.6%    70.4%    80.1%    79.3%    65.1%
    Loan production and processing fees, net.................................    10.9     14.2     15.0     13.5     19.7
    Management and technical fees and other..................................    34.3     12.3      5.2      8.0     15.0
    Interest, net............................................................     0.2      3.1    (0.3)    (0.8)       .2
                                                                                -----    -----    -----    -----    -----
Total revenue................................................................   100.0    100.0    100.0    100.0    100.0
                                                                                -----    -----    -----    -----    -----
EXPENSE:
    Compensation and employee benefits.......................................    86.8     79.4     73.1     72.2     73.0
    Marketing................................................................     1.3      1.4      3.7      1.3     11.6
    Research and development.................................................     6.6      6.6      8.2      6.4      5.9
    Depreciation and amortization............................................     8.7      2.9      5.2      2.2      5.3
    General and administrative...............................................    50.1     31.1     26.9     23.3     28.4
                                                                                -----    -----    -----    -----    -----
Total expenses...............................................................   153.5    121.4    117.1    105.4    124.2
                                                                                -----    -----    -----    -----    -----
Net loss.....................................................................   (53.5)%  (21.4)%  (17.1)%   (5.4)%  (24.2)%
                                                                                -----    -----    -----    -----    -----
                                                                                -----    -----    -----    -----    -----
THREE MONTHS ENDED MARCH 31, 1998 AND 1999

  REVENUE

     Total revenue increased 94% to $13.2 million for the three months ended
March 31, 1999 from $6.8 million in the comparable period in 1998. This growth
resulted primarily from our acquisition of AFI in April 1998, the related loan
volume generated by our Web sites and from new strategic alliances with online
partners and Realtors.

     Secondary marketing revenue, net.  Gains and other revenue from the
origination and secondary marketing of mortgage loans increased 59% to
$8.6 million for the three months ended March 31, 1999 from $5.4 million in the
comparable period in 1998. This increase resulted primarily from the increase in
the total dollar amount of loans we originated, funded and sold. The total
dollar amount of closed loans that we originated increased to $751.6 million for
the three months ended March 31, 1999 from $348.3 million in the comparable
period in 1998. Of these originations, we funded and sold in the secondary
market $615.1 million

                                       21
in loans as compared to $241.8 million in the first quarter of last year. Loans
that we originated but chose not to fund were funded by other mortgage lenders.
The increase in loan volumes and related revenue resulted primarily from our
introduction of additional Internet origination channels in April 1998 and an
increase in Realtor affiliations.

     Loan production and processing fees, net.  Total loan production and
processing fees, less amounts paid to third parties for certain processing
services, increased 181% to $2.6 million for the three months ended March 31,
1999 from $0.9 million in the comparable period in 1998. This increase in
production and processing fees resulted from an overall increase in loan volume
and from new strategic alliances that produce fees for processing loans for
third parties and other mortgage lenders.

     Management, technology and other fees.  Total revenue from management,
technology and other fees increased 264% to $2.0 million for the three months
ended March 31, 1999 from $0.5 million in the comparable period in 1998. The
1999 amount includes recognition of $1.0 million in previously deferred revenue
from the sale of software that we no longer use in our business. The remaining
increase was primarily attributable to fees earned from business affiliations
for management services and technology.

     Net interest (expense) income.  The net contribution of interest to revenue
increased to a net interest income of $26,000 for the three months ended
March 31, 1999 from a net interest expense of $56,000 in the comparable period
in 1998. This increase was primarily related to higher net cash positions
resulting from equity investments we received in the last three quarters of
1998, and from an improvement in the difference between the interest revenue we
received from borrowers and our cost of funds.

  EXPENSES

     Compensation and employee benefits.  Compensation and employee benefits
consist primarily of management and employee salaries, bonuses and commissions
and related costs as well as the cost of consultants and personnel from
temporary agencies. Total compensation and benefit costs increased 96% to
$9.6 million for the three months ended March 31, 1999, or 73.0% of revenue,
from $4.9 million in the comparable period in 1998, or 72.2% of revenue. The
dollar increase in total compensation and benefit costs resulted primarily from
an increase in personnel from 295 at March 31, 1998 to 594 at March 31, 1999 to
support our new Internet origination volumes and related technical and
administrative support services. The increase was also a result of increased
commissions paid to loan originators commensurate with increased loan volumes.
We expect total compensation and employee benefits to increase in absolute
dollars as we continue to expand our business by hiring additional personnel.
Total compensation and benefit costs increased as a percentage of revenue due to
training periods involved in expanding our call center capacity to meet
increasing Internet loan demand.

     Included in "Compensation and employee benefits" is the amortization of
unearned compensation which resulted when stock options we granted during 1998
and the first quarter of 1999 were subsequently deemed to have exercise prices
less than the estimated fair market value of our common stock at the time of
grant. As of March 31, 1999, we have recorded approximately $15.4 million in
deferred compensation and we amortized approximately $193,000 of that amount to
expense in the three months ended March 31, 1999. An additional $1.3 million
will be recorded in the second quarter of 1999. As our stock option plan has a
five-year vesting requirement, the remaining deferred compensation cost will be
amortized at approximately $837,000 per quarter through the fourth quarter of
2003. Stock-based compensation is a non-cash expense.

     Marketing.  Marketing expenses consist primarily of the cost of leads
generated through Internet marketing and distribution agreements or co-branding
arrangements, as well as the cost of direct advertising and trade-show
participation. Marketing expenses also include fees paid to other Web sites and
business partners for lead generation. Marketing expenses increased to
$1.5 million for the three months ended March 31, 1999, or 11.6% of revenue,
from $85,000 in the comparable period in 1998, or 1.3% of revenue. These
increases were directly related to new online distribution agreements and online
advertising designed to increase the exposure of our Web site. We believe that
marketing expenses will increase, both in absolute dollars and as a percentage
of revenue, as we expand our strategic partnerships with other Web sites to
drive more traffic to our Web site and to increase brand awareness.

                                       22
Research and development.  Research and development costs consist primarily
of compensation and benefit costs of development personnel, materials, computer
equipment and supplies consumed in software development and related facility
costs. Research and development expenses increased 79% to $777,000 for the three
months ended March 31, 1999, or 5.9% of revenue, from $433,000 in the comparable
period in 1998, or 6.4% of revenue. These increases were primarily due to the
addition of product development personnel to integrate CLOser with
newly-acquired Internet technology and third-party software and Web platforms.
We believe additional investment in research and development is essential to our
success and we expect these expenses will increase in future periods.

     Depreciation and amortization.  Depreciation and amortization consists of
depreciation of capital equipment, amortization of goodwill related to
acquisitions and amortization of capitalized software development costs.
Depreciation and amortization expenses increased to $698,000 for the three
months ended March 31, 1999, or 5.3% of revenue, from $154,000 in the comparable
period in 1998, or 2.2% of revenue. These increases were a result of increased
expenditures for an expansion of our Internet infrastructure, acquisition of
capital equipment to support call center operations, additions to goodwill
from the AFI acquisition and payments relating to the Online Capital
acquisition. We expect these expenses will increase in absolute dollars as a
result of our exercise of an option to repurchase our CLOser software system
from a third party in May 1999 for $3.5 million and our commitment to maintain
state-of-the-art technology to support our Internet operations.

     General and administrative.  General and administrative costs include
telephone and communication costs, rent and other occupancy costs, equipment
leases, certain loan transfer fees and consulting and professional expenses.
General and administrative expenses increased 138% to $3.8 million for the three
months ended March 31, 1999, or 28.4% of revenue, from $1.6 million in the
comparable period in 1998, or 23.3% of revenue. The increase in general and
administrative expenses resulted from additional rent, communication costs and
other expenses related to call center operations and the addition of
administrative personnel in anticipation of becoming a public company. We expect
general and administrative expenses to increase in absolute dollars as we
continue to grow but decrease as a percentage of revenue as mortgage loan volume
increases.

  YEARS ENDED DECEMBER 31, 1997 AND 1998

  REVENUE

     Total revenue increased 116% to $35.7 million in 1998 from $16.5 million in
1997. This growth resulted primarily from our acquisition of AFI in April 1998
and the loan volume generated by our Web sites, a full year of operations of
OnLine Capital acquired in the summer of 1997, strategic alliances with online
partners that generated increased loan volume for us and an increase in
refinancing activities resulting from relatively low interest rates.

     Secondary marketing revenue, net.  Gains and other revenue from the
origination and secondary marketing of mortgage loans increased 147% to
$28.6 million in 1998 from $11.6 million in 1997. This increase resulted
primarily from the increase in the total dollar amount of loans we originated,
funded and sold. The total dollar amount of loans that we originated increased
to $2.0 billion in 1998 from $808.7 million in 1997. We funded and sold in the
secondary market $1.5 billion of these loans in 1998 and $562.0 million in 1997.
The increase in loan volumes and related revenue resulted primarily from our
introduction of additional Internet origination channels in April 1998 and a
full year of operations of OnLine Capital. The increase was also attributable to
increased refinancing activity by borrowers resulting from relatively low
interest rates.

     Loan production and processing fees, net.  Total loan production and
processing fees, less amounts paid to third parties for certain processing
services, increased 130% to $5.3 million in 1998 from $2.3 million in 1997. This
increase in production and processing fees resulted from an overall increase in
loan volume.

     Management, technology and other fees.  Total revenue from management,
technology and other fees decreased 5% to $1.9 million in 1998 from
$2.0 million in 1997. This decrease was primarily attributable to the refocusing
of our resources in 1998 on internal development of expanded Internet
capabilities.

                                       23
Net interest (expense) income.  The net contribution of interest to revenue
declined to a net interest expense of $113,000 in 1998 as compared to net
interest income of $500,000 in 1997. This decline was primarily related to a
convergence of short and intermediate-term market interest rates. This results
in circumstances where the rates of certain loans funded by us during the year
were equal to or less than our borrowing cost, producing a net interest loss
during the period of time we held these loans prior to delivery to secondary
market investors.

  EXPENSES

     Compensation and employee benefits.  Total compensation and benefit costs
increased 99% to $26.1 million in 1998, or 73.1% of revenue, from $13.1 million
in 1997, or 79.4% of revenue. The dollar increase in total compensation and
benefit costs resulted primarily from an increase in personnel from 158 at
December 31, 1997 to 486 at December 31, 1998 to support our new Internet
origination volumes and related technical support services. The increase was
also a result of increased commissions paid to loan originators commensurate
with increased loan volumes. We expect total compensation and employee benefits
to increase in absolute dollars as we continue to expand our business by hiring
additional personnel. Total compensation and benefit costs decreased as a
percentage of revenue.

     Marketing.  Marketing expenses also include fees paid to other Web sites
and business partners for lead generation. Marketing expenses increased 550% to
$1.3 million in 1998, or 3.7% of revenue, from $238,000 in 1997, or 1.4% of
revenue. These increases were directly related to new online distribution
agreements and online advertising designed to increase the exposure of our Web
site.

     Research and development.  Research and development expenses increased 164%
to $2.9 million in 1998, or 8.2% of revenue, from $1.1 million in 1997, or 6.6%
of revenue. These increases were primarily due to the addition of product
development personnel to integrate CLOser with newly-acquired Internet
technology and third-party software and Internet platforms.

     Depreciation and amortization.  Depreciation and amortization expenses
increased 280% to $1.9 million in 1998, or 5.2% of revenue, from $480,000 in
1997, or 2.9% of revenue. These increases were a result of increased
expenditures for an expansion of our Internet infrastructure and acquisition of
capital equipment to support call center operations, and a shortening of the
period that we amortize capitalized software development costs from five years
to three years. We capitalized an additional $832,000 in software development
costs in 1998 and $518,000 in 1997.

     General and administrative.  General and administrative expenses increased
88% to $9.6 million in 1998, or 26.9% of revenue, from $5.1 million in 1997, or
31.1% of revenue. The increase in general and administrative expenses resulted
from additional rent, communication costs and other expenses related to call
center operations and the addition of administrative personnel in anticipation
of becoming a public company. These expenses declined as a percentage of revenue
due to increased mortgage loan originations.

  YEARS ENDED DECEMBER 31, 1996 AND 1997

  REVENUE

     Total revenue increased 120% to $16.5 million in 1997 as compared to
$7.5 million in 1996.

     Secondary marketing revenue, net.  Gains and other revenue from the
origination and secondary marketing of mortgage loans we originated increased
183% to $11.6 million for 1997 from $4.1 million in 1996. The total dollar
amount of loans we originated increased to $808.7 million in 1997 as compared to
$330.8 million in 1996, a 144% increase. We funded and sold in the secondary
market $562.0 million in loans in 1997 and $180.0 million in 1996. The increase
in loan volumes and related revenue resulted primarily from the acquisition of
OnLine Capital, as well as expansion of our member business.

                                       24
Loan production and processing fees, net.  Total loan production and
processing fees, less amounts paid to third parties for certain processing
services, increased 180% to $2.3 million in 1997 from $820,000 in 1996. This
increase in production and processing fees resulted from an overall increase in
loan volume.

     Management, technology and other fees.  Total revenue from management,
technology and other fees decreased 23% to $2.0 million for 1997 from
$2.6 million in 1996. This decrease was primarily attributable to the refocusing
of our resources on the conversion of our technology platform from MS-DOS to
Windows 95.

     Net interest (expense) income.  The net contribution of interest to revenue
increased to $500,000 for 1997 as compared to $17,000 in 1996. This increase was
due primarily to higher loan volumes and an improvement in the difference
between the interest revenue we received from borrowers and our cost of funds.

  EXPENSES

     Compensation and employee benefits.  Total compensation and benefit costs
increased 102% to $13.1 million in 1997, or 79.4% of revenue, from $6.5 million
in 1996, or 86.8% of revenue. The dollar increase was primarily attributable to
the acquisition of OnLine Capital.

     Marketing.  Marketing expenses increased 151% to $238,000 in 1997, or 1% of
revenue, from $95,000 in 1996, or 1% of revenue. These increases were directly
related to promotional activities and participation in trade shows designed to
increase brand awareness.

     Research and development.  Research and development expenses increased 121%
to $1.1 million in 1997, or 7% of revenue, from $497,000 in 1996, or 7% of
revenue. The dollar increase was primarily related to our decision to convert
CLOser to the Microsoft Windows 95 operating system.

     Depreciation and amortization.  Depreciation and amortization expenses
decreased 26% to $480,000 in 1997, or 3% of revenue, from $652,000 in 1996, or
9% of revenue. This decrease was primarily the result of the $263,000
amortization of the remaining organizational costs in 1996.

     General and administrative.  General and administrative expenses increased
34% to $5.1 million in 1997, or 31% of revenue, from $3.8 million in 1996, or
50% of revenue. The dollar increase was primarily related to the additional
rent, communication costs and equipment costs attributable to the OnLine Capital
operation, while the percentage decrease was attributable to the higher loan
volumes from those operations.

QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth certain unaudited quarterly consolidated
statement of operations data for each of the nine quarters ended March 31, 1999.
This information has been prepared substantially on the same basis as the
audited consolidated financial statements appearing elsewhere in this
prospectus, and all necessary adjustments, consisting only of normal recurring
adjustments, have been included in the amounts stated below to present fairly
the quarterly results. The quarterly data should be read in conjunction with our
audited consolidated financial statements and unaudited consolidated financial
statements and the notes to those statements appearing elsewhere in this
prospectus. As a result of our limited operating history and numerous factors
beyond management's control, we may experience material fluctuations in revenue
and

                                       25
earnings in future quarters. Accordingly, the operating results of any quarter
may not be indicative of the results that may be expected for any future period.
QUARTER ENDED
                                  ------------------------------------------------------------------------------------------------
                                  MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,  SEPT. 30,  DEC. 31,   MAR. 31,
                                    1997      1997        1997       1997       1998       1998       1998       1998       1999
                                  --------   --------   ---------   --------   --------   --------  ---------  --------   --------
                                                                            (IN THOUSANDS)
STATEMENTS OF OPERATIONS DATA:
Revenue:
  Secondary marketing revenue,
    net.......................... $   997     $2,116     $ 4,052     $4,430     $5,407     $6,620    $ 7,632   $  8,938   $  8,600
  Loan production and processing
    fees, net....................     300        521         685        842        922      1,278      1,329      1,809      2,598
  Management, technology and
    other fees...................     416        359         707        551        546        649        539        134      1,991
  Net interest (expense)
    income.......................     144        137         155         63        (56)       (22)       108       (143)        26
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
    Total revenue................   1,857      3,133       5,599      5,886      6,819      8,525      9,608     10,738     13,215
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
Expenses:
  Compensation and employee
    benefits.....................   1,754      2,534       4,067      4,728      4,927      5,892      6,653      8,602      9,645
  Marketing......................      26         49          79         84         85        258        454        539      1,536
  Research and development.......     162        216         269        432        434        578        722      1,155        776
  Depreciation and
    amortization.................     110        123         143        105        154        268        337      1,114        698
  General and administrative.....     869      1,205       1,574      1,478      1,589      2,292      2,721      2,994      3,759
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
    Total Expenses...............   2,921      4,127       6,132      6,827      7,189      9,288     10,887     14,404     16,414
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
Net loss......................... $(1,064)    $ (994)    $  (533)    $ (941)    $ (370)    $ (763)   $(1,279)  $ (3,666)  $ (3,199)
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
AS A PERCENTAGE OF TOTAL REVENUE:
Revenue:
  Secondary marketing revenue,
    net..........................    53.7%      67.5%       72.4%      75.3%      79.3%      77.7%      79.5%      83.3%      65.1%
  Loan production and processing
    fees, net....................    16.2       16.6        12.2       14.3       13.5       15.0       13.8       16.8       19.7
  Management, technology and
    other fees...................    22.4       11.5        12.6        9.3        8.0        7.6        5.6        1.2       15.0
Net interest (expense) income....     7.7        4.4         2.8        1.1       (0.8)      (0.3)       1.1       (1.3)        .2
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
  Total revenue..................   100.0      100.0       100.0      100.0      100.0      100.0      100.0      100.0      100.0
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
Expenses:
  Compensation and employee
    benefits.....................    94.5       80.9        72.7       80.3       72.2       69.1       69.2       80.1       73.0
  Marketing......................     1.4        1.6         1.3        1.4        1.3        3.0        4.8        5.0       11.6
  Research and development.......     8.7        6.9         4.8        7.4        6.4        6.8        7.5       10.8        5.9
  Depreciation and
    amortization.................     5.9        3.9         2.6        1.8        2.2        3.1        3.5       10.4        5.3
  General and administrative.....    46.8       38.4        28.1       25.1       23.3       26.9       28.3       27.8       28.4
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
    Total expenses...............   157.3      131.7       109.6      116.0      105.4      108.9      113.3      134.1      124.2
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
Net loss.........................   (57.3)%    (31.7)%      (9.6)%    (16.0)%     (5.4)%     (8.9)%    (13.3)%    (34.1)%    (24.2)%
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
                                  --------    ------     -------     ------     ------     ------    -------   --------   --------
Our quarterly growth in revenue has resulted from a growth in loan volumes.
The growth rate during the nine quarters has been significant enough to obscure
any seasonality that we may have experienced. However, the mortgage industry
usually experiences stronger demand in the summer than in the winter. Our
acquisition in June 1997 of OnLine Capital and our acquisition in March 1998 of
AFI boosted revenue growth in the subsequent quarters.

     The following chart shows our total volume of loans originated, whether
funded by us or other mortgage lenders, for each of the nine quarters ended
March 31, 1999. As seen in the chart, our quarterly loan volume has grown by
958% over the last nine quarters, from approximately $71 million in the first
quarter of 1997 to more than $750 million in the first quarter of 1999.

                                       26
MORTGAGE.COM TOTAL LOAN VOLUME
                                 (IN MILLIONS)

                        [The chart appearing here shows
                          the growth in our total loan
                          volume, in dollars, for each
                          of the last nine quarters].

     Apart from our amortization of unearned compensation, our compensation
costs reflect a general downward trend as a percentage of revenue over the nine
quarters due to efficiency of scale and the efficiency of originating loans
through the Internet. We have increased our marketing expense both in absolute
dollars and as a percentage of revenue in an effort to increase loan volumes
generated through the Internet. We intend to increase our marketing expenditures
further in 1999 as we continue to direct traffic to our Web site and embark on a
brand recognition program. Our general and administrative expenses have declined
as a percentage of revenue due to economies of scale.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have funded operations primarily through net cash
proceeds from private placements of preferred stock of approximately
$26.5 million through December 31, 1998. As of December 31, 1998, we had cash
and cash equivalents of $3.4 million. In February and April 1999, we received
gross proceeds from the issuance of subordinated notes totaling $13.0 million.
In May 1999, we received an additional $27.5 million from the issuance of a
convertible subordinated note, which is either payable, or convertible to common
stock, upon completion of this offering. We also received $15.0 million from the
sale of shares of Series F Preferred Stock.

     Our primary need for operating capital is for the funding of mortgage loans
between closing and eventual delivery to secondary market investors. We fund
these loans through warehouse lines of credit and collateralized loan purchase
agreements with banks and other financial institutions. We have a $70.0 million
warehouse line of credit with Residential Funding Corporation, a $60.0 million
warehouse line of credit with Bank United and a $25.0 million warehouse line of
credit with Cooper River Funding. We also have loan purchase agreements with
Superior Bank FSB and Greenwich Capital. Our aggregate borrowing limits are
currently set at approximately $220.0 million. These financing arrangements
generally provide from 97% to 99% of the principal amounts needed to fund
mortgage loans and are collateralized by the underlying mortgages. The average
time between funding closed mortgages and receipt of loan sale proceeds from
investors was approximately 25 days during 1998.

     We have entered into a letter of intent with Telebanc Financial Corp. to
provide a committed $200.0 million repurchase agreement which will allow us to
sell our closed mortgage loans to Telebanc instead of holding them in our
warehouse lines of credit. The net effect of this arrangement should be to
provide us with lower financing costs between closing and ultimate sale and
delivery to investors in the secondary market. In addition, the letter of intent
outlines the parameters for the development of an electronic mortgage conduit
with the intent of streamlining the financing process. Telebanc would work with
us to create a dedicated e-commerce platform that will enable the efficient
transmission of loan information from originators to the secondary market.
Although we expect this financing arrangement to become available by

                                       27
the end of July 1999, we cannot assure you that it will be available at that
time, if at all, nor can we assure you that the development of the e-commerce
platform will happen as anticipated.

     Net cash used for operating activities for the year ended December 31, 1998
totaled $102.7 million. We used this cash primarily to fund loans held for sale
to investors, offset by reductions in other working capital requirements and
non-cash charges. For the quarter ended March 31, 1999, net cash provided by
operating activities totaled $6.1 million. This cash was generated primarily
from a reduction in mortgage loans held for sale, offset by operating losses.

     Net cash used in investing activities for the year ended December 31, 1998
totaled $7.6 million, $2.7 million of which was used for the purchase of AFI. We
used the remaining $4.9 million primarily for the purchase of computers,
workstations, servers and other equipment to support our growth in technology
support services and call center operations and costs related to software
development. Net cash used in investing activities for the quarter ended
March 31, 1999 totaled $1.6 million, $500,000 of which we used to purchase
computers and equipment and $700,000 of which we used for software development
costs.

     Net cash provided by financing activities for the year ended December 31,
1998 totaled $112.1 million. Warehouse facilities provided $99.6 million of this
amount and we received an additional $12.4 million as proceeds from the sale of
Series D Preferred Stock. We repaid $200,000 in subordinated notes during the
year. Net cash used by financing activities for the quarter ended March 31, 1999
totaled $1.7 million, as $10.0 million in proceeds from the issuance of
subordinated notes were used for general corporate purposes.

     As of December 31, 1998, we had net operating loss carryforwards of
approximately $16.1 million available to reduce future taxable income, which
carryforwards expire on various dates from 2010 to 2014.

     Since inception, we have significantly increased our operating costs and we
anticipate that we will continue to experience significant increases in our
operating costs for the foreseeable future. In addition, we may use cash
resources, including a portion of the net proceeds of this offering, to fund
acquisitions or investments in joint ventures, businesses, technologies and
products or services complementary to our business. Increased loan volume also
requires additional cash to fund the loans. We believe that net proceeds of this
offering coupled with the expected increase of our warehouse credit lines and
mortgage repurchase facilities will be sufficient to meet anticipated cash
requirements over the next twelve months. If cash generated from operations in
future periods remains insufficient to satisfy our liquidity requirements, we
may sell additional equity or debt securities, or obtain additional credit
facilities. The issuance of additional equity or convertible debt securities
could result in additional dilution to our stockholders.

RECENT ACCOUNTING PRONOUNCEMENTS

  COMPREHENSIVE INCOME

     On January 1, 1998, we adopted SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 established standards for reporting and presentation of
comprehensive income and its components in a full set of financial statements.
Comprehensive income consists of net income and net unrealized gains (losses) on
securities and is presented in the consolidated statements of shareholders'
equity and comprehensive income. The Statement requires only additional
disclosures in the consolidated financial statements; it does not affect our
consolidated balance sheets or statements of operations. The adoption of SFAS
No. 130 has had no effect on our consolidated financial statements.

  SEGMENT REPORTING

     In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 established standards for
the way that a public enterprise reports 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
shareholders. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997, and requires restatement of earlier periods presented. The
adoption of SFAS No. 131 has not had a significant impact on our consolidated
financial statements.

                                       28
SOFTWARE REVENUE RECOGNITION

     In March 1998, the AICPA issued Statement of Position 98-4, "Deferral of
the Effective Date of a Provision of SOP 97-2" ("SOP 98-4"). SOP 98-4 defers for
one year the application of certain provisions of Statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2"). Different informal and
unauthoritative interpretations of certain provisions of SOP 97-2 have arisen
and, as a result, the AICPA is deliberating amendments to SOP 97-2, so it can
issue interpretations regarding the applicability and the method of application
of those provisions. We have adopted SOP 97-2. The adoption of SOP 97-2 has not
had a material impact on our consolidated statements of operations, balance
sheets or cash flows.

  DERIVATIVES

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. As we do not currently engage in derivative or
hedging activities, there has been no impact on our consolidated statements of
operations, balance sheets or cash flows upon the adoption of this standard. If
we engage in derivative or hedging activities in the future, we will apply SFAS
No. 133.

  DISCLOSURES ABOUT MARKET RISK

     Interest rate movements significantly impact our volume of closed loans.
Interest rate movements represent the primary component of market risk to us. In
a higher interest rate environment, borrower demand for mortgage loans,
particularly refinancing of existing mortgages, declines. Interest rate
movements affect the interest income earned on loans we hold for sale in the
secondary market, interest expense on our warehouse lines, the value of mortgage
loans we hold for sale in the secondary market and ultimately the gain on the
sale of those mortgage loans. In addition, in an increasing interest rate
environment, the volume of mortgage loans that our clients originate declines.

     We originate mortgage loans and manage the market risk related to these
loans by pre-selling them on a best efforts basis to the anticipated secondary
market investors at the same time that we establish the borrowers' interest
rates. If we can deliver mortgage loans within the time frames established by
the secondary market investors, we have no interest rate risk exposure on those
loans. However, if the loan closes but we cannot deliver the loan within those
time frames, and if interest rates increase, we may experience a reduced gain or
may even incur a loss on the sale of the loan.

     We sell more than 90% of the loans we sell through best efforts
commitments, which means we do not suffer a penalty if the loans do not close.
We sell some loans, including sub-prime loans, on a mandatory delivery basis. We
earn a higher sale price on these, but we have risk if the loans do not close.

     We also do not currently maintain a trading portfolio. As a result, we are
not exposed to market risk as it relates to trading activities. Our entire loan
portfolio is held for sale. Accordingly, we must perform market valuations of
our pipeline, our mortgage portfolio held for sale and the related sale
commitments in order to properly record the portfolio and the pipeline at the
lower of cost or market. Therefore, we measure the interest rates of our loan
portfolio against prevailing interest rates in the market.

     Because we pre-sell our mortgage loan commitments, we believe that a 1%
increase or decrease in long-term interest rates would not have a significant
adverse effect on our earnings from interest rate sensitive assets. We pay off
warehouse lines when the loans are sold in the secondary market. Because the
loans are held in the warehouse lines for a short period of time, we do not
expect to incur significant losses from an increase in interest rates on the
warehouse lines. However, since a significant percentage of our closed loan
volume is from refinancing mortgage loans, our future operating results may be
more sensitive to interest rate movements.

     In the future, if we do not pre-sell the mortgage loans to secondary market
investors or if we do not rely on best-efforts commitments, our market risk
could change significantly.

                                       29
YEAR 2000 READINESS DISCLOSURE STATEMENT

     Many currently installed computer systems and software products are
designed to accept only two digit entries in the date code field. As a result,
they may have problems properly recognizing 1/1/00 as January 1, 2000. In less
than a year, computer systems and software may need to be upgraded to comply
with "Year 2000" requirements. Significant uncertainty exists concerning the
potential effects associated with the Year 2000 issue on business operations.

     In early 1998, we began reviewing the Year 2000 compliance status of our
technology platforms licensed to others, the software and systems used in our
internal business processes and other systems and services on which we rely. We
have completed the assessment phase and the research and strategy phases of the
program and are beginning to implement these strategies, which will include
developing contingency plans for potential third party Year 2000 compliance
problems that we deem critical to our business continuity. We cannot assure you
that the program will anticipate or identify all potential Year 2000 effects on
our business or that our contingency plans will be effective.

     We have fully integrated Year 2000 testing into the development of our own
software. We believe that the entire technology platform on which we operate and
which we provide to clients is generally Year 2000 compliant. Accordingly, the
use or occurrence of dates on or after January 1, 2000 and the occurrence of
leap years will not affect the performance of our systems with respect to their
ability to correctly create, store, process and output information related to
such data.

     We are in the process of contacting our major customers and critical
suppliers of components, equipment and services to determine whether products
and services we obtain from them are Year 2000 compliant. Our suppliers and
customers are under no obligation to provide such information to us. We intend
to continue monitoring the Year 2000 compliance of suppliers and major
customers.

     Based on the information available to date, we believe we will be able to
complete our Year 2000 compliance modifications and contingency plans, if
necessary, in the last quarter of 1999. We are prioritizing our efforts to focus
on Year 2000 discrepancies that would significantly impact operations.
Nevertheless, to the extent we are relying on vendors or suppliers to notify us
or resolve Year 2000 issues within their own products, we may experience delays
in implementing such changes. If key systems, or a significant number of systems
fail as a result of Year 2000 problems, we could incur substantial costs and
disruption of our business, which potentially would have a material adverse
effect on our results of operations. In addition, because we heavily rely on
communications and Internet service providers, failure of any such providers to
adequately address issues relating to Year 2000 may have a material adverse
effect on our business, financial condition and results of operations.

     In certain circumstances, we have warranted to customers that the use or
occurrence of dates on or after January 1, 2000 will not adversely affect the
performance of our systems with respect to the ability to create, store, process
and output information related to such data. If any of these customers
experience Year 2000 problems in connection with use of our systems, they could
assert claims for damages against us.

     To date we have not maintained a complete budget for investigating and
remedying issues related to Year 2000 compliance of our own software and
underlying systems used in our internal operations. We have incorporated the
costs of our Year 2000 initiative into existing workloads and budgets within our
technology group, and we do not expect them to be material to our results of
operations or financial position. Management is developing a contingency plan
based upon the results of supplier and customer readiness reviews. To the extent
we have not adequately assessed our Year 2000 compliance deficiencies,
additional and possibly significant resources may be spent on investigating and
remedying Year 2000 issues. The expenditure of such resources may have a
material adverse effect on our business, financial condition and results of
operations.

                                       30
BUSINESS

MORTGAGE.COM

     We are a leading provider of online mortgage services to consumers and
businesses. We have developed state-of-the-art technology to support the
origination, processing, underwriting, closing and secondary marketing of
mortgage loans. We use this proprietary technology to provide mortgage financing
directly to borrowers. We also enable our clients, such as mortgage brokers,
mortgage banks, financial institutions, Realtors and homebuilders, to improve
the efficiency and effectiveness of their mortgage operations.

     We believe that borrowers are generally dissatisfied with the traditional
mortgage lending process. This dissatisfaction stems from the complexity of the
process, inefficiencies and delays related to the manual collection and transfer
of information and the borrower's inability to monitor the status of his loan.
Mortgage lending on the Internet can offer borrowers an easier, faster and less
expensive way to obtain mortgage loans and has the potential to eliminate many
of the borrower's frustrations found in traditional mortgage lending. We believe
companies that provide these benefits to borrowers will gain a competitive
advantage.

     We offer borrowers a more satisfying, less frustrating mortgage experience.
We use our Internet platform and other proprietary technologies to make the
mortgage lending process more efficient, whether for our own direct-to-consumer
mortgage banking operation or in support of the mortgage operations of our
business-to-business clients.

