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

                                    FORM 10-K

(Mark one)

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

                  For the fiscal year ended December 31, 2001

                                       OR

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

                  For the transition period from: _____________ to _____________

                           Commission File No. 0-21341

                           OCWEN FINANCIAL CORPORATION
             ------------------------------------------------------
             (Exact name of Registrant as specified in our charter)

            Florida                                              65-0039856
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

    1675 Palm Beach Lakes Boulevard
        West Palm Beach, Florida                                         33401
---------------------------------------                               ----------
(Address of principal executive office)                               (Zip Code)

                                 (561) 682-8000
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.01 par value                 New York Stock Exchange (NYSE)
    (Title of each class)            (Name of each exchange on which registered)

  Securities registered pursuant to Section 12 (g) of the Act: Not applicable.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No[ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

Aggregate market value of the Common Stock, $.01 par value, held by
nonaffiliates of the registrant, computed by reference to the closing price as
reported on the NYSE as of the close of business on March 8, 2002: $260,831,633
(for purposes of this calculation affiliates include only directors and
executive officers of the registrant).

Number of shares of Common Stock, $.01 par value, outstanding as of March 8,
2002: 67,308,819 shares

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the Annual Report to
Shareholders for fiscal year ended December 31, 2001 are incorporated by
reference into Part I, Items 1 and 3, and Part II, Items 5-8, and portions of
our definitive Proxy Statement with respect to our Annual Meeting of
Shareholders to be held on May 16, 2002, and as filed with the Commission on or
about March 29, 2002, are incorporated by reference into Part III, Items 10-13.
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OCWEN FINANCIAL CORPORATION

                          2001 FORM 10-K ANNUAL REPORT
                                TABLE OF CONTENTS
                                -----------------

                                                                            PAGE
                                                                            ----


                                     PART I


Item 1.  Business.........................................................    4
           General........................................................    4
           Recent Business Acquisitions and Dispositions..................    4
           Segments.......................................................    4
             Residential Loan Servicing...................................    5
             Ocwen Technology Exchange ("OTX")............................    5
             Ocwen Realty Advisors........................................    6
             Unsecured Collections........................................    7
             Residential Discount Loans...................................    7
             Commercial Loans.............................................    8
             Affordable Housing...........................................    9
             Commercial Real Estate.......................................   10
             Subprime Residential Lending.................................   10
             Corporate Items and Other....................................   11
           Sources of Funds...............................................   11
           Risk Factors...................................................   13
           Competition....................................................   13
           Subsidiaries...................................................   13
           Employees......................................................   13
           Regulation.....................................................   13
             The Holding Company..........................................   13
             The Bank.....................................................   14
           Federal Taxation...............................................   20
           State Taxation.................................................   21


Item 2.  Properties.......................................................   22


Item 3.  Legal Proceedings................................................   22


Item 4.  Submission of Matters to a Vote of Security Holders..............   22


                                     PART II


Item 5.  Market for the Registrant's Common Equity and Related
         Stockholder Matters..............................................   23


Item 6.  Selected Consolidated Financial Data.............................   23


Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations............................................   23


Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......   23


Item 8.  Financial Statements and Supplementary Data......................   23

                                        1

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                           OCWEN FINANCIAL CORPORATION
                          2001 FORM 10-K ANNUAL REPORT
                                TABLE OF CONTENTS
                                   (CONTINUED)
                                   -----------

                                                                            PAGE
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Item 9.  Changes in and Disagreements with Accountants on Accounting
         and Financial Disclosure.........................................   23


                                    PART III


Item 10. Directors and Executive Officers of Registrant...................   24


Item 11. Executive Compensation...........................................   24


Item 12. Security Ownership of Certain Beneficial Owners and Management...   24


Item 13. Certain Relationships and Related Transactions...................   24


                                     PART IV


Item 14. Exhibits, Financial Statement Schedules, and Reports on
         Form 8-K.........................................................   24

         Signatures.......................................................   27

                                        2

<PAGE>

FORWARD-LOOKING STATEMENTS

         Certain statements contained herein are not, and certain statements
contained in future filings by us with the Securities and Exchange Commission
(the "Commission"), in our press releases or in the our other public or
shareholder communications may not be, based on historical facts and are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These forward-looking statements, which are based on various
assumptions (some of which are beyond our control), may be identified by
reference to a future period(s) or by the use of forward-looking terminology
such as "anticipate," "believe," "commitment," "consider," "continue," "could,"
"estimate," "expect," "foresee," "intend," "in the event of," "may," "plan,"
"propose," "prospect," "whether," "will," "would," future or conditional verb
tenses, similar terms, variations on such terms or negatives of such terms.
Although we believe the anticipated results or other expectations reflected in
such forward-looking statements are based on reasonable assumptions, we can give
no assurance that those results or expectations will be attained. Actual results
could differ materially from those indicated in such statements due to risks,
uncertainties and changes with respect to a variety of factors, including, but
not limited to, international, national, regional or local economic environments
(particularly in the market areas where we operate), government fiscal and
monetary policies (particularly in the market areas where we operate),
prevailing interest or currency exchange rates, effectiveness of interest rate,
currency and other hedging strategies, laws and regulations affecting financial
institutions, investment companies and real estate (including regulatory fees,
capital requirements, access for disabled persons and environmental compliance),
uncertainty of foreign laws and potential political issues related to operations
outside of the USA, competitive products, pricing and conditions (including from
competitors that have significantly greater resources than our Company), credit,
prepayment, basis, default, subordination and asset/liability risks, loan
servicing effectiveness, ability to identify acquisitions and investment
opportunities meeting our investment strategy, the course of negotiations and
the ability to reach agreement with respect to the material terms of any
particular transaction, satisfactory due diligence results, satisfaction or
fulfillment of agreed upon terms and conditions of closing or performance, the
timing of transaction closings, software integration, development and licensing,
damage to our computer equipment and the information stored our data centers,
availability of and costs associated with obtaining adequate and timely sources
of liquidity, ability to repay or refinance indebtedness (at maturity or upon
acceleration), to meet collateral calls by lenders (upon re-valuation of the
underlying assets or otherwise), to generate revenues sufficient to meet debt
service payments and other operating expenses, availability of discount loans
and servicing rights for purchase, size of, nature of and yields available with
respect to the secondary market for mortgage loans, financial, securities and
securitization markets in general, adequacy of allowances for loan losses,
changes in real estate conditions (including liquidity, valuation, revenues,
rental rates, occupancy levels and competing properties), adequacy of insurance
coverage in the event of a loss, other factors generally understood to affect
the real estate acquisition, mortgage, servicing and leasing markets, securities
investments and the software and technology industry, and other risks detailed
from time to time in our reports and filings with the Commission, including our
Registration Statements on Forms S-1 and S-3 and our periodic reports on Forms
10-Q, 8-K and 10-K and Exhibit 99.1, Risk Factors (filed herewith) 10-K for the
year ended December 31, 2001. Given these uncertainties, readers are cautioned
not to place undue reliance on such. We do not undertake, and specifically
disclaim any obligation, to release publicly the results of any revisions that
may be made to any forward-looking statements to reflect the occurrence of
anticipated or unanticipated events or circumstances after the date of such
statements.

                                        3

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                                     PART I


ITEM 1.  BUSINESS (Dollars in thousands)

GENERAL

         Ocwen Financial Corporation ("OCN") is a financial services company
headquartered in West Palm Beach, Florida. OCN is a Florida corporation that was
organized in February 1988 in connection with the acquisition of Ocwen Federal
Bank FSB (the "Bank"). OCN is a registered savings and loan holding company
subject to regulation by the Office of Thrift Supervision (the "OTS"). The Bank
is a wholly owned subsidiary of OCN and is also subject to regulation by the
OTS, as our chartering authority, and by the Federal Deposit Insurance
Corporation ("FDIC"), as a result of its membership in the Savings Association
Insurance Fund ("SAIF"), which insures the Bank's deposits to the maximum extent
permitted by law. The Bank is also subject to regulation by the Board of
Governors of the Federal Reserve System ("Federal Reserve Board") and currently
is a member of the Federal Home Loan Bank ("FHLB") of New York, one of the 12
regional banks that comprise the FHLB System.

         Our primary businesses are the servicing and resolution of
subperforming and nonperforming residential and commercial mortgage loans, as
well as the related development of loan servicing technology and
business-to-business e-commerce technology solutions for the mortgage and real
estate industries. Our business activities in recent years reflect a change in
strategic direction from capital-intensive lines of business to fee-based lines
of business: primarily mortgage loan servicing and developing technology
solutions for the mortgage and real estate industries. See "Segments" below.

RECENT BUSINESS ACQUISITIONS AND DISPOSITIONS

         On November 22, 2000, we sold our minority investment in Kensington
Group plc ("Kensington"), an originator of subprime residential mortgages in the
United Kingdom ("UK"), for the pound sterling equivalent of approximately
$48,600, net of stamp duty and other fees. We originally purchased 36.07% of the
total outstanding common stock of Kensington in February 1998.

         On October 7, 1999, Ocwen Acquisition Company, an indirect wholly-owned
subsidiary of OCN, merged with (the "Merger") and into Ocwen Asset Investment
Corp. ("OAC"). OAC was a real estate investment company that invested in several
categories of real estate and real estate related assets. Prior to the Merger,
OCN, through Investors Mortgage Insurance Holding Company, owned 8.12% of the
outstanding common stock of OAC and 8.71% of the outstanding partnership units
of Ocwen Partnership L.P. ("OPLP"). OPLP is the operating partnership subsidiary
of OAC. In accordance with the terms of the Merger, OAC shareholders (except for
OCN or its subsidiaries) received 0.71 shares of OCN stock for each outstanding
share of OAC common stock, and a total of 12,371,750 shares of OCN stock at a
value of $96,809 was issued to OAC shareholders. The Merger, which resulted in
OCN acquiring the remaining interest in OAC, reflected an aggregate purchase
price of $101,271, including direct costs of the acquisition. We accounted for
the Merger as a purchase and allocated the purchase price to OAC's assets and
liabilities based on their fair market values, resulting in $60,042 of excess of
net assets acquired over the purchase price.

         On September 30, 1999, we sold all the shares of our wholly-owned
subsidiary, Ocwen UK plc ("Ocwen UK"), to Malvern House Acquisition Limited for
the pound sterling equivalent of $122,101 in cash. We originally formed Ocwen UK
to acquire the UK mortgage loan portfolio and residential subprime mortgage loan
origination and servicing operations of Cityscape Financial Corp. ("Cityscape
UK") in April 1998.

SEGMENTS

         Our business segments consist of the following:

         o   Residential Loan Servicing
         o   OTX (technology solutions)
         o   Ocwen Realty Advisors
         o   Unsecured Collections
         o   Residential Discount Loans
         o   Commercial Loans
         o   Affordable Housing
         o   Commercial Real Estate
         o   Subprime Residential Lending
         o   Corporate Items and Other

                                        4

<PAGE>

         Segment activity in recent years reflects growth in our residential
loan servicing segment, continued investment in the development and marketing of
our technology solutions at OTX, an exit from the subprime loan origination
business, both in the US and the UK, our acquisition of OAC, the cessation of
loan acquisitions and origination activity and our continuing resolution or
disposition of those assets not associated with our loan servicing or technology
businesses. This activity reflects our ongoing transition in business strategy
from capital-intensive businesses to fee-based businesses.

Residential Loan Servicing

         In connection with the securitization and sale of loans during 1999 and
prior years, we generally retained the rights to service such loans for
investors. More recently, we have purchased servicing rights directly from third
parties. Purchased servicing rights are initially recorded at cost.

         During 1996, we developed a program to provide loan servicing and
various other asset management and resolution services to third party owners of
nonperforming assets, underperforming assets and subprime assets such as Class
B, C and D single family residential mortgage loans. Servicing contracts entered
into by us provide for the payment to us of specified fees and in some cases may
include terms that allow us to participate in the profits resulting from the
successful resolution of the assets being serviced. We collect servicing fees,
generally expressed as a percent of the unpaid principal balance, from the
borrowers' payments. During any period in which the borrower is not making
payments, we are required under certain servicing agreements to advance our own
funds to meet contractual principal and interest remittance requirements for
certain investors, maintain property taxes and insurance, and process
foreclosures. We generally recover such advances from borrowers for reinstated
and performing loans and from investors for foreclosed loans.

         The U.S. Department of Housing and Urban Development ("HUD"), Freddie
Mac and Fannie Mae have approved the Bank as a loan servicer. Standard & Poor's
has rated the Bank as "Strong" as a Residential Subprime Servicer, Residential
Special Servicer and Commercial Special Servicer. "Strong" represents Standard &
Poor's highest ratings category. Moody's Investors Service has rated the Bank as
"SQ1" as a Residential Subprime Servicer and as a Residential Special Servicer.
"SQ1" represents Moody's Investors Services highest ratings category. Fitch
Ratings has rated the Bank "RPS2" for Residential Subprime Servicing, "RSS2" for
Residential Special Servicing and "CSS2" for Commercial Special Servicing.

         In 1997, we also developed the concept of residential special
servicing. In 1998, we began entering into special servicing arrangements
wherein we act as a special servicer for third parties, typically as part of a
securitization. We service loans that become greater than 90 days past due and
receive incentive fees to the extent that we achieve certain loss mitigation
parameters.

         We continue to grow and develop our residential servicing business as
part of our change in strategic focus from capital intensive to fee-based
businesses. As a result, we have seen steady growth in the average unpaid
principal balance of residential loans we service for others from $8,802,444
during 1999 to $15,727,659 during 2001.

         Our loan servicing operations are primarily conducted out of our
125,000 square foot national servicing center in Orlando, Florida. The service
center has capacity to house 900 employees per shift handling customer contact
on up to one million loans.

         In December 1999, we announced a joint venture with an independent
Italian loan servicer, FBS SpA, to service mortgage loans in Italy. OCN holds a
50% ownership interest in a newly formed company, Ocwen.FBS SpA.

         Additional financial information regarding this segment appears under
the captions "Segment Profitability" on pages 15 to 17 and "Note 29: Business
Segment Reporting" on pages 110 to 112 of our 2001 Annual Report to Shareholders
and is incorporated herein by reference.

OTX

         OTX, which was formed in 1998, designs software solutions for mortgage
and real estate transactions, provides business-to-business e-commerce solutions
via the Internet for the mortgage and real estate industries, and also provides
implementation, integration and consulting services related to our software and
internet products. OTX's principal products are REALTransSM, REALServicing(TM)
and REALSynergy(TM).

                                        5

<PAGE>

         On January 20, 1998, we acquired DTS Communications, Inc. ("DTS"), a
real estate technology company located in San Diego, California. The acquisition
was accounted for as a purchase. DTS was merged into OTX in 2000. DTS developed
technology tools to automate real estate. Our acquisition of DTS and its product
served as the basis for the REALTrans system, an Internet-based mortgage loan
processing application and vendor management system that facilitates the
electronic ordering, tracking and fulfillment of mortgage and real estate
products and services. REALTrans automates the mortgage process, eliminating
duplicate manual data entry, reducing errors and speeding delivery time. It also
provides a task-based workflow management system, allowing users to track the
progress of all tasks and vendor requests required to fulfill an order from any
location, at any time. REALTrans also provides for bulk order management that
allows customers to order real estate documents and services for an entire
portfolio of loans.

         On November 6, 1997, we acquired AMOS, Inc. ("AMOS"), a
Connecticut-based company engaged primarily in the development of residential
mortgage loan servicing software. The acquisition was accounted for as a
purchase. AMOS is a wholly-owned subsidiary of OTX. Our acquisition of AMOS and
its products became the basis for the REALServicing software, a Microsoft(R)
Windows(R)-based, residential loan-servicing platform that manages the entire
servicing life cycle of single family loans. We developed the REALServicing
software through years of experience in the loan servicing industry.
REALServicing provides powerful workflow management capability, leading to
increased effectiveness and lower operational costs, and it integrates with the
Internet, call center telephony and data warehouse technology. It can be
implemented in its entirety or as a series of modules, including Loan Servicing,
Collections, Loss Mitigation, Default Loan Management, REO Management,
Construction Loan Servicing and Single Family Bond Series Tracking. The
table-driven architecture of REALServicing permits workflow customization by
users without requiring support from their information technology staffs. We
fully implemented REALServicing at the Bank on January 1, 2001. The Bank has
used REALServicing since that time as the platform for managing both its own
portfolio of single family residential mortgage loans and the loans that it
services for third parties.

         On June 2, 1999, we acquired the assets of Synergy Software, LLC
("Synergy"), a developer of commercial and multifamily mortgage servicing
systems and a wholly-owned subsidiary of OTX. The acquisition of Synergy's
product was the basis for the REALSynergy software, an advanced, Windows-based
full-service commercial and multi-family loan servicing platform. REALSynergy
handles virtually any loan structure, including complex remittance requirements,
monitors multiple properties for each loan, tracks building and site information
reports, details extensive appraisal summaries, and includes dynamic,
easy-to-use contact management, call tracking and task management capabilities.
REALSynergy and its MS-DOS(R)-based predecessor, AMICUS, represent one of the
most widely used commercial and multi-family loan servicing systems in the
country.

         The losses incurred by OTX to date reflect our continuing efforts to
develop and market our suite of technology solutions.

         Additional financial information regarding this segment appears under
the captions "Segment Profitability" on pages 15 to 17 and "Note 29: Business
Segment Reporting" on pages 110 to 112 of our 2001 Annual Report to Shareholders
and is incorporated herein by reference.

Ocwen Realty Advisors

         As part of our strategic focus on fee-based businesses, we established
Ocwen Realty Advisors ("ORA") in 1999 as a new division. ORA provides valuation
services to external customers in the wholesale lending community as well as due
diligence and research analysis for our own commercial and residential real
estate transactions.

         An important part of the process of acquiring and managing mortgage
loans portfolios is the accurate review and analysis of the collateral offered
as security for the loans. ORA not only provides traditional valuation products
such as appraisals and broker price opinions, it also employs proprietary
Internet-based valuation models and other alternative valuation products that
can more precisely meet the specific risk management needs of our customers.

         ORA also monitors the state of the economy in 60 of the largest U.S
real estate markets. The resulting data enable ORA to assist customers in making
loan decisions in riskier markets and in timing loan and asset dispositions.
Ocwen Realty Advisors can customize reports down to the specific property level
to fit the needs of a customer.

         Additional financial information regarding this segment appears under
the captions "Segment Profitability" on pages 15 to 17 and "Note 29: Business
Segment Reporting" on pages 110 to 112 of our 2001 Annual Report to Shareholders
and is incorporated herein by reference.

                                        6

<PAGE>

Unsecured Collections

         In 1998, we began acquiring charged-off unsecured credit card
receivables at a discount. We account for collections of unsecured credit card
receivables under the cost recovery method, whereby revenue is recognized only
to the extent that collections have exceeded original cost. Our contractual
obligations to acquire these receivables expired in June 2000. We made no
purchases during 2001 or during the third and fourth quarters of 2000 and plan
no future purchases at this time. This business segment also provides collection
services for third party mortgage investors as well as for our own portfolio of
loans.

         Additional financial information regarding this segment appears under
the captions "Segment Profitability" on pages 15 to 17 and "Note 29: Business
Segment Reporting" on pages 110 to 112 of our 2001 Annual Report to Shareholders
and is incorporated herein by reference.

Residential Discount Loans

         Prior to 2001, we acquired at a discount certain mortgage loans for
which the borrowers were not current as to principal and interest payments or
for which there was reason to believe borrowers would be unable to continue to
make their scheduled principal and interest payments. Discount loans generally
have collateral coverage that is sufficiently in excess of the purchase price of
the loan, such that successful resolutions can produce total returns that are in
excess of an equivalent investment in performing mortgage loans.

         We began our discount loan operations in 1991 and initially focused on
the acquisition of single family residential loans. In 1994 we expanded this
business to include the acquisition and resolution of discount multi-family
residential and commercial real estate loans (together, unless the context
otherwise requires, "commercial real estate loans"). Prior to entering the
discount loan business, our management had substantial loan resolution
experience through former subsidiaries that had been engaged in the business of
providing private mortgage insurance for residential loans. This experience
assisted us in developing the procedures, facilities and systems to evaluate,
acquire and resolve such loans.

         The volume of discount loan acquisitions has declined in recent years,
primarily because of two factors: a decline in the volume of nonperforming loans
available for purchase; and, more recently, our change in strategic direction
from capital intensive lines of business to fee-based businesses. We have not
acquired any discount loans since 2000.

         Acquisition of Discount Loans. Historically, we generally acquired
discount real estate loans in pools, although we also acquired discount
commercial real estate loans individually. We generally acquired these pools at
auction or in other competitive bid circumstances. We obtained a substantial
amount of discount loans from various private sector sellers, such as banks,
savings institutions, mortgage companies, subprime lenders and insurance
companies. In addition, governmental agencies, including the Department of
Housing and Urban Development ("HUD"), were potential sources of discount loans.

         Prior to making an offer to purchase a portfolio of discount loans, we
conducted an investigation and evaluation of the loans in the portfolio. Our
employees, who specialize in the analysis of nonperforming loans, often with
further specialization based on geographic or collateral-specific factors, had
primary responsibility for conducting evaluations of potential discount loan
acquisitions. Our employees regularly used third parties, such as brokers, who
were familiar with a property's type and location, to assist them in conducting
an evaluation of the value of collateral property, and depending on the
circumstances, particularly in the case of commercial real estate loans, used
subcontractors, such as local counsel and engineering and environmental experts,
to assist in the evaluation and verification of information and the gathering of
other information not previously made available by a potential seller.

         We determined the purchase offer by using a proprietary modeling system
and loan information database that focused on the anticipated recovery amount
and the timing and cost of the resolution of the loans. The amount offered by us
generally was at a discount from both the stated value of the loan and the value
of the underlying collateral, which we estimated was sufficient to generate an
acceptable return on our investment.

         Resolution of Discount Loans. We utilize our information technology
software systems, including OTX's residential loan servicing system
REALServicing(TM), to resolve discount loans as expeditiously as possible in
accordance with specified procedures. The various resolution alternatives
generally include the following:

                                        7

<PAGE>

         o   The borrower brings the loan current in accordance with original or
             modified terms;
         o   The borrower repays the loan or a negotiated amount of the loan;
         o   The borrower agrees to deed the property to us in lieu of
             foreclosure, in which case it is classified as real estate owned
             and held for sale; or
         o   We foreclose on the loan and the property is acquired at the
             foreclosure sale either by a third party or by us, in which case it
             is classified as real estate owned and held by us for sale.

         In appropriate cases, we work with borrowers to resolve the loan in
advance of foreclosure. One method is through forbearance agreements, which
generally allow the borrower to pay the contractual monthly payment plus a
portion of the arrearage each month, and other means. Although this strategy may
result in an initial reduction in the yield on a discount loan, we believe that
it is advantageous because it:

         o   Generally results in a higher resolution value than foreclosure;
         o   Reduces the amount of real estate owned acquired by foreclosure or
             by deed-in-lieu thereof and related risks, costs and expenses;
         o   Enhances our ability to sell the loan in the secondary market; and
         o   Permits the borrower to retain ownership of the home and, thus,
             enhances relations with the borrower.

         The general goal of our asset resolution process is to maximize, in a
timely manner, cash recovery on each loan in the discount loan portfolio. We
generally anticipate a longer period (approximately 12 to 30 months) to resolve
discount commercial real estate loans than to resolve discount single family
residential loans because of their complexity and the wide variety of issues
that may occur in connection with the resolution of such loans.

         The Credit Committee of the Board of Directors of the Bank actively
monitors the asset resolution process to identify discount loans which have
exceeded their expected foreclosure period and real estate owned which has been
held longer than anticipated. We develop plans of action for each of these
assets to remedy the cause for delay, and the Credit Committee reviews these
plans.

         Sale of Discount Loans. From time to time we have sold discount loans
either on a whole loan basis or indirectly through the securitization of such
loans and sale of the mortgage-related securities backed by them. During the
third quarter of 1999, we made a strategic decision to structure future
securitizations as financing transactions, which precludes the use of
gain-on-sale accounting. We executed no securitizations of loans during 2001,
2000 or the second half of 1999.

         Additional financial information regarding this segment appears under
the captions "Segment Profitability" on pages 15 to 17 and "Note 29: Business
Segment Reporting" on pages 110 to 112 of our 2001 Annual Report to Shareholders
and is incorporated herein by reference.

Commercial Loans

         Commercial loan activities include both discount loans and originated
loans. See "Single Family Residential Discount Loans" above for a discussion
regarding discount loan acquisition, resolution and sale activities, including
commercial. A discussion follows regarding commercial loans that we originated.

         Our investment in multi-family residential and commercial real estate
loans declined significantly during 1999, 2000 and 2001, reflecting our decision
in 1999 to cease the origination of such loans. Our lending activities
previously included the acquisition of loans secured by commercial real estate,
particularly loans secured by hotels and office buildings, which we began
originating in late 1994 and late 1995, respectively. We have also made
commercial real estate loans to finance the purchase and refinance of commercial
properties, the refurbishment of distressed properties and the construction of
hotels. Additionally, we have originated loans for the construction of
multi-family residences, as well as bridge loans to finance the acquisition and
rehabilitation of distressed multi-family residential properties.

         Multi-family residential and commercial real estate loans are secured
by a first priority lien on the real property, all improvements thereon and, in
the case of hotel loans, all fixtures and equipment used in connection
therewith, as well as a first priority assignment of all revenue and gross
receipts generated in connection with the property. The liability of a borrower
on multi-family residential and commercial real estate loans generally is
limited to the borrower's interest in the property, except with respect to
certain specified circumstances.

                                        8

<PAGE>

         In addition to stated interest, certain of the multi-family residential
and commercial real estate loans that we originated include provisions pursuant
to which the borrower agrees to pay us, as additional interest on the loan, an
amount based on specified percentages of the net cash flow from the property
during the term of the loan and/or the net proceeds from the sale or refinancing
of the property upon maturity of the loan. We have also obtained participating
interests in the form of additional fees that must be paid by the borrower in
connection with a prepayment of the loan, generally after an initial lock-out
period during which prepayments are prohibited. The fees that could be payable
by a borrower during specified periods of the loan consist of either fixed exit
fees or yield maintenance payments, which are required to be paid over a
specified number of years after the prepayment and are intended to increase the
yield to us on the proceeds from the loan payoff to a level that is comparable
to the yield on the prepaid loan.

         Construction loans generally have terms of three to four years and
interest rates that float on a monthly basis in accordance with designated
reference rates. Payments during the term of the loan may be made to us monthly
on an interest-only basis. The loan amount may include an interest reserve that
is maintained by us and utilized to pay interest on the loan during a portion of
its term.

         Construction loans are secured by a first priority lien on the real
property, all improvements thereon and all fixtures and equipment used in
connection therewith, as well as a first priority assignment of all revenues and
gross receipts generated in connection with the property. We made construction
loans without pre-leasing requirements or any requirement of a commitment by
another lender to "take-out" the construction loan by making a permanent loan
secured by the property upon completion of construction. Disbursements on a
construction loan are subject to a retainage percentage of 10%, and we make them
only after evidence that available funds have been utilized by the borrower,
available funds are sufficient to pay for all construction costs through the
date of the construction advance and funds remain in the construction budget and
from sources other than the loan to complete construction of the project.

         We generally have required the general contractor selected by the
borrower, which along with the general construction contract is subject to our
review and approval, to provide payment and performance bonds issued by a surety
approved by us in an amount at least equal to the costs which are estimated to
be necessary to complete construction of the project in accordance with the
construction contract. Moreover, we generally conduct site inspections of
projects under construction at least bi-monthly and of completed projects at
least semi-annually.

         Additional financial information regarding this segment appears under
the captions "Segment Profitability" on pages 15 to 17 and "Note 29: Business
Segment Reporting" on pages 110 to 112 of our 2001 Annual Report to Shareholders
and is incorporated herein by reference.

Affordable Housing

         We have invested in affordable housing properties primarily through
limited partnerships for the purpose of obtaining Federal income tax credits
pursuant to Section 42 of the Internal Revenue Code of 1986, as amended (the
"Code"), which provides a tax credit to investors in qualified low-income rental
housing that is constructed, rehabilitated or acquired after December 31, 1986.
To be eligible for housing tax credits, a property generally must first be
allocated an amount of tax credits by the tax credit allocating agency, which in
most cases also serves as the housing finance agency, of the state in which the
property is located. If the property is to be constructed or rehabilitated, it
must be completed and placed in service within a specified time, generally
within two years after the year in which the tax credit allocation is received.
A specified portion of the apartment units in a qualifying project may be rented
only to qualified tenants for a period of 15 years, or a portion of any
previously claimed tax credits will be subject to recapture, as discussed below.

         During 2000, we began reducing our investment in affordable housing
both as part of our change in strategic focus away from capital intensive lines
of business and because the volume of tax credits being generated was exceeding
our ability to utilize them effectively. As a result, we have sold or have
entered into agreements to sell the majority of the properties that represent
our investment in such interests. We will continue to develop those projects
that are currently under construction, which may also be sold in the future.

         We made our investments in affordable housing indirectly through our
subsidiaries, which may be a general partner and/or a limited partner in the
partnership. Low-income housing tax credit partnerships in which we, through a
subsidiary, act as a general partner are presented in the financial statements
on a consolidated basis.

         The affordable housing projects owned by the low-income housing tax
credit partnerships in which we have invested are located throughout the United
States.

         The ownership of low-income housing tax credits produces two types of
tax benefits. The primary tax benefit flows from the low-income housing tax
credits under the Code that are generated by the ownership and operation of the
real property in the manner required to obtain such tax credits. These credits

                                        9

<PAGE>

may be used to offset Federal income tax on a dollar for dollar basis but may
not offset the alternative minimum tax; tax credits thus may reduce the overall
Federal income tax to an effective rate of 20%. In addition, the operation of
the rental properties produces losses for financial statement and tax purposes
in the early years and sometimes throughout the anticipated ownership period.
These tax losses may be used to offset taxable income from other operations and
thereby reduce income tax which would otherwise be paid on such taxable income.

         Tax credits may be claimed over a ten-year period on a straight-line
basis once the underlying multi-family residential properties are placed in
service. Tax credits claimed reduce the tax payments computed based upon taxable
income to not less than the alternative minimum tax computed for that year or
any year not more than three years before or 15 years after the year the tax
credit is earned. The Taxpayer Relief Act of 1997 changed the tax credit
carryback period from 3 years to 1 year and the carry forward period from 15
years to 20 years for credits that become available for use in years beginning
after December 31, 1997. Tax credits are realized even if units in the project
do not continue to be occupied once the units in the project have been initially
rented to qualifying tenants, and tax credits are not dependent on a project's
operating income or appreciation. Tax credits can be claimed over a ten-year
period and generally can be lost or recaptured only if non-qualifying tenants
are placed in units, ownership of the project is transferred or the project is
destroyed and not rebuilt during a 15-year compliance period for the project. We
have established specific investment criteria for investment in multi-family
residential projects that have been allocated tax credits, which require, among
other things, a third party developer of the project and/or the seller of the
interest therein to provide a guarantee against loss or recapture of tax credits
and to maintain appropriate insurance to fund rebuilding in case of destruction
of the project. Notwithstanding our efforts, there can be no assurance that the
multi-family residential projects owned by the low-income housing tax credit
partnerships in which we have invested will satisfy applicable criteria during
the 15-year compliance period and that there will not be loss or recapture of
the tax credits associated therewith.

         Additional financial information regarding this segment appears under
the captions "Segment Profitability" on pages 15 to 17 and "Note 29: Business
Segment Reporting" on pages 110 to 112 of our 2001 Annual Report to Shareholders
and is incorporated herein by reference.

Commercial Real Estate

         We entered the commercial real estate business largely as a result of
our acquisition of OAC in 1999. OAC had followed a strategy that sought to
capitalize on inefficiencies in the real estate markets by investing in
distressed commercial and multi-family real properties, including properties
acquired by a mortgage lender at foreclosure (or through deed in lieu of
foreclosure), as well as in properties that were environmentally distressed or
located outside the United States. Most of the properties purchased as part of
this strategy were in markets, such as San Francisco, that were characterized by
limited new supply and barriers to entry as a result of government regulation of
development and lack of developable land.

         The properties acquired were substantially renovated, including tenant
improvements and improvements to lobbies and other public areas. We also
upgraded mechanical, HVAC, electrical, fire and life/safety systems and made
other improvements necessary to comply with the Americans with Disabilities Act
of 1990. As a result of these improvements, we were able to increase occupancy
rates while at the same time increasing average rents.

         The enhanced cash flow and improved physical condition of the
properties increased the market values and marketability for most of the
properties. As a result, we have been able to successfully market and sell
several of the properties at gains. At December 31, 2001, only three properties
remain: two shopping centers and one office building.

         Additional financial information regarding this segment appears under
the captions "Segment Profitability" on pages 15 to 17 and "Note 29: Business
Segment Reporting" on pages 110 to 112 of our 2001 Annual Report to Shareholders
and is incorporated herein by reference.

Subprime Residential Lending

         In August 1999, we closed our subprime residential loan origination
offices and reassigned or terminated employees who were involved in loan
origination and related management and support functions. Since late 1994, our
lending activities had included the origination and purchase of domestic single
family residential loans to borrowers who, because of prior credit problems, the
absence of a credit history or other factors, are unable or unwilling to qualify
as borrowers for a single family residential loan under guidelines of the FNMA
and the FHLMC ("conforming loans") and who have substantial equity in the
properties that secure the loans.

                                       10

<PAGE>

         Through 1996, the Bank acquired subprime single family residential
loans primarily through a correspondent relationship with Admiral Home Loan
("Admiral") and, to a lesser extent, correspondent relationships with three
other financial services companies. Correspondent institutions originated loans
based on guidelines provided by us and promptly sold the loans to us on a
servicing-released basis. Through Ocwen Financial Services, Inc. ("OFS"), we
acquired substantially all of the assets of Admiral in a transaction that closed
on May 1, 1997. In connection with our acquisition of assets from Admiral, the
Bank transferred its retail and wholesale subprime single family residential
lending operations to OFS.

         The terms of the loan products offered by us directly or through our
correspondents emphasized real estate loans which generally were underwritten
with significant reliance on a borrower's level of equity in the property
securing the loan.

         Assets remaining in this segment at December 31, 2001 are primarily
comprised of subprime residual trading securities that we originally retained in
connection with our securitizations of loans during 1999 and prior years.

         Additional financial information regarding this segment appears under
the captions "Segment Profitability" on pages 15 to 17 and "Note 29: Business
Segment Reporting" on pages 110 to 112 of our 2001 Annual Report to Shareholders
and is incorporated herein by reference.

Corporate Items and Other

         Corporate items and other consists primarily of amortization of the
excess of net assets acquired over purchase price, UK operations, extraordinary
gains on repurchases of debt, business activities that are individually
insignificant, amounts that we have not allocated to the operating segments,
distributions on our 10-7/8% Capital Trust Securities, transfer pricing
mismatches and other general corporate expenses.

         Corporate items and other also includes the results of our
collateralized mortgage obligation ("CMO") securities portfolio. Residual and
subordinate securities have been included in the related business activity. On
July 27, 1998, we sold at book value our entire portfolio of AAA-rated agency
interest-only securities ("IOs"), the results of which had been included in this
segment. As a result of an increase in prepayment speeds due to declining
interest rates, we recorded significant impairment charges on the IOs in 1998
prior to the sale, which led to our decision to discontinue this investment
activity and write down the book value. Our investment policy, which is
established by the Investment Committee and approved by the Board of Directors,
is designed primarily to provide a portfolio of diversified instruments while
seeking to optimize net interest income within acceptable limits of interest
rate risk, credit risk and liquidity.

         Additional financial information regarding this segment appears under
the captions "Segment Profitability" on pages 15 to 17 and "Note 29: Business
Segment Reporting" on pages 110 to 112 of our 2001 Annual Report to Shareholders
and is incorporated herein by reference.

SOURCES OF FUNDS

         General. The principal sources of funds that support our business
activities are:

         o   Deposits                            o   Maturities of and payments
         o   FHLB advances                           received on loans,
         o   Securities sold under agreements        securities and advances
             to repurchase                       o   Proceeds from sales of
         o   Lines of credit                         assets
         o   Match funded debt                   o   Servicing fees

         We closely monitor rates and terms of competing sources of funds on a
regular basis and generally utilize the sources that are the most cost
effective.

         Deposits. Historically, a significant source of deposits for us has
been brokered certificates of deposit obtained primarily through national
investment banking firms that, pursuant to agreements with us, solicit funds
from their customers for deposit with the Bank ("brokered deposits"). In
addition, during 1995, we commenced a program to obtain certificates of deposit
from customers of regional and local investment banking firms that were made
aware of our products by our direct solicitation and marketing efforts. We also
solicited certificates of deposit from institutional investors and high net
worth individuals. Our brokered deposits are reported net of unamortized
deferred fees, which have been paid to investment banking firms.

                                       11

<PAGE>

         Although we believe that brokered and other wholesale deposits are
advantageous in certain cost respects, such funding sources, when compared to
retail deposits attracted through a branch network, are generally more sensitive
to changes in interest rates and volatility in the capital markets and are more
likely to be compared by the investor to competing investments. In addition,
such funding sources may be more sensitive to significant changes in our
financial condition. There are also various regulatory limitations on the
ability of insured financial institutions to obtain brokered deposits. See
"Regulation - The Bank - Brokered Deposits." During 2001, we did not issue any
new brokered certificates of deposit and do not intend to utilize such deposits
as a source of new funds in the foreseeable future.

         In addition to brokered and other wholesale deposits, we obtain
deposits from our office located in New Jersey through advertising, walk-ins and
other traditional means. These deposits include non-interest bearing checking
accounts, NOW and money market checking accounts and savings accounts, but are
primarily comprised of certificates of deposit. At December 31, 2001, the
deposits that were allocated to this office comprised approximately 23% of our
total deposits.

         Borrowings. Through the Bank, we can obtain advances from the FHLB of
New York upon the security of certain of our residential first mortgage loans,
mortgage-backed and mortgage-related securities and other assets, including FHLB
stock, provided certain standards related to the creditworthiness of the Bank
have been met. FHLB advances are available to member financial institutions,
such as the Bank, for investment and lending activities and other general
business purposes. FHLB advances are made pursuant to several different credit
programs, each of which has our own interest rate, which may be fixed or
adjustable, and range of maturities.

         We also obtain funds pursuant to securities sold under reverse
repurchase agreements. Under these agreements, we sell securities (generally
mortgage-backed and mortgage-related securities) under an agreement to
repurchase such securities at a specified price at a later date. Reverse
repurchase agreements have short-term maturities (typically 90 days or less) and
are deemed to be financing transactions. All securities underlying reverse
repurchase agreements are reflected as assets in our consolidated financial
statements and are held in safekeeping by broker-dealers.

         Our borrowings also include lines of credit, notes, subordinated
debentures, bonds-match funded agreements and other interest-bearing
obligations. During 2001 we began utilizing lines of credit and match funded
debt as sources of funding for advances related to loans we service for others.
Under a match funding agreement that we entered into on December 20, 2001, we
are eligible to sell advances on loans serviced for others up to a maximum debt
balance of $200,000 at any one time. At December 31, 2001, we had $91,766 of
bonds-match funded agreements outstanding under this facility, which is expected
to mature in December 2003.

         Other. Additional information on our sources of funds appears under the
captions "Liquidity, Commitments and Off-Balance Sheet Risks" on pages 59 to 60,
"Deposits" on pages 50 to 51, "Note 14: Deposits" on page 94, "Note 16: Bonds -
Match Funded Agreements" on page 95, "Note 17: Lines of Credit and Other
Short-Term Borrowings" on pages 95 to 96 and "Note 18: Notes, Debentures and
Other Interest-Bearing Obligations" on pages 96 to 97 of the 2001 Annual Report
to Shareholders and is incorporated herein by reference.

                                       12

<PAGE>

RISK FACTORS

         Information related to risk factors which could directly or indirectly
affect our results of operations and financial condition is set forth in Exhibit
99.1 and incorporated herein by reference.

COMPETITION

         The information under the caption "Competition" set forth in Exhibit
99.1 is incorporated herein by reference.

SUBSIDIARIES

         A list of our significant subsidiaries is set forth in Exhibit 21.0 and
is incorporated herein by reference.

EMPLOYEES

         At December 31, 2001 we had 1,663 full time employees, including 258 in
our Bangalore, India office. Our employees are not represented by a collective
bargaining agreement. We consider our employee relations to be satisfactory.

REGULATION

         Financial institutions and their holding companies are extensively
regulated under federal and state laws. As a result, our business, financial
condition and prospects can be materially affected not only by management
decisions and general economic conditions, but also by applicable statutes and
regulations and other regulatory pronouncements and policies promulgated by
regulatory agencies with jurisdiction over us and the Bank, such as the OTS and
the FDIC, which insures up to legal limits deposits placed at the Bank. The
effect of such statutes, regulations and other pronouncements and policies can
be significant, cannot be predicted with a high degree of certainty and can
change over time. Moreover, such statutes, regulations and other pronouncements
and policies are intended to protect depositors and the insurance funds
administered by the FDIC and not stockholders or holders of indebtedness that is
not insured by the FDIC.

         The enforcement powers available to Federal banking regulators are
substantial and include, among other things, the ability to assess civil
monetary penalties, to issue cease-and-desist or removal orders and to initiate
injunctive actions against banking organizations and institution-affiliated
parties, as defined. In general, these enforcement actions must be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with regulatory authorities.

         The following discussion and other references to and descriptions of
the regulation of financial institutions contained herein constitute brief
summaries thereof as currently in effect. This discussion is not intended to
constitute, and does not purport to be, a complete statement of all legal
restrictions and requirements applicable to us and the Bank and all such
descriptions are qualified in their entirety by reference to applicable
statutes, regulations and other regulatory pronouncements.

The Holding Company

         General. Ocwen Financial Corporation is a registered savings and loan
holding company under the Home Owners' Loan Act (the "HOLA"). As such, it is
subject to regulation, supervision and examination by the OTS.

         Activities Restrictions. There are generally no restrictions on the
activities of a savings and loan holding company, such as OCN, that held only
one savings institution subsidiary as of May 4, 1999. However, if the Director
of the OTS determines that there is reasonable cause to believe that the
continuation by a savings and loan holding company of an activity constitutes a
serious risk to the financial safety, soundness or stability of its subsidiary
savings institution, the Director may impose such restrictions as are deemed
necessary to address such risk, including limiting:

         o   Payment of dividends by the savings institution;
         o   Transactions between the savings institution and its affiliates;
             and
         o   Any activities of the savings institution that might create a
             serious risk that the liabilities of the holding company and
             its affiliates may be imposed on the savings institution.

                                       13

<PAGE>

         Notwithstanding the above rules as to permissible business activities
of unitary savings and loan holding companies, if the savings institution
subsidiary of such a holding company fails to meet the qualified thrift lender
("QTL") test set forth in OTS regulations, then such unitary holding company
shall after one year be subject to the restrictions applicable to, a bank
holding company. See "The Bank-Qualified Thrift Lender Test."

         If we were to acquire control of another savings institution, other
than through merger or other business combination with the Bank, OCN would
thereupon become a multiple savings and loan holding company. Except where such
acquisition is pursuant to the authority to approve emergency thrift acquisition
and where each subsidiary savings institution meets the QTL test, as set forth
below, the activities of OCN and any of its subsidiaries (other than the Bank or
other subsidiary savings institutions) would thereafter be subject to further
restrictions. Among other things, no multiple savings and loan holding company
or subsidiary thereof which is not a savings institution generally shall
commence or continue for a limited period of time after becoming a multiple
savings and loan holding company or subsidiary thereof any business activity,
other than:

         o   Furnishing or performing management services for a subsidiary
             savings institution;
         o   Conducting an insurance agency or escrow business;
         o   Holding, managing, or liquidating assets owned by or acquired from
             a subsidiary savings institution;
         o   Holding or managing properties used or occupied by a subsidiary
             savings institution;
         o   Acting as trustee under deeds of trust;
         o   Those activities authorized by regulation as of March 5, 1987 to be
             engaged in by multiple savings and loan holding companies; or
         o   Unless the Director of the OTS by regulation prohibits or limits
             such activities for savings and loan holding companies, those
             activities authorized by the Federal Reserve Board as permissible
             for bank holding companies. These activities also must be approved
             by the Director of the OTS prior to being engaged in by a multiple
             savings and loan holding company.

         Restrictions on Acquisitions. Except under limited circumstances,
savings and loan holding companies are prohibited from acquiring, without prior
approval of the Director of the OTS: (i) control of any other savings
institution or savings and loan holding company or substantially all of the
assets thereof; or (ii) more than 5% of the voting shares of a savings
institution or holding company thereof which is not a subsidiary. Except with
the prior approval of the Director of the OTS, no director or officer of a
savings and loan holding company, or person owning or controlling by proxy or
otherwise more than 25% of such company's stock, may acquire control of any
savings institution, other than a subsidiary savings institution, or of any
other savings and loan holding company.

         The Director of the OTS may approve acquisitions resulting in the
formation of a multiple savings and loan holding company which controls savings
institutions in more than one state only if: (i) the multiple savings and loan
holding company involved controls a savings institution which operated a home or
branch office located in the state of the institution to be acquired as of March
5, 1987; (ii) the acquirer is authorized to acquire control of the savings
institution pursuant to the emergency acquisition provisions of the Federal
Deposit Insurance Act ("FDIA"); or (iii) the statutes of the state in which the
institution to be acquired is located specifically permit institutions to be
acquired by state-chartered savings institutions located in the state where the
acquiring entity is located (or by a holding company that controls such
state-chartered savings institutions).

         Restrictions on Transactions with Affiliates. Transactions between OCN
or any of its non-bank subsidiaries and the Bank are subject to various
restrictions, which are described below under "The Bank-Affiliate Transactions."

The Bank

         General. The Bank is a federally-chartered savings bank organized under
the HOLA. As such, the Bank is subject to regulation, supervision and
examination by the OTS. The deposit accounts of the Bank are insured up to
applicable limits by the SAIF administered by the FDIC and, as a result, the
Bank also is subject to regulation, supervision and examination by the FDIC.

         The business and affairs of the Bank are regulated in a variety of
ways. Regulations apply to, among other things, insurance of deposit accounts,
capital ratios, payment of dividends, liquidity requirements, the nature and
amount of the investments that the Bank may make, transactions with affiliates,
community and consumer lending laws, internal policies and controls, reporting
by and examination of the Bank, changes in control of the Bank as well as
subsidiaries established by the Bank.

         Insurance of Accounts. Pursuant to legislation enacted in September
1996, a fee was required to be paid by all SAIF-insured institutions at the rate
of $0.657 per $100 of deposits held by such institutions at March 31, 1995. The
money collected recapitalized the

                                       14

<PAGE>

SAIF reserve to the level of 1.25% of insured deposits as required by law. The
recapitalization of the SAIF resulted in lower deposit insurance premiums for
most SAIF-insured financial institutions, including the Bank.

         Insured institutions also are required to share in the payment of
interest on the bonds issued by a specially created government entity, the
Finance Corporation ("FICO"), the proceeds of which were applied toward
resolution of the thrift industry crisis in the 1980s. Beginning on January 1,
1997, in addition to the insurance premiums paid by SAIF-insured institutions to
maintain the SAIF reserve at the required level pursuant to the current risk
classification system, SAIF-insured institutions pay deposit insurance premiums
towards the payment of interest on the FICO bonds. The FICO assessment rate is
adjusted quarterly.

         Under the current risk classification system, institutions are assigned
to one of three capital groups that are based solely on the level of an
institution's capital - "well capitalized," "adequately capitalized" and
"undercapitalized" - and that are defined in the same manner as the regulations
establishing the prompt corrective action system under Section 38 of the FDIA,
as discussed below. These three groups are then divided into three subgroups,
which are based on supervisory evaluations by the institution's primary federal
regulator, resulting in nine assessment classifications. Assessment rates
currently range from 0 basis points for well capitalized, healthy institutions
to 27 basis points for undercapitalized institutions with substantial
supervisory concerns.

         The FDIC may terminate the deposit insurance of any insured depository
institution, including the Bank, if it determines after a hearing that the
institution has engaged or is engaging in unsafe or unsound practices, is in an
unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, order or any condition imposed by an agreement with
the FDIC. It also may suspend deposit insurance temporarily during the hearing
process for the permanent termination of insurance, if the institution has no
tangible capital. If insurance of accounts is terminated, the accounts at the
institution at the time of the termination, less subsequent withdrawals, shall
continue to be insured for a period of six months to two years, as determined by
the FDIC. We are aware of no existing circumstances that would result in
termination of the Bank's deposit insurance.

         Regulatory Capital Requirements. Federally-insured savings associations
are subject to three capital requirements of general applicability: a tangible
capital requirement, a core or leverage capital requirement and a risk-based
capital requirement. All savings associations currently are required to maintain
tangible capital of at least 1.5% of adjusted total assets (as defined in the
regulations), core capital equal to 3% of adjusted total assets and total
capital (a combination of core and supplementary capital) equal to 8% of
risk-weighted assets (as defined in the regulations). For purposes of the
regulation, tangible capital is core capital less all intangibles other than
qualifying mortgage servicing rights. Core capital includes common stockholders'
equity, non-cumulative perpetual preferred stock and related surplus, minority
interests in the equity accounts of fully consolidated subsidiaries and certain
nonwithdrawable accounts and pledged deposits. Core capital generally is reduced
by the amount of a savings association's intangible assets, other than
qualifying mortgage servicing rights.

         A savings association is allowed to include both core capital and
supplementary capital in the calculation of its total capital for purposes of
the risk-based capital requirements, provided that the amount of supplementary
capital included does not exceed the savings association's core capital.
Supplementary capital consists of certain capital instruments that do not
qualify as core capital, including subordinated debt (such as the Bank's
Debentures) that meets specified requirements, and general valuation loan and
lease loss allowances up to a maximum of 1.25% of risk-weighted assets. In
determining the required amount of risk-based capital, total assets, including
certain off-balance sheet items, are multiplied by a risk weight based on the
risks inherent in the type of assets. The risk weights assigned by the OTS for
principal categories of assets currently range from 0% to 100%, depending on the
type of asset.

         OTS policy imposes a limitation on the amount of net deferred tax
assets that may be included in regulatory capital. Net deferred tax assets
represent deferred tax assets, reduced by any valuation allowances, in excess of
deferred tax liabilities. Application of the limit depends on the possible
sources of taxable income available to an institution to realize deferred tax
assets. Deferred tax assets that can be realized from the following generally
are not limited: taxes paid in prior carryback years and future reversals of
existing taxable temporary differences. To the extent that the realization of
deferred tax assets depends on an institution's future taxable income (exclusive
of reversing temporary differences and carryforwards), or its tax-planning
strategies, such deferred tax assets are limited for regulatory capital purposes
to the lesser of the amount that can be realized within one year of the
quarter-end report date or 10% of core capital.

         OTS has adopted an interest-rate risk component into the risk-based
capital regulation. Under the rule, an institution with a greater than "normal"
level of interest rate risk will be subject to a deduction of its interest rate
risk component from total capital for purposes of determining whether it has met
the risk-based capital requirement. As a result, such an institution will be
required to maintain additional capital in order to comply with the risk-based
capital requirement. Although the final rule was originally scheduled to be
effective as of January 1994, the OTS has indicated that it will delay invoking
its interest rate risk rule until appeal procedures are implemented and

                                       15

<PAGE>

evaluated. The OTS has not yet established an effective date for the capital
deduction. We not believe that the adoption of an interest rate risk component
to the risk-based capital requirement will adversely affect the Bank if it
becomes effective in its current form.

         The OTS minimum core capital ratio provides that only those
institutions with Uniform Financial Institution Rating System ("UFIRS") rating
of "1" are subject to a 3% minimum core capital ratio. All other institutions
are subject to a 4% minimum core capital ratio.

         The OTS and other banking regulators proposed revisions to their
capital rules concerning the treatment of residual interests in asset
securitizations and other transfers of financial assets. Generally, the proposed
rule would require that risk-based capital be held in an amount equal to the
amount of residual interests retained on an institution's balance sheet and
would limit the amount of residual interests that may be included in Tier 1
capital.

         In January 2001, the four federal banking agencies jointly issued
expanded examination and supervision guidance relating to subprime lending
activities. In the guidance, "subprime" lending generally refers to programs
that target borrowers with weakened credit histories or lower repayment
capacity. The guidance principally applies to institutions with subprime lending
programs with an aggregate credit exposure equal to or greater than 25 percent
of an institution's Tier 1 capital. Such institutions would be subject to more
stringent risk management standards and, in many cases, additional capital
requirements. As a starting point, the guidance generally expects that such an
institution would hold capital against subprime portfolios in an amount that is
one and one half to three times greater than the amount appropriate for similar
types of non-subprime assets. The guidance is primarily directed at insured
depository institutions.

         Classified Assets. OTS regulations require that each insured savings
association classify its assets on a regular basis. In addition, in connection
with examinations of insured associations, OTS examiners have authority to
identify problem assets and, if appropriate, require them to be classified.
There are three classifications for problem assets: "substandard," "doubtful"
and "loss." Substandard assets have one or more defined weaknesses and are
characterized by the distinct possibility that the insured institution will
sustain some loss if the deficiencies are not corrected. Doubtful assets have
the weaknesses of substandard assets with the additional characteristic that the
weaknesses make collection or liquidation in full on the basis of currently
existing facts, conditions and values questionable, and there is a high
possibility of loss. An asset classified as a loss is considered uncollectible
and of such little value that continuance as an asset of the institution is not
warranted. Another category, designated "special mention," also must be
established and maintained for assets which do not currently expose an insured
institution to a sufficient degree of risk to warrant classification as
substandard, doubtful or loss but do possess credit deficiencies or potential
weaknesses deserving management's close attention. Assets classified as
substandard or doubtful require the institution to establish general allowances
for loan losses. If an asset or portion thereof is classified as a loss, the
insured institution must either establish specific allowances for loan losses in
the amount of 100% of the portion of the asset classified as a loss or charge
off such amount. In this regard, we establish required reserves and charge-off
loss assets as soon as administratively practicable. General loss allowances
established to cover possible losses related to assets classified substandard or
doubtful may be included in determining an institution's regulatory capital,
while specific valuation allowances for loan losses do not qualify as regulatory
capital.

         On February 10, 1999, the Federal Financial Institutions Examination
Council ("FFIEC") issued the Uniform Retail Credit Classification and Account
Management Policy. As a result of this policy, we have classified all
residential loans as substandard if they are past due 90 days, or more, and the
ratio of book value to market value is 60%, or more. We classify as substandard
all residential loans that are in foreclosure or bankruptcy and have a ratio of
book value to market value of 85%, or more, and we classify as loss and charge
off the portion of the book value of such loans that exceeds 85% of market
value. In 2001, we modified our policies so that we now classify as substandard
all residential real estate owned held for less than three years and as doubtful
all held for three years or more. Our past experience indicates that classified
discount assets do not necessarily correlate to probability or severity of loss.

         Excluding assets that have been classified loss and fully reserved, the
Bank's classified assets at December 31, 2001 under the above policy consisted
of $205,038 of assets classified as substandard and $497 of assets classified as
doubtful. In addition, at the same date, $96,225 of assets were designated as
special mention.

         Substandard assets at December 31, 2001 under the above policy
consisted primarily of $45,993 of loans and real estate owned related to our
discount single family residential loans and $87,618 of loans and real estate
owned related to our discount commercial real estate loans. Special mention
assets at December 31, 2001 under the policy consisted primarily of $95,938 of
loans and real estate owned related to discount commercial real estate loans.

         Prompt Corrective Action. Federal law provides the Federal banking
regulators with broad power to take "prompt corrective action" to resolve the
problems of undercapitalized institutions. The extent of the regulators' powers
depends on whether the institution in question is "well capitalized,"

                                       16

<PAGE>

"adequately capitalized," "undercapitalized," "significantly undercapitalized"
or "critically undercapitalized." Under regulations adopted by the Federal
banking regulators, an institution shall be deemed to be:

         o   "Well capitalized" if it has a total risk-based capital ratio of
             10.0% or more, has a Tier 1 risk-based capital ratio of 6.0% or
             more, has a Tier 1 leverage capital ratio of 5.0% or more and is
             not subject to any written agreement, order or directive to meet
             and maintain a specific capital level for any capital measure;
         o   "Adequately capitalized" if it has a total risk-based capital ratio
             of 8.0% or more, a Tier 1 risk-based capital ratio of 4.0% or more
             and a Tier 1 leverage capital ratio of 4.0% or more (3.0% under
             certain circumstances) and does not meet the definition of "well
             capitalized";
         o   "Undercapitalized" if it has a total risk-based capital ratio that
             is less than 8.0%, a Tier 1 risk-based capital ratio that is less
             than 4.0% or a Tier 1 leverage capital ratio that is less than 4.0%
             (3.0% under certain circumstances);
         o   "Significantly undercapitalized" if it has a total risk-based
             capital ratio that is less than 6.0%, a Tier 1 risk-based capital
             ratio that is less than 3.0% or a Tier 1 leverage capital ratio
             that is less than 3.0% and;
         o   "Critically undercapitalized" if it has a ratio of tangible equity
             to adjusted total assets that is equal to or less than 2.0%.

         The regulations also permit the appropriate Federal banking regulator
to downgrade an institution to the next lower category (provided that a
significantly undercapitalized institution may not be downgraded to critically
undercapitalized) if the regulator determines: (i) after notice and opportunity
for hearing or response, that the institution is in an unsafe or unsound
condition or (ii) that the institution has received (and not corrected) a
less-than-satisfactory rating for any of the categories of asset quality,
management, earnings or liquidity in our most recent exam. At December 31, 2001,
the Bank was a "well capitalized" institution under the prompt corrective action
regulations of the OTS.

         Depending upon the capital category to which an institution is
assigned, the regulators' corrective powers, many of which are mandatory in
certain circumstances, include:

         o   Prohibiting capital distributions;
         o   Prohibiting payment of management fees to controlling persons;
         o   Requiring the submission of a capital restoration plan;
         o   Placing limits on asset growth;
         o   Limiting acquisitions, branching or new lines of business;
         o   Requiring the institution to issue additional capital stock
             (including additional voting stock) or to be acquired;
         o   Restricting transactions with affiliates;
         o   Restricting the interest rates that the institution may pay on
             deposits;
         o   Ordering a new election of directors of the institution;
         o   Requiring that senior executive officers or directors be dismissed;
         o   Prohibiting the institution from accepting deposits from
             correspondent banks;
         o   Requiring the institution to divest certain subsidiaries;
         o   Prohibiting the payment of principal or interest on subordinated
             debt; and, ultimately,
         o   Appointing a receiver for the institution.