     In 1998, we originated and closed mortgage loans with a total principal
amount of $2.0  billion, of which approximately 21% were originated through the
Internet. We funded and sold $1.5 billion of those loans. For the three months
ended March 31, 1999, we originated and closed mortgage loans with a total
principal amount of $751.6 million, of which approximately 37% were originated
through the Internet. We funded and sold $615.1 million of those loans.

     As of April 30, 1999, we were providing private label and co-branded Web
sites for 22 clients, including NetB@nk and Southtrust Mortgage. We have enabled
non-lenders, such as Intuit through its Quickenmortgage Web site, to provide its
customers with access to efficient mortgage services. As of April 30, 1999, we
also were providing mortgage banking services to 23 mortgage brokerage
companies, mortgage bankers and financial institutions. At the point-of-sale of
homes, we have business relationships with 20 homebuilders and Realtors,
including franchisees of Century 21 and Prudential Real Estate, enabling
borrowers to obtain mortgage loans at the same locations at which they arrange
for the purchase or building of a home.

INDUSTRY BACKGROUND

  Overview

     The Mortgage Bankers Association of America, or MBA, estimates that the
mortgage industry originated approximately $1.5 trillion in mortgages in 1998
compared to $834.0 billion in 1997. The MBA estimates that another $1.2 trillion
in mortgages will be originated in 1999.

     In traditional mortgage lending, a borrower obtains a mortgage loan by
contacting a mortgage originator, such as a mortgage banker, mortgage broker or
a financial institution. After a borrower has selected a mortgage originator, an
employee or commissioned loan officer of the mortgage originator collects
information about the borrower and completes a loan application by hand, while
the borrower waits. These mortgage originators often have business hours that
are not convenient for a borrower who works during the day, and a borrower may
have to make several trips to provide all of the information for the
application. In addition, these mortgage originators' offices may be located far
from the borrower's home. The borrower may have to wait weeks while credit
reports, appraisals and other third party verifications are ordered. For these
reasons, we believe that borrowers are generally dissatisfied with this process.

     We also believe that borrowers lack knowledge about the mortgage process,
including the costs associated with obtaining a mortgage loan. Consequently, it
is difficult for a borrower to determine whether

                                       31
he is getting the right mortgage loan, at the right cost, in a timely fashion.
In addition, a borrower is dependent upon the mortgage loan originator to keep
him informed about the status of the loan application.

     Some of a borrower's frustration and dissatisfaction stems from
inefficiencies and delays in the application, processing and underwriting phases
of the mortgage lending process. Manual collection and transfer of information
from the application process through the processing and underwriting phases
increases loan approval time and results in a greater number of human errors.
Many mortgage originators and mortgage lenders do not have the technical
expertise or financial resources to automate the origination, processing and
underwriting of mortgage loans to achieve greater efficiency. Continuing
inefficiencies make it difficult for mortgage originators and mortgage lenders
to adequately keep borrowers informed and satisfied.

GROWTH OF THE INTERNET AND ONLINE FINANCIAL SERVICES

     The Internet has emerged as a global medium for communication, content
delivery and electronic commerce, and Internet use continues to increase
rapidly. International Data Corporation, or IDC, estimates that the number of
users worldwide will increase from 142 million in 1998 to over 400 million in
2002. As consumers have become increasingly adept at using the Internet for
evaluating and purchasing a wide variety of goods, the dollar volume of online
commerce transactions has risen dramatically. IDC estimates that the volume of
goods and services purchased through the Web will increase from $50 billion in
1998 to more than $734 billion in 2002.

     The Internet provides companies with additional ways to reach potential
customers along with the opportunity to transact business with them in a more
efficient and low-cost manner than business transacted through traditional
channels. In addition, the Internet offers companies flexibility, permitting
them to adjust features, presentations and prices in response to competition.
Consumers benefit from improved overall convenience, low-cost access to
information regarding available products and services, ease of use, numerous
choices and often more competitive pricing.

     Financial services is one of the more prominent industries that has taken
advantage of the Internet. The information potential of the Internet and the
potential lower costs associated with conducting business electronically
underlie the success of financial services Web sites. For example, Forrester
Research reports that 25% of all retail stock trades are now executed online.
Many of these financial services companies have undertaken aggressive marketing
campaigns to establish their online brands. We believe that consumers will
become more willing to conduct financial transactions online, including mortgage
transactions, as Internet use increases, Internet brands are established and
concerns about security and privacy are alleviated.

ONLINE MORTGAGE SERVICES

     Online mortgage lending is particularly well-suited to the Internet
platform. Mortgage lending on the Internet can offer borrowers an easier,
faster, less expensive way to obtain mortgage loans and has the potential to
eliminate many of borrowers' frustrations found in traditional mortgage lending.
The same principles that make online mortgage lending an easier, faster and less
expensive process for the borrower can also benefit mortgage providers. Mortgage
providers can increase their access to borrowers by offering Web-enabled
services that are accessible at any time. Online mortgage lending can also
reduce costs and eliminate inefficiencies, resulting in a more satisfying
experience for borrowers.

     Based on a recent report from Forrester Research, less than 1% of the $1.5
trillion in mortgages funded in 1998 were originated online. However, Forrester
Research estimates online mortgage loan volume will reach $91.2 billion by 2003,
constituting nearly 10% of all mortgage loans funded in 2003.

     We believe that very few of the largest mortgage loan originators have
capitalized on the mortgage lending opportunities on the Internet. Most mortgage
originators lack the expertise to develop their own Internet technologies and
have been slow to address the online market. We believe the majority of the
prominent mortgage originators use the Internet primarily as an advertising
medium and to provide contact information. Even among originators that offer
online applications, we believe that many still have problems seamlessly
integrating their Internet applications with the systems that assist in
processing, underwriting and

                                       32
closing the mortgage loans. As a result, mortgage originators have not been
leveraging the Internet as a means to increase borrowers' satisfaction and
reduce overall costs.

     We believe that to maximize the potential of computer-related technology in
the mortgage industry, a company must be able to provide borrowers with:

          o numerous channels from which to obtain mortgage loans;

          o faster loan applications and loan pre-qualifications;

          o greater choice among numerous loan products and rates;

          o the opportunity to obtain lower cost mortgages; and

          o the ability to monitor the status of their loans from origination
     through closing.

     We believe companies that are able to provide these benefits to borrowers
will gain a competitive advantage.

THE MORTGAGE.COM SOLUTION

     We use our Internet platform and other internally-developed, proprietary
technologies to maximize efficiency in the mortgage lending process, whether for
our own mortgage banking operation or in support of the mortgage operations of
our clients, such as mortgage bankers, mortgage brokers, financial institutions,
Realtors and homebuilders. As a result of these efficiencies, borrowers find the
mortgage experience more satisfying and less frustrating because they benefit
from:

          o convenient access to the mortgage lending process through the
            Internet, by e-mail, by telephone or in person at location where
            homes are sold;

          o interactive selection from a comprehensive suite of mortgage
            products and services;

          o personalized services and products tailored to individual needs;

          o faster applications and pre-qualifications;

          o interest rate locks; and

          o constant monitoring of loan status.

     We provide these benefits to borrowers through both direct-to-consumer and
business-to-business channels. Our direct-to-consumer channels consist of our
Web site at www.mortgage.com and the loan counselors using our proprietary
CLOser technology in our OnLine Capital operations. Throughout the mortgage
process, borrowers are supported by customer service representatives in our call
centers or by our OnLine Capital loan counselors.

     Through our business-to-business channels, we leverage our technology to
enable our clients to better satisfy their borrowers. Borrowers can access our
clients through customized "private label" mortgage lending Web sites we create
and maintain for clients who need technical expertise and other resources to
establish and maintain a comprehensive online presence. Borrowers also can get
efficient mortgage services at the point-of-sale of homes, where we enable
Realtors and homebuilders to enter the mortgage lending business with a minimum
initial investment and with low overhead. We also offer dedicated Internet-based
call center services to our clients so they can provide a high-level of customer
service for their borrowers.

     When we process, underwrite and fund mortgage loans for our mortgage
banking operations or for our clients, borrowers have constant and convenient
access through the Internet to monitor the status of their loan applications.
After the mortgage loans close, we sell those mortgage loans in the secondary
market to investors who will be responsible for servicing the mortgage loans.
Servicing consists of collecting from the borrower debt service and escrow funds
for property taxes and insurance, paying debt service to loan investors, paying
property taxes and insurance premiums and supervising foreclosures for defaulted
loans.

                                       33
MORTGAGE.COM STRATEGY

     Our objective is to touch every mortgage, either directly or through our
business-to-business channels. We intend to do this by leveraging the Internet
and our proprietary technology to efficiently originate, fund and sell mortgage
loans, and enable our clients to efficiently originate, fund and sell mortgage
loans. Key elements of our strategy are:

     Establishing and Enhancing Brand Awareness.  We seek to make Mortgage.com
the household name for mortgage services. We believe that our Mortgage.com brand
name will become synonymous with better, faster and more convenient mortgage
loans, which will bring potential borrowers to our Web site and will help
establish us as the premier technology enabler in the mortgage industry. We have
budgeted a significant amount of money for advertising and promotion of the
Mortgage.com brand name during 1999 and beyond, with a focus on advertising
through leading Web sites and other media, co-branding with leading financial
information sites and developing additional business alliances. We have also
planned a direct marketing campaign designed to attract additional borrowers to
www.mortgage.com, which will increase our share of the online mortgage business.
This direct marketing campaign will target all current and potential home buyers
in the United States.

     Expanding Our Ability to Serve Borrowers and Clients.  We intend to
continue to devote substantial resources to the development and acquisition of
innovative Internet and software solutions so that we can better serve our
clients and mortgage borrowers. We are currently developing and testing
improvements to CLOser and its Internet interface that will increase its
versatility and automate additional portions of the mortgage process. For
example, we intend to implement automated underwriting systems to enhance the
sub-prime lending portion of www.mortgage.com. We intend to continually modify
and upgrade our software, Internet servers and high-speed transmission lines to
increase bandwidth, expand services and reduce costs. We are also continually
evaluating strategic acquisitions of technology leaders in ancillary service
areas, such as appraisal and credit report services. In this way we and our
clients will be able to provide borrowers with convenient, high-value and
low-cost services.

     Addressing Underserved Markets.  Because online commerce is still in its
infancy, there are a number of online markets for mortgage lending that are
currently underserved. We recently have developed a new segment of our
www.mortgage.com Web site specifically tailored to borrowers of sub-prime loans.
We also intend to continue to provide solutions to Realtors and homebuilders, so
that potential borrowers at the point-of-sale of homes have convenient access to
efficient, cost-effective mortgage financing. We believe that enhancing our
presence at the point-of-sale will strengthen our position in the purchase
mortgage market, which is less sensitive to changes in interest rates than the
refinancing mortgage market.

     Reengineering the Mortgage Process with Advanced Technologies.  CLOser was
one of the first portable computer software systems in the industry and remains
one of the most comprehensive systems for performing and linking all functions
in the mortgage process. We believe that our CLOser technology and its Internet
interface give us a competitive advantage in the mortgage banking industry. We
are currently testing www.openclose.com, which will serve as a virtual market
place for industry participants to communicate and exchange borrower and loan
information. We believe that www.openclose.com will provide yet another way to
more quickly and cost-effectively enhance the mortgage process. We intend to
continue to develop technological solutions that will reengineer and automate
the mortgage process and make our technology the easiest, most efficient and
most cost-effective way to facilitate mortgage transactions, whether through
online or offline channels.

PRODUCTS AND SERVICES

     We make home financing easier, faster and less expensive for borrowers
through both direct-to-consumer channels and business-to-business channels. Our
direct-to-consumer channels include providing borrowers with access to low-cost
mortgage financing through the Internet and telephone and e-mail inquiries
generated by our Web site, and through loan counselors in our Florida and
California offices. We then process the mortgage loans to closing, provide
funding for the mortgages through our credit facilities, and sell the loans in
the secondary market to institutional investors.

                                       34
Through our business-to-business channels we:

          o create Web sites for our clients that borrowers can access 24 hours
            a day, 7 days a week;

          o provide automated processing, closing, underwriting and funding
            services to mortgage industry participants;

          o enable Realtors and homebuilders to provide borrowers with access to
            mortgage financing at the point-of-sale of homes; and

          o will administer a Web site that mortgage lenders and mortgage
            brokers can use to communicate and share borrower and loan
            information electronically.

     We offer clients the opportunity to use our services at any stage of the
mortgage process, from marketing, to online applications, processing,
underwriting, closing and selling mortgage loans in the secondary market.

     Our direct-to-consumer channels and business-to-business channels are
linked, enhanced and supported by our Internet platform and proprietary CLOser
software system which we develop and maintain. Use of this technology
streamlines the mortgage process by allowing us and our clients to
electronically obtain, analyze and transmit information. We believe this
ultimately results in a more satisfying experience for borrowers.

     The financial statements included in this prospectus contain financial
information for the direct-to-consumer and business-to-business segments of our
business for the years ended December 31, 1996, 1997 and 1998, and the three
months ending March 31, 1998 and 1999.

DIRECT-TO-CONSUMER CHANNELS

     Our direct-to-consumer channels include our www.mortgage.com Web site,
which is linked to our call centers and our OnLine Capital operations. During
the three months ended March 31, 1999, our direct-to-consumer channel originated
and closed $171.2 million of mortgage loans, 34.9% of which were originated
through the Internet. We funded $128.8 million of those loans.

     Online Mortgage Origination Through www.mortgage.com

          Our flagship Internet Web site is www.mortgage.com, which serves as
     our online origination source for mortgage loans. Borrowers can access our
     Web site 24 hours a day, 7 days a week, to:

          o research and evaluate mortgage products and services;

          o select the most suitable mortgage loan with interactive assistance;

          o apply for a mortgage loan;

          o lock in an interest rate; and

          o monitor the status of their loans.

          Originating mortgage loans directly on the Internet results in reduced
     costs and time to the borrower. The Internet also continues to provide us
     with greater access to a tremendous number of potential borrowers, which
     increases the number of mortgage loans that we expect to fund and sell in
     the secondary market.

          Prime Mortgage Loans.  Prime mortgage loans include residential
     mortgage loans that meet Fannie Mae's or Freddie Mac's secondary marketing
     guidelines. These loans generally meet the agencies' guidelines because the
     borrowers are credit-worthy and the loans have appropriate loan-to-value
     ratios and principal amounts. Prime mortgage loans also include loans made
     to credit-worthy borrowers that would otherwise meet Fannie Mae's or
     Freddie Mac's underwriting guidelines, but have a principal amount which
     exceeds the amounts permitted by Fannie Mae or Freddie Mac.

          The prime mortgage loan portion of our Web site first provides a
     borrower with knowledge about the mortgage lending process. It then
     provides the borrower with the opportunity to use "SmartQuote," a loan
     program search system we developed to make choosing a mortgage simple.
     SmartQuote prompts the user for information and then searches the database
     for all of the loan programs meeting the borrower's criteria. After
     obtaining information on pricing and the right type of loan for the
     borrower's

                                       35
situation, the borrower has an opportunity to securely apply online for a
     mortgage loan in about 20 minutes. The borrower then can monitor the
     progress of the loan through closing.

          This portion of our Web site also includes a feature that allows a
     user to specify the conditions under which he would be interested in
     refinancing his mortgage loan. CLOser then stores this information and
     provides the user with an automatic e-mail notification when a suitable
     loan program becomes available.

          To increase our access to borrowers, we participate as a mortgage
     lender on high-profile multi-lender Web sites such as Intuit's
     Quickenmortgage, Microsoft's Home Advisor and The Lending Tree. Our
     presence on these sites provides borrowers with a convenient avenue to
     access our technologically efficient mortgage services, which increases our
     opportunity to originate, process and fund mortgage loans, and then sell
     them in the secondary market.

          Sub-prime Mortgage Loans.  Sub-prime mortgage loans have
     characteristics that make them generally ineligible for sale to Fannie Mae
     or Freddie Mac in the secondary market for reasons other than an excessive
     principal amount. Those characteristics might include the credit history of
     the borrower, the debt-to-income ratio, the loan-to-value ratio, the
     property type, the lien position or other factors. Because borrowers of
     sub-prime loans have often been denied financing, they are more likely to
     be dissatisfied with the traditional sub-prime lending process. Our goal is
     to provide these borrowers with an unintimidating, informative and
     confidential way to obtain a mortgage. Our Web site and customer service
     representatives try to simplify the borrowing process and give borrowers
     answers within a short period of time. In most cases, a borrower knows
     within 3 hours whether he is approved for a mortgage loan.

          Commensurate with the higher credit risk, we charge borrowers higher
     interest rates on sub-prime mortgages, which allows us to generate higher
     origination fees and higher gains on sale in the secondary market than
     prime mortgage loans. The higher interest rate also allows us to generate a
     greater spread between the interest rate we charge the borrower and the
     interest rate we pay to lenders for the financing arrangements we use to
     fund the mortgage loans.

          Call Center Support.  Our call center operations are integrated with
     our Web site to provide customer service to visitors to www.mortgage.com.
     For those borrowers who have submitted a complete online application, our
     automatic call distribution software, CLOserLink, electronically imports
     all of the borrower's data into our CLOser software system. In addition,
     artificial intelligence software that we license from a third party
     provides an automated, customized e-mail response to confirm the
     application and make immediate contact with the potential borrower. We then
     follow up with frequent telephone calls and e-mails to keep the borrower
     informed of the mortgage loan's approval status.

          When a partial online application is submitted, or when a borrower
     calls or e-mails us based on contact information on our Web site, a
     customer service representative in our call center is assigned to that
     potential borrower for the duration of the origination process. The
     customer service representative works with the potential borrower to
     explain portions of the mortgage lending process, provide rate and product
     information and assist the borrower with obtaining a mortgage loan. The
     customer service representative can enter data into an electronic loan
     application through CLOser, which efficiently manages the remainder of the
     mortgage transaction.

  OnLine Capital Loan Counselors

          In addition to our Internet site, we also maintain our own sales force
     that originates prime and sub-prime mortgage loans directly with borrowers.
     This sales force consists of loan counselors operating under the trade name
     OnLine Capital in offices we have established in Florida and California. We
     provide each loan counselor with a personalized Web page at
     www.onlinecap.com which they use to extend their access to borrowers.
     OnLine Capital loan counselors then use their personal Web sites and CLOser
     on a portable computer to conduct the mortgage origination process more
     efficiently.

          Our proprietary CLOser software system operates on portable and
     desktop computers connected through a secure nationwide communications
     network. CLOser includes the following features:

          o full integration with Web sites we have developed;

                                       36
o automated loan applications and interest rate locks;

          o daily updated loan rates and more than 100 loan products;

          o in-depth loan tracking;

          o high-speed dedicated connections to automated underwriting systems
            at Fannie Mae and Freddie Mac;

          o automatic generation of disclosure and closing documents tailored to
            the loan product, property and local laws; and

          o contact information, reminders of critical deadlines, e-mail, fax
            services and custom printing of promotional material.

          CLOser allows the user to input information from a prospective
     borrower once, pre-qualify the borrower, and evaluate numerous loan
     programs in light of the borrower's individual financial situation. It
     automatically downloads credit reports and obtains other third party
     verifications electronically. All information about a borrower and the
     borrower's loan is electronically transferred through CLOser to third-party
     automated underwriting systems or to our processing and underwriting
     personnel over our secure wide area network. By automating virtually every
     stage of the mortgage process, CLOser potentially reduces paperwork and the
     time it takes the borrower to obtain a mortgage loan. Also, because CLOser
     is fully integrated with our Web site, borrowers can monitor the status of
     their loans on the Internet at any time.

BUSINESS-TO-BUSINESS CHANNELS

     In addition to our direct-to-consumer channels, we enable mortgage bankers,
mortgage brokers, financial institutions, Realtors and homebuilders to
efficiently participate in the online mortgage industry at low cost. We have
developed an Internet platform integrated with our CLOser software system that
we license to other mortgage industry participants, as well as a Web site,
www.openclose.com, which is designed to permit mortgage bankers, mortgage
brokers, mortgage insurance companies and loan correspondents to communicate and
exchange information more effectively. We also provide our CLOser software
system to clients who become network members. We automate the origination
process and provide support services to network members whose own processing and
underwriting systems are not as efficient as our systems. We also enable certain
network members to provide automated origination services at the point-of-sale
of homes. These products and services enable our clients to provide more
efficient mortgage services to borrowers.

     The same call centers that we use to support our direct-to-consumer
channels are used to support our online business-to-business channels, including
clients for whom we have created private label Web sites, those with whom we
have co-branding relationships and Intuit Lender Services. This allows our
clients to provide their borrowers with remote counseling through e-mail and the
telephone and the ability to apply for a mortgage loan at a convenient time and
place. Accordingly, our services are often used in support of, or as a
replacement for, a traditional retail loan officer staff. When clients hire us,
they no longer need to manage data centers, maintain technology help desks,
purchase, install or develop software or hire and manage technical personnel. We
have an e-mail address and a toll-free number assigned to each client, so that
inquiries are answered in the name of the client by a group of customer service
representatives dedicated to that client's potential borrowers.

     During 1998, our business-to-business channel originated and closed $1.2
billion of mortgage loans, 14% of which were originated through the Internet. We
funded $934.7 million of those loans. For the three months ended March 31, 1999,
our business-to-business channel originated and closed $579.5 million, 38% of
which were originated through the Internet. We funded $485.9 million of those
loans.

    "Private Label" Web Sites for Mortgage Lenders

          We create and maintain private label Web sites for mortgage lenders,
     including banks, thrifts and credit unions of any size or sophistication.
     These private label Web sites are operated in the name of the client, while
     we provide the technology and management support in the background through
     CLOser. We create and maintain prime and sub-prime private label Web sites
     for such clients as SouthTrust

                                       37
Mortgage and NetB@nk, and the mortgage companies owned by CPS Realty,
     Arvida Homebuilders and Keyes Realty.

          The Web sites we create are custom-tailored to our clients and offer
     online applications, full integration with processing and underwriting
     systems and call center support. Just as with our own www.mortgage.com Web
     site, the private label Web sites we create for clients allow borrowers the
     opportunity to shop and apply for mortgage loans at their convenience. They
     also allow borrowers constant access to the status of their loans.

    "Co-Branded" Web Sites

          We have entered into marketing agreements that provide for advertising
     and promotion of our mortgage.com brand and Internet links to
     www.mortgage.com, through established home and financial information Web
     sites such as www.homefair.com, www.financenter.com and
     www.homepricecheck.com. When a potential borrower is browsing one of these
     sites for home buying or financial information, he is presented with an
     opportunity to apply for a mortgage online, without having to search for a
     separate Web site. The borrower can click on a link that takes him to a
     version of our Web site that displays both our mortgage.com brand and the
     brand of the information site that provided the link. We refer to these Web
     sites as "co-branded."

          Through these relationships, our co-branding partners can provide
     their customers with more than mere home buying and financial information.
     Those customers will gain access to convenient online mortgage financing
     through www.mortgage.com, including our call center support and the ability
     to monitor the status of their loans through closing. We process,
     underwrite and fund the mortgage loans and then sell them in the secondary
     market.

    Relationship with Intuit Lender Services and Participating Lenders on
www.quickenmortgage.com

          Some of our clients, such as First Union Capital Markets Group, Fleet
     Mortgage and GE Capital Mortgage Services, are provided online marketing
     and application capabilities through www.quickenmortgage.com, which is a
     multi-lender Web site operated by Intuit Lender Services. These clients
     recognize that we have the expertise to fully integrate the information
     they receive online with their own call centers and internal processing and
     underwriting systems. We provide them with call center support, as well as
     processing, underwriting, funding and secondary marketing services as their
     back office solution.

          The processing, underwriting and funding services we provide to
     participating lenders on www.quickenmortgage.com are subject to performance
     standards relating to the number of applications and inquiries we convert
     to funded loans and the level of customer service we provide. We currently
     are not meeting the performance standards which relate to converting
     applications and inquiries to closed loans. If we continue to fail to meet
     these performance standards, Intuit Lender Services may cancel the
     agreement. A cancellation of the agreement would have a negative effect on
     our online loan originations and our business as a whole. We believe we
     will either be able to meet the conversion ratios in the future or reach an
     appropriate accommodation with Intuit Lender Services so that we may
     continue providing services on www.quickenmortgage.com.

          We are also a participating lender on www.quickenmortgage.com. After a
     potential borrower on the www.quickenmortgage.com Web site chooses one of
     our or our clients' loan products, the information collected about the
     borrower is transferred to us through an electronic link to the CLOser
     software system. Information about a potential borrower may come to us at
     any stage of the process, from a mere inquiry initiated through
     www.quickenmortgage.com, to a potential borrower that has pre-qualified on
     the site, to a potential borrower that has filled out an application on the
     site. Regardless of the stage at which borrower information is transferred
     to us, our call center personnel complete the origination process. If the
     borrower chooses one of our loan products, we process, underwrite, fund
     with our own warehouse lending arrangements and close the loan in our name.
     We then sell the loan in the secondary market. If the borrower chooses one
     of our clients' loan products, we also fund the loan with our own warehouse
     lending arrangements and close the loan in our name. Then, we immediately
     sell the mortgage loan to our client along with the servicing rights.

                                       38
Point-of-Sale Access to Borrowers

          We have developed strategic alliances with Realtors and homebuilders
     so that borrowers have access to efficient mortgage services at the
     point-of-sale of homes, much like a car buyer can get financial services in
     the showroom of an auto dealer. This saves borrowers the extra visits and
     phone calls to lenders that are necessary in traditional mortgage lending.
     It also allows us to increase our share of the more stable purchase
     mortgage business and gives our clients the ability to offer home buyers
     point-of-sale mortgage financing. We provide these services through a
     membership structure.

          Princeton Capital, Advantage Financial and Western America
     Mortgage.  A significant portion of our point-of-sale business operates
     under the trade names Princeton Capital, Advantage Financial and Western
     America Mortgage. In each case, our loan counselors are located in the
     office of a network member. These loan counselors use CLOser to improve the
     application and pre-qualification process. CLOser electronically handles
     credit reports and other third party approvals and electronically transmits
     the resulting information to our processing and underwriting departments,
     saving time and reducing paperwork and errors. Because CLOser is integrated
     with our Web site, point-of-sale borrowers have access to our Web site 24
     hours a day, 7 days a week to monitor the status of their loans.

          The network member for whom we employ our Western America Mortgage
     loan counselors is Mason-McDuffie Real Estate, which does business in
     northern California as Prudential California Realty. Our Western America
     Mortgage loan counselors service 20 Prudential California Realty offices in
     northern California. Through our Princeton Capital operations, we have loan
     counselors stationed in 14 Century 21 real estate offices in the San
     Francisco Bay area. Through our Advantage Financial operations, we have
     loan counselors positioned in 23 Coldwell Banker real estate offices. We
     also have a relationship with Cendant Mortgage by which Cendant has waived
     its exclusive rights to market in certain real estate offices so that our
     Princeton Capital and Advantage Financial loan counselors can originate
     mortgage loans through those offices. We pay Cendant a monthly fee and have
     agreed to sell a certain number of loans to them.

          Establishing Separate Mortgage Brokerage Entities for Clients.  In
     some cases, we assist Realtors and homebuilders in establishing separate
     mortgage brokerage entities by providing them with licensing, recruiting,
     formation and management services. These entities become network members
     and use CLOser over a secure wide area network because they generally do
     not have the expertise and financial resources to keep up with complex
     mortgage lending regulations, to develop automated origination, processing
     and underwriting systems or to handle all of the administrative and
     managerial aspects of the mortgage business. We provide the expertise and
     resources without requiring network members to disclose that we are the
     provider for their mortgage services.

          Major homebuilders and real estate companies that have formed mortgage
     brokerage affiliates and have become network members include Arvida, one of
     Florida's largest homebuilders, Keyes Realty, one of Florida's largest
     realty firms, and CPS Realty, a California realty firm.

          Technology Correspondent Member Relationships.  We have additional
     strategic alliances with one of 1998's top Prudential Real Estate
     franchises in the nation, based on home sales, and a large mortgage broker
     in San Diego. Under our agreements with these mortgage lenders, they will
     process mortgage loans using CLOser, fund the loans in their own names and
     then sell the loans to us, so that we can then resell them in the secondary
     market. Technology correspondent member arrangements allow us to provide
     mortgage companies fully automated point-of-sale services and support while
     we incur very little overhead.

Openclose.com

     We are developing, in cooperation with Fannie Mae, a new Web site where
participating mortgage lenders, brokers and loan correspondents can exchange
lender product and pricing information, automated underwriting data, mortgage
insurance certificates and borrower application information in a neutral
environment. This Web site, www.openclose.com, is designed to expand the
availability of important underwriting information, which results in faster
transactions, cost savings for borrowers, brokers and lenders by eliminating
unnecessary paperwork, and improved communications between lenders and their
customers.

                                       39
The site also offers lenders access to a greater number of brokers and
correspondents. The Web site is currently being tested and we expect to expand
its availability beginning in August 1999.

     As of April 30, 1999, eight mortgage bankers have agreed to participate in
the www.openclose.com pilot program. We expect more will participate when we
expand www.openclose.com to a nationwide operation. Participating mortgage
bankers will pay us a fee for each mortgage loan sent to them through
openclose.com for their review, a loan transfer fee and an access fee for each
of the mortgage brokerage offices that access participating mortgage banker
sections of the Web site. In addition, participating mortgage bankers will pay
us a fee for each sub-prime mortgage loan transmitted through www.openclose.com
for review. The fees we charge participating mortgage bankers for each viewing
of the mortgage banker's page on the Web site by brokers are split equally
between us and GHR Information Systems, from whom we license some of the tools
available on www.openclose.com.

     We expect to begin marketing to brokers on a wide scale basis in June.
Mortgage brokers will pay us a fee for each loan submitted to www.openclose.com
for review by lenders. There are no monthly participation fees charged to
mortgage brokers.

     We pay Fannie Mae a licensing fee for Desktop Underwriter based on the
volume of mortgage loans submitted for automated underwriting.

CUSTOMERS

     Our direct-to-consumer customers consist of borrowers who contact us
through www.mortgage.com and our OnLine Capital loan counselors. We provided
4,317 home buyers and home owners with mortgage financing totaling more than
$798 million in 1998 through these channels.

     Our business-to-business client base consists of mortgage banks, mortgage
brokers, banks, thrifts, credit unions, Realtors and homebuilders throughout the
United States. Mortgage banks, mortgage brokers, banks, thrifts and credit
unions look to us primarily to establish an online presence or to provide
integrated call centers and back office support for their current online
systems. Realtors and homebuilders look to us primarily for turnkey solutions
that allow them to make mortgage services available to their customers with very
little cost. Through us our clients can get increased access to borrowers, call
center support and efficient processing, underwriting, funding, closing and
secondary marketing services. Among our representative clients and key
relationships are:

Arvida Home Builders
Cendant Mortgage
Century 21 Filer Realty
Consumer Finance Network
CPS Real Estate
First Union Capital Markets
Fleet Mortgage
GE Capital Mortgage Services
Intuit Lender Services
Mason-McDuffie Real Estate (doing business as Prudential California Realty in
northern California)
NetB@nk
Pickford Realty (doing business as Prudential California Realty in southern
California)
Southtrust Bank
Superior Bank FSB

     Our relationship with Mason-McDuffie Real Estate accounted for 10% or more
of our total revenues in 1998.

     The chart on the following page demonstrates a few of the ways that we can
solve the mortgage lending problems faced by our clients:

                                       40
SELECTED CLIENT APPLICATIONS
CLIENTS                 PROBLEM                                       SOLUTION
----------------------  --------------------------------------------  --------------------------------------------
Arvida Home Builders    Arvida is one of Florida's largest            We assisted Arvida in forming a mortgage
                        homebuilders. It wanted to offer its          brokerage subsidiary which became a member
                        customers the opportunity to obtain mortgage  of our network using CLOser at the
                        financing on-site. However, as a              point-of-sale of Arvida homes in conjunction
                        homebuilder, Arvida had limited experience    with loan counselor's personal Web sites. We
                        in the mortgage business and did not have     perform all of the origination, processing,
                        the technical expertise to automate the       underwriting, funding and secondary
                        mortgage process.                             marketing services they need to provide
                                                                      Arvida home buyers with home financing.

Valley National Bank    Valley National Bank is a Super Regional      Valley National Bank engaged us to provide a
                        Community Bank with 105 branches              private label prime loan Web site and the
                        concentrated in Northern New Jersey. Valley   complete CLOser system package to support
                        National Bank supports multi-state mortgage   its own call center and mortgage lending
                        origination through a marketing agreement     systems.
                        with a national insurance company's
                        independent insurance agents. It is large
                        enough to attract a significant number of
                        potential mortgage loan borrowers, but too
                        small to carry out its own technical
                        development of mortgage banking systems.
SALES AND MARKETING

     We market our products and services to consumers through targeted online
advertising, such as mortgage and real estate banners on Internet portals and
Web site sponsorship opportunities, as well as through more traditional means,
such as direct mail. Our marketing efforts focus on what we believe customers
want most, namely:

     o secure online transactions;

     o the ability to compare rates and get current information;

     o availability of human assistance through a toll-free number; and

     o a trusted brand.

Our marketing campaigns have an overall goal of increasing the general awareness
of the Mortgage.com brand and the products and services we provide.

     We have a sales team dedicated to marketing our online and call center
business-to-business services, including our private label Web sites. We have
licensed to GHR Information Systems the computer

                                       41
programming code that underlies our prime mortgage loan Web site platform so
that it can create private label Web sites for lenders. We receive a portion of
the installation, transaction, software maintenance and other fees GHR receives
from the creation of private label Web sites based on our "prime" Web site
product. GHR also markets our other mortgage banking services.

     We have a separate sales team dedicated solely to www.openclose.com. We are
developing a national marketing plan to build awareness among mortgage brokers,
mortgage lenders and mortgage insurance companies. The plan includes direct mail
advertising with promotional CD-Roms included, direct sales, lender
sponsorships, online advertising and free trial offers. We also intend to
participate in numerous industry trade shows, including regional trade shows in
Florida and California, and the trade shows held for the National Association of
Mortgage Brokers and the Mortgage Bankers Association.

     We currently rely primarily on management to market our services to
Realtors, homebuilders and other potential network members, such as financial
planners. We intend to hire an internal sales force so that our network and
technology correspondent memberships can expand geographically.

OPERATIONS

  PRODUCTION OF MORTGAGE LOANS

     At the initiation of the mortgage banking process is the generation of
leads and the completion of loan applications. We perform this function
(1) online, (2) through loan counselors that we employ, (3) through network
members and (4) through mortgage lenders acting as loan correspondents. In the
case of the first three, we evaluate the loan applications and fund those loans
that meet our underwriting criteria. We then sell the mortgage loans in the
secondary market. In the fourth case, we will underwrite and purchase mortgage
loans from loan correspondents and sell the mortgage loans in the secondary
market.

     As a step to evaluating mortgage loan applications, our processing
department evaluates credit reports and property appraisals when required,
verifies borrowers' income and assets and obtains any additional third party
verifications relating to the borrowers and the mortgaged properties. We
maintain processing centers in Walnut Creek, California, Los Gatos, California
and Plantation, Florida, where as of March 31, 1999, 162 employees execute the
processing functions. Our operations managers approve and monitor third party
sources who have originated the loans, and third parties from whom we receive
credit reports, appraisals and similar verifications, based on criteria
established by our chief underwriter.

     We underwrite mortgage loans based on criteria established by secondary
market investors. Underwriting criteria may include the borrower's credit
standing and repayment ability and the value and adequacy of the mortgaged
property as collateral. Our underwriting department consists of a team of
17 underwriters in Plantation, Florida, Walnut Creek, California and Los Gatos,
California. The underwriting evaluation is done primarily through our CLOser
software system and through links to the automated underwriting systems of
Fannie Mae and Freddie Mac.

     CLOser acts as a pre-funding quality control department because it will not
generate closing documents for a mortgage loan that does not meet the
underwriting criteria. If a mortgage loan meets the underwriting criteria,
CLOser automatically generates closing documents tailored to the loan product,
the borrower, secondary marketing requirements and state laws and regulations.

  SECONDARY MARKETING OF MORTGAGE LOANS

     We originate all of our mortgage loans with the intent of selling those
loans in the secondary market. Our secondary marketing department monitors the
prices secondary market investors are willing to pay for various loan products.
We then add an appropriate profit margin to the interest rate for the loan and
publish our price for that loan on our Web site, in CLOser and on various
industry databases and price sheets. Our price includes a premium that we charge
investors for the value of the servicing rights associated with the mortgage
loans we sell in the secondary market. When we sell a loan in the secondary
market, we achieve a net gain, or suffer a net loss, equal to the difference
between the amount we paid for the loans and the price at which the loans are
sold to secondary market investors.

                                       42
We obtain commitments from secondary market investors for the purchase of
substantially all the prime mortgage loans we fund on the same day that we lock
in a rate for a borrower. This protects us against changes in interest rates
between the date we issue a loan commitment at a locked-in interest rate to the
borrower and the date we sell the loan in the secondary market. Our obligations
to sell to secondary market investors are generally on a "best efforts" basis,
which means we are required to sell the loan to a committed secondary market
investor only if the loan closes within an agreed upon time period. However,
occasionally a borrower will elect to not lock an interest rate until the
closing. In those cases, we may choose to sell the loan on a short-term
"mandatory" basis, which means we are required to sell the loan to a secondary
market investor within a specified number of days after the closing. We sell
loans on a mandatory basis only when we are confident that the loan will close.

     We also accumulate sub-prime mortgage loans for sale in pools of between
$1 million and $3 million. While this entails additional credit risk because we
hold the mortgage loan for a longer period of time, sales of these pooled
sub-prime loans typically bring higher net gains than the net gains earned on
the sale of prime loans. If we are particularly concerned about the credit risk
on a sub-prime mortgage loan, we will obtain an investor commitment in advance,
which reduces our credit risk but decreases the amount we receive on the sale of
the mortgage loan to secondary market investors.

     The following list shows some of the secondary market investors who
commonly purchase mortgage loans from us:
Norwest Funding                                      Fleet Mortgage
Cendant Mortgage                                     GE Capital Mortgage Services
Residential Funding Corporation                      Interfirst Mortgage
Citicorp Mortgage
In most cases when we sell a mortgage loan in the secondary market, there
is no recourse to us. However, inaccuracies in loan documents, information about
the borrower or information about the mortgaged property may require us to
repurchase the mortgage loans from the investors and indemnify them for any
damages caused by the inaccuracies. Since our inception, mortgage loans that we
have repurchased from investors have represented an insignificant percentage of
our total mortgage loan originations.

  FUNDING MORTGAGE LOANS

     After a mortgage loan has been approved for funding, we generally borrow
from one of our warehouse lines of credit or other financing vehicles to fund
and close the mortgage loan. We currently have warehouse lending or loan
repurchase arrangements with five large financial entities. Our aggregate
borrowing limits are currently set at approximately $220 million.

     After we borrow funds to fund a mortgage loan, we must pledge the mortgage
loan to the lender as security for our repayment of the borrowed money. During
the time a mortgage loan is pledged to the lender, it is considered
"warehoused." A mortgage loan is warehoused until we sell it in the secondary
market, at which time we repay the lender and the pledge is released. Prime
mortgage loans are warehoused for an average of approximately 25 days. Sub-prime
mortgage loans are warehoused for an average of approximately 40 days. In cases
where we hold loans for more than 30 days, we perform some interim servicing on
those loans using computer software licensed from a third party.

     We have entered into a letter of intent with Telebanc Financial Corp. to
provide a committed $200.0 million repurchase agreement which will allow us to
sell our closed mortgage loans to Telebanc instead of holding them in our
warehouse lines of credit. The net effect of this arrangement should be to
provide us with lower financing costs between closing and ultimate delivery to
investors. In addition, the letter of intent outlines the parameters for the
development of an electronic mortgage conduit with the intent of streamlining
the financing process. Telebanc would work with us to create a dedicated
e-commerce platform that will enable the efficient transmission of loan
information from originators to the secondary market. Although we expect this
financing arrangement to become available by the end of July 1999, we cannot
assure you that it will be available at that time, if at all.

                                       43
POST-CLOSING QUALITY CONTROL

     After we have funded and closed a mortgage loan, we submit 10% of funded
loans for a post-funding review. A post-funding review includes a
re-verification of credit, employment income and source of funds, as well as a
review of closing documentation. These reviews also include procedures designed
to detect evidence of fraudulent documentation or unacceptable activities during
the processing, funding or selling of the mortgage loan. We have hired an
independent third party to handle post-funding reviews and to recommend internal
corrective actions.

TECHNOLOGY

     The CLOser software system encompasses an Internet platform, local and wide
area networks, back office modules for processing, underwriting, closing and
secondary marketing, automated call and e-mail distribution links and
computer-based training. As of March 31, 1999, we employed 35 software
developers who are continually working towards developing new technological
solutions for the mortgage industry. As of that date, we employed 31 systems
support and operations personnel who provide communications and infrastructure
support for our direct-to-consumer and business-to-business channels and
training services for clients who use our technology. We also employed 15
customer service employees who provide technical help desk services. Last year
we spent approximately $2.9 million on research and development and we intend to
continue devoting substantial resources toward that end.

  TECHNOLOGY INFRASTRUCTURE AND SECURITY

     We have 80 computer servers which house all of our computer-based
technology, from our Internet Web sites to our e-mail capabilities. All of our
server hardware is provided by Dell Computer Corp. and our routers and switches
are provided by Cisco Systems. Our servers run on the Microsoft Windows NT
operating system software. We have redundant high-speed data lines from multiple
vendors for Internet access. We stock additional hardware parts and have
designed system and power supply redundancies to ensure that there are no
interruptions in service based on hardware failures. In addition, we monitor our
servers to ensure that we have sufficient space to handle software upgrades and
that at least 35% of our disk drive space is free for performance
considerations. All software and data in the system is backed up to magnetic
tape each night, which is stored off-site.

     Our technology security systems are designed to prevent unauthorized access
to internal systems and illegal third-party access to our data. Internally, log
in identifications and passwords are maintained for all systems, and personnel
have access only to those areas they are responsible for. We rely on encryption
and authentication technology licensed from third parties to provide secure
transmission of confidential information, such as employment and income items
submitted with online applications. Our servers are protected by firewalls and
no outside access is permitted.

     Our technology must accommodate a large number of users and must deliver
frequently updated information. Some components of our technology have
experienced outages or slower response times in the past, but none have had a
material effect on our business.

  OTHER LICENSED TECHNOLOGY

     Our www.openclose.com Web site will use a wide range of internally
developed software, as well as the Desktop Underwriter(Registered) software,
which we license from Fannie Mae. Our Desktop Underwriter(Registered) license
expires October 15, 2003, with provision for automatic year to year renewals.
Fannie Mae can amend our license by issuing a bulletin. If we object to the
amendment, Fannie Mae can terminate our license.

     We license from GHR Information Systems, Inc. portions of their
PremierSuite software, which we use to publish our prices on quickenmortgage.com
and which we use to access pricing information for participating lenders on
quickenmortgage.com who are our clients. Our license for this software expires
February 29, 2000, with successive one year automatic renewals unless one party
decides not to renew.

                                       44
[The chart appearing here represents the types of customers in each of the
two segments of Mortgage.com's business across the top of the page. Down the
side of the page are the Mortgage and technology services Mortgage.com offers.
Dots in the table represent the specific services utilized the corresponding
customer.]

COMPETITION

     Many of our business-to-business clients also compete with us for mortgage
loan originations. We compete with other mortgage bankers, mortgage brokers and
financial institutions such as Norwest Bank, Countrywide Mortgage, Chase
Mortgage, Headlands Mortgage, Cendant Mortgage, Citibank and Fleet Mortgage for
the origination and funding of mortgage loans directly with borrowers. Many of
our competitors have branch offices in the same areas where our loan counselors
and network members operate. We also compete with mortgage companies whose focus
is on telemarketing, such as The Money Store.

     Our online competition also is substantial. In addition to the traditional
mortgage companies and financial institutions who have or are developing an
online presence, we compete with other online financial service providers, such
as Intuit's Quickenmortgage, iOwn, E-LOAN and Finet. Our primary competitors for
business-to-business mortgage banking technology solutions are FiServ, Inc. and
Alltel Corporation.

     We believe that the principal competitive factors in our markets are:

     o brand recognition;

     o ability to attract borrowers;

     o a broad selection of mortgage loan products;

     o access to low cost financing arrangements;

     o comprehensiveness of information services;

     o quality and responsiveness of customer service; and

     o ease of use of computer technology.

     We must continue to enhance our mortgage.com brand and enhance our
technology to effectively compete. Many of our current and potential competitors
are profitable, have longer operating histories, larger customer bases, greater
brand recognition and significantly greater financial resources than we do. In
addition, other financial-related businesses with these characteristics are
likely to enter into the online mortgage origination business. We cannot be sure
that we will be able to compete successfully against current and future
competitors.

INTELLECTUAL PROPERTY

     We regard substantial elements of our Web sites and underlying technology
as proprietary and attempt to protect them by relying on trademark, service
mark, copyright and trade secret laws and restrictions on disclosure. We also
generally enter into confidentiality agreements with all technical employees and
consultants, and with third parties in connection with our license agreements.
Despite these precautions, it may be possible for a third party to copy or
otherwise obtain and use our proprietary information without our authorization.
Third parties may also develop similar technology independently from us.

     We have registered CLOser as a federal trademark. We also have registered
the Internet domain names "mortgage.com," "openclose.com" and other domain names
we use. This gives us the exclusive rights to use these names as the addresses
for our Web sites. We have pledged the domain name "mortgage.com" to Credit.com
to secure our obligations to Credit.com resulting from our purchase of the
domain name "mortgage.com."

     We may not be able to register "mortgage.com" and certain other of our
trade names as federal trademarks because those names may be too generic to
qualify for federal trademark protection. Accordingly, we may not be able to
prevent other people from using those names in their businesses. It is possible
that others could use "mortgage.com" and our other trade names in such a way as
to damage our reputation, which could ultimately affect our revenues.

                                       45
Legal standards relating to the validity, enforceability and scope of
protection of our proprietary rights are uncertain and are still evolving,
especially as they relate to Internet-related rights. In addition, the laws of
some foreign countries may not protect our rights to the same degree as the
United States. For these reasons, we cannot be sure that the steps we take will
adequately protect our proprietary rights. We also may be required to litigate
to enforce our intellectual property rights or to determine the validity and
scope of the proprietary rights of others. This could create substantial costs
and a diversion of management's attention.

REGULATION

     Our mortgage banking business is subject to the rules and regulations of
the Department of Housing and Urban Development, Federal Housing Administration,
Veteran's Administration, Federal National Mortgage Association, Federal Home
Loan Mortgage Corporation, Government National Mortgage Association and other
regulatory agencies in connection with originating, processing, underwriting and
selling mortgage loans. These rules and regulations, among other things, impose
licensing obligations on us, prohibit discrimination and establish underwriting
guidelines. We also are required to comply with each regulatory entity's
financial requirements.

     Mortgage origination activities are further subject to the provisions of
various federal and state statutes including the Equal Credit Opportunity Act,
the Fair Housing Act, the Federal Truth-in-Lending Act, the Fair Credit
Reporting Act and the Real Estate Settlement Procedures Act. The Equal Credit
Opportunity Act and the Fair Housing Act prohibit us from discriminating against
applicants on the basis of race, color, religion, national origin, familial
status, sex, age, marital status or other prohibited characteristics. It also
requires us to disclose certain matters to applicants, such as the reason for
any credit denial. The Truth-in-Lending Act requires us to provide borrowers
with uniform, understandable information about the terms and conditions of
mortgage loans so that they can compare credit terms. It also guarantees
borrowers a three-day right to cancel certain credit transactions. If we fail to
comply with Truth-in-Lending, aggrieved customers could have the right to
rescind their loan transaction with us and to demand the return of finance
charges paid to us. The Fair Credit Reporting Act requires us to supply loan
applicants with a name and address of the credit reporting agency we use when
the applicant is denied credit or when the rate or charge for a loan increases
as a result of information we obtained from a credit reporting agency.

     Some of our client relationships are "affiliated business arrangements"
that must comply with complex limitations under the Real Estate Settlement
Procedures Act and to regulation by the Department of Housing and Urban
Development. Affiliated business arrangements permit companies to refer real
estate settlement business to us without violating the Real Estate Settlement
Procedures Act's prohibition on "kickbacks" to the referring company. There are
limitations on the types of payments that can be made to the referring company
and disclosures that are required to be made to borrowers. The Real Estate
Settlement Procedures Act also requires us to collect certain applicant
information and file an annual report with the Department of Housing and Urban
Development. Failure to comply with the Real Estate Settlement Procedures Act
could result in administrative enforcement actions which could eliminate
important revenue sources for us and could lead to demands for indemnification
or loan repurchases.

     Industry participants are frequently named as defendants in class-action
and other litigation involving alleged violations of federal and state consumer
lending laws and regulations. Some of the practices which have been the subject
of lawsuits against other companies include:

          o "add on" fees;

          o truth in lending calculations and disclosures;

          o escrow and adjustable rate mortgage calculations;

          o private mortgage insurance calculations and disclosures;

          o forced-placed hazard, flood and optional insurance; and

          o unfair lending practices.

                                       46
If a significant judgment were rendered against us in connection with any
litigation, it could have a material adverse effect on our business and results
of operations.

     Although our operations on the Internet are not currently regulated by any
government agency in the United States beyond the mortgage-related regulations
described above and regulations applicable to businesses generally, it is likely
that a number of laws and regulations may be adopted governing the Internet. In
addition, existing laws may be interpreted to apply to the Internet. There may
be claims that our services violate those laws.

     Regulatory and legal requirements are subject to change and may become more
restrictive, making our compliance more difficult or expensive or otherwise
restricting our ability to conduct our business as it is now conducted. Such
changes could hurt our business.

EMPLOYEES

     At March 31, 1999, we had 594 full-time employees. Management expects to
hire an additional 150 employees in 1999, primarily to support our online
direct-to-consumer channels. Our success depends upon our ability to attract,
train and retain qualified personnel. We have a comprehensive training program
which explains our customer service philosophies and techniques, and we have
developed a sophisticated computer-based training program for CLOser and its
Internet component. To date, our attrition rate has been low. However, as we
develop new business alliances that increase the mortgage loan volumes we handle
through our call centers and processing centers, finding personnel to
participate in these training programs may become more difficult. We cannot be
sure that we will be able to find qualified personnel who can be trained in
sufficient time to handle increased mortgage loan volumes.

     None of our employees are represented by a union. We believe we have a good
relationship with our employees.

FACILITIES

     We are headquartered in Plantation, Florida, where we currently lease
approximately 53,300 square feet of space. Our lease for the building which
houses our executive offices and a portion of our call centers expires in 2007.
A second building houses the remainder of our call centers under a lease that
expires in 2002. Our California operations are contained in several locations in
the San Jose/San Francisco metropolitan area, totaling approximately 29,200
square feet. A majority of our technology personnel reside primarily in
approximately 15,000 square feet of space in Montvale, New Jersey. Our Montvale
office sub-lease expires in 2002 and without provision for extension and
renewal. We also have a 2,500 square foot office in Santa Rosa, California and a
1,000 square foot office in Reno, Nevada.

     We are currently negotiating to obtain approximately 100,000 square feet of
additional office space in Sunrise, Florida, with an option for 50,000 square
feet of expansion. If obtained, our executive offices and call centers would be
relocated to this building in September 1999 at a cost of approximately
$1 million. We then would sublease our current executive offices. If we are able
to obtain this new space for our executive offices and call centers, we believe
our facilities will be satisfactory for our current needs. If we are unable to
obtain that space upon favorable terms, we will actively seek alternative
arrangements to accommodate the growth in our direct-to-consumer business and
personnel. However, as our business grows, we anticipate needing additional
space for our direct-to-consumer business. We believe we will be able to secure
additional space on commercially reasonable terms.

LEGAL PROCEEDINGS

     We are not a party to any material litigation.

                                       47
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

     Each member of our board of directors serves for a one-year term and until
their successors are elected and qualified. Our executive officers and directors
are as follows:
NAME                                               AGE   POSITION
------------------------------------------------   ---   ------------------------------------------------
Seth S. Werner(1)(2)............................   53    Chairman of the Board; President; and Chief
                                                           Executive Officer
John J. Hogan(1)................................   37    Executive Vice President and Director
David W. Larson(1)..............................   48    Executive Vice President and Director
John Buscema....................................   42    Executive Vice President
Stephen L. Green(2)(3)..........................   48    Director
Edwin Johnson...................................   42    Chief Financial Officer and Senior Vice
                                                           President
Michael K. Lee(2)(3)............................   42    Director
George A. Naddaff...............................   69    Vice Chairman of the Board
John T. Rodgers.................................   37    Executive Vice President
------------------
(1) The employment agreement for this officer requires us to nominate him for
    election to the board of directors at each annual meeting.

(2) Member of the Compensation Committee.

(3) Mr. Green and Mr. Lee have been elected to the board of directors under the
    terms of the Series B Preferred Stock. Those terms provide that each holder
    or affiliated group of holders of 363,000 or more shares of Series B
    Preferred Stock have the right to elect one director to our board of
    directors. All of the outstanding shares of Series B Preferred Stock will
    automatically convert to common stock upon completion of this offering, at
    which time the rights to elect one director cease.

     Seth S. Werner founded our company in September 1993, has served as
Chairman of the Board and Chief Executive Officer since the company's inception,
and as President from 1993 to 1997 and again in 1999. From 1973 to 1995,
Mr. Werner was the President and Chief Executive Officer of Werner Capital
Corporation, a Miami-based real estate investment banking firm which served as a
consultant to some of the largest financial institutions in the United States
and to the United States government on matters concerning its real estate
portfolios. He also was founder, Chairman and Chief Executive Officer of First
Capital Financial Corporation, a national real estate investment banking firm,
from 1974 through 1984. He is a director and President of SSW, Inc., general
partner of Kendall Racquetball Investments, Ltd., and a director, President,
Secretary and Treasurer of Harbour Real Estate Corporation.

     John J. Hogan has been an Executive Vice President and a member of our
board of directors since July 1997. Mr. Hogan heads our mortgage banking group.
From February 1995 to June 1997, he served as the President of OnLine Capital,
which merged into our company in June 1997. From March 1986 to February 1995,
Mr. Hogan served in several capacities, including Vice President of Loan
Administration, Senior Vice President of Mortgage Operations and Senior Vice
President and Chief Financial Officer of First Franklin Financial Corporation in
San Jose, California.

     David W. Larson has been a member of our board of directors since 1997 and
served as President from June 1997 through December 1998. Mr. Larson now is an
Executive Vice President who heads our broker services group. From January 1989
to October 1996, Mr. Larson served as the President and Chief Executive Officer
of B.F. Saul Mortgage Company, a $10 billion mortgage bank in Chevy Chase,
Maryland. Prior to that, Mr. Larson was the President of San Jacinto Savings and
Loan in Houston, Texas.

     John Buscema has been an Executive Vice President since April 1995, and
heads our advanced technology group. Mr. Buscema was responsible for developing
the ParEx software module, an integral part of our CLOser

                                       48
software system. From 1990 to April 1995, he served as President of Morbank
Financial Systems, Inc., the company which developed the ParEx module, and also
oversaw all MIS-related issues for Globe Mortgage Company.

     Stephen L. Green has been a director since March 1996. Since 1991,
Mr. Green has served as a general partner of Canaan Partners, a principal
shareholder in our company. He serves on the boards of directors of Advance
Paradigm, Inc., a provider of pharmacy benefit management services, Chartwell Re
Corporation, an insurance holding company, and Suiza Foods Corporation, a
manufacturer and distributor of dairy products and plastic packaging, as well as
a number of private companies.

     Edwin D. Johnson has been Senior Vice President and Chief Financial Officer
since November 1998. From June 1998 through October 1998, Mr. Johnson was a
principal in JR Capital, Inc., an acquisition firm. From March 1996 to June
1998, Mr. Johnson was Chief Financial Officer of MasTec, Inc., a
telecommunications infrastructure company. From January 1995 to March 1996, he
was a private real estate consultant and from October 1984 to January 1995
Mr. Johnson was worldwide Chief Financial Officer for Attwoods, plc, an
international services company.

     Michael K. Lee has been a director since March 1996. In 1985 Mr. Lee
founded Dominion Ventures, Inc., a venture capital firm specializing in emerging
growth companies, and has served as its President and Chief Executive Officer
since its founding. Affiliates of Dominion Ventures, Inc. are principal
stockholders in our company, and Mr. Lee is the managing general partner of
those affiliates. He serves on the boards of directors of Advanced Access,
Gateway Insurance Co., Online Resources & Communications Corp., a provider of
financial e-commerce hubs, Paragon Acceptance Corp. and Relax the Back Corp.

     George A. Naddaff is Vice Chairman of our board of directors and has been a
director since September 1995. Mr. Naddaff is the controlling shareholder and a
director of Business Expansion Capital Corporation, a venture capital firm he
founded in 1987. From 1994 to 1996, he served as a director and Chairman of Food
Trends Acquisition Corporation, a publicly-traded corporation. Mr. Naddaff also
is the Chairman and Chief Executive Officer of Ranch 1, Inc. which has operated
a chain of sandwich shops since November 1997, and since June 1997, Mr. Naddaff
has been Chairman of Frame King Express, Inc. which sells framed art. He
currently is a consultant to Jreck Subs Group, Inc. Mr. Naddaff also is a
consultant to, and a director of, numerous private companies.

     John T. Rodgers has been an Executive Vice President since April 1998 and
heads our consumer services group. In 1993 Mr. Rodgers co-founded American
Finance and Investment and served as its President until April 1998 when it was
merged into our company. He also serves as a member of Microsoft's Real Estate
Advisory Board.

COMMITTEES OF THE BOARD OF DIRECTORS

     The audit committee of the board of directors will be established
immediately following the completion of this offering and will consist of three
directors, Michael Lee, Stephen Green and George Naddaff, two of whom are
independent directors. The audit committee will review and recommend outside
auditors and compensation paid to outside auditors, review results and
recommendations in each external audit, assist external auditors in connection
with the preparation of financial statements, review the procedures we use to
prepare financial statements and related management commentary and meet
periodically with management to review our major financial risk exposures.

     The compensation committee of the board of directors will be re-constituted
immediately following the completion of this offering and will consist of two
non-employee directors, Stephen Green and George Naddaff. The compensation
committee will oversee and review all decisions regarding the compensation of
executive officers and directors and the granting of stock options under our
stock option plan.

DIRECTORS' COMPENSATION

     After this offering, each non-employee director will be reimbursed for
expenses incurred in attending the meetings. No director who is an employee will
receive separate compensation for services rendered as a director. Non-employee
directors are eligible to participate in our stock option plan.

                                       49
EXECUTIVE COMPENSATION

     The following table summarizes the compensation we paid or accrued for
services rendered for the year ended December 31, 1998, to our Chief Executive
Officer and each of the four other most highly compensated executive officers
who earned more than $100,000 in salary and bonus for the year ended
December 31, 1998:
LONG-TERM
                                                                                  COMPENSATION AWARDS
                                                                                  -------------------
                                                            ANNUAL COMPENSATION     NUMBER OF
                                                            -------------------    SECURITIES           ALL OTHER
NAME AND PRINCIPAL POSITION                                  SALARY     BONUS     UNDERLYING OPTIONS    COMPENSATION
----------------------------------------------------------  --------   --------   -------------------   ------------
Seth S. Werner, Chief Executive Officer...................  $190,000   $100,000          50,000           $ 26,165(1)
David Larson, Executive Vice President....................   190,000    100,000          50,000             53,841(2)
John J. Hogan, Executive Vice President...................   161,347    100,000          20,000             22,248(3)
John Buscema, Executive Vice President....................   161,465     10,000           5,500              3,925(4)
John T. Rodgers, Executive Vice President.................   142,536         --              --              6,576(5)
------------------
(1) Consists of an $18,000 car allowance, $5,000 in matching company
    contributions to the 401(k) plan and $3,165 in life insurance premiums.

(2) Consists of an $18,000 car allowance, $3,633 in matching company
    contributions to the 401(k) plan, $1,808 in life insurance premiums and a
    $30,400 relocation allowance.

(3) Consists of an $18,000 car allowance and $4,248 in matching company
    contributions to the 401(k) plan.

(4) Consists of $3,925 in matching company contributions to the 401(k) plan.

(5) Consists of a $4,500 car allowance and $2,076 in matching company
    contributions to the 401(k) plan.

EMPLOYMENT AGREEMENTS

     We have entered into employment agreements with most of our executive
officers. Each employment agreement entitles the executive officer to
participate in our company's benefits plans, including health insurance plans,
401(k) plan and stock option plan. Each also prohibits the executive officer
from making any unauthorized disclosures of our confidential information.

     Mr. Werner's employment agreement requires him to be our President and
Chief Executive Officer and also requires us to nominate him for the board of
directors at each annual meeting. His employment agreement expires December 31,
2003, with provision for annual one year renewals. Effective January 1, 1999,
his base salary is $350,000 per year, subject to annual increases. He is
entitled to bonuses based on merit and on the financial performance of our
company. We also pay premiums on a life insurance policy of which Mr. Werner is
the beneficiary. If Mr. Werner is terminated without cause or if he quits for
good reason, we must pay him a lump sum cash severance amount.

     Mr. Werner's employment agreement contains provisions to provide him
economic security after a change of control. Mr. Werner may terminate his
employment for good reason any time within two years after a change of control.
If that happens, or if we terminate him without cause within two years after a
change of control, Mr. Werner is entitled to a lump sum cash payment equal to
three times his base salary and three times his bonuses. Mr. Werner also may
terminate his employment for any reason after 120 days have passed since the
change of control. If that happens, Mr. Werner is entitled to a lump sum cash
payment equal to his base salary and his average bonus over the three prior
years. In either case, he is entitled to immediate vesting of all of his stock
options and the deadline for exercise of those options may be extended. To the
extent Mr. Werner incurs any federal excise taxes on the severance amount or the
value of the accelerated stock options, Mr. Werner is entitled to be reimbursed
by us for those tax consequences.

     If we terminate Mr. Werner for cause or if he terminates his employment for
good reason within two years after a change of control, he is prohibited from
competing with the company for three years following the date of his
termination. If we terminate Mr. Werner without cause, or if he terminates his
employment without good reason after 120 days have passed since a change of
control, he is prohibited from competing with the company for one year following
the date of his termination. In addition, if we terminate Mr. Werner for cause
or if he

                                       50
leaves voluntarily, he is prohibited from soliciting our employees or any of the
businesses with whom we have business relationships for a period of two years
after the date of termination.

     Mr. Hogan's employment agreement requires him to be an executive vice
president and to head our mortgage banking group. The agreement also requires us
to nominate him for the board of directors at each annual meeting during the
term of his employment agreement. His employment agreement expires by its terms
on December 31, 2001, with provision for annual one year renewals. Effective
January 1, 1999, Mr. Hogan's base salary is $250,000 per year, subject to annual
increases. Mr. Hogan is entitled to merit bonuses at the discretion of the board
of directors. We also pay premiums on a life insurance policy of which he is the
beneficiary. If Mr. Hogan is terminated without cause or if he quits for good
reason, we must pay him a lump sum cash severance amount.

     Mr. Hogan's employment agreement contains change of control provisions
substantially similar to the change of control provisions in Mr. Werner's
employment agreement. In addition, the non-competition and non-solicitation
provisions in Mr. Hogan's agreement are substantially similar to Mr. Werner's
agreement.

     Mr. Larson's employment agreement requires him to head our broker services
group, which administers openclose.com. The agreement also requires us to
nominate him for the board of directors at each annual meeting. His employment
agreement expires February 28, 2002, with provision for annual one year
renewals. Mr. Larson is entitled to merit bonuses based on the number of lenders
and brokers who have committed to openclose.com. We also pay premiums on a life
insurance policy of which he is the beneficiary. If Mr. Larson is terminated
without cause, we must pay him a lump sum cash severance amount and all of
Mr. Larson's stock options become fully vested.

     As additional incentive compensation, Mr. Larson is entitled to receive,
beginning on January 1, 2001, a portion of the pre-tax net profits earned by
openclose.com. His percentage interest peaks at 10% on January 1, 2004.
Mr. Larson may, for 90 days after the earlier of January 1, 2001 or the date his
employment is terminated by us, elect to trade his interest in openclose.com for
(1) cash or common stock in an amount equal to the then current market price of
the common stock less the aggregate exercise price of options to purchase 50,000
shares of common stock which Mr. Larson has foregone in consideration of
receiving a portion of the pre-tax net profits of openclose.com or (2) cash or
common stock equal to the amount of the appraised value of his interest in
openclose.com. After that 90 day period, he may elect to trade his interest in
openclose.com for cash or stock equal to the appraised value of his interest in
openclose.com. Until December 31, 2001, or in the event we sell the assets of
openclose.com, we may redeem his interest in openclose.com for cash equal to the
appraised value of his interest in openclose.com. Mr. Larson's employment
agreement further provides that (1) if the openclose.com assets are distributed
to a separate entity controlled by us and such entity raises money in a debt or
equity financing from unaffiliated third parties, then Mr. Larson will be
entitled to the same percentage of the net proceeds as he is entitled to of the
pre-tax net profits earned by openclose.com and (2) if we discontinue operating
openclose.com, he may elect to have us assign to him all broker and lender
contracts for openclose.com, as well as the then current contract with Fannie
Mae.

     Vesting of the unvested stock options Mr. Larson has been granted under the
stock option plan accelerate to 20% vesting each 6 months following the initial
public offering. If Mr. Larson is terminated for any reason, he is prohibited
from competing with the company for one year following the date of his
termination. In addition, if Mr. Larson is terminated for cause or if he quits
voluntarily, he is prohibited from soliciting our employees or any of the
businesses with whom we have business relationships for a period of one year
after the date of termination.