         Qualified Thrift Lender Test. All savings associations are required to
meet the QTL test set forth in the HOLA to avoid certain restrictions on their
operations. Under the QTL test provisions, a savings institution must maintain
at least 65% of portfolio assets in qualified thrift investments. In general,
qualified thrift investments include loans, securities and other investments
that are related to housing, small business and credit card lending, and to a
more limited extent, consumer lending and community service purposes. Portfolio
assets are defined as an institution's total assets less goodwill and other
intangible assets, the institution's business property and a limited amount of
the institution's liquid assets. A savings association that does not meet the
QTL test set forth in the HOLA and implementing regulations must either convert
to a bank charter or comply with the following restrictions on its operations:

         o   The association may not engage in any new activity or make any new
             investment, directly or indirectly, unless such activity or
             investment is permissible for a national bank;
         o   The branching powers of the association shall be restricted to
             those of a national bank; and
         o   Payment of dividends by the association shall be subject to the
             rules regarding payment of dividends by a national bank.

         Upon the expiration of three years from the date the association ceases
to be a QTL, it must cease any activity and not retain any investment unless
that activity or investment would be permissible if the association were a
national bank and for the association as a savings association. The Bank met the
QTL test throughout 2001, and our qualified thrift investments comprised 75.29%
of our portfolio assets at December 31, 2001.

                                       17

<PAGE>

         Restrictions on Capital Distributions. Effective April 1, 1999, the
Bank is required to file a notice with the OTS at least 30 days prior to making
any payment to repurchase, redeem, retire or otherwise acquire debt instruments
included in total risk-based capital (each a "capital distribution") unless (a)
it is not eligible for expedited treatment under the OTS application processing
regulations, (b) the total amount of the Bank's capital distributions (including
the proposed distribution) for the calendar year exceeds the Bank's net income
for the year to date plus retained net income for the previous two years, (c)
the Bank would not be "adequately capitalized" following the proposed
distribution or (d) the proposed distribution would violate any applicable
statute, regulation, or an agreement between the Bank and the OTS, or a
condition imposed upon the Bank by an OTS-approved application or notice. If one
of these four criteria is present, the Bank is required to file an application
with the OTS at least 30 days prior to making the proposed capital distribution.
The OTS may deny the Bank's application or disapprove our notice if the OTS
determines that (a) the Bank will be "undercapitalized," "significantly
undercapitalized" or "critically under capitalized," as defined in the OTS
capital regulations, following the capital distribution, (b) the proposed
capital distribution raises safety and soundness concerns or (c) the proposed
capital distribution violates a prohibition contained in any statute, regulation
or agreement between the Bank and the OTS or a condition imposed on the Bank in
an application or notice approved by the OTS.

         Loan-To-One Borrower. Under applicable laws and regulations, the amount
of loans and extensions of credit that may be extended by a savings institution
such as the Bank to any one borrower, including related entities, generally may
not exceed 15% of the unimpaired capital and unimpaired surplus of the
institution. Loans in an amount equal to an additional 10% of unimpaired capital
and unimpaired surplus also may be made to a borrower if the loans are fully
secured by readily marketable collateral. An institution's "unimpaired capital
and unimpaired surplus" includes, among other things, the amount of its core
capital and supplementary capital included in its total capital under OTS
regulations.

         At December 31, 2001, the Bank's unimpaired capital and surplus
amounted to $239,305, resulting in a general loan-to-one borrower limitation of
$35,896 under applicable laws and regulations.

         Brokered Deposits. Under applicable laws and regulations, an insured
depository institution may be restricted in obtaining, directly or indirectly,
funds by or through any "deposit broker," as defined, for deposit into one or
more deposit accounts at the institution. The term "deposit broker" generally
includes any person engaged in the business of placing deposits, or facilitating
the placement of deposits, of third parties with insured depository institutions
or the business of placing deposits with insured depository institutions for the
purpose of selling interests in those deposits to third parties. In addition,
the term "deposit broker" includes any insured depository institution, and any
employee of any insured depository institution, which engages, directly or
indirectly, in the solicitation of deposits by offering rates of interest (with
respect to such deposits) that are significantly higher than the prevailing
rates of interest on deposits offered by other insured depository institutions
having the same type of charter in such depository institution's normal market
area. As a result of the definition of "deposit broker," all of the Bank's
brokered deposits, as well as possibly our deposits obtained through customers
of regional and local investment banking firms and the deposits obtained from
the Bank's direct solicitation efforts of institutional investors and high net
worth individuals, are potentially subject to the restrictions described below.
Under FDIC regulations, well-capitalized institutions are not subject to the
brokered deposit limitations, while adequately capitalized institutions are able
to accept, renew or roll over brokered deposits only: (i) with a waiver from the
FDIC; and (ii) subject to the limitation that they do not pay an effective yield
on any such deposit which exceeds by more than 75 basis points (a) the effective
yield paid on deposits of comparable size and maturity in such institution's
normal market area for deposits accepted in our normal market area or (b) 120%
(130% for deposits at least half of which is uninsured) of the current yield on
comparable maturity U.S. Treasury obligations for deposits accepted outside the
institution's normal market area. Undercapitalized institutions are not
permitted to accept brokered deposits and may not solicit deposits by offering
an effective yield that exceeds by more than 75 basis points the prevailing
effective yields on insured deposits of comparable maturity in the institution's
normal market area or in the market area in which such deposits are being
solicited. See "Sources of Funds - Deposits."

         Liquidity Requirements. All savings associations were previously
required to maintain an average daily balance of liquid assets, which include
specified short-term assets and certain long-term assets, equal to a certain
percentage of the sum of their average daily balance of net withdrawable deposit
accounts and borrowings payable in one year or less. The liquidity requirement
varied from time to time (between 4% and 10%) depending upon economic conditions
and savings flows of all savings associations. In November 1997, the OTS amended
its liquidity regulations to, among other things, provide that a savings
association shall maintain liquid assets of not less than 4% of the amount of
its liquidity base at the end of the preceding calendar quarter as well as to
provide that each savings association must maintain sufficient liquidity to
ensure its safe and sound operation. Prior to November 1997, the required liquid
asset ratio was 5%. Historically, the Bank has operated in compliance with these
requirements. In December 2000, Congress passed the Financial Regulatory Relief
and Economic Efficiency Act of 2000 (Pub. L. 106-569) which repealed the
statutory liquidity requirement for savings associations formerly found in HOLA.
Accordingly, effective July 18, 2001, the OTS issued a Final Rule that
eliminated the 4% liquidity requirement. The Final Rule requires savings
associations to maintain sufficient liquidity to ensure their safe and sound
operation.

                                       18

<PAGE>

         Affiliate Transactions. Under federal law and regulation, transactions
between a savings association and its affiliates are subject to quantitative and
qualitative restrictions. Affiliates of a savings association include, among
other entities, companies that control, are controlled by or are under common
control with the savings association. As a result, Ocwen Financial Corporation,
OAC, OTX and their non-bank subsidiaries are affiliates of the Bank.

         Savings associations are restricted in their ability to engage in
"covered transactions" with their affiliates. In addition, covered transactions
between a savings association and an affiliate, as well as certain other
transactions with or benefiting an affiliate, must be on terms and conditions at
least as favorable to the savings association as those prevailing at the time
for comparable transactions with non-affiliated companies. Savings associations
are required to make and retain detailed records of transactions with
affiliates.

         Notwithstanding the foregoing, a savings association is not permitted
to make a loan or extension of credit to any affiliate unless the affiliate is
engaged only in activities the Federal Reserve Board has determined to be
permissible for bank holding companies. Savings associations also are prohibited
from purchasing or investing in securities issued by an affiliate, other than
shares of a subsidiary.

         Savings associations are also subject to various limitations and
reporting requirements on loans to insiders. These limitations require, among
other things, that all loans or extensions of credit to insiders (generally
executive officers, directors or 10% stockholders of the institution) or their
"related interests" be made on substantially the same terms (including interest
rates and collateral) as, and follow credit underwriting procedures that are not
less stringent than, those prevailing for comparable transactions with the
general public and not involve more than the normal risk of repayment or present
other unfavorable features.

         Community Investment and Consumer Protections Laws. The Bank is subject
to a variety of federal laws designed to protect borrowers and promote lending
to various sectors of the economy and population. Included among these are the
Federal Home Mortgage Disclosure Act, Real Estate Settlement Procedures Act,
Truth-in-Lending Act, Equal Credit Opportunity Act, Fair Credit Reporting Act
and the Community Reinvestment Act.

         Gramm-Leach-Bliley Act. The Bank is also subject to the
Gramm-Leach-Bliley Act ("GLB Act"), which was signed into law at the end of
1999. The GLB Act contains comprehensive consumer financial privacy
restrictions. Various federal enforcement agencies, including the Federal Trade
Commission, have issued final regulations to implement the GLB Act; however,
compliance with the new regulations was voluntary until July 1, 2001. The
restrictions fall into two basic categories. First, a financial institution must
provide various notices to consumers about an institution's privacy policies and
practices. Second, the GLB Act gives consumers the right to prevent the
financial institution from disclosing non-public personal information about the
consumer to non-affiliated third parties, with exceptions.

         Safety and Soundness. Other regulations include: (i) real estate
lending standards for insured institutions, which provide guidelines concerning
loan-to-value ratios for various types of real estate loans; (ii) risk-based
capital rules to account for interest rate risk, concentration of credit risk
and the risks posed by "non-traditional activities;" (iii) rules requiring
depository institutions to develop and implement internal procedures to evaluate
and control credit and settlement exposure to their correspondent banks; and
(iv) rules addressing various "safety and soundness" issues, including
operations and managerial standards, standards for asset quality, earnings and
stock valuations, and compensation standards for the officers, directors,
employees and principal stockholders of the insured institution.

         Federal Reserve Regulation. Under Federal Reserve Board regulations,
the Bank is required to maintain a reserve against its transaction accounts
(primarily interest-bearing and noninterest-bearing checking accounts). Because
reserves must generally be maintained in cash or in noninterest-bearing
accounts, the effect of the reserve requirements is to increase an institution's
cost of funds. These regulations generally require that the Bank maintain
reserves against net transaction accounts. Institutions may designate and exempt
$5,000 of certain reservable liabilities from these reserve requirements. This
amount is subject to adjustment by the Federal Reserve Board. The Bank, like
other depository institutions maintaining reservable accounts, may borrow from
the Federal Reserve Bank discount window, but the Federal Reserve Board's
regulations require the Bank to exhaust other reasonable alternative sources
before borrowing from the Federal Reserve Bank. Numerous other regulations
promulgated by the Federal Reserve Board affect the business operations of the
Bank. These include regulations relating to equal credit opportunity, electronic
fund transfers, collection of checks, truth in lending, truth in savings and
availability of funds.

         Federal Home Loan Bank System. The FHLB System was created in 1932 and
consists of twelve regional FHLBs. The FHLBs are federally chartered but
privately owned institutions created by Congress. The Federal Housing Finance
Board ("Finance Board") is an agency of the federal government and is generally

                                       19

<PAGE>

responsible for regulating the FHLB System. Each FHLB is owned by its member
institutions. The primary purpose of the FHLBs is to provide funding to their
members for making housing loans as well as for affordable housing and community
development lending. FHLBs are generally able to make advances to their member
institutions at interest rates that are lower than could otherwise be obtained
by such institutions. Under current rules, an FHLB member is generally required
to purchase FHLB stock in an amount equal to at least 5% of the aggregate
outstanding advances made by the FHLB to the member. The GLB Act and new
regulations adopted by the Finance Board that became effective January 31, 2001
require a new capital structure for the FHLBs. The new capital structure will
contain risk-based and leverage capital requirements similar to those currently
in place for depository institutions. Each FHLB was required to submit a capital
structure plan to the Finance Board for approval within 270 days of the
publication of the new regulations. Generally, an institution is eligible to be
a member of the FHLB for the district where the member's principal place of
business is located. The Bank, whose home office is in Ft. Lee, New Jersey, is a
member of the New York FHLB.

         Community Reinvestment Act. The Community Reinvestment Act ("CRA")
requires financial institutions regulated by the federal financial supervisory
agencies to ascertain and help meet the credit needs of their delineated
communities, including low- to moderate-income neighborhoods within those
communities, while maintaining safe and sound banking practices. The regulatory
agency assigns one of four possible ratings to an institution's CRA performance
and is required to make public an institution's rating and written evaluation.
The four possible ratings of meeting community credit needs are outstanding,
satisfactory, needs to improve, and substantial noncompliance. In 1999, the Bank
received a "satisfactory" CRA rating from the OTS. This rating reflects our
commitment to meeting the credit needs of the communities we serve. Under
regulations that apply to all CRA performance evaluations after July 1, 1997,
many factors play a role in assessing a financial institution's CRA performance.
The institution's regulator must consider its financial capacity and size, legal
impediments, local economic conditions and demographics, including the
competitive environment in which it operates. The evaluation does not rely on
absolute standards, and the institutions are not required to perform specific
activities or to provide specific amounts or types of credit. We maintain a CRA
file available for public viewing.

         The Bank filed an application with the OTS to be designated a Wholesale
Bank for CRA purposes beginning in May 2001. The bank was designated as a
Wholesale Bank as of June 15, 2001. The Wholesale Bank designation is available
to institutions that are not in the business of extending home mortgage, small
business, small farm or consumer loans to retail customers. Wholesale Banks are
subject to a separate CRA test that measures their community development loans,
investments and services.

FEDERAL TAXATION

         General. OCN and all of its domestic subsidiaries currently file, and
expect to continue to file, a consolidated Federal income tax return based on a
calendar year. Consolidated returns have the effect of eliminating inter-company
transactions, including dividends, from the computation of taxable income.

         Alternative Minimum Tax. In addition to the regular corporate income
tax, corporations, including qualifying savings institutions, are subject to an
alternative minimum tax. The 20% tax is computed on Alternative Minimum Taxable
Income ("AMTI") and applies if it exceeds the regular tax liability. AMTI is
equal to regular taxable income with certain adjustments. For taxable years
beginning after 1989, AMTI includes an adjustment for 75% of the excess of
"adjusted current earnings" over regular taxable income. Net operating loss
carrybacks and carryforwards are permitted to offset only 90% of AMTI.
Alternative minimum tax paid can be credited against regular tax due in later
years.

         Tax Residuals. From time to time, we acquire Real Estate Mortgage
Investment Conduit ("REMIC") residuals or retain residual securities in REMICs
which were formed by us in connection with the securitization and sale of loans.
Although a tax residual may have little or no future economic cash flows from
the REMIC from which it has been issued, the tax residual does bear the income
tax liability or benefit resulting from the difference between the interest rate
paid on the securities by the REMIC and the interest rate received on the
mortgage loans held by the REMIC. This generally results in taxable income for
us in the first several years of the REMIC and equal amounts of tax deductions
thereafter. We receive cash payments in connection with the acquisition of tax
residuals to compensate us for the time value of money associated with the tax
payments related to these securities and the costs of modeling, recording,
monitoring and reporting the securities. We defer all fees received and
recognize such fees in interest income on a level yield basis over the expected
life of the deferred tax asset related to tax residuals. We also adjust the
recognition in interest income of fees deferred based upon the changes in the
actual prepayment rates of the underlying mortgages held by the REMIC and
periodic reassessments of the expected life of the deferred tax asset related to
tax residuals. At December 31, 2001, our gross deferred tax assets included
$3,176, which was attributable to our tax residuals and related deferred income.

                                       20

<PAGE>

         Investments in Low-Income Housing Tax Credit Interests. For a
discussion of the tax effects of investments in low-income housing tax credit
interests, see "Segments-Affordable Housing Properties."

         Examinations. The most recent examination by the IRS of our Federal
income tax return was of the tax return filed for 1996. The statute of
limitations has run with respect to 1997 and all prior tax years. Thus, the
Federal income tax returns for the years 1998 through 2000 are open for
examination. We do not anticipate any material adjustments as a result of any
examination, although there can be no assurances in this regard.

STATE TAXATION

         OCN's income is subject to tax by the States of Florida and California,
which have statutory tax rates of 5.5% and 10.84%, respectively, and its taxable
income in these states is determined based on certain apportionment factors. We
are taxed in New Jersey on income, net of expenses, earned in New Jersey at a
statutory rate of 3.0%. No state return of ours has been examined, and no
notification has been received by us that any state intends to examine any of
our tax returns.

                                       21

<PAGE>


I
TEM 2.  PROPERTIES

         The following table sets forth information relating to our facilities
at December 31, 2001:


<TABLE>
<CAPTION>
                                                                                   Net Book Value of
                                                                                 Property or Leasehold
                          Location                              Owned/Leased         Improvements
------------------------------------------------------------    ------------    ----------------------
                                                                                (Dollars in Thousands)
<S>                                                                <C>             <C>            
Executive offices:
     1675 Palm Beach Lakes Boulevard
     West Palm Beach, FL....................................       Leased          $         3,135

Bank main office:
     2400 Lemoine Ave
     Fort Lee, NJ...........................................       Leased          $            11

Servicing center:
     12650 Ingenuity Drive
     Orlando, FL............................................       Owned           $        22,239

Software development and servicing operations center:
     Information Technology Park
     Bangalore, India.......................................       Leased          $           184

OTX offices:
California office:
     5050 Avenida Encinas, Suite 200
     Carlsbad, CA...........................................       Leased          $           128

Amos, Inc.:
     10 Research Parkway
     Wallingford, CT........................................       Leased          $            51

Synergy Software, LLC:
     Two Creekside Crossing
     10 Cadillac Drive, Suite 350                                  Leased
     Brentwood, TN..........................................                       $           131
</TABLE>


         OTX's main offices are located in facilities provided by OCN. OAC does
not maintain an office, but rather relies on the facilities provided by OCN.


ITEM 3.  LEGAL PROCEEDINGS

         We are subject to various pending legal proceedings. Management is of
the opinion that the resolution of these claims will not have a material adverse
effect on the results of operations or financial condition of us. See "Note 30:
Commitments and Contingencies" on page 112 of our 2001 Annual Report to
Shareholders which is incorporated herein by reference.


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

         None.

                                       22

<PAGE>


                                     PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
         MATTERS

         Information required by this Item appears under the caption
"Shareholder Information" on page 117 of our Annual Report to Shareholders and
is incorporated herein by reference.


ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

         Information required by this Item appears under the caption "Selected
Consolidated Financial Information" on pages 10 to 12 of our Annual Report to
Shareholders and is incorporated herein by reference.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         Information required by this Item appears under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 13 to 60 of our 2001 Annual Report to Shareholders and is
incorporated herein by reference. In addition, please also note the information
below, which is not discussed in our 2001 Annual Report to Shareholders.

Recent Developments

         On March 27, 2002, OCN announced the formation of Global Servicing
Solutions, LLC, a joint venture with Merrill Lynch. The joint venture will be
responsible for establishing, licensing and operating distressed asset
management servicing companies in countries around the world to service Merrill
Lynch assets as well as assets owned by third parties.


I
TEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Information required by this Item appears under the captions "Asset and
Liability Management" on pages 53 to 58, "Note 1: Summary of Significant
Accounting Policies" on pages 71 to 77 and "Note 21: Derivative Financial
Instruments" on pages 99 to 101 of our Annual Report to Shareholders and is
incorporated herein by reference.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Information required by this Item appears on pages 63 to 116 in our
Annual Report to Shareholders and is incorporated herein by reference.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None.

                                       23

<PAGE>


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information contained in our definitive Proxy Statement with
respect to our Annual Meeting of Shareholders to be held on May 16, 2002, and as
filed with the Commission on or about March 29, 2002 (the "2002 Proxy
Statement") under the captions "Election of Directors - Nominees for Director,"
"Executive Officers Who Are Not Directors," and "Security Ownership of Certain
Beneficial Owners - Section 16(a) Beneficial Ownership Reporting Compliance" is
incorporated herein by reference.


ITEM 11. EXECUTIVE COMPENSATION

         The information contained in our 2002 Proxy Statement under the
captions "Executive Compensation," "Board of Directors Compensation" and
"Comparison of Cumulative Total Return" is incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information contained in our 2002 Proxy Statement under the caption
"Security Ownership of Certain Beneficial Owners - Beneficial Ownership of
Common Stock" is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         None.



                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a) 1 & 2    Financial Statements and Schedules. The following Consolidated
                  Financial Statements of Ocwen Financial Corporation and Report
                  of PricewaterhouseCoopers LLP, Independent Certified Public
                  Accountants, are incorporated herein by reference from pages
                  63 to 116 of our Annual Report to Shareholders:


                  Report of Independent Certified Public Accountants

                  Consolidated Statements of Financial Condition at December 31,
                  2001 and 2000

                  Consolidated Statements of Operations for each of the three
                  years in the period ended December 31, 2001

                  Consolidated Statements of Changes in Shareholders' Equity for
                  each of the three years in the period ended December 31, 2001

                  Consolidated Statements of Comprehensive Income for each of
                  the three years in the period ended December 31, 2001

                  Consolidated Statements of Cash Flows for each of the three
                  years in the period ended December 31, 2001


                  Notes to Consolidated Financial Statements

                  Financial statement schedules have been omitted because they
                  are not applicable or the required information is shown in the
                  Consolidated Financial Statements or notes thereto.

     (a) 3        Exhibits.

                  2.1      Agreement of Merger dated as of July 25, 1999 among
                           Ocwen Financial Corporation, Ocwen Asset Investment
                           Corp. and Ocwen Acquisition Company (1)
                  3.1      Amended and Restated Articles of Incorporation (2)

                                       24

<PAGE>

                  3.2      Amended and Restated Bylaws (3)
                  4.0      Form of Certificate of Common Stock (2)
                  4.1      Form of Indenture between OCN and Bank One, Columbus,
                           NA as Trustee (2)
                  4.2      Form of Note due 2003 (included in Exhibit 4.1) (2)
                  4.3      Certificate of Trust of Ocwen Capital Trust I (4)
                  4.4      Amended and Restated Declaration of Trust of Ocwen
                           Capital Trust I (4)
                  4.5      Form of Capital Security of Ocwen Capital Trust I
                           (included in Exhibit 4.4) (4)
                  4.6      Form of Indenture relating to 10.875% Junior
                           Subordinated Debentures due 2027 of OCN (4)
                  4.7      Form of 10.875% Junior Subordinated Debentures due
                           2027 of OCN (included in Exhibit 4.6) (4)
                  4.8      Form of Guarantee of OCN relating to the Capital
                           Securities of Ocwen Capital Trust I (4)
                  4.9      Form of Indenture between Ocwen Federal Bank FSB and
                           The Bank of New York as Trustee (5)
                  4.10     Form of Subordinated Debentures due 2005 (5)
                  4.11     Form of Indenture between OAC and Norwest Bank
                           Minnesota, National Association, as Trustee
                           thereunder for the 11.5% Redeemable Notes due 2005
                           (6)
                  4.12     Form of 11.5% Redeemable Note due 2005 (7)
                  4.13     Form of Second Supplemental Indenture between OAC and
                           Wells Fargo Bank Minnesota, National Association as
                           successor to Norwest Bank Minnesota, National
                           Association, as trustee thereunder for the 11.5%
                           Redeemable Notes due 2005 (8)
                  10.1     Ocwen Financial Corporation 1996 Stock Plan for
                           Directors, as amended (9)
                  10.2     Ocwen Financial Corporation 1998 Annual Incentive
                           Plan (10)
                  10.3     Amended and Restated Loan Agreement, dated as of June
                           10, 1998, by and among, inter alia, OAIC California
                           Partnership, L.P., OAIC California Partnership II,
                           L.P., Salomon Brothers Realty Corp. and LaSalle
                           National Bank (11)
                  10.4     Compensation and Indemnification Agreement, dated as
                           of May 6, 1999, between OAC and the independent
                           committee of the Board of Directors (12)
                  10.5     Second Amendment to Guarantee of Payment, dated as of
                           July 9, 1999, made by and between Salomon Brothers
                           Realty Corp. and Ocwen Partnership, L.P. (12)

                  10.6     Indemnity agreement, dated August 24, 1999, among
                           OCN, and OAC's directors (13)
                  10.7     Amended Ocwen Financial Corporation 1991
                           Non-Qualified Stock Option Plan, dated October 26,
                           1999 (13)
                  10.8     First Amendment to Agreement, dated March 30, 2000
                           between HCT Investments, Inc. and OAIC Partnership I,
                           L.P. (13)
                  10.9     Form of Separation Agreement and Full Release, dated
                           as of February 28, 2001, by and among Christine A.
                           Reich, Ocwen Federal Bank FSB and Ocwen Financial
                           Corporation (14)
                  10.10    Form of Employment Agreement, dated as of April 1,
                           2001, by and between Ocwen Financial Corporation and
                           Arthur D. Ringwald (filed herewith)
                  10.11    Form of Employment Agreement, dated August 1, 2001,
                           by and between Ocwen Technology Xchange and Jack
                           Timpe (filed herewith)
                  11.1     Computation of earnings per share (15)
                  12.1     Ratio of earnings to fixed charges (filed herewith)
                  13.1     Excerpts from the Annual Report to Shareholders for
                           the year ended December 31, 2001 (filed herewith)
                  21.0     Subsidiaries (filed herewith)
                  23.0     Consent of PricewaterhouseCoopers LLP (filed
                           herewith)
                  99.1     Risk factors (filed herewith)

                  (1)      Incorporated by reference from a similarly described
                           exhibit included with the Registrant's Current Report
                           on Form 8-K filed with the Commission on July 26,
                           1999.

                  (2)      Incorporated by reference from the similarly
                           described exhibit filed in connection with the
                           Registrant's Registration Statement on Form S-1 (File
                           No. 333-5153) as amended, declared effective by the
                           commission on September 25, 1996.

                  (3)      Incorporated by reference from the similarly
                           described exhibit included with the Registrant's
                           Annual Report on Form 10-K for the year ended
                           December 31, 1998.

                                       25

<PAGE>

                  (4)      Incorporated by reference from the similarly
                           described exhibit filed in connection with our
                           Registration Statement on Form S-1 (File No.
                           333-28889), as amended, declared effective by the
                           Commission on August 6, 1997.

                  (5)      Incorporated by reference from the similarly
                           described exhibit filed in connection with Amendment
                           No. 2 to Offering Circular on Form OC (on Form S-1)
                           filed on June 7, 1995.

                  (6)      Incorporated by reference from OAC's Current Report
                           on Form 8-K filed with the Commission on July 11,
                           1998.

                  (7)      Incorporated by reference from OAC's Registration
                           Statement on Form S-4 (File No. 333-64047), as
                           amended, as declared effective by the Commission on
                           February 12, 1999.

                  (8)      Pursuant to Item 601 of Regulation S-K, Instruction
                           (4)(iii), the Registrant agrees to furnish a copy to
                           the Commission upon request.

                  (9)      Incorporated by reference from the similarly
                           described exhibit filed in connection with the
                           Registrant's Registration Statement on Form S-8 (
                           File No. 333-44999), effective when filed with the
                           Commission on January 28, 1998.

                  (10)     Incorporated by reference from the similarly
                           described exhibit to our definitive Proxy Statement
                           with respect to our 1998 Annual Meeting of
                           Shareholders as filed with the Commission on March
                           31, 1998.

                  (11)     Incorporated by reference from OAC's Quarterly Report
                           on Form 10-Q for the quarterly period ended June 30,
                           1998.

                  (12)     Incorporated by reference from OAC's Quarterly Report
                           on Form 10-Q for the quarterly period ended September
                           30, 1999.

                  (13)     Incorporated by reference from the similarly
                           described exhibit included with the Registrant's
                           Quarterly Report on Form 10-Q for the quarterly
                           period ended March 31, 2000.

                  (14)     Incorporated by reference from the similarly
                           described exhibit included with the Registrant's
                           Annual Report on Form 10-K for the year ended
                           December 31, 2000.

                  (15)     Incorporated by reference from "Note 20: Basic and
                           Diluted Earnings per Share" on page 99 of our Annual
                           Report to Shareholders.

         (b)      Reports on Form 8-K Filed During the Quarter Ended December
                  31, 2001

                  (1)      A Form 8-K was filed by OCN on November 8, 2001 which
                           contained a news release announcing our 2001 third
                           quarter results and certain other information.

                                       26

<PAGE>


 
                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on our behalf by the undersigned, thereunto duly authorized.

                                       OCWEN FINANCIAL CORPORATION


                                       By: /s/ WILLIAM C. ERBEY
                                           ----------------------------------
                                           William C. Erbey
                                           Chairman of the Board and
                                           Chief Executive Officer
                                           (duly authorized representative)

Date: March 29, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:

/s/ WILLIAM C. ERBEY                                       Date:  March 29, 2002
---------------------------------------------
William C. Erbey, Chairman of the
Board and Chief Executive Officer
(principal executive officer)


/s/ BARRY N. WISH                                          Date:  March 29, 2002
---------------------------------------------
Barry N. Wish, Director


/s/ W. C. MARTIN                                           Date:  March 29, 2002
---------------------------------------------
W.C. Martin, Director


/s/ HON. THOMAS F. LEWIS                                   Date:  March 29, 2002
---------------------------------------------
Hon. Thomas F. Lewis, Director


/s/ Mark S. Zeidman                                        Date:  March 29, 2002
---------------------------------------------
Mark S. Zeidman, Senior Vice President and
Chief Financial Officer
(principal financial officer)


/s/ ROBERT J. LEIST, JR.                                   Date:  March 29, 2002
---------------------------------------------
Robert J. Leist, Jr., Vice President and
Chief Accounting Officer
(principal accounting officer)

                                       27





                                                                   EXHIBIT 10.10

                              EMPLOYMENT AGREEMENT

               EMPLOYMENT AGREEMENT, dated as of April 1, 2001, by and between
Ocwen Financial Corporation, a Florida corporation, with its principal office at
1675 Palm Beach Lakes Blvd. West Palm Beach, Florida 33401 (the "Company"), and
Arthur D. Ringwald, residing at 151 Camino Don Miguel, Orinda, California 94563
("Executive").

                                   WITNESSETH:

               WHEREAS, the Company desires to employ Executive as Chief
Executive Officer of Ocwen Technology Xchange ("OTX");

               WHEREAS, the Company and Executive desire to enter into this
agreement (the "Agreement") as to the terms of his employment by the Company;

               NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
parties agree as follows:

               1.     Term of Employment. Except for earlier termination as
provided in Section 8 hereof, Executive's employment under this Agreement shall
be for a five (5) year term (the "Initial Employment Term") commencing on April
1, 2001 (the "Commencement Date") and ending on March 31, 2006. Subject to
Section 8 hereof, the Initial Employment Term shall be automatically extended
for additional terms of successive one (1) year periods (the "Additional
Employment Term") unless
 the Company or Executive gives written notice to the
other at least six (6) months prior to the expiration of the then Initial
Employment Term or Additional Employment Term of the termination of Executive's
employment hereunder at the end of such Initial Employment Term or Additional
Employment Term. The Initial Employment Term and the Additional Employment Term
shall be referred to herein as the "Employment Term."

               2.     Position and Duties. (a) Commencing April 1, 2001 and
throughout the Employment Term, Executive shall serve as the Chief Executive
Officer of OTX and all subsidiaries of OTX. In addition, OTX will elect
Executive during the Employment Term as a member of the Board of Directors of
OTX.

               (b)    Executive shall report directly to the Chairman of the
Board of Directors of the Company (the "Board") and shall have such duties and
authority consistent with his position as Chief Executive Officer and a Director
of OTX as shall be assigned to him from time to time by the Chairman of the
Board. Such duties shall include using diligent efforts to: (i) formulate and
achieve long-term goals and objectives; (ii) prepare, present and achieve the
OTX forecast and budget; (iii) lead and manage all personnel and direct all
operating activities and operations; (iv) establish, implement and upgrade major
strategic relationships, alliances, partnerships, and acquisitions; (v)
establish and formulate the overall vision, mission, product planning and
direction for OTX, jointly with the Chairman of the Board; and (vi) hire and
terminate all employees of OTX. Executive agrees that at all times he will be
bound by and comply with the provisions of the Company's Employee Guidebook. In
the event of a conflict between the terms of this Agreement and the terms of the
Employee Guidebook, this Agreement shall control.

               (c)    During the Employment Term, Executive shall devote his
business time and efforts to the performance of his duties hereunder; provided,
however, that Executive shall be allowed, to the extent that such activities do
not interfere with the performance of his duties and responsibilities hereunder,
to manage his personal financial and legal affairs and to serve on corporate,
civic, charitable and industry boards or committees. Notwithstanding the
foregoing, during the Employment Term, Executive shall only serve on boards of
directors of entities as may be approved by the Board of Directors of OTX from
time to time.

               3.     Base Salary. During the Employment Term, in exchange for
Executive's ongoing performance of his duties and obligations under this
Agreement, the Company shall pay Executive a base salary at the annual rate of
not less than $300,000. Base salary shall be payable in accordance with the
usual payroll practices of the Company. Beginning on the third anniversary of
this Agreement, the base salary shall be adjusted by multiplying the base salary
by a fraction, the numerator of which shall be the Consumer Price Index-All
Urban Consumers excluding food and energy issued by the U.S. Department of
Labor, Bureau of Labor Statistics as published on a monthly basis in the Wall
Street Journal (Eastern Edition) (the "Index") for January of the then-current
year, and the denominator of which shall be the Index for January of the prior
year. Notwithstanding the foregoing, in no event shall the base salary be

                                       1

<PAGE>

reduced below $300,000 during the term of this Agreement. The base salary as
determined as aforesaid from time to time shall constitute "Base Salary" for
purposes of this Agreement.

               4.     Incentive Compensation. (a) Bonus. The Board shall
establish a performance-based annual bonus plan with targets and objectives
approved by the Board in consultation with Executive (the "Performance Bonus
Plan"), with a target bonus of $450,000 and a maximum bonus of $675,000. In any
event, the compensation to Executive under the Performance Bonus Plan shall not
be less than $150,000 in cash annually (the "Guaranteed Bonus"), payable in
equal monthly installments. Bonus payments above the Guaranteed Bonus shall be
paid in accordance with the payment structure specified in the 1998 Annual
Incentive Plan of the Company. In addition, Executive shall be eligible to
participate in any other annual bonus plan the Company may implement at any time
during Executive's Employment Term for senior executives at a level commensurate
with his position.

               (b)    Equity.
                      ------

               (i)    Initial Public Offering. Executive and OTX will enter into
               an agreement by which OTX grants to Executive options (the
               "Options") to purchase shares of the commonstock of OTX, on and
               after the date of the Initial Public Offering ("IPO") of OTX, in
               an amount equal to 3 % of the common stock shares of OTX
               outstanding on the date of the IPO. The purchase price for each
               share subject to the Option will be equal to 50% ofthe initial
               per share offering price under the IPO. The term of the Option
               will begin on the date of the IPO and will continue for a period
               of ten (10) years unless earlier- terminated under this Agreement
               or as provided in the standard Option agreement to purchase
               shares in OTX. Executive must be employed by the Company on such
               date in orderfor the relevant portion of the Option to vest.
               One-half of the Options will be exercisable in whole or in part
               on the date of the IPO, and one quarter of the Options will be
               exercisable on each of the first and second anniversaries of the
               relevant IPO. Upon termination of Executive by Company with Cause
               or termination by Executive without Good Reason, Executive will
               have sixty (60) days from the date of termination to exercise
               Options that had vested on the date of termination. On a
               termination of employment by Company without Cause or by
               Executive with Good Reason or as a result of the expiration of
               the Employment Term, Executive will have 180 days to exercise all
               Options that had vested on the date of termination. Vesting shall
               be accelerated such that upon a termination of Executive's
               employment without Cause or a termination by Executive for Good
               Reason, or in the event of a Change in Control of OTX, all
               Options will immediately vest to the extent not then vested. The
               Options will be subject to such other standard terms and
               conditions placed on Options to purchase shares in OTX as
               determined by the Board of Directors in its sole discretion.

               (ii)   Sale of OTX. In the event that, during the period in which
               Executive is employed by Company pursuant to this Agreement and
               prior to the IPO, the Company sells all of its interest in OTX or
               all or substantially all of the assets of OTX to an unaffiliated
               third party (a "Sale"), Executive shall be entitled to receive
               compensation (the "Sale Compensation") in an amount equal to 1.5
               % of the Aggregate Consideration received by OTX or the Company
               in the Sale. For purposes of this Section 4(b), "Aggregate
               Consideration" shall mean the total, net of expenses of sale, of
               all cash and other property paid or payable, directly or
               indirectly, to OTX or the Company, and any indebtedness assumed
               or repaid by a buyer. In the event the Aggregate Compensation for
               the Sale is cash, then Executive shall receive the Sale
               Compensation in cash. In the event the Aggregate Consideration
               for the Sale is in the form of shares of stock in the acquiring
               company or other property, then Executive shall receive the Sale
               Compensation in the form of shares in the acquiring company or
               other property. In the event the Aggregate Consideration for the
               Sale is a combination of both cash and shares of stock in the
               acquiring company or other property, then Executive shall receive
               the Sale Compensation in cash and shares of stock in the
               acquiring company or other , property, in the same proportion as
               was paid to the Company for the purchase of OTX. Executive shall
               receive the Sale Compensation at the same time the Aggregate
               Consideration or portions thereof are paid to the Company. If
               Executive is entitled to receive Sale Compensation pursuant to
               this Section 4(b)(ii) and Executive's employment pursuant to this
               Agreement is terminated for any reason subsequent to a Sale,
               Executive shall continue to receive his Sale Compensation for
               portions of the Aggregate Consideration associated with such sale
               that are paid to the Company after the date of Executive's
               termination.

                                       2

<PAGE>

               (iii)  Other. If, at the time Executive's employment under this
               Agreement terminates (unless such termination is by the Company
               for Cause or by Executive during the Employment Term without Good
               Reason) there has been no IPO of the shares of OTX and the
               Company has not sold its interest in OTX such that Executive is
               entitled to receive compensation under Section 4(b)(ii),
               Executive will be entitled to receive additional compensation
               under this Section 4(b)(iii) if, and only if, the net income
               after taxes ("IAT") for OTX for the twelve month period ending
               the last day of the month immediately preceding the termination
               of Executive's employment under this Agreement (the "Base Year")
               exceeds the sum of $20,000,000 plus (A) 10 % of the amount
               contributed by the Company to OTX as capital contributions from
               January 1, 2002 until the date of expiration or termination of
               Executive's employment under this Agreement, less (B) 10 %a of
               the Aggregate Proceeds received by the Company for any sale of
               less than its entire interest in OTX and less (C) 10% of any
               amounts withdrawn from OTX by the Company in the form of a
               dividend or in any other manner (the "Threshold"). If the IAT of
               OTX in the Base Year meets or exceeds the Threshold, then
               Executive will be entitled to receive additional compensation
               equal to 1.5 % of the product of (x) the Base Year IAT multiplied
               by (y) 10. Such compensation may be paid to Executive in the form
               of cash and/or shares of stock in the Company or options for
               shares of stock of the Company, at the sole discretion of the
               Company. Such shares shall be immediately saleable in the public
               market and shall have a fair market value equal to the amount of
               such compensation, or, in the case of options, the options shall
               be immediately exercisable into shares of stock of the Company,
               such shares of stock shall be immediately saleable in the public
               market and the net proceeds to Executive of payment of any
               exercise price and sale of such shares shall be equal to the
               amount of such compensation (assuming the immediate exercise of
               such options and the immediate sale of such shares upon the
               receipt of the options by Executive).

               (iv)   The provisions of Sections 4(b)(i), 4(b)(ii) and 4(b)(iii)
               are mutually exclusive. The payment to Executive of additional
               compensation under one of Sections 4(b)(i), 4(b)(ii)or 4(b)(iii)
               shall terminate the right of Executive to receive additional
               compensation pursuant to this Section 4(b).

               5.     Employee Benefits and Vacation. During the Employment
Term, Executive shall be entitled to participate in all benefit plans and
arrangements and fringe benefits and perquisite programs generally provided to
comparable senior executives of the Company, including, without limitation,
participation in a 401(k) plan, participation in a deferred compensation option
plan, life, health, and disability insurance, and retiree health coverage.
Executive shall be entitled to vacation, sick days and personal days in
accordance with Company policy as such may be in effect from time to time;
provided that in no event shall Executive be entitled to less than four (4)
weeks paid vacation per calendar year, regardless of Company policy concerning
vacation.

               6.     Business Expenses. The Company shall reimburse Executive
for the travel, entertainment and other business expenses incurred by Executive
in the performance of his duties hereunder, in accordance with the Company's
policies as in effect from time to time. Such reimbursement by the Company shall
include, without limiting the generality of the foregoing, the expenses for
business class or first class airfare on all business flights involving four
hours or more of air travel by Executive in a single day.

               7.     Moving Expenses. (a) The Company shall reimburse Executive
for all reasonable expenses and costs associated with relocating his family from
Orinda, California to the West Palm Beach area ("Relocation Expenses") in
accordance with the Company's Corporate Relocation Guide (the "Guide"), subject
to the adjustments in this Section 7. All Relocation Expenses shall be paid on a
fully grossed up basis such that on an after tax basis Executive shall have no
after tax cost for the relocation. In addition to the expenses described in the
Guide, "Relocation Expenses" shall include all costs of the following: (i) 2
points on a mortgage for the acquisition of a West Palm Beach area home; (ii)
all appraisal fees, credit report fees, lenders application and inspection fees,
recording fees, tax stamps, survey fees, title insurance and/or search fees,
attorney and notary fees and any other normal and customary fees associated with
the acquisition of a home in the West Palm Beach area; (iii) the packing,
partial unpacking and transportation of all household goods, automobiles, pets
and paintings and payment of appropriate insurance for same; and (iv) for a
cumulative period not to exceed 120 days, (x) the establishment and maintenance
of temporary housing for Executive and his family in the West Palm Beach area
and/or (y) in the event that Executive closes on a home in the West Palm Beach
area before closing on the sale of his home in Orinda, the lesser of all costs
associated with owning one of the two residences. In addition to Relocation
Expenses, in the event that Executive closes on a home in the West Palm Beach
area before closing on the sale of his home in Orinda, the Company shall provide
an interest-free loan for a maximum of 120 days equal to the contract sale price

                                       3

<PAGE>

for the home in Orinda less the outstanding mortgage less $200,000 if the Orinda
home is subject to a sale contract, or, if there is no sale contract, the sum of
$1,800,000 shall be used as the contract sale price in the foregoing clause.

               (b)    In the event that Executive terminates his employment
hereunder without Good Reason (as hereinafter defined) on or prior to the second
anniversary of the date hereof, Executive shall repay a portion of the expenses
incurred by the Company under Section 7(a) in an amount equal to the total
expenses incurred by the Company under Section 7(a) multiplied by a fraction,
the numerator of which is twenty-four (24) less the number of months Executive
has been employed by the Company, and the denominator of which is twenty-four
(24).

               8.     Termination. (a) The employment of Executive under this
Agreement shall terminate upon the earliest to occur of any of the following
events:

                      (i)    the death of Executive;

                      (ii)   the termination of Executive's employment by the
                      Company due to Executive's Disability pursuant to Section
                      8(b) hereof;

                      (iii)  the termination of Executive's employment by
                      Executive for Good Reason pursuant to Section 8(c) hereof;

                      (iv)   the termination of Executive's employment by the
                      Company without Cause;

                      (v)    the termination of Executive's employment by the
                      Company for Cause pursuant to Section 8(e), the voluntary
                      resignation of Executive without Good Reason or the
                      retirement of Executive; or

                      (vi)   the expiration of the Employment Term.

               (b)    Disability. If by reason of the same or related physical
or mental illness or incapacity, Executive is unable to carry out his material
duties pursuant to this Agreement for more than six (6) consecutive months, the
Company may terminate Executive's employment for Disability. Such termination
shall be upon thirty (30) days written notice by a Notice of Disability
Termination, at any time thereafter while Executive consecutively continues to
be unable to carry out his duties as a result of the same or related physical or
mental illness or incapacity. A termination for Disability hereunder shall not
be effective if Executive returns to the full time performance of his material
duties within such thirty (30) day period.

               (c)    Termination for Good Reason. A termination for Good Reason
means a termination by Executive by written notice given within ninety (90) days
after the occurrence of the Good Reason event, unless such circumstances are
fully corrected prior to the date of termination specified in the Notice of
Termination for Good Reason (as defined in Section 8(d) hereof). For purposes of
this Agreement, "Good Reason" shall mean the occurrence or failure to cause the
occurrence, as the case may be, without Executive's express written consent, of
any of the following circumstances: (i) any material diminution of Executive's
positions, duties or responsibilities hereunder (except in each case in
connection with the termination of Executive's employment for Cause or
Disability or as a result of Executive's death, or temporarily as a result of
Executive's illness or other absence), or, the assignment to Executive of duties
or responsibilities that are inconsistent with Executive's position; (ii)
removal of, or the nonreelection of, Executive from officer positions with OTX
or its subsidiaries as specified herein without election to a higher position or
removal of Executive from any of his then officer positions; (iii) a relocation
of the OTX executive office in West Palm Beach, Florida to a location more than
fifty (50) miles from its current location prior to April 1, 2003 or to any
location outside of the United States; (iv) a failure by the Company (A) to
continue any bonus plan, program or arrangement in which Executive is entitled
to participate (the "Bonus Plans"), provided that any such Bonus Plans may be
modified at the Company's discretion from time to time but shall be deemed
terminated if plans providing Executive with substantially similar benefits are
not substituted therefor ("Substitute Plans") and any such Bonus Plan shall
include the Guaranteed Bonus described in Section 4(a), or (B) to continue
Executive as a participant in the Bonus Plans and Substitute Plans on at least
the same basis as to potential amount of the bonus as Executive participated in
prior to any change in such plans or awards, in accordance with the Bonus Plans
and the Substitute Plans; (v) any material breach by the Company of any
provision of this Agreement, including, without limitation, Section 12 hereof;
(vi) Executive's removal from or failure to be elected or reelected to the Board
of Directors of OTX; or (vii) failure of any successor to the Company (whether
direct or indirect and whether by merger, acquisition, consolidation or
otherwise) to assume in a writing delivered to Executive upon the assignee
becoming such, the obligations of the Company hereunder.

                                       4

<PAGE>

               (d)    Notice of Termination for Good Reason. A Notice of
Termination for Good Reason shall mean a notice that shall indicate the specific
termination provision in Section 8(c) relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination for Good Reason. The Notice of Termination for Good Reason shall
provide for a date of termination not less than ten (10) nor more than sixty
(60) days after the date such Notice of Termination for Good Reason is given,
provided that in the case of the events set forth in Sections 8(c)(i) or (ii)
the date may be five (5) days after the giving of such notice.

               (e)    Cause. Subject to the notification provisions of Section
8(f) below, Executive's employment hereunder may be terminated by the Company
for Cause. For purposes of this Agreement, the term "Cause" shall be limited to
(i) willful misconduct by Executive with regard to the Company or OTX which has
a material adverse effect on the Company or OTX and which is not cured within
thirty (30) days of receipt of a written notice from the Board or the Chairman
of the Board which specifically identifies such purported misconduct by
Executive; (ii) the willful refusal of Executive to attempt to follow the proper
direction of the Board or the Chairman of the Board which is not cured within
thirty (30) days of receipt of a written notice from the Board or the Chairman
of the Board which specifically identifies such purported failure by Executive,
provided that the foregoing refusal by Executive shall not be "Cause" if such
direction is illegal, unethical or immoral and Executive promptly so notifies
the Board or the Chairman of the Board (whichever is applicable); (iii) material
and continuing willful failure by Executive to perform the duties required of
him hereunder (other than any such failure resulting from incapacity due to
physical or mental illness) which is not cured within thirty (30) days of
receipt of a written demand for substantial performance from the Board or the
Chairman of the Board which specifically identifies the manner in which it is
believed that Executive has substantially and continually refused to attempt to
perform his duties hereunder; (iv) Executive being convicted of a felony; (v) a
material breach of this Agreement, which breach is not cured within thirty (30)
days of receipt of a written notice of such breach from the Board or the
Chairman of the Board which specifically identifies the manner in which it is
believed that Executive has materially breached this Agreement, or (vi)
drunkenness or the possession of narcotics on Company's property, willful and
material damage to Company property or repeated and material violations of
Company's policies, provided that such violations have not been cured within
thirty (30) days of receipt of written notice which specifically identifies the
policies at issue. For purposes of this paragraph, no act, or failure to act, on
Executive's part shall be considered "willful" unless done or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interests of the Company or OTX.

               (f)    Notice of Termination for Cause. A Notice of Termination
for Cause shall mean a notice that shall indicate the specific termination
provision in Section 8(e) relied upon and shall set forth in reasonable detail
the facts and circumstances which provide for a basis for termination for Cause.
Further, a Notification for Cause shall be required to include a copy of a
resolution duly adopted by the Board at a meeting of the Board which was called
for the purpose of considering such termination and which Executive and his
representative had the right to attend and address the Board, finding that, in
the good faith judgment of the Board, Executive engaged in conduct set forth in
the definition of Cause herein and specifying the particulars thereof in
reasonable detail. The date of termination for a termination for Cause shall be
the date indicated in the Notice of Termination. Any purported termination for
Cause which is held not to have been based on the grounds set forth in this
Agreement or not to have followed the procedures set forth in this Agreement
shall be deemed a termination by the Company without Cause.

               9.     Consequences of Termination of Employment.
                      -----------------------------------------

               (a)    Death. If, Executive's employment is terminated by reason
of Executive's death, the employment period under this Agreement shall terminate
without further obligations to Executive's legal representatives under this
Agreement except for: (i) any compensation earned but not yet paid, including
and without limitation, any bonus if declared or earned but not yet paid for a
completed fiscal year, any amount of Base Salary earned but unpaid, any accrued
vacation pay payable pursuant to the Company's policies, and any unreimbursed
business expenses payable pursuant to Section 6 (collectively "Accrued
Amounts"), which amounts shall be promptly paid in a lump sum to Executive's
estate; (ii) any other amounts or benefits owing to Executive under the then
applicable employee benefit plans, long term incentive plans or equity plans and
programs of the Company in accordance with the terms of such plans and programs;
and (iii) continuation of Executive's health benefits for Executive's spouse and
dependent children for twelve (12) months at the same level and cost as if
Executive was an employee of the Company.

               (b)    Disability. If Executive's employment is terminated by
reason of Executive's Disability, Executive shall be entitled to receive the
payments and benefits to which his representatives would be entitled in the
event of a termination of employment by reason of his death plus, to the extent
not duplicative of the foregoing, Executive shall be entitled to continuation of
the benefits (including without limitation to health, life, disability and

                                       5

<PAGE>

pension) for twelve (12) months as if Executive had been an employee of the
Company.

               (c)    Termination by Executive for Good Reason or Termination by
the Company without Cause. If (i) Executive terminates his employment for Good
Reason or (ii) Executive's employment with the Company is terminated by the
Company without Cause, Executive shall be entitled, provided that Executive
delivers to the Company a full release, on the Company's standard separation and
release form for executives, of the Company and its officers and directors of
all obligations under this Agreement, to receive a lump sum cash payment of
$750,000 and any amounts payable to Executive as of the date of termination
under Section 4(b); provided that, if such termination is after a Change in
Control of the Company, Executive shall receive (A) payment in a lump sum of the
greater of (x) $750,000 or (y) Base Salary and Guaranteed Bonus until the end of
the Employment Term; (B) any Accrued Amounts at the date of termination; (C) any
amounts payable to Executive as of the date of termination under Section 4(b);
(D) any other amounts or benefits payable to Executive under the then applicable
employee benefit, bonus, long term incentive or equity plans and programs of the
Company, which shall be paid or treated as if Executive were an employee of the
Company reaching the maximum performance targets until the end of the Employment
Term with regard to the such employee benefit, bonus, long term incentive or
equity plans and programs of the Company; and (E) continuation of the benefits
(including without limitation to health, life, disability and pension) for a
period of twelve (12) months from the Termination Date as if Executive were an
employee of the Company.

               (d)    Termination with Cause or Voluntary Resignation without
Good Reason or Retirement. If Executive's employment hereunder is terminated (i)
by the Company for Cause or (ii) by Executive without Good Reason, Executive
shall be entitled to receive only his Base Salary through the date of
termination, any unreimbursed business expenses payable pursuant to Section 6,
any pro-rated bonus amounts that were paid prior to the termination and any
amounts earned by Executive pursuant to Section 4(b)(ii) hereof but unpaid as of
the date of termination. Executive's rights under all benefits plans and equity
grants shall be determined in accordance with the Company's plans, programs and
grants.

               (e)    Expiration of Employment Term. If Executive's employment
hereunder comes to an end because of the expiration of the Employment Term,
Executive shall be entitled to receive (A) any Accrued Amounts at the date of
termination; (B) any amounts payable to Executive pursuant to Section 4(b)(iii)
hereof; and (C) any other amounts or benefits payable to Executive under the
then applicable employee benefit, bonus, long term incentive or equity plans and
programs of the Company, which shall be paid or treated in accordance with the
Company's plans, programs and grants.

               10.    No Mitigation; No Set-Off. In the event of any termination
of employment hereunder, Executive shall be under no obligation to seek other
employment and there shall be no offset against any amounts due Executive under
this Agreement on account of any remuneration attributable to any subsequent
employment that Executive may obtain; provided that Executive delivers to the
Company a full release, on the Company's standard separation and release form
for executives, of the Company and its officers and directors of all obligations
under this Agreement. The amounts payable hereunder shall not be subject to
setoff, counterclaim, recoupment, defense or other right which the Company may
have against Executive or others, except upon obtaining by the Company of a
final unappealable judgment against Executive.

               11.    Change in Control. (a) For purposes of this Agreement, the
term "Change in Control" shall mean, with respect to the Company or OTX, the
occurrence of any one of the following events:

               (i)    any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company or OTX, as applicable, representing
fifty percent (50%) or more of the combined voting power of such entity's then
outstanding voting securities;

               (ii)   there is a consummated merger or consolidation of the
Company or OTX, as applicable, with any other corporation, other than (A) a
merger or consolidation which would result in the voting securities of such
entity outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving or parent entity) more than fifty percent (50%) of the combined voting
power of the voting securities of such entity or such surviving or parent equity
outstanding immediately after such merger or consolidation or (B) a merger or
consolidation effected to implement a recapitalization of such entity (or
similar transaction) in which no Person, directly or indirectly, acquired
twenty-five percent (25%) or more of the combined voting power of such entity's
then outstanding securities; or

               (iii)  the stockholders of the Company or OTX, as applicable,
approve a plan of complete liquidation of such entity or there is consummated an
agreement for the sale or disposition by such entity of all or substantially all
of such entity's assets (or any transaction having a similar effect), other than
a sale or disposition by such entity of all or substantially all of such

                                       6

<PAGE>

entity's assets to an entity, at least fifty percent (50%) of the combined
voting power of the voting securities of which are owned by stockholders of the
Company or OTX, as applicable, in substantially the same proportions as their
ownership of the Company or OTX, as applicable, immediately prior to such sale.

               (b)    For purposes of this Section 11, the following terms shall
have the following meanings:

                      (i) "Affiliate" shall mean an affiliate of the Company, as
                      defined in Rule 12b-2 promulgated under Section 12 of the
                      Securities Exchange Act of 1934, as amended from time to
                      time (the "Exchange Act");

                      (ii) "Beneficial Owner" shall have the meaning set forth
                      in Rule 13d-3 under the Exchange Act;

                      (iii) "Person" shall have the meaning set forth in Section
                      3(a)(9) of the Exchange Act, as modified and used in
                      Sections 13(d) and 14(d) thereof, except that such term
                      shall not include (1) the Company, (2) a trustee or other
                      fiduciary holding securities under an employee benefit
                      plan of the Company or OTX, (3) an underwriter temporarily
                      holding securities pursuant to an offering of such
                      securities or (4) a corporation owned, directly or
                      indirectly, by the stockholders of the Company or OTX in
                      substantially the same proportions as their ownership of
                      shares of Common Stock of the Company or OTX.

               12.    Indemnification. The Company shall indemnify and hold
harmless Executive to the fullest extent permitted by Florida law for any action
or inaction of Executive while serving as an officer and director of the Company
or, at the Company's request, as an officer or director of any other entity or
as a fiduciary of any benefit plan. The Company shall cover Executive under
directors and officers liability insurance both during and, while potential
liability exists, after the Employment Term in the same amount and to the same
extent as the Company covers its other officers and directors.

               13.    Legal Fees. 
                      ----------

               (a)    The Company shall pay one-half of Executive's reasonable
legal and financial counseling fees and costs associated with this Agreement in
an amount not to exceed $6,000.

               (b)    All disputes and controversies arising under or in
connection with this Agreement shall be settled by arbitration conducted before
a single arbitrator sitting in West Palm Beach, Florida, or such other location
agreed by the parties hereto, in accordance with the rules for expedited
resolution of employment disputes of the American Arbitration Association then
in effect. The determination of the arbitrator shall be final and binding on the
parties. Judgment may be entered on the award of the arbitrator in any court
having proper jurisdiction. The arbitrator in such proceeding may award
reasonable attorney's fees and out-of-pocket costs to the prevailing party.

               14.    Miscellaneous.
                      -------------

               (a)    Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida without reference
to principles of conflict of laws.

               (b)    Entire Agreement/Amendments. This Agreement and the
instruments contemplated herein, contain the entire understanding of the parties
with respect to the employment of Executive by the Company from and after the
Commencement Date and supersedes any prior agreements between the Company and
Executive. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties with respect to the subject matter
herein other than those expressly set forth herein and therein. This Agreement
may not be altered, modified, or amended except by written instrument signed by
the parties hereto.

               (c)    No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
Any such waiver must be in writing and signed by Executive or an authorized
officer of the Company, as the case may be.

               (d)    Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable by the Company only to an acquirer
of all or substantially all of the assets of the Company, provided such acquirer

                                       7

<PAGE>

promptly assumes all of the obligations hereunder of the Company in a writing
delivered to Executive and otherwise complies with the provisions hereof with
regard to such assumption.

               (e)    Successors; Binding Agreement; Third Party Beneficiaries.
This Agreement shall inure to the benefit of and be binding upon the personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees legatees and permitted assignees of the parties hereto.

               (f)    [intentionally omitted]

               (g)    Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local taxes as
may be required to be withheld pursuant to any applicable law or regulation.

               (h)    Survivorship. The respective rights and obligations of the
parties hereunder, including without limitation Section 12 hereof, shall survive
any termination of Executive's employment to the extent necessary to the agreed
preservation of such rights and obligations.

               (i)    Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

               (j)    Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.

               15.    Company Information. All information, materials or
         documents in any way regarding or relating to Company or the Company's
         Affiliates or their respective businesses including, without
         limitation, all Developments (as defined below), all information
         requested by or provided to Executive and all information learned or
         obtained by Executive (i) will be and at all times remain the sole and
         exclusive property of Company, (ii) will not be used by Executive for
         any reason or purpose except in direct connection with Executive's
         performance of his duties and obligations under this Agreement and
         (iii) will not, without the express prior written consent and approval
         of Company, be disclosed in whole or in part to any person or entity
         except in direct connection with Executive's performance of his duties
         and obligations under this Agreement. Executive acknowledges that money
         damages would be an inadequate remedy for the injuries and damage that
         would be suffered by Company in the case of Executive's breach of this
         Section. The breach or threatened breach by Executive of the provisions
         of this Section shall entitle Company, besides any other remedies it
         may have at law or in equity, to injunctive relief to enforce the
         provisions of this Section. Executive's duties and obligations under
         this Section will survive the termination or expiration of this
         Agreement. In recognition of the foregoing obligations, Executive
         agrees that upon his separation from the Company, he will turn over to
         Company all records, files, drawings, documents, specifications,
         blueprints, letters, notes, reports and computer software, and all
         transcriptions thereof relating to Company or the Company's Affiliates
         which are in his possession or under his control. At the time of
         termination, Executive will have an exit interview with Company wherein
         Executive will certify that Executive has returned to Company all
         tangible Confidential Information disclosed to him, and disclose all
         Developments, as defined below, conceived or developed by him during
         the Term. Executive's liability for any breach of this Section will not
         be subject to any limitation of liability provision contained elsewhere
         in this Agreement.

Executive has carefully read and considered the provisions of this Section, and
having done so, agrees that the restrictions set forth in this section are fair
and reasonably required for the protection of the interests of the Company.

               16.    Rights in Data. Executive hereby expressly assigns to
Company all of Executive's right, title and interest in and to all work product
produced by Executive during the Term including, without limitation, all
systems, reports, data, materials, ideas, concepts, methodologies, know-how,
information, knowledge, software, designs, specifications, plans, programs,
studies, techniques, procedures, methods, processes, formulae, inventions,
improvements, sketches, reports, diagrams, graphs, charts, notes, writings,
discoveries, models, flow charts and research, including without limitation all
patent, copyright, trademark, trade secret, design and other proprietary rights
that may now or in the future exist therein or be appurtenant thereto, whether
in oral, written, graphic, electronic, machine readable or any other form and in
whatsoever medium now known or hereafter developed, and all copies of the
foregoing and all information, data and knowledge incorporating, based upon or
derived from the foregoing (collectively, "Developments"). All Developments will
be and at all times remain the sole and exclusive property of Company. In the
event that Executive is ever deemed, by operation of law or otherwise, to retain
any rights in or to any Developments, Executive will assign all of Executive's
right, title and interest in and to such Developments to Company. Executive will
execute any documents of assignment or registration of proprietary or other

                                       8

<PAGE>

rights requested by Company and will perform any and all further acts deemed
necessary or desirable by Company in order to confirm, exploit, or enforce the
rights herein granted and assigned by Executive to Company. Executive's duties
and obligations under this Section will survive the termination or expiration of
this Agreement. Executive's liability for any breach of this Section will not be
subject to any limitation of liability provision contained elsewhere in this
Agreement. Executive has signed an Intellectual Property Agreement in favor of
Ocwen Financial Corporation and its affiliates in consideration for Executive's
employment by Company.

       Section 17.    Covenant Not to Compete.
       -----------    ------------------------
               (a)    Executive acknowledges that, in consideration of his
                      employment, and to induce Company to allow Executive
                      access to confidential information and Company's and OTX's
                      clients, customers and other with whom Company and OTX
                      have formed valuable business arrangements, he will not,
                      during such time as Executive is employed by Company and
                      for a period of one (1) year after expiration or
                      termination of Executive's employment, or, if later,
                      termination or expiration of a subsequent consulting
                      arrangement, regardless of whether Executive caused said
                      termination:

                      (i)    In the event of voluntary termination by Executive,
                             directly or indirectly, perform any services
                             similar to his duties and obligations under this
                             Agreement, own an interest in, operate, join,
                             control, or participate in, or be connected as an
                             officer, employee, agent, independent contractor,
                             partner, shareholder or principal of any
                             corporation, partnership, proprietorship, firm,
                             association, person, or other entity producing,
                             designing, providing, soliciting orders for,
                             selling, distributing, or marketing products,
                             goods, equipment, or services that compete directly
                             or indirectly with -OTX's products and services or
                             OTX's business, without first obtaining the written
                             approval of OTX;

                      (ii)   Take any action that would interfere with, diminish
                             or impair the valuable relationships that OTX
                             and/or OTX's Affiliates have with its or their
                             customers and clients and others with which OTX
                             and/or OTX's Affiliates have business relationships
                             or to which its services are rendered;

                      (iii)  Directly or indirectly, for his own benefit or for
                             the benefit of any other person (whether as an
                             officer, director, owner, partner, investor,
                             consultant, employee, agent, manager, or other
                             participant in any business or venture) divert,
                             solicit or attempt to divert or solicit any of
                             OTX's customers or patrons with respect to products
                             or services offered by OTX;

                      (iv)   Recruit or otherwise solicit, induce or influence
                             any person (natural or otherwise) who is or becomes
                             an employee or consultant of the Company or the
                             Company's Affiliates to terminate his or her
                             employment with, or otherwise cease his
                             relationship with, Company or the Company's
                             Affiliates or hire any such employee or consultant
                             who has left the employ of Company or the Company's
                             Affiliates within two (2) years after the
                             termination or expiration of such employee's or
                             consultant's employment with Company or the
                             Company's Affiliates, as the case may be; or

                      (v)    Assist with others in engaging in any of the
                             foregoing.

               (b)    It is acknowledged and agreed by Executive that Company,
                      OTX and their respective affiliates have a legitimate
                      business interest justifying the restrictions contained
                      herein and that such restrictions are reasonably necessary
                      to protect such legitimate business interests, which
                      interests, including, without limitation, trade secrets;
                      other valuable confidential business information,
                      including but not limited to the information set forth in
                      Sections 15 and 16, that may not qualify as trade secrets,
                      but as to which Company, OTX and their Affiliates have
                      expended time and money in developing and as to which they
                      hold confidential and proprietary; substantial business
                      relationships with existing and prospective customers,

                                        9

<PAGE>

                      clients and others with whom Company, OTX and their
                      Affiliates have formed valuable relationships; customer
                      and client goodwill associated with the ongoing business
                      of Company, OTX and their Affiliates and evidenced by the
                      various trademarks, trade names, service marks and trade
                      dress used by Company, OTX and their Affiliates in
                      connection with their businesses, and an expectation of
                      continuing patronage from their existing customers,
                      clients and others with whom Company, OTX and their
                      Affiliates have formed valuable business relationships.

               (c)    Executive acknowledges and agrees that, in the event of a
                      breach or threatened breach of any of the terms of this
                      Section, Company and/or the Company's Affiliates, as the
                      case may be, would suffer irreparable harm for which
                      monetary damages would be inadequate. Accordingly, in
                      addition to any other remedies available, at law or in
                      equity, in the event of a breach or threatened breach by
                      the Executive of the provisions of this Section, Company
                      and/or the Company's Affiliates shall be entitled to seek
                      an injunction restraining Executive from such breach or to
                      seek specific performance of the terms hereof. The 1-year
                      period mentioned above shall be tolled for any period(s)
                      of violation or period(s) of time required for litigation
                      to enforce the covenants herein. In addition, any breach
                      or threatened breach of any of the terms of this Section
                      which is not curedwithin thirty (30) days of receipt of a
                      written notice from the Board or the Chairman of the Board
                      which specifically identifies such purported breach or
                      threatened breach by Executive shall constitute cause for
                      the termination of Executive's employment hereunder
                      notwithstanding any other term, provision or definition
                      contained in this Agreement.

               (d)    The provisions of this Section shall survive any
                      termination or expiration of this Agreement.

               Executive has carefully read and considered the provisions of
this Section, and having done so, agrees that the restrictions set forth in this
Section (including, but not limited to, the time period of the restrictions) are
fair and reasonable and are reasonably required for the protection of the
interests of Company.

Section 18.    Representations. Executive represents and warrants to Company
that (i) the execution, delivery and performance of this Agreement by Executive
does not and will not conflict with, breach, violate or cause a default under
any contract, agreement, instrument, order, judgement or decree to which
Executive is a party or by which he is bound, (ii) Executive is not a party to
or bound by any employment agreement, noncompetition agreement or
confidentiality agreement with any other person or entity that has not been
previously disclosed in writing to Company and (iii) upon the execution and
delivery of this Agreement by Company, this Agreement shall be the valid and
binding obligation of Executive, enforceable in accordance with its terms.

Section 19.    Notices. No notice or other communication will be deemed given
unless sent in any of the manners, and to the persons, specified in this
Section. All notices and other communications hereunder will be in writing and
will be deemed given (a) upon receipt if delivered personally (unless subject to
clause (b)) or if mailed by registered or certified mail, (b) at noon on the
date after dispatch if sent by overnight courier or (c) upon the completion of
transmission (which is confirmed by telephone or by a statement generated by the
transmitting machine) if transmitted by telecopy or other means of facsimile
which provides immediate or near immediate transmission to compatible equipment
in the possession of the recipient, in any case to the parties at the following
addresses or telecopy numbers (or at such other address or telecopy number for a
party as will be specified by like notice):

                                       10

<PAGE>

         If to Company:

                                      Ocwen Financial Corporation
                                      1675 Palm Beach Lakes Boulevard Suite 1000
                                      West Palm Beach, FL 33401
                                      Attention: Secretary

                                      TelecopyNumber: (561)682-8177
                                      Confirmation Number: (561) 682-8000

         If to Executive:

                                      25 Bridgetown Road
                                      Hilton Head Island, SC 29928

                                      Telecopy Number: (843) 341-5980
                                      Confirmation Number: (843) 341-5982


               IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                      OCWEN FINANCIAL CORPORATION

                                      By: /s/ JOHN R. ERBEY
                                          --------------------------------------
                                          John R.Erbey
                                          Senior Managing Director


                                          /s/ ARTHUR D. RINGWALD
                                          --------------------------------------
                                          ARTHUR D. RINGWALD

                                       11



                                                                   EXHIBIT 10.11

                              EMPLOYMENT AGREEMENT

               EMPLOYMENT AGREEMENT by and between Ocwen Technology Xchange, a
Florida corporation, with its principal office at 1675 Palm Beach Lakes Blvd.,
West Palm Beach, Florida 33401 (the "Company"), and Jack Timpe, residing at 2259
Beachcomber Trail; Atlantic Beach, Florida 32233 ("Executive").

                                   WITNESSETH:

               WHEREAS, Executive is to be employed by the Company;

               WHEREAS, the Company is engaged in the development and marketing
of advanced software and integrated technology solutions for the mortgage and
real estate industries; and

               WHEREAS, Executive desires to perform services for the Company
and the Company desires to engage Executive to perform services in accordance
with the terms and conditions of this Agreement.

               NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
parties agree as follows:

         Section 1.   Employment. Company hereby agrees to employ the
Executive's exclusive services subject to the terms and provisions of this
Agreement and subject to the terms and provisions of the Company's Management
Directives and Policies and Procedures set forth in Company's Employee
Guidebook, as the
 same may be modified or amended by Company from time to time
in Company's sole discretion (the "Guidebook"). Executive will occupy the
position of Executive Vice President and National Sales Manager.

         Section 2.   Duties.
         ----------   -------

               (a)    Executive will have such duties as are incumbent in his
                      position and as otherwise specified from time to time by
                      Company, all subject to the direction and supervision of
                      the CEO of Company, to whom the Executive shall report,
                      and the Board of Directors of Company. Executive will
                      devote his full business time and effort to performing his
                      duties and obligations hereunder. Executive agrees that he
                      will at all times be bound by and comply with the terms
                      and provisions of the Guidebook.

               (b)    Executive acknowledges that he owes Company a fiduciary
                      duty pursuant to the terms of this Agreement. Therefore,
                      Executive agrees that he will perform his duties and
                      obligations hereunder in a diligent, careful, thorough and
                      professional manner consistent with good business practice
                      and will at all times (i) endeavor to provide to Company
                      the most sound and reasonable recommendations and advice
                      and (ii) fully promote the business and interests of
                      Company. Executive agrees that Executive will promptly
                      disclose to Company the existence of any activities or
                      other circumstances which result in or may hereunder, and
                      Executive will make such other disclosures relating to
                      Executive's business activities as Company may reasonably
                      request from time to time. Except as is otherwise provided
                      herein, Executive shall not render any services of a
                      commercial or professional nature to any other person or
                      organization, whether for compensation or otherwise,
                      without the prior written consent of the CEO of Company.

               (c)    All fiends and/or property received by Executive on behalf
                      of Company or any parent or affiliated corporation,
                      subsidiary or division (collectively, the "Affiliates" or
                      "Company's Affiliates") will be received and held by
                      Executive in trust, and Executive will promptly account
                      for and remit all such fiends and/or property to Company.

         Section 3.   Compensation. During the tern of this Agreement as defined
in Section 4, the Company agrees to pay Executive compensation for the services
of Executive as follows:

               (a)    Base Salary. In exchange for Executive's ongoing
                      performance of his duties and obligations under this
                      Agreement, Company will pay to Executive a salary (the
                      "Base Salary") at the rate of Two Hundred Fifty Thousand
                      Dollars ($250,000) per calendar year, less applicable
                      payroll taxes and authorized deductions. The Base Salary
                      will increase to Two Hundred Sixty Two Thousand Five
                      Hundred Dollars ($262,500) on the first anniversary of the
                      Effective Date, and will further increase to Two Hundred
                      Seventy Five Thousand Six Hundred Twenty Five Dollars

                                       1

<PAGE>

                      ($275,625) on the second anniversary of the Effective
                      Date. The Base Salary will be payable biweekly on the
                      regularly recurring pay dates established from time to
                      time by Company and in accordance with Company's customary
                      practices, as the same may be changed by Company from time
                      to time.

               (b)    Bonus. The Board shall establish a performance-based
                      annual bonus plan with targets and objectives approved by
                      the Board (the "Performance Bonus Plan") with a target
                      bonus of $350,000. Bonus payments shall be paid in
                      accordance with the payment structure specified in the
                      1998 Annual Incentive Plan of Ocwen Financial Corporation,
                      as amended from time to time. In any event, the
                      compensation to Executive under the Performance Bonus Plan
                      for the first twelve months of this Agreement shall be
                      payable in equal monthly installments not less than (i)
                      $29,166 per month for the first six months of this
                      Agreement and (ii) $14,583 per month for the second six
                      months of this Agreement, payable at Executives option in
                      either cash or options to purchase shares of Common Stock
                      in Ocwen Financial Corporation.

               (c)    Sign-on Bonus. The Company agrees to pay Executive a
                      sign-on bonus of $75,000, payable by check on the closing
                      of the purchase of Executive's permanent residence in Palm
                      Beach County, Florida by Executive.

               (d)    COBRA Reimbursement. Beginning on the Effective Date, the
                      Company agrees to reimburse Executive for up to ninety
                      (90) days of health insurance coverage under the
                      Consolidated Omnibus Budget Reconciliation Act (COBRA).

               (e)    Stock Options. Subject to the approval by the Board of
                      Directors of Company and its subsidiaries, Executive and
                      Company will enter into an agreement by which Company
                      grants to Executive an option to purchase up to one
                      percent 1 % of the outstanding shares of the common stock
                      of Company on the date of their initial public offering
                      ("IPO") for a purchase price per share equal to (i) $1.00
                      if the TPO price per share is $12 or more or (ii) $0.10 if
                      the IPO price per share is less than $12. The term of the
                      option WILL begin on the date of the IPO and will continue
                      for a period of ten (10) years unless earlier terminated
                      as provided in the Option Agreement between OTX and
                      Executive. The option will vest and become exercisable in
                      four pro-rata increments beginning on the date of the IPO
                      and ending on the fourth anniversary of the date of the
                      1P0. Vesting shall be accelerated in the event that
                      Executive retires after 5 or more years of service to the
                      Company such that all options will vest on the date of
                      retirement, and Executive will have sixty (60) days
                      thereafter to exercise. The Options WILL be subject to
                      such other standard terms and conditions placed on Options
                      to purchase shares in OTX as determined by the Board of
                      Directors in its sole discretion.

               (f)    Sale of OTX. In the event that, during the period in which
                      Executive is employed by Company pursuant to this
                      Agreement and prior to the IPO, Ocwen Financial
                      Corporation ("Ocwen") sells all of its interest in OTX or
                      all of the assets of OTX to an unaffiliated third party (a
                      "Sale"), Executive shall be entitled to receive
                      compensation (the "Sale Compensation") in an amount equal
                      to one percent (1%) of the Aggregate Consideration
                      received by the Company in the Sale minus the sum of (i)
                      $200 million and (ii) any consideration paid by the
                      Company or Ocwen in connection with the acquisition of
                      stock or assets of another entity for the benefit of the
                      Company. For purposes of this Section 3(f), "Aggregate
                      Consideration" shall mean the total, net of expenses, of
                      all cash and other property paid and any indebtedness
                      assumed or repaid by a buyer. In the event the Aggregate
                      Compensation for the Sale is cash, then Executive shall
                      receive the Sale Compensation in cash. In the event the
                      Aggregate Consideration for the Sale is in the form of
                      shares of stock in the acquiring company or other
                      property, then Executive shall receive the Sale
                      Compensation in the form of shares in the acquiring
                      company or other property. In the event the Aggregate
                      Consideration for the Sale is a combination of both cash
                      and shares of stock in the acquiring company or other
                      property, then Executive shall receive the Sale
                      Compensation in cash and shares of stock in the acquiring

                                       2

<PAGE>

                      company or other property, in the same proportion as was
                      paid for the purchase of OTX.

               (g)    The provisions of Sections 3(e) and 3(f) are mutually
                      exclusive. The payment to Executive of additional
                      compensation under one of Sections 3(e) and 3(f) shall
                      terminate the right of Executive to receive additional
                      compensation pursuant to this Section 3.

         Section 4.   Term and Termination. The term of this Agreement (the
"Term") shall be for three years commencing on August 1, 2001 (the "Effective
Date") and ending on August 1, 2004 (the "Expiration Date") unless earlier
terminated upon the occurrence of any of the following events:

               (a)    Company may terminate this Agreement effective upon
                      written notice to Executive prior to its expiration date
                      for Just Cause or due to Executive's death or substantial
                      physical or mental impairment which Company has determined
                      prevents Executive from performing his duties and
                      responsibilities as set forth herein. For purposes of this
                      Section, "Just Cause" is defined as a violation of
                      Section(s) 2, 7, 8, 9, 10 or 11 of this Agreement, fraud,
                      misappropriation of funds, embezzlement, theft, physical
                      assault on another person, drunkenness on the job,
                      possession or use of narcotics on Company's property,
                      willful and material damage to Company's property,
                      conviction of a felony, or repeated or material violations
                      of Company's policies.

               (b)    In the event Company terminates this Agreement without
                      just cause, Company shall pay Executive twelve (12) months
                      of Base Salary and, in the event the termination occurs
                      after any person or entity acquires through purchase,
                      merger or otherwise fifty percent (50%) or more of the
                      combined voting power of the Company's then outstanding
                      voting securities, all stock options issued to Executive
                      pursuant to this Agreement shall be automatically vested
                      also. 

               (c)    Executive may terminate this Agreement without Good Reason
                      upon ninety (90) days prior written notice of his
                      intention to terminate.

               (d)    Executive shall be entitled to terminate this Agreement
                      for Good Reason by written notice given within ninety (90)
                      days after the occurrence of the Good Reason event, unless
                      such circumstances are fully corrected prior to the date
                      of termination specified in the written notice of
                      termination for Good Reason. For purposes of this
                      Agreement, "Good Reason" shall mean the occurrence,
                      without Executive's express written consent, of any of the
                      following circumstances: (i) any material diminution of
                      Executive's positions, duties or responsibilities
                      hereunder (except in each case in connection with the
                      termination of Executive's employment for Just Cause or as
                      a result of Executive's death or disability, or
                      temporarily as a result of Executive's illness or other
                      absence); (ii) removal of, or the non-reelection of,
                      Executive from officer positions with OTX or its
                      subsidiaries as specified herein without election to a
                      higher position or removal of Executive from any of his
                      then officer positions; or (iii) any material breach by
                      the Company of any provision of this Agreement.

               (e)    Except as specifically provided in this Section 4, (i)
                      upon termination of this Agreement, Company will have no
                      further obligation to Executive, except with respect to
                      compensation accrued hereunder and unpaid at the date of
                      such termination and (ii) the terms and provisions of
                      Sections 4, 8, 9, 10, and 13 of this Agreement shall
                      indefinitely survive the expiration or termination of this
                      Agreement.

         Section 5.   Employee Benefits and Vacation. During the Term, Executive
shall be entitled to participate in all benefit plans and arrangements and
fringe benefits and perquisite programs generally provided to comparable senior
executives of the Company, including, without limitation, participation in a 401
(k) plan, participation in a deferred compensation option plan, life, health,
and disability insurance, and retiree health coverage. Executive shall be
entitled to vacation, sick days and personal days in accordance with Company
policy as such may be in effect from time to time; provided that in no event
shall Executive be entitled to less than four (4) weeks paid vacation per
calendar year:

                                       3

<PAGE>

         Section 6.   Relocation. The Company shall reimburse Executive for all
reasonable expenses and costs associated with relocating his family to the West
Palm Beach area in accordance with the Company's Corporate Relocation Guide. In
addition, the Company shall provide Executive with up to six (6) months of
temporary housing at a location to be approved by Ocwen.

         Section 7.   Exclusive Representation. Executive hereby agrees that
during the Term, Executive shall not, directly or indirectly, perform any
services similar to his duties and obligations under this Agreement, own an
interest in (except for Alltel common stock owned prior to the date of this
Agreement or acquired pursuant to options granted prior to the date of this
Agreement), operate, join, control, or participate in, or be connected as an
officer, employee, agent, independent contractor, partner, shareholder or
principal of any corporation, partnership, proprietorship, firm, association,
person, or other entity producing, designing, providing, soliciting orders for,
selling, distributing, or marketing products, goods, equipment, or services that
compete directly or indirectly with Company's products and services or Company's
business, without first obtaining the written approval of Company. Such approval
may be rescinded by Company if and when, in the opinion of Company, such
activities materially inhibit Executive's performance under this Agreement or
place Company at risk. Any breach or threatened breach of the terms of this
Section shall constitute cause for the termination of Executive's employment
hereunder notwithstanding any other term, provision or definition contained in
this Agreement, and Company will have no further obligation to Executive. The
terms and provisions of Sections 4, 8, 9, 10 and 13 of this Agreement shall
survive the expiration or termination of this Agreement.

         Section 8.   Company Information. All information, materials or
documents in any way regarding or relating to Company or the Company's
Affiliates or their respective businesses including, without limitation, all
Developments (as defined below), all information requested by or provided to
Executive and all information learned or obtained by Executive (i) will be and
at all times remain the sole and exclusive property of Company, (ii) will not be
used by Executive for any reason or purpose except in direct connection with
Executive's performance of his duties and obligations under this Agreement and
(iii) will not, without the express prior written consent and approval of
Company, be disclosed in whole or in part to any person or entity except in
direct connection with Executive's performance of his duties and obligations
under this Agreement. Executive acknowledges that money damages would be an
inadequate remedy for the injuries and damage that would be suffered by Company
in the case of Executive's breach of this Section. The breach or threatened
breach by Executive of the provisions of this Section shall entitle Company,
besides any other remedies it may have at law or in equity, to injunctive relief
to enforce the provisions of this Section. Executive's duties and obligations
under this Section will survive the termination or expiration of this Agreement.
In recognition of the foregoing obligations, Executive agrees that upon his
separation from the Company, he will turn over to Company all records, files,
drawings, documents, specifications, blueprints, letters, notes, reports and
computer software, and all transcriptions thereof relating to Company or the
Company's Affiliates which are in his possession or under his control. At the
time of termination, Executive will have an exit interview with Company wherein
Executive will certify that Executive has returned to Company all tangible
Confidential Information disclosed to him, and disclose all Developments, as
defined below, conceived or developed by him during the Term. Executive's
liability for any breach of this Section will not be subject to any limitation
of liability provision contained elsewhere in this Agreement.

Executive has carefully read and considered the provisions of this Section, and
having done so, agrees that the restrictions set forth in this section are fair
and reasonably required for the protection of the interests of the Company.

         Section 9.   Rights in Data. Executive hereby expressly assigns to
Company all of Executive's right, title and interest in and to all work product
produced by Executive during the Term including, without limitation, all
systems, reports, data, materials, ideas, concepts, methodologies, know-how,
information, knowledge, software, designs, specifications, plans, programs,
studies, techniques, procedures, methods, processes, formulae, inventions,
improvements, sketches, reports, diagrams, graphs, charts, notes, writings,
discoveries, models, flow charts and research, including without limitation all
patent, copyright, trademark, trade secret, design and other proprietary rights
that may now or in the future exist therein or be appurtenant thereto, whether
in oral, written, graphic, electronic, machine readable or any other form and in
whatsoever medium now known or hereafter developed, and all copies of the
foregoing and all information, data and knowledge, incorporating, based upon or
derived from the foregoing (collectively, "Developments"). All Developments will

                                       4

<PAGE>

be and at all times remain the sole and exclusive property of Company. In the
event that Executive is ever deemed, by operation of law or otherwise, to retain
any rights in or to any Developments, Executive will assign all of Executive's
right, title and interest in and to such Developments to Company. Executive will
execute any documents of assignment or registration of proprietary or other
rights requested by Company and will perform any and all further acts deemed
necessary or desirable by Company in order to confirm, exploit, or enforce the
rights herein granted and assigned by Executive to Company. Executive's duties
and obligations under this Section will survive the termination or expiration of
this Agreement. Executive's liability for any breach of this Section will not be
subject to any limitation of liability provision contained elsewhere in this
Agreement. Executive has signed an Intellectual Property Agreement in favor of
Ocwen Financial Corporation and its affiliates in consideration for Executive's
employment by Company.

         Section 10.  Covenant Not to Compete.
         ----------   -----------------------

               (a)    Executive acknowledges that, in consideration of his
                      employment, and to induce Company to allow Executive
                      access to confidential information and Company's clients,
                      customers and others with whom Company has formed valuable
                      business arrangements, he will not, during such time as
                      Executive is employed by Company and for a period of one
                      (1) year after expiration or termination of Executive's
                      employment, or, if later, termination or expiration of a
                      subsequent consulting arrangement, regardless of whether
                      Executive caused said termination; (provided, however,
                      this Section 10 shall apply only if the provisions of
                      Section 4 above are applicable):

                             (i) In the event of voluntary termination by
                             Executive, directly or indirectly, perform any
                             services similar to his duties and obligations
                             under this Agreement, own an interest in, operate,
                             join, control, or participate in, or be connected
                             as an officer, employee, agent, independent
                             contractor, partner, shareholder or principal of
                             any corporation, partnership, proprietorship, firm,
                             association, person, or other entity producing,
                             designing, providing, soliciting orders for,
                             selling, distributing, or marketing products,
                             goods, equipment, or services that compete directly
                             or indirectly with Company's products and services
                             or Company's business, without first obtaining the
                             written approval of the Company;

                             (ii) Take any action that would interfere with,
                             diminish or impair the valuable relationships that
                             Company and/or Company's Affiliates have with its
                             or their customers and clients and others with
                             which Company and/or Company's Affiliates have
                             business relationships or to which its services are
                             rendered;

                             (iii) Directly or indirectly, for his own benefit
                             or for the benefit of any other person (whether as
                             an officer, director, owner, partner, investor,
                             consultant, employee, agent, manager, or other
                             participant in any business or venture) divert,
                             solicit or attempt to divert or solicit any of
                             Company's customers or patrons with respect to
                             products or services offered by Company.

                             (iv) Recruit or otherwise solicit, induce or
                             influence any person (natural or otherwise) who is
                             or becomes an employee or consultant of the Company
                             or the Company's Affiliates to terminate his or her
                             employment with, or otherwise cease his
                             relationship with, Company or the Company's
                             Affiliates or hire any such employee or consultant
                             who has left the employ of Company or the Company's
                             Affiliates within two (2) years after the
                             termination or expiration of such employee's or
                             consultant's employment with Company or the
                             Company's Affiliates, as the case may be; or

                                       5

<PAGE>

                             (v) Assist with others in engaging in any of the
                             foregoing.

               (b)    It is acknowledged and agreed by Executive that Company
                      and its Affiliates have a legitimate business interest
                      justifying the restrictions contained herein and that such
                      restrictions are reasonably necessary to protect such

                      legitimate business interests, which interests, including,
                      without limitation, trade secrets; other valuable
                      confidential business information, including but not
                      limited to the information set forth in Sections 6 and 7,
                      that may not qualify as trade secrets, but as to which
                      Company and its Affiliates have expended time and money in
                      developing and as to which they hold confidential and
                      proprietary; substantial business relationships with
                      existing and prospective customers, clients and others
                      with whom Company and its Affiliates have formed valuable
                      relationships; customer and client goodwill associated
                      with the ongoing business of Company and its Affiliates
                      and evidenced by the various trademarks, trade names,
                      service marks and trade dress used by Company and its
                      Affiliates in connection with their businesses, and an
                      expectation of continuing patronage from their existing
                      customers, clients and others with whom Company and its
                      Affiliates have formed valuable business relationships.

               (c)    Executive acknowledges and agrees that, in the event of a
                      breach or threatened breach of any of the terms of this
                      Section, Company and/or the Company's Affiliates, as the
                      case may be, would suffer irreparable harm for which
                      monetary damages would be inadequate. Accordingly, in
                      addition to any other remedies available, at law or in
                      equity, in the event of a breach or threatened breach by
                      the Executive of the provisions of this Section, Company
                      and/or the Company's Affiliates shall be entitled to seek
                      an injunction restraining Executive from such breach or to
                      seek specific performance of the terms hereof. The 1-year
                      period mentioned above shall be tolled for any period(s)
                      of violation or period(s) of time required for litigation
                      to enforce the covenants herein. In addition, any breach
                      or threatened breach of any of the terns of this Section
                      which is not cured within thirty (30) days of receipt of a
                      written notice from the Board or the Chairman of the Board
                      which specifically identifies such purported breach or
                      threatened breach by Executive shall constitute cause for
                      the termination of Executive's employment hereunder
                      notwithstanding any other term, provision or definition
                      contained in this Agreement.

               (d)    The provisions of this Section shall survive any
                      termination or expiration of this Agreement.

               (e)    Executive has carefully read and considered the provisions
                      of this Section, and having done so, agrees that the
                      restrictions set forth in this Section (including, but not
                      limited to, the time period of the restrictions) are fair
                      and reasonable and are reasonably required for the
                      protection of the interests of Company.

         Section 11.  Representations. Executive represents and warrants to
Company that (i) the execution, delivery and performance of this Agreement by
Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order judgement or decree to
which Executive is a party or by which he is bound, (ii) Executive is not a
party to or bound by any employment agreement, noncompetition agreement or
confidentiality agreement with any other person or entity that has not been
previously disclosed in writing to Company and (iii) Executive is not in
possession of any property of his former employer, Alltel, including but not
limited to any of Alltel's confidential, proprietary and trade secrets (iv) upon
the execution and delivery of this Agreement by Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. Executive acknowledges that in the event any of the representations
made by him in this Agreement are determined to be false, such false
representation shall constitute Just Cause for his termination. In the event
Alltel should bring legal action against Executive contending a breach of a

                                       6

<PAGE>

covenant not to compete or other basis why Company should not employ him, so
long as the above representations of Executive are true, Company agrees to pay
all reasonable legal fees and costs associated with Executive's defense of such
legal action. Counsel utilized for such defense of Executive shall be subject to
approval of Company.

         Section 12.  Notices. No notice or other communication will be deemed
given unless sent in any of the manners, and to the persons, specified in this
Section. All notices and other communications hereunder will be in writing and
will be deemed given (a) upon receipt if delivered personally (unless subject to
clause (b)) or if mailed by registered or certified mail, (b) at noon on the
date after dispatch if sent by overnight courier or (c) upon the completion of
transmission (which is confirmed by telephone or by a statement generated by the
transmitting machine) if transmitted by telecopy or other means of facsimile
which provides immediate or near immediate transmission to compatible equipment
in the possession of the recipient, in any case to the parties at the following
addresses or telecopy numbers (or at such other address or telecopy number for a
party as will be specified by like notice):

         If to Company:                 Ocwen Technology Xchange, Inc.
                                        1675 Palm Beach Lakes Boulevard
                                        West Palm Beach, FL 33401
                                        Attention: Secretary

                                        Telecopy Number: (561) 682-8177
                                        Confirmation Number: (561) 682-8000

         If to Executive:               Jack Timpe
                                        2259 Beachcomber Trail
                                        Atlantic Beach, FL  32233
                                        Telecopy Number:
                                        Confirmation Number:

         Section 13.  Miscellaneous.

               (a)    Governing Law. This Agreement shall be governed by and
                      construed in accordance with the laws of the State of
                      Florida without reference to principles of conflict of
                      laws.

               (b)    Entire Agreement/Amendments. This Agreement and the
                      instruments contemplated herein contain the entire
                      understanding of the parties with respect to the
                      employment of Executive by the Company from and after the
                      Commencement Date and supersedes any prior agreements
                      between the Company and Executive. There are no
                      restrictions, agreements, promises, warranties, covenants
                      or undertakings between the parties with respect to the
                      subject matter herein other than those expressly set forth
                      herein and therein. This Agreement may not be altered,
                      modified, or amended except by written instrument signed
                      by the parties hereto.

               (c)    No Waiver. The failure of a party to insist upon strict
                      adherence to any term of this Agreement on any occasion
                      shall not be considered a waiver of such party's rights or
                      deprive such party of the right thereafter to insist upon
                      strict adherence to that term or any other tern of this
                      Agreement. Any such waiver must be in writing and signed
                      by Executive or an authorized officer of the Company, as
                      the case may be.

               (d)    Assignment. This Agreement shall not be assignable by
                      Executive. This Agreement shall be assignable by the
                      Company only to an acquirer of all or substantially all of
                      the assets of the Company, provided such acquirer promptly
                      assumes all of the obligations hereunder of the Company in
                      a writing delivered to Executive and otherwise complies
                      with the provisions hereof with regard to such assumption.

               (e)    Successors; Binding Agreement; Third Party Beneficiaries
                      This Agreement shall inure to the benefit of and be
                      binding upon the personal or legal representatives,
                      executors, administrators, successors, heirs,
                      distributees, devisees legatees and permitted assignees of
                      the parties hereto.

                                       7

<PAGE>

               (f)    Withholding Taxes. The Company may withhold from any and
                      all amounts payable under this Agreement such Federal,
                      state and local taxes as may be required to be withheld
                      pursuant to any applicable law or regulation.

               (g)    Counterparts This Agreement may be signed in counterparts,
                      each of which -shall be an original, with the same effect
                      as if the signatures thereto and hereto were upon the same
                      instrument.

               (h)    Heading. The headings of the sections contained in this
                      Agreement are for convenience only and shall not be deemed
                      to control or affect the meaning or construction of any
                      provision of this Agreement.

               (i)    Consequential Damages. EXCEPT WITH RESPECT TO EXECUTIVE'S
                      OBLIGATIONS SET FORTH IN SECTIONS 8, 9 and 10 OF THIS
                      AGREEMENT, UNDER NO CIRCUMSTANCES WILL EITHER PARTY TO
                      THIS AGREEMENT BE LIABLE TO THE OTHER PARTY FOR ANY
                      SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES,
                      WHETHER OR NOT SUCH DAMAGES ARE CAUSED BY THE FAULT OR
                      NEGLIGENCE OF SUCH PARTY AND WHETHER OR NOT SUCH PARTY IS
                      NOTIFIED OF THE POSSIBILITY OF SUCH LOSSES OR DAMAGES.


               IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.

                                       OCWEN TECHNOLOGY XCHANGE, INC.

                                       By: /s/ ARTHUR D. RINGWALD
                                           -------------------------------------
                                           Arthur D. Ringwald
                                           President and Chief Executive Officer

/s/ JACK TIMPE
-----------------------------------
Jack Timpe

                                       8



                                                                    Exhibit 12.1



<TABLE>
<CAPTION>
                                         OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
                                           COMPUTATION OF EARNINGS TO FIXED CHARGES
                                                    (DOLLARS IN THOUSANDS)


                                                                     2001         2000         1999        1998         1997
                                                                  ---------    ---------    ---------   ---------    ---------
<S>                                                               <C>          <C>          <C>         <C>          <C>      
Earnings:
  (Loss) income from continuing operations before
    income taxes and extraordinary gain (1) ...................   $ (45,557)   $  (8,564)   $  23,973   $ (32,805)   $  99,538

Add:
  Interest expensed and capitalized, except interest on
    deposits, and amortization of capitalized debt expenses ...      42,738       84,897       72,765      84,596       44,137
  Interest on deposits ........................................      59,967       98,224       98,370     116,584      122,070
  Interest component of rental expense ........................       1,176        1,124        2,032       2,135          958
                                                                  ---------    ---------    ---------   ---------    ---------
  Total fixed charges (2) .....................................     103,881      184,245      173,167     203,315      167,165
                                                                  ---------    ---------    ---------   ---------    ---------
Earnings for computation purposes .............................   $  58,324    $ 175,681    $ 197,140   $ 170,510    $ 266,703
                                                                  =========    =========    =========   =========    =========

Ratio of earnings to fixed charges:
  Including interest on deposits (3) ..........................          (4)          (4)        1.13          (4)        1.58
  Excluding interest on deposits (3) ..........................          (5)          (5)        1.33          (5)        3.39
</TABLE>



(1)      Earnings represents pre-tax income from continuing operations before
         extraordinary gain, adjusted for losses and undistributed income of
         equity investees.

(2)      Fixed charges represent total interest expensed and capitalized,
         including and excluding interest on deposits, amortization of
         capitalized debt expenses, as well as the interest component of rental
         expense.

(3)      The ratios of
 earnings to fixed charges were computed by dividing (x)
         income from continuing operations before income taxes and extraordinary
         gains, adjusted for losses and undistributed income of equity investees
         plus fixed charges by (y) fixed charges.

(4)      Due to our losses in 2001, 2000 and 1998, the ratio of earnings to
         fixed charges was less than 1:1. We would have had to have generated
         additional earnings of $46,342, $9,305 and $34,117, respectively, to
         achieve a coverage of 1:1.

(5)      Due to our loss in 2001, 2000 and 1998, the ratio of earnings to fixed
         charges was less than 1:1. We would have had to have generated
         additional earnings of $45,557, $8,564 and $32,805, respectively, to
         achieve a coverage of 1:1.


                                                                    Exhibit 13.1


FINANCIAL TABLE OF CONTENTS

SELECTED CONSOLIDATED FINANCIAL INFORMATION...............................   10

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.............................   13

REPORT OF MANAGEMENT......................................................   62

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS........................   63

CONSOLIDATED FINANCIAL STATEMENTS.........................................   64

SHAREHOLDER INFORMATION...................................................  117


                                       9

<PAGE>

SELECTED CONSOLIDATED FINANCIAL INFORMATION

      The following tables present selected consolidated financial information
of Ocwen Financial Corporation and its subsidiaries at the dates and for the
years indicated. Our historical operations and balance sheet data at and for the
years ended December 31, 2001, 2000, 1999, 1998 and 1997 have been derived from
our financial statements audited by PricewaterhouseCoopers LLP, independent
certified public accountants. We have classified certain amounts included in the
2000, 1999, 1998 and 1997 selected consolidated financial information to conform
to the 2001 presentation. The selected consolidated financial information should
be read in conjunction with, and is qualified in its entirety by reference to,
the information we have provided in our Consolidated Financial Statements and
the Notes to Consolidated
 Financial Statements on pages 64 to 116.


<TABLE>
<CAPTION>
                                                                                For the Year Ended December 31,
                                                                  -------------------------------------------------------------
                                                                    2001         2000        1999(1)      1998(1)      1997
                                                                  ---------    ---------    ---------    ---------    ---------
                                                                          (Dollars in thousands, except per share data)
<S>                                                               <C>          <C>          <C>          <C>          <C>      
Operations Data:
Interest income ...............................................   $  83,371    $ 184,816    $ 253,224    $ 307,694    $ 272,531
Interest expense ..............................................      93,329      169,090      155,542      184,893      156,289
                                                                  ---------    ---------    ---------    ---------    ---------
  Net interest income (expense) before provision for loan
    losses ....................................................      (9,958)      15,726       97,682      122,801      116,242
Provision for loan losses .....................................      15,666       15,177        6,710       18,509       32,218
                                                                  ---------    ---------    ---------    ---------    ---------
  Net interest income (expense) after provision for loan
    losses ....................................................     (25,624)         549       90,972      104,292       84,024
                                                                  ---------    ---------    ---------    ---------    ---------
Servicing and other fees ......................................     134,597       97,080       76,018       59,163       25,962
Gain (loss) on interest-earning assets, net (2) ...............      (3,949)      17,625       44,298      129,988       82,212
Gain (loss) on trading and match funded securities, net (3) ...      16,330       (3,971)          --           --           --
Impairment charges on securities available for sale (3) .......          --      (11,597)     (58,777)    (129,714)          --
Gain (loss) on real estate owned, net .........................      (9,256)     (14,904)      (3,957)      13,429        7,276
Gain (loss) on other non-interest earning assets, net (4) .....      (1,054)      45,517       58,693       17,702        6,052
Net operating gains (losses) on investments in real
  estate (5) ..................................................       5,581       27,579          820       (1,112)         144
Amortization of excess of net assets acquired over
  purchase price (1) ..........................................      18,333       14,112        3,201           --           --
Other income ..................................................       8,759        6,084       24,346       21,994        2,446
                                                                  ---------    ---------    ---------    ---------    ---------
  Total non-interest income ...................................     169,341      177,525      144,642      111,450      124,092
                                                                  ---------    ---------    ---------    ---------    ---------
Non-interest expense ..........................................     182,446      170,009      195,068      226,529      127,017
Distributions on Company-obligated, mandatorily redeemable
  securities of subsidiary trust holding solely junior
  subordinated debentures of the Company ......................       7,132       11,380       13,111       13,594        5,249
Equity in income (losses) of investments in unconsolidated
  entities (6) ................................................         304       (5,249)     (12,616)      (7,985)      23,688
                                                                  ---------    ---------    ---------    ---------    ---------
Income (loss) before income taxes and extraordinary gain ......     (45,557)      (8,564)      14,819      (32,366)      99,538
Income tax expense (benefit) (7) ..............................      81,587        7,957        2,608      (30,699)      21,309
Minority interest in net loss of consolidated subsidiary ......          --           --         (638)        (467)        (703)
                                                                  ---------    ---------    ---------    ---------    ---------
Income (loss) before extraordinary gain .......................    (127,144)     (16,521)      12,849       (1,200)      78,932
Extraordinary gain on repurchase of debt, net of taxes ........       2,362       18,713        6,983           --           --
                                                                  ---------    ---------    ---------    ---------    ---------
Net income (loss) .............................................   $(124,782)   $   2,192    $  19,832    $  (1,200)   $  78,932
                                                                  =========    =========    =========    =========    =========

Income (loss) before extraordinary gain per share:
  Basic .......................................................   $   (1.89)   $   (0.25)   $    0.20    $   (0.02)   $    1.40
  Diluted .....................................................   $   (1.89)   $   (0.25)   $    0.20    $   (0.02)   $    1.39
Net income (loss) per share:
  Basic .......................................................   $   (1.86)   $    0.03    $    0.31    $   (0.02)   $    1.40
  Diluted .....................................................   $   (1.86)   $    0.03    $    0.31    $   (0.02)   $    1.39
</TABLE>


                                       10

<PAGE>


<TABLE>
<CAPTION>
                                                                             At or For the Year Ended December 31,
                                                            ----------------------------------------------------------------------
                                                               2001           2000          1999(1)        1998           1997
                                                            -----------    -----------    -----------   -----------    -----------
<S>                                                         <C>            <C>            <C>           <C>            <C>        
Balance Sheet Data:                                                                   (Dollars in thousands)
Total assets .............................................  $ 1,711,150    $ 2,249,420    $ 3,281,674   $ 3,301,083    $ 3,048,149
Trading securities, at fair value (3) ....................      226,249        390,242             --            --             --
Securities available for sale, at fair value (3) .........           --             --        587,518       593,347        441,638
Loans available for sale, at lower of cost or market (8)..        1,040         10,610         45,213       177,847        177,041
Affordable housing properties (9) ........................      102,069        142,812        150,989       144,164        128,614
Loan portfolio, net ......................................       64,925         93,414        157,408       230,312        266,299
Discount loan portfolio ..................................      119,327        536,028        913,229     1,026,511      1,434,176
Match funded assets, net (10) ............................      174,351        116,987        157,794            --             --
Investments in unconsolidated entities ...................        1,067            430         37,118        86,893         38,684
Real estate owned, net ...................................      110,465        146,419        167,506       201,551        167,265
Investments in real estate and real estate held for
   sale (11) .............................................      130,314        145,431        268,241        36,860         76,340
Advances on loans and loans serviced for others ..........      283,183        277,055        162,548       108,078         51,061
Mortgage servicing rights ................................      101,107         51,426         11,683         7,060          5,739
Deposits .................................................      730,443      1,258,360      1,814,647     2,168,791      1,965,844
Bonds-match funded agreements (12) .......................      156,908        107,050        141,515            --             --
Borrowings and other interest-bearing obligations (13) ...      324,014        206,263        552,804       476,336        453,529
Company-obligated mandatorily redeemable securities
   of subsidiary trust holding solely junior subordinated
   debentures of the Company .............................       61,159         79,530        110,000       125,000        125,000
Stockholders' equity (14) ................................      379,109        503,426        509,442       436,376        419,692

Other Data:
Average assets ...........................................  $ 1,988,321    $ 3,095,021    $ 3,187,683   $ 3,574,780    $ 2,835,514
Average equity ...........................................      448,752        495,430        462,216       427,512        290,030
Return on average assets:
   Income (loss) before extraordinary gain ...............        (6.39)%        (0.53)%         0.40%        (0.03)%         2.78%
   Net income (loss) .....................................        (6.28)          0.07           0.62         (0.03)          2.78
Return on average equity:
   Income (loss) before extraordinary gain ...............       (28.33)         (3.33)          2.78         (0.28)         27.22
   Net income (loss) .....................................       (27.81)          0.44           4.29         (0.28)         27.22
Average equity to average assets .........................        22.52          16.01          14.50         11.96          10.23
Net interest spread ......................................         1.25           2.06           4.57          3.90           4.81
Net interest margin ......................................        (1.01)          0.81           4.39          4.30           4.91
Efficiency ratio (15) ....................................        69.93          90.43          84.92        100.12          48.11
Bank regulatory capital ratios at end of period:
   Tangible ..............................................        13.43          13.83          10.67          9.07          10.66
   Core (Leverage) .......................................        13.64          13.83          10.67          9.07          10.66
   Risk-based ............................................        23.33          21.83          19.12         17.26          14.83
Number of full-service offices at end of period ..........         1              1              1             1              1
</TABLE>


                                       11

<PAGE>

Notes to Selected Consolidated Financial Information

(1)   Financial data we have presented for 1999 and 1998 included our
      wholly-owned UK subsidiary, Ocwen UK Limited, formerly known as Ocwen UK
      plc ("Ocwen UK"). Ocwen UK was engaged in the subprime mortgage loan
      origination and servicing business, began operations on April 24, 1998 and
      was sold on September 30, 1999. Beginning in 1999, the financial data
      presented also included Ocwen Asset Investment Corp. ("OAC"), which was
      acquired on October 7, 1999 for a total purchase price of $101,271. Our
      acquisition of OAC resulted in an excess of net assets acquired over the
      purchase price of $60,042, which we have amortized to earnings on a
      straight-line basis. Previously, we accounted for our investment in OAC
      and its operating partnership subsidiary, Ocwen Partnership L.P. ("OPLP"),
      under the equity method.

(2)   We recognized $36,804, $109,601, and $71,933 of net gains in connection
      with the securitization of loans during 1999, 1998, and 1997,
      respectively. During the third quarter of 1999, we decided to structure
      future securitizations as financing transactions, thereby precluding our
      use of gain-on-sale accounting.

(3)   On September 30, 2000 we changed our policy for securities available for
      sale and match funded securities to account for these securities as
      trading. For these securities, changes in fair value are reported in
      income in the period of change. Previously, we accounted for our
      securities as available for sale, and the unrealized gains and losses for
      these securities were reported as a separate component of accumulated
      other comprehensive income in stockholders' equity.

(4)   Net gains earned in 1999 included a $50,371 gain from the sale of Ocwen
      UK. Net gains for 2000 included a gain of $20,025 from the sale of our
      unconsolidated investment in Kensington Group plc ("Kensington") on
      November 22, 2000. Kensington was engaged in the subprime mortgage loan
      origination business in the UK.

(5)   Gains for 2001 and 2000, and to a lesser extent 1999, included operating
      income from real estate properties acquired as a result of our acquisition
      of OAC. Gains for 2001 and 2000 also included equity in earnings related
      to certain loans acquired during the first quarter of 2000 which we
      account for as investments in real estate under the equity method.

(6)   Losses we incurred for 2000 related primarily to our investment in
      Kensington. Losses for 1999 and 1998 related primarily to our investment
      in Kensington and our equity investments in OAC and OPLP, before their
      acquisition on October 7, 1999. Income earned for 1997 resulted from our
      investment in BCBF, L.L.C. (the "LLC"), a joint venture formed to acquire
      loans from the Department of Housing and Urban Development in April 1996.
      The LLC distributed all of its assets on December 12, 1997.

(7)   Income tax expense we recorded for 2001, 2000 and 1999 included $83,000,
      $17,500 and $2,500, respectively, of net provisions to increase the
      valuation allowance on our deferred tax asset.

(8)   Loans available for sale at December 31, 1998 included $87,644 of subprime
      loans held by Ocwen UK. The decline in our investment in loans available
      for sale also reflects our closing of our subprime origination business in
      August 1999.

(9)   Balance at December 31, 2001 and 2000 included $54,688 and $93,210,
      respectively, of affordable housing properties that we have entered into
      agreements to sell. Although these agreements resulted in the transfer of
      tax credits and operating results for these properties to the purchaser,
      they did not qualify as sales for accounting purposes.

(10)  Match funded assets at December 31, 1999 and 2000 were comprised of
      securitized loans and securities. Match funded assets at December 31, 2001
      also included $101,963 of loan servicing advances which were sold but did
      not qualify as a sale for accounting purposes. We have accounted for these
      transactions as secured borrowings with pledges of collateral. We acquired
      the match funded loans as a result of our acquisition of OAC.

(11)  Balance at December 31, 2001, 2000 and 1999 included $78,544, $75,080 and
      $252,604, respectively, of properties that we acquired as a result of our
      acquisition of OAC.

(12)  Balances included bonds-match funded agreements we assumed as a result of
      our acquisition of OAC and at December 31, 2001 also included $91,766
      collateralized by loan servicing advances. See (10) above.

(13)  Balance at December 31, 1999 included $140,487 of 11.5% Notes and $159,170
      of lines of credit we acquired in connection with our acquisition of OAC.
      During 2000, we repurchased our 11.5% Notes and paid down lines of credit
      significantly as a result of real estate sales.

(14)  Reflects our issuance of 12,371,750 shares of common stock in the amount
      of $96,809 in connection with our acquisition of OAC. We repurchased
      1,388,300 shares of common stock for an aggregate of $8,996 and 4,611,700
      of common stock shares for an aggregate of $30,691 during 2000 and 1999,
      respectively. Additionally, we completed a secondary stock offering to the
      public of 6,900,000 shares of our common stock in 1997.

(15)  The efficiency ratio represents non-interest expense divided by the sum of
      net interest income before provision for loan losses, non-interest income
      and equity in earnings of investment in unconsolidated entities.

                                       12

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The following discussion of our results of operations, consolidated
financial condition and capital resources and liquidity should be read in
conjunction with our Selected Consolidated Financial Information, Consolidated
Financial Statements and the related notes, all included elsewhere herein.

Overview of Risks and Related Critical Accounting Policies

      For the past several years, we have been undergoing a fundamental
transition in the nature of our business. We are exiting our capital-intensive
businesses and growing our fee-based revenue sources. Both of these strategies
are affected by risks in the marketplace, and our ability to measure and report
our operating results and financial position is heavily impacted by the need to
estimate the impact or outcome of these risks or other future events. Our
critical accounting policies are those that relate to the estimation and
measurement of these risks; an understanding of these policies is fundamental to
understanding Management's Discussion and Analysis of Results of Operations and
Financial Condition. Our significant accounting policies are discussed in detail
in Note 1 of our Consolidated Financial Statements (which are incorporated
herein by reference). The following is a summary of our more subjective and
complex accounting policies, as they relate to our overall business strategy.

      Our exit from our capital intensive discount loan, real estate and
affordable housing businesses is largely focused on the orderly disposition or
resolution of the assets associated with these lines of business. The critical
accounting policies that affect the measurement of these businesses are those
that determine the valuation of real estate and affordable housing assets as
well as the determination of the allowance for loan losses.

      Real estate-related assets include real estate owned, investments in real
estate, and investments in affordable housing properties. These assets are
carried at different bases by asset class and at different amounts within each
asset class, depending on whether the assets are classified as held for
investment or held for sale. In addition, all of these assets are subject to
ongoing impairment tests using various impairment methodologies that differ by
asset class. In general, none of the assets have readily determinable fair
values based on quoted market prices. In certain cases, we utilize appraisals or
other market value estimates, in conjunction with estimates of completion costs
or costs of disposition, to determine asset values. In other cases, we value
these assets based on future cash flow analyses. These cash flow analyses
involve assumptions such as discount rates, anticipated rents received, etc.
that are highly subject to management judgment and estimation. Our task of
estimation is even more challenging given the current risks in the economic
environment, which can result in material and sometimes rapid changes in
valuation estimates. Individual assumptions between and within asset classes can
vary significantly, with variances in assumptions resulting in substantially
different asset values.

      The allowance for loan losses is established and maintained at levels we
deem adequate to cover losses resulting from the inability of borrowers to make
contractually required loan payments. Estimates for loan losses are developed by
analyzing historical loan losses, current trends in delinquencies and charge
offs, plans for problem loan administration and resolution, the views of our
regulators, changes in the size and composition of the loan portfolio, and peer
group information. Where there is a question as to the impairment of specific
loans, we obtain valuations of the property or other collateral securing the
loan, and, if applicable, the borrower's current financial information. We also
include in our estimates of inherent probable loan losses the impact of economic
events, the outcome of which are uncertain. These events may include, but are
not limited to, deterioration in general economic conditions, increases or
decreases in overall lending rates, political conditions, legislation that
directly and indirectly affects the banking industry, and regional economic
conditions affecting specific geographical areas in which we conduct business.

      Our most significant area of growth during the past year has been our
residential loan servicing business, which virtually doubled the transaction
volumes processed during the course of 2001. Inherent in our growth of this
business has been an increase in purchased mortgage servicing rights, an
intangible asset representing the present value of the right to service loans in
a portfolio. Therefore, the most critical accounting policy for this business
line is the methodology we use to determine the valuation of mortgage servicing
rights. Application of this methodology requires the development of a number of
estimates, including anticipated amortization and periodic revaluation. Both our
initial and ongoing valuations and the rate of amortization of mortgage
servicing rights are significantly affected by interest rates, prepayment speeds
and the payment performance of the underlying loans. In general, during periods
of declining interest rates, the value of mortgage servicing assets declines due
to increasing prepayments attributable to increased mortgage refinance activity.
We amortize mortgage servicing rights over the period of estimated net servicing
income based on our projections of the amount and timing of future cash flows.
The amount and timing of servicing asset amortization is adjusted periodically
based on actual results and updated projections.

      Our other core business line is Ocwen Technology Xchange ("OTX"), our
technology solutions business. At December 31, 2001 we had goodwill and
intellectual property recorded as a result of the acquisitions of three
predecessor technology companies, as well as

                                       13

<PAGE>


Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

capitalized software development costs for the period of early development,
which ended in 1999. These assets are subject to periodic impairment tests,
under which the determination of realization is dependent upon projected future
income. The realizability of these assets is based primarily on
product-by-product projections of future income, which involve a comparison of
the projected undiscounted cash flows of the underlying software products to the
carrying amounts of the assets. Effective January 1, 2002 we adopted Statement
of Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other
Intangibles. SFAS 142 prescribes a new methodology for performing the impairment
analyses for goodwill and other intangibles, which changes to an approach based
on fair value of the assets rather than undiscounted cash flows as used prior to
adoption. We are in the process of performing this analysis using our previously
developed projections of future income discounted at a market rate. The
determination of market discount rates is also subjective and may vary by
product based on the type of product, stage of development and sales to date. We
have not yet completed this impairment analysis.

      Another risk factor affecting all of our business lines is the
determination of our overall tax provision. This is a complex task and requires
extensive judgment, particularly in evaluating the realizability of the gross
deferred tax assets in the near term. During 2001 we recorded a substantial
increase to our valuation allowance, and as of December 31, 2001 our remaining
net deferred tax asset amounted to $8,411. The evaluation of the need for a
valuation allowance takes into consideration our recent earnings history,
current tax position, and estimates of taxable income in the near term. The tax
character (ordinary versus capital) and the carryforward periods of certain tax
attributes (e.g., capital losses and tax credits) must also be considered.
Significant judgment is required in considering the relative impact of negative
and positive evidence related to realizability of the deferred tax assets. The
determination of the amount of the aggregate valuation allowance is based on
scenario analyses of the projected results of operations by line of business
resulting in a range of potential valuation allowances, within which a final
amount is determined.