     In connection with the acquisition of our CLOser software system, we
entered into employment terms with John Buscema. Mr. Buscema is required to be
the president of a division of the company. If we fail to renew his employment
each year, we are required to purchase Mr. Buscema's stock options for 25,000
shares of common stock at a price of $5.00 per share. If Mr. Buscema is
terminated for any reason, he is prohibited from competing with the company for
one year following the date of his termination. In addition, if Mr. Buscema is
terminated for any reason, he is prohibited from soliciting our employees or any
of the businesses with whom we have business relationships for a period of one
year after the date of termination.

     Our employment arrangement with John T. Rodgers makes him an executive vice
president and the head of our consumer services group. Effective April 1, 1999,
his base salary is $200,000. Mr. Rodgers is entitled to

                                       51
bonuses based on merit and on the financial performance of our company. If
Mr. Rodgers is terminated for any reason, he is prohibited from competing with
the company for one year following the date of his termination. In addition, if
Mr. Rodgers is terminated for any reason, he is prohibited from soliciting our
employees or any of the businesses with whom we have business relationships for
a period of one year after the date of termination.

STOCK OPTION PLAN

     We have adopted a stock option plan as of April 24, 1996 to assist us in
attracting and retaining highly competent people to serve as employees,
directors and advisors who will contribute to our success and the success of the
members of our network. We also seek to motivate those people to achieve
long-term objectives which will benefit our stockholders. The following groups
of people are eligible to receive options under the stock option plan:

     o employees

     o directors

     o advisors and consultants, including former employees who have become
       members of our network or have become employees of members of our
       network, at our request

     The compensation committee administers the stock option plan and has wide
discretion to award options. Subject to the provisions of the stock option plan,
the compensation committee determines who will be granted options, the type and
timing of options to be granted, vesting schedules and other terms and
conditions of options, including the exercise price. All of our employees are
granted options. The number of options awarded to a person is based on the
person's potential ability to contribute to our company's success, the person's
position with our company and, in certain instances, length of service. The
compensation committee makes its granting decisions monthly.

     The compensation committee may award "incentive" options or "non-qualified"
options. We have granted both incentive and non-qualified options under the
stock option plan. If the holder of an incentive option exercises the option and
holds the shares of common stock he receives for the holding periods required by
the Internal Revenue Code, the exercise of the option does not result in taxable
income to the holder. We are therefore not entitled to a corresponding tax
deduction. The incentive options we grant under the stock option plan are
designed to meet the requirements of the Internal Revenue Code, including a
requirement that the exercise price is at least 100% of the fair market value of
our common stock on the date we grant the option and that the option has a term
no longer than ten years.

     By contrast, if the holder of a non-qualified option exercises the option,
the holder will be required to recognize taxable income on the date of exercise.
The taxable income is equal to the difference between the fair market value of
the shares acquired by exercising the option and the exercise price of the
option. We are then entitled to a corresponding tax deduction.

     We have reserved 3,000,000 shares of common stock for issuance through our
stock option plan. Only options that are vested may be exercised. The options
terminate after a period of time following the termination of employment.
Options that expire unexercised or that are forfeited become available again for
issuance under the stock option plan. All of the option agreements contain
customary anti-dilution adjustments which provide for adjustments to the
exercise price and number of shares subject to the warrants upon certain events,
such as stock splits, stock dividends and consolidations. The vesting of many of
the options accelerates upon a change of control of the company.

     The compensation committee may not grant options if the granting of the
options would make the total number of shares issuable upon exercise of all
outstanding options exceed 30% of the then outstanding shares of common stock
(including any convertible preferred on an "as if converted" basis). However, a
higher percentage may be approved by at least two-thirds of the outstanding
shares entitled to vote.

                                       52
We have awarded the following options under the stock option plan during
the last fiscal year to the executive officers named in the summary compensation
table:

                             OPTION GRANTS IN 1998
INDIVIDUAL GRANTS
                              -------------------------------------------------------
                                          % OF TOTAL              ASSUMED
                                          OPTIONS                 MARKET                POTENTIAL REALIZABLE VALUE AT
                                          GRANTED TO               VALUE                 ASSUMED RATES OF STOCK PRICE
                               SHARES     EMPLOYEES IN              ON                 APPRECIATION FOR OPTION TERM(3)
                              COVERED BY   FISCAL       EXERCISE   GRANT   EXPIRATION  --------------------------------
NAME                          OPTIONS(1)  YEAR(2)        PRICE     DATE      DATE       0%($)      5%($)       10%($)
----------------------------- ----------  ------------  --------  -------  ----------  --------  ----------  ----------
Seth Werner..................   50,000         8.0%      $11.50   $11.50     5/20/08         --  $  361,614  $  916,402
David Larson.................   50,000         8.0        11.50    11.50     5/20/08         --     361,614     916,402
John J. Hogan................   20,000         3.2        11.50    15.00    10/31/08   $ 70,000     258,668     548,123
John Buscema.................    3,000          .5         7.50    11.50     5/20/08     12,000      33,697      66,984
John Buscema.................    2,500          .4        11.50    15.00    10/31/08      8,750      32,334      68,515
John T. Rodgers..............       --          --           --       --          --         --          --          --
------------------
(1) All options are either incentive stock options or nonqualified stock options
    and generally vest over five years at the rate of 20% of the shares on each
    anniversary of the date of grant. Options expire ten years from the date of
    grant.

(2) Based on options to purchase a total of 628,667 shares of common stock
    granted under the stock option plan in 1998.

(3) Potential realizable values are computed by (1) multiplying the number of
    shares of common stock subject to a given option by the assumed market value
    on the date of grant, (2) assuming that the aggregate stock value derived
    from that calculation compounds at the annual 0%, 5% or 10% rates shown in
    the table for the entire ten-year term of the option and (3) subtracting
    from that result the aggregate option exercise price. The 0%, 5% and 10%
    assumed annual rates of stock price appreciation are mandated by the rules
    of the Securities and Exchange Commission and do not represent our estimate
    or projection of future common stock prices.

     In February 1999, we granted to named executive officers options to
purchase an additional 150,000 shares of common stock at an exercise price of
$15.00 per share and in April 1999, we granted to an executive officer options
to purchase 15,000 shares of common stock at an exercise price of $30.00 per
share.

     None of the named executive officers or directors who have been granted
options under the stock option plan exercised any of the options in fiscal year
1998. The following table sets forth information regarding exercisable and
unexercisable stock options held as of December 31, 1998 by the named executive
officers. There was no public trading market for the common stock as of December
31, 1998. Accordingly, as permitted by the rules of the Securities and Exchange
Commission, the value of unexercised in-the-money options has been calculated by
determining the difference between the exercise price per share payable upon
exercise of such options and an assumed initial public offering price of
$            .

                    AGGREGATED FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES            VALUE OF UNEXERCISED
                                                                 UNDERLYING UNEXERCISED         IN-THE-MONEY OPTIONS AT
                                                               OPTIONS AT FISCAL YEAR-END           FISCAL YEAR END
                                                              ----------------------------    ----------------------------
NAME                                                          EXERCISABLE    UNEXERCISABLE    EXERCISABLE    UNEXERCISABLE
-----------------------------------------------------------   -----------    -------------    -----------    -------------
Seth Werner................................................      50,000          50,000
David Larson...............................................      30,000         170,000
John J. Hogan..............................................      25,000          20,000
John Buscema...............................................      10,500          12,500
John T. Rodgers............................................          --              --              --              --
53
401(K) SAVINGS PLAN

     We maintain a 401(k) savings plan which is intended to satisfy the tax
qualification requirements of the Internal Revenue Code of 1986, as amended. All
of our employees aged 18 or older are eligible to participate in the
401(k) plan after two months of service with us. The 401(k) plan permits
participants to contribute up to 15% of their annual compensation. We match up
to 50% of an employee's contributions to the 401(k) plan, not to exceed 2.5% of
their annual compensation. We contributed $341,000 to the 401(k) plan in 1998.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     Prior to this offering, the compensation committee of the board of
directors consisted of Seth S. Werner, Stephen Green and Michael Lee. The
compensation committee historically recommended to the board of directors
appropriate executive officer compensation and the granting of stock options
under the stock option plan. Mr. Werner did not participate in making
recommendations to the board of directors when his compensation was being
reviewed and approved. The board of directors historically made all final
decisions regarding executive officer compensation and the granting of stock
options under the stock option plan.

                                       54
CERTAIN TRANSACTIONS

VENTURE CAPITAL FINANCINGS

     Each share of preferred stock described in this section will be converted
to common stock upon completion of this offering, and will receive one share of
common stock upon conversion.

     In January 1998, we sold $2,000,000 of Senior Subordinated Convertible
Notes due January 31, 2003 to Canaan Equity, L.P. and Dominion Fund III. In
connection with that sale, we issued warrants to purchase an aggregate of 66,667
shares of our common stock at an exercise price of $7.50 per share. In May 1998,
the principal of the Senior Subordinated Convertible Notes was converted into an
aggregate of 173,912 shares of Series D Preferred Stock based on a conversion
value of $11.50 per share.

     Also in May 1998, we sold an aggregate of 6,520 shares of Series D
Preferred Stock to directors Stephen Green and Michael K. Lee for $11.50 per
share. The aggregate consideration was $74,980. In August 1998, Stephen Green
purchased an additional 8,695 shares of Series D Preferred Stock for $11.50 per
share, for aggregate consideration of $99,992.50.

     In April 1998, we entered into a settlement agreement with FMN Associates
Limited Partnership. FMN Associates was the sole holder of the Series A
Preferred Stock which will convert to common stock upon the closing of this
offering. Under an earlier agreement with FMN Associates, we agreed to become a
licensed insurance agent and pay FMN Associates a portion of the profits we
generated from that business. In consideration of foregoing this right,
FMN Associates received in the settlement agreement warrants to purchase 36,000
shares of our common stock at an exercise price of $11.50 per share.
FMN Associates has since distributed those warrants to its partners.

     In February 1999, we sold $2,000,000 of Senior Subordinated Notes due
February 9, 2000 to Canaan Equity, L.P., Intuit, Inc., Dominion Fund IV, which
is an affiliate of Dominion Fund III, and Technology Crossover Venture funds,
each of whom are principal shareholders. In connection with that sale we issued
warrants to purchase an aggregate of 6,668 shares of common stock at an exercise
price equal to the initial public offering price in this offering. Later the
same month, we sold $8,000,000 of Senior Subordinated Notes due February 26,
2001 to Intuit, Dominion Fund IV and Technology Crossover Ventures. In
connection with that sale we issued warrants to purchase an aggregate of 53,344
shares of common stock at an exercise price equal to the initial public offering
price in this offering. The number of shares of common stock issuable under the
warrants we issued in these financings may be reduced pursuant to a formula
based on the initial public offering price of our common stock and will be
reduced by 26,672 shares upon application of the net proceeds of this offering
to retirement of all the debt held by the holders of these warrants.

     In May 1999, we sold $27.5 million of Senior Subordinated Convertible Notes
due May 5, 2001 to Intuit Inc. The Notes are convertible at Intuit's option into
common stock upon completion of this initial public offering at a conversion
value of $60 per share.

     In May 1999, we sold 250,001 shares of Series F Preferred Stock to Dominion
Fund IV, L.P., Canaan Equity, L.P., and nine funds operated by Technology
Crossover Ventures. The Series F Preferred Stock was sold for $60 per share, for
aggregate consideration of $15.0 million. Each of the purchasers is a principal
stockholder of our company.

     We believe that each of these transactions were completed on terms no less
favorable to us than would have been obtained from unrelated third parties.

TRANSACTIONS WITH SUPERIOR BANK FSB

     We are a party to a sales and marketing agreement with Superior Bank FSB,
which beneficially owns more than 5% of our outstanding securities prior to the
offering. In 1998, we earned approximately $1.6 million in management,
technology and other fees under this sales and marketing agreement.

     In May 1999, we agreed with Superior Bank to redeem their warrants to
purchase 400,000 shares of common stock with exercise prices of $5.00 per share
and a warrant to purchase 100,000 shares of common

                                       55
stock with an exercise price of $7.50 per share. The aggregate redemption price
for the warrants is $25 million. On May 10, 1999 we paid the first $6 million
installment for the warrants. Another $6 million is due on June 30, 1999, with
the remainder due upon the closing of this offering. We also agreed to purchase
from Superior certain rights to CLOser and the related intellectual property for
an aggregate purchase price of $3.5 million. This purchase was completed on
May 10, 1999.

     We believe that the terms of these transactions are no less favorable to us
than would have been obtained in arm's length transactions.

TRANSACTIONS WITH DOMINION VENTURES, INC.

     We have obtained a lease line of credit from Dominion Ventures, Inc., an
affiliate of two of our principal stockholders: Dominion Fund III and Dominion
Fund IV, L.P. Dominion Ventures has agreed to acquire computer and office
equipment when we request it, and to lease the equipment to us. Upon signing the
agreement we were required to pay Dominion Ventures advance rent of
approximately $89,667. In addition, each time Dominion Ventures leases us
equipment, we are required to make monthly rental payments equal to 2.81% of the
cost of the equipment. Prior to the end of the lease term on each piece of
equipment, we have an option to purchase the equipment for its fair market
value. The total value of the equipment leased under the lease line of credit
cannot exceed $1,595,500.

     In consideration of Dominion Ventures providing us with the lease line of
credit, we issued to Dominion Fund III a warrant to purchase 9,800 shares of our
Series D Preferred Stock at an exercise price of $11.50 per share and issued to
Dominion Capital Management LLC a warrant to purchase 8,850 shares of our
Series D Preferred Stock at an exercise price of $11.50 per share. Upon closing
of this offering, those warrants will become warrants to purchase 18,650 shares
of our common stock at an exercise price of $11.50 per share. We believe that
the lease line of credit we obtained from Dominion Ventures contains rental
rates and terms no less favorable to us than would have been obtained in an
arm's length transaction with another lease line of credit provider.

TRANSACTIONS WITH INTUIT LENDER SERVICES

         On May 26, 1999, we entered into a distribution, marketing, facilities
and services agreement with Intuit Lender Services, a wholly-owned subsidiary of
Intuit Inc., which is a principal stockholder in our company. Under the
agreement, we will provide sub-prime mortgage support services to Intuit Lender
Services and will pay it fees for services and facilities. We also will pay an
exclusivity fee on August 10, 1999 if Intuit Lender Services has begun sub-prime
services by that date, and will pay an additional annual exclusivity fee. We
believe this agreement contains terms no less favorable to us than would have
been obtained in an arm's-length transaction.

TRANSACTIONS WITH EXECUTIVE OFFICERS

     In 1997, we merged OnLine Capital into our company and paid for the merger
with a combination of cash and common stock for an approximate aggregate
purchase price of $780,000. In addition, we entered into an employment agreement
with John Hogan, who was the sole shareholder of OnLine Capital and who is now
an executive vice president and a member of our board of directors. In 1998, we
revised Mr. Hogan's compensation. In consideration of the revisions, Mr. Hogan,
or any entity designated by Mr. Hogan, is entitled to receive cash in an amount
equal to a percentage of the quarterly pre-tax profits of our mortgage services
group and Mr. Hogan received 100,000 shares of common stock. The amount of cash
which can be earned is capped at $3,400,000 and Mr. Hogan's right to earn the
cash consideration ends on June 30, 2001. Mr. Hogan has designated
J.J.H. Financial, LLC, a company principally owned by him, as the recipient of
the cash consideration. Through the date of this prospectus, we have paid
J.J.H. Financial $1,634,000. We believe that the revised terms are no less
favorable to us than would have been obtained in an arm's length transaction.

                                       56
PRINCIPAL STOCKHOLDERS

     The following table sets forth information regarding the beneficial
ownership of our common stock as of May 28, 1999, and as adjusted as if the
convertible notes and all of the preferred stock, other than the Special
Preferred Stock (Northern California Division), had converted to common stock
and the sale of the common stock we are offering had already taken place. As of
that date, there were 43 holders of record of our common stock. We have listed
each person that beneficially owns more than 5% of the outstanding common stock,
each of our directors and executive officers identified in the executive
compensation table who beneficially owns any common stock and all directors and
executive officers as a group. Unless otherwise indicated, each of the
stockholders has sole voting and investment power with respect to the shares
beneficially owned. Unless otherwise noted in the footnotes, the address for
each principal stockholder is 8751 Broward Boulevard, Fifth Floor, Plantation,
FL 33324.

     For purposes of calculating amounts beneficially owned before the offering,
the number of shares deemed outstanding includes (1) 1,392,624 shares of common
stock outstanding as of May 28, 1999; (2) 3,906,407 shares of common stock
issuable upon conversion of convertible notes and preferred stock, other than
the Special Preferred Stock (Northern California Division); and (3) the shares
of common stock subject to options or warrants held by that person that are
currently exercisable within 60 days after May 28, 1999. It excludes shares of
common stock issuable upon conversion of the Special Preferred Stock (Northern
California Division) upon closing of this offering. Of the 1,000 outstanding
shares of Special Preferred Stock (Northern California Division), 660 shares
will convert, upon closing of this offering, to the number of shares of common
stock as is obtained by dividing $2,640,000 by the initial public offering
price. The remaining 340 shares will remain outstanding.

     For purposes of calculating the percentage beneficially owned after the
offering, the number of shares deemed outstanding includes (1) all shares deemed
to be outstanding before the offering and (2) shares being sold in this
offering, assuming no exercise of the underwriters' overallotment option.
PERCENT OF COMMON STOCK
                                                                NUMBER OF SHARES OF    ---------------------------------
NAME AND ADDRESS                                                 COMMON STOCK          BEFORE OFFERING    AFTER OFFERING
-------------------------------------------------------------   -------------------    ---------------    --------------
Stephen Green(1),(2).........................................        1,226,519               22.8%
Canaan Partners(2)...........................................        1,215,647               22.6
Intuit Inc.(3)...............................................        1,015,079               20.0
Michael K. Lee(4),(5)........................................          896,361               16.7
Dominion Ventures(5).........................................          892,014               16.6
Technology Crossover Ventures(6).............................          646,741               12.2
Superior Bank, FSB(7)........................................          400,000                7.3
Seth S. Werner(8)............................................          257,500                5.0
George A. Naddaff(9).........................................          232,455                4.5
John Hogan(10)...............................................          166,168                3.3
David Larson(11).............................................           70,000                1.4
John T. Rodgers(12)..........................................           35,561                  *
John Buscema(13).............................................           34,600                  *
All directors and executive officers as a group
  (9 persons)................................................        2,919,164               50.3
------------------
*   Represents less than 1%.

(1)  Mr. Green is a member of our board of directors and is a partner in Canaan
     Partners. Mr. Green has shared voting power with respect to the shares
     owned by Canaan Partners and shared investment power with respect to the
     shares and warrants owned by Canaan Partners. See footnote (2).

(2)  Includes 55,769 shares beneficially owned by Canaan Capital Limited
     Partnership; 465,444 shares beneficially owned by Canaan Capital Offshore
     Limited Partnership, C.V.; 51,733 shares beneficially owned by Canaan
     Ventures II Limited Partnership; 81,600 shares beneficially owned by Canaan
     Ventures II Offshore, C.V.; and 476,101 shares beneficially owned by Canaan
     Equity, L.P. Canaan Equity, L.P. also holds warrants to purchase common
     stock in the following amounts and at the following prices: (a) 1,667 at
     the initial public offering price, though the number of shares subject to
                            the warrant may be reduced by a formula based on the

                                              (Footnotes continued on next page)

                                       57
(Footnotes continued from previous page)
     initial offering price; and (b) 83,333 at $7.50 per share. The address for
     each of these entities is 105 Rowayton Avenue, Rowayton, Connecticut 06853.

(3)  Includes 521,739 shares of common stock beneficially owned by Intuit Inc.,
     458,333 shares of common stock issuable to Intuit upon conversion of the
     12% Senior Subordinated Convertible Notes due May 5, 2001 and warrants to
     purchase 35,007 shares of common stock at the initial public offering
     price, though the number of shares subject to the warrant may be reduced by
     a formula based on the initial offering price and will be further reduced
     by 16,670 shares upon application of the net proceeds of this offering to
     retirement of debt held by Intuit Inc. The address for Intuit Inc. is 2535
     Garcia Avenue, Mountain View, California 94043.

(4)  Mr. Lee is a member of our board of directors and is a principal in the
     general partner of the Dominion Ventures entities. Mr. Lee has sole voting
     power with respect to the shares owned by Dominion Ventures and has shared
     investment power with respect to the shares and warrants owned by Dominion
     Ventures. See footnote (5).

(5)  Includes 766,693 shares beneficially owned by Dominion Fund III and 58,334
     shares beneficially owned by Dominion Fund IV, L.P. Dominion Fund III holds
     a warrant to purchase 9,800 shares of Series D Preferred Stock at $11.50
     per share and Dominion Capital Management LLC holds a warrant to purchase
     8,850 shares of Series D Preferred Stock at $11.50 per share. Those
     warrants will become warrants to purchase 18,650 shares of common stock at
     $11.50 per share upon closing of this offering. Dominion Fund III also
     holds warrants to purchase 33,334 shares of common stock at $7.50 per
     share. Dominion Fund IV, L.P. holds warrants to purchase 15,003 shares of
     common stock at the initial public offering price, though the number of
     shares subject to the warrant may be reduced by a formula based on the
     initial offering price and will be further reduced by 6,668 shares upon
     application of the net proceeds of this offering to retirement of the debt
     held by Dominion Fund IV, L.P. The address for Dominion Fund III, Dominion
     Capital Management LLC and Dominion Fund IV, L.P. is 44 Montgomery Street,
     #4200, San Francisco, California 94104.

(6)  Consists of 257,559 shares beneficially owned by Technology Crossover
     Ventures II, L.P. and warrants to purchase 3,987 shares of common stock at
     the initial public offering price; 8,367 shares beneficially owned by TCV
     II, V.O.F. and warrants to purchase 130 shares of common stock at the
     initial public offering price; 198,019 shares beneficially owned by TCV II
     (Q), L.P. and warrants to purchase 3,065 shares of common stock at the
     initial public offering price; 35,141 shares beneficially owned by TCV II
     Strategic Partners, L.P. and warrants to purchase 545 shares of common
     stock at the initial public offering price; 39,324 shares beneficially
     owned by Technology Crossover Ventures II, C.V. and warrants to purchase
     608 shares of common stock at the initial public offering price; and
     100,000 shares beneficially owned by TCV III (GP), TCV III L.P., TCV III
     (Q) and TCV III Strategic Partners, L.P. (collectively, the "TCV Funds").
     The number of shares subject to warrants held by the TCV Funds may be
     reduced by a formula based on the initial offering price and will be
     further reduced by 3,334 shares upon application of the net proceeds of
     this offering to retirement of debt held by the TCV Funds. These entities
     also have an option to purchase up to $3 million of our common stock from
     the underwriters in this offering at the initial public offering price per
     share. Jay C. Hoag and Richard H. Kimball are the sole managing members of
     Technology Crossover Management II, L.L.C. ("TCM II"), the general partner
     of each of the TCV Funds. Consequently, TCM II and Messrs. Hoag and Kimball
     may each be deemed to beneficially own all of the shares held by the TCV
     Funds. TCM II and Messrs. Hoag and Kimball each disclaim beneficial
     ownership of such shares, except to the extent of their pecuniary interests
     in those shares. The address for each of these entities is 575 High Street,
     Suite 400, Palo Alto, California 94301.

(7)  Consists of 400,000 shares of common stock issuable pursuant to presently
     exercisable warrants. On June 30, 1999, we expect to repurchase 100,000 of
     the warrants from Superior Bank for an aggregate price of $6 million. In
     addition, a portion of the net proceeds of this offering is expected to be
     used to repurchase the remaining warrants for an aggregate price of
     $13 million. The address for Superior Bank, FSB is One Lincoln Centre,
     Oakbrook Terrace, Illinois 60181.

(8)  Consists of 197,500 shares of common stock beneficially owned by The Seth
     Werner Revocable Trust dated October 1, 1996, presently exercisable options
     to purchase 50,000 shares of common stock at $5.50 per share and presently
     exercisable options to purchase 10,000 shares of common stock at $11.50 per
     share.

(9)  Consists of 72,727 shares of common stock, presently exercisable options to
     purchase 50,000 shares of common stock at $5.50 per share, presently
     exercisable options to purchase 36,576 shares of common stock at $8.00 per
     share, presently exercisable options to purchase 36,576 shares of common
     stock at $10.50 per share and presently exercisable options to purchase
     36,576 shares of common stock at $13.00 per share, each held by FirstMN,
     LLC, of which George A. Naddaff, a member of our board of directors, is 50%
     owner.

(10) Consists of 141,168 shares of common stock and presently exercisable
     options to purchase 25,000 shares of common stock at $7.50 per share.

(11) Consists of presently exercisable options to purchase 60,000 shares of
     common stock at $5.50 per share and presently exercisable options to
     purchase 10,000 shares of common stock at $11.50 per share.

(12) Consists of 27,540 shares of common stock and presently exercisable
     warrants to purchase 8,021 shares of common stock at $7.50 per share.

(13) Consists of presently exercisable warrants to purchase 20,000 shares of
     common stock at $5.00 per share, presently exercisable options to purchase
     6,000 shares of common stock at $5.50 per share and presently exercisable
     options to purchase 8,600 shares of common stock at $7.50 per share.

                                       58
DESCRIPTION OF CAPITAL STOCK

GENERAL

     We are authorized to issue up to 30,000,000 shares of common stock, $.01
par value per share, and 15,000,000 shares of preferred stock, $.01 par value
per share. At the date of this prospectus, 1,392,624 shares of common stock and
3,449,074 shares of preferred stock were issued and outstanding. All of the
outstanding capital stock is and will be, fully paid and non-assessable.

COMMON STOCK

     Holders of common stock are entitled to one vote per share. All actions
submitted to a vote of stockholders are voted on by holders of common stock
voting together as a single class. Holders of common stock are not entitled to
cumulative voting in the election of directors.

     Holders of common stock are entitled to receive dividends in cash or in
property on an equal basis, if and when dividends are declared on the common
stock by our board of directors, subject to any preference in favor of
outstanding shares of preferred stock, if there are any.

     In the event of liquidation of our company, all holders of common stock
will participate on an equal basis with each other in our net assets available
for distribution after payment of our liabilities and payment of any liquidation
preferences in favor of outstanding shares of preferred stock, if there are any.

     Holders of common stock are not entitled to preemptive rights and the
common stock is not subject to redemption.

     The rights of holders of common stock are subject to the rights of holders
of any preferred stock which we designate or have designated. The rights of
preferred stockholders may adversely affect the rights of the common
stockholders.

PREFERRED STOCK

     Our board of directors has the ability to issue up to 15,000,000 shares of
preferred stock in one or more series, without stockholder approval. The board
of directors may designate for the series (1) the number of shares and name of
the series, (2) the voting powers of the series, including the right to elect
directors, if any, (3) the dividend rights and preferences, if any,
(4) redemption terms, if any, (5) liquidation preferences and the amounts
payable on liquidation or dissolution, (6) the terms upon which such series may
be converted into any other series or class of our stock, including the common
stock and (7) any other terms that are not prohibited by law.

     It is impossible for us to state the actual effect it will have on common
stock holders if the board of directors designates a new series of preferred
stock. The effects of such a designation will not be determinable until the
rights accompanying the series have been designated. The issuance of preferred
stock could adversely affect the voting power, liquidation rights or other
rights held by owners of common stock or other series of preferred stock. The
board of directors' authority to issue preferred stock without shareholder
approval could make it more difficult for a third party to acquire control of
our company, and could discourage any such attempt. We have no present plans to
issue any additional shares of preferred stock.

     All outstanding shares of preferred stock (other than Special Preferred
Stock (Northern California Division)) will automatically convert into an
aggregate of 3,448,074 shares of common stock upon closing of this offering.

  SPECIAL PREFERRED STOCK (NORTHERN CALIFORNIA DIVISION)

     Of the 1,000 outstanding shares of Special Preferred Stock (Northern
California Division) 660 shares will convert, upon closing of this offering, to
the number of shares of common stock as is obtained by dividing $2,640,000 by
the initial public offering price. We currently are negotiating with the holder
of all of the outstanding shares of Special Preferred Stock (Northern California
Division) to convert all of the outstanding Special Preferred Stock to the
number of shares of common stock as is obtained by dividing

                                       59
$2,040,000 by the initial public offering price, pursuant to a recapitalization
agreement. If we are unable to successfully negotiate a 100% conversion of the
Special Preferred Stock, 340 shares will remain outstanding following closing of
this offering.

     The rights, preferences and limitations of the Special Preferred Stock are
summarized below. Because it is a summary, you should refer to our Articles of
Incorporation, which contain the complete designation of the rights, preferences
and limitations of the Special Preferred Stock.

  Voting Rights

     The holder of Special Preferred Stock is entitled to vote on any action
that would (1) change any rights of the Special Preferred Stock or increase or
decrease the number of authorized shares of Special Preferred Stock, (2) create
any new series or class of stock that is senior to or on a parity with the
Special Preferred Stock, (3) create any obligations that would be convertible
into or exchangeable for shares of stock senior to or on a parity with the
Special Preferred Stock, (4) create any option rights to purchase shares of
stock senior to or on a parity with the Special Preferred Stock or
(5) reclassify any class or series of common stock into shares of stock senior
to or on a parity with the Special Preferred Stock. The Special Preferred Stock
carries no additional voting rights beyond those required by Florida law.

  Dividends

     Upon conversion of 660 shares of Special Preferred Stock, the holder of
Special Preferred Stock will be entitled to receive quarterly dividends in cash
equal to 6.8% of the net profits of our Northern California Division, which
includes the operations of Advantage Financial, Princeton Capital and Western
America Mortgage. This dividend has a preference over any other dividend payable
to holders of our capital stock. The holder is not entitled to any other
dividends.

  Liquidation Rights

     Upon liquidation of the company or the Northern California Division, the
holder of Special Preferred Stock will be entitled to receive the following
before any payment or distribution on any class or series of stock is made:
(1) 6.8% of the fair market value of the Northern California Division, (2) an
assignment of all of our rights to mortgage loans that have been originated and
processed through the joint efforts of our company and the holder, but which
have not yet been closed and (3) a return of the holder's capital contributions
provided to the Northern California Division (presently $20,000). Such amounts
are payable solely from the assets of the Northern California Division, and not
from any other of our assets.

  Redemption Rights

     If (1) we and the holder of the Special Preferred Stock mutually agree to
terminate our relationship within the Northern California Division, (2) we fail
to pay a dividend to the holder within 45 days after our board of directors has
legally approved the dividend or (3) we fail to maintain sufficient financing
arrangements, such as warehouse lines of credit, to carry out our obligations in
the Northern California Division, then we are required to redeem the Special
Preferred Stock. The redemption price is payable in cash or assets equal to 6.8%
of the fair market value of the Northern California Division.

                                       60
OPTIONS AND WARRANTS

     As of May 27, 1999, 1,808,888 options were outstanding under our stock
option plan and 1,190,487 options were available for issuance under our stock
option plan. In addition to options granted through the stock option plan, the
following options and warrants were outstanding as of May 27, 1999 and except as
noted below are presently exercisable for shares of common stock:
NUMBER OF SHARES PURCHASABLE              EXERCISE PRICE
----------------------------     --------------------------------
572,500(1)                         $ 5.00
            62,484                             5.50
           281,745(2)                          7.50
            36,576                             8.00
            36,576                            10.50
            54,650(3)                         11.50
            36,576                            13.00
            84,016(4)            Offering price in this offering
------------------
(1) Includes warrants to purchase 100,000 shares of common stock held by
    Superior Bank which we are required to redeem for $6 million by June 30,
    1999. Also includes warrants to purchase 200,000 shares of common stock held
    by Superior Bank which we will redeem from the net proceeds of this
    offering.

(2) Includes warrants to purchase 100,000 shares of common stock held by
    Superior Bank which we will redeem from the net proceeds of this offering.

(3) Includes warrants to purchase 18,650 shares of Series D Preferred Stock at
    $11.50 per share which will become warrants to purchase 18,650 shares of
    common stock at $11.50 per share upon closing of this offering.

(4) The number of shares subject to warrants having an exercise price equal to
    the offering price in this offering may be reduced by a formula based on the
    offering price. In addition, the number of shares subject to these warrants
    will be further reduced by 36,674 shares upon application of the net
    proceeds of the offering to retirement of all the debt held by certain
    holders of these warrants. Warrants to purchase 3,175 shares of common stock
    are not presently exercisable.

     Holders of options and warrants do not have any of the rights or privileges
of our stockholders, including voting rights, prior to exercise of the options
and warrants. We have reserved sufficient shares of authorized common stock to
cover the issuance of common stock subject to the options and warrants.

CERTAIN STATUTORY PROVISIONS AND PROVISIONS OF OUR ARTICLES OF INCORPORATION AND
BYLAWS

     The following provisions of the Florida Business Corporation Act and our
articles of incorporation and bylaws could have the effect of preventing or
delaying a person from acquiring or seeking to acquire a substantial equity
interest in, or control of, our company.

  STATUTORY PROVISIONS

     We are subject to several anti-takeover provisions under Florida law that
apply to public corporations organized under Florida law unless the corporation
has elected to opt out of those provisions in its articles of incorporation or
its bylaws. We have not elected to opt out of these provisions.

     The Florida Business Corporation Act prohibits the voting of shares in a
publicly held Florida corporation that are acquired in a "control share
acquisition" unless (1) the board of directors approves the control share
acquisition or (2) the holders of a majority of the corporation's voting shares
(not counting shares held by officers of the corporation, inside directors or
the acquiring party) approve the granting of voting rights to the acquiring
party. A "control share acquisition" is defined as an acquisition that
immediately thereafter entitles the acquiring party, directly or indirectly, to
vote in the election of directors within any of the following ranges of voting
power:

          o 1/5 or more but less than 1/3

          o 1/3 or more but less than a majority

          o a majority or more

                                       61
There are some exceptions to the "control share acquisition" rules.

     The Florida Business Corporation Act also contains an "affiliated
transaction" provision that prohibits a publicly-held Florida corporation from
engaging in a broad range of business combinations or other extraordinary
corporate transactions with an "interested shareholder" unless

          o the transaction is approved by a majority of disinterested directors
            before the person becomes an interested shareholder

          o the corporation has not had more than 300 stockholders of record
            during the past three years

          o the interested shareholder has owned at least 80% of the
            corporation's outstanding voting shares for at least five years

          o the interested shareholder is the beneficial owner of at least 90%
            of the voting shares (excluding shares acquired directly from the
            corporation in a transaction not approved by a majority of the
            disinterested directors)

          o consideration is paid to the holders of the corporation's shares
            equal to the highest amount per share paid by the interested
            shareholder for the acquisition of the corporation's shares in the
            last two years or fair market value, and certain other conditions
            are met or

          o the transaction is approved by the holders of two-thirds of the
            Company's voting shares other than those owned by the interested
            shareholder.

     An "interested shareholder" is defined as a person who, together with
affiliates and associates, beneficially owns more than 10% of a company's
outstanding voting shares. The Florida Business Corporation Act defines
"beneficial ownership" in more detail.

  INDEMNIFICATION AND LIMITATION OF LIABILITY

     The Florida Business Corporation Act authorizes Florida corporations under
certain circumstances to indemnify any person who was or is a party to any
proceeding (other than an action by, or in the right of, the corporation), by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation. The indemnity also applies to any person who is or was serving
at the request of the corporation as a director, officer, employee, or agent of
another corporation or other entity. The indemnification applies against
liability incurred in connection with such a proceeding, including any appeal
thereof, if the person acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation. To
be eligible for indemnity with respect to any criminal action or proceeding, the
person must have had no reasonable cause to believe his conduct was unlawful.

     In the case of an action by or on behalf of a corporation, indemnification
may not be made if the person seeking indemnification is found liable, unless
the court in which the action was brought determines such person is fairly and
reasonably entitled to indemnification.

     The indemnification provisions of the Florida Business Corporation Act
require indemnification if a director, officer, employee or agent has been
successful in defending any action, suit or proceeding to which he was a party
by reason of the fact that he is or was a director, officer, employee or agent
of the corporation. The indemnity covers expenses actually and reasonably
incurred in defending the action.

     The indemnification authorized under Florida law is not exclusive and is in
addition to any other rights granted to officers and directors under the
articles of incorporation or bylaws of the corporation or any agreement between
officers and directors and the corporation. Each of our directors and executive
officers, other than John Buscema, has signed an indemnification agreement. The
indemnification agreements provide for full indemnification under Florida law.
The indemnification agreements also provide that we will indemnify the officer
or director against liabilities and expenses incurred in a proceeding to which
the officer or director is a party or is threatened to be made a party, or in
which the officer or director is called upon to testify as a witness or
deponent, in each case arising out of actions of the officer or director in his
official capacity. Exceptions to this additional indemnification include
criminal violations by the officer or director,

                                       62
transactions involving an improper personal benefit to the officer or director,
unlawful distributions of our assets under Florida law and wilful misconduct or
conscious disregard for our best interests.

     Our bylaws provide for the indemnification of directors, former directors
and officers to the maximum extent permitted by Florida law and for the
advancement of expenses incurred in connection with the defense of any action,
suit or proceeding that the director or officer was a party to by reason of the
fact that he is or was a director or officer of our corporation, or at our
request, a director, officer, employee or agent of another corporation. Our
bylaws also provide that we may purchase and maintain insurance on behalf of any
director against liability asserted against the director in such capacity.

     Under the Florida Business Corporation Act, a director is not personally
liable for monetary damages to us or to any other person for acts or omissions
in his capacity as a director except in certain limited circumstances. Those
circumstances include certain violations of criminal law and transactions in
which the director derived an improper personal benefit. As a result,
stockholders may be unable to recover monetary damages against directors for
actions taken by them which constitute negligence or gross negligence or which
are in violation of their fiduciary duties, although injunctive or other
equitable relief may be available.

TRANSFER AGENT AND REGISTRAR

     The transfer agent for our common stock is                    .

                                       63
SHARES ELIGIBLE FOR FUTURE SALE

     Prior to this offering there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect the market price of our common stock. Furthermore, since only a
limited number of shares will be available for sale shortly after this offering
because of certain contractual and legal restrictions on resale, sales of
substantial amounts of common stock in the public market after the restrictions
lapse could adversely affect the market price of our common stock and our
ability to raise capital in the future.

     Upon completion of this offering, we will have outstanding
                      shares of common stock, assuming no exercise of the
underwriters' over-allotment option and no exercise of outstanding options or
warrants, based on shares outstanding as of May 28, 1999. Of these shares, the
                 shares of common stock sold in this offering will be freely
tradable, unless shares are purchased by an existing "affiliate". Our affiliates
are people or entities that directly or indirectly control our company, are
controlled by our company, or are under common control with our company. For
instance, our directors, executive officers and principal stockholders are
deemed to control our company, and thus are affiliates.

     The remaining                   outstanding shares of common stock will be
"restricted" securities within the meaning of Rule 144 under the Securities Act
of 1933, as amended, and may not be sold in the absence of registration under
the securities laws unless an exemption from registration is available.

     One of those exemptions is Rule 144. In general, Rule 144 allows a
shareholder (including an affiliate) who has beneficially owned restricted
shares for at least one year to sell within any three-month period shares which
do not exceed the greater of (1) 1% of the outstanding shares of common stock of
the company or (2) the average weekly trading volume during the four calendar
weeks preceding the sale. Sales under Rule 144 also must be sold through brokers
or "market makers" and there must be current public information about the
company available. Shares properly sold in reliance on Rule 144 to persons who
are not affiliates become freely tradable without restriction or registration
under the securities laws. The Rule 144 restrictions are not applicable to a
person who has beneficially owned shares for at least two years (including
"tacked on" holding periods) and who is not an affiliate of the company.

     Another exemption is Rule 701 of the Securities Act of 1933. Subject to
certain limitations on the aggregate offering price of a transaction and other
conditions, Rule 701 may be relied upon by stockholders with respect to the
resale of securities originally purchased by employees, directors, officers and
consultants under stock options issued under our stock option plan. To be
eligible for resale under Rule 701, shares must have been issued pursuant to
written compensatory benefit plans or written contracts relating to the
compensation of such persons. In addition, the Securities and Exchange
Commission has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, including exercises after the date of this
offering. Securities issued in reliance on Rule 701 are restricted securities.
Subject to the contractual restrictions described below, securities may be sold
under Rule 701 beginning 90 days after the date of this prospectus by affiliates
if they comply with Rule 144, other than the holding period requirement, and by
non-affiliates, subject only to the manner of sale provisions of Rule 144.

     All of the executive officers and directors and certain stock holders and
option holders have signed lock-up agreements in favor of the underwriters which
prohibit them from selling or otherwise disposing of any shares of common stock
or convertible securities for a period of 180 days after the date of this
prospectus. Credit Suisse First Boston currently has no plans to release any
portion of the securities subject to these lock-up agreements. When determining
whether or not to release shares from lock-up agreements, Credit Suisse First
Boston will consider, among other factors, the stockholder's reasons for
requesting the release, the number of shares for which the release is being
requested and market conditions at the time.

     Following this offering, we intend to file registration statements covering
approximately 1,800,000 shares of common stock issued pursuant to the exercise
of stock options issued under our stock option plan. Accordingly, shares to be
registered in this manner will be available for sale in the open market, except
to the extent the shares are subject to the lock-up agreements. Affiliates will
still be required to comply with Rule 144.

                                       64
As a result of Rule 144, Rule 701, the lock-up agreements and our intention
to file registration statements covering shares of common stock subject to
outstanding stock options under our stock option plan, approximately
shares will be eligible for sale in the public market during the 180 days after
the date of this prospectus. In addition, approximately       shares will become
eligible for sale in the public market upon expiration of the lock-up agreements
180 days after the date of this prospectus.

                                       65
UNDERWRITING

     Under the terms and subject to the conditions contained in an underwriting
agreement dated                   , the underwriters named below for whom Credit
Suisse First Boston Corporation, BT Alex. Brown Incorporated and U.S. Bancorp
Piper Jaffray are acting as representatives, have severally but not jointly
agreed to purchase from Mortgage.com the following respective numbers of shares
of common stock:
NUMBER OF
                                  UNDERWRITERS                                       SHARES
--------------------------------------------------------------------------------   ----------
Credit Suisse First Boston Corporation..........................................
BT Alex. Brown Incorporated.....................................................
U.S. Bancorp Piper Jaffray......................................................

                                                                                   ----------
     Total......................................................................
                                                                                   ----------
                                                                                   ----------
The underwriting agreement provides that the underwriters are subject to
certain conditions and that the underwriters will be obligated to purchase all
of the shares of the common stock offered hereby (other than those shares
covered by the over-allotment option described below) if any are purchased. The
underwriting agreement provides that, in the event of a default by an
underwriter, in certain circumstances the purchase commitments of non-defaulting
underwriters may be increased or the underwriting agreement may be terminated.

     Mortgage.com has granted to the underwriters an option, expiring on the
30th day after the date of this prospectus, to purchase up to
additional shares of common stock at the initial public offering price, less
underwriting discounts and commissions, all as set forth on the cover page of
this prospectus. Such option may be exercised only to cover over-allotments in
the sale of shares of common stock. To the extent such option is exercised, each
underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of common stock as
it was obligated to purchase pursuant to the underwriting agreement.

     Mortgage.com has been advised by the representatives that the underwriters
propose to offer the shares of common stock to the public initially at the
public offering price set forth on the cover page of this prospectus and,
through the representatives, to certain dealers (who may include the
underwriters) at such price less a concession of $     per share, and the
underwriters and such dealers may allow a discount of $     per share on sales
to certain other dealers. After the offering, the public offering price and
concession and discount to dealers may be changed by the representatives.

     The following table summarizes the compensation to be paid to the
underwriters by Mortgage.com and the expenses payable by Mortgage.com:
TOTAL
                                                                             --------------------------------
                                                                              WITHOUT             WITH
                                                                PER SHARE    OVER-ALLOTMENT    OVER-ALLOTMENT
                                                                ---------    --------------    --------------
Underwriting discounts and commissions.......................
Expenses payable.............................................
The representatives have informed Mortgage.com that they do not expect
discretionary sales by the underwriters to exceed 5% of the shares being offered
hereby.

     Mortgage.com, its officers and directors, and certain other existing
stockholders and optionholders of Mortgage.com have agreed that they will not
offer, sell, contract to sell, pledge or otherwise dispose of, directly or
indirectly, or, in the case of Mortgage.com, file with the Securities and
Exchange Commission, a registration statement relating to any shares of common
stock or securities exhangeable or exercisable for or convertible into shares of
common stock or publicly disclose the intention to do any of the foregoing
without

                                       66
the prior written consent of Credit Suisse First Boston for a period of
180 days after the date of this prospectus, except under certain circumstances.

     Of the       shares of common stock to be sold in this offering, the
underwriters have reserved for sale, at the price to public set forth on the
cover page of this prospectus, up to       shares as follows: (1) at
Mortgage.com's request, up to       shares for Mortgage.com's directors,
officers, employees and business associates and (2) up to an additional
      shares for a holder of Mortgage.com's preferred stock in connection with a
pre-existing contractual agreement between Mortgage.com and such holder. As a
result, the number of shares of common stock available for sale to the general
public will be reduced to the extent such persons purchase the reserved shares.
The underwriters will offer to the general public, on the same basis as the
other shares to be sold in this offering, any reserved shares that are not so
purchased.

     Mortgage.com has agreed to indemnify the underwriters against certain
liabilities, including civil liabilities under the Securities Act, or contribute
to payments which the underwriters may be required to make in respect thereof.

     Mortgage.com has applied to list the shares of common stock on The Nasdaq
Stock Market's National Market under the symbol "MDCM."

     Prior to the offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between Mortgage.com and the representatives. The principal factors considered
in determining the public offering price will include:

     o the information set forth in this prospectus and otherwise available to
       the representatives;

     o the history of, and the prospects for, Mortgage.com and the mortgage
       banking industry;

     o an assessment of Mortgage.com's management;

     o the prospects for, and the timing of, future earnings of Mortgage.com;

     o the present state of Mortgage.com's development and its current financial
       condition;

     o the general condition of the securities markets at the time of the
       offering;

     o the recent market prices of, and the demand for, publicly-traded common
       stock of companies in businesses similar to those of Mortgage.com;

     o market conditions for initial public offerings; and

     o other relevant factors.

     There can be no assurance that an active trading market will develop for
the common stock or that the common stock will trade in the market subsequent to
the offering at or above the initial public offering price.

     The representatives, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position. Stabilizing transactions permit bids
to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
shares of the common stock in the open market after the distribution has been
completed to cover syndicate short positions. Penalty bids permit the
underwriters' representatives to reclaim a selling concession from a syndicate
when shares of the common stock originally sold by such syndicate member are
purchased in a syndicate covering transaction to cover syndicate short
positions. Such stabilizing transactions, syndicate covering transactions and
penalty bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of such transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

                                       67
NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

     The distribution of the common stock in Canada is being made only on a
private placement basis and is exempt from the requirement that we prepare and
file a prospectus with the securities regulatory authorities in each province
where trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws which
will vary depending on the relevant jurisdiction, and which may require resales
to be made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.

REPRESENTATIONS OF PURCHASERS

     Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that:

     o such purchaser is entitled under applicable provincial securities laws to
       purchase such common stock without the benefit of a prospectus qualified
       under such securities laws,

     o where required by law, that such purchaser is purchasing as principal and
       not as agent, and

     o such purchaser has reviewed the text above under "Resale Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

     The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Section 32 of the Regulation under the Securities Act (Ontario). As a result,
Ontario purchasers must rely on other remedies that may be available, including
common law rights of action for damages or rescission or rights of action under
the civil liability provisions of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

     All of the issuer's directors and officers as well as the experts named in
this prospectus may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada upon
the issuer or such persons. All or a substantial portion of the assets of the
issuer and such persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or such persons in
Canada or to enforce a judgment obtained in Canadian courts against such issuer
or persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

     A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to the offering. Such a report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under the
same prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

     Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.

                                       68
LEGAL MATTERS

     The validity of the shares of common stock issued in this offering will be
passed upon for us by the law firm of Foley & Lardner, Jacksonville, Florida. An
individual attorney at Foley & Lardner beneficially owns 4,347 shares of our
common stock. Certain legal matters in connection with this offering will be
passed upon for the underwriters by the law firm of Testa, Hurwitz &
Thibeault, LLP, Boston, Massachusetts.

                                    EXPERTS

     Our financial statements as of December 31, 1997 and 1998, and for each of
the three years in the period ended December 31, 1998, have been included in
this prospectus and in the Registration Statement filed with the Securities and
Exchange Commission in reliance upon the report of KPMG LLP, independent
certified public accountants, upon its authority as experts in accounting and
auditing. KPMG LLP's report on the financial statements can be found at the end
of this prospectus and in the Registration Statement.

                             ADDITIONAL INFORMATION

     We have filed with the Securities and Exchange Commission a Registration
Statement (of which this prospectus is a part) under the Securities Act of 1933,
as amended, relating to the common stock we are offering. This prospectus does
not contain all the information that is in the Registration Statement. Certain
portions of the Registration Statement have been omitted as allowed by the rules
and regulations of the Securities and Exchange Commission. Statements in this
prospectus which summarize documents are not necessarily complete, and in each
case you should refer to the copy of the document filed as an exhibit to the
Registration Statement. For further information regarding our company and our
common stock, please see the Registration Statement and its exhibits and
schedules. You may examine the Registration Statement free of charge at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission at Suite 1400, 500 West Madison Street, Chicago,
Illinois 60661 and 7 World Trade Center, Thirteenth Floor, New York, New York
10048. Copies of the Registration Statement may also be obtained from the public
reference facilities of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, or by calling the Commission at 1-800-SEC-0330, at prescribed rates.
In addition, the Registration Statement and other public filings can be obtained
from the Commission's Web site at http://www.sec.gov.

     We intend to furnish our stockholders written annual reports containing
audited financial statements certified by an independent public accounting firm.

                                       69
MORTGAGE.COM, INC.
                         INDEX TO FINANCIAL STATEMENTS
PAGE
                                                                                                              ----
Independent Auditors' Report...............................................................................    F-3
Consolidated Balance Sheets as of December 31, 1998, 1997 and March 31, 1999 (unaudited)...................    F-4
Consolidated Statements of Operations for the years ended December 31, 1998, 1997 and 1996, and for the
  three months ended March 31, 1999 (unaudited) and 1998 (unaudited).......................................    F-5
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1998, 1997 and
  1996, and for the three months ended March 31, 1999
  (unaudited)..............................................................................................    F-6
Consolidated Statements of Cash Flow for the years ended December 31, 1998, 1997 and 1996, and for the
  three months ended March 31, 1999 (unaudited) and 1998 (unaudited).......................................    F-7
Notes to Consolidated Financial Statements.................................................................   F-10
F-1
MORTGAGE.COM, INC.
                       CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998, 1997 AND 1996
                                      AND
                      MARCH 31, 1999 AND 1998 (UNAUDITED)
                  (WITH INDEPENDENT AUDITORS' REPORT THEREON)

                                      F-2
INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Mortgage.com, Inc.

We have audited the accompanying consolidated balance sheets of Mortgage.com,
Inc. (formerly known as First Mortgage Network, Inc.) (the "Company") as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the years
in the three year period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

As discussed in note 12 to the accompanying consolidated financial statements,
the Company is currently in discussions with a number of venture-capital firms
to provide additional capital for the operations and growth of the Company. The
Company's ability to function at or beyond their current level and achieve their
growth strategy may be affected by the amount of capital available to it.

In our opinion, the consolidated financial statements referred to above presents
fairly, in all material respects, the financial position of Mortgage.com, Inc.
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.

March 26, 1999
  except for
  note 2
  which is as of
  May 26, 1999

                                      F-3
MORTGAGE.COM, INC.
                          CONSOLIDATED BALANCE SHEETS
DECEMBER 31,                MARCH 31,
                                                             -----------------------------      ------------
                                                                 1998             1997              1999
                                                             ------------      -----------      ------------
                                                                                                (UNAUDITED)
ASSETS
Cash and cash equivalents...............................     $  3,412,283      $ 1,679,722      $  6,250,720
Mortgage loans available for sale, net..................      176,372,516       73,737,933       166,149,185
Accounts and notes receivable, net......................        1,243,571        1,228,762         1,939,110
Private placement receivables...........................               --        2,000,000                --
Accrued interest receivable.............................          196,943          197,659           231,041
Prepaid expenses and deposits...........................        1,280,133          639,100         1,761,451
Property and equipment, net.............................        5,265,877        1,339,237         5,597,006
Capitalized software development costs..................          978,261          639,123         1,317,903
Intangible asset........................................               --               --           873,630
Goodwill, net...........................................        4,688,125          465,434         4,685,117
                                                             ------------      -----------      ------------
     Total assets.......................................     $193,437,709      $81,926,970      $188,805,163
                                                             ------------      -----------      ------------
                                                             ------------      -----------      ------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Warehouse notes payable.................................     $171,777,572      $72,223,912      $159,650,534
Accounts payable, accrued expenses and other
  liabilities...........................................        5,538,021        1,908,303         5,957,345
Notes payable...........................................          288,701           70,833           386,980
Capital lease obligations...............................        1,565,778               --         2,074,831
Lines of credit.........................................               --          395,899                --
Subordinated debt, net of discount......................          100,000        2,500,000         9,722,774
Deferred revenue........................................        1,011,987        1,011,987                --
Deferred rent...........................................           19,481           19,481            19,481
                                                             ------------      -----------      ------------
     Total liabilities..................................      180,301,540       78,130,415       177,811,945
                                                             ------------      -----------      ------------
Shareholders' equity:
  Preferred stock, $.01 par value. Authorized 15,000,000
     shares, issued and outstanding 3,199,073, 1,925,175
     and 3,199,073 shares at December 31, 1998 and 1997,
     and March 31, 1999, respectively...................           31,991           19,252            31,991
  Common stock, $.01 par value. Authorized 15,000,000
     shares, issued and outstanding 1,342,610, 1,098,610
     and 1,362,730 shares at December 31, 1998 and 1997
     and March 31, 1999, respectively...................           13,426           10,985            13,627
  Unearned compensation.................................         (631,000)              --       (15,187,000)
  Additional paid-in capital............................       31,612,112       14,828,493        47,403,353
  Accumulated deficit...................................      (17,890,360)     (11,062,175)      (21,268,753)
                                                             ------------      -----------      ------------
     Total shareholders' equity.........................       13,136,169        3,796,555        10,993,218
                                                             ------------      -----------      ------------
Commitments and contingencies...........................
                                                             ------------      -----------      ------------
     Total liabilities and shareholders' equity.........     $193,437,709      $81,926,970      $188,805,163
                                                             ------------      -----------      ------------
                                                             ------------      -----------      ------------
See accompanying notes to consolidated financial statements.

                                      F-4
MORTGAGE.COM, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
                                                YEARS ENDED DECEMBER 31,                     MARCH 31,
                                        -----------------------------------------    --------------------------
                                           1998           1997           1996           1999           1998
                                        -----------    -----------    -----------    -----------    -----------
                                                                                            (UNAUDITED)
Revenue:
  Secondary marketing revenue, net...   $28,597,825    $11,594,660    $ 4,101,341    $ 8,599,974    $ 5,407,489
  Loan production and processing
     fees, net.......................     5,337,625      2,347,321        820,469      2,598,337        921,584
  Management, technology and other
     fees............................     1,868,202      2,032,428      2,577,296      1,991,360        545,795
  Interest income....................     6,998,242      3,549,599        921,825      2,676,232      1,068,976
  Interest expense...................    (7,111,344)    (3,049,591)      (904,622)    (2,650,395)    (1,125,060)
                                        -----------    -----------    -----------    -----------    -----------
     Net interest (expense) income...      (113,102)       500,008         17,203         25,837        (56,084)
                                        -----------    -----------    -----------    -----------    -----------
Total revenue........................    35,690,550     16,474,417      7,516,309     13,215,508      6,818,784
                                        -----------    -----------    -----------    -----------    -----------
Expenses:
  Compensation and employee
     benefits........................    26,074,914     13,083,250      6,527,303      9,645,103      4,927,394
  Marketing..........................     1,335,494        237,868         94,541      1,536,187         85,295
  Research and development...........     2,888,159      1,079,257        496,568        776,565        433,224
  Depreciation and amortization......     1,873,119        480,338        652,136        697,759        153,633
  General and administrative.........     9,596,652      5,125,570      3,763,936      3,758,804      1,589,398
                                        -----------    -----------    -----------    -----------    -----------
Total expenses.......................    41,768,338     20,006,283     11,534,484     16,414,418      7,188,944
                                        -----------    -----------    -----------    -----------    -----------
Net loss.............................   $(6,077,788)   $(3,531,866)   $(4,018,175)   $(3,198,910)   $  (370,160)
                                        -----------    -----------    -----------    -----------    -----------
                                        -----------    -----------    -----------    -----------    -----------
Net loss per share, basic and
  diluted............................   $     (7.17)   $     (3.85)   $     (3.92)   $     (3.05)   $     (0.63)
                                        -----------    -----------    -----------    -----------    -----------
                                        -----------    -----------    -----------    -----------    -----------
See accompanying notes to consolidated financial statements.

                                      F-5
MORTGAGE.COM, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
               AND THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
ADDITIONAL
                                  PREFERRED   COMMON      PAID-IN       UNEARNED     ACCUMULATED    TREASURY
                                   STOCK       STOCK      CAPITAL     COMPENSATION     DEFICIT        STOCK         TOTAL
                                  ---------   -------   -----------   ------------   ------------   ---------    ------------
Balance at December 31, 1995
  (unaudited)...................   $ 2,252    $10,319   $ 3,846,219   $        --    $(3,512,134)   $      --    $    346,656
  Issuance of preferred stock...    12,273        --      6,698,413            --             --           --       6,710,686
  Issuance of common stock......        --     1,000        533,024            --             --           --         534,024
  Issuance of common stock
    warrants....................        --        --        260,000            --             --           --         260,000
  Purchase of treasury stock....        --        --             --            --             --     (550,000)       (550,000)
  Net loss......................        --        --             --            --     (4,018,175)          --      (4,018,175)
                                   -------    -------   -----------   ------------   ------------   ---------    ------------

Balance at December 31, 1996....    14,525    11,319     11,337,656            --     (7,530,309)    (550,000)      3,283,191
  Issuance of preferred stock...     4,727        --      3,495,273            --             --           --       3,500,000
  Issuance of common stock......        --       716        536,794            --             --           --         537,510
  Issuance of common stock
    warrants....................        --        --          7,720            --             --           --           7,720
  Retirement of treasury
    stock.......................        --    (1,050)      (548,950)           --             --      550,000              --
  Net loss......................        --        --             --            --     (3,531,866)          --      (3,531,866)
                                   -------    -------   -----------   ------------   ------------   ---------    ------------

Balance at December 31, 1997....    19,252    10,985     14,828,493            --    (11,062,175)          --       3,796,555
  Issuance of preferred stock...    12,739        --     14,208,914            --             --           --      14,221,653
  Issuance of common stock......        --     2,441      1,827,560            --             --           --       1,830,001
  Issuance of common stock
    warrants....................        --        --         87,145            --             --           --          87,145
  Stock option plan
    compensation................        --        --        660,000      (660,000)            --           --              --
  Amortization of unearned
    compensation................        --        --             --        29,000             --           --          29,000
  Dividends paid................        --        --             --            --       (750,397)          --        (750,397)
  Net loss......................        --        --             --            --     (6,077,788)          --      (6,077,788)
                                   -------    -------   -----------   ------------   ------------   ---------    ------------

Balance at December 31, 1998....   $31,991    13,426    $31,612,112      (631,000)   (17,890,360)          --      13,136,169
  Costs ascribed to issuance of
    preferred stock.............        --        --         (1,538)           --             --           --          (1,538)
  Issuance of common stock......        --       201        646,699            --             --           --         646,900
  Issuance of common stock
    warrants....................        --        --        397,080            --             --           --         397,080
  Stock option plan
    compensation................        --        --     14,749,000   (14,749,000)            --           --              --
  Amortization of unearned
    compensation................        --        --             --       193,000             --           --         193,000
  Dividends paid................        --        --             --            --       (179,483)          --        (179,483)
  Net loss......................        --        --             --            --     (3,198,910)          --      (3,198,910)
                                   -------    -------   -----------   ------------   ------------   ---------    ------------

Balance at March 31, 1999
  (unaudited)...................   $31,991    $13,627   $47,403,353   $(15,187,000)  $(21,268,753)  $      --    $ 10,993,218
                                   -------    -------   -----------   ------------   ------------   ---------    ------------
                                   -------    -------   -----------   ------------   ------------   ---------    ------------
See accompanying notes to consolidated financial statements.

                                      F-6
MORTGAGE.COM, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
                                                           YEARS ENDED DECEMBER 31,                         MARCH 31,
                                                ----------------------------------------------    ------------------------------
                                                    1998             1997             1996            1999              1998
                                                -------------    -------------    ------------    -------------      -----------
                                                                                                           (UNAUDITED)
Net cash flows from operating activities:
  Net loss...................................   $  (6,077,788)   $  (3,531,866)   $ (4,018,175)   $  (3,198,910)     $  (370,160)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
    Depreciation and amortization............       1,873,119          480,338         652,136          697,759          153,633
    Amortization of unearned compensation....          29,000               --              --          193,000               --
    Provision for losses.....................         898,593          133,499          27,170          111,278               --
    Amortization of discount on subordinated
      debt...................................              --               --              --           19,854               --
  (Increase) decrease in mortgage loans
    available for sale, net..................    (102,703,406)     (36,490,196)    (15,972,647)      10,211,703        6,232,290
  Changes in operating assets and
    liabilities:
    (Increase) decrease in accounts and notes
      receivable, net........................        (939,570)         684,498      (1,473,091)        (795,180)          27,558
    Decrease in private placement
      receivables............................       2,000,000        1,000,000              --               --        2,000,000
    (Increase) decrease in accrued interest
      receivable.............................         (53,403)         247,382         (49,350)         (34,098)         101,026
    Increase in prepaid expenses and
      deposits...............................        (644,710)         (86,233)        (59,521)        (481,318)      (1,978,785)
    Increase (decrease) in accounts payable,
      accrued expenses and other
      liabilities............................       2,911,531       (4,263,100)      1,802,139          419,324          434,650
    (Decrease) increase in deferred
      revenue................................              --          (20,078)      1,032,065       (1,011,987)              --
    (Decrease) increase in deferred rent.....              --         (169,329)        188,812               --               --
                                                -------------    -------------    ------------    -------------      -----------
        Net cash (used in) provided by
          operating activities...............    (102,706,634)     (42,015,085)    (17,870,462)       6,131,425        6,600,212
                                                -------------    -------------    ------------    -------------      -----------
Cash flows from investing activities:
  Additions to capitalized software
    development costs........................        (831,559)        (517,955)       (218,745)        (500,776)        (133,724)
  Additions to property and equipment........      (4,146,001)      (1,065,482)       (146,522)        (767,367)        (197,622)
  Purchase of companies, net of cash
    acquired.................................      (2,650,321)         366,035              --          (91,455)              --
  Purchase of intangible asset...............              --               --              --         (233,563)              --
                                                -------------    -------------    ------------    -------------      -----------
        Net cash used in investing
          activities.........................      (7,627,881)      (1,217,402)       (365,267)      (1,593,161)        (331,346)
                                                -------------    -------------    ------------    -------------      -----------
Cash flows from financing activities:
  Proceeds from and cost ascribed to common
    stock warrants...........................              --            7,720         260,000               --               --
  (Repayment of) proceeds from issuance of
    subordinated debentures..................        (200,000)       1,500,000      (1,134,625)      10,000,000               --
  Payment of notes payable...................         (70,832)         (31,095)             --           (1,721)              --
  Proceeds from notes payable................              --               --              --          100,000               --
  Proceeds from issuance of common stock.....              --               --         534,424              900               --
  Proceeds from issuance of preferred
    stock....................................      12,364,766        2,000,000       6,582,411           (1,538)          15,440
  Proceeds from capital lease obligations....       1,565,778               --              --          509,053               --
  (Payment of) proceeds from lines of
    credit...................................        (395,899)         395,899              --               --          (21,667)
  Dividends paid.............................        (750,397)              --              --         (179,483)         (15,438)
  Purchase of treasury stock.................              --               --        (550,000)              --               --
  Proceeds from (reduction of) warehouse
    notes payable............................      99,553,660       39,031,320      14,330,094      (12,127,038)      (6,924,374)
                                                -------------    -------------    ------------    -------------      -----------
        Net cash provided by (used in)
          financing activities...............     112,067,076       42,903,844      20,022,304       (1,699,827)      (6,946,039)
                                                -------------    -------------    ------------    -------------      -----------
        Net increase (decrease) in cash and
          cash equivalents...................       1,732,561         (328,643)      1,786,575        2,838,437         (677,173)

Cash and cash equivalents at beginning of
  year.......................................       1,679,722        2,008,365         221,790        3,412,283        1,679,722
                                                -------------    -------------    ------------    -------------      -----------
Cash and cash equivalents at end of year.....   $   3,412,283    $   1,679,722    $  2,008,365    $   6,250,720      $ 1,002,549
                                                -------------    -------------    ------------    -------------      -----------
                                                -------------    -------------    ------------    -------------      -----------
See accompanying notes to consolidated financial statements.