Results of Operations

      General. We recorded a net loss of $(124,782) for 2001, as compared to net
income of $2,192 and $19,832 for 2000 and 1999, respectively. Our loss per share
was $(1.86) for 2001, as compared with earnings per share of $0.03 and $0.31 for
2000 and 1999, respectively. During 2001, we continued our transition in
business strategy from capital-intensive businesses to fee-based businesses:
loan servicing and technology solutions for the mortgage and real estate
industries. Our results for 2001, 2000 and 1999, reflect growth in our
residential loan servicing businesses, continued investment in the development
of our technology products, cessation of loan origination and acquisition
activities, continuing sales of those assets not associated with our loan
servicing and technology businesses, our acquisition of OAC in 1999 and our exit
from the UK subprime loan business in 1999 and 2000. Key factors contributing to
our annual results for 2001, 2000 and 1999 include:

o  Pre-tax income we earned from our residential loan servicing business
   improved to $34,591 for 2001 as compared to $19,609 for 2000 and $20,515 for
   1999, reflecting our continued growth of this fee-based business. We serviced
   residential loans for others with an unpaid principal balance of $21,943,417
   at December 31, 2001 as compared to $10,494,684 at December 31, 2000.

o  We incurred pre-tax losses of $(36,392) in our OTX segment for 2001 as
   compared to $(33,951) for 2000 and $(18,343) for 1999, reflecting our
   continuing investment in the development of our technology fee-based
   businesses.

o  During 2001, we recorded provisions for losses on our loans and real estate
   owned of $15,666 and $17,766, respectively, significantly strengthening our
   reserves on those assets as a percent of asset value at December 31, 2001.

o  Net losses of $(3,949) were incurred in 2001 on sales of our interest-earning
   assets as compared to gains of $17,625 in 2000 and $44,298 in 1999. This
   trend primarily reflects our decision in the third quarter of 1999 to
   discontinue our practice of structuring securitizations as sales
   transactions, thus precluding our recognition of gain-on-sale accounting.

o  We recorded gains on our trading securities of $16,330 in 2001 as compared to
   losses of $(3,971) in 2000. These amounts include both realized and
   unrealized gains and losses. Previously, we accounted for our securities as
   available for sale, and we reported the unrealized gains and losses for those
   securities as a separate component of accumulated other comprehensive income
   in stockholders' equity. See "Results of Operations - Non-Interest Income,
   Gain (Loss) on Trading and Match Funded Securities." Primarily as a result of
   sales, the value of our subordinate and residual securities has declined to
   $65,058 at December 31, 2001.

o  We recorded impairment charges on our available for sale securities portfolio
   of $11,597 and $58,777 during 2000 and 1999, respectively, prior to the
   change in our policy on September 30, 2000 noted above.

o  We realized a gain of $50,371 from the sale of Ocwen UK on September 30,
   1999.

o  We realized a gain of $20,025 from the sale of our investment in Kensington
   on November 22, 2000.

o  We realized gains on our sale of investments in real estate of $45 in 2001 as
   compared to $22,949 in 2000 and $1,753 in 1999. These results reflect
   significant sales during 2000 of real estate we acquired in connection with
   our acquisition of OAC in October 1999.

                                       14

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

o  We recorded impairment charges on affordable housing properties of $15,587,
   $6,448 and $700 during 2001, 2000 and 1999, respectively, to provide for
   estimated losses from the sale of these assets. Of the $102,069 of properties
   remaining, $54,688 are subject to sales contracts although they have not yet
   satisfied all of the accounting criteria for sales treatment.

o  We recorded net provisions of $83,000, $17,500 and $2,500 during 2001, 2000
   and 1999, respectively, to increase the valuation allowance on our deferred
   tax asset based on our evaluation of the realizability of the deferred tax
   asset in the near future. Our net deferred tax asset had been reduced to
   $8,411 at December 31, 2001.

o  Extraordinary gains on our debt repurchases amounted to $2,362 in 2001 as
   compared to $18,713 in 2000 and $6,983 in 1999. The decline in gains we
   earned during 2001 reflects a reduction in the volume of these transactions
   in light of available pricing levels. We continue to evaluate additional debt
   repurchases.

      Segment Profitability.

      The following table presents the pre-tax income (loss) and total assets
for each of our reportable segments at and for the dates indicated:


<TABLE>
<CAPTION>
                                                                 Pre-Tax Income (Loss)                   Total Assets
                                                            For the Years Ended December 31,             December 31,
                                                         --------------------------------------    ------------------------
                                                            2001          2000          1999          2001          2000
                                                         ----------    ----------    ----------    ----------    ----------
<S>                                                      <C>           <C>           <C>           <C>           <C>       
Residential Loan Servicing..........................     $   34,591    $   19,609    $   20,515    $  420,134    $  218,981
OTX.................................................        (36,392)      (33,951)      (18,343)       13,231        20,462
Ocwen Realty Advisors...............................            944           (86)           --         1,351         1,625
Unsecured Collections...............................         (5,020)      (14,398)       (6,750)           --         8,417
Residential Discount Loans..........................         (4,396)       21,154       (20,451)      115,691       396,305
Commercial Loans....................................        (22,236)          648        28,404       280,220       555,040
Affordable Housing..................................        (29,917)      (23,664)      (17,934)      132,724       171,070
Commercial Real Estate..............................          1,222        16,530        (3,336)       83,794        80,561
Subprime Residential Lending........................         13,549       (24,532)      (30,103)       83,599       135,617
Corporate Items and Others..........................          2,098        30,126        62,817       580,406       661,342
                                                         ----------    ----------    ----------    ----------    ----------
                                                         $  (45,557)   $   (8,564)   $   14,819    $1,711,150    $2,249,420
                                                         ==========    ==========    ==========    ==========    ==========
</TABLE>


      The following is a discussion of the pre-tax income (loss) for each of our
reportable business segments.

o  Residential Loan Servicing. Total non-interest income for this segment
   increased by $35,366 during 2001 and by $24,261 during 2000. Included in
   non-interest income were residential servicing and other fees amounting to
   $117,583, $82,020 and $59,900 during 2001, 2000 and 1999, respectively,
   reflecting continued growth in residential loans we service for others. The
   average balance of residential loans we service for others grew to
   $15,727,659 during 2001 from $9,835,132 during 2000 and $8,802,444 during
   1999. Net interest income decreased by $10,773 during 2001 and by $11,386
   during 2000 primarily as a result of an increase in the average balance of
   advances and servicing rights, which do not earn interest. Non-interest
   expense increased to $68,383 in 2001 as compared to $58,773 for 2000 and
   $44,990 for 1999. See "Results of Operations - Non-Interest Income."

o  OTX. The increase in net losses incurred by this segment, which began in
   1998, is a result of our continuing investment in the development and
   marketing of our technology businesses. Our losses for 2001 included $4,620
   of one-time expenses, including $3,185 for a payment due in connection with
   an acquisition of a subsidiary in 1997. Through this segment we provide
   technology solutions for the mortgage and real estate industries. OTX
   products include both a residential and commercial loan servicing software
   platform and an internet-based mortgage loan processing application and
   vendor management system. Our losses for 1999 included a $3,367 charge
   reflecting the impact of a reduction in the estimated useful life of the
   goodwill associated with the acquisitions previously made by OTX. See Note 2
   to our Consolidated Financial Statements (which is incorporated herein by
   reference).

o  Ocwen Realty Advisors. Through this segment we provide property valuation
   services and real estate research for residential and commercial properties,
   including those that we own or service for others.

o  Unsecured Collections. This segment is primarily comprised of activities
   related to our charged-off unsecured credit card receivables, which we
   acquired at a discount, as well as collections we make on behalf of others.
   We account for our collections of unsecured credit card receivables under the
   cost recovery method. At December 31, 2001, the net book value of our
   unsecured receivables had been reduced to zero as a result of collections and
   additional reserves. We recorded provisions for losses of $1,176, $6,867 and
   $870

                                       15

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

   during 2001, 2000 and 1999, respectively. Our servicing fees for this
   segment amounted to $2,500, $1,485 and $18 during 2001, 2000 and 1999,
   respectively.

o  Residential Discount Loans. The decline in profitability for this segment in
   2001 as compared to 2000 was primarily due to a decline in gains we earned
   from sales of loans, a decline in net interest income and an increase in the
   provision for loan losses, offset in part by a decline in losses from our
   real estate owned. Gains (losses) from the sale of loans amounted to $(545)
   and $15,720 during 2001 and 2000, respectively. This compares to
   securitization gains during 1999 of $22,763. We have not securitized loans
   since 1999 and have not acquired any discount loans since 2000. Provision for
   loan losses was $6,060, $(637) and $8,435 in 2001, 2000 and 1999
   respectively. Losses from the sale and operation of our real estate owned
   declined to $(6,623) in 2001 from $(11,164) and $(9,071) in 2000 and 1999,
   respectively. Net realized and unrealized trading gains on subordinate
   securities amounted to $1,868 and $3,352 during 2001 and 2000, respectively.
   The loss for 1999 included impairment charges of $27,342 on our portfolio of
   residential subordinate securities. See "Results of Operations - Non-Interest
   Income - Gain (Loss) on Trading and Match Funded Securities."

o  Commercial Loans. Profitability declined for this segment in 2001 as compared
   to 2000 primarily as a result of a decline in gains on our investments in
   real estate and a decline in net interest income. Equity in earnings related
   to certain loans, which we acquired in 2000 and which we account for as
   investments in real estate, declined to $3,338 in 2001 from $12,427 in 2000.
   The decline in equity in earnings is primarily due to repayments we received
   on loans during 2000, which generated significant gains. Gains on the
   repayment of discount loans, which we report as interest income, have also
   declined and amounted to $2,257, $9,369 and $16,919 for 2001, 2000 and 1999,
   respectively. The decline in profitability during 2000 as compared to 1999
   was primarily due to declines in net interest income, gains from sales of
   loans, gains from our real estate owned and an increase in the provision for
   loan losses, offset in part by equity in earnings from our investments in
   real estate (see above) and a decline in operating expenses. Gains (losses)
   we earned from sales of loans were $(3,487), $(1,559) and $4,746 during 2001,
   2000 and 1999, respectively. Gains (losses) we earned from the sale and
   operation of our real estate owned amounted to $(2,143), $(1,869) and $3,769
   during 2001, 2000 and 1999, respectively. The provision for loan losses
   amounted to $7,223, $9,195 and $4,610, during 2001, 2000 and 1999,
   respectively. The increase in the provision in 2000 was principally related
   to our commercial discount loans.

o  Affordable Housing. Losses have increased during 2001 and 2000 primarily due
   to a decline in gains from sales of our properties and an increase in
   impairment charges, offset in part by a decline in operating losses as a
   result of sales. The net book value of our remaining properties amounted to
   $102,069 at December 31, 2001, of which $54,688 are subject to sales
   contracts although they have not yet qualified as sales for accounting
   purposes. Gains (losses) from the sales were $(956), $497 and $6,591 for
   2001, 2000 and 1999, respectively. Net operating losses from properties in
   service amounted to $16,580, $9,931 and $6,291 during 2001, 2000 and 1999,
   respectively. Net operating losses included impairment charges of $15,587,
   $6,448 and $700 for estimated losses on the sale of the properties. During
   2000, we began reducing our investment in affordable housing properties both
   as part of our shift in strategy to fee-based businesses and because the
   volume of tax credits being generated was exceeding our ability to utilize
   them effectively. See "Changes in Financial Condition - Affordable Housing
   Properties." On February 4, 2002 we were notified by the California Tax
   Credit Allocation Committee of a challenge to our receipt of previously
   allocated federal low-income housing tax credits for a recently constructed
   affordable housing development in which we invested. We intend to contest
   this challenge, which stems from an issue regarding a determination of the
   date the development was made available for occupancy. If the Committee
   prevails in its challenge, we could incur a loss of up to $7,500.

o  Commercial Real Estate. The results of this segment principally represent the
   activities of our commercial real estate investments acquired in connection
   with our acquisition of OAC in October 1999. The decline in income for 2001
   as compared to 2000 is primarily the result of $21,024 of gains from our
   sales of real estate during 2000 and a decline in operating income from our
   real estate, partially offset by a decline in interest expense on our lines
   of credit. Net operating gains we earned on our investments in real estate
   amounted to 4,775, $13,415 and $1,881 for 2001, 2000 and 1999, respectively.
   The decline in operating income for 2001 is the result of the sales of our
   real estate properties during 2000. Interest expense on lines of credit used
   to fund our real estate investments declined to $1,997 for 2001 as compared
   to $11,046 and $2,789 incurred for 2000 and 1999, respectively. Income for
   2000 also included $2,768 of gains from the sale of securities available for
   sale.

o  Subprime Residential Lending. In August 1999, we closed our domestic subprime
   origination business, which we had previously conducted primarily through our
   subsidiary Ocwen Financial Services, Inc. ("OFS"). Assets remaining in this
   segment at December 31, 2001 are primarily comprised of subprime residual
   trading securities with a fair value of $60,051 and match funded securities
   with a fair value of $19,435. We recorded net realized and unrealized trading
   gains of $14,247 in 2001 on our subprime residual and match funded securities
   as compared to losses of $(8,483) for 2000. Losses for 2000 and 1999 included
   $10,930 and $31,216, respectively, of impairment charges on subprime
   subordinate and residual securities available for sale. Also, we recorded
   gains of $3,834 during 1999 in connection with our securitization of loans.

                                       16

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

o  Corporate Items and Other. Pre-tax results for this segment consists of
   amortization of the excess of net assets we acquired over purchase price, UK
   operations, our business activities that are individually insignificant,
   amounts we do not allocate to our operating segments, distributions on our
   Capital Securities, transfer pricing mismatches, other general corporate
   expenses and the results of our collateralized mortgage obligation ("CMO")
   trading portfolio. Our UK operations generated pre-tax income of $13,467 and
   $59,450 for 2000 and 1999, respectively. On September 30, 1999, we sold all
   of the shares of our wholly-owned subsidiary, Ocwen UK, for a gain of
   $50,371. Ocwen UK had commenced operations on April 24, 1998. Ocwen UK
   securitization gains during 1999 totaled $10,207. On November 22, 2000, we
   sold our equity investment in Kensington for a gain of $20,025. Equity in
   losses of Kensington of $(5,280) and $(9,154) were recognized for 2000 and
   1999, respectively.

      See Note 29 to our Consolidated Financial Statements (which is
incorporated herein by reference) for additional information related to our
operating segments.

      Net Interest Income: 2001 versus 2000 and 2000 versus 1999. Net interest
income (expense) is the difference between the interest income earned from our
interest-earning assets and interest expense incurred on our interest-bearing
liabilities. Net interest income (expense) is determined by net interest spread
(i.e., the difference between the yield earned on our interest-earning assets
and the rates incurred on our interest-bearing liabilities), the relative amount
of interest-earning assets and interest-bearing liabilities and the degree of
mismatch in the maturity and repricing characteristics of our interest-earning
assets and interest-bearing liabilities.

      The following table sets forth, for the years indicated, information
regarding the total amount of income from our interest-earning assets and the
resultant average yields, the interest expense associated with our
interest-bearing liabilities, expressed in dollars and rates, and the net
interest spread and net interest margin. Information is based on average daily
balances during the indicated years:

                                       17

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                    ---------------------------------------------------------------------------------------------
                                                  2001                           2000                            1999
                                    ------------------------------  -----------------------------  ------------------------------
                                                 Interest  Average              Interest  Average               Interest  Average
                                     Average     Income/    Yield/   Average    Income/    Yield/   Average     Income/    Yield/
                                     Balance     Expense     Rate    Balance    Expense     Rate    Balance     Expense     Rate
                                    ----------   --------  -------  ----------  --------  -------  ----------   --------  -------
<S>                                 <C>          <C>       <C>      <C>         <C>       <C>      <C>          <C>       <C>    
Average Assets:
Federal funds sold and repurchase
   agreements.....................  $  200,329   $  7,328    3.66%  $  128,079  $  8,700    6.79%  $  174,495   $  8,847    5.07%
Trading Securities (1):
   CMOs (AAA-rated)...............     125,640      7,465    5.94       83,543     5,568    6.66           --         --      --
   Subordinates, residuals and
      other.......................      97,217     11,400   11.73       24,177     2,631   10.88           --         --      --
Securities available for sale (1):
   CMOs (AAA-rated)...............          --         --      --      427,821    27,693    6.47      366,343     20,914    5.71
   Subordinates, residuals and
      other.......................          --         --      --      113,833    14,815   13.01      227,056     41,784   18.40
Loans available for sale (2)......       7,138        526    7.37       31,050     2,474    7.97      238,747     25,724   10.77
Investment securities and other...      11,008        743    6.75       23,677     1,501    6.34       29,340      2,181    7.43
Loan portfolio (2)................      82,125      6,807    8.29      143,906    20,586   14.31      181,445     28,683   15.81
Discount loan portfolio (2).......     358,246     38,757   10.82      819,262    89,826   10.96      975,436    121,854   12.49
Match funded loans and
   securities (2).................     103,594     10,345    9.99      143,452    11,022    7.68       30,483      3,237   10.62
                                    ----------   --------           ----------  --------           ----------   --------
   Total interest earning assets..     985,297     83,371    8.46    1,938,800   184,816    9.53    2,223,345    253,224   11.39
                                                 --------                       --------                        --------
Non-interest earning cash.........      69,029                          44,517                         80,335
Allowance for loan losses.........     (22,235)                        (27,695)                       (26,597)
Real estate held for sale.........      22,457                         114,891                             --
Affordable housing properties.....     123,793                         147,054                        166,600
Investment in unconsolidated
   entities.......................         408                          28,832                         76,146
Real estate owned, net............     128,371                         176,828                        191,694
Investment in real estate.........     113,883                         204,288                         90,494
Advances on loans and loans
   serviced for others............     303,382                         191,642                        133,408
Mortgage servicing rights.........      76,145                          18,337                          8,462
Other assets......................     187,791                         257,527                        243,796
                                    ----------                      ----------                     ----------
   Total assets...................  $1,988,321                      $3,095,021                     $3,187,683
                                    ==========                      ==========                     ==========

Average Liabilities and
Stockholders' Equity:
Interest-bearing demand deposits..  $   14,655        393    2.68%  $   12,169       532    4.37%  $   37,247      1,313    3.53%
Savings deposits..................       1,388         29    2.09        1,527        37    2.42        1,588         38    2.39
Certificates of deposit...........     920,668     59,545    6.47    1,520,493    97,655    6.42    1,590,553     97,019    6.10
                                    ----------   --------           ----------  --------           ----------   --------
   Total interest-bearing
      deposits....................     936,711     59,967    6.40    1,534,189    98,224    6.40    1,629,388     98,370    6.04
Securities sold under agreements
   to repurchase..................      19,500        529    2.71      167,337    10,729    6.41      107,622      7,456    6.93
Bonds-match funded agreements.....      85,924      7,315    8.51      123,856    11,484    9.27       28,904      2,101    7.27
Obligations outstanding under
   lines of credit................      82,604      5,511    6.67      152,424    13,881    9.11      256,300     16,319    6.37
Notes, debentures and other.......     170,123     20,007   11.76      284,634    34,772   12.22      257,219     31,296   12.17
                                    ----------   --------           ----------  --------           ----------   --------
   Total interest-bearing
      liabilities.................   1,294,862     93,329    7.21    2,262,440   169,090    7.47    2,279,433    155,542    6.82
                                                 --------                       --------                        --------
Non-interest bearing deposits.....      12,813                           7,118                         15,594
Escrow deposits...................      73,326                         114,254                         218,607
Excess of net assets acquired
   over purchase price............      28,866                          51,486                         13,720
Other liabilities.................      64,726                          60,584                         76,016
                                    ----------                      ----------                     ----------
   Total liabilities..............   1,474,593                       2,495,882                      2,603,370
Capital securities................      64,976                         103,709                        122,097
Stockholders' equity..............     448,752                         495,430                        462,216
                                    ----------                      ----------                     ----------
   Total liabilities and
     stockholders' equity.........  $1,988,321                      $3,095,021                     $3,187,683
                                    ==========                      ==========                     ==========
Net interest income (expense).....               $ (9,958)                      $ 15,726                        $ 97,682
                                                 ========                       ========                        ========
Net interest spread...............                           1.25%                          2.06%                           4.57%
Net interest margin...............                          (1.01)%                         0.81%                           4.39%
Ratio of interest-earning assets
   to interest-bearing
   liabilities....................          76%                             86%                            98%
</TABLE>


                                       18

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

(1)   Excludes effect of unrealized gains or losses on securities.

(2)   The average balances include non-performing loans, interest on which we
      recognize on a cash basis.

      The following table describes the extent to which changes in interest
rates and changes in volume of our interest-earning assets and interest-bearing
liabilities have affected our interest income and expense during the periods
indicated. For each category of our interest-earning assets and interest-bearing
liabilities, we have provided information on changes attributable to (i) changes
in volume (change in volume multiplied by prior rate), (ii) changes in rate
(change in rate multiplied by prior volume) and (iii) total change in rate and
volume. We have allocated changes attributable to both volume and rate
proportionately to the change due to volume and the change due to rate.


<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                             -------------------------------------------------------------------------------
                                                        2001 vs. 2000                              2000 vs. 1999
                                             -------------------------------------     -------------------------------------
                                                  Increase (Decrease) Due To                Increase (Decrease) Due To
                                             -------------------------------------     -------------------------------------
                                               Rate         Volume         Total         Rate         Volume         Total
                                             ---------     ---------     ---------     ---------     ---------     ---------
<S>                                          <C>           <C>           <C>           <C>           <C>           <C>       
Interest-Earning Assets:
Federal funds sold and repurchase
   agreements..........................      $  (5,034)    $   3,662     $  (1,372)    $   2,557     $  (2,704)    $    (147)
Trading securities:
   CMOs (AAA-rated)....................           (498)        2,395         1,897         2,358         3,210         5,568
   Subordinates, residuals and other...           (324)        9,093         8,769        (4,972)        7,603         2,631
Securities available for sale:
   CMOs (AAA-rated)....................         (2,101)      (25,592)      (27,693)        3,386         3,393         6,779
   Subordinates, residuals and other...         (1,335)      (13,480)      (14,815)      (12,147)      (14,822)      (26,969)
Loans available for sale...............           (173)       (1,775)       (1,948)       (5,358)      (17,892)      (23,250)
Investment securities and other........             91          (849)         (758)         (294)         (386)         (680)
Loan portfolio.........................         (6,819)       (6,960)      (13,779)       (2,549)       (5,548)       (8,097)
Discount loan portfolio................         (1,178)      (49,891)      (51,069)      (13,871)      (18,157)      (32,028)
Match funded loans and securities......          2,827        (3,504)         (677)       (1,125)        8,910         7,785
                                             ---------     ---------     ---------     ---------     ---------     ---------
   Total interest-earning assets.......        (14,544)      (86,901)     (101,445)      (32,015)      (36,393)      (68,408)
                                             ---------     ---------     ---------     ---------     ---------     ---------
Interest-Bearing Liabilities:
Interest-bearing demand deposits.......           (233)           94          (139)          259        (1,040)         (781)
Savings deposits.......................             (5)           (3)           (8)           --            (1)           (1)
Certificates of deposit................            679       (38,789)      (38,110)        5,012        (4,376)          636
                                             ---------     ---------     ---------     ---------     ---------     ---------
   Total interest-bearing deposits.....            441       (38,698)      (38,257)        5,271        (5,417)         (146)
Securities sold under agreements to
   repurchase..........................         (4,029)       (6,171)      (10,200)         (592)        3,865         3,273
Bonds-match funded agreements..........           (879)       (3,290)       (4,169)          726         8,657         9,383
Obligations outstanding under lines of
   credit..............................         (3,085)       (5,285)       (8,370)        5,556        (7,994)       (2,438)
Notes, debentures and other interest-
   bearing obligations.................         (1,254)      (13,511)      (14,765)          127         3,349         3,476
                                             ---------     ---------     ---------     ---------     ---------     ---------
     Total interest-bearing liabilities         (8,806)      (66,955)      (75,761)       11,088         2,460        13,548
                                             ---------     ---------     ---------     ---------     ---------     ---------
(Decrease) increase in net interest
   income..............................      $  (5,738)    $ (19,946)    $ (25,684)    $ (43,103)    $ (38,853)    $ (81,956)
                                             =========     =========     =========     =========     =========     =========
</TABLE>


2001 versus 2000:

We incurred net interest expense before provision for loan losses of $(9,958)
for the year ended December 31, 2001 as compared to net interest income of
$15,726 earned for the year ended December 31, 2000, a decline of $25,684 or
163%. The decrease was due to a decrease in the balance of our average
interest-earning assets and a decrease in the net interest spread, offset by a
decrease in the balance of our average interest-bearing liabilities. The average
balance of our interest-earning assets decreased by $953,503 or 49% during 2001
and reduced interest income by $86,901. The average balance of our
interest-bearing liabilities decreased by $967,578 or 43% during 2001 and
decreased interest expense by $66,955. The net impact of these volume changes
resulted in a $19,946 decrease in net interest income. The net interest spread
decreased 81 basis points as a result of a 107 basis-point decrease in

                                       19

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

the weighted average rate on our interest-earning assets, offset by a 26
basis-point decrease in the weighted average rate on our interest-bearing
liabilities. The net impact of these rate changes resulted in a $5,738 decrease
in net interest income. The increases in the average balance of our non-interest
earning assets, primarily our servicing advances and servicing rights, that we
fund with interest-bearing liabilities, have contributed to the decline in the
net interest spread.

      The following table presents the change in average balances and yields for
2001 as compared to 2000 for each of our interest-earning asset categories:


<TABLE>
<CAPTION>
                                                Average Balance        Increase          Average Yield            Increase
                                        -------------------------     (Decrease)   -------------------------     (Decrease)
For the Year Ended December 31,             2001          2000            $            2001          2000       Basis Points
-------------------------------         -----------   -----------    -----------   -----------   -----------    ------------
<S>                                     <C>           <C>            <C>           <C>           <C>            <C>         
Federal funds sold and repurchase
  agreements ........................   $   200,329   $   128,079    $    72,250         3.66%         6.79%           (313)
Trading securities:
  CMOs (AAA-rated) ..................       125,640        83,543         42,097         5.94          6.66             (72)
  Subordinates and residuals ........        97,217        24,177         73,040        11.73         10.88              85
Securities available for sale:
  CMOs (AAA-rated) ..................            --       427,821       (427,821)          --          6.47            (647)
  Subordinates and residuals ........            --       113,833       (113,833)          --         13.01          (1,301)
Loans available for sale ............         7,138        31,050        (23,912)        7.37          7.97             (60)
Investment securities and other .....        11,008        23,677        (12,669)        6.75          6.34              41
Loan portfolio ......................        82,125       143,906        (61,781)        8.29         14.31            (602)
Discount loan portfolio .............       358,246       819,262       (461,016)       10.82         10.96             (14)
Match funded loans and securities ...       103,594       143,452        (39,858)        9.99          7.68             231
                                        -----------   -----------    -----------
                                        $   985,297   $ 1,938,800    $  (953,503)        8.46%         9.53%           (107)
                                        ===========   ===========    ===========
</TABLE>


      We earned interest income on our trading securities of $18,865 during 2001
as compared to $8,199 during 2000. Interest income we earned on securities
available for sale amounted to $0 during 2001 as compared to $42,508 for 2000.
On September 30, 2000 we changed our policy for securities available for sale
and transferred those securities to the trading category. We believe that this
treatment more appropriately reflects the impact on our results of operations
arising from changes in the fair value of securities. The following presents the
results of our securities portfolio, both trading and available for sale, on a
combined basis for 2001 and 2000:


<TABLE>
<CAPTION>
                                             CMOs                 Subordinates and Residuals                Total
                                ------------------------------  ------------------------------  ------------------------------
                                 Average   Interest              Average   Interest              Average   Interest
                                 Balance    Income     Yield     Balance    Income     Yield     Balance    Income     Yield
                                ---------  --------  ---------  ---------  --------  ---------  ---------  --------  ---------
<S>                              <C>        <C>         <C>      <C>        <C>        <C>       <C>        <C>        <C>  
2001:
Trading securities.............. $125,640   $7,465      5.94%    $ 97,217   $11,400    11.73%    $222,857   $18,865    8.47%
                                 ========   ======               ========   =======              ========   ======

2000:
Trading securities.............. $ 83,543    5,568      6.66%    $ 24,177   $ 2,631    10.88%    $107,720   $ 8,199    7.61%
Securities available for sale...  427,821   27,693      6.47      113,833    14,815    13.01      541,654    42,508    7.85
                                 --------   ------               --------   -------              --------   -------
                                 $511,364   33,261      6.50%    $138,010   $17,446    12.64%    $649,374   $50,707    7.81%
                                 ========   ======               ========   =======              ========   =======
</TABLE>


      As presented in the table above, interest income we earned from our
securities portfolio on a combined basis declined from $50,707 in 2000 to
$18,865 in 2001, a $31,842 or 63% decline. The decline in interest income is
primarily due to a $385,724 or 75% decline in our average investment in CMOs and
a $40,793 or 30% decline in our average investment in subordinates and
residuals. The decline in the average balance of our CMOs during 2001 reflects
our planned reduction in the use of these securities to meet the Qualified
Thrift Lender requirements. The decline in the average balance of our
subordinate and residuals during 2001 was primarily due to sales of subprime
residuals and amortization. Because CMOs have less cash flow variability, their
average lives and yields to maturity are more stable, and therefore, CMOs are
priced to yield less than classes of mortgage-related securities such as
subordinates and residuals that are less stable. Yield on the total portfolio of
trading securities increased in 2001 as compared to 2000 because lower-yielding
CMOs comprised a greater proportion of the portfolio in 2000.

      Interest income we earned on our loan portfolio decreased by $13,779 or
67% during 2001 as compared to 2000 due to a $61,781 or 43% decrease in the
average balance of our portfolio and a 602 basis-point decrease in the average
yield. The decline in the

                                       20

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

average balance of our portfolio is primarily due to sales and repayments.
During 1999, we ceased origination of multifamily and commercial loans. See
"Changes in Financial Condition - Loan Portfolio, Net."

      Interest income we earned on our discount loans decreased by $51,069 or
57% during 2001 as compared to 2000 as a result of a $461,016 or 56% decline in
the average balance of our investment and a 14 basis-point decrease in the
average yield. Sales, foreclosures, resolutions and the absence of acquisitions
have resulted in the declines in the average balance of our discount loans
during 2001. The yield on our discount loan portfolio is likely to fluctuate
from period to period as a result of the timing of resolutions, particularly the
resolution of large multi-family residential and commercial real estate loans,
and the mix of the overall portfolio between performing and non-performing
loans. See "Changes in Financial Condition - Discount Loan Portfolio, Net."

      The following table presents the change in average balances and rates for
2001 as compared to 2000 for each of our interest-bearing liability categories:


<TABLE>
<CAPTION>
                                                                                 Increase                           Increase
                                                        Average Balance         (Decrease)       Average Rate      (Decrease)
                                                    -----------   -----------   ----------    ------------------  ------------
For the Year Ended December 31,                        2001          2000           $           2001      2000    Basis Points
-------------------------------                     -----------   -----------   ----------    --------  --------  ------------
<S>                                                 <C>           <C>           <C>           <C>       <C>        <C>     
Interest-bearing deposits........................   $   936,711   $ 1,534,189   $ (597,478)     6.40%     6.40%         --
Securities sold under agreements to repurchase...        19,500       167,337     (147,837)     2.71      6.41        (370)
Bonds-match funded agreements....................        85,924       123,856      (37,932)     8.51      9.27         (76)
Obligations outstanding under lines of credit....        82,604       152,424      (69,820)     6.67      9.11        (244)
Notes, debentures and other......................       170,123       284,634     (114,511)    11.76     12.22         (46)
                                                    -----------   -----------   ----------
                                                    $ 1,294,862   $ 2,262,440   $ (967,578)     7.21%     7.47%        (26)
                                                    ===========   ===========   ==========
</TABLE>


      Interest expense we incurred on our interest-bearing deposits decreased
$38,257 or 39% during 2001 as compared to 2000 due to a $597,478 or 39% decrease
in the average balance. The decline in the average balance resulted primarily
from maturing brokered certificates of deposit. We did not issue any new
brokered certificates of deposit during 2001 and, at this time, do not intend to
issue any such deposits in the foreseeable future. The decline in average
deposits is consistent with the 36% decline in average total assets as we
continue our transition in business strategy from capital-intensive businesses
to fee-based businesses. See "Changes in Financial Condition - Deposits."

      Interest expense we incurred on securities we sold under agreements to
repurchase declined $10,200 or 95% during 2001 as a result of a $147,837 or 88%
decrease in the average balance and a 370 basis-point decline in the average
rate. We have used securities sold under agreements to repurchase primarily to
fund our purchases of CMOs, the average balance of which has declined
significantly during 2001.

      Interest expense we incurred on bonds-match funded agreements declined
$4,169 or 36% during 2001 as compared to 2000 primarily as a result of a $37,932
or 31% decline in the average balance outstanding. Interest expense on our
bonds-match funded agreements is primarily comprised of interest we incurred on
bonds-match funded agreements acquired as a result of our acquisition of OAC in
October 1999 and on non-recourse notes, which resulted from our transfer of four
unrated residual securities in December 1999 in exchange for non-recourse notes.
We have accounted for these transactions, which did not qualify as sales for
accounting purposes, as secured borrowings with pledges of collateral. See
"Changes in Financial Condition - Bonds - Match Funded Agreements."

      Interest expense we incurred on obligations outstanding under our lines of
credit decreased $8,370 or 60% during 2001 as compared to 2000 due to a $69,820
or 46% decrease in the average balance and a 244 basis-point decline in the
average rate. During 2001, we used lines of credit to fund real estate
investments and commercial construction loans and, beginning in the second
quarter of 2001, to fund servicing advances that were purchased in connection
with the acquisition of loans serviced for others. Average balances outstanding
under our lines of credit decreased during 2001 primarily because of sales of
our real estate properties and commercial loans, offset in part by the funding
of our residential loan servicing advances under new lines. See "Changes in
Financial Condition - Obligations Outstanding Under Lines of Credit."

      Interest expense we incurred on notes, debentures and other interest
bearing obligations decreased $14,765 or 42% during 2001 as compared to 2000
primarily due to a $114,511 or 40% decrease in the average balance. The decrease
in the average balance is primarily due to repurchases of debt we made during
2001 and 2000. See "Changes in Financial Condition - Notes, Debentures and Other
Interest-Bearing Obligations."

                                       21

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

2000 versus 1999:

Our net interest income before provision for loan losses of $15,726 decreased
$81,956 or 84% during 2000 as compared to the prior year. The decline was
primarily due to a decrease in the average balance of our interest-earning
assets and a decrease in the net interest spread. Our average interest-earning
assets decreased by $284,545 or 13% during 2000 and reduced interest income by
$36,393. The net impact of volume changes resulted in a $38,853 decrease in net
interest income. The net interest spread decreased 251 basis points during 2000
as a result of a 186 basis-point decrease in the weighted average yield on
interest-earning assets and a 65 basis-point increase in the weighted average
rate on interest-bearing liabilities. The impact of these rate changes resulted
in a $43,103 decrease in net interest income. The sale of Ocwen UK, which
generated a high net interest spread in 1999, contributed to the overall decline
in the net interest spread. Additionally, the average balance of our
non-interest earning assets, which are largely funded by interest bearing
liabilities, increased during 2000, primarily due to an increase in real estate
assets resulting from our acquisition of OAC and an increase in our servicing
advances and servicing rights.

      The following table presents the change in average balances and yields for
2000 as compared to 1999 for each of our interest-earning asset categories:


<TABLE>
<CAPTION>
                                                Average Balance          Increase            Average Yield         Increase
                                          -------------------------     (Decrease)     ------------------------   (Decrease)
For the Year Ended December 31,               2000          1999             $             2000         1999     Basis Points
-------------------------------           -----------   -----------    -----------     -----------  -----------  ------------
<S>                                       <C>           <C>            <C>             <C>          <C>           <C>    
Federal funds sold and repurchase
  agreements ..........................   $   128,079   $   174,495    $   (46,416)        6.79%        5.07%         172
Trading Securities:
  CMOs (AAA-rated) ....................        83,543            --         83,543         6.66        --             666
  Subordinates, residuals and other ...        24,177            --         24,177        10.88        --           1,088
Securities available for sale:
  CMOs (AAA-rated) ....................       427,821       366,343         61,478         6.47         5.71           76
  Subordinates, residuals and other ...       113,833       227,056       (113,223)       13.01        18.40         (539)
Loans available for sale (1) ..........        31,050       238,747       (207,697)        7.97        10.77         (280)
Investment securities and other .......        23,677        29,340         (5,663)        6.34         7.43         (109)
Loan portfolio ........................       143,906       181,445        (37,539)       14.31        15.81         (150)
Discount loan portfolio ...............       819,262       975,436       (156,174)       10.96        12.49         (153)
Match funded loans and securities .....       143,452        30,483        112,969         7.68        10.62         (294)
                                          -----------   -----------    -----------
                                          $ 1,938,800   $ 2,223,345    $  (284,545)        9.53%       11.39%        (186)
                                          ===========   ===========    ===========
<FN>
(1)   Included subprime loans with an average balance of $132,066 and an average
      yield earned of 12.28% held by Ocwen UK during 1999 prior to its sale.
</FN>
</TABLE>


      Interest income we earned on our trading securities amounted to $8,199 as
compared to $0 for 1999. Interest income on our securities available for sale
amounted to $42,508 during 2000 as compared to $62,698 during 1999. On September
30, 2000, we changed our policy for securities available for sale and
transferred those securities to the trading category. Our sale of Ocwen UK and
its subprime residuals contributed to the decline in the average balance and
average yield. The following presents the results of our securities portfolio,
both trading and available for sale, on a combined basis for 2000 and 1999:


<TABLE>
<CAPTION>
                                                                        Subordinates
                                               CMOs                   and Residuals(1)                     Total
                                  ----------------------------  ----------------------------   ----------------------------
                                   Average   Interest            Average   Interest             Average   Interest
                                   Balance    Income    Yield    Balance    Income    Yield     Balance    Income    Yield
                                  --------   --------  -------  --------   --------  -------   --------   --------  -------
<S>                               <C>        <C>        <C>     <C>        <C>        <C>      <C>        <C>        <C>  
2000:
Trading securities............... $ 83,543   $  5,568   6.66%   $ 24,177   $  2,631   10.88%   $107,720   $  8,199   7.61%
Securities available for sale....  427,821     27,693   6.47     113,833     14,815   13.01     541,654     42,508   7.85
                                  --------     ------           --------   --------            --------   --------
                                  $511,364   $ 33,261   6.50%   $138,010   $ 17,446   12.64%   $649,374   $ 50,707   7.81%
                                  ========   ========           ========   ========            ========   ========

1999:
Securities available for sale....
                                 $366,343    $ 20,914   5.71%   $227,056   $ 41,784   18.40%   $593,399   $ 62,698  10.57%
                                 ========    ========           ========   ========            ========   ========

<FN>
(1)   Included subprime residuals with an average balance of $60,736 and an
      average yield earned of 24.45% held by Ocwen UK during 1999 prior to its
      sale.
</FN>
</TABLE>


                                       22

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Interest income we earned on our loans available for sale decreased
$23,250 or 90% during 2000 as compared to 1999 as a result of a $207,697 or 87%
decrease in the average balance and a 280 basis-point decline in weighted
average yield earned. The decrease in the average balance reflects the closure
of our domestic subprime origination business and our sale of Ocwen UK. The
decline in the average yield is also largely due to our sale of Ocwen UK. See
"Changes in Financial Condition - Loans Available for Sale."

      Interest income we earned on our loan portfolio decreased by $8,097 or 28%
in 2000 versus 1999 due to a $37,539 or 21% decrease in the average balance and
a 150 basis-point decrease in the average yield. The decrease in the average
yield is due in part to a decline in the amount of additional interest we
received in connection with the repayment of loans. Such additional interest
amounted to $96 and $8,121 during 2000 and 1999, respectively. During 1999, we
ceased origination of multi-family and commercial loans. See "Changes in
Financial Condition - Loan Portfolio, Net."

      Interest income we earned on our discount loans decreased by $32,028 or
26% during 2000 as a result of a $156,174 or 16% decrease in the average balance
and a 153 basis-point decline in the average yield. Sales, resolutions,
foreclosures and a decline in acquisition volume have contributed significantly
to the decline in the average balance. See "Changes in Financial Condition -
Discount Loan Portfolio, Net." The yield on the discount loan portfolio is
likely to fluctuate from period to period as a result of the timing of
resolutions, particularly the resolution of large multi-family residential and
commercial real estate loans, and the mix of the overall portfolio between
performing and non-performing loans.

      Interest income we earned on our match funded loans and securities is
comprised of income earned on loans we acquired in connection with our
acquisition of OAC in October 1999 and on four unrated residual securities
transferred by us in December 1999 in exchange for non-recourse notes. OAC
previously securitized the loans under a securitization we accounted for as a
secured borrowing with pledge of collateral. See "Changes in Financial Condition
- Match Funded Assets."

      The following table presents the change in average balances and rates for
2000 as compared to 1999 for each of our interest-bearing liability categories:


<TABLE>
<CAPTION>
                                                        Average Balance          Increase         Average Rate       Increase
                                                    -------------------------   (Decrease)     ------------------   (Decrease)
For the Year Ended December 31,                        2000          1999           $            2000      1999    Basis Points
-------------------------------                     -----------   -----------   ----------     --------  --------  ------------
<S>                                                 <C>           <C>           <C>            <C>       <C>            <C>
Interest-bearing deposits........................   $ 1,534,189   $ 1,629,388   $  (95,199)      6.40%     6.04%          36
Securities sold under agreements to
   repurchase (1)................................       167,337       107,622       59,715       6.41      6.93          (52)
Bonds-match funded agreements....................       123,856        28,904       94,952       9.27      7.27          200
Obligations outstanding under lines of credit (2)       152,424       256,300     (103,876)      9.11      6.37          274
Notes, debentures and other......................       284,634       257,219       27,415      12.22     12.17            5
                                                    -----------   ------------  ----------
                                                    $ 2,262,440   $ 2,279,433   $  (16,993)      7.47%     6.82%          65
                                                    ===========   ============  ==========
<FN>
(1)   Included an average balance of $22,908 with an average yield of 7.64%
      for 1999 related to Ocwen UK.

(2)   Included an average balance of $130,437 with an average yield of 6.16%
      for 1999 related to Ocwen UK.
</FN>
</TABLE>


      Interest expense we incurred on our securities sold under agreements to
repurchase increased $3,273 or 44% primarily due to a $59,715 or 55% increase in
the average balance.

      Interest expense we incurred on our bonds-match funded agreements is
comprised of interest incurred on bonds-match funded agreements acquired as a
result of our acquisition of OAC in October 1999 and on non-recourse notes which
resulted from our transfer of four unrated residual securities in December 1999
in exchange for non-recourse notes. See "Changes in Financial Condition - Bonds
Match Funded Agreements."

      Interest expense we incurred on our obligations outstanding under lines of
credit decreased $2,438 or 15% during 2000 as compared to 1999 due to a $103,876
or 41% decrease in the average balance, which was partially offset by a 274
basis-point increase in the weighted average interest rate. During 1999, we used
our lines of credit primarily to fund the acquisition and origination of
subprime single family loans at OFS and Ocwen UK. The net decrease in the
average balance reflects our closure of the domestic subprime origination
business and our sale of Ocwen UK, offset by our assumption of lines as a result
of our acquisition of OAC. The average

                                       23

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

balance of the OAC lines, which are collateralized by our investments in real
estate and commercial loans, declined during 2000 as a result of collateral
sales. See "Changes in Financial Condition - Obligations Outstanding Under Lines
of Credit."

      Interest expense we incurred on our notes, debentures and other increased
$3,476 or 11% during 2000 primarily due to a $27,415 or 11% increase in the
average balance. The increase in the average balance is primarily due to our
assumption of $140,487 of 11.5% Redeemable Notes as a result of our acquisition
of OAC in October 1999, offset in part by our repurchase of substantially all of
this debt in December 2000. See "Changes in Financial Condition - Notes,
Debentures and Other Interest-Bearing Obligations."

      Provisions for Loan Losses. Provisions we record for losses on our loans
are charged to operations to maintain an allowance for losses on the loan
portfolio, the discount loan portfolio and the match funded loans at a level
which we consider adequate based upon an evaluation of known and inherent risks
in such portfolios. Our ongoing evaluation is based on an analysis of our
discount loan portfolio, loan portfolio and match funded loans, historical loss
experience, current economic conditions and trends, collateral values and other
relevant factors.

      The following table presents the provisions for loan losses for our
discount loan portfolio, loan portfolio and the match funded loans for the years
indicated:

                                                 2001        2000        1999
                                                -------     -------     -------
   Discount loan portfolio.................     $12,960     $15,266     $ 5,434
   Loan portfolio..........................       2,518           4       1,636
   Match funded loans......................         188         (93)       (360)
                                                -------     -------     -------
                                                $15,666     $15,177     $ 6,710
                                                =======     =======     =======

      The provision for losses on our discount loans included $1,567, $7,503 and
$1,267 related to our unsecured credit card receivables during 2001, 2000 and
1999, respectively, which we had fully reserved at December 31, 2001. As
indicated in the table below, our allowances as a percentage of loan value have
been increased for both our loan and discount loan portfolios at December 31,
2001. Those increases are primarily in response to increases in our
non-performing loans as a percentage of loan value See "Changes in Financial
Condition - Loan Portfolio, Net," "Match Funded Assets" and "Discount Loan
Portfolio, Net."

      The following table sets forth the allowance for loan losses as a
percentage of our respective loan balances at the dates indicated:

                                                                      Allowance
                                                                        as a %
                                                            Loan       of Loan
                                              Allowance    Balance     Balance
                                              ---------   ----------  ---------
 December 31, 2001:
   Discount loan portfolio (1)............    $  17,554   $  136,881    12.82%
   Loan portfolio.........................        3,197       68,122     4.69%
   Match funded loans.....................          170       53,123     0.32%
                                              ---------   ---------
                                              $  20,921   $  258,126     8.11%
                                              =========   ==========
 December 31, 2000:
   Discount loan portfolio................    $  20,871   $  556,899     3.75%
   Loan portfolio.........................        2,408       95,822     2.51%
   Match funded loans.....................          285       80,834     0.35%
                                              ---------   ----------
                                              $  23,564   $  733,555     3.21%
                                              =========   ==========
 December 31, 1999:
   Discount loan portfolio................    $  19,181   $  932,410     2.06%
   Loan portfolio.........................        7,259      164,667     4.41%
   Match funded loans.....................          495      105,596     0.47%
                                              ---------   ----------
                                              $  26,935   $1,202,673     2.24%
                                              =========   ==========

(1)   Included unsecured credit card receivables with a loan balance of $10,337
      and allowance of $10,337, or 100%, at December 31, 2001. Excluding these
      receivables, the allowance as a percentage of total discount loans was
      5.70%, 2.24% and 1.96% at December 31, 2001, 2000 and 1999, respectively.

                                       24

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      For additional information regarding our allowance for loan losses on the
above portfolios, see "Changes in Financial Condition - Allowances for Loan
Losses." For information relating to our valuation allowance on real estate
owned, see "Changes in Financial Condition - Real Estate Owned, Net."

      Non-Interest Income. The following table sets forth the principal
components of our non-interest income during the years indicated:


<TABLE>
<CAPTION>
                                                                            2001          2000          1999
                                                                          ---------     ---------     ---------
<S>                                                                       <C>           <C>           <C>      
Servicing and other fees .............................................    $ 134,597     $  97,080     $  76,018
Gain (loss) on interest-earning assets, net ..........................       (3,949)       17,625        44,298
Gain (loss) on trading and match funded securities, net ..............       16,330        (3,971)           --
Impairment charges on securities available for sale ..................           --       (11,597)      (58,777)
Gain (loss) on real estate owned, net ................................       (9,256)      (14,904)       (3,957)
Gain (loss)on other non-interest earning assets, net .................       (1,054)       45,517        58,693
Net operating gains (losses) on investments in real estate ...........        5,581        27,579           820
Amortization of excess of net assets acquired over purchase price ....       18,333        14,112         3,201
Other income .........................................................        8,759         6,084        24,346
                                                                          ---------     ---------     ---------
                                                                          $ 169,341     $ 177,525     $ 144,642
                                                                          =========     =========     =========
</TABLE>


      Servicing and Other Fees. Our servicing and other fees are primarily
comprised of fees we earned from investors for servicing residential mortgage
loans on their behalf. The increase in servicing fees is largely due to the
growth in residential loans we service for others. Excluding Ocwen UK from 1999,
the average unpaid principal balance of loans we service for others amounted to
$16,738,3377, $10,798,857 and $10,060,673 during 2001, 2000 and 1999,
respectively. The following table sets forth the principal components of our
servicing and other fees for the years indicated:

                                                 2001        2000      1999 (1)
                                               --------    --------    --------
Loan servicing and related fees:
Loan servicing fees........................    $ 95,569    $ 47,334    $ 49,304
Late charges...............................      21,326      14,890      10,076
Interest on custodial accounts (2).........       8,530       6,523          68
Special servicing fees (3).................       8,494      10,420      12,164
Other......................................       8,924       9,554       6,207
Amortization of servicing rights...........     (29,841)    (10,036)     (4,595)
                                               --------    --------    --------
                                                113,002      78,685      73,224
Other fees:
Property valuation fees (ORA)..............      11,789      10,630         582
Default servicing fees.....................       3,917       3,040         782
Retail banking fees........................       2,689       1,526       1,044
Other......................................       3,200       3,199         386
                                               --------    --------    --------
                                               $134,597    $ 97,080    $ 76,018
                                               ========    ========    ========

(1)   Loan servicing fees earned by Ocwen UK amounted to $9,691 during 1999
      prior to its sale.

(2)   Interest we earned on custodial accounts during the holding period between
      collection of borrower payments and remittance to investors.

(3)   Fees we earned under special servicing arrangements wherein we act as a
      special servicer for third parties, typically as part of a securitization.
      Under these arrangements, we service loans that become greater than 90
      days past due and receive base special servicing fees plus incentive fees
      to the extent we achieve certain loss mitigation parameters.

                                       25

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The following table sets forth our loans serviced for others at the dates
indicated:


<TABLE>
<CAPTION>
                                                   Subprime Loans (1)             Other Loans                    Total
                                               -------------------------   -------------------------   -------------------------
                                                               No. of                      No. of                      No. of
                                                  Amount        Loans         Amount        Loans         Amount        Loans
                                               -----------   -----------   -----------   -----------   -----------   -----------
<S>                                            <C>           <C>           <C>           <C>           <C>           <C>        
December 31, 2001:
Performing:
    Residential loans ......................   $18,068,542       242,664   $   919,639        18,074   $18,988,181       260,738
    Commercial loans and other .............            --            --     1,062,345         1,962     1,062,345         1,962
                                               -----------   -----------   -----------   -----------   -----------   -----------
                                               $18,068,542       242,664   $ 1,981,984        20,036   $20,050,526       262,700
                                               ===========   ===========   ===========   ===========   ===========   ===========
Non-performing:
    Residential loans (3) ..................   $ 2,638,235        35,585   $   317,001         5,021   $ 2,955,236        40,606
    Commercial loans (3) ...................            --            --       158,250           247       158,250           247
                                               -----------   -----------   -----------   -----------   -----------   -----------
                                               $ 2,638,235        35,585   $   475,251         5,268   $ 3,113,486        40,853
                                               ===========   ===========   ===========   ===========   ===========   ===========
Total loans serviced for others:
    Residential loans ......................   $20,706,777       278,249   $ 1,236,640        23,095   $21,943,417       301,344
    Commercial loans and other .............            --            --     1,220,595         2,209     1,220,595         2,209
                                               -----------   -----------   -----------   -----------   -----------   -----------
                                               $20,706,777       278,249   $ 2,457,235        25,304   $23,164,012       303,553
                                               ===========   ===========   ===========   ===========   ===========   ===========

December 31, 2000 (2):
Performing:
    Residential loans ......................   $ 7,499,361       118,174   $ 1,170,782        22,162   $ 8,670,143       140,336
    Commercial loans and other .............            --            --       798,873           278       798,873           278
                                               -----------   -----------   -----------   -----------   -----------   -----------
                                               $ 7,499,361       118,174   $ 1,969,655        22,440   $ 9,469,016       140,614
                                               ===========   ===========   ===========   ===========   ===========   ===========
Non-performing:
    Residential loans (3) ..................   $ 1,430,528        18,246   $   394,013         5,869   $ 1,824,541        24,115
    Commercial loans and other (3) .........            --            --        66,967            24        66,967            24
                                               -----------   -----------   -----------   -----------   -----------   -----------
                                               $ 1,430,528        18,246   $   460,980         5,893   $ 1,891,508        24,139
                                               ===========   ===========   ===========   ===========   ===========   ===========
Total loans serviced for others:
    Residential loans ......................   $ 8,929,889       136,420   $ 1,564,795        28,031   $10,494,684       164,451
    Commercial loans .......................            --            --       865,840           302       865,840           302
                                               -----------   -----------   -----------   -----------   -----------   -----------
                                               $ 8,929,889       136,420   $ 2,430,635        28,333   $11,360,524       164,753
                                               ===========   ===========   ===========   ===========   ===========   ===========

December 31, 1999:
Performing:
    Residential loans ......................   $ 6,830,385        82,612   $ 1,446,836        26,707   $ 8,277,221       109,319
    Commercial loans and other .............            --            --       939,422           218       939,422           218
                                               -----------   -----------   -----------   -----------   -----------   -----------
                                               $ 6,830,385        82,612   $ 2,386,258        26,925   $ 9,216,643       109,537
                                               ===========   ===========   ===========   ===========   ===========   ===========
Non-performing:
    Residential loans (3) ..................   $ 1,341,009        16,147   $   481,556         6,863   $ 1,822,565        23,010
    Commercial loans and other .............            --            --        66,075           123        66,075           123
                                               -----------   -----------   -----------   -----------   -----------   -----------
                                               $ 1,341,009        16,147   $   547,631         6,986   $ 1,888,640        23,133
                                               ===========   ===========   ===========   ===========   ===========   ===========
Total loans serviced for others:
    Residential loans ......................   $ 8,171,394        98,759   $ 1,928,392        33,570   $10,099,786       132,329
    Commercial loans and other .............            --            --     1,005,497           341     1,005,497           341
                                               -----------   -----------   -----------   -----------   -----------   -----------
                                               $ 8,171,394        98,759   $ 2,933,889        33,911   $11,105,283       132,670
                                               ===========   ===========   ===========   ===========   ===========   ===========
<FN>
(1)   Subprime loans represent loans we service which were made by others to
      borrowers who did not qualify under guidelines of the FNMA and FHLMC
      ("nonconforming loans").

(2)   Does not include approximately 38,500 loans with an unpaid principal
      balance of approximately $1,027,600 that we acquired on December 31, 2000
      but which we did not board in our loan servicing system until 2001.
</FN>
</TABLE>


                                       26

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

(3)   The following table presents loans which we service under special
      servicing agreements, included in the table above, and the total pool of
      loans for which we are designated as special servicer should those loans
      become greater than 90 days past due:


<TABLE>
<CAPTION>
                                                                         Designated
                                      Loans Special Serviced         Special Servicing
                                             by OCN                     Loan Pools
                                     -------------------------   -------------------------
                                        Amount    No. of Loans      Amount    No. of Loans
                                     -----------  ------------   -----------  ------------
<S>                                  <C>           <C>           <C>           <C>        
      December 31, 2001:
         Residential loans .......   $ 1,647,837        19,469   $ 4,894,376        53,098
         Commercial loans ........        34,703           169       814,820           295
                                     -----------   -----------   -----------   -----------
                                     $ 1,682,540        19,638   $ 5,709,196        53,393
                                     ===========   ===========   ===========   ===========
      December 31, 2000:
         Residential loans .......   $ 2,399,842        26,755   $12,795,282       126,065
         Commercial loans ........        84,155           118       952,070           336
                                     -----------   -----------   -----------   -----------
                                     $ 2,483,997        26,873   $13,747,352       126,401
                                     ===========   ===========   ===========   ===========

      December 31, 1999
         Residential loans .......   $   878,284         9,319   $ 8,057,768        82,630
         Commercial loans ........       123,924           151       994,230           422
                                     -----------   -----------   -----------   -----------
                                     $ 1,002,208         9,470   $ 9,051,998        83,052
                                     ===========   ===========   ===========   ===========
</TABLE>


      Gain (Loss) on Interest Earning Assets. The following table sets for the
principal components of net gains (losses) we earned on our interest earning
assets for the years indicated:

                                                2001        2000        1999
                                              --------    --------    --------
Gain (loss) on loan sales (1).............    $ (4,380)   $ 12,084    $ 40,380
Gain on security sales (2)................          --       4,983       4,968
Other.....................................         431         558      (1,050)
                                              --------    --------    --------
                                              $ (3,949)   $ 17,625    $ 44,298
                                              ========    ========    ========

(1)   During the third quarter of 1999, we made a strategic decision to
      structure future securitizations as financing transactions which precluded
      our use of gain-on-sale accounting. Gains we earned for 1999 include
      $36,804 from securitizations as detailed in the table below. See "Changes
      in Financial Condition - Match Funded Assets."

(2)   Prior to the transfer of our securities from available for sale to trading
      on September 30, 2000.

      The following table sets forth details of our net gains recognized in
connection with the securitization of loans during 1999:


<TABLE>
<CAPTION>
                                                                                              Book Value of
                                      Loans Securitized                                        Securities
-----------------------------------------------------------------------                         Retained
             Types of Loans                  Principal     No. of Loans       Net Gain       (Non-Cash Gain)      Cash Gain
---------------------------------------     -----------    ------------      -----------     ---------------     -----------
<S>                                         <C>            <C>               <C>              <C>                <C>        
1999:
Single family discount................      $   227,303          3,137       $    22,763      $        4,040     $    18,723
Single family subprime:
     Domestic.........................          235,572          2,192             3,834              12,091              --
     Foreign (Ocwen UK)...............          295,157          8,983            10,207              34,452              --
                                            -----------    -----------       -----------      --------------     -----------
                                                530,729         11,175            14,041              46,543              --
                                            -----------    -----------       -----------      --------------     -----------
                                            $   758,032         14,312       $    36,804      $       50,583     $    18,723
                                            ===========    ===========       ===========      ==============     ===========
</TABLE>


      Gain (Loss) on Trading and Match Funded Securities. The gain (loss)
recorded on trading and match funded securities during 2001 and 2000 resulted
from our change in our policy for securities available for sale and match-funded
securities to account for them as trading securities effective September 30,
2000. See Notes 1 and 4 to our Consolidated Financial Statements (which are
incorporated herein by reference).

                                       27

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Impairment Charges on Securities Available for Sale. Prior to our transfer
of securities available for sale to trading on September 30, 2000, we recorded
impairment charges on securities available as a result of declines in fair value
that we deemed to be other-than-temporary. See "Changes in Financial Condition -
Trading Securities" and Note 1 to our Consolidated Financial Statements (which
is incorporated herein by reference).

      Gain (Loss) on Real Estate Owned, Net. The following table sets forth the
results of our real estate owned (which does not include investments in real
estate, as discussed below) during the years indicated:


<TABLE>
<CAPTION>
                                                 2001          2000          1999
                                             ----------     ----------    ----------
<S>                                          <C>            <C>           <C>       
Gains on sales............................   $   14,111     $   22,515    $   36,265
Provision for losses in fair value........      (17,766)       (26,674)      (28,008)
Carrying costs, net.......................       (5,601)       (10,745)      (12,214)
                                             ----------     ----------    ----------
(Loss) gain on real estate owned, net.....   $   (9,256)    $  (14,904)   $   (3,957)
                                             ==========     ==========    ==========
</TABLE>


      See "Changes in Financial Condition - Real Estate Owned, Net" for
additional information regarding real estate owned and the related provision for
losses in fair value.

      Gain (Loss) on Other Non-Interest Earning Assets. The following table sets
forth the principal components of net gains (losses) we recorded on other
non-interest earning assets for the years indicated:


<TABLE>
<CAPTION>
                                                 2001          2000          1999
                                             ----------     ----------    ----------
<S>                                          <C>            <C>           <C>       
Gain on sale of investments in real
  estate (1)..............................   $       45     $   22,949    $    1,753
Gain (loss) on sale of affordable housing          (956)           497         6,591
properties................................
Gain on sale of Kensington................           --         20,025            --
Gain on sale of Ocwen UK..................           --             --        50,371
Other.....................................         (143)         2,046           (22)
                                             ----------     ----------    ----------
                                             $   (1,054)    $   45,517    $   58,693
                                             ==========     ==========    ==========
<FN>
(1)   Gains earned for 2000 resulted primarily from sales of real estate we
      acquired in connection with our acquisition of OAC in October 1999.
</FN>
</TABLE>


      Net Operating Gains on Investments in Real Estate. The following table
sets forth the results of our investments in real estate during the years
indicated:


<TABLE>
<CAPTION>
                                                2001           2000          1999
                                              ---------     ---------      ---------
<S>                                           <C>           <C>            <C>      
Operating income, net (1)..................   $   6,758     $  15,856      $   3,637
Equity in earnings of loans accounted for
  as investments in real estate (2)........       3,338        12,427             --
Impairment write-down (3)..................      (4,515)         (704)        (2,817)
                                              ---------     ---------      ---------
                                              $   5,581     $  27,579      $     820
                                              =========     =========      =========
<FN>
(1)   The decrease in operating income from our investments in real estate
      during 2001 is primarily due to sales of properties during 2000, most of
      which we acquired in connection with our acquisition of OAC in October
      1999.

(2)   The decline in equity in earnings related to certain loans we account for
      as investments in real estate during 2001 is primarily due to the
      repayment of loans during 2000, which generated significant resolution
      gains, and an increase in our non-performing loans in 2001.

(3)   Write-downs we recorded during 2001 consisted of $1,471 on our investment
      in a shopping center in Bradenton, and $2,225 on our investment in three
      assisted living facilities. See "Changes in Financial Condition -
      Investments in Real Estate" and "Changes in Financial Condition - Real
      Estate Held for Sale."
</FN>
</TABLE>


      Amortization of Excess of Net Assets Acquired over Purchase Price. The
amortization of excess of net assets acquired over purchase price resulted from
our acquisition of OAC on October 7, 1999. Our acquisition resulted in an excess
of net assets acquired over the purchase price of $60,042, which we amortize on
a straight-line basis. Effective October 1, 2000, we reduced the amortization
period

                                       28

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

from 60 months to 39 months as a result of an acceleration of projected sale
dates for the acquired assets. This reduction in amortization period accounts
for the increase in amortization during 2001 as compared to 2000. The
unamortized balance of the excess of net assets acquired over purchase price at
December 31, 2001 was $18,133, as compared to $36,665 at December 31, 2000. On
January 1, 2002, upon adoption of Statement of Financial Accounting Standard
("SFAS") No. 141 and No. 142, we reversed the unamortized balance to income as
the effect of a change in accounting principle as required by these statements.
See Note 1 and Note 2 to our Consolidated Financial Statements (which is
incorporated herein by reference).

      Other Income. See Note 27 to our Consolidated Financial Statements (which
is incorporated herein by reference) for a disclosure of the components of other
income for 2001, 2000 and 1999. The increase in other income during 2001 as
compared to 2000 was primarily due to consulting revenues generated by our joint
venture in Jamaica and real estate commission income generated from the sale of
our real estate owned properties during 2001. Other income for 1999 included
$12,896 of brokerage commissions earned by Ocwen UK prior to its sale on
September 30, 1999.

      Non-Interest Expense. The following table sets forth the principal
components of our non-interest expense during the years indicated:

                                                   2001       2000       1999
                                                 --------   --------   --------
Compensation and employee benefits.............  $ 84,914   $ 83,086   $102,173
Occupancy and equipment........................    11,577     12,005     18,501
Technology and communication costs.............    26,768     23,876     20,957
Loan expenses..................................    15,811     13,051     12,618
Net operating losses on certain affordable
  housing properties...........................    16,580      9,931      6,291
Amortization of excess of purchase price over
  net assets acquired..........................     3,112      3,124      4,448
Professional services and regulatory fees......    14,749     12,829     13,992
Other operating expenses.......................     8,935     12,107     16,088
                                                 --------   --------   --------
                                                 $182,446   $170,009   $195,068
                                                 ========   ========   ========

      Compensation and Employee Benefits. The following table presents the
principal components of compensation and benefits we incurred for the years
indicated:

                                                   2001       2000       1999
                                                 --------   --------   --------
Salaries (1)...................................  $ 58,012   $ 58,580   $ 73,713
Bonuses (2)....................................     9,544      8,876      4,104
Payroll taxes..................................     4,763      4,834      4,789
Commissions....................................     3,541      3,957      4,739
Insurance......................................     2,682      2,736      2,338
Severance......................................     1,701        778        689
Contract programmers...........................     1,539      4,772      5,239
Relocation.....................................     1,049      1,165      1,875
Long-term incentive plan (3)...................        --     (6,012)     3,645
Other..........................................     2,083      3,400      1,042
                                                 --------   --------   --------
                                                   84,914     83,086    102,173
Adjusted for:
  Exclusion of Ocwen UK........................        --         --    (16,520)
  Exclusion of OFS.............................        --         --     (6,174)
  Suspension of long-term incentive plan (3)...        --      6,012     (3,645)
  Reversal of stock option accrual (4).........        --         --      2,248
                                                 --------   --------   --------
                                                 $ 84,914   $ 89,098   $ 78,082
                                                 ========   ========   ========

(1)   Salaries includes fees paid for the services of temporary employees.

(2)   Bonus expense for 2001 and 2000 included $568 and $572, respectively,
      related to stock options we granted to employees at an exercise price
      below fair market value.

(3)   We suspended our long-term incentive plan in the first quarter of 2000
      and reversed the related accrual at that time.

                                       29

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

(4)   In 1999 we decided to grant stock options for services provided in 1999
      and 1998 at an exercise price equal to fair market value, thereby not
      recognizing any bonus expense attributable to stock options for those
      years. We reversed the accrual related to 1998 in 1999 at the time of our
      decision.

      The average number of our full-time employees increased to 1,536 during
2001 as compared to 1,288 during 2000. At December 31, 2001 we had 258 employees
in our Bangalore, India office as we continue our globalization initiative to
reduce labor costs while maintaining the highly skilled level of our employees.
Our plans for 2002 call for a significant increase in the number of our India
employees. As indicated in the table above, excluding the reversal of our
long-term incentive plan accrual in 2000, our compensation and employee benefits
expense declined in 2001. This decline in compensation and employee benefits
expense resulted primarily from a reduction in contract programmers assisting
with the implementation of our residential loan servicing system, which was
completed in January 2001.

      The decline in compensation and employee benefits for 2000 as compared to
1999 was largely a result of our sale of Ocwen UK and our closing of our
domestic subprime lending operations at OFS. As indicated in the table above,
excluding Ocwen UK, OFS and the long-term incentive plan, our compensation and
employee benefits increased during 2000. This increase reflects an increase in
the average number of our full-time employees (excluding Ocwen UK and OFS) from
1,155 to 1,288 between 1999 and 2000, respectively, and reductions in the stock
option component of bonus expense during 1999 as indicated in the table above.

      Occupancy and Equipment. Occupancy and equipment costs consist principally
of rents, depreciation, mail and delivery expense and other costs of our office
operations. Excluding Ocwen UK and OFS, occupancy and equipment expense
decreased $793 during 2000.

      Technology and Communication Costs. Technology and communication costs
consist primarily of depreciation on our computer hardware and software,
technology-related consulting fees (primarily OTX), imaging and telephone
expense. Technology costs for 2001 included $4,620 of one-time expenses
comprised primarily of a $3,185 payment related to the acquisition of an OTX
subsidiary in 1997. Excluding Ocwen UK and OFS, technology and communication
costs increased by $4,907 in 2000. These increases were primarily due to
increased consulting fees incurred at OTX. Additionally, OTX capitalized $2,645
of consulting fees as software development costs during 1999.

      Net Operating Losses on Certain Affordable Housing Properties. Net
operating losses we recorded on investments in certain affordable housing
properties have increased during 2001 and 2000 principally because of impairment
charges we recorded in the amount of $15,587 and $6,448, respectively, for
expected losses on the sale of properties. Partially offsetting the increase in
impairment charges were declines in operating losses as a result of sales. See
"Changes in Financial Condition - Affordable Housing Properties."

      Amortization of Excess of Purchase Price Over Net Assets Acquired
("Goodwill"). Goodwill amortization we recognized during 2001, 2000 and 1999
related entirely to OTX. Amortization in 1999 included a charge of $3,367
reflecting the impact of our reduction in the estimated useful life of the
goodwill. In accordance with the provisions of SFAS No. 142, which we adopted on
January 1, 2002, the remaining balance of our goodwill will no longer be
amortized beginning in 2002. However, our goodwill will be tested annually for
impairment. See Note 1 to our consolidated financial statements (which is
incorporated herein by reference).

      Loan Expenses. Excluding Ocwen UK and OFS, loan expenses increased $5,110
during 2000. The increase in loan expenses during 2000 was due primarily to an
increase in appraisal fees in connection with property valuation services we
provided through ORA.

      Professional Services and Regulatory Fees. Professional services and
regulatory fees are primarily comprised of non-technology related consulting
fees, legal and audit fees and FDIC insurance. The increase in 2001 is primarily
due to a $1,651 increase in FDIC insurance. The decline in professional services
and regulatory fees during 2000 is principally related to Ocwen UK and OFS.
Excluding Ocwen UK and OFS, professional services and regulatory fees increased
by $254 in 2000 as compared to 1999.

      Other Operating Expenses. Other operating expenses include travel costs,
acquisition expenses, marketing costs, and amortization of deferred costs.
Excluding Ocwen UK and OFS, other operating expenses increased $4,328 during
2000. The increase in 2000 was largely due to increased marketing costs we
incurred at OTX and our recognition of $1,355 of previously deferred expenses
related to the sale of affordable housing properties. See Note 28 to our
Consolidated Financial Statements (which is incorporated herein by reference)
for a disclosure of the components of other operating expenses for 2001, 2000
and 1999.

                                       30

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Distributions on Company Obligated, Mandatorily Redeemable Securities of
Subsidiary Trust Holding Solely Junior Subordinated Debentures of the Company.
Cash distributions on our Capital Securities are payable semi-annually in
arrears on February 1 and August 1 of each year at an annual rate of 10.875%. We
recorded $7,132, $11,380, and $13,111 of distributions to holders of the Capital
Securities during 2001, 2000 and 1999, respectively. The decline in
distributions is the result of repurchases we made during 2000 and 1999. See
Note 19 to our Consolidated Financial Statements (which is incorporated herein
by reference) and "Changes in Financial Condition - Company-Obligated,
Mandatorily Redeemable Securities of Subsidiary Trust Holding Solely Junior
Subordinated Debentures of the Company."

      Equity in Earnings (Losses) of Investments in Unconsolidated Entities. The
following table sets forth earnings (losses) earned from our investments in
unconsolidated entities for the years indicated:

                                                2001        2000        1999
                                              --------    --------    --------
Kensington (1)............................    $     --    $ (5,280)   $ (9,154)
OAC (2)...................................          --          --      (1,809)
OPLP (2)..................................          --          --      (1,797)
Other.....................................         304          31         144
                                              --------    --------    --------
                                              $    304    $ (5,249)   $(12,616)
                                              ========    ========    ========

(1)   We sold our 38.7% investment in Kensington on November 22, 2000.

(2)   Before our acquisition of OAC in October 1999, we accounted for our
      investments in OAC and OPLP using the equity method.

      Income Tax Expense (Benefit). The following table provides details of our
income tax expense (benefit) and effective tax rates for the years indicated:


<TABLE>
<CAPTION>
                                                                                         2001           2000           1999
                                                                                     -----------    -----------    -----------
<S>                                                                                  <C>            <C>            <C>        
Income tax expense (benefit) on loss before taxes and extraordinary gain (1).....    $   (24,761)   $    (9,543)   $       108
Provision for valuation allowance on current year's deferred tax asset (1).......         23,348             --             --
Provision for valuation allowance on prior year's deferred tax asset.............         83,000         17,500          2,500
                                                                                     -----------    -----------    -----------
    Income tax expense...........................................................         81,587          7,957          2,608
Income tax expense on extraordinary gain (1).....................................          1,413         10,990          1,491
                                                                                     -----------    -----------    -----------
Total income tax expense.........................................................    $    83,000    $    18,947    $     4,099
                                                                                     ===========    ===========    ===========
<FN>
(1)   Net of the provision to increase the valuation allowance on current year's
      deferred tax asset, we did not record income tax expense or benefit for
      2001. The income tax benefit we recorded on the loss before income taxes
      and extraordinary gain was entirely offset by the provision to increase
      the current year's valuation allowance and the income tax expense on
      extraordinary gains.
</FN>
</TABLE>


      For 2001, 2000 and 1999 our effective tax rate before the provision for
the deferred tax valuation allowance was 54.9%, 6.8% and 6.9%, respectively, and
reflected tax credits of $2,078, $2,577 and $18,242, respectively, resulting
from our investment in affordable housing properties.

      The provision for deferred tax asset valuation allowance is a non-cash
charge we recorded to increase the aggregate valuation allowance to $165,221 at
December 31, 2001 based on our estimate under the applicable accounting rules of
the amount of the deferred tax asset that we are more likely than not to
realize.

      See Note 22 to our Consolidated Financial Statements (which is
incorporated herein by reference) and "Changes in Financial Condition -
Affordable Housing Properties."

                                       31

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Extraordinary Gain on Repurchase of Debt, Net of Taxes. The following
table sets forth the components of the extraordinary gains resulting from our
repurchase of our debt securities during the years indicated:


<TABLE>
<CAPTION>
                                                      2001        2000        1999
                                                    --------    --------    --------
<S>                                                 <C>         <C>         <C>     
10.875% Capital Securities due August 1, 2027:
  Face amount repurchased.........................  $ 18,371    $ 30,470    $ 15,000
                                                    ========    ========    ========
  Extraordinary gain..............................     3,723      11,739       5,547
  Income taxes....................................    (1,378)     (4,343)       (977)
                                                    --------    --------    --------
   Net extraordinary gain.........................  $  2,345    $  7,396    $  4,570
                                                    ========    ========    ========

11.875% Notes due October 1, 2003:
  Face amount repurchased.........................  $ 13,025    $  3,800    $ 21,150
                                                    ========    ========    ========
  Extraordinary gain..............................        52         439       1,322
  Income taxes....................................       (35)       (163)       (232)
                                                    --------    --------    --------
   Net extraordinary gain.........................  $     17    $    276    $  1,090
                                                    ========    ========    ========

11.5% Redeemable Notes due July 1, 2005:
  Face amount repurchased.........................  $     --    $142,955    $     --
                                                    ========    ========    ========
  Extraordinary gain..............................        --      17,525          --
  Income taxes....................................        --      (6,484)         --
                                                    --------    --------    --------
   Net extraordinary gain.........................  $     --    $ 11,041    $     --
                                                    ========    ========    ========

12.00% Subordinated Debentures due June 15, 2005:
  Face amount repurchased.........................  $     --    $     --    $ 33,000
                                                    ========    ========    ========
  Extraordinary gain..............................        --          --       1,605
  Income taxes....................................        --          --        (282)
                                                    --------    --------    --------
   Net extraordinary gain.........................  $     --    $     --    $  1,323
                                                    ========    ========    ========

Total debt repurchases:
  Face amount repurchased.........................  $ 31,396    $177,225    $ 69,150
                                                    ========    ========    ========
  Extraordinary gain..............................     3,775      29,703       8,474
  Income taxes....................................    (1,413)    (10,990)     (1,491)
                                                    --------    --------    --------
   Net extraordinary gain.........................  $  2,362    $ 18,713    $  6,983
                                                    ========    ========    ========
</TABLE>


      See "Changes in Financial Condition - Notes, Debentures and Other
Interest-Bearing Obligations" and "Company Obligated, Mandatorily Redeemable
Securities of Subsidiary Trust Holding Solely Junior Subordinated Debentures of
the Company" and Note 18 and Note 19 to our Consolidated Financial Statements
(which are incorporated herein by reference).

                                       32

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

Changes in Financial Condition

      Trading Securities. The following table sets forth the fair value of our
trading securities at the dates indicated:


<TABLE>
<CAPTION>
                                                                  December 31,  December 31,
                                                                      2001          2000
                                                                  -----------   -----------
<S>                                                               <C>           <C>        
   Mortgage-related securities:
     Collateralized mortgage obligations (AAA-rated) (1).......   $   161,191   $   277,595
                                                                  ===========   ===========
     Subordinates and residuals (2):
      Single family residential:
        BB-rated subordinates .................................   $       625   $     4,563
        B-rated subordinates ..................................           799         2,911
        Unrated subordinates ..................................         1,008         9,361
        Unrated subprime residuals ............................        60,049        93,176
                                                                  -----------   -----------
                                                                       62,481       110,011
      Multi-family residential and commercial unrated
        subordinates ..........................................         2,577         2,636
                                                                  -----------   -----------
                                                                  $    65,058   $   112,647
                                                                  ===========   ===========
<FN>
(1)   During the year ended December 31, 2001, our CMO trading securities
      declined $116,404. This decline was primarily due to $187,113 of
      maturities and principal repayments and $116,715 of sales, offset in part
      by purchases of $188,432.

(2)   During the year ended December 31, 2001, our subordinate, residual and
      other trading securities declined by $47,589. This decline was primarily
      due to $10,721 of maturities and principal repayments, $31,683 of sales
      and $7,416 of net premium amortization.
</FN>
</TABLE>


      On September 30, 2000, we reclassified our portfolio of securities
available for sale to trading.

      CMOs are like traditional debt instruments because they have stated
principal amounts and traditionally defined interest-rate terms. During 1999 and
prior years, we generally retained subordinate and residual securities related
to our securitizations of loans. Subordinate and residual interests in
mortgage-related securities provide credit support to the more senior classes of
the mortgage-related securities. Principal from the underlying mortgage loans
generally is allocated first to the senior classes, with the most senior class
having a priority right to the cash flow from the mortgage loans until its
payment requirements are satisfied. To the extent that there are defaults and
unrecoverable losses on the underlying mortgage loans, resulting in reduced cash
flows, the most subordinate security will be the first to bear this loss.
Because subordinate and residual interests generally have no credit support, to
the extent there are realized losses on the mortgage loans comprising the
mortgage collateral for such securities, we may not recover the full amount or,
indeed, any of our initial investment in such subordinate and residual
interests. Historically, we generally retained the most subordinate classes of
the securities from the securitization and therefore will be the first to bear
any credit losses.

      Subordinate and residual and securities at December 31, 2001 and 2000
included retained interests with a fair value of $25,274 and $43,016,
respectively, from securitizations of loans completed by us during 1999 and
prior years. We determine the present value of estimated cash flows utilizing
valuation assumptions appropriate for each particular transaction. The
significant valuation assumptions have included the estimated prepayment speeds
and the estimated credit losses related to the underlying mortgages. In order to
determine the present value of this estimated excess cash flow, we currently
apply a discount rate of 9.78% to 25.00% to the projected cash flows on the
unrated classes of securities. The annual prepayment rate of the securitized
loans is a function of full and partial prepayments and defaults. We make
assumptions as to the prepayment rates of the underlying loans, which we believe
are reasonable, in estimating fair values of the subordinate securities and
residual securities retained. During 2001, we utilized proprietary prepayment
curves (reaching an approximate range of annualized rates of 14.55% - 40.22%).
During 2001, we estimated annual losses of between 0.76% and 5.26% of the unpaid
principal balance of the underlying loans. See Note 4 to our Consolidated
Financial Statements (which is incorporated herein by reference) for additional
disclosures regarding retained interests.

      Subordinate and residual interests are affected by the rate and timing of
payments of principal (including prepayments, repurchase, defaults and
liquidations) on the mortgage loans underlying a series of mortgage-related
securities. The rate of principal payments may vary significantly over time
depending on a variety of factors, such as the level of prevailing mortgage loan
interest rates and economic, demographic, tax, legal and other factors.
Prepayments on the mortgage loans underlying a series of mortgage-related

                                       33

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

securities are generally allocated to the more senior classes of
mortgage-related securities. Although in the absence of defaults or interest
shortfalls all subordinates receive interest, amounts otherwise allocable to
residuals generally are used to make payments on more senior classes or to fund
a reserve account for the protection of senior classes until
overcollateralization or the balance in the reserve account reaches a specified
level. For residual interests in residential mortgage-backed securities,
over-collaterization is the amount by which the collateral balance exceeds the
sum of the bond principal amounts. Over-collaterization is achieved by applying
monthly a portion of the interest payments of the underlying mortgages toward
the reduction of the class certificate principal amounts, causing them to
amortize more rapidly than the aggregate loan balance. Over-collaterization
represents the first tier of loss protection afforded to the non-residual
holders. To the extent not consumed by losses on more highly rated bonds,
over-collaterization is remitted to the residual holders. In periods of
declining interest rates, rates of prepayments on mortgage loans generally
increase, and if the rate of prepayments is faster than anticipated, then the
yield on subordinates will be positively affected and the yield on residuals
will be negatively affected.

      We periodically assess the carrying value of our subordinate securities
and residual securities retained. There can be no assurance that our estimates
used to determine the value of subordinate securities and residual securities
retained will remain appropriate for the life of each securitization. If actual
loan prepayments or defaults exceed our estimates, the carrying value of our
subordinate securities and residual securities retained may be decreased during
the period in which we recognized the disparity. During 2000, and before our
transfer of securities available for sale to trading, we recorded $11,597 of
impairment charges on our portfolio of subordinate and residual securities as a
result of declines in value that we deemed to be "other- than- temporary."

      The following table presents information regarding our trading subordinate
and residual securities summarized by classification and rating at December 31,
2001:


<TABLE>
<CAPTION>
                                                                Anticipated   Anticipated
                                                                 Yield to      Yield to               Anticipated
                                                                 Maturity      Maturity                Weighted
                                                     Percent        at            at                    Average     Prospective
                                                     Owned by    Purchase      12/31/01                Remaining     Yield at
Rating/Description (1)                   Fair Value    Ocwen        (2)           (3)       Coupon     Life (4)    12/31/01 (5)
-------------------------------------    ----------  --------   -----------   -----------   ------    -----------  ------------
<S>                                      <C>         <C>        <C>           <C>           <C>       <C>          <C>     
Single-family residential:
    BB-rated subordinates............    $     625    100.00%       16.87%       5.54%       6.93%        2.53       70.47%
    B-rated subordinates.............          799    100.00        17.49       28.22        7.31         1.95       66.53
    Unrated subordinates.............        1,008     97.50        15.50       15.82        7.97         0.39       49.42
    Unrated subprime residuals.......       60,049    100.00        18.66        6.41         N/A         5.35       21.85
                                         ---------
                                            62,481
Commercial:
    Unrated subordinates.............        2,577     25.00        22.15        12.10        N/A         1.35       14.06
                                         ---------
                                         $  65,058
                                         =========
<FN>
(1)   Refers to the credit rating designated by the rating agency for each
      securitization transaction. Classes designated "A" have a superior claim
      on payment to those rated "B", which are superior to those rated "C."
      Additionally, multiple letters have a superior claim to designations with
      fewer letters. Thus, for example, "BBB" is superior to "BB," which in turn
      is superior to "B." The lower class designations in any securitization
      will receive interest payments after senior classes and will experience
      losses before any senior class. The lowest potential class designation is
      unrated which, if included in a securitization, will always receive
      interest last and experience losses first.

(2)   Represents the effective yield from inception to maturity based on the
      purchase price and anticipated future cash flows under pricing
      assumptions.

(3)   Represents the effective yield based on the purchase price, actual cash
      flows received from inception until the respective date, and the then
      current estimate of future cash flows under the assumptions at the
      respective date. Changes in the December 31, 2001 anticipated yield to
      maturity from that originally anticipated are primarily the result of
      changes in prepayment assumptions and loss assumptions.

(4)   Represents the weighted average life based on the December 31, 2001 book
      value.

(5)   Represents the effective yield based on the book value of the investment
      and the then current estimate of the future cash flows under assumptions
      at the respective date. Prospective yields are considerably higher than
      the anticipated yield to maturity because book values include impairments
      recorded on the securities when they were classified as available for
      sale.
</FN>
</TABLE>


                                       34

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The following table sets forth the principal amount of mortgage loans by
the geographic location of the property securing the mortgages that underlie our
trading subordinate and residual securities at December 31, 2001:


<TABLE>
<CAPTION>
Description                       California       U.K.        Florida       New York     New Jersey     Other (1)       Total
-------------------------------   ----------    ----------    ----------    ----------    ----------    ----------    ----------
<S>                               <C>           <C>           <C>           <C>           <C>           <C>           <C>       
Single family residential .....   $  211,099    $  112,052    $  107,561    $   67,478    $   61,631    $  599,058    $1,158,879
Commercial ....................       18,842            --            --            --            --        43,714        62,556
Multi-family ..................          450            --            21         4,029           930         2,685         8,115
                                  ----------    ----------    ----------    ----------    ----------    ----------    ----------
Total .........................   $  230,391    $  112,052    $  107,582    $   71,507    $   62,561    $  645,457    $1,229,550
                                  ==========    ==========    ==========    ==========    ==========    ==========    ==========

Percentage (2) ................        18.74%         9.11%         8.75%         5.82%         5.09%        52.49%       100.00%
                                  ==========    ==========    ==========    ==========    ==========    ==========    ==========
<FN>
(1)   Consists of properties located in 46 other states, none of which
      aggregated over $46,844 in any one state.

(2)   Based on a percentage of the total unpaid principal balance of the
      underlying loans.
</FN>
</TABLE>


      See Note 1 and Note 4 to our Consolidated Financial Statements (which is
incorporated herein by reference).

      Loans Available for Sale. Our loans available for sale are comprised
primarily of subprime single family residential loans and are carried at the
lower of cost or aggregate market value. The decline in our loans available for
sale during 2001, 2000 and 1999 primarily reflects our closure of the domestic
subprime origination business in 1999 and our sale of Ocwen UK, also in 1999.

      Activity in Loans Available for Sale. The following table sets forth the
activity in our net loans available for sale during the periods indicated:


<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                 ---------------------------------------------------------------------------
                                                     2001            2000            1999           1998            1997
                                                 ------------    ------------    ------------    ------------   ------------
<S>                                              <C>             <C>             <C>             <C>            <C>         
Balance at beginning of period...............    $     10,610    $     45,213    $    177,847    $    177,041   $    126,366
                                                 ------------    ------------    ------------    ------------   ------------
Purchases (1)................................              --              --          47,129         795,053        278,081
Originations (2).............................              --              --         728,509         959,105        316,101
Sales (3) (4)................................          (7,702)        (24,774)       (865,959)     (1,658,773)      (501,079)
Decrease (increase) in lower of cost or
   market valuation allowance................             478           1,625           1,282          (4,064)        (1,034)
Loans transferred (to)/from loan portfolio...                              --              --              --        (13,674)
Principal repayments, net of capitalized
   interest..................................          (2,076)         (6,785)        (30,314)        (82,728)       (22,151)
Transfer to real estate owned................            (270)         (4,669)        (13,281)         (7,787)        (5,569)
                                                 ------------    ------------    ------------    ------------   ------------
Net (decrease) increase in loans.............          (9,570)        (34,603)       (132,634)            806         50,675
                                                 ------------    ------------    ------------    ------------   ------------
Balance at end of period.....................    $      1,040    $     10,610    $     45,213    $    177,847   $    177,041
                                                 ============    ============    ============    ============   ============
<FN>
(1)   Included $292,848 we purchased during 1998 from the U.S. operations of
      Cityscape Financial Corp. and $421,188 we purchased from the UK operations
      of Cityscape Financial Corp.

(2)   Included approximately $509,800 and $254,300 originated by Ocwen UK during
      1999 and 1998, respectively.

(3)   Included $297,469 related to our sale of Ocwen UK on September 30, 1999.

(4)   Included securitizations of domestic and foreign subprime single family
      residential loans by us during 1999 and prior years. See "Results of
      Operations - Non-Interest Income."
</FN>
</TABLE>


                                       35

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Real Estate Held for Sale. Our real estate held for sale consisted of the
following at the dates indicated:

                                                       December 31,
                                           ------------------------------------
                                              2001         2000         1999
                                           ----------   ----------   ----------
Shopping centers (1).....................  $       --   $   22,670   $       --
Assisted living facilities (2)...........      13,418           --           --
                                           ----------   ----------   ----------
                                           $   13,418   $   22,670   $       --
                                           ==========   ==========   ==========

(1)   During the fourth quarter of 2001, we transferred our shopping center in
      Bradenton, Florida to held for investment after the contract to sell the
      property was terminated. We recorded impairment charges of $1,471 on this
      property during the second quarter of 2001. During the first quarter of
      2001, we sold another shopping center located in Havre, Montana, which had
      a carrying value of $1,034, for no gain.

(2)   We transferred three assisted living facilities from held for investment
      during the third quarter of 2001. We recorded impairment charges of $2,225
      on these properties at the time of transfer based on anticipated sales
      proceeds.

      See "Changes in Financial Condition - Investments in Real Estate" and Note
9 to our Consolidated Financial Statements (which is incorporated herein by
reference).

      Investment in Real Estate. Our investment in real estate consisted of the
following at the dates indicated:

                                                           December 31,
                                                 ------------------------------
                                                   2001       2000       1999
                                                 --------   --------   --------
Properties held for investment:
  Office buildings.............................  $ 32,132   $ 32,112   $202,607
  Retail.......................................    29,637      9,515     33,224
  Building improvements........................    17,513     11,346     17,590
  Tenant improvements and lease commissions....     4,537      1,744      8,150
  Furniture and fixtures.......................        52         52         44
                                                 --------   --------   --------
                                                   83,871     54,769    261,615
  Accumulated depreciation.....................    (5,327)    (2,359)    (9,011)
                                                 --------   --------   --------
                                                   78,544     52,410    252,604
                                                 --------   --------   --------
Loans accounted for as investments in real
 estate:
  Multi-family residential.....................        --         97         --
  Nonresidential...............................    30,436     45,689         --
                                                 --------   --------   --------
                                                   30,436     45,786         --
                                                 --------   --------   --------
Properties held for lease:
  Land and land improvements                           --      1,256      1,256
  Building.....................................        --     15,641     14,629
  Accumulated depreciation.....................        --       (855)      (248)
                                                 --------   --------   --------
                                                       --     16,042     15,637
                                                 --------   --------   --------

Investment in real estate partnerships.........     7,916      8,523         --
                                                 --------   --------   --------
                                                 $116,896   $122,761   $268,241
                                                 ========   ========   ========

                                       36

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Properties Held for Investment. These properties were acquired by us as a
result of our acquisition of OAC. The increase in our investment during 2001 was
due primarily to capitalized improvements and the transfer of our shopping
center in Bradenton, Florida from held for sale. The decline in our investment
during 2000 was due to sales and the transfer of properties from held for
investment to held for sale. Our properties held for investment at December 31,
2001 were comprised of the following:


<TABLE>
<CAPTION>
     Date                                                                                              %
   Acquired              Property                 Location         Square Feet     Property Type     Leased    Carrying Value
---------------  -------------------------  ---------------------  -------------  ---------------  ----------  --------------
<S>              <C>                        <C>                    <C>            <C>              <C>         <C>           
07/22/98         841 Prudential Drive (1)   Jacksonville, FL           550,000    Office Bldg.        95.6%      $     41,937
04/09/98         7075 Bayers Road (2)       Halifax, Nova Scotia       402,529    Shopping Ctr.       66.9             20,675
11/10/97         905-1205 Cortez Road (3)   Bradenton, FL              290,673    Shopping Ctr.       93.9             21,259

                                                                         Accumulated depreciation                      (5,327)
                                                                                                                 ------------
                                                                                                                 $     78,544
<FN>
(1)   In July 1998, OAC purchased the Prudential Building, a 22-story office
      building located in the central business district of Jacksonville,
      Florida. OAC funded the purchase with cash on hand and advances from a
      line of credit. Simultaneously with this closing, OAC also leased 98% of
      the building back to the Prudential Insurance Co. of America for a term
      expiring July 31, 2002 and sold two adjacent parking areas to a
      neighboring hospital. Aetna U.S. Healthcare has executed a 7-year lease,
      commencing on August 1, 2002, for approximately 297,000 square feet. This
      lease is contingent upon, among other factors, the construction and
      completion of an 1,100 space parking garage before the commencement date.

(2)   In April 1998, OAC acquired the Bayers Road Shopping Centre. OAC acquired
      the property by foreclosure on the loans secured by the property, which
      OAC acquired at a discount in September 1997. The property consists
      primarily of retail space but also includes some office space and storage
      space. The original buildings were built in 1956 and were enclosed and
      expanded in several phases between 1971 and 1987. We currently are
      implementing a renovation plan to establish the second level as a
      community shopping center anchored by value-oriented retailers while
      filling the lower level with service providers, discount retailers and
      entertainment uses. The third level will remain office space.

(3)   In November 1997, OAC purchased Cortez Plaza, a shopping center located in
      a suburb of Tampa, Florida. This property was built in 1956 and renovated
      in 1988. In a separate transaction, OAC simultaneously purchased the fee
      simple title to a large portion of the shopping center that had been
      subject to a ground lease.
</FN>
</TABLE>


                                       37

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The following table sets forth a summary schedule of the total lease
expirations for our investments in real estate for leases in place as of
December 31, 2001, assuming that none of our tenants exercise renewal options or
termination rights, if any, at or before the scheduled expirations.


<TABLE>
<CAPTION>
                                                           Percentage of                       Average Base     Percentage of
                                                             Aggregate         Annualized        Rent per         Aggregate
                        Number of       Square Footage       Portfolio        Base Rent of    Square Foot of      Portfolio
  Year of Lease          Leases          of Expiring       Leased Square        Expiring         Expiring      Annualized Base
  Expiration (1)        Expiring            Leases             Feet            Leases (2)       Leases (3)          Rent
-----------------  -----------------  -----------------  -----------------  ----------------  ---------------  ---------------
<S>                     <C>               <C>                 <C>              <C>                <C>            <C>  
       2002                 14                504,409             51.06            4,422              8.77           63.14
       2003                  9                 17,361              1.76               98              5.66            1.40
       2004                  9                 28,920              2.93              332             11.48            4.74
       2005                 18                 61,843              6.26              226              3.66            3.23
       2006                  9                106,627             10.79              473              4.43            6.75
       2007                  4                 32,540              3.29              211              6.48            3.01
       2008                  6                 67,868              6.87              326              4.80            4.65
       2009                  1                  3,409              0.35               40             11.65            0.57
       2010                  9                 51,845              5.25              175              3.37            2.49
       2011                  1                 11,791              1.19               19              1.67            0.28
    Thereafter               4                101,257             10.25              682              6.74            9.74
                         -----            -----------        ----------        ---------                          --------
                            84                987,870            100.00%       $   7,004                            100.00%
                         =====            ===========        ==========        =========                          ========

<FN>
(1)   Lease year runs from January 1 to December 31 for all years.

(2)   Annualized base rent is calculated based on the amount of rent scheduled
      from January 1 of the listed year to the lease expiration.

(3)   Average base rent per square foot is calculated using the annualized base
      rent divided by the square footage.
</FN>
</TABLE>


      We regularly engage in negotiations with existing tenants to extend leases
due to expire as well as to enter into new leases with other interested parties.
Square footage involved in such negotiations may vary from a small sub-tenancy
to substantially all the available space at any given property.

      Non-cancellable operating leases with our tenants expire on various dates
through 2012. The future minimum rental income (base rent) we expect to receive
under leases existing as of December 31, 2001, is as follows:

2002...............................................................    $ 8,528
2003...............................................................      4,313
2004...............................................................      3,799
2005...............................................................      3,211
2006...............................................................      3,577
Thereafter.........................................................      8,756
                                                                       -------
                                                                       $32,184

      Loans Accounted for as Investments in Real Estate. We acquired certain
acquisition, development and construction loans in January 2000 in which we
participate in the expected residual profits of the underlying real estate, and
where the borrower has not contributed substantial equity to the project. As
such, we account for these loans under the equity method of accounting as though
we have an investment in a real estate limited partnership. The decline in our
investment during 2001 is due primarily to repayments of loans.

      Properties Held for Lease. During the third quarter of 2001, we recorded
an impairment charge of $2,225 on our three assisted living facilities based on
anticipated sales proceeds and transferred our investment to real estate held
for sale.

                                       38

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Investment in Real Estate Partnerships. Consists of interests in four
limited partnerships operating as real estate ventures, consisting of
multi-family type properties. During 1999, we recognized an impairment charge of
$2,817 on our investment in a nonresidential real estate venture, which reduced
the carrying value to $0.

      See "Changes in Financial Condition - Real Estate Held for Sale" and Note
10 to our Consolidated Financial Statements (which is incorporated herein by
reference).

      Affordable Housing Properties. We have invested in multi-family
residential projects which have been allocated low-income housing tax credits
under Section 42 of the Internal Revenue Code of 1986, as amended, by a state
tax credit allocating agency. The carrying values of our affordable housing
investments are as follows at the dates indicated:


<TABLE>
<CAPTION>
                                                                                                   December 31,
                                                                                      --------------------------------------
                                                                                         2001          2000          1999
                                                                                      ----------    ----------    ----------
<S>                                                                                   <C>           <C>           <C>       
Investments solely as a limited partner made prior to May 18, 1995..................  $   21,768    $   53,399    $   17,327
Investments solely as a limited partner made on or after May 18, 1995...............       6,838        15,185        59,541
Investments both as a limited and, through subsidiaries, as a general partner.......      73,463        74,228        74,121
                                                                                      ----------    ----------    ----------
     Total .........................................................................  $  102,069    $  142,812    $  150,989
                                                                                      ==========    ==========    ==========
</TABLE>


      The decline in the balances during 2001 and 2000 was due to sales of
projects with a book value of approximately $38,000 and impairment charges of
$15,587, offset by additional investments in projects under construction of
approximately $18,000. During 2000, we entered into agreements to sell
twenty-five of our affordable housing properties, together with the related tax
credits. Although these agreements resulted in the transfer of tax credits and
operating results for these properties to the purchaser, they did not qualify as
sales for accounting purposes due to insufficient cash received and
contingencies with respect to potential repurchase requirements. As a result, we
have valued them at the lower of cost or fair value less disposal costs. At
December 31, 2001 and 2000, our investments in affordable housing properties
included $54,688 and $93,210, respectively, of properties subject to sales
agreements that had not yet qualified as sales for accounting purposes. We
recorded a charge to earnings during 2000 of $6,448 reflecting the expected net
loss to be incurred upon completion of these transactions. During 2001, we
recorded impairment charges of $15,587 on properties not subject to sales
contracts to reflect their estimated net realizable values.

      We account for investments made on or after May 18, 1995, in which we
invest solely as a limited partner, using the equity method in accordance with
the consensus of the Emerging Issues Task Force as recorded in Issue Number
94-1. We account for limited partnership investments made prior to May 18, 1995,
under the effective yield method as a reduction of income tax expense. We
present investments both as a limited and, through a subsidiary, as general
partner on a consolidated basis.

      See Note 12 to our Consolidated Financial Statements (which is
incorporated herein by reference).

      Loan Portfolio, Net. Our net loan portfolio decreased during 2001, 2000
and 1999 reflecting the continuing payoff of multi-family and commercial loans
following our decision in 1999 to cease origination of such loans, offset in
part by our acquisition of loans acquired in 1999 in connection with our
acquisition of OAC.

                                       39

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Composition of Loan Portfolio. The following table sets forth the
composition of our loan portfolio by type of loan at the dates indicated:


<TABLE>
<CAPTION>
                                                                December 31,
                                         -------------------------------------------------------------
                                           2001         2000         1999         1998         1997
                                         ---------    ---------    ---------    ---------    ---------
<S>                                      <C>          <C>          <C>          <C>          <C>      
Single family residential loans ......   $     400    $     848    $   4,334    $  30,361    $  46,226
                                         ---------    ---------    ---------    ---------    ---------
Multi-family residential loans:
   Permanent .........................         277        6,083       23,430       53,311       38,105
   Construction ......................      19,714       39,123       57,526       22,288       33,277
                                         ---------    ---------    ---------    ---------    ---------
     Total multi-family residential...      19,991       45,206       80,956       75,599       71,382
                                         ---------    ---------    ---------    ---------    ---------
Commercial real estate:
   Hotels:
     Permanent .......................          --           --           --       29,735       64,040
     Construction ....................      30,115       38,153       38,349        6,896       25,322
   Office buildings ..................      20,350       20,817       64,745       93,068       68,759
   Land ..............................          --            1        2,238        2,266        2,858
   Other .............................          --           --           --        6,762       16,094
                                         ---------    ---------    ---------    ---------    ---------
     Total commercial real estate.....      50,465       58,971      105,332      138,727      177,073
                                         ---------    ---------    ---------    ---------    ---------
Consumer .............................           9           48           82          132          244
                                         ---------    ---------    ---------    ---------    ---------
Unsecured ............................         200           --           --           --           --
                                         ---------    ---------    ---------    ---------    ---------
                                            71,065      105,073      190,704      244,819      294,925
Undisbursed loan funds ...............      (2,914)      (8,879)     (24,654)      (7,099)     (22,210)
Unamortized deferred fees ............         (29)        (372)      (1,383)      (2,480)      (2,721)
Allowance for loan losses ............      (3,197)      (2,408)      (7,259)      (4,928)      (3,695)
                                         ---------    ---------    ---------    ---------    ---------
                                         $  64,925    $  93,414    $ 157,408    $ 230,312    $ 266,299
                                         =========    =========    =========    =========    =========
</TABLE>


      Contractual Principal Repayments. The following table sets forth certain
information at December 31, 2001 regarding the dollar amount of loans maturing
in our loan portfolio based on scheduled contractual amortization, as well as
the dollar amount of loans which have fixed or adjustable interest rates. We
report demand loans (loans having no stated schedule of repayments and no stated
maturity) and overdrafts as due in one year or less. We have not reduced loan
balances for (i) undisbursed loan proceeds, unearned fees and the allowance for
loan losses or (ii) non-performing loans.


<TABLE>
<CAPTION>
                                                                                Maturing in
                                              -------------------------------------------------------------------------------
                                                                  After         After Five
                                                                 One Year          Years
                                                   One         Through Five     Through Ten       After Ten
                                              Year or Less        Years            Years            Years            Total
                                              ------------     ------------     -----------      -----------      -----------
<S>                                            <C>              <C>             <C>              <C>              <C>        
Single family residential loans..........      $        91      $        --     $        24      $       285      $       400
Multi-family residential loans...........           19,131               --             860               --           19,991
Commercial real estate and land loans....           50,465               --              --               --           50,465
Consumer and other loans.................                9               --              --              200              209
                                               -----------      -----------     -----------      -----------      -----------
                                               $    69,696      $        --     $       884      $       485      $    71,065
                                               ===========      ===========     ===========      ===========      ===========

Interest rate terms on amounts due:
   Fixed.................................      $    20,719      $        --     $       884      $       395      $    21,998
   Adjustable............................           48,977               --              --               90           49,067
                                               -----------      -----------     -----------      -----------      -----------
                                               $    69,696      $        --     $       884      $       485      $    71,065
                                               ===========      ===========     ===========      ===========      ===========
</TABLE>


      Scheduled contractual principal repayments may not reflect the actual
maturities of loans because of prepayments and, in the case of conventional
mortgage loans, due-on-sale clauses. The average life of mortgage loans,
particularly fixed-rate loans, tends to increase when current mortgage loan
rates are substantially higher than rates on existing mortgage loans and,
conversely, to decrease when rates on existing mortgages are substantially
higher than current mortgage loan rates.

                                       40

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Activity in the Loan Portfolio. The following table sets forth the
activity in our net loan portfolio during the periods indicated:


<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                      -----------------------------------------------------------------------
                                                         2001           2000           1999           1998           1997
                                                      -----------    -----------    -----------    -----------    -----------
<S>                                                   <C>            <C>            <C>            <C>            <C>        
Balance at beginning of period.....................   $    93,414    $   157,408    $   230,312    $   266,299    $   402,582
                                                      -----------    -----------    -----------    -----------    -----------
Originations and funded commitments:
   Single family residential loans.................            --            --             --              --          1,987
   Multi-family residential loans..................         5,109         36,165          3,692         56,657         16,799
   Commercial real estate loans....................        12,835          3,627         17,258        116,452         69,948
   Commercial non-mortgage and
     consumer loans................................           200             --             --             --          1,140
                                                      -----------    -----------    -----------    -----------    -----------
     Total loans originated (1)....................        18,144         39,792         20,950        173,109         89,874
                                                      -----------    -----------    -----------    -----------    -----------
Purchases:
   Single family residential loans.................            --             --          6,209             --             78
   Multi-family residential loans..................            --             --         45,285             --             --
   Commercial real estate loans....................            --             --         69,619             --             --
                                                      -----------    -----------    -----------    -----------    -----------
     Total loans purchased (2).....................            --             --        121,113             --             78
                                                      -----------    -----------    -----------    -----------    -----------
Sales..............................................       (23,288)       (32,959)       (53,197)            --         (2,346)
Loans transferred from available for sale..........            --             --             --             --         13,782
Principal repayments and other.....................       (28,618)       (89,591)      (138,530)      (222,668)      (306,916)
Transfer to real estate owned......................          (246)        (2,872)        (4,451)          (547)          (661)
Decrease (increase) in undisbursed loan funds......         5,965         15,774        (17,555)        15,111         67,630
Decrease in unamortized deferred fees..............           343          1,011          1,097            241          2,448
Decrease (increase) in allowance for loan losses...          (789)         4,851         (2,331)        (1,233)          (172)
                                                      -----------    -----------    -----------    -----------    -----------
Net (decrease) increase in loans...................       (28,489)       (63,994)       (72,904)       (35,987)      (136,283)
                                                      -----------    -----------    -----------    -----------    -----------
Balance at end of period...........................   $    64,925    $    93,414    $   157,408    $   230,312    $   266,299
                                                      ===========    ===========    ===========    ===========    ===========
<FN>
(1)   Originations in 2001 and 2000 represent loans made to facilitate sales of
      our own assets and fundings of construction loans we originated in prior
      years.

(2)   Purchases during 1999 represent loans, including undisbursed loans, we
      acquired as a result of our acquisition of OAC.
</FN>
</TABLE>


      The following table sets forth certain information relating to our
non-performing loans in our loan portfolio at the dates indicated:


<TABLE>
<CAPTION>
                                                                                   December 31,
                                                        --------------------------------------------------------------------
                                                          2001           2000          1999           1998           1997
                                                        ---------      ---------     ---------      ---------      ---------
<S>                                                     <C>            <C>           <C>            <C>            <C>      
Non-performing loans:
 Single family residential loans.................       $      --      $     316     $     982      $   1,169      $   1,575
 Multi-family residential loans (1)..............          17,201         13,373        11,037          7,392          7,583
 Commercial real estate and other................               5          4,581        19,360            488             --
                                                        ---------      ---------     ---------      ---------      ---------
    Total........................................       $  17,206      $  18,270     $  31,379      $   9,049      $   9,158
                                                        =========      =========     =========      =========      =========

Non-performing loans as a percentage of:
 Total loans (2).................................          25.26%         19.07%        19.06%          3.85%          3.39%
 Total assets....................................           1.01%          0.81%         0.96%          0.27%          0.30%

Allowance for loan losses as a percentage of:
    Total loans (2)..............................           4.69%          2.51%         4.41%          2.09%          1.37%
    Non-performing loans.........................          18.58%         13.18%        23.13%         54.46%         40.35%

<FN>
(1)   Non-performing multi-family residential loans at December 31, 2001 were
      comprised of 3 loans, all of which management believes are adequately
      collateralized and reserved.

(2)   Total loans is net of undisbursed loan proceeds and unamortized deferred
      fees.
</FN>
</TABLE>


                                       41

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      See Note 5 to our Consolidated Financial Statements (which is incorporated
herein for reference).

      Discount Loan Portfolio, Net. Our discount loan portfolio has decreased
during 2001, 2000 and 1999. Resolutions and repayments, loans transferred to
real estate owned and sales more than offset acquisitions during those years. We
have not acquired any discount loans since 2000. Substantially all of our
discount loan portfolio is secured by first mortgage liens on real estate.

      Composition of the Discount Loan Portfolio. The following table sets forth
the composition of our discount loan portfolio by type of loan at the dates
indicated:


<TABLE>
<CAPTION>
                                                                              December 31,
                                           ----------------------------------------------------------------------------------
                                               2001              2000             1999              1998             1997
                                           ------------      ------------     ------------      ------------     ------------
<S>                                        <C>               <C>              <C>               <C>              <C>         
Principal balance:
   Single family residential loans....     $     56,699      $    289,883     $    597,719      $    597,100     $    900,817
                                           ------------      ------------     ------------      ------------     ------------
   Multi-family residential loans.....           13,328           105,591          191,971           244,172          191,302
                                           ------------      ------------     ------------      ------------     ------------
   Commercial real estate loans:
     Office buildings.................           43,913            77,608           97,784           154,063          363,681
     Hotels...........................              911            63,967           75,095           100,407           98,907
     Retail properties................           47,492            85,924          105,247            21,230          106,755
     Other properties.................              607            36,511           87,148           173,310          131,692
                                           ------------      ------------     ------------      ------------     ------------
                                                 92,923           264,010          365,274           449,010          701,035
                                           ------------      ------------     ------------      ------------     ------------
   Other loans (1)....................           10,337            17,188           21,615            10,144            1,865
                                           ------------      ------------     ------------      ------------     ------------
                                                173,287           676,672        1,176,579         1,300,426        1,795,019
                                           ------------      ------------     ------------      ------------     ------------
Unaccreted discount:
   Single family residential loans....          (16,460)          (74,184)        (147,630)         (161,650)        (170,743)
   Multi-family residential loans.....             (650)           (5,176)         (37,981)          (20,795)         (45,944)
   Commercial real estate loans.......          (19,296)          (40,413)         (57,604)          (69,747)        (120,457)
   Other loans........................               --                --             (954)             (321)            (206)
                                          -------------     -------------    -------------     -------------    -------------
                                                (36,406)         (119,773)        (244,169)         (252,513)        (337,350)
                                          -------------     -------------    -------------     -------------    -------------
                                                136,881           556,899          932,410         1,047,913        1,457,669
Allowance for loan losses.............          (17,554)          (20,871)         (19,181)          (21,402)         (23,493)
                                           ------------      ------------     ------------      ------------     ------------
                                           $    119,327      $    536,028     $    913,229      $  1,026,511     $  1,434,176
                                           ============      ============     ============      ============     ============

<FN>
(1)   Included $10,337, $17,188, $16,397 and $8,248 at December 31, 2001, 2000,
      1999 and 1998, respectively, of charged-off unsecured credit card
      receivables which were acquired at a discount. Collections are accounted
      for under the cost recovery method. These receivables were fully reserved
      at December 31, 2001.
</FN>
</TABLE>


     Activity in the Discount Loan Portfolio. The following table sets forth the
activity in our net discount loan portfolio during the periods indicated:


<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                 --------------------------------------------------------------------------
                                                    2001            2000            1999           1998            1997
                                                 -----------     -----------     -----------    -----------     -----------
<S>                                              <C>             <C>             <C>            <C>             <C>        
Amount
Balance at beginning of period...............    $   536,028     $   913,229     $ 1,026,511    $ 1,434,176     $ 1,060,953
Acquisitions (1)(2)(3):
  Single family residential loans............             --         164,920         516,744        613,201       1,061,967
  Multi-family residential loans.............             --          21,378          78,244        231,130          57,707
  Commercial real estate loans...............             --          25,612         157,258        264,697         656,904
  Other......................................             --          10,030          17,414         14,699             195
                                                 -----------     -----------     -----------    -----------     -----------
                                                          --         221,940         769,660      1,123,727       1,776,773
                                                 -----------     -----------     -----------    -----------     -----------
Resolutions and repayments (4)...............        (98,679)       (216,480)       (372,442)      (539,353)       (484,869)
Loans transferred to real estate owned.......        (92,433)       (193,469)       (203,043)      (382,904)       (292,412)
Sales (5)....................................       (312,273)       (311,897)       (318,022)      (696,063)       (518,872)
Decrease (increase) in discount..............         83,367         124,395           8,344         84,837         (95,442)
Decrease (increase) in allowance.............          3,317          (1,690)          2,221          2,091         (11,955)
                                                 -----------     -----------     -----------    -----------     -----------
Balance at end of period.....................    $   119,327     $   536,028     $   913,229    $ 1,026,511     $ 1,434,176
                                                 ===========     ===========     ===========    ===========     ===========
</TABLE>


                                       42

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                 --------------------------------------------------------------------------
                                                    2001            2000            1999            1998           1997
                                                 -----------     -----------     -----------     -----------    -----------
<S>                                              <C>             <C>             <C>             <C>            <C>        
Number of Loans
Balance at beginning of period...............          4,021           8,064           8,100          12,980          5,460
Acquisitions (1)(2)(3):
Single  family residential loans.............             --           2,208           6,606           7,779         17,154
Multi-family residential loans...............             --               9              34              92            173
Commercial real estate loans.................             --              12             202             205            354
Other........................................             --               2               6               8             22
                                                 -----------     -----------     -----------     -----------    -----------
                                                          --           2,231           6,848           8,084         17,703
                                                 -----------     -----------     -----------     -----------    -----------
Resolutions and repayments (4)...............           (585)         (1,467)         (1,241)         (1,918)        (1,978)
Loans transferred to real estate owned.......           (739)         (2,400)         (2,367)         (3,193)        (1,596)
Sales (5)....................................         (1,827)         (2,407)         (3,276)         (7,853)        (6,609)
                                                 -----------     -----------     -----------     -----------    -----------
Balance at end of period.....................            870           4,021           8,064           8,100         12,980
                                                 ===========     ===========     ===========     ===========    ===========

<FN>
(1)   Acquisitions exclude certain commercial and multi-family loans which we
      account for as investments in real estate. See "Changes in Financial
      Condition - Investment in Real Estate."

(2)   The decline in acquisitions reflect our strategic decision to move from
      reliance on capital-intensive businesses toward more fee-based businesses.

(3)   Acquisitions of other discount loans during 2000, 1999 and 1998 consisted
      primarily of charged-off unsecured credit card receivables we acquired at
      a discount.

(4)   Resolutions and repayments consists of loans which we resolved in a manner
      which resulted in partial or full repayment of the loan to us, as well as
      principal payments on loans which have been brought current in accordance
      with their original or modified terms (whether pursuant to forbearance
      agreements or otherwise) or on other loans which have not been resolved.

(5)   Included securitizations of performing single family discount loans in
      1999, 1998, and 1997. See "Results of Operations - Non-Interest Income."
</FN>
</TABLE>


     Payment Status of Discount Loans. The following table sets forth certain
information relating to the contractual payment status of loans in our discount
loan portfolio at the dates indicated:


<TABLE>
<CAPTION>
                                                                               December 31,
                                              ----------------------------------------------------------------------------
                                                   2001            2000           1999            1998            1997
                                              -------------   -------------   -------------  -------------   -------------
<S>                                           <C>             <C>             <C>            <C>             <C>          
Loans without Forbearance Agreements:
  Current...................................  $      46,887   $     270,106   $     432,603  $     533,904   $     589,119
  Past due 31 days to 89 days...............          2,071           5,027          18,860         30,652          18,271
  Past due 90 days or more..................         72,070         222,216         329,477        354,436         474,466
  Acquired and servicing not yet transferred             --              --          67,740         39,726           6,557
                                              -------------   -------------   -------------  -------------   -------------
                                                    121,028         497,349         848,680        958,718       1,088,413
                                              -------------   -------------   -------------  -------------   -------------
Loans with Forbearance Agreements:
  Current...................................          1,815           3,273           2,308          1,049           2,905
  Past due 31 days to 89 days...............            453           1,622           7,951          3,267           1,452
  Past due 90 days or more (1)..............         13,585          54,655          73,471         84,879         364,899
                                              -------------   -------------   -------------  -------------   -------------
                                                     15,853          59,550          83,730         89,195         369,256
                                              -------------   -------------   -------------  -------------   -------------
                                              $     136,881   $     556,899   $     932,410  $   1,047,913   $   1,457,669
                                              =============   =============   =============  =============   =============
</TABLE>


                                       43

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

(1)   For our loans with forbearance agreements that are contractually past due
      90 days or more, the following table indicates the payment status of the
      loans under the terms of their forbearance agreements:


<TABLE>
<CAPTION>
                                                                    December 31,
                                    ---------------------------------------------------------------------------
                                        2001            2000            1999           1998            1997
                                    ------------    ------------    ------------    ------------   ------------
      <S>                           <C>             <C>             <C>             <C>            <C>         
      Current.....................  $      6,071    $     33,776    $     52,005    $     57,919   $    216,155
      Past due 31 to 89 days......         2,064           1,698          21,204          23,438         46,576
      Past due 90 days or more....         5,450          19,181             262           3,522        102,168
                                    ------------    ------------    ------------    ------------   ------------
                                    $     13,585    $     54,655    $     73,471    $     84,879   $    364,899
                                    ============    ============    ============    ============   ============
</TABLE>



<TABLE>
<CAPTION>
                                                                               December 31,
                                                ------------------------------------------------------------------------
                                                   2001            2000            1999           1998            1997
                                                ---------       ---------       ---------      ---------       ---------
<S>                                             <C>             <C>             <C>            <C>             <C>   
Percentage of Loans
Loans without Forbearance Agreements:
  Current...................................        34.25%          48.50%          46.40%         50.95%          40.42%
  Past due 31 days to 89 days...............         1.51            0.90            2.02           2.93            1.25
  Past due 90 days or more..................        52.66           39.91           35.33          33.82           32.55
  Acquired and servicing not yet transferred          --              --             7.27           3.79            0.45
                                                ---------       ---------       ---------      ---------       ---------
                                                    88.42           89.31           91.02          91.49           74.67
                                                ---------       ---------       ---------      ---------       ---------

Loans with Forbearance Agreements:
  Current...................................         1.33            0.59            0.25           0.10            0.20
  Past due 31 days to 89 days...............         0.33            0.29            0.85           0.31            0.10
  Past due 90 days or more..................         9.92            9.81            7.88           8.10           25.03
                                                ---------       ---------       ---------      ---------       ---------
                                                    11.58           10.69            8.98           8.51           25.33
                                                ---------       ---------       ---------      ---------       ---------
                                                   100.00%         100.00%         100.00%        100.00%         100.00%
                                                =========       =========       =========      =========       =========
</TABLE>


         The following table sets forth certain information relating to our
non-performing discount loans and allowance for loan losses at the dates
indicated:


<TABLE>
<CAPTION>
                                                                               December 31,
                                               ---------------------------------------------------------------------------
                                                   2001            2000           1999            1998            1997
                                               ------------    ------------    ------------   ------------    ------------
<S>                                            <C>             <C>             <C>            <C>             <C>         
Non-performing loans (1):
   Single family.............................  $     31,828    $    179,276    $    328,582   $    352,390    $    572,290
   Multi-family..............................         5,251           4,381          20,098         23,975          71,749
   Commercial real estate and other..........        48,576          93,214          54,268         62,950          95,326
                                               ------------    ------------    ------------   ------------    ------------
     Total...................................  $     85,655    $    276,871    $    402,948   $    439,315    $    739,365
                                               ============    ============    ============   ============    ============

Non-performing loans as a percentage of (1):
  Total loans (2)............................     62.58%          49.44%          43.22%         41.92%          50.72%
  Total assets...............................      5.01%          12.27%          12.28%         13.31%          24.26%

Allowance for loan losses as a percentage of:
  Total loans (2)............................     12.82%           3.75%           2.06%          2.04%           1.61%
  Non-performing loans (1)...................     20.49%           7.56%           4.76%          4.87%           3.18%

<FN>
(1)   Loans which are contractually past due 90 days or more in accordance with
      the original terms of the loan agreement.