                                      F-7
MORTGAGE.COM, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
                                                            YEARS ENDED DECEMBER 31,                 MARCH 31,
                                                      ------------------------------------    -----------------------
                                                         1998         1997         1996          1999         1998
                                                      ----------   ----------   ----------    ----------   ----------
                                                                                                    (UNAUDITED)
Supplemental disclosures of cash flow information:

  Cash paid during the period for interest..........  $6,731,503   $2,749,196   $1,125,753    $2,738,066   $1,094,177
                                                      ----------   ----------   ----------    ----------   ----------
                                                      ----------   ----------   ----------    ----------   ----------
  Cash paid during the period for income taxes......  $   26,356   $       --   $    1,986    $      827   $    4,941
                                                      ----------   ----------   ----------    ----------   ----------
                                                      ----------   ----------   ----------    ----------   ----------
Supplemental disclosures of noncash investing and financing activities:

          During the three months ended March 31, 1999 (unaudited), in
     conjunction with the issuance of subordinated debt of $2,000,000 and
     $8,000,000, the Company issued 6,668 and 26,672, respectively, of common
     stock warrants which are convertible to common stock at $30 per share.

         During the three months ended March 31, 1999 (unaudited), in
    conjunction with the Internet domain name purchase of www.mortgage.com, the
    Company issued 20,000 shares of common stock at $32.30 per share.

         During the three months ended March 31, 1999 (unaudited), an employee
    exercised stock options for 120 shares of common stock at $7.50 per share.

         During June 1998, the Company issued 44,000 shares of common stock at a
    value of $7.50 to a brokerage firm in payment for the facilitation of
    capital investments in the Company by unaffiliated firms.

         During April 1998, the Company purchased all of the outstanding common
    stock of RM Holdings, Inc. In conjunction with the acquisition, fair value
    of assets acquired and liabilities assumed were as follows:
Fair value of assets.......................................   $   427,219
Goodwill...................................................     2,112,629
Accounts payable and accrued expenses......................    (1,230,101)
                                                              -----------
Cash paid, net of cash received............................   $ 1,309,747
                                                              -----------
                                                              -----------
In conjunction with this purchase, the Company issued 100,000 shares of
    common stock at a price of $7.50 to the shareholders of RM Holdings, Inc.

         During 1997, the Company purchased all of the outstanding common stock
    of Online Capital. In conjunction with the acquisition, fair value of assets
    acquired and liabilities assumed were as follows:
Fair value of assets......................................   $ 13,799,201
Goodwill..................................................        325,696
Accounts payable and accrued expenses.....................    (13,758,862)
                                                             ------------
Cash received, net of cash paid...........................   $    366,035
                                                             ------------
                                                             ------------
In conjunction with this purchase, the Company issued 71,668 shares of
    common stock at a price of $7.50 to the sole shareholder of Online Capital
    during 1997. As an adjunct to this purchase, the Company entered into an
    earnout agreement in 1998 providing for payments to the shareholder of a
    percentage of the profits over the next three years of the division of the
    Company that he directs and the issuance of 100,000 shares of common stock
    at a price of $7.50. The payments under the earnout agreement will cease
    once a maximum of $3,400,000 is paid. The payments and stock issuance during
    1998 were:
Additions to goodwill.......................................   $2,402,694
Stock issued................................................     (750,000)
Accounts payable............................................     (312,120)
                                                               ----------
Cash paid under earnout agreement...........................   $1,340,574
                                                               ----------
                                                               ----------
F-8
MORTGAGE.COM, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 AND
                   THREE MONTHS ENDED MARCH 31, 1999 AND 1998

         Land and building was acquired in satisfaction of a note receivable
    owed to the Company. The book value of assets acquired was $419,800 at
    December 31, 1998. The building is subject to a mortgage of $288,701 at
    December 31, 1998.

         In the fourth quarter of 1998, the board of directors granted incentive
    stock options for 162,026 shares of common stock to employees at a price of
    $11.50 per share. The fair value of stock options was esimated to be greater
    than the issue price of $11.50. Accordingly, the Company recorded unearned
    compensation as the excess of fair value over the issuance price. The
    Company is recognizing unearned compensation as compensation expense over
    the vesting period of the options.

         During 1998 and 1997, $2,200,000 and $1,500,000 of subordinated debt
    converted to 193,471 and 206,000 shares of Series D and C preferred stock at
    a price of $11.50 and $7.50, respectively.

         On December 31, 1997, the Company entered into a subscription
    receivable agreement with a venture capital firm, where the venture-capital
    firm subscribed for the purchase of $2,000,000 of the Company's 12% senior
    subordinated convertible notes due January 31, 2003. The proceeds were
    received in January 1998.

         During 1997, the Company retired 105,000 shares of outstanding treasury
    stock.

         On December 31, 1996, the Company sold $1,000,000 of 12% cumulative
    Series C preferred stock in a private placement offering. The Company
    received final payment from this sale in March 1997.

         During 1996, the Company sold $5,150,000 of 12% cumulative Series B
    preferred stock in a private placement offering. Net proceeds from this
    transaction were $4,581,600. In addition, $127,875 of subordinated debt was
    converted to Series B preferred stock. The remaining $1,134,625 of
    subordinated debt was redeemed for cash in 1996.

          See accompanying notes to consolidated financial statements.

                                      F-9
MORTGAGE.COM, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  (a) Description of Business

     Mortgage.com, Inc., (formerly known as First Mortgage Network, Inc.) (the
"Company"), is incorporated in Florida and provides online mortgage services to
consumers and to other businesses. The Company has developed state-of-the-art
technology to support its own loan origination, processing, underwriting,
closing and secondary marketing of mortgage loans and is using this technology
as a platform to enable other industry participants to improve the efficiency
and effectiveness of their operations.

     The Company commenced operations in 1994 as a wholesale mortgage lender
providing independent mortgage brokers with various support services, including
processing and closing services, as well as a source of funding for their loans.
In 1995, the Company acquired a software system designed to support mortgage
origination, processing, underwriting and closing operations. This system, known
as CLOser, became the platform that supports all of the services provided. The
system provides management, processing and other back-office services to
realtors and homebuilders on an outsource basis and provides funding for the
mortgages originated by the Company. The system is marketed to other mortgage
industry participants, providing technology and technical support services,
including private label web sites, on an outsource basis to numerous banks and
real estate related entities.

  (b) Consolidation

     The consolidated financial statements of the Company include all of its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.

  (c) Basis of Presentation

     The financial statements of the Company have been prepared on the accrual
basis of accounting. A summary of the major accounting policies followed in the
preparation of the accompanying financial statements, which conform to generally
accepted accounting principles, is presented below.

  (d) Unaudited Interim Consolidated Financial Statements

     The consolidated financial statements for the three month periods ended
March 31, 1999 and 1998 are unaudited. The unaudited consolidated financial
statements have been prepared on the same basis as the audited consolidated
financial statements. In the opinion of management, all adjustments of a
recurring nature which are necessary to present a fair statement of results for
the interim periods have been made. The unaudited results of operations for the
interim periods are not necessarily indicative of the results for the full year
or any future period.

  (e) Acquisitions

     On January 7, 1999, the Company purchased the Internet domain name of
www.Mortgage.com from an unaffiliated party and has changed the name of the
Company to Mortgage.com, Inc. The purchase price of the transaction was $200,000
in cash and 20,000 shares of common stock at a value of $32.30 per share.

     Effective April 1, 1998, the Company purchased RM Holdings, Inc., an
internet-based mortgage lender and call center and merged its operations into a
division of the Company. The fair market value of assets acquired was $427,219.
Under the terms of the agreement, the stockholders of RM Holdings, Inc. received
100,000 shares of common stock at $7.50 per share and $1,471,000 in cash. This
transaction was accounted for under the purchase method of accounting. Under
this method of accounting, the purchase price is allocated to the respective
assets acquired and liabilities assumed based on their estimated fair values.
Goodwill recorded in conjunction with this purchase was $2,112,629.

                                      F-10
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
     Effective June 2, 1997, the Company purchased Online Capital, a mortgage
lender located in San Jose, California, with net assets of $268,755. Under the
terms of the agreement, the sole shareholder of Online Capital received 35,834
shares of common stock and $255,672 in cash. An additional 35,834 shares of
common stock were issued to the shareholder during December 1997, based on
certain profitability criteria being met. In 1998, the Company finalized certain
contingent payment terms related to the transaction. An additional 100,000
shares of common stock were issued to the seller, and an agreement was entered
into which provides for contingent consideration of up to $3,400,000 as
calculated based upon a percentage of the profits of the division, payable
quarterly until the limit is reached or until June 30, 2001, whichever comes
first. Contingent consideration is added to the purchase price as earned. These
transactions were accounted for under the purchase method of accounting. Under
this method of accounting, the purchase price is allocated to the respective
assets acquired and liabilities assumed based on their estimated fair values.
Goodwill recorded under the 1998 contingent consideration agreement and the 1997
purchase of Online Capital was $2,402,694 and $476,475, respectively, through
December 31, 1998. An additional $91,455 of goodwill was recorded under the
contingent consideration agreement during the three months ended March 31, 1999.

  (f) Cash and Cash Equivalents

     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

  (g) Mortgage Loans Available For Sale, Net

     Mortgage loans available for sale, net of discounts and deferred fees, are
carried at the lower of cost or market as determined by outstanding commitments
from investors or current investor yield requirements calculated on the
aggregate loan basis. The net deferred fees and costs are credited to income
when the related loans are sold. The loans are secured by one to four family
residential real estate located throughout the United States.

  (h) Accounts and Notes Receivable, Net

     The Company entered into an agreement on December 5, 1996, to sell
internally developed software to an investment firm. As a condition to the
agreement, the Company entered into a ten-year distribution and profit sharing
agreement for the software with the same investment firm. The purchase price of
the software was $10,800,000 of which $1,080,000 was received as of December 31,
1996, and $533,222 was received as of March 31, 1997. The proceeds from the
transaction, net of related costs, were recorded as deferred revenue. Due to
contract contingencies, whereby the deferred revenue could be refundable, the
Company elected to recognize the revenue when the remaining $9,180,000 note
becomes due. The note becomes due on or before November 30, 2006, and bears
interest at 5%. The note, included in accounts and notes receivable on the
balance sheets, has been discounted to its net present value and has been fully
reserved at December 31, 1998 and 1997. On March 31, 1999, this software profit
sharing agreement was sold to an unrelated company as part of a sale of a
subsidiary of the Company. The Company has been relieved of any further
obligations.

  (i) Private Placement Receivables

     Private placement receivables at December 31, 1997, consisted of a
subscription agreement between the Company and a venture-capital firm. Under
this agreement, the venture-capital firm subscribed for and purchased $2,000,000
of the Company's 12% senior subordinated convertible notes due January 31, 2003,
and warrants to purchase up to an aggregate of 66,667 shares of the Company's
common stock at a price of $7.50 per share. Net proceeds of $2,000,000 were
received during January 1998.

                                      F-11
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
  (j) Property and Equipment, Net

     Property and equipment, consisting of computer hardware and software,
furniture and fixtures, assets under capital leases and telephone equipment are
recorded at cost. Depreciation is recorded on the straight-line method over the
estimated useful lives of the assets, which are 3 to 30 years.

  (k) Capitalized Software Development Costs

     Costs incurred internally in creating computer software products are
charged to expense when incurred as research and development costs, until
technological feasibility has been established for the product. Thereafter,
software production costs are capitalized and subsequently reported at the lower
of cost or net realizable value. Capitalized costs are amortized based on
current and future revenue for each product over three years. Prior to 1998,
capitalized costs were amortized over five years. Amortization of the
capitalized costs commences when individual products become available for
general release.

  (l) Goodwill, Net

     Upon the Company's acquisitions of Online Capital in 1997 and RM Holdings,
Inc. in 1998, the purchase price exceeded the fair value of the assets acquired
less liabilities assumed, thereby creating goodwill. In addition, payments due
under the contingent consideration agreement described in Note 1(c) above are
added to goodwill when incurred. Goodwill is being amortized using the
straight-line method over 15 years.

  (m) Income Taxes

     The Company records income taxes using the method required by Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Accordingly, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. SFAS 109 requires companies to set up a valuation
allowance for that component of net deferred tax assets which does not meet the
more likely than not criterion for realization.

     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. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.

  (n) Allowance for Losses

     The Company provides for losses relating to the origination and sale of
mortgage loans and accounts receivable. The allowance for losses is based on
management's evaluation of various factors, including potential for
repurchase-related expenses and contractual recourse obligations relating to
loans sold in the secondary market. While management uses the information
available to make evaluations, future adjustments to the allowance may be
necessary if future economic conditions differ substantially from the
assumptions used in making the evaluations. Management has considered all events
and/or transactions that are subject to reasonable and normal methods of
estimations, and the financial statements reflect that consideration.

     Management, considering current information and events regarding the
borrowers' ability to repay their obligations, considers a loan to be impaired
when it is probable that the Company will be unable to collect all amounts due
according to the contractual terms of the loan. When a loan is considered to be
impaired, the amount of the impairment is measured based on the present value of
expected future cash flows discounted at the note's effective interest rate.
Impairment losses are included in the allowance for losses through a charge to
the provision.

     The Company has agreements with several unaffiliated investors, whereby all
loans that are originated and funded are sold on an individual loan basis. The
agreements include clauses whereby loans that fail to meet specific criteria
require repurchase by the Company. Loans that are repurchased are usually resold
to

                                      F-12
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
other investors once the specific deficiencies are resolved. The impact of such
repurchases has not been significant to date.

  (o) Secondary Marketing Revenue, Net

     Gains or losses on sales of mortgage loans are recognized based upon the
difference between the selling price and the carrying value of the related
mortgage loans. Loan origination fees and direct loan origination costs on one
to four family residential mortgage loans are deferred until the loans are sold
to permanent investors and are considered part of the carrying value of a loan.
Deferred origination fees and expenses, net of commitment fees paid in
connection with the sale of the loans, are recognized when the related loans are
sold.

  (p) Loan Production and Processing Fees, Net

     Loan production and processing fees, which are received for underwriting,
processing and preparing documents for loans originated, are recorded when the
loans are closed. Any disbursements incurred in originating the loans, such as
for credit reports, appraisals and flood certifications, are charged as an
offset against this revenue.

  (q) Management, Technology and Other Fees

     Revenue from software sales to unaffiliated third parties is recorded as
revenue in the period during which the sale occurs, when there are no further
obligations on behalf of the Company and no right of return exists. Maintenance
fees are recorded as revenue in the period when services are rendered.

     Software sales, development, maintenance and user fees of approximately
$1,638,000, $1,854,000 and $1,966,800 were earned from one customer for the
years ended December 31, 1998, 1997 and 1996, respectively. (See note 13 for
warrants issued in conjunction with revenue generated by the Company.)

     Research and development expenses are charged to operations in the year
incurred and are comprised of the compensation and general and administrative
expenses directly related to such activities.

  (r) Use of Estimates

     In preparation of the financial statements, management has considered all
events and/or transactions that are subject to reasonable and normal methods of
estimation, and the financial statements reflect that consideration.

     Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.

                                      F-13
MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)

  (s) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of

     The Company reviews long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair value of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value, less costs to sell.

  (t) Reclassifications

     Certain prior year balances have been reclassified to conform to current
year presentation.

  (u) Stock-Based Compensation

     In 1997, the Company adopted the disclosure provisions of Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-based Compensation." The Company has
elected to continue accounting for stock-based compensation issued to employees
using Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock
Issued to Employees," and, accordingly, pro forma disclosures required under
SFAS No. 123 have been presented (See Note 15). Under APB No. 25, compensation
expense is based on the difference, if any, on the date of the grant, between
the fair value of the Company's stock and the exercise price. Stock issued to
non-employees has been accounted for in accordance with SFAS No. 123 and valued
using the Black-Scholes model.

  (v) Unearned Compensation

     Unearned compensation resulted when stock options were granted at prices
that were subsequently determined to be less than their estimated fair value.
The Company has recorded an estimate of the excess of fair value over the issue
price as unearned compensation as a separate component of shareholders' equity.

  (w) Net Loss Per Share

     The Company computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share," and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under
the provisions of SFAS No. 128 and SAB 98, basic net loss per share is computed
by dividing the net loss available to common stockholders for the period by the
weighted average number of common shares outstanding during the period. Diluted
net loss per share is computed by dividing the net loss for the period by the
weighted average number of common and common equivalent shares outstanding
during the period. Common equivalent shares, composed of unvested restricted
common stock and incremental common shares issuable upon the exercise of stock
options and warrants and upon conversion of Special Preferrred Stock (Northern
California Division), Series B, Series C, and Series D convertible preferred
stock, are included in the diluted net loss per share computation to the extent
such shares are dilutive.

                                      F-14
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
YEAR ENDED DECEMBER 31,
                                                             -----------------------------    MARCH 31,    MARCH 31,
                                                              1998       1997       1996        1999         1998
                                                             -------    -------    -------    ---------    ---------
                                                               (IN THOUSANDS, EXCEPT PER           (UNAUDITED)
                                                                    SHARE AMOUNTS)
Numerator:
  Net Loss................................................   $(6,078)   $(3,532)   $(4,018)    $(3,199)     $  (370)
  Dividends paid on special preferred stock...............      (751)        --         --        (178)          --
     Cumulative dividends on Series B convertible
       preferred stock....................................      (618)      (618)      (413)       (153)        (155)
     Cumulative dividends on Series C convertible
       preferred stock....................................      (665)      (335)        (3)       (164)        (166)
     Cumulative dividends on Series D convertible
       preferred stock....................................      (831)        --         --        (436)          --
                                                             -------    -------    -------     -------      -------
  Net loss attributable to common shareholders............   $(8,943)   $(4,485)   $(4,434)    $(4,130)     $  (691)
                                                             -------    -------    -------     -------      -------

Denominator:
  Weighted average shares--basic and diluted..............     1,247      1,166      1,132       1,356        1,098
                                                             -------    -------    -------     -------      -------
  Net loss per share--basic and diluted...................   $ (7.17)   $ (3.85)   $ (3.92)    $ (3.05)     $ (0.63)
                                                             -------    -------    -------     -------      -------
                                                             -------    -------    -------     -------      -------
Since the Company reported a net loss, the computation does not consider
the convertible preferred stock, common stock options and warrants due to the
anti-dilutive effect on net loss per share.

  (x) Comprehensive Income

     On January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income." SFAS No. 130 established standards for reporting and
presentation of comprehensive income and its components in a full set of
financial statements. Comprehensive income consists of net income and net
unrealized gains (losses) on securities and is presented in the consolidated
statements of shareholders' equity and comprehensive income. The Statement
requires only additional disclosures in the consolidated financial statements;
it does not affect the Company's consolidated balance sheets or statements of
operations. The adoption of SFAS No. 130 has had no effect on the Company's
consolidated financial statements.

  (y) Segment Reporting

     In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 established standards for
the way that a public enterprise reports 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
shareholders. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997, and requires restatement of earlier periods presented.
Segment information is presented in note 21.

  (z) Software Revenue Recognition

     In March 1998, the AICPA issued Statement of Position 98-4, "Deferral of
the Effective Date of a Provision of SOP 97-2" ("SOP 98-4"). SOP 98-4 defers for
one year the application of certain provisions of Statement of Position 97-2,
"Software Revenue Recognition" ("SOP 97-2"). Different informal and
unauthoritative interpretations of certain provisions of SOP 97-2 have arisen
and, as result, the AICPA is deliberating amendments to SOP 97-2, so they can
issue interpretations regarding the applicability and the method of application
of those provisions. The adoption of SOP 97-2 has not had a material impact on
the Company's consolidated statements of operations, balance sheets or cash
flows.

                                      F-15
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES--(CONTINUED)
  (aa) Derivatives

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Financial Accounting Standards Board has
issued an exposed draft to delay the implementation of the Standard, however, it
is not presently known if such implementation will be delayed. As the Company
does not currently engage or plan to engage in derivative or hedging activities,
there will be no impact to the Company's consolidated statements of operations,
balance sheets or cash flows upon the adoption of this standard.

(2) RESTATEMENT

     In preparation of the consolidated financial statements, management
considered all events and/or transactions that were subject to reasonable and
normal methods of estimation to determine a fair value of the Company's common
stock in order to estimate the unearned compensation amounts.

     Subsequent to the issuance of the Company's financial statements as of and
for the year ended December 31, 1998, certain transactions were executed which
caused the Company's estimate of the fair value of its common stock to decrease.
Accordingly, the Company's 1998 financial statements have been restated to
reflect the impact of this decrease in fair value. The effect of this
restatement is a reclass between additional paid-in capital and unearned
compensation, thus having no effect on total shareholder's equity. In addition,
the amortization related to unearned compensation was decreased to reflect this
change.
DECEMBER 31, 1998
                                                                 ----------------------------
                                                                      AS
                                                                  PREVIOUSLY
                                                                   REPORTED        RESTATED
                                                                 ------------    ------------
Consolidated Balance Sheet:
  Unearned compensation.......................................   $ (6,095,000)   $   (631,000)
  Additional paid-in capital..................................   $ 37,352,112    $ 31,162,112
  Accumulated deficit.........................................   $(18,166,360)   $(17,890,360)
  Total shareholder's equity..................................   $ 13,136,169    $ 13,136,169

Consolidated Statement of Operations:
  Compensation and benefits...................................   $ 26,350,914    $ 26,074,914
  Net loss....................................................   $ (6,353,788)   $ (6,077,788)
(3) MORTGAGE LOANS AVAILABLE FOR SALE, NET

     Mortgage loans available for sale, net are carried on the books at lower of
cost or market and consist of the following at December 31, 1998 and 1997:
DECEMBER 31,
                                                                 ---------------------------
                                                                     1998           1997
                                                                 ------------    -----------
Mortgage loans available for sale.............................   $175,683,013    $73,037,135
Loan broker premiums, origination points and
  discounts, net..............................................        185,933        572,618
Deferred loan origination costs...............................        503,570        128,180
                                                                 ------------    -----------
Mortgage loans available for sale, net........................   $176,372,516    $73,737,933
                                                                 ------------    -----------
                                                                 ------------    -----------
F-16
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(4) ACCOUNTS AND NOTES RECEIVABLE, NET

     Accounts and notes receivable, net, consist of the following at December
31, 1998 and 1997:
DECEMBER 31,
                                                                   --------------------------
                                                                      1998           1997
                                                                   -----------    -----------
Notes receivable................................................   $ 6,158,654    $ 5,898,901
Broker fee receivables..........................................       672,209        669,235
Other...........................................................       880,409        598,310
                                                                   -----------    -----------
     Subtotal...................................................     7,711,272      7,166,446
Less: allowance for losses......................................    (6,467,701)    (5,937,684)
                                                                   -----------    -----------
                                                                   $ 1,243,571    $ 1,228,762
                                                                   -----------    -----------
                                                                   -----------    -----------
The activity in the allowance for losses account was as follows at
December 31, 1998 and 1997:
DECEMBER 31,
                                                                     ------------------------
                                                                        1998          1997
                                                                     ----------    ----------
Allowance at beginning of period..................................   $5,937,684    $5,893,929
Recoveries, transfers and charge offs, net........................     (299,753)      (89,744)
Provision for losses..............................................      829,770       133,499
                                                                     ----------    ----------
Allowance at end of period........................................   $6,467,701    $5,937,684
                                                                     ----------    ----------
                                                                     ----------    ----------
F-17
MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(5) PROPERTY AND EQUIPMENT, NET

     Property and equipment, net consists of the following at December 31, 1998
and 1997:
DECEMBER 31,
                                                                    -------------------------
                                                                       1998           1997
                                                                    -----------    ----------
Land.............................................................   $   132,000    $       --
Building.........................................................       287,800            --
Computer hardware and software...................................     3,515,647     1,523,408
Furniture and fixtures...........................................       729,222       295,939
Assets under capital leases......................................     2,058,436       310,231
Leasehold improvements...........................................       346,056       148,579
Telephone equipment..............................................       216,034            --
Vehicle..........................................................        12,063            --
                                                                    -----------    ----------
                                                                      7,297,258     2,278,157
                                                                    -----------    ----------
Less accumulated depreciation....................................    (2,031,381)     (938,920)
                                                                    -----------    ----------
Property and equipment, net......................................   $ 5,265,877    $1,339,237
                                                                    -----------    ----------
                                                                    -----------    ----------
Useful lives for property and equipment are as follows:
Building.......................................................   30 years
Computer hardware and software.................................   3 years
Furniture and fixtures, telephone equipment and vehicle........   5 years
The land and building were acquired in satisfaction of a note receivable
owed to the Company by an individual who subsequently became an employee of the
Company. The building is occupied by, and leased to, an auto maintenance
franchise that pays the Company rent of $4,000 monthly under a lease that
expires in 2015, with three subsequent five-year renewal periods. During 1998,
$24,000 in revenue was recorded under the lease.

     Depreciation expense for the years ended 1998, 1997 and 1996 $1,092,000,
$331,000 and $573,000, respectively.

(6) CAPITALIZED SOFTWARE DEVELOPMENT COSTS

     Capitalized software costs at December 31, 1998, 1997 and 1996, were net of
accumulated amortization of $666,253, $173,832 and $250,000, respectively.

     Information related to net capitalized software costs is as follows:
DECEMBER 31,
                                                                         --------------------
                                                                           1998        1997
                                                                         --------    --------
Balance at beginning of year..........................................   $639,123    $250,000
Capitalized costs.....................................................    831,559     517,955
Amortization..........................................................   (492,421)   (128,832)
                                                                         --------    --------
                                                                         $978,261    $639,123
                                                                         --------    --------
                                                                         --------    --------
F-18
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(7) GOODWILL, NET

     Goodwill, net consists of the following at December 31, 1998 and 1997:
DECEMBER 31,
                                                                       ----------------------
                                                                          1998         1997
                                                                       ----------    --------
Online Capital, Inc. acquisition....................................   $  476,475    $476,475
RM Holdings, Inc. acquisition.......................................    2,112,629          --
Online Capital, Inc. earnout agreement..............................    2,402,694          --
                                                                       ----------    --------
                                                                        4,991,798     476,475
Less accumulated amortization.......................................     (303,673)    (11,041)
                                                                       ----------    --------
Goodwill, net.......................................................   $4,688,125    $465,434
                                                                       ----------    --------
                                                                       ----------    --------
Goodwill is amortized on a straight-line basis over 15 years. The
amortization of goodwill in the years ended 1998, 1997 and 1996 was $293,000,
$21,000 and $0, respectively.

(8) WAREHOUSE NOTES PAYABLE

     Under the terms of the Company's warehouse agreements, all mortgage loans
available for sale are pledged as collateral for the warehouse notes payable.

     The Company had warehouse lines of credit totaling $205,000,000,
$90,000,000 and $195,000,000 at December 31, 1998 and 1997 and March 31, 1999
(unaudited), respectively, from unaffiliated entities. These lines are used to
support the funding of mortgage loans as follows:

          (a) The Company has a $75,000,000 credit line at March 31, 1999. This
              credit line was $65,000,000 at December 31, 1998, and was
              temporarily increased from $45,000,000 to $75,000,000 during 1998.
              At December 31, 1998 and 1997 and March 31, 1999 (unaudited),
              $71,918,148, $37,890,528 and $69,432,892, respectively, were
              outstanding on this facility, with a weighted average interest
              rate of 7.60%, 8.47% and 7.01%, respectively. The line of credit
              is collateralized by a portion of the Company's mortgage loans
              available for sale, which amounted to $73,931,690, $48,120,268 and
              $72,300,119 at December 31, 1998 and 1997 and March 31, 1999,
              respectively. The line of credit requires the Company to maintain
              certain financial covenants, which were not met at December 31,
              1998. The lender has provided the Company with a waiver of this
              default pending the receipt of additional capital, which was
              received in February and March 1999. The Company met the financial
              covenants at March 31, 1999.

          (b) The Company has a $60,000,000 credit line with an entity, which
              temporarily was increased to $70,000,000 for December 31, 1998.
              This credit line was increased from $35,000,000 during 1998. At
              December 31, 1998 and 1997 and March 31, 1999 (unaudited),
              $62,486,268, $20,209,540 and $55,298,564, respectively, was
              outstanding on this facility, with a weighted average interest
              rate of 7.33%, 8.65% and 6.82%, respectively. The line of credit
              is collateralized by a portion of the Company's mortgage loans
              available for sale, which amounted to $67,518,557, $19,551,770 and
              $60,390,766 at December 31, 1998 and 1997 and March 31, 1999
              (unaudited), respectively. The line of credit requires the Company
              to maintain certain financial covenants, which were not met at
              December 31, 1998 or March 31, 1999. The lender has provided the
              Company with a waiver of this default pending the receipt of
              additional capital, which was received in February, March and
              April 1999.

          (c) The Company received a $25,000,000 credit line with an entity
              during 1998. At December 31, 1998 and March 31, 1999 (unaudited),
              $24,417,181 and $25,628,993, respectively, was outstanding on this
              facility, with a weighted average interest rate of 7.29% and
              6.74%, respectively. The line of credit is collateralized by a
              portion of the Company's mortgage loans

                                      F-19
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(8) WAREHOUSE NOTES PAYABLE--(CONTINUED)
          available for sale, which amounted to $26,320,308 and $26,690,321 at
              December 31, 1998 and March 31, 1999 (unaudited), respectively.
              The line of credit requires the Company to maintain certain
              financial covenants, which were not met at December 31, 1998. The
              lender has provided the Company with a waiver of this default
              pending the receipt of additional capital, which was received in
              February and March 1999. The Company met the financial covenants
              at March 31, 1999.

          (d) The Company received a $25,000,000 repurchase credit line from an
              entity during 1998. At December 31, 1998 and March 31, 1999
              (unaudited), there was no outstanding amount on this facility.

          (e) Since 1996, the Company has had a $10,000,000 line of credit by an
              entity. The line of credit bears interest at prime less 0.25% and
              has no maturity date. At December 31, 1998 and 1997 and March 31,
              1999 (unaudited), $7,367,831, $5,123,845 and $6,422,858,
              respectively, were outstanding on this facility. This line of
              credit is collateralized by a portion of the Company's mortgage
              loans available for sale, which amounted to $7,067,801, $5,167,405
              and $6,300,955 at December 31, 1998 and 1997 and March 31, 1999
              (unaudited), respectively. Under the terms of the Company's
              warehouse agreements, all mortgage loans available for sale are
              pledged as collateral for the warehouse notes payable.

     The warehouse lines of credit described in (a) through (c) above were in
default as to requirements for ratios of tangible net worth and leverage at
December 31, 1998. The creditors have given the Company waivers on these
requirements pending receipt of additional capital, which was received as
described in note 13. The additional capital received in the form of
Subordinated Debt eliminated the defaults as of February 28, 1999. However, the
line of credit described in (b) above was in default again at March 31, 1999.
The creditor has given the Company a waiver on these requirements due to the
receipt of additional capital.

(9) NOTE PAYABLE

     A note payable in the amount of $291,456 with an interest rate of 9.25% was
assumed through the acquisition of the land and building described in note 4. At
December 31, 1998, this note payable has an outstanding balance of $288,701 and
matures on April 10, 2002.

     The note payable in the amount of $70,833 at December 31, 1997, arose
through the Online Capital acquisition in the amount of $99,999 and had an
interest rate of 10%. The note was paid in full when it matured in 1998.

(10) LINES OF CREDIT

     The Company has three lines of credit with entities under which furniture
and equipment are leased. One line of credit is with the unaffiliated financing
subsidiary of a computer manufacturer and is accounted for as an operating
lease. No equipment at December 31, 1998, was under lease in this line of
credit. The Company accounts for the other two lease lines as capital leases.
One of these lease credit lines is with an affiliated entity and has an
available limit of $1,595,000 in equipment value, bears interest at
approximately 10% per annum and had an outstanding balance of $996,610 at
December 31, 1998. The other lease credit line is with an unaffiliated entity
and has no stated limit, bears interest at varying rates according to the
purchase amount of the underlying equipment and had an outstanding balance of
$520,167 at December 31, 1998. (See note 19 for capital lease obligation).

     During 1998 and 1997, the Company had a line of credit of $110,000 from an
unaffiliated financial institution for the use of purchasing equipment, which
had an outstanding balance of $49,001 and $85,668 at

                                      F-20
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(10) LINES OF CREDIT--(CONTINUED)
December 31, 1998 and 1997, respectively. The note matures on August 18, 2002,
and bears interest at the prime rate, which was 8.25% at December 31, 1998.

     During 1997, the Company opened a $200,000 working capital line of credit
with an unaffiliated financial institution. At December 31, 1998 and 1997, there
was no balance outstanding.

(11) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

     Accounts payable and accrued expenses consist of the following at
December 31, 1998 and 1997:
DECEMBER 31,
                                                                     ------------------------
                                                                        1998          1997
                                                                     ----------    ----------
Accounts payable..................................................   $3,225,450    $1,143,321
Accrued expenses..................................................    1,488,223       471,637
Profit distribution payable.......................................      312,120       160,958
Warehouse line interest payable...................................      512,228       132,387
                                                                     ----------    ----------
     Total accounts payable and accrued expenses..................   $5,538,021    $1,908,303
                                                                     ----------    ----------
                                                                     ----------    ----------
(12) LIQUIDITY AND CAPITAL RESOURCES

     Since inception, the Company has funded operations primarily through net
cash proceeds from private placements of preferred and common stock totaling
$36 million through December 31, 1998. As of December 31, 1998, the Company had
cash and cash equivalents of $3.4 million. During the three month period ended
March 31, 1999 (unaudited), the Company has raised an additional $10 million in
cash through the issuance of senior subordinated debentures, and is currently in
discussion with various potential investors to provide additional capital for
the operations and growth of the Company. The Company's primary need for
operating capital is for the funding of mortgage loans between closing and
eventual sale to investors, which is accomplished through the use of warehouse
lines of credit and the funding of operating losses. There can be no assurance
that the Company will be able to continue raising capital sufficient to fund its
operations or obtain sufficient warehouse borrowing capacity to maintain current
operating levels.

(13) SUBORDINATED DEBT, NET OF DISCOUNT

     Subordinated debt, net of discount at March 31, 1999 (unaudited), of
$9,622,774, consists of convertible debentures at a fixed rate of interest of
12%, $2,000,000 of which matures on February 9, 2000 and $8,000,000 matures on
February 26, 2001. The holders of these notes received 6,668 and 26,672,
respectively of common stock warrants that are convertible to common stock at
$30 per share at any time prior to or upon maturity.

     Subordinated debt at December 31, 1998 of $100,000 consists of convertible
debentures, at a fixed rate of interest of 12%, which mature May 1, 1999.
Interest is due and payable monthly through maturity. At the option of the
holders, the debt can be converted to equity at the rate of $15 per share in
multiples of $15,000 at any time prior to or upon maturity. The debentures are
subordinated to any future indebtedness of the Company that is wholly secured by
first mortgage loans.

     During December 1997, the Company issued $2,400,000 of convertible
subordinated debt, of which $2,200,000 subsequently converted to preferred stock
at $11.50 per share during 1998. The remaining $200,000 was redeemed for cash
during 1998.

     During August 1997, the Company issued $1,500,000 of convertible
subordinated debt, which subsequently converted to preferred stock at $7.50 per
share during December 1997.

                                      F-21
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(14) SHAREHOLDERS' EQUITY

  (a) Common Stock Transactions

     During January 1999, the Company issued 20,000 shares of common stock at a
value of $32.30 per share in connection with the acquisition of the Internet
domain name www.mortgage.com as described in note 1(c).

     Options to purchase 120 shares of common stock were exercised during the
three-month period ending March 31, 1999.

     During April 1998, the Company issued 100,000 shares of common stock at a
value of $7.50 per share in connection with the acquisition of RM Holdings, Inc.
as described in note 1(c).

     During March 1998, the Company issued 100,000 shares of common stock at a
value of $7.50 per share in accordance with the contingent consideration
agreement as described in note 1(c).

     During June 1998, the Company issued 44,000 shares of common stock at a
value of $7.50 per share to a brokerage firm in consideration for the
facilitation of capital investments in the Company by unaffiliated firms.

     During 1997, the Company issued 71,668 shares of common stock at a value of
$7.50 per share in connection with the acquisition of Online Capital as
described in note 1(c).

  (b) Preferred Stock Transactions

     During 1998, the Company issued 1,273,898 shares of $.01 par value Series D
preferred stock at a price of $11.50 per share. Of these shares, 191,301 were
issued upon conversion of $2,200,000 of subordinated debt. Net proceeds from the
issuance of preferred stock, other than those converted from subordinated debt,
were $12,224,971. All Series D preferred stock will automatically convert into
common stock if the Company sells shares of its stock in an initial public
offering meeting certain specific criteria and the shareholders have not
redeemed their shares or upon the consent of holders of two-thirds of the
outstanding Series D preferred shares. These shares are entitled to voting
rights equal to those of the common stock of the Company and have liquidation
preference to all other shares of stock.

     During 1997 and 1996, the Company issued 472,668 and 133,333 shares,
respectively, of $.01 par value Series C preferred stock at a price of $7.50 per
share. Of these shares, 206,000 were issued upon conversion of $1,500,000 of
subordinated debt. Net proceeds from the issuance of preferred stock, other than
those converted from subordinated debt, were $2,000,000. All Series C preferred
stock will automatically convert into common stock if the Company sells shares
of its stock in an initial public offering meeting certain specific criteria and
the shareholders have not redeemed their shares or upon the consent of holders
of two-thirds of the outstanding Series C preferred shares. These shares are
entitled to voting rights equal to those of the common stock of the Company and
have liquidation preference to all other shares of stock.

                                      F-22
MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(14) SHAREHOLDERS' EQUITY--(CONTINUED)

     During 1996, the Company sold $5,150,000 of 12% cumulative Series B
preferred stock in a private-placement offering. Net proceeds from this
transaction were $4,581,600. In addition, $127,875 of the 14% subordinated debt
was converted to Series B preferred stock. The remaining $1,134,625 of the 14%
subordinated debt was subsequently redeemed for cash in May 1996. All Series B
preferred stock will convert into common stock if the Company sells it's stock
in an initial public offering. These shares are also redeemable, at the
discretion of the holders, if the Company sells shares of its stock in an
initial public offering or private offering meeting certain specified criteria.
These shares are entitled to voting rights equal to those of the common stock of
the Company and have liquidation preference to all other shares of stock.

     Pursuant to the acquisition of Western American Mortgage, Inc. ("WAM") in
1996, the Company issued a class of preferred stock with special dividend
requirements equal to 50% of the net profits, as defined, of the WAM operations.
In July 1997, in conjunction with the acquisition of Online Capital, Inc., the
operations of WAM were integrated with other California operations of the
Company and the dividend requirements were amended to 20% of the net profit of
the Company's Northern California Division. Dividends paid for the year ending
December 31, 1998 and 1997 and the three month period ending March 31, 1999
(unaudited) to holders of this class of preferred stock amounted to $750,397, $0
and $179,483, respectively.

     Cumulative dividends, not declared, on the Series B preferred stock totaled
$1,649,129, $1,031,129 and $1,801,513 as of December 31, 1998 and 1997 and
March 31, 1999 (unaudited), respectively. Cumulative dividends, not declared, on
the Series C preferred stock totaled $1,002,924, $337,522 and $1,166,996 as of
December 31, 1998 and 1997 and March 31, 1999 (unaudited), respectively.
Cumulative dividends, not declared, on the Series D preferred stock totaled
$831,342, $-0- and $1,264,816 as of December 31, 1998 and 1997 and March 31,
1999 (unaudited), respectively. No liability has been established for the
cumulative dividends, inasmuch as they have not been declared.

     The Company's preferred stock has a liquidation preference to common stock.

  (c) Stock Warrant Transactions

     During the three month period ending March 31, 1999, 25,000 common stock
warrants converted to common stock options at $5.00 per share.

     In connection with certain operational and capital transactions, the
Company issued 175,650, 50,000, 363,000 and 33,340 common and preferred stock
warrants during 1998, 1997 and 1996 and the three months ended March 31, 1999
(unaudited), respectively. Total warrants outstanding as of December 31, 1998
and March 31, 1999 were 1,179,314 and 1,187,654 shares, respectively, with
exercise prices on the warrants ranging from $5.00 to $30.00 per share. The
Company has agreed to repurchase 500,000 of these warrants in the event that the
Company issues equity rights, either through a public or private placement of
shares, of 25% or more of the then outstanding total equity of the Company or if
the Company sells substantially all of its assets. Subsequent to March 31, 1999,
under this agreement the Company repurchased 100,000 of these warrant and
expects to repurchase the remaining 400,000 warrants by June 30, 1999.

  (d) Other

     During 1997, the Company retired 105,000 shares of outstanding treasury
stock.

                                      F-23
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(14) SHAREHOLDERS' EQUITY--(CONTINUED)
     The following summarizes the activity in the number of shares outstanding
at December 31, 1998 and 1997 and March 31, 1999 (unaudited):
COMMON      PREFERRED
                                                                    COMMON      PREFERRED      STOCK       STOCK
                                                                     STOCK        STOCK      WARRANTS     WARRANTS
                                                                   ---------    ---------    ---------    ---------
Balance at December 31, 1996....................................   1,131,942    1,452,507      953,664          --
  Issuance of common stock......................................      71,668           --           --          --
  Issuance of preferred stock...................................          --      472,668           --          --
  Common stock warrants granted.................................          --           --       50,000          --
  Preferred stock warrants granted..............................          --           --           --          --
  Retirement of treasury stock..................................    (105,000)          --           --          --
                                                                   ---------    ---------    ---------     -------
Balance at December 31, 1997....................................   1,098,610    1,925,175    1,003,664          --
  Issuance of common stock......................................     244,000           --           --          --
  Issuance of preferred stock...................................          --    1,273,898           --          --
  Common stock warrants granted.................................          --           --      157,000          --
  Preferred stock warrants granted..............................          --           --           --      18,650
                                                                   ---------    ---------    ---------     -------
Balance at December 31, 1998....................................   1,342,610    3,199,073    1,160,664      18,650
  Issuance of common stock......................................      20,120           --           --          --
  Common stock warrants granted.................................          --           --       33,340          --
  Warrants converted to options.................................          --           --      (25,000)         --
                                                                   ---------    ---------    ---------     -------
Balance at March 31, 1999 (unaudited)...........................   1,362,730    3,199,073    1,169,004      18,650
                                                                   ---------    ---------    ---------     -------
                                                                   ---------    ---------    ---------     -------
(15) STOCK OPTION PLANS

     The Company's 1996 Employee Stock Option Plan (the "Plan") covered 350,000
shares of the Company's common stock and has been amended in 1997 and 1998 to
include a total of 1,190,000 shares. Subsequent to 1998, the Plan was amended to
increase the total shares to 1,590,000. Under the terms of the Plan, officers,
directors, key employees and consultants of the Company are eligible to receive
incentive as well as nonqualified stock options. Incentive stock options granted
under the Plan vest 40% on the second anniversary from the date of grant and 20%
in each of three years thereafter, except that California residents vest 20% on
the first anniversary. The options are exercisable for a period of up to ten
years from the date of grant at an exercise price which is not less than the
fair market value of the Company's common stock on the date of the grant. For
any stockholder owning more than 10% of the outstanding common stock, incentive
stock options are exercisable for a period of up to ten year exercise price
which is not less than 110% of the fair market value of the Company's common
stock on the date of the grant. Nonqualified options vest at 40% after the
second anniversary of the date of first service as an employee or consultant to
the Company and then equally over three years on the anniversary date of
service, and are granted on terms determined by the Company's board of
directors.

     The Company's Directors' 1996 Stock Option Plan (the "Directors' Plan")
covers 60,000 shares of the Company's common stock and provides for the grant of
nonqualified stock options to the Company's nonemployee directors. Stock options
granted under the Directors' Plan vest 66.67% on the second anniversary of the
date of first service as a director of the Company and entirely on the third
anniversary and are exercisable for a period of up to 3 1/2 years from the date
of grant at an exercise price which is not less than the fair market value of
the Company's common stock on the date of grant. The Directors' Plan is
administered by the board of directors or a committee appointed by the board of
directors consisting of at least three of its members.

                                      F-24
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(15) STOCK OPTION PLANS--(CONTINUED)
     The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," and related interpretations in
accounting for its employee and non-employee directors' stock options.
Accordingly, no compensation expense has been recognized for the options, as the
exercise price equals or exceeds the market price of the underlying stock on the
date of grant.

     Stock option activity during the periods indicated is as follows:
WEIGHTED-
                                                                                                AVERAGE
                                                                                                EXERCISE
                                                                                    OPTIONS      PRICE
                                                                                   ---------    ---------
Outstanding at December 31, 1995................................................          --     $    --
  Granted.......................................................................     392,000        5.50
  Exercised.....................................................................          --          --
  Forfeited.....................................................................     (17,500)       5.50
                                                                                   ---------     -------
Outstanding at December 31, 1996................................................     374,500        5.50
  Granted.......................................................................     233,000        7.47
  Exercised.....................................................................          --          --
  Forfeited.....................................................................     (49,100)       6.34
                                                                                   ---------     -------
Outstanding at December 31, 1997................................................     558,400        6.33
  Granted.......................................................................     628,677       10.30
  Exercised.....................................................................          --          --
  Forfeited.....................................................................     (66,125)       8.12
                                                                                   ---------     -------
Outstanding at December 31, 1998................................................   1,120,952        8.45
  Granted.......................................................................     649,296       15.13
  Exercised.....................................................................        (120)       7.50
  Forfeited.....................................................................     (14,760)      13.63
                                                                                   ---------     -------
Outstanding at March 31, 1999 (unaudited).......................................   1,755,368     $ 10.72
                                                                                   ---------     -------
                                                                                   ---------     -------
Weighted-average fair value of options granted during 1998, 1997, 1996 and
1999 (unaudited) were $2.56, $0.69, $0.26 and $22.70, respectively.

                                      F-25
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(15) STOCK OPTION PLANS--(CONTINUED)
     The following table summarizes information about stock options outstanding
at December 31, 1998:
OPTIONS OUTSTANDING
-------------------------------------------------------------------------            OPTIONS EXERCISABLE
                                        WEIGHTED-                             ---------------------------------
                      NUMBER             AVERAGE           WEIGHTED-            NUMBER           WEIGHTED-
                   OUTSTANDING AT       REMAINING           AVERAGE           OUTSTANDING AT      AVERAGE
EXERCISE PRICE       12/31/98         CONTRACTUAL LIFE     EXERCISE PRICE      12/31/98          EXERCISE PRICE
---------------    --------------     ----------------     --------------     --------------     --------------
$5.50-11.50         1,120,952         9.26 years             $ 8.45             399,117            $ 6.20
The following table summarizes information about stock options outstanding
at December 31, 1997:
OPTIONS OUTSTANDING
-------------------------------------------------------------------------            OPTIONS EXERCISABLE
                                        WEIGHTED-                             ---------------------------------
                      NUMBER             AVERAGE           WEIGHTED-            NUMBER           WEIGHTED-
                   OUTSTANDING AT       REMAINING           AVERAGE           OUTSTANDING AT      AVERAGE
EXERCISE PRICE       12/31/97         CONTRACTUAL LIFE     EXERCISE PRICE      12/31/97          EXERCISE PRICE
---------------    --------------     ----------------     --------------     --------------     --------------
$5.50-7.50            558,400            9 years             $ 6.33             233,000            $ 6.34
The following table summarizes information about stock options outstanding
at December 31, 1996:
OPTIONS OUTSTANDING
-------------------------------------------------------------------------            OPTIONS EXERCISABLE
                                        WEIGHTED-                             ---------------------------------
                      NUMBER             AVERAGE           WEIGHTED-            NUMBER           WEIGHTED-
                   OUTSTANDING AT       REMAINING           AVERAGE           OUTSTANDING AT      AVERAGE
EXERCISE PRICE       12/31/96         CONTRACTUAL LIFE     EXERCISE PRICE      12/31/96          EXERCISE PRICE
---------------    --------------     ----------------     --------------     --------------     --------------
$5.50              374,500           7.8 years            $ 5.50             148,502            $ 5.50
The following table summarizes information about stock options outstanding
    at March 31, 1999 (unaudited):
OPTIONS OUTSTANDING
-------------------------------------------------------------------------            OPTIONS EXERCISABLE
                                        WEIGHTED-                             ---------------------------------
                      NUMBER             AVERAGE           WEIGHTED-            NUMBER           WEIGHTED-
                   OUTSTANDING AT       REMAINING           AVERAGE           OUTSTANDING AT      AVERAGE
EXERCISE PRICE       3/31/99          CONTRACTUAL LIFE     EXERCISE PRICE       3/31/99          EXERCISE PRICE
---------------    --------------     ----------------     --------------     --------------     --------------
$5.50-$30.00         1,755,368           9.0 years            $10.72             506,652            $ 6.31
Aggregate proceeds realizable upon the exercise of all options outstanding
at December 31, 1998, 1997, 1996 and March 31, 1999 (unaudited) approximates
$9.5 million, $3.5 million, $2.1 million and $18.8 million, respectively.

                                      F-26
MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(15) STOCK OPTION PLANS--(CONTINUED)

     Pro forma information regarding results of operations had compensation
expense been recorded at the grant date for awards consistent with Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123") has been determined as if the Company had
accounted for the employee and nonemployee directors' stock options granted
during the years ended December 31, 1998 and 1997, under the fair value method
of SFAS No. 123. The fair value of each employee stock option grant has been
estimated on the date of grant with the following assumptions for the years
ended December 31, 1998, 1997 and 1996 and the three month period ending
March 31, 1999 (unaudited):
DECEMBER 31,                MARCH 31,
                                                  --------------------------------------  ------------
                                                      1998         1997         1996          1999
                                                  ------------  -----------  -----------  ------------
                                                                                          (UNAUDITED)
Weighted-average risk-free interest rate........   4.42-5.74%   6.12-6.73%      6.46%     4.63%-5.30%
Dividend yield..................................       --           --           --            --
Weighted-average expected option life...........    6 years      5 years     4-10 years     5 years
Fair market value of the common stock...........  $7.50-25.40      $5.00        $5.00     $32.30-42.40
The Black-Scholes Model was used in estimating the fair market value of
options and warrants and a discount for lack of marketability was used as the
warrants and options are not traded on a public market. Management of the
Company has reviewed both internal and external factors which influence the
value of the warrants and options. Internal factors include, among other things,
the Company's financial position, results of its operations and the size and
marketability of the interest being valued. External factors include, among
other things, the status of the industry, the position of the Company relative
to the industry and the local, national and international economic environment.
For the purposes of pro forma disclosure, the estimated fair value of the
options is amortized over the options' vesting period.

     Had compensation cost for the Company's stock option plan been determined
based on the fair value at the grant date for awards in 1998, 1997 and 1996 and
the three month period ending March 31, 1999 (unaudited), consistent with the
provisions of SFAS 123, the Company's net loss and basic and diluted net loss
per share would have been increased to the pro forma amounts indicated below:
YEAR ENDED
                                                                   DECEMBER 31,             THREE MONTHS
                                                           -----------------------------       ENDED
                                                            1998       1997       1996      MARCH 31, 1999
                                                           -------    -------    -------    --------------
                                                                                            (UNAUDITED)
Net Loss--attributable to common shareholders...........   $(8,943)   $(4,485)   $(4,433)      $ (4,133)
Net Loss--atrributable to common shareholders--as
  adjusted..............................................   $(9,077)   $(4,524)   $(4,445)      $ (4,488)
Basic and diluted net loss per share--as reported.......   $ (7.17)   $ (3.85)   $ (3.92)      $  (3.05)
Basic and diluted net loss per share--as adjusted.......   $ (7.28)   $ (3.88)   $ (3.93)      $  (3.31)
The effects of applying SFAS 123 in this disclosure are not indicative of
future amounts. Additional grants in future years are anticipated.

(16) INCOME TAXES

     No current or deferred provision for income taxes was recorded for the
years ended December 31, 1998 and 1997, due to the Company's operating losses in
the respective periods.

                                      F-27
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(16) INCOME TAXES--(CONTINUED)
     At December 31, 1998, the Company had approximately $16.1 million of tax
net operating loss carryforwards. The net operating loss carryforwards will
expire as follows:
YEAR                                                            AMOUNT
-----------------------------------------------------------   -----------
2010.......................................................   $ 2,200,000
2011.......................................................     2,900,000
2012.......................................................     1,900,000
2013.......................................................     3,100,000
2018.......................................................     6,000,000
                                                              -----------
Total......................................................   $16,100,000
                                                              -----------
                                                              -----------
Utilization of these carryforwards is dependent on the future profitability
of the Company and may be limited if certain changes in ownership occur. If
certain substantial changes in the Company's ownership should occur, or have
already occurred, there would be an annual limitation in the amount of tax net
operating loss carryforwards which could be utilized.

     The composition of net deferred tax assets at December 31, 1998 and 1997,
is as follows:
1998           1997
                                               -----------    -----------
Deferred tax assets:
     Tax net operating loss carryforward....   $ 6,052,874    $ 3,568,212
     Software sale..........................       607,055        607,055
     Organization costs.....................        29,881         59,682
     Provision for losses...................       181,969         71,340
     Property and equipment.................        37,650         57,533
     Other..................................        10,915         67,042
                                               -----------    -----------
                                                 6,920,344      4,430,864
Valuation allowance.........................    (6,479,601)    (4,190,362)
                                               -----------    -----------
     Net deferred tax asset.................       440,743        240,502
Deferred tax liabilities:
     Capitalized software development
       costs................................       440,743        240,502
                                               -----------    -----------
          Total.............................   $        --    $        --
                                               -----------    -----------
                                               -----------    -----------
A 100 percent valuation allowance was established against the net deferred
tax asset at December 31, 1998 and 1997.

(17) RELATED PARTIES

     The Company has a consulting agreement with a consulting firm of which the
two principle owners are shareholders of the Company. Total consulting fees
expensed related to this consulting firm were $604,600, $300,100 and $266,000
for the years ended December 31, 1998, 1997 and 1996, respectively. As of
December 31, 1998, total unpaid fees for services rendered during 1998 under
such agreement totaled $115,000.

(18) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     SFAS 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 practicable to
estimate fair value.

                                      F-28
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(18) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)
     Financial instruments include such items as mortgage loans available for
sale, warehouse notes payable and other instruments.

     Fair value estimates are made as of a specific point in time based on the
characteristics of the financial instruments and the relevant market
information. Where available, quoted market prices are used. In other cases,
fair values are based on estimates using other valuation techniques, such as
discounting estimated future cash flows using a rate commensurate with the risks
involved or other acceptable methods. These techniques involve uncertainties and
are significantly affected by the assumptions used and the judgements made
regarding risk characteristics of various financial instruments, prepayments,
discount rates, estimates of future cash flows, future expected loss experience,
and other factors. Changes in assumptions could significantly affect these
estimates. Derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in an immediate
sale of the instrument. Also, because of differences in methodologies and
assumption used to estimate fair value, the Company's fair values should not be
compared to those of other companies.

     Under the Statement, fair value estimates are based on existing financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Accordingly, the aggregate fair value amount presented
does not represent the underlying value of the Company. For certain assets and
liabilities, the information required under the Statement is supplemental with
additional information relevant to an understanding of the fair value.

     The methods and assumptions used to estimate the fair values of each class
of financial instruments are as follows:

     Cash and Cash Equivalents

          The carrying amount reported in the balance sheet approximates fair
     value.

     Mortgage Loans Available For Sale, Net

          Fair values are based on the estimated value at which the loans could
     be sold in the secondary market. These loans are priced to be sold with
     servicing rights released, as is the Company's normal business practice.

     Accounts and Notes Receivable, Net

          Carrying amounts are considered to approximate fair value. All amounts
     that are assumed to be uncollectible within a reasonable time are written
     off and or reserved.

     Warehouse Notes Payable

          The carrying amount of warehouse notes payable reported in the balance
     sheet approximates its fair value.

     Note Payable

          Fair value of note payable is estimated by discounting estimated
     future cash flows using a rate commensurate with the risks involved.

     Subordinated Debt

          Fair value is estimated using the estimated fair value of the
     preferred stocks into which the subordinated debt can be converted.

     Lines of Credit

          The carrying amount of amounts outstanding on lines of credit is
     estimated by discounting estimated future cash flows using a rate
     commensurate with the risks involved.

                                      F-29
MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(18) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS--(CONTINUED)

     The estimated fair values of the Company's financial investments are as
follows:
DECEMBER 31, 1998              DECEMBER 31, 1997
                                           ----------------------------    --------------------------
                                             CARRYING          FAIR         CARRYING         FAIR
                                              AMOUNT          VALUE          AMOUNT          VALUE
                                           ------------    ------------    -----------    -----------
ASSETS
Cash and cash equivalents...............   $  3,412,283    $  3,412,283    $ 1,679,722    $ 1,679,722
Mortgage loans available for sale, net..    176,372,516     177,167,458     73,737,933     74,316,028
Accounts and notes receivable, net......      1,243,571       1,243,571      1,228,762      1,228,762

LIABILITIES
Warehouse notes payable.................   $171,777,572    $171,777,572    $72,223,912    $72,223,912
Note payable............................        288,701         295,934         70,833         70,833
Lines of credit.........................      1,565,778       1,565,778        395,899        395,899
Subordinated debt.......................        100,000         333,350      2,500,000      2,500,000
(19) COMMITMENTS AND CONTINGENCIES

  (a) Leases

     The Company is obligated under various operating lease agreements relating
to branch and executive offices and equipment. Lease terms expire during the
years 1998 to 2003, subject to renewal options. The following is a schedule of
future minimum rental payments under non-cancelable operating leases for office
space and equipment as of December 31, 1998:
YEAR                                                             AMOUNT
------------------------------------------------------------   ----------
1999........................................................   $2,342,000
2000........................................................    1,940,000
2001........................................................    1,449,000
2002........................................................    1,089,000
2003 and thereafter.........................................      896,000
                                                               ----------
     Total minimum payments.................................   $7,716,000
                                                               ----------
                                                               ----------
Beginning in 1998, the Company is obligated under various capital lease
agreements relating to computer equipment, furniture and leasehold improvements.
Lease terms are from 36 to 42 months and expire from 1999 to 2002, subject to
renewal options.

     At December 31, 1998 and 1997, the gross amount of equipment, furniture and
leasehold improvements and related accumulated amortization recorded under
capital leases is as follows:
DECEMBER 31,
                                                                       ----------------------
                                                                          1998         1997
                                                                       ----------    --------
Computer hardware and software......................................   $1,101,804    $310,231
Furniture and fixtures..............................................      322,420          --
Telephone equipment.................................................      526,947          --
Leasehold improvements..............................................      107,265          --
                                                                       ----------    --------
                                                                        2,058,436     310,231
Less: accumulated amortization......................................     (397,089)         --
                                                                       ----------    --------
                                                                       $1,661,347    $310,231
                                                                       ----------    --------
                                                                       ----------    --------
F-30
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(19) COMMITMENTS AND CONTINGENCIES--(CONTINUED)
     The following is a schedule of future minimum rental payments under capital
leases as of December 31, 1998:
YEAR                                                             AMOUNT
------------------------------------------------------------   ----------
1999........................................................   $  829,000
2000........................................................      704,000
2001........................................................      447,000
2002........................................................       70,000
2003 and thereafter.........................................           --
                                                               ----------
Total minimum lease payments................................    2,050,000
Less amount representing interest at 12%....................     (502,000)
                                                               ----------
Present value of net minimum capital lease payments.........    1,548,000
Less current installments of obligations under capital
  leases....................................................     (665,000)
                                                               ----------
Obligations under capital leases excluding current
  installments..............................................   $  883,000
                                                               ----------
                                                               ----------
Rent expense for the years ended December 31, 1998, 1997 and 1996 was
$1,343,053, $739,805 and $453,029, respectively. Included in the rent for 1998
is $647,577 relating to the capital leases.

  (b) Litigation

     The Company is a defendant in various lawsuits arising during the ordinary
course of business. Management has consulted with legal counsel and is of the
opinion, based on legal counsel's advice, that none of these matters will have a
material adverse effect on the financial position of the Company. Where
appropriate, the Company has adequately reserved for fees and costs.

  (c) Software Rights

     The Company sold its CLOser software to a customer under a financing
arrangement whereby the Company retained licensing rights to the software and a
repurchase option. Under certain events, including a public offering of stock in
the Company, the Company is required to repurchase the CLOser software for $3.5
million.

  (d) Other

     On December 3, 1996, the Company entered into a partnership agreement whose
primary function is the ownership of rental office space in Plantation, Florida.
The Company had a 25% interest in this partnership and entered into a ten-year
lease for approximately 22% of the rentable space in the partnership's office
building. In addition, the partnership committed to reimburse the Company for
approximately $146,000 in rental expense in 1997 attributable to the Company's
prior leased headquarters. During 1997, the Company sold its investment in the
partnership for $247,000.

     The Company has entered into arrangements with certain employees and third
parties which provide for profit sharing based on results of operations of
specified products or divisions of the Company. In conjunction with these
arrangements, the Company has also entered into employment and noncompetitive
agreements with certain individuals.

(20) SUBSEQUENT EVENTS

     During the three month period ended March 31, 1999 (unaudited), the
Company's Board of Directors authorized management of the Company to file a
Registration Statement with the Securities and Exchange Commission permitting
the Company to sell shares of its common stock to the public.

                                      F-31
MORTGAGE.COM, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(21) YEAR 2000

     Many currently installed computer systems and software products are
designed to accept only two digit entries in the date code field. As a result,
they may have problems properly recognizing 1/1/00 as January 1, 2000. In less
than a year, computer systems and/or software used by many companies may need to
be upgraded to comply with "Year 2000" or "Y2K" requirements. Significant
uncertainty exists concerning the potential effects associated with the Year
2000 issue on business operations.

     In early 1998, the Company commenced a program to review the Y2K compliance
status of the software and systems used in its internal business processes, its
technology platforms licensed to others and other systems and services provided
by third-party vendors on which the Company is reliant. The assessment and the
research and strategy phases of the program have been completed and strategies
are being implemented, including the development of contingency plans for
potential third-party Y2K compliance problems that management believes could
affect business continuity. There can be no assurance that all potential Y2K
effects on the Company's business will be anticipated or identified by the
program or that contingency plans developed will be effective.

     The Company has fully integrated Y2K testing into the development process
for all of its own software. The Company believes that the entire technology
platform on which it operates and which provides for use by clients is generally
Y2K compliant. In certain circumstances, the Company has warranted to customers
that the use or occurrence of dates on or after January 1, 2000, will not
adversely affect the performance of the Company's systems with respect to the
ability to create, store, process and output information related to such data.
If any of these customers experience Y2K problems, such customers could assert
claims for damages against the Company.

     To date the Company has not maintained a complete and separate budget for
investigation and remediation related to Y2K compliance of its own software and
underlying systems used in internal operations. The costs of the Company's Y2K
initiative have been incorporated into existing workloads and budgets within the
technology group and are not expected to be material to the Company's results of
operations or financial position. Management will develop a contingency plan in
the second and third quarter of 1999 based upon the results of supplier and
customer readiness reviews. To the extent the Company has not adequately
assessed its Y2K compliance deficiencies, additional and possibly significant
Company resources may be spent on investigating and remedying Y2K issues. The
expenditure of such resources may have a material adverse effect on the
Company's business, financial condition and results of operations.

(22) SEGMENT INFORMATION

     The Company operates in two reportable business segments: the Direct to
Consumer reportable Segment, which includes the Mortgage.com internet web site
and retail mortgage brokerage operations, both of which originate mortgage loans
that are subsequently sold in the secondary market; and the Business to Business
reportable Segment, which includes back-office mortgage services for lenders,
realtors, homebuilders and software and internet conduits, technology platform
licenses to mortgage industry participants and the Openclose.com website that
enables brokers, correspondents and insurance companies to conduct their
business through a neutral internet site with selected financial institutions
using automated underwriting capabilities provided by the Federal National
Mortgage Association. The Business to Business reportable Segment generates
revenues by charging fees for these services. These segments are characterized
by the nature of their customers. Summarized financial information concerning
the business segments is shown in the following table: (Certain expenses that
are not directly attributable to the business channels have been reclassified to
Overhead in these tables.)