(2)   Total loans are net of unaccreted discount.
</FN>
</TABLE>


      See Note 6 to our Consolidated Financial Statements (which is incorporated
herein by reference).

                                       44

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Match Funded Assets. Our match funded assets were comprised of the
following at the dates indicated:

                                                         December 31,
                                               --------------------------------
                                                 2001        2000        1999
                                               --------    --------    --------
Single family residential loans..............  $ 53,123    $ 80,834    $105,596
Allowance for loan losses....................      (170)       (285)       (495)
                                               --------    --------    --------
  Match funded loans, net....................    52,953      80,549     105,101
                                               --------    --------    --------
Match funded securities......................    19,435      36,438      52,693
                                               --------    --------    --------
Match funded advances on loans serviced for
  others:
  Principal and interest.....................    65,705          --          --
  Taxes and insurance........................    21,900          --          --
  Other......................................    14,358          --          --
                                               --------    --------    --------
                                                101,963          --          --
                                               --------    --------    --------
                                               $174,351    $116,987    $157,794
                                               ========    ========    ========

      We acquired single family residential match funded loans in connection
with our acquisition of OAC. OAC had previously securitized these loans and
transferred them to a real estate mortgage investment conduit on November 13,
1998. The transfer did not qualify as a sale for accounting purposes.
Accordingly, we report the proceeds we received from the transfer as a secured
borrowing with pledge of collateral (bonds-match funded agreements).
Non-performing loans amounted to $4,405, $2,831 and $1,127 at December 31, 2001,
2000 and 1999, respectively. The declines in the balance during 2001 and 2000
were due to repayment of loan principal.

      Match funded securities resulted from our transfer of four unrated
residual securities to a trust on December 16, 1999 in exchange for non-recourse
notes. The transfer did not qualify as a sale for accounting purposes.
Accordingly, we reported the amount of proceeds we received from the transfer as
a secured borrowing with pledge of collateral (bonds-match funded agreements).
The declines in the balance during 2001 and 2000 were primarily due to principal
repayments. The following table presents information regarding our match funded
securities summarized by classification and rating:


<TABLE>
<CAPTION>
                                                                                                     Anticipated
                                                                 Original   Anticipated               Weighted
                                                               Anticipated    Yield to                 Average    Prospective
                                                                 Yield to   Maturity at               Remaining     Yield at
                                  Fair Value    Percent Owned    Maturity   12/31/01 (1)   Coupon      Life(2)      12/31/01
                                  ----------    -------------    --------   ------------   ------      -------      --------
<S>                               <C>             <C>             <C>          <C>         <C>       <C>            <C>    
Unrated residuals...............   $ 19,435        100.00%         17.47%       3.89%        N/A     8.36 years     142.27%
                                   ========
<FN>
(1)   Changes in the December 31, 2001 anticipated yield to maturity from that
      originally anticipated are primarily the result of changes in prepayment
      assumptions and, to a lesser extent, loss assumptions.

(2)   Equals the weighted average duration based on the December 31, 2001 book
      value.
</FN>
</TABLE>


     The following table sets forth the principal amount of mortgage loans by
the geographic location of the property securing the mortgages that underlie our
match-funded securities at December 31, 2001:


<TABLE>
<CAPTION>
Description                  California      Florida       Illinois        New York      Washington     Other (1)        Total
-----------                 -----------    -----------    -----------    -----------    -----------    -----------    -----------
<S>                         <C>            <C>            <C>            <C>            <C>            <C>            <C>        
Single family residential   $    44,929    $    33,310    $    14,397    $    11,954    $    12,027    $   172,107    $   288,724
Multi-family ............         1,635            599            695            793             --          4,783          8,505
                            -----------    -----------    -----------    -----------    -----------    -----------    -----------
                            $    46,564    $    33,909    $    15,092    $    12,747    $    12,027    $   176,890    $   297,229
                            ===========    ===========    ===========    ===========    ===========    ===========    ===========

Percentage (2) ..........         15.67%         11.41%          5.08%          4.29%          4.05%         59.50%        100.00%
                            ===========    ===========    ===========    ===========    ===========    ===========    ===========

<FN>
(1)   Consists of properties located in 44 other states, none of which
      aggregated over $11,259 in any one state.

(2)   Based on a  percentage  of the total  unpaid  principal  balance  of the
      underlying loans.
</FN>
</TABLE>


                                       45

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Match funded advances on loans serviced for others resulted from our
transfer of certain residential loan servicing related advances to a third party
in exchange for cash on December 20 and 21, 2001. The transfer did not qualify
as a sale for accounting purposes. Accordingly, we report the amount of proceeds
we received from the sale as a secured borrowing with pledge of collateral
(bonds-match funded agreements.) See "Bonds-Match Funded Agreements" and Note 7
to our Consolidated Financial Statements, (which is incorporated herein by
reference).

      Allowances for Loan Losses. We maintain an allowance for loan losses for
each of our loan, discount loan and match funded loan portfolios at a level
which we consider adequate to provide for probable losses in each portfolio
based upon an evaluation of known and inherent risks in such portfolios. The
following tables set forth (a) the breakdown of the allowance for loan losses on
our loan portfolio, discount loan portfolio and match funded loan portfolios by
loan category and (b) the percentage of loans in each category to total loans in
the respective portfolios at the dates indicated:


<TABLE>
<CAPTION>
                                                                               December 31,
                                                --------------------------------------------------------------------------
                                                   2001            2000            1999           1998            1997
                                                -----------     -----------     -----------    -----------     -----------
<S>                                             <C>             <C>             <C>            <C>             <C>        
Amount
Loan portfolio:
  Single family residential loans...........    $         5     $        10     $        87    $       215     $       512
  Multi-family residential loans............          1,275             993           1,722          2,714           2,163
  Commercial real estate loans..............          1,917           1,405           5,450          1,999           1,009
  Other.....................................             --              --              --             --              11
                                                -----------     -----------     -----------    -----------     -----------
                                                $     3,197     $     2,408     $     7,259    $     4,928     $     3,695
                                                ===========     ===========     ===========    ===========     ===========

Discount loan portfolio:
  Single family residential loans...........    $     3,396     $     3,483     $    11,081    $    10,307     $    15,017
  Multi-family residential loans............            911           1,805           1,681          2,457           2,616
  Commercial real estate loans..............          2,910           6,813           5,152          8,607           5,860
  Other loans (1)...........................         10,337           8,770           1,267             31              --
                                                -----------     -----------     -----------    -----------     -----------
                                                $    17,554     $    20,871     $    19,181    $    21,402     $    23,493
                                                ===========     ===========     ===========    ===========     ===========

Match funded loans:
  Single family residential loans...........    $       170     $       285     $       495    $        --     $        --
                                                ===========     ===========     ===========    ===========     ===========

<FN>
(1)   Allowance for loan losses on other discount loans pertains to our
      charged-off unsecured credit card receivables acquired at a discount.
</FN>
</TABLE>



<TABLE>
<CAPTION>
                                                                               December 31,
                                                -------------------------------------------------------------------------
                                                   2001            2000           1999            1998            1997
                                                ----------      ----------      ----------     ----------      ----------
<S>                                             <C>             <C>             <C>            <C>             <C>  
Percentage of Loans to Total Loans
Loan portfolio:
  Single family residential loans...........           0.6%            0.8%            2.3%          12.4%           15.7%
  Multi-family residential loans............          27.2            42.5            42.5           30.9            24.2
  Commercial real estate loans..............          72.2            56.7            55.2           56.7            60.0
  Other.....................................            --              --              --             --             0.1
                                                ----------      ----------      ----------     ----------      ----------
                                                     100.0%          100.0%          100.0%         100.0%          100.0%
                                                ==========      ==========      ==========     ==========      ==========

Discount loan portfolio:
  Single family residential loans...........          29.4%           42.8%           48.3%          41.6%           50.1%
  Multi-family residential loans............           9.3            15.6            16.5           21.3            10.0
  Commercial real estate loans..............          53.8            39.0            33.0           36.2            39.8
  Other loans...............................           7.5             2.6             2.2            0.9             0.1
                                                ----------      ----------      ----------     ----------      ----------
                                                     100.0%          100.0%          100.0%         100.0%          100.0%
                                                ==========      ==========      ==========     ==========      ==========
</TABLE>


      The allocation of the allowance to each category is not necessarily
indicative of future losses and does not restrict our use of the allowance to
absorb losses in any other category.

                                       46

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The following table sets forth an analysis of activity in the allowance
for loan losses relating to our loan portfolio during the periods indicated:


<TABLE>
<CAPTION>
                                                                              Year Ended December 31,
                                                        -------------------------------------------------------------------
                                                          2001          2000           1999           1998           1997
                                                        --------      --------       --------       --------       --------
<S>                                                     <C>           <C>            <C>            <C>            <C>     
Balance at beginning of period...................       $  2,408      $  7,259       $  4,928       $  3,695       $  3,523
Provision for loan losses........................          2,518             4          1,636            891            325
Charge-offs:
   Single family residential loans...............           (173)           --             (8)          (212)          (100)
   Multi-family residential loans................           (872)       (1,662)            --             --             --
   Commercial real estate loans..................           (684)       (3,193)            --             --             --
   Consumer loans................................             --            --             --             (7)           (53)
                                                        --------      --------       --------       --------       --------
     Total charge-offs...........................         (1,729)       (4,855)            (8)          (219)          (153)
Recoveries:
   Commercial real estate loans..................             --            --             --            561             --
                                                        --------      --------       --------       --------       --------
     Net (charge-offs) recoveries................         (1,729)       (4,855)            (8)           342           (153)
                                                        --------      --------       --------       --------       --------
Acquired allowance (OAC acquisition).............             --            --            703             --             --
                                                        --------      --------       --------       --------       --------
Balance at end of period.........................       $  3,197      $  2,408       $  7,259       $  4,928       $  3,695
                                                        ========      ========       ========       ========       ========
Net (charge-offs) recoveries as a percentage of
   average loan portfolio .......................        (2.11)%       (3.37%)            --%          0.13%         (0.04%)
</TABLE>


      The following table sets forth an analysis of activity in the allowance
for loan losses relating to our discount loan portfolio during the periods
indicated:


<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                        ----------------------------------------------------------------------
                                                           2001           2000           1999           1998           1997
                                                        ----------     ----------     ----------     ----------     ----------
<S>                                                     <C>            <C>            <C>            <C>            <C>       
Balance at beginning of period.....................     $   20,871     $   19,181     $   21,402     $   23,493     $   11,538
Provision for loan losses..........................         12,960         15,266          5,434         17,618         31,894
Charge-offs:
   Single family residential loans.................         (5,791)        (7,132)        (4,409)       (14,574)       (13,281)
   Multi-family residential loans..................             --           (888)          (912)        (2,648)        (2,056)
   Commercial real estate loans....................        (10,970)        (6,193)        (2,687)        (2,888)        (5,012)
   Other loans.....................................             --             --            (44)           (20)            --
                                                        ----------     ----------     ----------     -----------    ----------
      Total charge-offs............................        (16,761)       (14,213)        (8,052)       (20,130)       (20,349)
                                                        ----------     ----------     ----------     ----------     ----------
Recoveries:
   Single family residential loans.................            391            616            397            421            410
   Commercial real estate loans....................             93             21             --             --             --
                                                        ----------     ----------     ----------     ----------     ----------
      Total recoveries.............................            484            637            397            421            410
                                                        ----------     ----------     ----------     ----------     ----------
      Net charge-offs..............................        (16,277)       (13,576)        (7,655)       (19,709)       (19,939)
                                                        ----------     ----------     ----------     ----------     ----------
Balance at end of period...........................     $   17,554     $   20,871     $   19,181     $   21,402     $   23,493
                                                        ==========     ==========     ==========     ==========     ==========
Net charge-offs as a percentage of average discount
   loan portfolio..................................         (4.54%)        (1.66%)        (0.80%)        (1.52%)        (1.55%)
</TABLE>


      Real Estate Owned, Net. Real estate owned, net, has decreased during 2001,
2000 and 1999. Sales of real estate owned more than offset loan foreclosures
during those years. Declines in our acquisitions of discount loans have
contributed to the decline in foreclosures. Our real estate owned consists
almost entirely of properties we acquired by foreclosure or deed-in-lieu thereof
on loans in our discount loan portfolio.

                                       47

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The following table sets forth the composition of our real estate owned by
loan portfolio at the dates indicated:


<TABLE>
<CAPTION>
                                                                                 December 31,
                                                    -----------------------------------------------------------------------
                                                       2001           2000            1999           1998            1997
                                                    ----------     ----------     ----------      ----------     ----------
<S>                                                 <C>            <C>            <C>             <C>            <C>       
Discount loan portfolio:
   Single family residential..................      $   16,150     $   55,751     $   72,193      $   94,641     $   76,409
   Multi-family residential...................              --            149          2,601          20,130         16,741
   Commercial real estate.....................          93,664         88,214         85,233          82,591         71,339
                                                    ----------     ----------     ----------      ----------     ----------
     Total....................................         109,814        144,114        160,027         197,362        164,489
Loan portfolio................................             377          1,384          2,183             227            357
Loans available for sale......................             274            921          5,296           3,962          2,419
                                                    ----------     ----------     ----------      ----------     ----------
                                                    $  110,465     $  146,419     $  167,506      $  201,551     $  167,265
                                                    ==========     ==========     ==========      ==========     ==========
</TABLE>


         The following tables set forth the activity in our real estate owned
during the years indicated:


<TABLE>
<CAPTION>
                                                              2001          2000         1999          1998          1997
                                                           ----------   ----------    ----------   ----------    ----------
<S>                                                        <C>          <C>           <C>          <C>           <C>       
Amount
Balance at beginning of period.........................    $  146,419   $  167,506    $  201,551   $  167,265    $  103,704
Properties acquired through foreclosure or
 deed-in-lieu thereof:
  Discount loans.......................................        92,433      193,469       203,043      382,904       292,412
  Loans available for sale.............................           270        4,669        13,281        7,787         5,569
  Loan portfolio.......................................           246        2,872         4,451          547           661
  Less discount transferred............................       (35,698)     (60,246)      (63,664)    (110,716)      (93,021)
  Add advances transferred.............................         6,790       11,741        13,308       16,551        10,962
                                                           ----------   ----------    ----------   ----------    ----------
                                                               64,041      152,505       170,419      297,073       216,583
                                                           ----------   ----------    ----------   ----------    ----------

Capital improvements...................................        12,737        6,775            37          808           598
Acquired in connection with acquisitions of discount       
 loans.................................................            --        9,059        47,808       19,949        38,486
Sales..................................................      (111,776)    (188,465)     (250,453)    (280,565)     (191,253)
Increase in valuation allowance........................          (956)        (961)       (1,856)      (2,979)         (853)
                                                           ----------   ----------    ----------   ----------    ----------
Balance at end of period...............................    $  110,465   $  146,419    $  167,506   $  201,551    $  167,265
                                                           ==========   ==========    ==========   ==========    ==========
</TABLE>



<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                           ----------------------------------------------------------------
                                                              2001          2000         1999          1998          1997
                                                           ----------   ----------    ----------   ----------    ----------
<S>                                                        <C>          <C>           <C>          <C>           <C>
Number of Properties
Balance at beginning of period.........................         1,298        1,672         1,999        1,505           825
Properties acquired through foreclosure or
 deed-in-lieu thereof:
  Discount loans.......................................           739        2,400         2,367        3,193         1,596
  Loans available for sale.............................             7           47           157           82            54
  Loan portfolio.......................................             1            8            10            3             6
                                                           ----------   ----------    ----------   ----------    ----------
                                                                  747        2,455         2,534        3,278         1,656
                                                           ----------   ----------    ----------   ----------    ----------
Acquired in connection with acquisitions of discount   
 loans.................................................            --          171           931          303           545
Sales..................................................        (1,656)      (3,000)       (3,792)      (3,087)       (1,521)
                                                           ----------   ----------    ----------   ----------    ----------
Balance at end of period...............................           389        1,298         1,672        1,999         1,505
                                                           ==========   ==========    ==========   ==========    ==========
</TABLE>


                                       48

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The following table sets forth the amount of time that we have held our
real estate owned at the dates indicated:


<TABLE>
<CAPTION>
                                                                              December 31,
                                            ---------------------------------------------------------------------------------
                                                2001             2000             1999             1998             1997
                                            ------------      ------------     ------------     ------------     ------------
<S>                                         <C>               <C>              <C>              <C>              <C>         
One to two months.....................      $      2,251      $     17,832     $     30,695     $     38,444     $     83,144
Three to four months..................             1,655            11,450           26,532           79,264           28,912
Five to six months....................             2,244             9,494           11,263           27,115           20,929
Seven to 12 months....................            27,422            18,426           28,606           26,122           23,621
Over 12 months........................            76,893            89,217           70,410           30,606           10,659
                                            ------------      ------------     ------------     ------------     ------------
                                            $    110,465      $    146,419     $    167,506     $    201,551     $    167,265
                                            ============      ============     ============     ============     ============
</TABLE>


      We actively manage our real estate owned. Our sales of real estate owned
resulted in gains (losses), net of the provision for loss, of $(3,655), $(4,159)
and $8,257 during 2001, 2000 and 1999, respectively, which are included in
determining our gain (loss) on real estate owned. Real estate owned that we have
held in excess of one year include a large retail property with a carrying value
of $49,275 at December 31, 2001 which, as anticipated, migrated into the over 12
month category in 1999, because it was being repositioned for sale. The balance
of real estate owned we have held in excess of one year at December 31, 2000
also included an office building with a carrying value of $12,386 which was
subsequently sold in January 2001. The average period during which we held the
real estate owned, which was sold during the years ended December 31, 2001, 2000
and 1999, was 8 months, 7 months and 6 months, respectively.

      We value properties acquired through foreclosure or by deed-in-lieu
thereof at the lower of amortized cost or fair value after foreclosure. We
periodically reevaluate properties included in the our real estate owned
portfolio to determine that we are carrying them at the lower of cost or fair
value less estimated costs to sell. We record holding and maintenance costs we
incur related to properties as expenses in the period incurred. We recognize
decreases in value resulting from valuation adjustments to real estate owned
after acquisition as a valuation allowance. We reflect subsequent increases
related to the valuation of real estate owned as a reduction in the valuation
allowance, but not below zero. We charge or credit to income, respectively,
increases and decreases in the valuation allowance.

      The following table sets forth the activity, in aggregate, in the
valuation allowance on our real estate owned during the years indicated:


<TABLE>
<CAPTION>
                                                           2001           2000           1999           1998          1997
                                                        ----------     ----------     ----------     ----------    ----------
<S>                                                     <C>            <C>            <C>            <C>           <C>       
Balance at beginning of year......................      $   18,142     $   17,181     $   15,325     $   12,346    $   11,493
Provisions for losses.............................          17,766         26,674         28,008         18,626        13,450
Charge-offs and sales.............................         (16,810)       (25,713)       (26,152)       (15,647)      (12,597)
                                                        ----------     ----------     ----------     ----------    ----------
Balance at end of year............................      $   19,098     $   18,142     $   17,181     $   15,325    $   12,346
                                                        ==========     ==========     ==========     ==========    ==========

Valuation allowance as a percentage of total gross
   real estate owned (1)..........................           14.74%         11.02%          9.30%          7.07%         6.87%

<FN>
(1)   The increase in this ratio since 1998 reflects an increasing valuation
      allowance and a declining balance of gross real estate owned. The
      valuation allowance has not declined proportionately primarily because of
      the large retail property we are repositioning for sale, as discussed
      above.
</FN>
</TABLE>


      See Note 8 to our Consolidated Financial Statements (which is incorporated
herein by reference).

      Deferred Tax Asset. The following table provides details of our net
deferred tax assets as of the dates indicated:


<TABLE>
<CAPTION>
                                                                                          December 31,
                                                                   ---------------------------------------------------------
                                                                        2001                 2000                 1999
                                                                   ---------------      ---------------      ---------------
<S>                                                                <C>                  <C>                  <C>            
Deferred tax asset, net of deferred tax liabilities............    $       173,632      $       154,864      $       178,293
                                                                   ---------------      ---------------      ---------------
Valuation allowance:
  OAC purchase accounting adjustment...........................             38,873               38,873               38,873
  Allowance on deferred tax asset..............................            126,348               20,000                2,500
                                                                   ---------------      ---------------      ---------------
                                                                           165,221               58,873               41,373
                                                                   ---------------      ---------------      ---------------
Deferred tax asset, net........................................    $         8,411      $        95,991      $       136,920
                                                                   ===============      ===============      ===============
</TABLE>


                                       49

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The decreases in our net deferred tax asset during 2001 and 2000 were due
in large part to an increase in our valuation allowance resulting from our
evaluation of the future realizability of the deferred tax asset in the near
future. Depending on the results of operations in future periods, additional
provisions may be required, although considered unlikely, or the valuation
allowance may be reversed to income. See Note 22 to our Consolidated Financial
Statements (which is incorporated herein by reference) for a disclosure of the
components of our gross deferred tax assets and liabilities.

      Advances on Loans and Loans Serviced for Others. Advances related to our
loan portfolios and loans we serviced for others consisted of the following at
the dates indicated:


<TABLE>
<CAPTION>
                                                                                        December 31,
                                                                   ----------------------------------------------------
                                                                       2001                 2000               1999
                                                                   -----------          -----------         -----------
<S>                                                                <C>                  <C>                 <C>        
Loan Portfolios:
     Taxes and insurance.........................................  $     2,214          $    11,168         $    19,967
     Other.......................................................        4,135               11,840              11,594
                                                                   -----------          -----------         -----------
                                                                         6,349               23,008              31,561
                                                                   -----------          -----------         -----------
Loans Serviced for Others:
     Principal and interest......................................      107,319               95,191              58,497
     Taxes and insurance.........................................       99,972               64,159              41,569
     Other.......................................................       69,543               44,697              30,921
                                                                   -----------          -----------         -----------
                                                                       276,834              204,047             130,987
                                                                   -----------          -----------         -----------
                                                                   $   283,183          $   227,055         $   162,548
                                                                   ===========          ===========         ===========
</TABLE>


      The increase in advances on loans serviced for others reflects the growth
in our residential loan servicing business. The balances at December 31, 2001 do
not include advances transferred to a third party in exchange for cash, a
transaction which did not qualify as a sale for accounting purposes and which we
accounted for as a secured borrowing with pledge of collateral. We reclassified
those transferred advances to match funded assets at the time of the transfer in
December 2001. See "Changes in Financial Condition - Match Funded Assets" and
Note 11 to our Consolidated Financial Statements (which is incorporated herein
by reference).

      Mortgage Servicing Rights. Our unamortized balance of mortgage servicing
rights amounted to $101,107, $51,426 and $11,683 at December 31, 2001, 2000 and
1999, respectively. The increase in our investment during 2001 and 2000 reflects
the growth of our residential loan servicing business through purchases of
rights to service loans for others. Our purchases of new servicing rights
amounted to $79,522 and $49,779 during 2001 and 2000, respectively. Our
purchases were offset in part by amortization of $29,841 and $10,036 during 2001
and 2000, respectively. See Note 11 to our Consolidated Financial Statements
(which is incorporated herein by reference).

      Deposits. Our deposits decreased during 2001 and 2000 primarily as a
result of maturing brokered certificates of deposits. We did not issue any new
brokered certificates of deposit during 2001 and, at this time, do no intend to
issue any such deposits in the foreseeable future.

                                       50

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The following table sets forth information related to our deposits at the
dates indicated:


<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                  ----------------------------------------------------------------------------------------------
                                               2001                             2000                           1999
                                  ------------------------------  ------------------------------  ------------------------------
                                              Weighted    % of                Weighted    % of                Weighted    % of
                                               Average   Total                 Average   Total                 Average   Total
                                    Amount      Rate    Deposits    Amount      Rate    Deposits    Amount      Rate    Deposits
                                  ----------  --------  --------  ----------  --------  --------  ----------  --------  --------
<S>                               <C>         <C>       <C>       <C>         <C>       <C>       <C>         <C>       <C>    
Non-interest bearing checking
   accounts.....................  $    5,624      --%      0.8%   $   13,523       --%     1.1%   $    9,215      --%      0.6%
NOW and money market checking
   accounts.....................      15,479    1.44%      2.4        14,670     5.18%     1.2        30,342    4.28%      1.9
Savings accounts................       1,287    1.25%      0.2         1,274     2.38%     0.1         1,361    2.38%      0.1
                                  ----------             -----    ----------             -----    ----------             -----
                                      22,390               3.4        29,467               2.4        40,918               2.6
                                  ----------                      ----------                      ----------
Certificates of deposit (1)(2)       636,037                       1,176,566                       1,536,997
Unamortized deferred fees.......      (1,549)                         (3,989)                         (6,688)
                                  ----------                      ----------                      ----------
Total certificates of deposit...     634,488    6.06%     96.6     1,172,577     6.34%    97.6     1,530,309    5.92%     97.4
                                  ----------             -----    ----------             -----    ----------             -----
                                  $  656,878             100.0%    1,202,044             100.0%   $1,571,227             100.0%
                                  ==========             =====    ==========             =====    ==========             =====

<FN>
(1)   Included $499,710, $964,443 and $1,379,262 at December 31, 2001, 2000 and
      1999, respectively, of brokered deposits originated through national,
      regional and local investment banking firms which solicit deposits from
      their customers, all of which are non-cancellable.

(2)   At December 31, 2001, 2000 and 1999, certificates of deposit issued on an
      uninsured basis (greater than $100) amounted to $60,804, $75,417 and
      $155,205, respectively. Of the $60,804 of uninsured deposits at December
      31, 2001, $2,149 were from political subdivisions in New Jersey and were
      secured or collateralized as required under state law.
</FN>
</TABLE>


      The following table sets forth remaining maturities for our term deposits
in amounts of $100 or more at December 31, 2001:

Three months or less................................................   $ 56,095
Over three months through six months................................     41,920
Over six months through twelve months...............................     15,874
Thereafter..........................................................     42,674
                                                                       --------
                                                                       $156,563
                                                                       ========

      Escrow Deposits on Loans and Loans Serviced for Others. Escrow deposits on
our loans and loans we serviced for others amounted to $73,565, $56,316 and
$243,420 at December 31, 2001, 2000 and 1999, respectively. The balance at
December 31, 2001 and 2000, consisted principally of custodial deposit balances
representing collections we made from borrowers for the payment of taxes and
insurance premiums on mortgage properties underlying loans we serviced for
others. The balance increased during 2001 principally because of an increase in
loans we serviced for others. The balance at December 31, 1999 also included
custodial deposit balances related to taxes and insurance, but was primarily
comprised of custodial deposit balances representing collections of principal
and interest we received from borrowers which we had yet to remit to investors
under loan servicing agreements. We transferred these custodial balances to a
correspondent bank during 2000. See "Results of Operations - Non-Interest Income
- Servicing and Other Fees."

                                       51

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Bonds-Match Funded Agreements. Bonds-match funded agreements represent
proceeds received from transfers of loans, residual securities and advances on
our loans serviced for others. These transfers did not qualify as sales for
accounting purposes and therefore, we report them as secured borrowings with
pledges of collateral. Our bonds-match funded agreements were comprised of the
following at the dates indicated:


<TABLE>
<CAPTION>
                                                                  December 31,
                                                    ---------------------------------------
Collateral                                             2001          2000           1999
--------------------------------------------------  -----------   -----------   -----------
<S>                                                 <C>           <C>           <C>        
Single family residential loans (1)...............  $    46,145   $    72,101   $   100,968
Unrated residual securities (1)...................       18,997        34,949        40,547
Advances on loans serviced for others (2).........       91,766            --            --
                                                    -----------   -----------   -----------
                                                    $   156,908   $   107,050   $   141,515
                                                    ===========   ===========   ===========

<FN>
(1)   The decline in the balance outstanding during 2001 and 2000 was due to
      principal repayments, offset by amortization of discount.

(2)   Under the terms of the agreement, we are eligible to sell additional
      advances on loans serviced for others up to a maximum balance of $200,000.
</FN>
</TABLE>


      See "Changes in Financial Condition - Bonds-Match Funded Assets" and Notes
7 and 16 to our Consolidated Financial Statements (which are incorporated herein
by reference).

      Notes, Debentures and Other Interest-Bearing Obligations. Notes,
debentures and other interest-bearing obligations mature as follows:


<TABLE>
<CAPTION>
                                                                  December 31,
                                                    ---------------------------------------
                                                       2001           2000          1999
                                                    -----------   -----------   -----------
<S>                                                 <C>           <C>           <C>        
2003:
11.875% Notes due October 1.......................  $    87,025   $   100,050   $   103,850
2004:
Loan due May 24 (LIBOR plus 250 basis points).....        6,235         6,235         6,236
2005:
12% Subordinated Debentures due June 15...........       67,000        67,000        67,000
11.5% Redeemable Notes due July 1.................           45            45       140,487
                                                    -----------   -----------   -----------
                                                    $   160,305   $   173,330   $   317,573
                                                    ===========   ===========   ===========
</TABLE>


      The decrease in outstanding balances during 2001 and 2000 is due to
repurchases. These repurchases resulted in extraordinary gains. See "Results of
Operations - Extraordinary Gain on Repurchase of Debt, Net of Taxes" and Note 18
to our Consolidated Financial Statements (which is incorporated herein by
reference).

                                       52

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      Obligations Outstanding Under Lines of Credit. We have obtained secured
line of credit arrangements from unaffiliated financial institutions as follows
at the dates indicated:


<TABLE>
<CAPTION>
                                        Balance       Amount of     Committed      Maturity
             Collateral               Outstanding     Facility        Amount         Date              Interest Rate(1)
------------------------------------  -----------  --------------  -----------  ---------------  ------------------------------
<S>                                   <C>          <C>             <C>          <C>              <C>
December 31, 2001:
   Real estate investments and
     commercial loans............       $  32,463     $ 200,000      $ 115,580     June 2002     LIBOR + 240 basis points

   Advances on loans serviced for
     others......................          51,841       100,000         51,841  October 2002     LIBOR + 200 basis points
                                        ---------
                                        $  84,304
                                        =========

December 31, 2000:
   Real estate investments and
     commercial loans............       $  32,933     $ 200,000      $ 115,580     June 2001     LIBOR + 240 basis points
                                        =========

December 31, 1999:
   Subprime single family
     residential loans...........       $   2,041     $ 200,000      $ 100,000     July 2001     LIBOR + 75 basis points

                                            3,770       115,000        100,000      May 2000     LIBOR + 95 - 150 basis points
                                           15,227        50,000         50,000      May 2000     LIBOR + 137.5 basis points
                                            7,658        25,000             --      May 2000     LIBOR + 175 basis points

   Real estate investments and
     commercial loans............          84,170       200,000        200,000     June 2001     LIBOR + 175 basis points
                                           75,000        75,000         75,000    April 2001     LIBOR + 175 basis points
                                        ---------
                                        $ 187,866
                                        =========

<FN>
(1)   1-month LIBOR was 1.87%, 6.57% and 5.82% at December 31, 2001, 2000 and
      1999, respectively.
</FN>
</TABLE>


      Lines of credit secured by advances on loans serviced for others were
entered into during April 2001 to fund advances purchased in connection with our
acquisition of rights to services loans for others. The decrease in outstanding
balances during 2000 was primarily the result of repayments of lines secured by
loans and real estate properties held for sale which were sold during 2000. See
Note 17 to our Consolidated Financial Statements (which is incorporated herein
by reference).

      Company Obligated, Mandatorily Redeemable Securities of Subsidiary Trust
Holding Solely Junior Subordinated Debentures of the Company ("Capital
Securities"). The outstanding balance of the 10.875% Capital Securities amounted
to $61,159, $79,530 and $110,000 at December 31, 2001, 2000 and 1999,
respectively. During 2001 and 2000, we repurchased $18,371 and $30,470,
respectively, of our Capital Securities in the open market, resulting in
extraordinary gains. See "Results of Operations - Extraordinary Gain on
Repurchase of Debt, Net of Taxes" and Note 19 to our Consolidated Financial
Statements (which is incorporated herein by reference).

      Stockholders' Equity. Stockholders' equity amounted to $379,106 at
December 31, 2001 as compared to $503,426 at December 31, 2000 and $509,442 at
December 31, 1999. The $124,320 decrease in equity during 2001 was primarily due
to the $124,782 net loss we incurred for the year. The decrease in equity during
2000 was primarily due to our repurchase of 1,388,300 shares of common stock in
the aggregate amount of $8,996, offset in part by net income we earned of
$2,192. On September 30, 2000, we changed our policy for securities available
for sale and match funded securities to account for these securities as trading.
As a result, we now include net unrealized holding gains and losses on trading
securities in earnings. Previously, we reported unrealized holding gains and
losses for these securities as a separate component of accumulated other
comprehensive income in stockholders' equity. See Consolidated Statements of
Changes in Stockholders' Equity and Notes 1 and 24 to our Consolidated Financial
Statements (which are incorporated herein by reference).

Asset and Liability Management

      Asset and liability management is concerned with the timing and magnitude
of the repricing of assets and liabilities. Our objective is to attempt to
control risks associated with interest rate and foreign currency exchange rate
movements. In general, our strategy is to match our asset and liability balances
within maturity categories and to manage our foreign currency rate exposure
related to our

                                       53

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

investments in non-U.S. dollar functional currency operations to limit our
exposure to earnings variations and variations in the value of our assets and
liabilities as interest rates and foreign currency exchange rates change over
time. Our Asset/Liability Management Committee (the "Committee"), which is
composed of our directors and officers, formulates and monitors our asset and
liability management strategy in accordance with policies approved by our Board
of Directors. The Committee meets to review, among other things, the sensitivity
of the our assets and liabilities to interest rate changes and foreign currency
exchange rate changes, the book and market values of assets and liabilities,
unrealized gains and losses, including those attributable to hedging
transactions, purchase and sale activity, and maturities of investments and
borrowings. The Committee also approves and establishes pricing and funding
decisions with respect to overall asset and liability composition.

      The Committee's methods for evaluating interest rate risk include an
analysis of the our interest rate sensitivity "gap," which is defined as the
difference between interest-earning assets and interest-bearing liabilities
maturing or repricing within a given time period. A gap is considered positive
when the amount of interest-rate sensitive assets exceeds the amount of
interest-rate sensitive liabilities. A gap is considered negative when the
amount of interest-rate sensitive liabilities exceeds interest-rate sensitive
assets. During a period of rising interest rates, a negative gap would tend to
adversely affect net interest income, while a positive gap would tend to result
in an increase in net interest income. During a period of falling interest
rates, a negative gap would tend to result in an increase in net interest
income, while a positive gap would tend to affect net interest income adversely.
Because different types of assets and liabilities with the same or similar
maturities may react differently to changes in overall market rates or
conditions, changes in interest rates may affect net interest income positively
or negatively even if an institution were perfectly matched in each maturity
category.

      The following table sets forth the estimated maturity or repricing of our
interest-earning assets and interest-bearing liabilities at December 31, 2001.
We determined the amounts of our assets and liabilities shown within a
particular period in accordance with the contractual terms of the assets and
liabilities, with the following exceptions:

      o  We include adjustable-rate loans, performing discount loans, securities
         and FHLB advances in the period in which they are first scheduled to
         adjust and not in the period in which they mature.

      o  Fixed-rate mortgage-related securities reflect estimated prepayments,
         which we estimated based on analyses of broker estimates, the results
         of a prepayment model utilized and empirical data.

      o  Non-performing discount loans reflect the estimated timing of
         resolutions that result in repayment to us.

      o  NOW and money market checking deposits and savings deposits, which do
         not have contractual maturities, reflect estimated levels of attrition,
         which we based on detailed studies of each such category of deposit.

      o  We exclude escrow deposits on loans and loans serviced for others and
         other non-interest bearing checking accounts, which amounted to $79,189
         at December 31, 2001.

                                       54

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      We believe that these assumptions approximate actual experience and
consider them reasonable; however, the interest rate sensitivity of our assets
and liabilities in the table could vary substantially if we were to use
different assumptions or actual experience differs from the historical
experience on which we based the assumptions.


<TABLE>
<CAPTION>
                                                                                   December 31, 2001
                                                       ------------------------------------------------------------------------
                                                                                       More Than
                                                       Within Three      Four to      One Year to   Three Years
                                                          Months      Twelve Months   Three Years     and Over         Total
                                                       ------------   ------------   ------------   ------------   ------------
<S>                                                    <C>            <C>            <C>            <C>            <C>         
Rate-Sensitive Assets:
  Interest-earning deposits.......................     $    111,579   $         --   $         --   $         --   $    111,579
  Federal funds sold..............................          126,000             --             --             --        126,000
  Trading securities..............................           85,448         73,140         24,096         43,565        226,249
  Loans available for sale (1)....................               61            643            201            135          1,040
  Investment securities, net......................            4,659             --             --             --          4,659
  Loan portfolio, net (1).........................           25,282         39,458             42            143         64,925
  Discount loan portfolio, net (1)................           26,385         35,171         49,740          8,031        119,327
  Match funded assets, net (1)(2).................           12,989         22,947         14,037         22,415         72,388
                                                       ------------   ------------   ------------   ------------   ------------
   Total rate-sensitive assets....................          392,403        171,359         88,116         74,289        726,167
                                                       ------------   ------------   ------------   ------------   ------------
Rate-Sensitive Liabilities:
  NOW and money market checking deposits..........           13,804            192            412          1,071         15,479
  Savings deposits................................               98            183            362            644          1,287
  Certificates of deposit.........................          167,656        249,018        171,063         46,751        634,488
                                                       ------------   ------------   ------------   ------------   ------------
  Total interest-bearing deposits.................          181,558        249,393        171,837         48,466        651,254
  Securities sold under agreements to repurchase..           79,405             --             --             --         79,405
  Bonds-match funded agreements...................          143,021          6,353          7,534             --        156,908
  Obligations outstanding under lines of credit...           84,304             --             --             --         84,304
  Notes, debentures and other.....................            6,235             --         87,025         67,045        160,305
                                                       ------------   ------------   ------------   ------------   ------------
   Total rate-sensitive liabilities...............          494,523        255,746        266,396        115,511      1,132,176
                                                       ------------   ------------   ------------   ------------   ------------
Interest rate sensitivity gap excluding financial
   instruments....................................         (102,120)       (84,387)      (178,280)       (41,222)      (406,009)
Financial Instruments:
Interest rate caps................................               --             --            104             --            104
Interest rate floors..............................               --             --            300             --            300
                                                       ------------   ------------   ------------   ------------   ------------
Total rate-sensitive financial instruments........               --             --            404             --            404
                                                       ------------   ------------   ------------   ------------   ------------
Interest rate sensitivity gap including financial
   instruments....................................     $   (102,120)  $    (84,387)  $   (177,876)  $    (41,222)  $   (405,605)
                                                       ============   ============   ============   ============   ============

Cumulative interest rate sensitivity gap (3)......     $   (102,120)  $   (186,507)  $   (364,383)  $   (405,605)
                                                       ============   ============   ============   ============
Cumulative interest rate sensitivity gap as a
  percentage of total rate-sensitive assets.......         (14.06)%       (25.68)%       (50.18)%       (55.86)%

<FN>
(1)   Balances have not been reduced for non-performing loans.

(2)   Excludes match funded advances on loans serviced for others, which do not
      earn interest, of $101,963 at December 31, 2001.

(3)   We have experienced an increasingly large negative interest rate
      sensitivity gap in recent years. This change has been the result of both
      our acquisition of OAC and our change in strategic focus away from
      capital-intensive businesses and into fee-based sources of income. The
      result has been an increase in the relative amount of our
      noninterest-bearing assets, such as real estate assets and loan servicing
      assets that are funded by interest-bearing liabilities. Consequently, the
      amount of the negative interest rate sensitivity gap may continue to
      increase as we continue our transition to fee-based businesses.
</FN>
</TABLE>


                                       55

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The OTS has established specific minimum guidelines for thrift
institutions to observe in the area of interest rate risk as described in Thrift
Bulletin No. 13a, "Management of Interest Rate Risk, Investment Securities, and
Derivative Activities" ("TB 13a"). Under TB 13a, institutions are required to
establish and demonstrate quarterly compliance with board-approved limits on
interest rate risk that are defined in terms of net portfolio value ("NPV"),
which is defined as the net present value of an institution's existing assets,
liabilities and off-balance sheet instruments. These limits specify the minimum
net portfolio value ratio ("NPV Ratio") allowable under current interest rates
and hypothetical interest rate scenarios. An institution's NPV Ratio for a given
interest rate scenario is calculated by dividing the NPV that would result in
that scenario by the present value of the institution's assets in that same
scenario. The hypothetical scenarios are represented by immediate, permanent,
parallel movements (shocks) in the term structure of interest rates of plus and
minus 100, 200 and 300 basis points from the actual term structure observed at
quarter end. The current NPV Ratio for each of the seven rate scenarios and the
corresponding limits approved by the Board of Directors, as applied to Ocwen
Financial Corporation and its subsidiaries, are as follows at December 31, 2001:

                                   Board Limits                 Current
 Rate Shock in basis points    (minimum NPV Ratios)           NPV Ratios
---------------------------- ------------------------ --------------------------
            +300                      5.00%                     24.42%
            +200                      6.00%                     24.38%
            +100                      7.00%                     24.38%
             0                        8.00%                     24.36%
            -100                      7.00%                     24.40%
            -200                      6.00%                     24.50%
            -300                      5.00%                     24.66%

      The Committee also regularly reviews interest rate risk by forecasting the
impact of alternative interest rate environments on net interest income or
expense and NPV and evaluating such impacts against the maximum potential
changes in net interest income and NPV that is authorized by the Board of
Directors, as applied to Ocwen Financial Corporation and its subsidiaries. The
following table quantifies the potential changes in net interest expense and net
portfolio value should interest rates go up or down (shocked) 300 basis points,
assuming the yield curves of the rate shocks will be parallel to each other. We
calculate the cash flows associated with the loan portfolios and securities
available for sale based on prepayment and default rates that vary by asset. We
generate projected losses, as well as prepayments, based upon the actual
experience with the subject pool, as well as similar, more seasoned pools. To
the extent available, we use loan characteristics such as loan-to-value ratio,
interest rate, credit history, prepayment penalty terms and product types to
produce the projected loss and prepayment assumptions that are included in the
cash flow projections of the securities. When we shock interest rates we further
adjust these projected loss and prepayment assumptions. The base interest rate
scenario assumes interest rates at December 31, 2001. Actual results of Ocwen
Financial Corporation and its subsidiaries could differ significantly from the
results estimated in the following table:

                                             Estimated Changes in
                             ---------------------------------------------------
 Rate Shock in basis points    Net Interest Expense               NPV
---------------------------- ------------------------ --------------------------
            +300                      88.45%                    (1.97)%
            +200                      58.97%                    (1.45)%
            +100                      29.48%                    (0.64)%
             0                        0.00%                      0.00%
            -100                     (29.48)%                    0.97%
            -200                     (58.97)%                    2.25%
            -300                     (88.45)%                    3.73%


                                       56

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

      The following table shows our financial instruments that are sensitive to
changes in interest rates, categorized by expected maturity or repricing
characteristics, and the fair values of those instruments at December 31, 2001:


<TABLE>
<CAPTION>
                                                               Expected Maturity Date At December 31, 2001 (1)
                                          -----------------------------------------------------------------------------------------
                                                                                                                Total        Fair
                                            2002       2003       2004       2005       2006     Thereafter    Balance      Value
                                          ---------  ---------  ---------  ---------  ---------  ----------  ----------  ----------
<S>                                       <C>        <C>        <C>        <C>        <C>        <C>         <C>         <C>       
Rate-Sensitive Assets:
  Interest-earning deposits.............  $ 111,579  $      --  $      --  $      --  $      --  $       --  $  111,579  $  111,579
     Average interest rate..............      1.64%         --         --         --         --          --       1.64%
  Federal funds.........................    126,000         --         --         --         --          --     126,000     126,000
     Average interest rate..............      1.46%         --         --         --         --          --       1.46%
  Trading securities....................    158,587     16,482      7,615      7,678      7,095      28,792     226,249     226,249
     Average interest rate..............      8.67%    21.39%      28.30%     24.37%     31.40%      28.80%      14.07%
  Loans available for sale (2)..........        704        180         21         16         14         105       1,040       1,040
     Average interest rate..............     12.23%     10.87%     12.42%     12.12%     12.12%      12.14%      11.98%
  Investment securities.................      4,659         --         --         --         --          --       4,659       4,659
     Average interest rate..............         --         --         --         --         --          --          --
  Loan portfolio, (2)...................     64,739         23         20         26         16         101      64,925      64,925
     Average interest rate..............      7.10%     10.53%     10.52%      9.98%     10.48%      10.39%       7.11%
  Discount loan portfolio (2)...........     61,557     40,048      9,691      1,098        975       5,958     119,327     127,133
     Average interest rate..............     10.18%     10.46%     10.07%     10.63%     10.64%      10.65%      10.30%
  Match funded assets (2)(3)............     35,936     10,541      3,496      2,882      2,487      17,046      72,388      70,344
     Average interest rate..............      9.19%      8.85%      9.63%      9.67%      9.64%       9.70%       9.32%
                                          ---------  ---------  ---------  ---------  ---------  ----------  ----------  ----------
       Total rate-sensitive assets......  $ 563,761  $  67,274  $  20,843  $  11,700  $  10,587  $   52,002  $  726,167  $  731,929
                                          =========  =========  =========  =========  =========  ==========  ==========  ==========
Rate-Sensitive Liabilities:
  NOW and money market checking 
       deposits.........................  $  13,996  $     223  $     189  $     160  $     137  $      774  $   15,479  $   15,070
     Average interest rate..............      1.78%      0.48%      0.48%      0.48%      0.48%       0.48%       1.66%
  Savings deposits......................        281        201        161        129        103         412       1,287       1,226
     Average interest rate..............      1.25%      1.25%      1.25%      1.25%      1.25%       1.25%       1.25%
  Certificates of deposit...............    416,674    110,660     60,403     25,701      1,107      19,943     634,488     657,204
     Average interest rate..............      5.94%      6.09%      6.59%      6.91%      5.36%       5.94%       6.06%
                                          ---------  ---------  ---------  ---------  ---------  ----------  ----------  ----------
       Total interest-bearing deposits..    430,951    111,084     60,753     25,990      1,347      21,129     651,254     673,500
  Securities sold under agreements to
     repurchase.........................     79,405         --         --         --         --          --      79,405      79,405
     Average interest rate..............      1.87%         --         --         --         --          --       1.87%
  Bonds-match funded agreements.........    149,374      6,612        922         --         --          --     156,908     156,996
     Average interest rate..............      3.31%      9.50%      9.50%         --         --          --       3.61%
  Obligations outstanding under lines of
       credit...........................     84,304         --         --         --         --          --      84,304      84,304
     Average interest rate..............      4.28%         --         --         --         --          --       4.28%
  Notes, debentures and other...........      6,235     87,025         --     67,045         --          --     160,305     159,590
     Average interest rate..............      7.00%     11.88%         --     12.00%         --          --      11.74%
                                          ---------  ---------  ---------  ---------  ---------  ----------  ----------  ----------
       Total rate-sensitive liabilities.  $ 750,269  $ 204,721  $  61,675  $  93,035  $   1,347  $   21,129  $1,132,176  $1,153,795
                                          =========  =========  =========  =========  =========  ==========  ==========  ==========

<FN>
(1)   Expected maturities are contractual maturities adjusted for prepayments of
      principal. We use certain assumptions to estimate fair values and expected
      maturities. For assets, expected maturities are based upon contractual
      maturity, projected repayments and prepayments of principal. We base the
      prepayment experience reflected herein on our historical experience. Our
      average Constant Prepayment Rate ("CPR") is 29.84% and 22.14% on our
      fixed-rate and adjustable-rate portfolios, respectively, for
      interest-earning assets (excluding investment securities, which do not
      have prepayment features). The actual maturities of these instruments
      could vary substantially if future prepayments differ from our historical
      experience.

(2)   We have not reduced balances for non-performing loans.

(3)   Excludes match funded advances on loans serviced for others, which do not
      earn interest, of $101,963 at December 31, 2001.
</FN>
</TABLE>


                                       57

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

(4)   The expected maturity or repricing dates of interest rate-sensitive assets
      and liabilities as of December 31, 2001 and 2000 compare as follows:


<TABLE>
<CAPTION>
                                 1st Year      2nd Year      3rd Year      4th Year      5th Year     Thereafter       Total
                                ----------    ----------    ----------    ----------    ----------    ----------    ----------
<S>                             <C>           <C>           <C>           <C>           <C>           <C>           <C>       
Total rate-sensitive assets:
2001:
  Amount.....................   $  563,761    $   67,274    $   20,843    $   11,700    $   10,587    $   52,002    $  726,167
     % of total..............       77.64%         9.26%         2.87%         1.61%         1.46%         7.16%       100.00%
2000:
  Amount.....................   $  801,060    $  206,150    $   70,041    $   46,854    $   26,163    $  145,257    $1,295,525
     % of total..............       61.83%        15.91%         5.41%         3.62%         2.02%        11.21%       100.00%

Total rate-sensitive
liabilities:
2001:
  Amount.....................   $  750,269    $  204,721    $   61,675    $   93,035    $    1,347    $   21,129    $1,132,176
     % of total..............       66.27%        18.08%         5.45%         8.22%         0.12%         1.86%       100.00%
2000:
  Amount.....................   $  785,055    $  332,126    $  207,900    $   57,135    $   95,692    $   23,925    $1,501,833
     % of total..............       52.27%        22.12%        13.84%         3.81%         6.37%         1.59%       100.00%
</TABLE>


      We believe that the broad geographic distribution of our loans available
for sale, loan portfolio, discount loan portfolio and match-funded loans reduces
the risks that would otherwise result from concentrating such loans in limited
geographic areas. See Notes 5, 6 and 7 to our Consolidated Financial Statements
(which are incorporated herein by reference).

      The Committee is authorized to utilize a wide variety of off-balance sheet
financial techniques to assist it in the management of interest rate risk and
foreign currency exchange rate risk. These techniques include interest rate
exchange contracts or "swap" agreements, interest rate caps and floors U.S.
Treasury interest rate futures contracts, foreign currency futures contracts,
foreign currency forwards and European swaptions and put options.

      Interest Rate Risk Management. In managing our interest rate risk, we
enter, from time to time, into interest rate swaps. Under interest rate swaps,
we agree with other parties to exchange, at specified intervals, the difference
between fixed-rate and floating-rate interest amounts calculated by reference to
an agreed notional amount. We utilize interest rate swaps to protect against the
decrease in value of a fixed-rate asset or the increase in borrowing cost from a
short-term, fixed-rate liability such as a line of credit, in an increasing
interest-rate environment. We had entered into interest rate swaps with an
aggregate notional amount of $33,000 at December 31, 2000. Those swaps matured
in April 2001 and we have no interest rate swaps outstanding at December 31,
2001.

      From time to time, we also enter into swaption contracts, put option
contracts and interest rate futures contracts, including Eurodollar and U.S.
Treasury contracts. Swaption contracts are options to enter into an interest
rate swap agreement at a future date at a specific interest rate. A put option
allows us to sell a specified quantity of an asset at a specified price at a
specific date. Interest rate futures contracts are commitments to either
purchase or sell designated financial instruments at a future date for a
specified price and may be settled in cash or through delivery. We had no
swaptions, put option contracts or interest futures contracts outstanding at
either December 31, 2001 or 2000.

      Additionally, we purchased amortizing caps and floors to hedge the
interest rate exposure relating to our mortgage servicing rights and our match
funded loans and securities. An interest rate cap or interest rate floor is
designed to provide protection against the interest rate on a floating-rate
instrument rising above some level (cap) or falling below some level (floor). We
had entered into caps and floors with an aggregate notional amount of $125,933
and $34,101, respectively, at December 31, 2001, as compared to caps and floors
with an aggregate notional amount of $141,674 and $37,787, respectively, at
December 31, 2000. The floor related to our mortgage servicing rights, which had
a notional amount of $11,600, expired during the third quarter of 2001.

      See the "Derivative Financial Instruments" section of Note 1 and the
"Interest Rate Management" section of Note 21 to our Consolidated Financial
Statements (which are incorporated herein by reference).

      Foreign Currency Exchange Rate Risk Management. We have entered into
foreign currency derivatives to hedge our net investment in foreign subsidiaries
which own residual securities backed by residential loans originated in the UK
("UK residuals") and a shopping center located in Halifax, Nova Scotia ("the
Nova Scotia shopping center"). Our exposure to foreign currency exchange rates

                                       58

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

exists with the British Pound versus the U.S. dollar and the Canadian Dollar
versus the U.S. dollar. Our policy is to periodically adjust the amount of
foreign currency derivative contracts we have entered into in response to
changes in our recorded investment in these foreign entities as well as to
changes in our assets denominated in a foreign currency.

      Our hedges, related investments in foreign subsidiaries and our net
exposures at December 31, 2001 and December 31, 2000 were as follows:

                                            Investment     Hedge    Net Exposure
                                            ----------  ----------  ------------
December 31, 2001:
UK residuals.............................    $ 25,535    $ 24,754    $   (781)
Nova Scotia shopping center..............      21,648      21,691          43
December 31, 2000:
UK residuals.............................    $ 23,239    $ 22,236    $ (1,003)
Nova Scotia shopping center..............      21,913      22,423         510

      Our net exposures are subject to gain or loss if foreign currency exchange
rates fluctuate. See the "Derivatives Financial Instruments" section of Note 1
and the "Foreign Currency Management" section of Note 21 to our Consolidated
Financial Statements (which are incorporated herein by reference).

Liquidity, Commitments and Off-Balance Sheet Risks

      Our primary sources of funds for liquidity are:

      o  Deposits                          o  Maturities and payments received
      o  FHLB advances                        on loans, securities and advances
      o  Securities sold under             o  Proceeds from sales of assets
         agreements to repurchase          o  Servicing fees
      o  Lines of credit
      o  Match funded debt

      At December 31, 2001, we were eligible to borrow up to an aggregate of
$149,398 from the FHLB of New York (based on the availability of acceptable
collateral) and had $81,764 of short duration CMOs pledged as security for any
such borrowings. At December 31, 2001, we had contractual relationships with
eleven brokerage firms and the FHLB of New York pursuant to which we could
obtain funds from securities sales under agreements to repurchase. In addition,
under a match funding agreement that we entered into on December 20, 2001, we
were eligible to sell advances on loans serviced for others up to a maximum debt
balance of $200,000 at any one time. At December 31, 2001, we had $91,766 of
bonds-match funded agreements outstanding under this facility, which is expected
to mature in December 2003. The sales of advances did not qualify as sales for
accounting purposes; therefore, we report them as secured borrowings with
pledges of collateral. We will account for additional sales under this facility
in the same manner. At December 31, 2001, we also had $245,249 of unrestricted
cash and cash equivalents and $74,190 of short duration CMOs which we could use
to secure additional borrowings. We had no outstanding FHLB advances at December
31, 2001. Securities we sold under agreements to repurchase from the FHLB
amounted to $79,405 at December 31, 2001.

      We continuously monitor our liquidity position and ongoing funding
requirements. Among the risks and challenges associated with our funding
activities are the following:

      o  We do not intend to utilize brokered certificates of deposit, a
         significant portion of which mature during 2002, as a source of funding
         in the foreseeable future.
      o  Expiration of existing collateralized lines of credit at various times
         through 2002.
      o  Potential extension of resolution and sale timelines for non-core
         assets in the current weak economic environment.
      o  Ongoing cash requirements to fund operations of our holding company and
         OTX.
      o  Cash requirements to fund our acquisition of additional servicing
         rights and related advances, as well as the need to fund the unfinanced
         portion of our existing servicing advances.

      We believe that our existing sources of liquidity, including internally
generated funds, will be adequate to fund our planned activities for the
foreseeable future, although there can be no assurances in this regard. We
continue to evaluate other sources of liquidity, such as lines of credit from
unaffiliated parties, match funded debt and other secured borrowings. See the
"Short-Term Highly Liquid

                                       59

<PAGE>

Management's Discussion and Analysis of Financial Condition and Results of
Operations. (Dollars in thousands, except share data)
--------------------------------------------------------------------------------

Investments," "Securities Sold Under Agreements to Repurchase," and "Derivative
Financial Instruments" sections of Note 1 and Notes 14 and 17 to our
Consolidated Financial Statements (which are incorporated herein by reference).

      As of November 29, 2001, Standard & Poor's and Fitch's rating outlooks for
Ocwen Financial Corporation and Ocwen Federal Bank are negative. On November 13,
2001, Standard & Poor's lowered its credit rating on Ocwen Financial Corporation
and its subsidiaries, Ocwen Federal Bank and Ocwen Capital Trust I. On November
29, 2001, Fitch lowered its credit ratings on Ocwen Financial Corporation and
Ocwen Federal Bank's subordinated debt while affirming its credit ratings on
Ocwen Financial Corporation's long-term senior debt and short-term ratings and
Ocwen Federal Bank's short-term rating.