                                      F-32
MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(22) SEGMENT INFORMATION--(CONTINUED)
DIRECT TO     BUSINESS TO
                                                                         TOTAL         CONSUMER       BUSINESS
                                                                      ------------    -----------    -----------
Year ended December 31, 1998
Revenue:
  Secondary marketing revenue, net.................................   $ 28,597,825    $12,571,230    $16,026,595
  Loan production and processing fees, net.........................      5,337,625      1,826,050      3,511,575
  Management, technology and other fees............................      1,868,202             --      1,868,202
  Net interest (expense) income....................................       (113,102)      (217,118)       104,016
                                                                      ------------    -----------    -----------
Total revenue......................................................     35,690,550     14,180,162     21,510,388
                                                                      ------------    -----------    -----------
Expenses:
  Compensation and employee benefits...............................     23,640,569     10,732,442     12,908,127
  Marketing........................................................      1,324,760        613,465        711,295
  Depreciation and amortization....................................        742,661        240,424        502,237
  General and administrative.......................................      7,997,176      3,007,596      4,989,580
                                                                      ------------    -----------    -----------
  Total segment expenses...........................................     33,705,166     14,593,927     19,111,239
                                                                                      -----------    -----------
  Segment (loss)/income............................................                   $  (413,765)   $ 2,399,149
                                                                                      -----------    -----------
  Research and development not allocated to segments...............      2,888,159
  Overhead expenses not allocated to segments......................      5,175,013
                                                                      ------------
Total expenses.....................................................     41,768,338
                                                                      ------------
Net loss...........................................................   $ (6,077,788)
                                                                      ------------
                                                                      ------------
Segment assets.....................................................   $176,372,516    $93,324,622    $83,047,894
                                                                      ------------    -----------    -----------
                                                                      ------------    -----------    -----------

Year ended December 31, 1997
Revenue:
  Secondary marketing revenue, net.................................   $ 11,594,660    $ 4,997,935    $ 6,596,726
  Loan production and processing fees, net.........................      2,347,321        788,358      1,558,963
  Management, technology and other fees............................      2,032,428             90      2,032,338
  Net interest (expense) income....................................        500,008         58,022        441,985
                                                                      ------------    -----------    -----------
Total revenue......................................................     16,474,417      5,844,405     10,630,012
                                                                      ------------    -----------    -----------
Expenses:
  Compensation and employee benefits...............................     12,057,725      4,781,058      7,276,667
  Marketing........................................................         57,586         51,007          6,579
  Depreciation and amortization....................................        318,704         91,236        227,468
  General and administrative.......................................      3,258,339        714,118      2,544,221
                                                                      ------------    -----------    -----------
  Total segment expenses...........................................     15,692,354      5,637,419     10,054,935
                                                                                      -----------    -----------
  Segment income...................................................                   $   206,986    $   575,077
                                                                                      -----------    -----------
  Research and development not allocated to segments...............      1,079,257
  Overhead expenses not allocated to segments......................      3,234,672
                                                                      ------------
Total expenses.....................................................     20,006,283
                                                                      ------------
Net loss...........................................................   $ (3,531,866)
                                                                      ------------
                                                                      ------------
Segment assets.....................................................   $ 73,737,933    $31,243,110    $42,494,823
                                                                      ------------    -----------    -----------
                                                                      ------------    -----------    -----------
F-33
MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(22) SEGMENT INFORMATION--(CONTINUED)
DIRECT TO     BUSINESS TO
                                                                       TOTAL         CONSUMER        BUSINESS
                                                                    ------------    -----------    ------------
Year ended December 31, 1996
Revenue:
  Secondary marketing revenue, net...............................   $  4,101,341    $ 1,466,111    $  2,635,230
  Loan production and processing fees, net.......................        820,469        256,766         563,703
  Management, technology and other fees..........................      2,577,296         (2,250)      2,579,546
  Net interest (expense) income..................................         17,203         18,826          (1,623)
                                                                    ------------    -----------    ------------
Total revenue....................................................      7,516,309      1,739,453       5,776,855
                                                                    ------------    -----------    ------------
Expenses:
  Compensation and employee benefits.............................      5,810,129      1,538,761       4,271,368
  Marketing......................................................         17,795          4,162          13,633
  Depreciation and amortization..................................         42,728          2,361          40,367
  General and administrative.....................................      2,224,406        394,214       1,830,192
                                                                    ------------    -----------    ------------
  Total segment expenses.........................................      8,095,058      1,939,498       6,155,560
                                                                                    -----------    ------------
  Segment loss...................................................                   $  (200,045)   $   (378,705)
                                                                                    -----------    ------------
  Research and development not allocated to segments.............        496,568
  Overhead expenses not allocated to segments....................      2,942,858
                                                                    ------------
Total expenses...................................................     11,534,484
                                                                    ------------
Net loss.........................................................   $ (4,018,175)
                                                                    ------------
                                                                    ------------
Segment assets...................................................   $ 24,701,486    $ 3,705,223    $ 20,996,263
                                                                    ------------    -----------    ------------
                                                                    ------------    -----------    ------------

Three months ended March 31, 1999 (unaudited)
Revenue:
  Secondary marketing revenue, net...............................   $  8,599,974    $ 2,421,061    $  6,178,913
  Loan production and processing fees, net.......................      2,598,337        533,640       2,064,697
  Management, technology and other fees..........................      1,991,360             --       1,991,360
  Net interest (expense) income..................................         25,837         12,362          13,475
                                                                    ------------    -----------    ------------
Total revenue....................................................     13,215,508      2,967,063      10,248,445
                                                                    ------------    -----------    ------------
Expenses:
  Compensation and employee benefits.............................      8,753,356      2,507,748       6,245,608
  Marketing......................................................      1,349,337        350,964         998,373
  Depreciation and amortization..................................        384,764         91,277         293,487
  General and administrative.....................................      2,987,684        505,815       2,481,869
                                                                    ------------    -----------    ------------
  Total segment expenses.........................................     13,475,141      3,455,804      10,019,337
                                                                                    -----------    ------------
  Segment (loss)/income..........................................                   $  (448,741)   $    229,108
                                                                                    -----------    ------------
  Research and development not allocated to segments.............        776,565
  Overhead expenses not allocated to segments....................      2,162,712
                                                                    ------------
Total expenses...................................................     16,414,418
                                                                    ------------
Net loss.........................................................   $  3,198,910
                                                                    ------------
                                                                    ------------
Segment assets...................................................   $166,149,185    $52,436,683    $113,712,502
                                                                    ------------    -----------    ------------
                                                                    ------------    -----------    ------------
F-34
MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(22) SEGMENT INFORMATION--(CONTINUED)
DECEMBER 31,                    MARCH 31,
                                                     ------------------------------------------    ------------
                                                         1998           1997           1996            1999
                   Total Assets                      ------------    -----------    -----------    ------------
                                                                                                   (UNAUDITED)
Total assets for reportable segments..............   $176,372,516    $73,737,933    $24,701,486    $166,149,185
Other assets not allocated to segments............     17,065,193      8,189,037      6,009,641      22,655,978
                                                     ------------    -----------    -----------    ------------
Total consolidated assets.........................   $193,437,709    $81,926,970    $30,711,127    $188,805,163
                                                     ------------    -----------    -----------    ------------
                                                     ------------    -----------    -----------    ------------
Assets not allocated to reportable segments include all assets other than
mortgage loans available for sale, net. All segment revenues are from external
customers. Expenses not allocated to reportable segments include corporate
overhead related to facilities, general and administrative costs and executive
salaries. Certain costs are allocated between segments based on either the
number of loans processed and/or originated. Research and development costs are
not allocated as the development efforts are primarily related to the technology
platform which is used to support activities conducted by all segments.

                                      F-35
MORTGAGE.COM, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

(23) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

     The following table presents the Company's statements of operation on a
quarterly basis for the years ended December 31, 1998 and 1997 (amounts in
thousands):
QUARTER ENDED:                           MARCH      JUNE     SEPTEMBER     DECEMBER
-----------------------------------------------------------   -------    ------    ----------    ---------
1998:
  Revenue:
     Secondary marketing revenue, net......................   $ 5,407    $6,620     $  7,632      $ 8,938
     Loan production and processing fees, net..............       922     1,278        1,329        1,809
     Management, technology and other fees.................       546       649          539          134
     Net interest (expense) income.........................       (56)      (22)         108         (143)
                                                              -------    ------     --------      -------
       Total revenue.......................................     6,819     8,525        9,608       10,738
                                                              -------    ------     --------      -------
  Expenses:
     Compensation and employee benefits....................     4,927     5,892        6,653        8,602
     Marketing.............................................        85       258          454          539
     Research and development..............................       434       578          722        1,155
     Depreciation and amortization.........................       154       268          337        1,114
     General and administrative............................     1,589     2,292        2,721        2,994
                                                              -------    ------     --------      -------
       Total expenses......................................     7,189     9,288       10,887       14,404
                                                              -------    ------     --------      -------
  Net loss.................................................   $  (370)   $ (763)    $ (1,279)     $(3,666)
                                                              -------    ------     --------      -------
                                                              -------    ------     --------      -------
  Net loss per share, basic and dilutive...................   $ (0.83)   $(1.16)    $  (1.62)     $ (3.56)
                                                              -------    ------     --------      -------
                                                              -------    ------     --------      -------
1997:
  Revenue:
     Secondary marketing revenue, net......................   $   997    $2,116     $  4,052      $ 4,430
     Loan production and processing fees, net..............       300       521          685          842
     Management, technology and other fees.................       416       359          707          551
     Net interest (expense) income.........................       144       137          155           63
                                                              -------    ------     --------      -------
       Total revenue.......................................     1,857     3,133        5,599        5,886
                                                              -------    ------     --------      -------
  Expenses:
     Compensation and employee benefits....................     1,754     2,534        4,067        4,728
     Marketing.............................................        26        49           79           84
     Research and development..............................       162       216          269          432
     Depreciation and amortization.........................       110       123          143          105
     General and administrative............................       869     1,205        1,574        1,478
                                                              -------    ------     --------      -------
       Total expenses......................................     2,921     4,127        6,132        6,827
                                                              -------    ------     --------      -------
  Net loss.................................................   $(1,064)   $ (994)    $   (533)     $  (941)
                                                              -------    ------     --------      -------
                                                              -------    ------     --------      -------
  Net loss per share, basic and dilutive...................   $ (1.11)   $(1.06)    $  (0.67)     $ (1.02)
                                                              -------    ------     --------      -------
                                                              -------    ------     --------      -------
F-36
[The graphic appearing here is a picture of the real estate section of a
newspaper with the Mortgage.com logo and slogan in the middle of the page.]
PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

     The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the registrant in connection with the sale of
the common stock being registered. All amounts are estimates, except for the
Securities and Exchange Commission registration fee, the NASD filing fee and the
Nasdaq listing fee. All of these costs and expenses will be borne by the
registrant.
Securities and Exchange Commission filing fee..................   $31,171
NASD filing fee................................................    11,713
Nasdaq listing fee.............................................     5,000
Blue Sky fees and expenses.....................................          *
Transfer agent expenses and fees...............................          *
Printing and engraving.........................................          *
Accountants' fees and expenses.................................          *
Legal fees and expenses........................................          *
Miscellaneous..................................................          *
                                                                  -------
     TOTAL.....................................................   $      *
                                                                  -------
                                                                  -------
---------------------------------
               * To be filed by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

     Section 607.0850 of the Florida Business Corporation Act authorizes a court
to award, or permits a Florida corporation to grant, indemnity to present or
former directors and officers, as well as certain other persons serving at the
request of the corporation in related capacities. This permitted indemnity is
sufficiently broad to permit indemnification for liabilities arising under the
Securities Act of 1933, including reimbursement for expenses incurred.

     The indemnification authorized under Florida law is not exclusive and is in
addition to any other rights granted to officers and directors under the
Articles of Incorporation or Bylaws of the corporation or any agreement between
officers and directors and the corporation. The registrant's Bylaws provide for
the indemnification of directors, former directors and officers to the maximum
extent permitted by Florida law. The registrant's Bylaws also provide that it
may purchase and maintain insurance on behalf of a director or officer against
liability asserted against the director or officer in such capacity. In
addition, the registrant has entered into Indemnification Agreements (Exhibits
10.32, 10.33 and 10.34 hereto) with each officer and director, other than John
Buscema. The Underwriting Agreement (Exhibit 1.1) also provides for
cross-indemnification among the registrant and the Underwriters with respect to
certain matters, including matters arising under the Securities Act.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against such public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act, and will be governed by the final adjudication
of such issues.

                                      II-1
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

     Within the past three years, the registrant has sold the following
securities which were not registered under the Securities Act. The purchases and
sales were exempt pursuant to Section 4(2) of the Securities Act (and/or
Regulation D promulgated thereunder) as transactions by an issuer not involving
a public offering, where the purchasers represented their intention to acquire
the securities for investment only, not with a view to distribution, and
received or had access to adequate information about the registrant.

     1. Between December 24, 1996 and June 30, 1997, the registrant issued
533,336 shares of Series C Preferred Stock to six accredited institutional
investors, Canaan Equity, L.P., Canaan Ventures II Limited Partnership, Canaan
Ventures II Offshore CV, Canaan Capital Limited Partnership, Canaan Capital
Offshore Limited Partnership, CV, and Dominion Fund III, for aggregate
consideration of approximately $4,000,000. In connection with this issuance and
sale, between December 24, 1996 and March 10, 1997, the registrant also issued
warrants to purchase 14,952 shares of common stock at $7.50 per share to Raymond
James and Associates, Inc. in consideration for its services as placement agent
in the sale of Series C Preferred Stock. The purchases and sales were exempt
pursuant to Rule 506 and Regulation D as transactions by an issuer not involving
a public offering, where the purchasers were accredited investors, represented
their intention to acquire the securities for investment only, not with a view
to distribution, and received or had access to adequate information about the
registrant.

     2. As of June 30, 1997, the registrant issued 35,834 shares of common stock
to John Hogan in consideration for the merger of OnLine Capital into the
registrant. On January 1, 1998, the registrant issued an additional 35,834
shares of common stock to John Hogan pursuant to a clause in the OnLine Capital
merger agreement. As of January 1, 1998, the registrant issued 100,000 shares of
common stock to John Hogan in consideration of changing John Hogan's
compensation plan.

     3. As of August 31, 1997, the registrant issued $1,500,000 in face amount
of 12% Senior Subordinated Convertible Notes due September 30, 2002 and warrants
to purchase 50,000 shares of common stock at $7.50 per share to two accredited,
institutional investors, Canaan Equity, L.P. and Dominion Fund III. The
purchases and sales were exempt pursuant to Rule 506 and Regulation D as
transactions by an issuer not involving a public offering, where the purchasers
were accredited investors, represented their intention to acquire the securities
for investment only, not with a view to distribution, and received or had access
to adequate information about the registrant.

     4. As of December 31, 1997, the registrant issued 206,000 shares of Series
C Preferred Stock to two accredited, institutional investors, Canaan Equity,
L.P. and Dominion Fund III, upon their conversion of $1,500,000 in face amount
of 12% Senior Subordinated Convertible Notes due September 30, 2002. The
purchases and sales were exempt pursuant to Rule 506 and Regulation D as
transactions by an issuer not involving a public offering, where the purchasers
were accredited investors, represented their intention to acquire the securities
for investment only, not with a view to distribution and received or had access
to adequate information about the registrant.

     5. As of January 30, 1998, the registrant issued $2,000,000 of 12% Senior
Subordinated Convertible Notes due January 31, 2003 and warrants to purchase
66,667 shares of common stock at $7.50 per share to two accredited,
institutional investors, Canaan Equity, L.P. and Dominion Fund III. The
purchases and sales were exempt pursuant to Rule 506 and Regulation D as
transactions by an issuer not involving a public offering, where the purchasers
were accredited investors, represented their intention to acquire the securities
for investment only, not with a view to distribution, and received or had access
to adequate information about the registrant.

     6. As of March 31, 1998, the registrant issued 100,000 shares of common
stock to John Rodgers, Andrew Heller and Kyle Meyer as consideration for the
merger of RM Holdings, Inc. into the registrant. The merger agreement also
contained an earn-out provision which provided for the issuance of warrants to
purchase 100,000 shares of common stock at $7.50 per share, pursuant to a
formula. On December 31, 1998, the registrant issued warrants to purchase 29,126
shares of common stock at $7.50 per share to John Rodgers, Andrew Heller and
Kyle Meyer pursuant to the earn-out provision.

     7. As of April 1, 1998 the registrant issued a warrant to purchase 300,000
shares of common stock at $5.00 per share and a warrant to purchase 100,000
shares of common stock at $7.50 per share to an accredited,

                                      II-2
institutional investor, Superior Bank, FSB, in consideration of services under
the Sale and Marketing Agreement between the registrant and Superior Bank dated
as of April 28, 1995, as amended.

     8. As of April 15, 1998, the registrant issued a warrant to purchase 36,000
shares of common stock with an exercise price of $11.50 per share to FMN
Associates Limited Partnership in consideration for the settlement of a dispute.

     9. As of April 15, 1998, the registrant issued warrants to purchase 21,000
shares of common stock with an exercise price of $7.50 per share and 44,000
shares of common stock to an accredited, institutional investor, Raymond James &
Associates, Inc., in settlement of a dispute regarding services as a placement
agent in connection with the sale of Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock.

     10. As of April 1, 1998, the registrant issued a warrant to purchase 9,800
shares of Series D Preferred Stock with an exercise price of $11.50 per share to
an accredited, institutional investor, Dominion Fund III, as consideration for
the establishment of an equipment lease line of credit with an affiliate of
Dominion Fund III. As of November 20, 1998, the registrant issued a warrant to
purchase 8,850 shares of Series D Preferred Stock with an exercise price of
$11.50 per share to Dominion Capital Management, LLC, an affiliate of the
lessor, for an aggregate price of $672.60 in connection with an increase of
$925,000 in the equipment lease line of credit.

     11. Between May 29, 1998 and August 31, 1998, the registrant issued
1,273,898 shares of Series D Preferred Stock to sixteen investors in exchange
for the retirement of $200,000 in face amount of 12% Senior Subordinated Notes
due January 31, 2003 and $14,900,000 in cash. The purchases and sales were
exempt pursuant to Rule 506 and Regulation D as transactions by an issuer not
involving a public offering, where the purchasers represented their intention to
acquire the securities for investment only, not with a view to distribution, and
received or had access to adequate information about the registrant.

     12. As of January 1, 1999, the registrant issued 20,000 shares of common
stock to Credit.Com, LLC as partial consideration for the acquisition of the
domain name "www.mortgage.com".

     13. As of February 9, 1999, the registrant issued an aggregate amount of
$2,000,000 of 12% Senior Subordinated Notes due February 9, 2000 and warrants to
purchase 6,668 shares common stock with an adjustable exercise price (initially
$30 per share) to eight accredited, institutional investors. The purchases and
sales were exempt pursuant to Rule 506 and Regulation D as transactions by an
issuer not involving a public offering, where the purchasers were accredited
investors, represented their intention to acquire the securities for investment
only, not with a view to distribution, and received or had access to adequate
information about the registrant.

     14. As of February 26, 1999, the registrant issued an aggregate amount of
$8,000,000 of 12% Senior Subordinated Notes due February 26, 2001 and warrants
to purchase 53,334 shares of common stock with an adjustable exercise price
(initially $30 per share) to seven accredited, institutional investors. The
purchases and sales were exempt pursuant to Rule 506 and Regulation D as
transactions by an issuer not involving a public offering, where the purchasers
were accredited investors, represented their intention to acquire the securities
for investment only, not with a view to distribution, and received or had access
to adequate information about the registrant.

     15. As of April 5, 1999, the registrant issued an aggregate amount of
$3,000,000 of 12% Senior Subordinated Notes due April 5, 1999 and a warrant to
purchase 20,004 shares of common stock with an adjustable exercise price
(initially $30 per share) to an accredited, institutional investor, TeleBanc
Capital Markets, Inc. The purchase and sale was exempt pursuant to Rule 506 and
Regulation D as a transaction by an issuer not involving a public offering,
where the purchaser was an accredited investor, represented its intention to
acquire the securities for investment only, not with a view to distribution, and
received or had access to adequate information about the registrant.

     16. As of April 15, 1999, the registrant issued warrants to purchase an
aggregate of 4,000 shares of common stock with an exercise price equal to the
initial public offering price of the common stock in consideration for the
waiver by First Capital Corporation of Los Angeles and Mortgage Loan
Specialists, Inc. of their respective conversion rights pursuant to Technology
Member Correspondent Agreements dated as of November 1, 1998.

                                      II-3
17. As of April 30, 1999, the registrant issued 6,667 shares of common
stock to Harris Friedman in conversion of a 12% Convertible Subordinated
Debenture with a principal amount of $100,000 due May 1, 1999.

     18. As of May 6, 1999, the registrant issued $27,500,000 in face amount of
12% Senior Subordinated Convertible Debentures, due May 6, 2001, convertible in
certain circumstances to common stock or Series E Preferred Stock, to an
accredited, institutional investor, Intuit Inc. The purchase and sale was exempt
pursuant to Rule 506 and Regulation D as a transaction by an issuer not
involving a public offering, where the purchaser was an accredited investor,
represented its intention to acquire the securities for investment only, not
with a view to distribution, and received or had access to adequate information
about the registrant.

     19. As of May 28, 1999, the registrant issued 250,001 shares of its
Series F Preferred Stock to three accredited institutional investors, consisting
of affiliates of Dominion Fund III, Canaan Equity, L.P. and Technology Crossover
Ventures, for aggregate consideration of $15,000,000. The purchases and sales
were exempt pursuant to Rule 506 and Regulation D as transactions by an issuer
not involving a public offering, where the purchasers were accredited investors,
represented their intention to acquire the securities for investment only, not
with a view to distribution, and received or had access to adequate information
about the registrant.

     20. Since May 1996, the registrant granted stock options to purchase
1,766,583 shares of common stock with exercise prices ranging from $5.50 to
$60.00 per share, to employees, directors, and consultants pursuant to the
registrant's employee stock option plan. As of May 1, 1997, the Registrant also
granted an option outside of the plan to an employee for 6,000 shares of common
stock with an exercise price of $5.50 per share as part of a severance
arrangement. Of these options, 625 have been exercised for an aggregate
consideration of $4,678.50. The issuance of common stock upon exercise of the
options was exempt either pursuant to Rule 701, as a transaction pursuant to a
compensatory benefit plan, or pursuant to Section 4(2) as a transaction by an
issuer not involving a public offering.

     No underwriters were employed in any of the above transactions. Appropriate
legends were affixed to the share certificates and warrants issued in the
transactions.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) EXHIBITS.
EXHIBIT
  NUMBER     DESCRIPTION
----------   --------------------------------------------------------------------------------------------------------
1.1*      --   Form of Underwriting Agreement
    3.1*      --   Fourth Amended and Restated Articles of Incorporation
                   (a) Form of Amendment to Fourth Amended and Restated Articles of Incorporation
    3.2       --   Amended and Restated Bylaws
    4.1       --   $27,500,000 Note Purchase Agreement dated as of May 5, 1999
    4.2       --   $8,000,000 Note Purchase Agreement dated as of February 26, 1999
    4.3       --   $3,000,000 Note Purchase Agreement dated as of April 19, 1999
    4.4       --   Registration Rights Agreement dated March 15, 1996, between the Registrant and Mason-McDuffie Real
                   Estate, Inc.
    4.5       --   Registration Rights Agreement dated May 1, 1996, between the Registrant and Raymond James &
                   Associates, Inc.
    4.6       --   Registration Rights Agreement dated as of January 1, 1998, between the Registrant and Credit.com,
                   LLC
II-4
EXHIBIT
  NUMBER     DESCRIPTION
----------   --------------------------------------------------------------------------------------------------------
4.7       --   Series B Preferred Stock Purchase Agreement dated as of March 29, 1996 among the Registrant,
                   purchasers of the Series B Preferred Stock, Purchasers of the Series C Preferred Stock, Purchasers
                   of the Series D Preferred Stock, Andrew Heller, Kyle Meyer, John T. Rodgers, TeleBanc Capital
                   Markets, Inc. and Dominion Fund IV, L.P.
                   (a) First Amendment to Series B Purchase Agreement
                   (b) Second Amendment to Series B Purchase Agreement
                   (c) Third Amendment to Series B Purchase Agreement
                   (d) Fourth Amendment to Series B Purchase Agreement
                   (e) Fifth Amendment to Series B Purchase Agreement
                   (f) Sixth Amendment to Series B Purchase Agreement
                   (g) Seventh Amendment to Series B Purchase Agreement
    4.8*      --   Specimen certificate for shares of the Registrant's common stock.
    5.1*      --   Legal Opinion of Foley & Lardner as to legality of securities
   10.1*      --   Employment Agreement between the Registrant and Seth S. Werner dated
   10.2*      --   Employment Agreement between the Registrant and John J. Hogan dated
   10.3*      --   Amended and Restated Employment Agreement between the Registrant and David Larson dated
   10.4*      --   Letter re Employment of John T. Rodgers dated May 21, 1999
                   (a) Noncompetition Agreement between the Registrant and John T. Rodgers
   10.5*      --   Noncompetition Agreement between the Registrant and John Buscema
   10.6       --   Purchase and Sale Agreement dated April 7, 1995 among the Registrant, Morbank Financial Systems,
                   Inc., Globe Mortgage Company, John Buscema, and Financial Resources Group (a) Waiver of Rights to
                   Software
   10.7       --   Amended and Restated Stock Option Plan (as of March 24, 1999)
   10.8       --   Form of Stock Option Agreements under Employee Stock Option Plan
                   (a) Mortgage.com, Inc. (f/k/a First Mortgage Network, Inc.) Non-Qualified Stock Option Agreement
                   (b) Mortgage.com, Inc. (f/k/a First Mortgage Network, Inc.) Non-Qualified Stock Option Agreement
                   (For Employees of Network Members)
                   (c) Mortgage.com, Inc. (f/k/a First Mortgage Network, Inc.) Incentive Stock Option Agreement
                   (d) Mortgage.com, Inc. Non-Qualified Stock Option Agreement (Revised April 26, 1999)
                   (e) Mortgage.com, Inc. Non-Qualified Stock Option Agreement (For Employees of Network Members
                   Revised April 26, 1999)
                   (f) Mortgage.com, Inc. Incentive Stock Option Agreement (Revised April 26, 1999)
   10.9       --   Superior Bank Warrant Repurchase Agreement between Registrant and Superior Bank, FSB dated May 4,
                   1999
   10.10      --   Agreement between Registrant and Superior Bank, FSB dated as of April 1, 1998
   10.11      --   Common Stock Warrant dated April 1, 1998 to Superior Bank, FSB to purchase 300,000 shares of
                   Common Stock at $5.00 per share
   10.12      --   Common Stock Warrant dated April 1, 1998 to Superior Bank, FSB to purchase 100,000 shares of
                   Common Stock at $7.50 per share
   10.13+     --   Amended and Restated Desktop Underwriter Seller/Servicer Software License and Subscription
                   Agreement between Registrant and Fannie Mae executed October 15, 1998
   10.14+     --   Distribution, Marketing, Facilities and Service Agreement between Registrant and Intuit Lender
                   Services, Inc. dated as of May 31, 1998, as amended
   10.15      --   Mortgage Loan Processing Agreement between the Registrant and Atlanta Internet Bank, FSB dated as
                   of April 1, 1998
II-5
EXHIBIT
  NUMBER     DESCRIPTION
----------   --------------------------------------------------------------------------------------------------------
10.16      --   Atlanta Internet Bank Mortgage Center Mortgage Loan Origination, Processing, Purchase and Sale
                   Agreement between Registrant and Atlanta Internet Bank, FSB dated as of April 1, 1998
   10.17+     --   License, Staffing, Purchase and Sale Agreement between Registrant and Atlanta Internet Bank, FSB
                   dated as of April 1, 1998
   10.18      --   Letter Agreement dated May 20, 1999, between the Registrant and NetBank
   10.19      --   $2,000,000 Note Purchase Agreement dated as of February 9, 1999
   10.20      --   Form of Common Stock Warrant dated August 31, 1997 with an exercise price of $7.50 per share
                   (50,000 shares)
   10.21      --   Form of Common Stock Warrant dated January 30, 1998 with an exercise price of $7.50 per share
                   (66,667 shares)
   10.22      --   Form of Warrant dated February 9, 1999 with an exercise price of $30.00 per share (6,668 shares)
   10.23      --   Form of Warrant dated February 26, 1999 with an exercise price of $30.00 per share
                   (53,334 shares)
   10.24      --   Form of Warrant dated April 19, 1999 with an exercise price of $30.00 per share (20,004 shares)
   10.25+     --   Warehousing Credit and Security Agreement (Single-Family Mortgage Loans) between Registrant and
                   Bank United dated as of July 1, 1998
   10.26+     --   First Amended and Restated Warehousing Credit and Security Agreement (Single Family Mortgage
                   Loans) between Registrant and Residential Funding Corporation dated as of June 8, 1998
                   (a) First Amendment to First Amended and Restated Warehousing Credit and Security Agreement
                   (Single Family Mortgage Loans)
                   (b) Second Amendment to First Amended and Restated Warehousing Credit and Security Agreement
                   (Single Family Mortgage Loans)
                   (c) Third Amendment to First Amended and Restated Warehousing Credit and Security Agreement
                   (Single Family Mortgage Loans)
                   (d) Fourth Amendment to First Amended and Restated Warehousing Credit and Security Agreement
                   (Single Family Mortgage Loans)
   10.27      --   Master Lease Agreement between Dominion Ventures, Inc. and Registrant dated as of April 1, 1998
   10.28+     --   $25,000,000 Warehouse Credit Agreement among Registrant, Cooper River Funding, Inc. and GE Capital
                   Mortgage Services, Inc. dated as of August 7, 1998
   10.29      --   Amended and Restated Operating Agreement for the Northern California Division dated as of July 1,
                   1998, between the Registrant and Mason-McDuffie Real Estate, Inc.
   10.30      --   Domain Name Assignment Agreement dated as of January 1, 1999, between the Registrant and
                   Credit.com, LLC
   10.31+     --   Intuit Lender Services, Inc. Subprime Agreement for Distribution, Marketing, Facilities and
                   Services dated as of May 26, 1999, between the Registrant and Intuit Lender Services, Inc.
   10.32      --   Form of Director Indemnification Agreement dated as of April 15, 1999
   10.33      --   Form of Director/Officer Indemnification Agreement dated as of April 15, 1999
   10.34      --   Form of Officer Indemnification Agreement dated as of April 15, 1999
   21.1       --   List of Subsidiaries
   23.1       --   Consent of KPMG LLP
   23.2       --   Consent of Foley & Lardner (included in Exhibit 5.1)
   24.1       --   Power of Attorney (included on signature page hereto)
   27.1       --   Financial Data Schedule (for SEC use only)
(Footnotes on next page)

                                      II-6
EXHIBIT
  NUMBER     DESCRIPTION
----------   --------------------------------------------------------------------------------------------------------
(Footnotes from previous page)

------------------
* To be filed by amendment
+ Confidential treatment requested

(B) FINANCIAL STATEMENT SCHEDULES.

     All schedules for which provision is made in the applicable accounting
regulations of the Securites and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.

ITEM 17. UNDERTAKINGS.

     The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

     The undersigned registrant hereby undertakes that:

          (1) For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this registration statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
     or (4) or 497(h) under the Securities Act shall be deemed to be part of
     this registration statement as of the time it was declared effective.

          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.

                                      II-7
SIGNATURES

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PLANTATION,
STATE OF FLORIDA, ON MAY 28, 1999.

                                          MORTGAGE.COM, INC.

                                          By:     /s/ SETH S. WERNER
                                              ----------------------------------
                                                       Seth S. Werner
                                               Chairman, President and Chief
                                                    Executive Officer

     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED. EACH PERSON WHOSE SIGNATURE APPEARS BELOW
CONSTITUTES AND APPOINTS SETH S. WERNER, JOHN HOGAN AND EDWIN JOHNSON, AND EACH
OF THEM INDIVIDUALLY, AS HIS OR HER TRUE AND LAWFUL ATTORNEYS-IN-FACT AND
AGENTS, WITH FULL POWER OF SUBSTITUTION AND RESUBSTITUTION, FOR HIM OR HER AND
IN HIS OR HER NAME, PLACE AND STEAD, IN ANY AND ALL CAPACITIES, TO SIGN ANY AND
ALL AMENDMENTS (INCLUDING POST-EFFECTIVE AMENDMENTS) TO THIS REGISTRATION
STATEMENT AND ANY RULE 462(B) REGISTRATION STATEMENT AND TO FILE THE SAME, WITH
ALL EXHIBITS THERETO, AND OTHER DOCUMENTS IN CONNECTION THEREWITH, WITH THE
SECURITIES AND EXCHANGE COMMISSION, GRANTING UNTO SAID ATTORNEYS-IN-FACT AND
AGENTS, AND EACH OF THEM, FULL POWER AND AUTHORITY TO DO AND PERFORM EACH AND
EVERY ACT AND THING REQUISITE AND NECESSARY TO BE DONE IN CONNECTION THEREWITH,
AS FULLY TO ALL INTENTS AND PURPOSES AS HE OR SHE MIGHT OR COULD DO IN PERSON,
HEREBY RATIFYING AND CONFIRMING ALL THAT SAID ATTORNEYS-IN-FACT AND AGENTS, OR
ANY OF THEM, OR THEIR OR HIS SUBSTITUTE OR SUBSTITUTES, MAY LAWFULLY DO OR CAUSE
TO BE DONE BY VIRTUE HEREOF.
SIGNATURE                                      TITLE                             DATE
------------------------------------------  -------------------------------------------   -------------------
/s/ SETH S. WERNER              Chairman of the Board, President and Chief           May 28, 1999
------------------------------------------  Executive Officer
              Seth S. Werner

              /s/ JOHN HOGAN                Executive Vice President and Director                May 28, 1999
------------------------------------------
                John Hogan

           /s/ DAVID W. LARSON              Executive Vice President and Director                May 28, 1999
------------------------------------------
             David W. Larson

          /s/ GEORGE A. NADDAFF             Vice-Chairman of the Board                           May 28, 1999
------------------------------------------
            George A. Naddaff

            /s/ EDWIN JOHNSON               Senior Vice President, Chief Financial               May 28, 1999
------------------------------------------  Officer and Chief Accounting Officer
              Edwin Johnson

            /s/ STEPHEN GREEN               Director                                             May 28, 1999
------------------------------------------
              Stephen Green

            /s/ MICHAEL K. LEE              Director                                             May 28, 1999
------------------------------------------
              Michael K. Lee
II-8