      Our operating activities provided (used) $53,850, $2,713 and $(248,082) of
cash flows during 2001, 2000 and 1999, respectively. During the foregoing years
our cash resources were provided primarily by trading securities and proceeds
from sales of loans available for sale, and we used cash resources primarily to
purchase and fund loan servicing advances and, in 1999, to purchase and
originate loans available for sale.

      Our investing activities provided cash flows totaling $428,088, $744,663
and $518,466 during 2001, 2000 and 1999, respectively. During the foregoing
years, cash flows from our investing activities were provided primarily from
principal payments on our discount loans and loans held for investment,
maturities of and principal payments received on our securities available for
sale and proceeds from sales of discount loans, securities available for sale,
real estate held for sale and real estate owned. We used cash flows from our
investing activities primarily to purchase discount loans, mortgage servicing
rights and securities available for sale. Cash flows from our investing
activities for 1999 included $122,101 of proceeds from our sale of Ocwen UK.

      Our financing activities used cash flows of $(375,019), $(947,859) and
$(335,319) during 2001, 2000 and 1999, respectively. Cash flows related to our
financing activities primarily resulted from changes in our deposits and
obligations outstanding under lines of credit, as well as repurchases and
issuance of debt. Cash flows used in our financing activities decreased during
2001 primarily because we established a new line of credit agreement to fund
advances on loans serviced for others that we acquired in connection with a
servicing acquisition, and we entered into a new match funding agreement to fund
current and future advances on loans serviced for others. We also repurchased
less of our outstanding debt and repurchased none of our common stock during
2001.

      Applicable federal regulations previously required that Ocwen Federal Bank
maintain specified levels of "liquid" investments in qualifying types of U.S.
government, federal agency and other investments having maturities of five years
or less (not less than 4% of its average daily balance of net withdrawable
deposit accounts and borrowings payable in one year or less). Effective July 18,
2001 the OTS issued a final rule eliminating the 4% liquidity requirement.
However, the rule continues to require that savings associations maintain
sufficient liquidity to ensure its safe and sound operation.

      At December 31, 2001, we had $3,432 of commitments related to the funding
of construction loans (including loans accounted for as investments in real
estate). We believe that we have adequate resources to fund all such unfunded
commitments to the extent required and that substantially all of such unfunded
commitments will be funded during 2002. See Note 30 to our Consolidated
Financial Statements (which is incorporated herein by reference).

      In addition to commitments to extend credit, we are party to various
off-balance sheet financial instruments in the normal course of our business to
manage our interest rate risk and foreign currency exchange rate risk. See Note
21 to our Consolidated Financial Statements (which is incorporated herein by
reference) and "Asset and Liability Management" above.

      We conduct business with a variety of financial institutions and other
companies in the normal course of business, including counterparties to our
off-balance sheet financial instruments. We are subject to potential financial
loss if the counterparty is unable to complete an agreed upon transaction. We
seek to limit counterparty risk through financial analysis, dollar limits and
other monitoring procedures.

Regulatory Capital and Other Requirements

      See Note 25 to our Consolidated Financial Statements (which is
incorporated herein by reference).

Recent Accounting Developments

      For information relating to the effects of our adoption of recent
accounting standards, see Note 1 to our Consolidated Financial Statements (which
is incorporated herein by reference).

                                       60

<PAGE>

Forward-Looking Statements

Certain statements contained herein are not, and certain statements contained in
future filings by us with the Securities and Exchange Commission (the
"Commission"), in our press releases or in the our other public or shareholder
communications may not be, based on historical facts and are "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements, which are based on various assumptions (some
of which are beyond our control), may be identified by reference to a future
period(s) or by the use of forward-looking terminology such as "anticipate,"
"believe," "commitment," "consider," "continue," "could," "estimate," "expect,"
"foresee," "intend," "in the event of," "may," "plan," "propose," "prospect,"
"whether," "will," "would," future or conditional verb tenses, similar terms,
variations on such terms or negatives of such terms. Although we believe the
anticipated results or other expectations reflected in such forward-looking
statements are based on reasonable assumptions, it can give no assurance that
those results or expectations will be attained. Actual results could differ
materially from those indicated in such statements due to risks, uncertainties
and changes with respect to a variety of factors, including, but not limited to,
international, national, regional or local economic environments (particularly
in the market areas where we operate), government fiscal and monetary policies
(particularly in the market areas where we operate), prevailing interest or
currency exchange rates, effectiveness of interest rate, currency and other
hedging strategies, laws and regulations affecting financial institutions,
investment companies and real estate (including regulatory fees, capital
requirements, access for disabled persons and environmental compliance),
uncertainty of foreign laws and potential political issues related to operations
outside of the USA, competitive products, pricing and conditions (including from
competitors that have significantly greater resources than our Company), credit,
prepayment, basis, default, subordination and asset/liability risks, loan
servicing effectiveness, ability to identify acquisitions and investment
opportunities meeting our investment strategy, the course of negotiations and
the ability to reach agreement with respect to the material terms of any
particular transaction, satisfactory due diligence results, satisfaction or
fulfillment of agreed upon terms and conditions of closing or performance, the
timing of transaction closings, software integration, development and licensing,
damage to our computer equipment and the information stored our data centers,
availability of and costs associated with obtaining adequate and timely sources
of liquidity, ability to repay or refinance indebtedness (at maturity or upon
acceleration), to meet collateral calls by lenders (upon re-valuation of the
underlying assets or otherwise), to generate revenues sufficient to meet debt
service payments and other operating expenses, availability of discount loans
and servicing rights for purchase, size of, nature of and yields available with
respect to the secondary market for mortgage loans, financial, securities and
securitization markets in general, adequacy of allowances for loan losses,
changes in real estate conditions (including liquidity, valuation, revenues,
rental rates, occupancy levels and competing properties), adequacy of insurance
coverage in the event of a loss, other factors generally understood to affect
the real estate acquisition, mortgage, servicing and leasing markets, securities
investments and the software and technology industry, and other risks detailed
from time to time in our reports and filings with the Commission, including our
periodic reports on Forms 10-Q, 8-K and 10-K and Exhibit 99.1, titled Risk
Factors, to our Form 10-K for the year ended December 31, 2001. Given these
uncertainties, readers are cautioned not to place undue reliance on such
statements. We do not undertake, and specifically disclaims any obligation, to
release publicly the results of any revisions that may be made to any
forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.

                                       61

<PAGE>



REPORT OF MANAGEMENT


      The management of Ocwen Financial Corporation is responsible for the
accompanying consolidated financial statements, which have been prepared in
conformity with accounting principles generally accepted in the United States of
America applied on a consistent basis. In preparing the financial statements, it
is necessary for management to make informed judgments and best estimates giving
due consideration to materiality. In the opinion of management, the consolidated
financial statements fairly reflect our financial position and results of
operations. Information, both financial and non-financial, presented elsewhere
in this annual report is consistent with that in the consolidated financial
statements.

      To ensure that the financial statements are reliable, the Company
established and maintains an effective system of internal accounting controls
and procedures that provide reasonable assurance that assets are safeguarded and
transactions are properly recorded and executed in accordance with corporate
policy and management authorization. The Company believes its accounting
controls provide reasonable assurance that errors or irregularities which could
be material to the financial statements are prevented or would be detected
within a timely period and corrected in the normal course of business.

      PricewaterhouseCoopers LLP was engaged to perform an audit of the
consolidated financial statements in accordance with auditing standards
generally accepted in the United States of America. Such standards include the
evaluation of our accounting policies and procedures and the effectiveness of
the related internal control system. In addition to the use of independent
certified public accountants, the Company maintains a professional staff of
internal auditors who conduct financial, procedural and special audits and make
recommendations on both administrative and accounting controls.

      The Audit Committee of the Board of Directors is comprised solely of
independent directors and is responsible for overseeing and monitoring the
quality of our accounting and auditing practices. The independent accountants
and internal auditors have direct access to the Audit Committee and meet
periodically with the committee to discuss the scope and results of their work,
the adequacy of internal accounting controls and financial reporting matters.




         /s/ William C. Erbey                        /s/ Mark S. Zeidman

         William C. Erbey                            Mark S. Zeidman
         Chairman and Chief Executive Officer        Senior Vice President and
                                                     Chief Financial Officer

                                       62

<PAGE>




               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders of Ocwen Financial Corporation


      In our opinion, the accompanying consolidated statements of financial
condition and the related consolidated statements of operations, of
comprehensive income, of changes in stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Ocwen
Financial Corporation (the "Company") and its subsidiaries at December 31, 2001
and 2000, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audits 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.




PRICEWATERHOUSECOOPERS LLP
West Palm Beach, Florida
February 12, 2002


                                       63

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
                    (Dollars in thousands, except share data)


<TABLE>
<CAPTION>
                                                                                         December 31, 2001   December 31, 2000
                                                                                         -----------------   -----------------
<S>                                                                                        <C>                 <C>           
Assets:
Cash and amounts due from depository institutions....................................      $       23,076      $       18,749
Interest earning deposits............................................................             111,579             134,987
Federal funds sold...................................................................             126,000                  --
Trading securities, at fair value:
     Collateralized mortgage obligations (AAA-rated).................................             161,191             277,595
     Subordinates, residuals and other securities....................................              65,058             112,647
Loans available for sale, at lower of cost or market.................................               1,040              10,610
Real estate held for sale............................................................              13,418              22,670
Investment in real estate............................................................             116,896             122,761
Affordable housing properties........................................................             102,069             142,812
Investment securities, at cost.......................................................               4,659              13,257
Loan portfolio, net..................................................................              64,925              93,414
Discount loan portfolio, net.........................................................             119,327             536,028
Match funded assets..................................................................             174,351             116,987
Investments in unconsolidated entities...............................................               1,067                 430
Real estate owned, net...............................................................             110,465             146,419
Premises and equipment, net..........................................................              44,589              43,152
Income taxes receivable..............................................................              20,842              30,261
Deferred tax asset, net..............................................................               8,411              95,991
Advances on loans and loans serviced for others......................................             283,183             227,055
Mortgage servicing rights............................................................             101,107              51,426
Other assets.........................................................................              57,897              52,169
                                                                                           --------------      --------------
                                                                                           $    1,711,150      $    2,249,420
                                                                                           ==============      ==============
Liabilities and Stockholders' Equity
  Liabilities:
  Deposits...........................................................................      $      656,878      $    1,202,044
  Escrow deposits on loans and loans serviced for others.............................              73,565              56,316
  Securities sold under agreements to repurchase.....................................              79,405                  --
  Bonds - match funded agreements....................................................             156,908             107,050
  Obligations outstanding under lines of credit......................................              84,304              32,933
  Notes, debentures and other interest bearing obligations...........................             160,305             173,330
  Accrued interest payable...........................................................              12,836              22,096
  Excess of net assets acquired over purchase price..................................              18,333              36,665
  Accrued expenses, payables and other liabilities...................................              28,351              36,030
                                                                                           --------------      --------------
     Total liabilities...............................................................           1,270,885           1,666,464
                                                                                           --------------      --------------

 Company obligated, mandatorily redeemable securities of subsidiary trust holding
    solely junior subordinated debentures of the Company.............................              61,159              79,530

  Commitments and contingencies (Note 30)

  Stockholders' equity:
   Preferred stock, $.01 par value; 20,000,000 shares authorized; 0 shares issued and
      outstanding....................................................................                  --                  --
   Common stock, $.01 par value; 200,000,000 shares authorized; 67,289,313 and
      67,152,363 shares issued and outstanding at December 31, 2001 and 
      December 31, 2000, respectively................................................                 673                 672
   Additional paid-in capital........................................................             224,142             223,163
   Retained earnings.................................................................             154,412             279,194
   Accumulated other comprehensive income (loss), net of taxes:
     Net unrealized foreign currency translation gain (loss).........................                (121)                397
                                                                                           --------------      --------------
   Total stockholders' equity........................................................             379,106             503,426
                                                                                           --------------      --------------
                                                                                           $    1,711,150      $    2,249,420
                                                                                           ==============      ==============
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       64

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (Dollars in thousands, except share data)


<TABLE>
<CAPTION>
                                                                               For the Years Ended December 31,
                                                                         -----------------------------------------------
                                                                             2001              2000             1999
                                                                         ------------     ------------      ------------
<S>                                                                      <C>              <C>               <C>         
Net interest income:
  Income ...........................................................     $     83,371     $    184,816      $    253,224
  Expense...........................................................           93,329          169,090           155,542
                                                                         ------------     ------------      ------------
  Net interest income (expense) before provision for loan losses....           (9,958)          15,726            97,682
  Provision for loan losses.........................................           15,666           15,177             6,710
                                                                         ------------     ------------      ------------
  Net interest income (expense) after provision for loan losses.....          (25,624)             549            90,972
                                                                         ------------     ------------      ------------

Non-interest income:
  Servicing and other fees..........................................          134,597           97,080            76,018
  Gain (loss) on interest earning assets, net.......................           (3,949)          17,625            44,298
  Gain (loss) on trading and match funded securities, net...........           16,330           (3,971)               --
  Impairment charges on securities available for sale...............               --          (11,597)          (58,777)
  Loss on real estate owned, net....................................           (9,256)         (14,904)           (3,957)
  Gain (loss) on other non-interest earning assets, net.............           (1,054)          45,517            58,693
  Net operating gains on investments in real estate.................            5,581           27,579               820
  Amortization of excess of net assets acquired over purchase price            18,333           14,112             3,201
  Other income......................................................            8,759            6,084            24,346
                                                                         ------------     ------------      ------------
                                                                              169,341          177,525           144,642
                                                                         ------------     ------------      ------------
Non-interest expense:
  Compensation and employee benefits................................           84,914           83,086           102,173
  Occupancy and equipment...........................................           11,577           12,005            18,501
  Technology and communication costs................................           26,768           23,876            20,957
  Loan expenses.....................................................           15,811           13,051            12,618
  Net operating losses on investments in certain affordable housing
    properties......................................................           16,580            9,931             6,291
  Amortization of excess of purchase price over net assets acquired.            3,112            3,124             4,448
  Professional services and regulatory fees.........................           14,749           12,829            13,992
  Other operating expenses..........................................            8,935           12,107            16,088
                                                                         ------------     ------------      ------------
                                                                              182,446          170,009           195,068
                                                                         ------------     ------------      ------------
Distributions on Company-obligated, mandatorily redeemable
    securities of subsidiary trust holding solely junior
    subordinated debentures of the Company..........................            7,132           11,380            13,111
Equity in income (losses) of investments in unconsolidated entities               304           (5,249)          (12,616)
                                                                         ------------     ------------      ------------
Income (loss) before income taxes and extraordinary gain............          (45,557)          (8,564)           14,819
Income tax expense..................................................           81,587            7,957             2,608
Minority interest in net loss of consolidated subsidiary............               --               --              (638)
                                                                         ------------     ------------      ------------

Income (loss) before extraordinary gain.............................         (127,144)         (16,521)           12,849
Extraordinary gain on repurchase of debt, net of taxes..............            2,362           18,713             6,983
                                                                         ------------     ------------      ------------
Net income (loss)...................................................     $   (124,782)    $      2,192      $     19,832
                                                                         ============     ============      ============

Earnings (loss) per share:
  Basic:
    Net income (loss) before extraordinary gain.....................     $      (1.89)    $      (0.25)     $       0.20
    Extraordinary gain..............................................             0.03             0.28              0.11
                                                                         ------------     ------------      ------------
    Net income (loss)...............................................     $      (1.86)    $       0.03      $       0.31
                                                                         ============     ============      ============

  Diluted:
    Net income (loss) before extraordinary gain.....................     $      (1.89)    $      (0.25)     $       0.20
    Extraordinary gain..............................................             0.03             0.28              0.11
                                                                         ------------     ------------      ------------
    Net income (loss)...............................................     $      (1.86)    $       0.03      $       0.31
                                                                         ============     ============      ============

Weighted average common shares outstanding:
  Basic.............................................................       67,227,058       67,427,662        63,051,015
  Diluted...........................................................       67,227,058       67,464,043        63,090,282
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       65

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                                   For the Years Ended December 31,
                                                                            -----------------------------------------------
                                                                                2001              2000             1999
                                                                            -----------       -----------       -----------
<S>                                                                         <C>               <C>               <C>        
Net income (loss).....................................................      $  (124,782)      $     2,192       $    19,832
                                                                            -----------       -----------       -----------
Other comprehensive  income (loss), net of taxes:
  Change in unrealized loss (gain) on securities available for sale
    arising during the year...........................................               --                --            (9,338)
  Less: Reclassification adjustment...................................               --              (163)           (4,556)
                                                                            -----------       -----------       -----------
    Netchange in unrealized (gain) loss on securities available for
       sale (net of a tax benefit of $122 and $7,771 for 2000 and
       1999, respectively)............................................               --              (163)          (13,894)
                                                                            -----------       -----------       -----------

  Change in unrealized foreign currency translation adjustment arising
    during the year...................................................             (518)              389               463
  Less: Reclassification adjustment for losses on foreign currency
    translation adjustment included in net income.....................               --               757               481
                                                                            -----------       -----------       -----------
  Net change in unrealized foreign currency translation loss (net of
    tax benefit (expense) of $284, $(627) and $(514) for 2001, 2000
    and 1999, respectively)...........................................             (518)            1,146               944
                                                                            -----------       -----------       -----------

  Other comprehensive income (loss)...................................             (518)              983           (12,950)
                                                                            -----------       -----------       -----------

Comprehensive income (loss)...........................................      $  (125,300)      $     3,175       $     6,882
                                                                            ===========       ===========       ===========

Disclosure of reclassification adjustment:

  Unrealized holding losses (gains) arising during the year on
    securities sold or impaired.......................................      $        --       $    (7,394)      $   (36,671)
  Add: Adjustment for realized losses and impairment charges on
    securities available for sale included in net income (loss).......               --             7,231            32,115
                                                                            -----------       -----------       -----------
  Net reclassification adjustment for (gains) losses recognized in
    other comprehensive income (loss) in prior years (net of tax
    benefit of $122 and $2,558 for 2000 and 1999, respectively) (1)...      $        --       $      (163)      $    (4,556)
                                                                            ===========       ===========       ===========

  Unrealized foreign currency translation adjustment arising during
    the year..........................................................      $        --       $      (131)      $      (703)
    
  Add: Adjustment for realized foreign currency losses on the sale of
    the equity investment in a foreign entity and foreign subsidiary
    in 2000 and 1999, respectively....................................               --               888             1,184
                                                                            -----------       -----------       -----------
  Net reclassification adjustment for foreign currency losses
    recognized in other comprehensive income (loss) in prior years
    (net of tax benefit of $408 and $259 for 2000 and 1999,
    respectively).....................................................      $        --       $       757       $       481
                                                                            ===========       ===========       ===========

<FN>
(1)   In 2000, includes the adjustment related to the reclassification of
      securities available for sale to trading securities.
</FN>
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       66

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 and 1999
                    (Dollars in thousands, except share data)


<TABLE>
<CAPTION>
                                                                                                  Accumulated
                                                                                                     Other
                                                     Common Stock        Additional              Comprehensive
                                                 --------------------      Paid-in   Retained    Income (Loss),
                                                    Shares     Amount      Capital   Earnings     Net of Taxes      Total
                                                 ------------  ------    ----------  ---------   --------------   ----------
<S>                                              <C>           <C>        <C>        <C>           <C>            <C>       
Balances at December 31, 1998................      60,800,357  $  608     $ 166,234  $ 257,170     $   12,364     $  436,376
Net income...................................              --      --            --     19,832             --         19,832
Repurchase and retirement of common stock....      (4,611,700)    (46)      (30,645)        --             --        (30,691)
Exercise of common stock options.............           5,069      --            23         --             --             23
Directors' compensation......................           6,099      --            43         --             --             43
Issuance of common stock for acquisition of
   Ocwen Asset Investment Corp...............      12,371,750     124        96,685         --             --         96,809
Other comprehensive income, net of taxes:
   Change in unrealized gain (loss) on
      securities available for sale..........              --      --            --         --        (13,894)       (13,894)
   Change in unrealized foreign currency
      translation loss.......................              --      --            --         --            944            944
                                                 ------------  ------     ---------  ---------     ----------     ----------
Balances at December 31, 1999................      68,571,575     686       232,340    277,002           (586)       509,442
Net income...................................              --      --            --      2,192             --          2,192
Repurchase and retirement of common stock....      (1,427,747)    (14)       (9,233)        --             --         (9,247)
Directors' compensation......................           8,535      --            56         --             --             56
Other comprehensive income, net of taxes:
   Change in unrealized gain on securities
      available for sale.....................              --      --            --         --           (163)          (163)
   Change in unrealized foreign currency
      translation loss.......................              --      --            --         --          1,146          1,146
                                                 ------------  ------     ---------  ---------     ----------     ----------
Balances at December 31, 2000................      67,152,363     672       223,163    279,194            397        503,426
Net loss.....................................              --      --            --   (124,782)            --       (124,782)
Exercise of common stock options.............         128,155       1           901         --             --            902
Directors' compensation......................           8,795      --            78         --             --             78
Other comprehensive income, net of taxes:
   Change in accounting principle for
      derivative financial instruments.......              --      --            --         --             59             59
   Reclassification of gain on derivative
      financial instruments to earnings......              --      --            --         --            (59)           (59)
   Change in unrealized foreign currency
      translation gain.......................              --      --            --         --           (518)          (518)
                                                 ------------  ------     ---------  ---------     ----------     ----------
Balances at December 31, 2001................      67,289,313  $  673     $ 224,142  $ 154,412     $     (121)    $  379,106
                                                 ============  ======     =========  =========     ==========     ==========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       67

<PAGE>

                   OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                                       For the Years Ended December 31,
                                                                                    ---------------------------------------
                                                                                      2001           2000           1999
                                                                                    ---------      ---------      ---------
<S>                                                                                 <C>            <C>            <C>      
Cash flows from operating activities:
Net income (loss)...........................................................        $(124,782)     $   2,192      $  19,832
Adjustments to reconcile net income (loss) to net cash provided (used) by
    operating activities:
  Net cash provided by trading activities...................................          192,069        102,091         18,723
  Proceeds from sales of loans available for sale...........................            6,996         22,982        568,490
  Purchases of loans available for sale.....................................               --             --        (47,129)
  Origination of loans available for sale...................................               --             --       (728,509)
  Principal payments received on loans available for sale...................            1,596          6,827         25,949
  Premium amortization (discount accretion) on securities, net..............            7,337          8,493         11,074
  Depreciation and amortization.............................................           26,902         20,360         13,339
  Provision for loan losses.................................................           15,666         15,177          6,710
  Provision for real estate owned...........................................           17,766         26,674         28,008
  Gain on sale of Ocwen UK..................................................               --             --        (50,371)
  Gain on sale of investment in Kensington Group plc........................               --        (20,025)            --
  Gain on interest-earning assets, net......................................            3,949        (17,625)       (44,298)
  (Gain) loss on trading and match funded securities........................          (16,330)         3,971             --
  Impairment charges on securities available for sale.......................               --         11,597         58,777
  Extraordinary gain on repurchase of debt..................................           (3,774)       (29,704)        (8,475)
  (Gain) loss on sale of other non-interest earning assets..................            1,054        (25,492)        (8,322)
  Impairment charges on investment in real estate...........................            4,515            704          2,817
  Impairment charges on affordable housing properties.......................           15,587          6,448            700
  Gain on sale of real estate owned.........................................          (14,111)       (22,515)       (36,265)
  Equity in (income) losses of investment in unconsolidated entities........             (304)         5,249         12,616
  (Increase) decrease in income taxes receivable............................            9,419        (30,261)        34,333
  (Decrease) increase in income taxes payable...............................               --         (6,369)         6,369
  (Increase) decrease in deferred tax asset.................................           87,580         40,929        (53,273)
  Increase in advances and match funded advances on loans and loans serviced
    for others..............................................................         (165,123)       (67,638)       (54,507)
  (Increase) decrease in other assets, net..................................            4,064        (12,340)       (11,330)
  Decrease in accrued expense, interest payable and other liabilities.......          (16,226)       (39,012)       (13,340)
                                                                                    ---------      ---------      ---------
Net cash provided (used) by operating activities............................           53,850          2,713       (248,082)
                                                                                    ---------      ---------      ---------
</TABLE>


                            (Continued on next page)

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       68

<PAGE>

                   OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                                       For the Years Ended December 31,
                                                                                    ----------------------------------------
                                                                                      2001            2000           1999
                                                                                    ---------      ---------       ---------
<S>                                                                                 <C>            <C>             <C>    
Cash flows from investing activities:
  Proceeds from sales of securities available for sale......................               --        553,589          43,923
  Purchase of securities available for sale.................................               --       (896,470)       (589,985)
  Maturities of and principal payments received on securities available for
    sale....................................................................               --        416,004         553,136
  Proceeds from the sale of Ocwen UK........................................               --             --         122,101
  Proceeds from the sale of investment in Kensington Group plc..............               --         48,556              --
  Redemption of Federal Home Loan Bank stock................................            8,598             --              --
  Acquisitions of subsidiaries..............................................               --             --          64,450
  Principal payments received on match funded loans.........................           30,552         26,595          11,868
  Investment in affordable housing properties...............................          (30,496)       (27,213)        (56,874)
  Proceeds from sale of affordable housing properties.......................           52,076         27,587          44,233
  Purchase of servicing rights..............................................          (79,522)       (49,779)         (9,218)
  Proceeds from sale of discount loans, net.................................          263,373        262,018         275,935
  Principal payments received on discount loans, net........................           84,282        180,048         301,826
  Purchase and funded commitments of discount loans.........................           (1,220)      (175,708)       (584,328)
  Proceeds from sale of real estate held for investment.....................           14,360          4,237          23,436
  Investment in real estate held for investment.............................           (7,996)       (34,057)        (19,115)
  Proceeds from sale of real estate held for sale...........................            1,000        232,811              --
  Investment in real estate held for sale...................................               --        (57,737)             --
  Proceeds from sales of loans held for investment..........................           18,018         30,709          51,691
  Principal payments received on loans held for investment..................           16,193         90,387         137,199
  Purchases, originations and funded commitments of loans held for
    investment, net.........................................................          (24,106)       (55,567)        (36,991)
  Decrease (increase) in investment in unconsolidated entities..............             (333)         7,286          10,687
  Capital improvements to real estate owned.................................          (12,737)        (6,775)            (37)
  Proceeds from sale of real estate owned...................................          108,338        180,473         251,621
  Purchase of real estate owned in connection with discount loan purchases..               --         (9,059)        (47,807)
  Additions to premises and equipment.......................................          (12,292)        (3,272)        (29,285)
                                                                                    ---------      ---------       ---------
Net cash provided by investing activities...................................          428,088        744,663         518,466
                                                                                    ---------      ---------       ---------
</TABLE>


                            (Continued on next page)

              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       69

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                                       For the Years Ended December 31,
                                                                                   ------------------------------------------
                                                                                      2001            2000           1999
                                                                                   -----------    -----------     -----------
<S>                                                                                <C>            <C>             <C>      
Cash flows from financing activities:
  Decrease in deposits.......................................................         (527,917)      (556,287)       (354,144)
  Increase (decrease) in securities sold under agreements to repurchase......           79,405        (47,365)        (34,059)
  (Repayment of) proceeds from obligations under lines of credit, net........           51,371       (155,805)        110,413
  Proceeds from issuance of other interest bearing obligations...............               --             --           6,236
  Proceeds from issuance of bonds - match funded agreements..................           91,766             --          40,094
  Repayments of bonds - match funded agreements..............................          (43,144)       (33,002)        (12,559)
  Repurchase of notes and subordinated debentures............................          (13,233)      (127,649)        (51,223)
  Exercise of common stock options...........................................              902             --              23
  Issuance of shares of common stock.........................................               78             56              43
  Repurchase of Capital Securities, net......................................          (14,247)       (18,811)         (9,452)
  Repurchase of common stock.................................................               --         (8,996)        (30,691)
                                                                                   -----------    -----------     -----------
Net cash used by financing activities........................................         (375,019)      (947,859)       (335,319)
                                                                                   -----------    -----------     -----------
Net increase (decrease) in cash and cash equivalents.........................          106,919       (200,483)        (64,935)
Cash and cash equivalents at beginning of period.............................          153,736        354,219         419,154
                                                                                   -----------    -----------     -----------
Cash and cash equivalents at end of period...................................      $   260,655    $   153,736     $   354,219
                                                                                   ===========    ===========     ===========

Reconciliation of cash and cash equivalents at end of period:
  Cash and amounts due from depository institutions..........................      $    23,076    $    18,749     $   125,799
  Interest-earning deposits..................................................          111,579        134,987         116,420
  Federal funds sold and repurchase agreements...............................          126,000             --         112,000
                                                                                   -----------    -----------     -----------
                                                                                   $   260,655    $   153,736     $   354,219
                                                                                   ===========    ===========     ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
  Interest...................................................................      $    75,834    $   179,564     $   153,891
  Income tax refunds (payments)..............................................          (14,816)        18,829             633

Supplemental schedule of non-cash investing and financing activities:
  Real estate owned acquired through foreclosure.............................           64,043        140,764         157,111
  Reclassification of properties from investment in real estate to real
     estate held for sale....................................................           (7,343)       174,480              --
  Reclassification of securities available for sale to trading securities....               --        496,295              --
  Exchange of discount loans and loans available for sale for securities.....               --             --         758,032
  Exchange of note receivable for real estate held for sale..................               --         19,000              --


Acquisition of businesses:
  Fair value of assets acquired..............................................      $        --    $        --     $  (706,329)
  Liabilities assumed........................................................               --             --         599,855
  Stock issued...............................................................               --             --          96,809
                                                                                   -----------    -----------     -----------
  Cash paid..................................................................               --             --          (9,665)
  Less cash acquired.........................................................               --             --          74,115
                                                                                   -----------    -----------     -----------
  Net cash acquired (paid) for assets acquired...............................      $        --    $        --     $    64,450
                                                                                   ===========    ===========     ===========

Sale of subsidiary:
  Fair value of assets sold..................................................      $        --    $        --     $   413,121
  Liabilities sold...........................................................               --             --        (345,327)
  Cash sold..................................................................               --             --           3,936
  Gain on sale...............................................................               --             --          50,371
                                                                                   -----------    -----------     -----------
Net cash received for assets sold............................................      $        --    $        --     $   122,101
                                                                                   ===========    ===========     ===========
</TABLE>


              The accompanying notes are an integral part of these
                       consolidated financial statements.

                                       70

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                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

      Ocwen Financial Corporation ("OCN") is a financial services company whose
primary business activities consist of the servicing and resolution of
subperforming and nonperforming residential and commercial mortgage loans. We
also specialize in the related development of loan servicing technology and
software for the mortgage and real estate industries. Our consolidated financial
statements include the accounts of OCN and its subsidiaries. We own directly and
indirectly all of the outstanding common and preferred stock of our primary
subsidiaries, Ocwen Federal Bank FSB (the "Bank"), Investors Mortgage Insurance
Holding Company ("IMI"), Ocwen Technology Xchange, Inc. ("OTX") and Ocwen Asset
Investment Corp. ("OAC"). We acquired OAC on October 7, 1999. Our consolidated
financial statements include OAC and its subsidiaries as of that date. We also
own 99.6% of Ocwen Financial Services, Inc. ("OFS"), with the remaining 0.4%
owned by the shareholders of Admiral Home Loan. In August 1999, we closed our
domestic subprime origination business, which we had previously conducted
through OFS. We sold our investment in our foreign subsidiary, Ocwen UK, on
September 30, 1999. Ocwen UK's results of operations for 1999 are included in
our consolidated statements of operations through that date. We have eliminated
all significant intercompany transactions and balances in consolidation.

      The Bank is a federally chartered savings bank regulated by the Office of
Thrift Supervision ("OTS").

Reclassification

      Certain amounts included in our 2000 and 1999 consolidated financial
statements have been reclassified to conform to the 2001 presentation.

Consolidated Statements of Cash Flows

      For purposes of reporting cash flows, our cash and cash equivalents
include cash on hand, interest-bearing and non-interest-bearing deposits and all
investments in highly liquid debt instruments that we purchased with an original
maturity of three months or less. Cash flows associated with items we intended
as hedges of identifiable transactions or events are classified in the same
category as the cash flows from the items being hedged.

Short-Term Highly Liquid Investments

      Our short-term highly liquid investments generally consist of federal
funds sold and assets we purchased under agreements to resell. We invest in
these assets to maximize the return on liquid funds. At December 31, 2001, such
investments amounted to $126,000 of federal funds sold which had an overnight
maturity. At December 31, 2000, we had no such investments outstanding. The
average balance of our investment in federal funds sold and assets purchased
under agreements to resell amounted to $200,329 and $128,079 during 2001 and
2000, respectively.

      The Federal Reserve System requires that the Bank maintain
non-interest-earning cash reserves against certain of its transaction accounts
and time deposit accounts. Such reserves totaled $5,040 and $5,153 at December
31, 2001 and 2000, respectively.

Securities

      We report securities in our statement of financial condition at fair
value. We determine fair value within a range based on third party dealer
quotations, where available, and internal values, subject to an internal review
process.

      In 1999 and prior years, when we acquired securities resulting from the
securitization of loans available for sale and sold the securities shortly
thereafter, we accounted for the transaction as the sale of loans and the
purchase and sale of trading securities.

      On September 30, 2000, we changed our policy for securities available for
sale and match funded securities to account for these securities as trading. For
these securities, we reported changes in fair value in income in the period of
change. Previously, we accounted for the securities as available for sale, for
which we reported the unrealized gains and losses as a separate component of
accumulated other comprehensive income in stockholders' equity, subject to an
evaluation for other-than-temporary impairment. For each security where we
concluded that all or part of the decrease in value was other-than-temporary, we
charged such amount to earnings, thereby establishing a new cost basis for the
security.

                                       71

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                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


Loans Available for Sale and Held for Investment

      We designate loans originated or purchased by us that we presently do not
intend to hold to maturity as loans available for sale at time of origination or
purchase. We report these loans at the lower of cost, after considering deferred
loan fees and costs, or aggregate market value. We record unrealized losses as a
reduction in earnings and include them under the caption "Gain on
interest-earning assets, net" in our consolidated statements of operations. We
have deferred loan origination fees and certain direct loan origination costs
and included them in the carrying value. Upon the sale of a loan, we include any
unamortized deferred loan fees, net of costs, in the gain or loss on sale of
interest earning assets. We compute gains and losses on disposal of such loans
on a specific identification basis.

      We report loans held for investment at amortized cost, less an allowance
for loan losses, discounts, deferred loan fees and undisbursed loan funds. To
qualify for this treatment, upon origination or purchase we must have both the
ability and the intent to hold such loans to maturity. We defer loan origination
fees and certain direct loan origination costs and recognize them over the lives
of the related loans as a yield adjustment that we include in interest income
using the interest method applied on a loan-by-loan basis.

      We accrue interest income as it is earned. We place loans on non-accrual
status after being delinquent greater than 89 days or earlier if the borrower is
deemed by management to be unable to continue performance. When we place a loan
on non-accrual status, we reverse interest accrued but not received. In
addition, we suspend the amortization of deferred loan fees when we place a loan
on nonaccrual status. We return loans to accrual status only when we reinstate
the loan and have no doubt regarding ultimate collectibility.

Allowance for Loan Losses

      We maintain the allowance for loan losses at a level that, based upon our
evaluation of known and inherent risks in the portfolio, we consider adequate to
provide for losses. We establish specific valuation allowances for impaired
loans in the amount by which the carrying value, before allowance for probable
losses, exceeds the fair value of collateral less costs to dispose on an
individual loan basis, except for single family residential mortgage loans and
consumer loans which we generally evaluate for impairment as homogeneous pools
of loans. We consider a loan to be impaired when, based upon current information
and events, we believe that we will probably be unable to collect on a timely
basis all amounts due according to the contractual terms of the loan agreement.
We measure these impaired loans at the fair value of the loans' underlying
collateral less estimated disposal costs. We may leave impaired loans on accrual
status during the period we are pursuing repayment of the loan. We place these
loans on non-accrual status at such time that either: (i) the loans become 90
days delinquent; or (ii) we determine that the borrower is incapable of, or has
ceased efforts toward, curing the cause of the non-payment. We recognize
impairment losses through an increase in the allowance for loan losses and a
corresponding charge to the provision for loan losses. When we either sell,
transfer to real estate owned ("REO") or charge-off an impaired loan, we remove
valuation allowance from the allowance for loan losses. Charge-offs occur when
we consider loans, or a portion thereof, uncollectible and of such little value
that we consider unwarranted their continuance as bankable assets. We base our
ongoing evaluation of the allowance for loan losses upon an analysis of the
portfolio, historical loss experience, economic conditions and trends,
collateral values and other relevant factors. We may make subsequent adjustments
to the allowance if economic conditions and trends, collateral values and other
relevant factors differ substantially from the assumptions used in making the
evaluation.

Discount Loan Portfolio

      We have acquired at a discount certain mortgage loans for which the
borrowers were not current as to principal and interest payments or for which
there was a reason to believe borrowers would be unable to continue to make
their scheduled principal and interest payments. We accounted for the initial
investment in these pools of loans based upon the pricing methodologies used to
bid on the pool. We allocated the acquisition cost to each loan within the pool
when we determined the bid price; we made these allocations based upon an
analysis of the expected future cash flows of each individual loan. We accounted
for the acquisition cost in the aggregate when we determined the bid price using
assumptions concerning the expected future cash flows from groups of loans
within the pool. For those single family residential mortgage loans that are
brought current by the borrower and certain multi-family and commercial real
estate loans that are current and that we believe will remain current, we
accrete the remaining unamortized discount into interest income as a yield
adjustment using the interest method over the contractual maturity of the loan.
For all other loans, we report interest as cash is received. We report gains on
the repayment and discharging of loans as interest income. The resolution
alternatives applied to the discount loan portfolio are:

      o  The borrower brings the loan current in accordance with original or
         modified terms

      o  The borrower repays the loan or a negotiated amount

      o  The borrower agrees to a deed-in-lieu of foreclosure, in which case we
         classify it as real estate owned and held for sale

                                       72

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                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      o  We foreclose on the loan and the property is either acquired at the
         foreclosure sale by a third-party or by us, in which case it is
         classified as real estate owned and held for sale.

      In situations where we foreclose upon the collateral, we transfer the
loans to real estate owned upon receipt of title to the property.

Real Estate Owned

      We value properties acquired through foreclosure at the lower of the
adjusted cost basis of the loan or fair value less estimated costs of disposal
of the property after the date of foreclosure. We periodically re-evaluate
properties held to determine that we are carrying them at the lower of cost or
fair value less estimated costs to dispose. We recognize sales proceeds and
related costs with passage of title to the buyer and, in cases where we finance
the sale, receipt of sufficient down payment. We report rental income related to
properties as a part of loss on real estate owned, net, as earned. We report
holding and maintenance costs related to properties as period costs as incurred.
We record no depreciation expense related to the properties. We recognize
decreases in the market value of foreclosed real estate after foreclosure as a
valuation allowance on a property specific basis. We report subsequent increases
in market value of the foreclosed real estate as reductions in the valuation
allowance, but only to the extent the valuation allowance reaches zero. We
charge or credit to income such changes in the valuation allowance.

Mortgage Servicing Rights

      We acquire mortgage servicing rights which we record at cost. In
connection with our securitization and sale of loans in 1999 and prior years, we
generally retained the rights to service such loans for investors. We recognized
the servicing asset or liability and other retained interests as allocations of
the carrying amounts of the assets sold between the asset sold and the servicing
obligation and other retained interests based on the relative fair value of the
assets sold to the interests retained. We amortize mortgage servicing assets in
proportion to and over the period of estimated net servicing income. We
determine estimated net servicing income using the estimated future balance of
the underlying mortgage loan portfolio which, absent new purchases, declines
over time from prepayments and scheduled loan amortization. We adjust
amortization prospectively in response to changes in estimated projections of
future cash flows. We evaluate the mortgage servicing assets for impairment
based on the fair value of the servicing assets by strata. We stratify the
servicing assets based on legal loan-to-value, seasoning, coupon rate and
delinquency rate. We estimate fair value by discounting underlying loan cash
flows using discount and prepayment rates that we believe market participants
would use. To the extent the carrying value of the servicing assets exceeds
their fair value by strata, we establish a valuation allowance, which we may
adjust in the future, as the value of the servicing assets increase or decrease.

Mortgage Servicing Fees and Advances on Loans Serviced for Others

      We receive fees from investors for servicing mortgage loans. We collect
servicing fees, generally expressed as a percent of the unpaid principal
balance, from the borrowers' payments. We also include late charge income and
other ancillary fees, net of amortization of our servicing assets, in servicing
income. During any period in which the borrower is not making payments, we are
required under certain servicing agreements to advance our own funds to meet
contractual principal and interest remittance requirements for certain
investors, pay property taxes and insurance premiums and process foreclosures.
We generally recover such advances from borrowers for reinstated and performing
loans and from investors for foreclosed loans. We record a charge to servicing
income to the extent that we estimate that advances are uncollectible under
provisions of the servicing contracts, taking into consideration historical loss
and delinquency experience, length of delinquency and the amount of the advance.

Investment in Real Estate

      We record investment in real estate at cost less accumulated depreciation.
We review our investment in real estate for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable.

                                       73

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                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      We compute depreciation on a straight-line basis over the estimated useful
lives of the assets as follows:

      Buildings and improvements             39 - 40 years
      Tenant improvements                    Lesser of lease term or useful life
      Land improvements                      20 years
      Furniture, fixtures and equipment      5 - 10 years

      Our investments in real estate partnerships are accounted for under the
equity method of accounting. Under the equity method of accounting, we record an
investment in the shares or other interests of an investee at cost of the shares
or interests acquired and thereafter periodically increase (decrease) the
investment by our proportionate share of earnings (losses) of the investee and
decrease it by the dividends or distributions that we receive from the investee.

      In addition, we acquired certain acquisition, development and construction
loans in which we participate in the residual profits of the underlying real
estate and the borrower had not contributed substantial equity to the project.
As such, we account for these loans under the equity method of accounting as
though we had made an investment in a real estate limited partnership.

      We charge expenditures for repairs and maintenance to operations as
incurred but capitalize significant improvements. We classify our leases as
operating. We defer fees and costs incurred in the successful negotiation of
leases and amortize them on a straight-line basis over the terms of the
respective leases. We report rental income on a straight-line basis over the
terms of the respective leases.

Real Estate Held for Sale

      We report real estate held for sale at the lower of the carrying amount or
fair value less cost to sell. We classify real estate as held for sale when we
have committed to a plan to sell the assets, and discontinue recording
depreciation. We include gains and losses on the sale of real estate held for
sale in gain on other non-interest earning assets, net, in our consolidated
statement of operations.

Investments in Affordable Housing Properties

      Affordable housing partnerships own multi-family residential properties
that have been allocated tax credits under the Internal Revenue Code of 1986, as
amended (the "Internal Revenue Code"). The obligations of the partnership to
sustain qualifying status of the properties covers a 15-year period; however,
tax credits accrue over a 10-year period on a straight-line basis. We account
for investments in affordable housing partnerships that we made on or after May
18, 1995 and in which we invest solely as a limited partner using the equity
method. For our limited partnership investments made before this date, we record
our receipt of income tax credits and other tax benefits on a level yield basis
over the 15-year obligation period and report the tax credits and tax benefits
net of amortization of our investment in the limited partnership as a reduction
of income tax expense. We consolidate affordable housing partnerships in which
we have invested as a limited partner, and through which a subsidiary acts as
the general partner, and include them in our consolidated financial statements.
For all investments in affordable housing partnerships made after May 18, 1995,
we capitalize interest expense and certain direct costs incurred during the
pre-operating period.

      We report affordable housing properties for which we have entered into an
agreement to sell at the lower of cost or fair value less costs to sell. We
report all other affordable housing investments at estimated net realizable
value.

Excess of Cost Over Net Assets Acquired

      We report the excess of purchase price over net assets of acquired
businesses ("goodwill") at cost and amortize it on a straight-line basis over
the estimated future periods to be benefited, ranging from 3 to 7 years. We
review the carrying value of goodwill for impairment whenever events or changes
in circumstances indicate that it may not be recoverable. Additionally, we
evaluate the amortization periods to determine whether events or circumstances
warrant revised amortization periods. We include the results of operations of
acquired companies in our consolidated statements of operations beginning with
the acquisition date. Effective January 1, 2002 we will no longer amortize our
goodwill, but will review the carrying value annually for impairment in
accordance with the provisions of Statement of Financial Accounting Standard
("SFAS") No. 142. See Current Accounting Pronouncements below.

                                       74

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


Premises and Equipment

      We report premises and equipment at cost and, except for land, depreciate
them over their estimated useful lives on the straight-line method as follows:

      Buildings                             39 years
      Land improvements                     15 years
      Furniture and fixtures                5 years
      Computer hardware and software        3 years
      Leasehold improvements                Life of the lease, with maximum
                                            lease term of 10 years.

Capitalized Software Costs

      We currently expense all costs attributable to developing, modifying and
enhancing our OTX technology solutions. Prior to 2000, we expensed costs
incurred up to the establishment of technological feasibility as research and
development costs. Once the products were made available for general release to
customers, we began amortization of the capitalized costs using the
straight-line method over the estimated economic lives of the individual
products. We reduce the unamortized costs by product to an amount not to exceed
the future net realizable value by product at each financial statement date.

Securities Sold Under Agreements to Repurchase

      We periodically enter into sales of securities under agreements to
repurchase the same securities ("reverse repurchase agreements"). We report
reverse repurchase agreements as financings and report the obligations to
repurchase securities sold as a liability in our consolidated statements of
financial condition. We report all securities underlying reverse repurchase
agreements as assets in our consolidated statements of financial condition.
Custodians hold these securities in safekeeping.

Excess of Net Assets Acquired Over Purchase Price

      The effects of our acquisition of OAC resulted in a new basis of
accounting reflecting fair values of assets and liabilities at the date of
acquisition. We report the excess of assets over the purchase price of acquired
net assets resulting from the acquisition at cost and have amortized it on a
straight-line basis over the estimated future periods to be benefited. Effective
January 1, 2002, we reversed the unamortized balance of the excess of net assets
acquired over purchase price to income in accordance with the provisions of SFAS
No. 141. See Current Accounting Pronouncements below.

Derivative Financial Instruments

      We use derivative financial instruments for the purpose of managing our
exposure to adverse fluctuations in interest and foreign currency exchange
rates. While these instruments are subject to fluctuations in value, such
fluctuations are generally offset by the change in value of the underlying
exposures being hedged. We do not enter into any derivative financial
instruments for trading purposes.

      We record all of our derivative instruments in the statement of financial
condition at fair value. We record changes in the fair value of derivatives each
period in current earnings or other comprehensive (loss) income, depending on
whether a derivative is designated as part of a hedge transaction and, if it is,
depending on the type of hedge transaction and the effectiveness of the hedge.

      For cash-flow hedge transactions in which we hedge the variability of cash
flows related to a variable-rate asset, liability or a forecasted transaction,
we report the effective portions of the changes in the fair value of the
derivative instruments in other comprehensive (loss) income. The gains and
losses on the derivative instrument that are reported in other comprehensive
(loss) income are reclassified to earnings in the periods in which earnings are
impacted by the variability of the cash flows of the hedged item.

      For hedge transactions of net investments in foreign operations, we record
the effective portions of the changes in fair value of the derivative
instruments as a cumulative translation adjustment and include as a component of
accumulated other comprehensive (loss) income in stockholders' equity.

      We recognize the ineffective portions of all hedges in our current period
earnings.

                                       75

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      We account for all other derivative instruments used for risk management
purposes that do not meet the hedge accounting criteria and, therefore, do not
qualify for hedge accounting at fair value with changes in fair value recorded
in our consolidated statement of operations.

      Effective January 1, 2001, we adopted SFAS No. 133. See Current Accounting
Pronouncements below.

Foreign Currency Translation

      We translate assets and liabilities of foreign entities where the
functional currency is not the U.S. dollar into U.S. dollars at the current rate
of exchange existing at the statement of financial condition date and revenues
and expenses at average monthly rates. We include the resulting translation
adjustments as a component of accumulated other comprehensive income in
stockholders' equity.

Income Taxes

      We file consolidated Federal income tax returns with our subsidiaries.
Consolidated income tax is allocated among the subsidiaries participating in the
consolidated returns as if each subsidiary that has one or more subsidiaries
filed its own consolidated return and those with no subsidiaries filed separate
returns.

      We account for income taxes using the asset and liability method which
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the carrying amounts
and the tax bases of assets and liabilities. Additionally, we adjust deferred
taxes for subsequent tax rate changes. We conduct periodic evaluations to
determine whether it is more likely than not that some or all of our deferred
tax asset will not be realized. Among the factors considered in this evaluation
are estimates of future earnings, the future reversal of temporary differences
and the impact of tax planning strategies that we can implement if warranted.

Investment in Unconsolidated Entities

      We account for our investments in unconsolidated entities under the equity
method of accounting. Under the equity method of accounting, we initially record
an investment in the shares or other interests of an investee at the cost of the
shares or interests acquired and thereafter periodically increase (decrease) the
investment by our proportionate share of the earnings (losses) of the investee
and decrease it by the dividends or distributions that we receive from the
investee.

Basic and Diluted Earnings Per Share

      We calculate basic earnings per share based upon the weighted average
number of shares of common stock outstanding during the year. We calculate
diluted earnings per share based upon the weighted average number of shares of
common stock outstanding and all dilutive potential common shares outstanding
during the year. The computation of diluted earnings per share includes the
impact of the exercise of the outstanding options to purchase common stock and
assumes that the proceeds from such issuance are used to repurchase common
shares at fair value. We exclude common stock equivalents from the diluted
calculation if the Company incurs a net loss for the period since the common
stock equivalents would be antidilutive.

Comprehensive Income

      Comprehensive income represents the change in equity of a business
enterprise during a period from transactions and other events and circumstances
excluding those resulting from investments by and distributions to owners. We
present comprehensive income beginning with net income and add the elements of
comprehensive income not included in the determination of net income to arrive
at comprehensive income. We present accumulated other comprehensive income net
of income taxes and include unrealized foreign currency translation gains and
losses.

Risks and Uncertainties

      In the normal course of business, we encounter two significant types of
risk: economic and regulatory. There are three main components of economic risk:
credit risk, market risk and concentration of credit risk. Credit risk is the
risk of default on our loan portfolios and derivative financial instruments that
results from a borrower's inability or unwillingness to make contractually
required payments. Market risk includes interest rate risk, foreign currency
exchange rate risk, equity price risk and liquidity risk. We are exposed to
interest

                                       76

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                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


rate risk to the degree that our interest-bearing liabilities mature or reprice
at different speeds, or different bases, than our interest-earning assets. We
are exposed to foreign currency exchange rate risk in connection with our
investment in non-U.S. dollar functional currency operations and to the extent
our foreign exchange positions remain unhedged. We are exposed to equity price
risk as a result of our investments in the equity securities of other entities.
Market risk also reflects the risk of declines in the valuation of loans held
for sale and trading securities, and in the value of the collateral underlying
loans and the value of real estate held. Concentration of credit risk refers to
the risk that, if we extend a significant portion of the total outstanding
credit to borrowers in a specific geographical area or industry or on the
security of a specific form of collateral, we may experience disproportionately
high levels of default and losses if those borrowers, or the value of such type
of collateral, is adversely affected by economic or other factors that are
particularly applicable to such borrowers or collateral.

      We are also exposed to liquidity risk. Our business requires substantial
cash to support the residential loan servicing business, including acquisitions
of mortgage servicing rights and the unfinanced portion of servicing advances,
and to fund holding company operations including OTX operations. In general, we
finance our operations through various sources, including asset specific lines
of credit and financing facilities, some of which have 90% advance rates. As we
continue to increase our purchase of mortgage servicing contracts and fund OTX
operations from other operating cash flows, we must secure additional capital to
support our growth. Failure to secure additional financing sources or to achieve
profitable operations could result in a significant adverse effect on our
financial position and results of operations.

      The Bank is subject to the regulations of various government agencies.
These regulations can and do change significantly from period to period. The
Bank also undergoes periodic examinations by the regulatory agencies, which may
subject it to further changes with respect to asset valuations, amounts of
required loss allowances and operating restrictions resulting from the
regulators' judgments based on information available to them at the time of
their examination.

      The preparation of financial statements in conformity with generally
accepted accounting principles requires that we make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Material estimates that are
particularly significant in the near or medium term relate to our determination
of the allowance for loan losses and our valuation of securities, real estate,
affordable housing properties, servicing rights, intangibles and our deferred
tax asset.

Current Accounting Pronouncements

      On January 1, 2001, we adopted the provisions of SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS No. 137
and SFAS No. 138 (collectively, "SFAS No. 133") and recorded a net of tax, a
cumulative effect adjustment in accumulated other comprehensive income to
recognize at fair value the interest rate swap that was designated as a
cash-flow hedging of an outstanding line of credit. The swap matured in April
2001, and we have reclassified to earnings all of this transition adjustment.

      Adoption of SFAS 133 did not have a material impact on our use of futures
contracts to hedge the net investments in our foreign subsidiaries, as the SFAS
133 accounting is similar to the pre-existing accounting. In addition, adoption
of SFAS 133 did not have an impact on our other risk management instruments that
do not meet the hedge criteria as these derivatives were already accounted for
at fair value with changes in fair value recognized currently in earnings.

      As of December 31, 2000, we adopted the disclosure provisions of SFAS No.
140, "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," as they relate to recognition and
reclassification of collateral and for disclosures relating to securitization
transactions, mortgage servicing rights and collateral.

      As of April 1, 2001, we adopted the other provisions of SFAS 140 as they
relate to transfers and servicing of financial assets and extinguishments of
liabilities. Adoption of SFAS 140 did not have a material impact on our results
of operations, financial position or cash flows.

      The Emerging Issues Task Force issued EITF 99-20 "Recognition of Interest
Income and Impairment on Purchased and Retained Beneficial Interests in
Securitized Assets" effective for fiscal quarters beginning after March 15,
2001. On April 1, 2001, we adopted the provisions of EITF 99-20. Adoption of
EITF 99-20 did not have a material impact on our results of operations,
financial position or cash flows.

                                       77

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The Financial Accounting Standards Board ("FASB") has issued SFAS No. 141,
"Business Combinations". SFAS No. 141 is effective for all business combinations
initiated after June 30, 2001 and for all business combinations accounted for
using the purchase method for which the date of acquisition is July 1, 2001, or
later.

      SFAS No. 141 eliminates the pooling-of-interests method of accounting for
business combinations leaving only the purchase method of accounting. In
addition, SFAS No. 141 requires that intangible assets be recognized separately
from goodwill if they meet one of two criteria - the contractual-legal criterion
or the separability criterion. SFAS No. 141 also expands upon disclosure
requirements by requiring the disclosure of the primary reasons for the business
combination, the allocation of the purchase price to the assets acquired and
liabilities assumed and, if significant, the amount of goodwill by segment and
the amount of the purchase price assigned to each major class of intangible
asset. As of July 1, 2001, we adopted the provisions of SFAS No. 141. The impact
of the adoption of SFAS No. 141 on our results of operations, financial position
and cash flows results from the reversal, as discussed below, of the unamortized
balance of the excess of net assets acquired over purchase price upon the
adoption of SFAS No. 142.

      The FASB has also issued SFAS No. 142, "Goodwill and Other Intangible
Assets." Except for goodwill and intangible assets acquired after June 30, 2001,
which are immediately subject to its provisions, SFAS No. 142 is effective
starting with fiscal years beginning after December 15, 2001.

      Under SFAS No. 142, goodwill and intangible assets that have indefinite
useful lives will no longer be amortized. Both goodwill and intangible assets
that are not being amortized must be tested annually for impairment. In
addition, SFAS No. 142 requires additional disclosures regarding goodwill and
other intangible assets, including changes in the carrying amount of goodwill
from period to period, the carrying amount of intangible assets by major
intangible asset class and the estimated intangible asset amortization for the
next five years.

      We adopted the provisions of SFAS No. 142 effective January 1, 2002. As a
result, we reversed the unamortized balance of the excess of net assets acquired
over purchase price. This reversal resulted in a pre-tax credit to income of
$18,333 on January 1, 2002 that will be reported as the effect of a change in
accounting principle. We expect that the elimination of goodwill amortization
after the adoption of SFAS No. 142 will positively impact pretax net income by
approximately $3,000 in 2002. We have not yet fully determined the impact that
the adoption of other elements of SFAS No. 142, including possible impairment
charges on goodwill or other intangible assets, may have on our financial
position or results of operations.

      On October 3, 2001, the FASB has also issued SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." SFAS is effective for fiscal
years beginning after December 15, 2001. SFAS No. 144 is designed to establish a
single model for long-lived assets to be disposed of and, as such, supercedes
SFAS 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" and the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions."

      We are required to adopt the provisions of SFAS No. 144 effective January
1, 2002. We have not yet determined the impact that the adoption of SFAS No. 144
will have on our results of operations, financial positions or cash flows.


NOTE 2: ACQUISITION AND DISPOSITION TRANSACTIONS

      On November 22, 2000, we sold our minority investment in Kensington Group
plc ("Kensington") for proceeds, net of stamp duty and other fees, of
approximately (pound)34,500 or $48,600. As a result of the transaction, we
recorded a pretax gain on sale of $20,025.

      On October 7, 1999, Ocwen Acquisition Company ("Acquisition Sub"), a
Virginia corporation and an indirect wholly-owned subsidiary of OCN, merged (the
"Merger") with and into OAC, a Virginia corporation, in accordance with the
Agreement of Merger (the "Merger Agreement") dated as of July 25, 1999 among
OAC, OCN and Acquisition Sub. In accordance with the Merger Agreement, OAC
shareholders (except for OCN or its subsidiaries) received 0.71 shares of OCN
stock for each outstanding share of OAC common stock. We issued a total of
12,371,750 shares of OCN stock at a value of $96,809 to OAC shareholders. Before
the Merger, we owned, through IMI, 1,540,000 or 8.12% of the outstanding common
stock of OAC and 1,808,733 units or 8.71% of the outstanding partnership units
of Ocwen Partnership L.P. ("OPLP"). OPLP is the operating partnership subsidiary
of OAC.

                                       78

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The Merger, which resulted in our acquisition of the remaining interest in
OAC, reflected an aggregate purchase price of $101,271, including direct costs
of the acquisition. The Merger was accounted for as a purchase, and the purchase
price was allocated to OAC's assets and liabilities based on their fair market
values as follows:

Purchase price..................................................    $   101,271
Fair value of net assets........................................        161,313
                                                                    -----------
Excess of net assets acquired over purchase price...............    $    60,042
                                                                    ===========

      We have amortized the excess of net assets acquired over the purchase
price on a straight-line basis. Amortization in 2000 includes an additional
amount of $2,330 resulting from the reduction in the estimated life of the
excess of net assets acquired over the purchase price from 60 months to 39
months, effective October 1, 2000, as a result of our acceleration of projected
sale dates for the acquired assets. Effective January 1, 2002, we reversed the
unamortized balance of net assets acquired over our purchase price to income in
accordance with the provisions FAS 141 (see Note 1, above). Results of
operations for OAC are included in our consolidated statement of operations from
the date of merger.

      On September 30, 1999, we sold all the shares of our wholly-owned
subsidiary, Ocwen UK, to Malvern House Acquisition Limited for the pound
sterling equivalent of $122,101 in cash. Ocwen UK was originally formed to
acquire substantially all of the assets, and certain of the liabilities, of the
United Kingdom operations of Cityscape Financial Corp., and commenced operations
on April 24, 1998. As a result of the transaction, we recorded a pretax gain on
sale of $50,371.

      On June 2, 1999, OTX acquired substantially all of the assets of Synergy
Software, LLC ("Synergy"), a developer of commercial and multi-family mortgage
servicing systems, for $5,000. The acquisition was accounted for as a purchase.
The excess of purchase price over net assets acquired related to this
transaction amounted to $4,948.


NOTE 3: FAIR VALUE OF FINANCIAL INSTRUMENTS

      A majority of our assets, liabilities and off-balance sheet instruments
and commitments are considered financial instruments. For the majority of our
financial instruments, principally loans and deposits, fair values are not
readily available since there are no available trading markets as characterized
by current exchanges between willing parties. Accordingly, fair values can only
be derived or estimated using various valuation techniques, such as computing
the present value of estimated future cash flows using discount rates
commensurate with the risks involved. However, the determination of estimated
future cash flows is inherently subjective and imprecise. In addition, for those
financial instruments with option-related features, prepayment assumptions are
incorporated into the valuation techniques. Minor changes in assumptions or
estimation methodologies can have a material effect on these derived or
estimated fair values.

      The fair values reflected below are indicative of the interest rate
environments as of December 31, 2001 and 2000, and do not take into
consideration the effects of interest rate fluctuations. In different interest
rate environments, fair value results can differ significantly, especially for
certain fixed-rate financial instruments and non-accrual assets. In addition,
the fair values presented do not attempt to estimate the value of our fee
generating businesses and anticipated future business activities. In other
words, they do not represent our value as a going concern. Furthermore, the
differences between the carrying amounts and the fair values presented may not
be realized.

      Reasonable comparability of fair values among financial institutions is
difficult due to the wide range of permitted valuation techniques and numerous
estimates that must be made in the absence of secondary market prices. This lack
of objective pricing standards introduces a degree of subjectivity to these
derived or estimated fair values. Therefore, while disclosure of estimated fair
values of financial instruments is required, readers are cautioned in using this
data for purposes of evaluating our financial condition.

                                       79

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The methodologies used and key assumptions made to estimate fair value,
the estimated fair values determined and recorded carrying values follow:

Cash and Cash Equivalents

      We have valued cash and cash equivalents at their carrying amounts as
these are reasonable estimates of fair value given the relatively short period
of time between origination of the instruments and their expected realization.

Securities

      We adjust our securities portfolio to fair value within a range based on
third party dealer quotations, where available, and internal values, subject to
an internal review process. For those securities which do not have an available
market quotation, we will request market values and underlying assumptions from
the various securities dealers that underwrote, are currently financing the
securities or have had prior experience with the type of security to be valued.
When we obtain quotations from two or more dealers, we generally use the average
dealer quote.

Loans Available for Sale, Loans, Match Funded Loans and Securities, and Discount
Loans

      We estimate the fair value of our performing loans based upon quoted
market prices for similar whole loan pools. We base the fair value of our
non-performing loans on estimated cash flows discounted using a rate
commensurate with the risk associated with the estimated cash flows. We estimate
the fair value of our match funded loans and our discount loan portfolio based
upon current market yields at which recent pools of similar mortgages have
traded taking into consideration the timing and amount of expected cash flows.
We mark our match funded securities to fair value in the same manner as
securities.

Investment Securities

      Our investment securities represent required holdings of specified levels
of common stock issued by the Federal Home Loan Bank. These securities are
subject to regulatory restrictions that limit our ability to dispose of them
freely and we carry them at cost.

Advances on Loans and Loans Serviced for Others

      We value advances we make on our loans and loans we service for others at
their carrying amounts because they have no stated maturity, do not bear
interest and we believe that there is no substantial risk of uncollectibility.

Deposits

      The fair value of our demand deposits, savings accounts and money market
deposits is the amount payable on demand at the reporting date. We estimate the
fair value of fixed-maturity certificates of deposit by discounting the required
cash payments at the market rates offered for deposits with similar maturities
on the respective financial statement dates.

Borrowings

      We base the fair value of our bond-match funded loan agreements, notes and
debentures and Capital Securities on quoted market prices. The fair value of our
other borrowings, including securities sold under agreements to repurchase and
obligations outstanding under lines of credit, approximates carrying value
because these borrowings are either short-term or bear interest at a rate that
is adjusted regularly based on a market index.

Derivative Financial Instruments

      We base the fair values of our derivative financial instruments on quoted
market prices.

                                       80

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


Loan Commitments, Letters of Credit and Guarantees

      The fair values of loan commitments, letters of credit and guarantees are
estimated considering the difference between interest rates on the respective
financial statement dates and the committed rates.

      The carrying amounts and the estimated fair values of our financial
instruments are as follows:


<TABLE>
<CAPTION>
                                                                 December 31, 2001                  December 31, 2000
                                                            ---------------------------        ---------------------------
                                                             Carrying           Fair            Carrying           Fair
                                                              Amount           Value             Amount           Value
                                                            ----------       ----------        ----------       ----------
<S>                                                         <C>              <C>               <C>              <C>       
Financial assets:
  Interest earning and non-interest earning cash.......     $  134,655       $  134,655        $  153,736       $  153,736
  Federal funds sold...................................        126,000          126,000                --               --
  Trading securities...................................        226,249          226,249           390,242          390,242
  Loans available for sale.............................          1,040            1,040            10,610           10,610
  Investment securities................................          4,659            4,659            13,257           13,257
  Loan portfolio, net..................................         64,925           64,925            93,414           93,408
  Discount loan portfolio, net.........................        119,327          127,133           536,028          579,909
  Match funded assets..................................        174,351          172,306           116,987          109,635
  Advances on loans and loans serviced for others......        283,183          283,183           227,055          227,055
Financial liabilities:
  Deposits.............................................        656,878          679,124         1,202,044        1,219,952
  Escrow deposits on loans and loans serviced for
    others.............................................         73,565           73,565            56,316           56,316
  Securities sold under agreements to repurchase.......         79,405           79,405                --               --
  Bond-match funded agreements.........................        156,908          156,996           107,050          108,783
  Obligations outstanding under lines of credit........         84,304           84,304            32,933           32,933
  Notes, debentures and other interest-bearing
    obligations........................................        160,305          159,590           173,330          152,277
  Capital Securities...................................         61,159           50,762            79,530           48,911
Derivative financial instruments:
  Interest rate swaps..................................             --               --                --               59
  Caps and floors......................................            404              404               271              499
  British Pound futures................................           (235)            (235)             (339)            (339)
  Canadian Dollar futures..............................            353              353              (242)            (242)
Other:
  Loan commitments.....................................             --            3,432                --           11,259
  Letters of credit....................................             --              210                --            6,968
  Guarantees...........................................             --            7,035                --            7,035
</TABLE>


                                       81

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 4: Trading Securities

      As discussed in Note 1, we reclassified our securities available for sale
to trading on September 30, 2000. The fair value of our trading securities are
as follows at December 31:


<TABLE>
<CAPTION>
                                                                                                    2001            2000
                                                                                                -----------     -----------
<S>                                                                                             <C>             <C>        
Collateralized mortgage obligations (AAA-rated)..............................................   $   161,191     $   277,595
                                                                                                ===========     ===========
Subordinates and residual securities:
   Single family residential:
      BB-rated subordinates..................................................................   $       625     $     4,563
      B-rated subordinates...................................................................           799           2,911
      Unrated subordinates...................................................................         1,008           9,361
      Unrated subprime residuals ............................................................        60,049          93,176
                                                                                                -----------     -----------
                                                                                                     62,481         110,011
   Multi-family and commercial unrated subordinates..........................................         2,577           2,636
                                                                                                -----------     -----------
                                                                                                $    65,058     $   112,647
                                                                                                ===========     ===========
</TABLE>


      At December 31, 2001, we had pledged securities from our portfolio of
collateralized mortgage obligation (AAA-rated) for the following purposes:


<TABLE>
<CAPTION>
                                                                                                                Fair Value
                                                                                                                ----------
<S>                                                                                                             <C>       
Securities sold under agreements to repurchase from the FHLB of New York.................................       $   81,764
Security for certificates of deposit in excess of $100 issued to municipalities in the State of New
    Jersey...............................................................................................            1,005
Overdraft protection with the Federal Reserve Bank of New York...........................................            4,231
                                                                                                                ----------
                                                                                                                $   87,000
                                                                                                                ==========
</TABLE>


      At December 31, 2001, we held securities with an aggregate fair value of
$36,181 and $59,634 that were issued by Freddie Mac and Fannie Mae,
respectively.

      A profile of the maturities of our trading securities at December 31,
2001, follows. Mortgage-backed securities are included based on their
weighted-average maturities, reflecting anticipated future prepayments.


<TABLE>
<CAPTION>
                                              Collateralized Mortgage Obligations            Subordinates and Residuals
                                            ---------------------------------------   ---------------------------------------
                                            Weighted Average                          Weighted Average
                                                 Yield              Fair Value              Yield             Fair Value
                                            ----------------    -------------------   ----------------   --------------------
<S>                                              <C>                <C>                    <C>               <C>         
Due within one year.....................         1.07%              $    150,002           50.70%            $      8,585
Due after 1 through 5 years.............         2.87                     11,189           31.98                   27,681
Due after 5 through 10 years............          --                          --           30.52                   21,555
Due after 10 years......................          --                          --           24.17                    7,237
                                                                    ------------                             ------------
                                                                    $    161,191                             $     65,058
                                                                    ============                             ============
</TABLE>


      Realized and unrealized gain (loss) on trading and match funded securities
for the year ended December 31, 2001, was comprised of the following:

Unrealized gain (loss):
  Trading securities...........................................     $     3,125
  Match funded securities......................................           2,088
                                                                    -----------
                                                                          5,213
                                                                    -----------
Realized gain (loss):
  Trading securities...........................................          11,117
  Match funded securities......................................              --
                                                                    -----------
                                                                         11,117
                                                                    -----------
                                                                    $    16,330
                                                                    ===========

                                       82

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      Our residual and subordinate securities classified as trading securities
at December 31, 2001 include retained interests with a fair value of $25,274
from securitizations of loans completed in prior years. We completed no
securitizations of loans during the years ended December 31, 2001 and 2000.

      The key economic assumptions we used to estimate the fair value of these
retained interests at December 31, 2001 were as follows:

                                                              Weighted Average
                                                              ----------------
Discount rate...............................................        18.84%
Projected prepayments.......................................        23.21%
Projected average life......................................         3.97 years
Projected annual loss rates.................................         3.07%
Static pool losses..........................................        12.74%

      At December 31, 2001, the effect on the fair value of our retained
interests caused by immediate adverse changes in the assumptions shown above
would be as follows:

                                                                     Decrease
                                                                   ------------
Discount rate:
   Impact of a +10% change......................................   $     (1,911)
   Impact of a +20% change......................................         (3,604)
Prepayments:
   Impact of a -10% change......................................           (258)
   Impact of a -20% change......................................           (543)
Loss rates:
   Impact of a +10% change......................................         (1,223)
   Impact of a +20% change......................................         (2,315)

      These sensitivities are hypothetical and are presented for illustrative
purposes only. We applied the changes in the assumptions regarding prepayments
and loss rates to the cash flows of the loans underlying the retained
securities. We applied changes in assumptions regarding discount rates to the
cash flows of the securities. Changes in fair value based upon a change in
assumptions generally cannot be extrapolated because the relationship of the
change in assumption to the change in fair value may not be linear. We
calculated the changes in assumptions presented in the table above without
changing any other assumption. In reality, changes in one assumption may result
in changes in another, which may magnify or offset the sensitivities presented.
For example, changes in market interest rates may simultaneously impact
prepayments, losses and the discount rate.

      At and for the year ended December 31, 2001, the following information is
provided regarding securitized loans and related financial assets we managed:

Current unpaid principal balance of securitized loans............   $   801,863
Delinquencies of securitized loans (30 days past due)............       255,127
Losses, net of recoveries, on securitized loans..................        50,348

                                       83

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 5: LOAN PORTFOLIO

      Our loan portfolio consisted of the following at December 31:

                                                             Carrying Value
                                                       ------------------------
                                                          2001          2000
                                                       ----------    ----------
Loan type:
Single family residential..........................    $      400    $      848
                                                       ----------    ----------
Multi-family residential:
  Permanent........................................           277         6,083
  Construction.....................................        19,714        39,123
                                                       ----------    ----------
  Total multi-family residential...................        19,991        45,206
                                                       ----------    ----------
Commercial real estate:
  Hotel construction...............................        30,115        38,153
  Office ..........................................        20,350        20,817
  Land ............................................            --             1
                                                       ----------    ----------
    Total commercial real estate...................        50,465        58,971
                                                       ----------    ----------
Other .............................................           209            48
                                                       ----------    ----------
    Total loans....................................        71,065       105,073
Undisbursed loan funds.............................        (2,914)       (8,879)
Unamortized deferred fees..........................           (29)         (372)
Allowance for loan losses..........................        (3,197)       (2,408)
                                                       ----------    ----------
    Loans, net.....................................    $   64,925    $   93,414
                                                       ==========    ==========

      Our loan portfolio is secured by mortgages on properties located
throughout the United States. The following table sets forth the five states in
which the largest amount of properties securing our loans were located at
December 31, 2001:


<TABLE>
<CAPTION>
                                 Single Family    Multi-family     Commercial
                                  Residential     Residential     Real Estate       Consumer       Unsecured        Total
                                  -----------     -----------     -----------      ----------      ----------     ----------
<S>                                <C>             <C>             <C>             <C>             <C>            <C>       
New York.......................    $       --      $       --      $   15,766      $        8      $       --     $   15,774
Delaware.......................           240              --          14,349              --              --         14,589
Connecticut....................            --              --          12,800              --              --         12,800
New Jersey.....................            35           8,563              --               1              --          8,599
Virginia.......................            --              --           7,550              --              --          7,550
Other (1)......................           125          11,428              --              --             200         11,753
                                   ----------      ----------      ----------      ----------      ----------     ----------
   Total.......................    $      400      $   19,991      $   50,465      $        9      $      200     $   71,065
                                   ==========      ==========      ==========      ==========      ==========     ==========

<FN>
(1)   Consists of properties located in 5 other states, none of which aggregated
      over $5,645 in any one state.
</FN>
</TABLE>


                                       84

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The following table presents a summary of our non-performing loans,
allowance for loan losses and significant ratios for our loan portfolio at and
for the years ended December 31:


<TABLE>
<CAPTION>
                                                                       2001                 2000                  1999
                                                                  --------------       --------------       --------------
<S>                                                               <C>                  <C>                  <C>           
Non-performing loans:
Single family residential...................................      $           --       $          316       $          982
Multi-family residential....................................              17,201               13,373               11,037
Commercial real estate and other............................                   5                4,581               19,360
                                                                  --------------       --------------       --------------
                                                                  $       17,206       $       18,270       $       31,379
                                                                  ==============       ==============       ==============
Allowance for loan losses:
Balance, beginning of year..................................      $        2,408       $        7,259       $        4,928
Provision for loan losses...................................               2,518                    4                1,636
Charge-offs.................................................              (1,729)              (4,855)                  (8)
Acquired allowance (OAC acquisition)........................                  --                   --                  703
                                                                  --------------       --------------       --------------
Balance, end of year........................................      $        3,197       $        2,408       $        7,259
                                                                  ==============       ==============       ==============

Significant ratios:
Non-performing loans as a percentage of:
   Total loans..............................................           25.26%               19.07%               19.06%
   Total assets.............................................            1.01                 0.81                 0.96
Allowance for loan losses as a percentage of:
   Total loans..............................................            4.69%                2.51%                4.41%
   Non-performing loans.....................................           18.58                13.18                23.13
</TABLE>


      If non-accrual loans had been current in accordance with their original
terms, interest income for the years ended December 31, 2001, 2000 and 1999,
would have been greater by approximately $1,175, $1,919 and $1,139,
respectively. We have accrued no interest on loans greater than 89 days past
due.

      At December 31, 2001, we had no commercial loans that were impaired. The
average carrying value of impaired loans during 2001 was $2,226. At December 31,
2000, we had five commercial loans with an aggregate carrying value of $1,877,
net of allowance for loan losses of $361, which were impaired. The average
carrying value of impaired loans for the year ended December 31, 2000 was
$8,988. At December 31, 1999, we had two commercial loans with an aggregate
carrying value of $1,793, net of allowance for loan losses of $1,982, which were
impaired.

      The following table sets forth the geographic distribution of properties
securing our non-accrual loans in the loan portfolio at December 31, 2001:

                                    Multi-family
                                     Residential      Consumer         Total
                                     -----------     ----------      ----------
New Jersey........................    $    7,516     $       --      $    7,516
California........................         5,519             --           5,519
Tennessee.........................         4,166             --           4,166
New York..........................            --              5               5
                                      ----------     ----------      ----------
   Total..........................    $   17,201     $        5      $   17,206
                                      ==========     ==========      ==========

                                       85

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 6: DISCOUNT LOAN PORTFOLIO

      Our discount loan portfolio consisted of the following at December 31:


<TABLE>
<CAPTION>
                                                                                       2001                     2000
                                                                                  ---------------          ---------------
<S>                                                                               <C>                      <C>            
Single family residential loans..........................................         $        56,699          $       289,883
                                                                                  ---------------          ---------------
Multi-family residential loans...........................................                  13,328                  105,591
                                                                                  ---------------          ---------------
Commercial real estate loans:
     Office buildings....................................................                  43,913                   77,608
     Hotels..............................................................                     911                   63,967
     Retail properties...................................................                  47,492                   85,924
     Other properties....................................................                     607                   36,511
                                                                                  ---------------          ---------------
                                                                                           92,923                  264,010
                                                                                  ---------------          ---------------
Other loans..............................................................                  10,337                   17,188
                                                                                  ---------------          ---------------
     Total discount loans................................................                 173,287                  676,672
                                                                                  ---------------          ---------------
Unaccreted discount:
     Single family residential loans.....................................                 (16,460)                 (74,184)
     Multi-family residential loans.....................................                     (650)                  (5,176)
     Commercial real estate loans........................................                 (19,296)                 (40,413)
                                                                                  ---------------          ---------------
                                                                                          (36,406)                (119,773)
                                                                                  ---------------          ---------------
                                                                                          136,881                  556,899
Allowance for loan losses................................................                 (17,554)                 (20,871)
                                                                                  ---------------          ---------------
Discount loans, net......................................................         $       119,327          $       536,028
                                                                                  ===============          ===============
</TABLE>


      Our discount loan portfolio is secured by mortgages on properties located
throughout the United States. The following table sets forth the five states in
which the largest amount of properties securing our discount loans were located
at December 31, 2001:


<TABLE>
<CAPTION>
                                                                                                Commercial
                                                  Single Family        Multi-Family            Real Estate
                                                   Residential          Residential             and Other           Total
                                                   -----------          -----------            -----------       -----------
<S>                                                <C>                  <C>                    <C>               <C>        
Wisconsin..................................        $        84          $        --            $    34,414       $    34,498
New York...................................              2,088                   --                 26,631            28,719
Texas......................................              2,497                4,127                    948             7,572
Oklahoma...................................                188                6,270                  1,033             7,491
California.................................              2,483                   --                  4,400             6,883
Other (1)..................................             32,899                2,281                 16,538            51,718
                                                   -----------          -----------            -----------       -----------
                                                   $    40,239          $    12,678            $    83,964       $   136,881
                                                   ===========          ===========            ===========       ===========

<FN>
(1)   Consists of properties located in 39 other states, none of which
      aggregated over $3,856 in any one state.
</FN>
</TABLE>


                                       86

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The following table sets forth the contractual payment status at December
31 of the loans in our discount loan portfolio:


<TABLE>
<CAPTION>
                                                                                        2001                   2000
                                                                                    ------------           ------------
<S>                                                                                 <C>                    <C>         
Loans without Forbearance Agreements:
  Current...................................................................        $     46,887           $    270,106
  Past due 31 days to 89 days...............................................               2,071                  5,027
  Past due 90 days or more..................................................              72,070                222,216
                                                                                    ------------           ------------
     Subtotal...............................................................             121,028                497,349
                                                                                    ------------           ------------

Loans with Forbearance Agreements:
  Current...................................................................               1,815                  3,273
  Past due 31 days to 89 days...............................................                 453                  1,622
  Past due 90 days or more (1)(2)...........................................              13,585                 54,655
                                                                                    ------------           ------------
     Subtotal...............................................................              15,853                 59,550
                                                                                    ------------           ------------
                                                                                    $    136,881           $    556,899
                                                                                    ============           ============

<FN>
(1)   Included $8,135 of loans which were less than 90 days past due under the
      terms of the forbearance agreements at December 31, 2001, of which $6,071
      were current and $2,064 were past due 31 to 89 days.

(2)   Included $35,474 of loans which were less than 90 days past due under the
      terms of the forbearance agreements at December 31, 2000, of which $33,776
      were current and $1,698 were past due 31 to 89 days.
</FN>
</TABLE>


      The following schedule presents a summary of our allowance for loan losses
and significant ratios for our discount loans at and for the years ended
December 31:


<TABLE>
<CAPTION>
                                                                                 2001              2000              1999
                                                                              -----------       -----------      -----------
<S>                                                                           <C>               <C>              <C>        
Allowance for loan losses:
     Balance at beginning of year......................................       $    20,871       $    19,181      $    21,402
     Provision for loan losses.........................................            12,960            15,266            5,434
     Charge-offs.......................................................           (16,761)          (14,213)          (8,052)
     Recoveries........................................................               484               637              397
                                                                              -----------       -----------      -----------
     Balance at end of year............................................       $    17,554       $    20,871      $    19,181
                                                                              ===========       ===========      ===========

Significant ratios:
     Allowances for loan losses as a percentage of:
         Total loans (1)...............................................            12.82%             3.75%            2.06%
         Total assets..................................................             1.03%             0.93%            0.58%
     Net charge-offs as a percentage of average discount loans.........            (4.54)%           (1.66)%          (0.80)%

<FN>
(1)   Total loans are net of unaccreted discount.
</FN>
</TABLE>


      At December 31, 2001, we had seven commercial discount loans with an
aggregate carrying value of $4,771, net of allowance for loan losses of $591,
that were impaired. The average carrying value of our impaired loans during 2001
was $21,925. At December 31, 2000, we had six commercial discount loans with an
aggregate carrying value of $19,744, net of allowance for loan losses of $1,267,
which were impaired. Impaired discount loans at December 31, 2000 were primarily
comprised of one loan with a carrying value of $17,896 and secured by a hotel
property. The average carrying value of our impaired loans for the year ended
December 31, 2000 was $25,572.

                                       87

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 7: MATCH FUNDED ASSETS

      Our match funded assets are comprised of the following at December 31:

                                                          2001          2000
                                                       ----------    ----------
Single family residential loans (1)................    $   53,123    $   80,834
Allowance for loan losses..........................          (170)         (285)
                                                       ----------    ----------
   Match funded loans, net.........................        52,953        80,549
                                                       ----------    ----------
Match funded securities............................        19,435        36,438
                                                       ----------    ----------
Match funded advances on loans serviced for others:
   Principal and interest..........................        65,705            --
   Taxes and insurance.............................        21,900            --
   Other...........................................        14,358            --
                                                       ----------    ----------
                                                          101,963            --
                                                       ----------    ----------
Balance at end of period...........................    $  174,351    $  116,987
                                                       ==========    ==========

(1)   Included $4,405 and $2,831 of non-performing loans at December 31, 2001
      and 2000, respectively.

      Match funded loans were acquired as a result of our acquisition of OAC.
These loans were securitized and transferred by OAC to OAC Mortgage Residential
Securities, Inc., a real estate mortgage investment conduit (the "Trust") on
November 13, 1998. On that date, the Trust issued two classes of notes secured
by the related group of mortgage loans. At December 31, 2001, Loan Group I
consisted of approximately 383 mortgage loans with original terms of up to 30
years that are secured by first liens on single family residential properties.
At that same date, Loan Group II consisted of approximately 239 mortgage loans
with original terms of up to 30 years that are secured by first or second liens
on single family residential properties. Upon the transfer, OAC received
approximately $173,900 of proceeds. The transfer did not qualify as a sale for
accounting purposes. Accordingly, the proceeds received from the transfer are
reported as a secured borrowing with pledge of collateral (bonds-match funded
agreements) in our consolidated statement of financial condition. See Note 16.

      Our match funded loans are secured by mortgages on properties located
throughout the United States. The following table sets forth the five states in
which the largest amount of properties securing our loans were located at
December 31, 2001:

Michigan........................................................    $    8,731
California......................................................         6,078
Texas...........................................................         4,201
Florida.........................................................         3,183
Massachusetts...................................................         3,048
Other (1).......................................................        27,882
                                                                    ----------
                                                                    $   53,123
                                                                    ==========

(1)   Consists of properties located in 40 other states, none of which
      aggregated over $2,244 in any one state.

      Match funded securities, which had a fair value of $19,435, resulted from
our transfer of four unrated residual securities to Ocwen NIMs Corp. on December
16, 1999 in exchange for $43,000 in non-recourse notes (Series 1999-OAC1). Upon
the transfer, we received approximately $40,100 of proceeds. The transfer did
not qualify as a sale for accounting purposes. Accordingly, the amount of
proceeds from the transfer is reported as a secured borrowing with pledge of
collateral (bonds-match funded agreements) in our consolidated statement of
financial condition. See Note 16.

                                       88

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The following table summarizes the maturities of our match-funded
securities at December 31, 2001. Maturities are based on weighted-average unpaid
principal balance and reflect anticipated future prepayments based on a
consensus of dealers in the market.

                                                                     Fair Value
                                                                     ----------
Due within one year...............................................   $    4,334
Due after 1 through 5 years.......................................        6,319
Due after 5 through 10 years......................................        3,598
Due after 10 years................................................        5,184
                                                                     ----------
                                                                     $   19,435
                                                                     ==========

      As disclosed in Note 4, the change in net unrealized holding gains or
losses related to match funded securities are included in gain (loss) on trading
and match funded securities, net, in our consolidated statement of operations.

      Match funded advances on loans serviced for others resulted from the
transfer of certain advances on loans serviced for others to a third party in
December 2001 in exchange for cash. The transfer did not qualify as a sale for
accounting purposes. As a result, the proceeds we received from the transfer are
reported as a secured borrowing with pledge of collateral (bonds-match funded
agreements) in our consolidated statement of financial condition. See Note 16.


NOTE 8: REAL ESTATE OWNED

      Our real estate owned consists almost entirely of properties acquired by
foreclosure or deed-in-lieu thereof on loans in our discount loan portfolio.
Real estate owned, net of valuation allowance, is held for sale and came from
the following loan portfolios:

                                                          2001          2000
                                                       ----------    ----------
Discount loan portfolio:
   Single family residential........................   $   16,150    $   55,751
   Multi-family residential.........................           --           149
   Commercial real estate...........................       93,664        88,214
                                                       ----------    ----------
       Total........................................      109,814       144,114
Loan portfolio......................................          377         1,384
Loans available for sale............................          274           921
                                                       ----------    ----------
       Total........................................   $  110,465    $  146,419
                                                       ==========    ==========

      The following table sets forth by type of property certain geographical
information related to our real estate owned at December 31, 2001:


<TABLE>
<CAPTION>
                                                                          Multi-family Residential
                                             Single Family Residential         and Commercial                  Total
                                             -------------------------    ------------------------    ------------------------
                                                              No. of                      No. of                      No. of
                                               Amount       Properties      Amount      Properties      Amount      Properties
                                             ---------      ----------    ----------    ----------    ----------    ----------
<S>                                           <C>            <C>           <C>           <C>           <C>           <C>     
Florida.................................      $    407             10      $  50,287            4      $  50,694           14
Michigan................................         1,320             34         21,606            1         22,926           35
Georgia.................................           689              7         14,361            1         15,050            8
Minnesota...............................           117              2          4,915            1          5,032            3
Washington..............................           231              4          2,447            1          2,678            5
Other (1)...............................        13,660            323            425            1         14,085          324
                                              --------       --------      ---------     --------      ---------     --------
   Total................................      $ 16,424            380      $  94,041            9      $ 110,465          389
                                              ========       ========      =========     ========      =========     ========

<FN>
(1)   Consists of properties located in 38 other states, none of which
      aggregated over $2,059 in any one state.
</FN>
</TABLE>


                                       89

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The following schedule presents the activity, in aggregate, in the
valuation allowance on our real estate owned for the years ended December 31:

                                             2001         2000         1999
                                          ----------   ----------   ----------
Balance at beginning of year...........   $   18,142   $   17,181   $   15,325
Provision for losses...................       17,766       26,674       28,008
Charge-offs and sales..................      (16,810)     (25,713)     (26,152)
                                          ----------   ----------   ----------
Balance at end of year.................   $   19,098   $   18,142   $   17,181
                                          ==========   ==========   ==========


NOTE 9: REAL ESTATE HELD FOR SALE

      Our real estate held for sale consisted of the following at December 31:

                                                          2001          2000
                                                       ----------   ----------
Shopping centers (1)................................   $       --   $   22,670
Assisted living facilities (2)......................       13,418           --
                                                       ----------   ----------
                                                       $   13,418   $   22,670
                                                       ==========   ==========

(1)   During 2001, we transferred our shopping center in Bradenton, Florida to
 
     real estate held for investment after the contract to sell the property
      was terminated. We recorded impairment charges of $1,471 on this property
      during 2001. Also, during 2001, we sold another shopping center located in
      Havre, Montana, which had a carrying value of $1,034, for no gain.

(2)   Our three assisted living facilities were transferred from real estate
      held for investment during 2001. Impairment charges of $2,225 were
      recorded on these properties at the time of transfer based on anticipated
      sales proceeds.

      See Note 10.

                                       90

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 10: INVESTMENT IN REAL ESTATE

      Our investment in real estate consisted of the following at December 31:


<TABLE>
<CAPTION>
                                                                                                 2001              2000
                                                                                             -------------     -------------
<S>                                                                                          <C>               <C>          
Properties held for investment (1):
   Office buildings....................................................................      $      32,132     $      32,112
   Retail..............................................................................             29,637             9,515
   Building improvements...............................................................             17,513            11,346
   Tenant improvements and lease commissions...........................................              4,537             1,744
   Furniture and fixtures..............................................................                 52                52
                                                                                             -------------     -------------
                                                                                                    83,871            54,769
   Accumulated depreciation............................................................             (5,327)           (2,359)
                                                                                             -------------     -------------
                                                                                                    78,544            52,410
                                                                                             -------------     -------------
Loans accounted for as investments in real estate (2):
   Multi-family residential............................................................                 --                97
   Nonresidential......................................................................             30,436            45,689
                                                                                             -------------     -------------
                                                                                                    30,436            45,786
                                                                                             -------------     -------------
Properties held for lease (3):
   Land and land improvements..........................................................                 --             1,256
   Building............................................................................                 --            15,641
   Accumulated depreciation............................................................                 --              (855)
                                                                                             -------------     -------------
                                                                                                        --            16,042
                                                                                             -------------     -------------

Investment in real estate partnerships (4).............................................              7,916             8,523
                                                                                             -------------     -------------
                                                                                             $     116,896     $     122,761
                                                                                             =============     =============

<FN>
(1)   We acquired these properties as a result of our acquisition of OAC. Our
      properties held for investment at December 31, 2001 are comprised of one
      commercial office building and two retail shopping centers. During 2001,
      we transferred our shopping center in Bradenton, Florida from held for
      sale to held for investment.

(2)   We acquired certain acquisition, development and construction loans in
      January 2000 in which we participate in the expected residual profits of
      the underlying real estate, and where the borrower has not contributed
      substantial equity to the project. As such we account for these loans
      under the equity method of accounting as though we had an investment in a
      real estate limited partnership.

(3)   Consisted of three assisted living facilities which were transferred to
      real estate held for sale during 2001.

(4)   Consists of interests in four limited partnerships operating as real
      estate ventures, consisting of multi-family type properties.
</FN>
</TABLE>



NOTE 11: MORTGAGE SERVICING

      Under contractual servicing agreements with investors, we service mortgage
and non-mortgage loans which we do not own. The total unpaid principal balance
of such loans we serviced for others was $23,164,012 and $11,360,523 at December
31, 2001 and 2000, respectively, and is excluded from our consolidated
statements of financial condition. We similarly exclude funds representing
collections of principal and interest we have received from borrowers which are
on deposit with an unaffiliated bank from our statements of financial condition.
Those funds amounted to $324,027 and $101,461 at December 31, 2001 and 2000,
respectively. Domestic servicing fees and other servicing-related income we
earned on loans we serviced for others, included in servicing and other fees,
amounted to $113,002, $78,685 and $73,224 for the years ended December 31, 2001,
2000 and 1999, respectively. In general, these servicing agreements include
guidelines and procedures for servicing the loans, including servicing,
remittance and reporting requirements, among other provisions.

                                       91

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      We earn servicing and sub-servicing income primarily on mortgage loans
secured by real estate in 50 states. At December 31, 2001, the geographic
distribution based on the unpaid principal balance of the loans we serviced was
as follows:

                                               No. of Loans (2)     Amount (2)
                                               ----------------    ------------
California.....................................      48,079        $  5,581,275
New York.......................................      19,087           1,685,048
Florida........................................      24,254           1,537,766
Illinois.......................................      12,649           1,275,094
Texas..........................................      20,417           1,188,924
Other (1)......................................     179,067          11,895,905
                                                  ---------        ------------
                                                    303,553        $ 23,164,012
                                                  =========        ============

(1)   Consisted of loans in 45 other states, none of which aggregated over
      $794,206 in any one state.

(2)   Included 1,571 non-mortgage loans with an unpaid principal balance of
      $220,343.

      The risk inherent in such concentrations is dependent upon regional and
general economic conditions that affect property values.

      The unamortized balance of our servicing rights was as follows at December
31:

                                                          2001          2000
                                                       ----------    ----------
Unamortized balance.................................   $  101,107    $   53,056
Valuation allowance.................................           --        (1,630)
                                                       ----------    ----------
                                                       $  101,107    $   51,426
                                                       ==========    ==========

      The following table summarizes the activity in our servicing rights for
the years ended December 31:

                                                          2001          2000
                                                       ----------    ----------
Balance at the beginning of year....................   $   51,426    $   11,683
Purchases...........................................       79,522        49,779
Amortization........................................      (29,841)      (10,036)
                                                       ----------    ----------
Balance at the end of the year......................   $  101,107    $   51,426
                                                       ==========    ==========

      The unamortized balance of $101,107 at December 31, 2001 was comprised of
$100,765 of purchased servicing rights and $342 of mortgage servicing rights
retained in connection with loan securitizations we completed in prior years. At
December 31, 2001, we estimated the fair value of our servicing rights to be
$200,528.

      Advances related to our loans serviced for others consisted of the
following at December 31:

                                                  2001 (1)(2)        2000 (1)
                                                 -------------    -------------
Principal and interest.......................    $     107,319    $      95,191
Taxes and insurance..........................           99,972           64,159
Other........................................           69,543           44,697
                                                 -------------    -------------
                                                 $     276,834    $     204,047
                                                 =============    =============

(1)   Does not include advances on our loan portfolios of $6,349 and $23,008 at
      December 31, 2001 and 2000, respectively.

(2)   Does not include $65,706 of principal and interest advances, $21,900 of
      taxes and insurance advances and $14,358 of other advances that are
      reported as part of match funded assets. See Note 7.

                                       92

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 12: AFFORDABLE HOUSING PROPERTIES

      Our investments in affordable housing properties were as follows at
December 31:


<TABLE>
<CAPTION>
                                                                                             2001                 2000
                                                                                        ---------------      ---------------
<S>                                                                                     <C>                  <C>            
Investments solely as a limited partner made before May 18, 1995................        $        21,768      $        53,399
Investments solely as a limited partner made on or after May 18, 1995...........                  6,838               15,185
Investments both as a limited and, through subsidiaries, as a general partner...                 73,463               74,228
                                                                                        ---------------      ---------------
                                                                                        $       102,069      $       142,812
                                                                                        ===============      ===============
</TABLE>


      The qualified affordable housing projects underlying our investments in
affordable housing properties are geographically located throughout the United
States. At December 31, 2001, our largest single investment was $14,028, which
related to a project located in Sacramento, California.

      We record income on our limited partnership investments made before May
18, 1995 under the level yield method as a reduction of income tax expense. This
income amounted to $388, $2,093 and $2,953 for the years ended December 31,
2001, 2000 and 1999, respectively. For 2000, we also recorded additional income
tax expense of $6,875 related to certain of our limited partnership investments
made before May 18, 1995 resulting from the sale of those investments in advance
of their maturity for tax credit purposes. As a result, we could not realize all
of the deferred tax benefit that had been previously recorded by us under the
level yield method, and we reversed the related accrual for the excess benefits.
Had we accounted for our investments under the level yield method under the
equity method, income would have been reduced by $88, $337 and $60 for the years
ended December 31, 2001, 2000 and 1999, respectively. For limited partnership
investments made after May 18, 1995, and for investments as a limited and,
through subsidiaries, as a general partner, we recognized tax credits of $1,690,
$7,359 and $15,289 for the years ended December 31, 2001, 2000 and 1999,
respectively, and recorded a loss after depreciation of $993, $3,483 and $6,291
from operations on the underlying real estate for the years ended December 31,
2001, 2000 and 1999, respectively.

      Included in our gains on other non-interest earning assets, net, for the
years ended December 31, 2001, 2000 and 1999, are gains (losses) of $(956), $497
and $6,591, respectively, on the sales of certain of our investments in
affordable housing properties which had carrying values of $11,469, $27,402 and
$41,744, respectively, at time of sale.

      During 2001, we recorded impairment charges of $15,587 on properties not
subject to sales contracts to reflect their estimated net realizable values.
During 2000, we entered into transactions to sell twenty-five of our low-income
housing tax credit properties, together with the related tax credits. Although
these transactions resulted in the transfer of tax credits and operating results
for these properties to the purchasers, they did not qualify as sales for
accounting purposes, primarily due to insufficient cash received at signing, as
well as certain contingencies with respect to potential repurchase requirements.
We recorded a charge to earnings during 2000 of $6,448 reflecting the expected
net loss to be incurred upon completion of these transactions. At December 31,
2001 and 2000, our investments in affordable housing properties included $54,688
and $93,210, respectively of properties subject to sales agreements that had not
yet qualified as sales for accounting purposes.


NOTE 13: PREMISES AND EQUIPMENT

      Our premises and equipment are summarized as follows at December 31:


<TABLE>
<CAPTION>
                                                                                         2001                   2000
                                                                                    --------------         --------------
<S>                                                                                 <C>                    <C>           
Computer hardware and software..............................................        $       53,557         $       42,759
Buildings...................................................................                19,270                 19,265
Leasehold improvements......................................................                 9,788                 10,056
Land and land improvements..................................................                 4,041                  4,814
Furniture and fixtures......................................................                 8,810                  7,455
Office equipment............................................................                 1,773                    746
Less accumulated depreciation and amortization..............................               (52,650)               (41,943)
                                                                                    --------------         --------------
                                                                                    $       44,589         $       43,152
                                                                                    ==============         ==============
</TABLE>


                                       93

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      Depreciation expense amounted to $11,398, $12,248 and $13,546 for 2001,
2000 and 1999, respectively (of which $2,344, $2,353 and $2,343 for 2001, 2000
and 1999, respectively, related to computer software). Buildings represent our
nationwide customer service and collection facility in Orlando, Florida.


NOTE 14: DEPOSITS

      Our deposits consisted of the following at December 31:


<TABLE>
<CAPTION>
                                                                                          2001                  2000
                                                                                      -------------         -------------
<S>                                                                                   <C>                   <C>          
Non-interest-bearing deposits................................................         $       5,624         $      13,523
NOW and money market checking accounts.......................................                15,479                14,670
Savings accounts.............................................................                 1,287                 1,274
                                                                                      -------------         -------------
                                                                                             22,390                29,467
                                                                                      -------------         -------------
Certificates of deposit (1)(2)...............................................               636,037             1,176,566
Unamortized deferred fees....................................................                (1,549)               (3,989)
                                                                                      -------------         -------------
                                                                                            634,488             1,172,577
                                                                                      -------------         -------------
                                                                                      $     656,878         $   1,202,044
                                                                                      =============         =============

<FN>
(1)   At December 31, 2001 and 2000, certificates of deposit, net of unamortized
      deferred fees, included $499,710 and $964,443, respectively, of brokered
      deposits originated through national, regional and local investment
      banking firms which solicit deposits from their customers, all of which
      are non-cancelable. We did not issue any new brokered certificates of
      deposit during 2001 and, at this time, do not intend to issue any such
      deposits in the foreseeable future.

(2)   At December 31, 2001 and 2000, certificates of deposit issued on an
      uninsured basis amounted to $60,804 and $75,417, respectively. Of the
      $60,804 of uninsured deposits at December 31, 2001, $2,149 were from
      political subdivisions in New Jersey and are secured or collateralized as
      required under state law.
</FN>
</TABLE>


      The contractual remaining maturity of our certificates of deposit at
December 31, 2001 is as follows:

Within one year...............................................     $    416,674
Within two years..............................................          110,660
Within three years............................................           60,403
Within four years.............................................           25,701
Within five years.............................................            1,107
Thereafter....................................................           19,943
                                                                   ------------
                                                                   $    634,488
                                                                   ============

      We amortize deferred fees on certificates of deposits on a straight-line
basis over the term of the respective certificates of deposit. Such amortization
amounted to $2,441, $4,419 and $5,098 for the years ended December 31, 2001,
2000 and 1999, respectively, and is included in interest expense on deposits.
Interest expense we incurred by type of deposit account was as follows for the
years ended December 31:


<TABLE>
<CAPTION>
                                                                                 2001              2000              1999
                                                                              -----------      -----------       -----------
<S>                                                                           <C>              <C>               <C>        
NOW accounts and money market checking................................        $       393      $       532       $     1,313
Savings...............................................................                 29               37                38
Certificates of deposit...............................................             59,545           97,655            97,019
                                                                              -----------      -----------       -----------
                                                                              $    59,967      $    98,224       $    98,370
                                                                              ===========      ===========       ===========
</TABLE>


         Accrued interest payable on our deposits amounted to $6,858, $14,955
and $15,078 at December 31, 2001, 2000 and 1999, respectively.

                                       94

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 15: ESCROW DEPOSITS ON LOANS AND LOANS SERVICED FOR OTHERS

      Escrow deposits on loans we own and on loans we serviced for others
consisted of the following at December 31:


<TABLE>
<CAPTION>
                                                                                          2001                   2000
                                                                                    ---------------        ---------------
<S>                                                                                 <C>                    <C>            
Taxes and insurance payments held on loans serviced for others...............       $        63,235        $        34,662
Escrow balances on loans held for sale, loan portfolio and discount loan
   portfolio.................................................................                   899                  6,917
Other escrow deposits........................................................                 9,431                 14,737
                                                                                    ---------------        ---------------
                                                                                    $        73,565        $        56,316
                                                                                    ===============        ===============
</TABLE>



NOTE 16: BONDS-MATCH FUNDED AGREEMENTS

      Our bonds-match funded agreements are accounted for as secured borrowings
with pledges of collateral and were comprised of the following at December 31:


<TABLE>
<CAPTION>
Collateral                                                                                2001                   2000
-----------------------------------------------------------------------------       ---------------        ---------------
<S>                                                                                 <C>                    <C>            
Single family residential loans..............................................       $        46,145        $        72,101
Unrated residual securities..................................................                18,997                 34,949
Advances on loans serviced for others........................................                91,766                     --
                                                                                    ---------------        ---------------
                                                                                    $       156,908        $       107,050
                                                                                    ===============        ===============
</TABLE>


      At December 31, 2001 and 2000, our bonds-match funded agreements had a
weighted average interest rate of 3.97% and 8.07%, respectively. Accrued
interest payable on our bonds-match funded agreements amounted to $97 and $143
at December 31, 2001 and 2000, respectively. We incurred interest expense on our
bonds-match funded agreements of $7,315, $11,484 and $2,101 during 2001, 2000
and 1999, respectively.


NOTE 17: LINES OF CREDIT AND OTHER SHORT-TERM BORROWINGS

      Through our subsidiaries we have obtained secured lines of credit from
various unaffiliated financial institutions as follows:


<TABLE>
<CAPTION>
                                         Balance       Amount of       Committed      Maturity
             Collateral                Outstanding      Facility        Amount          Date             Interest Rate(3)
-------------------------------------  -----------  ---------------  ------------  ---------------  -------------------------
<S>                                    <C>          <C>              <C>           <C>              <C>                      
December 31, 2001:
   Real estate investments and
     commercial loans (1)........       $  32,463      $ 200,000       $ 115,580      June 2002     LIBOR + 240 basis points

   Advances on loans serviced for
     others (2)..................          51,841        100,000          51,841   October 2002     LIBOR + 200 basis points
                                        ---------
                                        $  84,304
                                        =========

December 31, 2000:
   Real estate investments and
     commercial loans (1)........       $ 32,933       $ 200,000       $ 115,580      June 2001     LIBOR + 240 basis points
                                        =========

<FN>
(1)   Acquired in connection with our acquisition of OAC.

(2)   This line was entered into during 2001 to fund servicing advances we
      acquired in connection with our acquisition of servicing rights.

(3)   LIBOR was 1.87% and 6.57% at December 31, 2001 and 2000, respectively.
</FN>
</TABLE>


                                       95

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The maximum month end amount of our borrowings under lines of credit was
$119,648 and $184,750 for the years ended December 31, 2001 and 2000,
respectively. The average balance of obligations outstanding under lines of
credit was $82,604 and $152,424 during the years ended December 31, 2001 and
2000, respectively, and the weighted average interest rates were 6.67% and
9.11%, respectively.

      Accrued interest payable on our obligations outstanding under lines of
credit amounted to $171 and $0 at December 31, 2001 and 2000, respectively.
Interest expense we incurred on our obligations outstanding under lines of
credits amounted to $5,511, $13,881 and $16,318 during 2001, 2000 and 1999,
respectively.

      In addition to our lines of credit listed above, through the Bank, we have
the capacity to borrow from the Federal Home Bank of New York ("FHLB") up to an
aggregate of $50,000, at the prevailing market rate. This facility matures in
March 2002. We had no advances from the FHLB during the years ended December 31,
2001 and 2000.

      We also have contractual relationships with eleven brokerage firms and the
FHLB under which we can obtain funds under reverse repurchase agreements. At
December 31, 2001, we had $79,405 of such reverse repurchase agreements
outstanding as compared to $0 at December 31, 2000. At December 31, 2001 reverse
repurchase agreements ranged in maturity from two to seven days and had interest
rates ranging from 1.80% to 1.89%. The maximum month end amount of our
borrowings through reverse repurchase agreements was $92,095 and $421,050 during
the years ended December 31, 2001 and 2000, respectively. The average balance of
reverse repurchase agreements outstanding was $19,500 and $167,337 during the
years ended December 31, 2001 and 2000, respectively, and the weighted average
interest rates were 2.71% and 6.41%, respectively.

      As of December 31, the weighted average interest rates of our obligations
outstanding under lines of credit and reverse repurchase agreements were as
follows:

                                                          2001          2000
                                                       ----------    ----------
Lines of credit....................................       4.02%         8.97%
Reverse repurchase agreements......................       1.87%          --


NOTE 18: NOTES, DEBENTURES AND OTHER INTEREST-BEARING OBLIGATIONS

      Our notes, debentures and other interest-bearing obligations mature as
follows:

                                                              December 31,
                                                       ------------------------
                                                          2001          2000
                                                       ----------    ----------
2003:
11.875% Notes due October 1.........................   $   87,025    $  100,050
2004:
Loan due May 24 (LIBOR plus 250 basis points).......        6,235         6,235
2005:
12% Subordinated Debentures due June 15.............       67,000        67,000
11.5% Notes due July 1..............................           45            45
                                                       ----------    ----------
                                                       $  160,305    $  173,330
                                                       ==========    ==========

      We issued our 11.875% Notes due October 1, 2003, ("the Notes") in the
original amount of $125,000 with interest payable semiannually on April 1 and
October 1. The Notes are unsecured general obligations and are subordinated in
right of payment to the claims of creditors of our subsidiaries.

                                       96

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      We may not redeem the Notes before October 1, 2001, except as described
below. On or after such date, we may redeem the Notes at any time at our option,
in whole or in part, at the following redemption prices (expressed as a
percentage of the principal amount) plus accrued and unpaid interest, if
redeemed during the twelve-month period beginning October 1 of the years
indicated below:

Year                                                           Redemption Price
----                                                           ----------------
2001....................................................           105.938%
2002....................................................           102.969%

      During 2001 and 2000, we repurchased $13,025 and $3,800, respectively, of
our Notes in the open market, resulting in extraordinary gains of $52 ($17 net
of taxes) and $439 ($276 net of taxes), respectively.

      The indenture governing the Notes requires that we maintain, at all times
when the Notes are not rated in an investment grade category by one or more
nationally recognized statistical rating organizations, unencumbered liquid
assets with a value equal to 100% of the required interest payments due on the
Notes on the next two succeeding semiannual interest payment dates. We
maintained an investment in cash and cash equivalents of $10,366 and $12,057 at
December 31, 2001 and 2000, respectively, that is restricted for purposes of
meeting this liquidity requirement. The indenture further provides that we shall
not sell, transfer or otherwise dispose of shares of common stock of the Bank or
permit the Bank to issue, sell or otherwise dispose of shares of its common
stock unless in either case the Bank remains a wholly-owned subsidiary.

      In connection with the issuance of the Notes, we incurred certain costs
that we capitalized and are amortizing on a straight-line basis over the life of
the Notes. The unamortized balance of these issuance costs amounted to $1,185
and $2,140 at December 31, 2001 and 2000, respectively, and is included in other
assets. Accrued interest payable on the Notes amounted to $2,583 and $2,970 at
December 31, 2001 and 2000, respectively. We incurred interest expense on the
Notes of $11,465, $12,293 and $14,656 during 2001, 2000 and 1999 respectively.

      The Bank issued our 12% Subordinated Debentures due 2005 (the
"Debentures") in the original amount of $100,000 with interest payable
semiannually on June 15 and December 15. The Debentures are unsecured general
obligations of the Bank and are subordinated in right of payment to all existing
and future senior debt.

      The Bank may redeem the Debentures at any time at its option, in whole or
in part, together with accrued and unpaid interest, if any, on not less than 30
nor more than 60 days notice at the following redemption prices (expressed as a
percentage of the principal amount), if redeemed during the twelve-month period
beginning June 15 of the years indicated below:

Year                                                           Redemption Price
----                                                           ----------------
2001 ...................................................           104.000%
2002 ...................................................           102.667%
2003 ...................................................           101.333%
2004 and thereafter.....................................           100.000%

      In connection with the issuance of the Debentures, the Bank incurred
certain costs that we capitalized and are amortizing on a straight-line basis
over the expected life of the Debentures. The unamortized balance of these
issuance costs amounted to $617 and $1,043 at December 31, 2001 and 2000,
respectively, and is included in other assets. Accrued interest payable on the
Debentures amounted to $335 at both December 31, 2001 and 2000. We incurred
interest expense on the Debentures of $8,040, $8,040 and $11,412 during 2001,
2000 and 1999, respectively. During 1999, the Bank repurchased $33,000 of its
Debentures in the open market, resulting in an extraordinary gain of $1,605
($1,323 net of taxes). There were no repurchases during 2001 or 2000.

      As a result of our acquisition of OAC in October 1999, we assumed the
11.5% Redeemable Notes ("the Redeemable Notes") due 2005, which OAC issued
during 1998 in the original amount of $150,000. During 2000, we repurchased in
the open market $44,930 of the outstanding balance of its Redeemable Notes.
These repurchases resulted in extraordinary gains of $8,073 ($5,086 net of
taxes). Additionally, on December 21, 2000, we acquired $98,025 in aggregate
principal outstanding of the Redeemable Notes pursuant to our tender offer and
consent solicitation dated November 14, 2000. This repurchase resulted in an
extraordinary gain of $9,452 ($5,955 net of taxes). We incurred interest expense
on the Redeemable Notes of $5, $13,680 and $4,226 during 2001, 2000 and 1999,
respectively.

                                       97

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 19: CAPITAL SECURITIES

      In August 1997, Ocwen Capital Trust ("OCT") issued $125,000 of 10-7/8%
Capital Securities (the "Capital Securities"). OCT invested the proceeds from
issuance of the Capital Securities in 10-7/8% Junior Subordinated Debentures
issued by OCN. The Junior Subordinated Debentures, which represent the sole
assets of OCT, will mature on August 1, 2027. During 2001 and 2000, we
repurchased $18,371 and $30,470, respectively, of our Capital Securities in the
open market, resulting in extraordinary gains of $3,723 ($2,345 net of taxes)
and $11,739 ($7,396 net of taxes), respectively.

      Holders of the Capital Securities are entitled to receive cumulative cash
distributions accruing from the date of original issuance and payable
semiannually in arrears on February 1 and August 1 of each year, commencing on
February 1, 1998, at an annual rate of 10-7/8% of the liquidation amount of
$1,000 per Capital Security. OCN guarantees payment of distributions out of
moneys held by OCT, and payments on liquidation of OCT or the redemption of
Capital Securities, to the extent OCT has funds available. If Ocwen Financial
Corporation does not make principal or interest payments on the Junior
Subordinated Debentures, OCT will not have sufficient funds to make
distributions on the Capital Securities, in which event the guarantee shall not
apply to such distributions until OCT has sufficient funds available therefore.
Accumulated distributions payable on the Capital Securities amounted to $2,771
and $3,533 at December 31, 2001 and 2000, respectively, and are included in
accrued interest payable.

      We have the right to defer payment of interest on the Junior Subordinated
Debentures at any time or from time to time for a period not exceeding 10
consecutive semiannual periods with respect to each deferral period, provided
that no extension period may extend beyond the stated maturity of the Junior
Subordinated Debentures. Upon the termination of any such extension period and
the payment of all amounts then due on any interest payment date, we may elect
to begin a new extension period. Accordingly, there could be multiple extension
periods of varying lengths throughout the term of the Junior Subordinated
Debentures. If we defer interest payments on the Junior Subordinated Debentures,
distributions on the Capital Securities will also be deferred, and the we may
not, and may not permit any of our subsidiaries to, (i) declare or pay any
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, their capital stock or (ii) make any
payment of principal, interest or premium, if any, on or repay, repurchase or
redeem any debt securities that rank pari passu with or junior to the Junior
Subordinated Debentures. During an extension period, interest on the Junior
Subordinated Debentures will continue to accrue at the rate of 10-7/8% per
annum, compounded semiannually.

      We may redeem the Junior Subordinated Debentures before maturity at our
option, subject to the receipt of any necessary prior regulatory approval, (i)
in whole or in part on or after August 1, 2007, at a redemption price equal to
105.438% of the principal amount thereof on August 1, 2007, declining ratably on
each August 1 thereafter to 100% on or after August 1, 2017, plus accrued
interest thereon, or (ii) at any time, in whole (but not in part), upon the
occurrence and continuation of a special event (defined as a tax event,
regulatory capital event or an investment company event) at a redemption price
equal to the greater of (a) 100% of the principal amount thereof or (b) the sum
of the present values of the principal amount and premium payable with respect
to an optional redemption of such Junior Subordinated Debentures on August 1,
2007, together with scheduled payments of interest from the prepayment date to
August 1, 2007, discounted to the prepayment date on a semiannual basis at the
adjusted Treasury rate plus accrued interest thereon to the date of prepayment.
The Capital Securities are subject to mandatory redemption, in whole or in part,
upon repayment of the Junior Subordinated Debentures at maturity or their
earlier redemption, in an amount equal to the amount of the related Junior
Subordinated Debentures maturing or being redeemed and at a redemption price
equal to the redemption price of the Junior Subordinated Debentures, plus
accumulated and unpaid distributions thereon to the date of redemption.

      For financial reporting purposes, we treat OCT as a subsidiary and,
accordingly, the accounts of OCT are included in our consolidated financial
statements. We eliminate intercompany balances and transactions with OCT,
including the balance of Junior Subordinated Debentures outstanding, in our
consolidated financial statements. We present the Capital Securities in a
separate caption between liabilities and stockholders' equity in our
consolidated statement of financial condition as "Company-obligated, mandatorily
redeemable securities of subsidiary trust holding solely Junior Subordinated
Debentures of the Company." We report distributions on the Capital Securities in
a separate caption immediately following non-interest expense in our
consolidated statement of operations. We intend to continue this method of
accounting in the future.

      In connection with our issuance of the Capital Securities, we incurred
certain costs that we capitalized and are amortizing over the term of the
Capital Securities. The unamortized balance of these issuance costs amounted to
$2,083 and $2,815 at December 31, 2001 and 2000, respectively, and are included
it in other assets.

                                       98

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 20: BASIC AND DILUTED EARNINGS PER SHARE

      We are required to present both basic and diluted EPS on the face of our
statement of operations. Basic EPS excludes common stock equivalents and is
calculated by dividing net income by the weighted average number of common
shares outstanding during the year. We calculate diluted EPS by dividing net
income by the weighted average number of common shares outstanding, including
the dilutive potential common shares related to outstanding stock options.

      The following is a reconciliation of the calculation of basic EPS to
diluted EPS for the years ended December 31:


<TABLE>
<CAPTION>
                                                                                 2001              2000              1999
                                                                              -----------       -----------      -----------
<S>                                                                           <C>               <C>              <C>        
Net income (loss)......................................................       $  (124,782)      $     2,192      $    19,832
                                                                              ===========       ===========      ===========
Basic EPS:
   Weighted average shares of common stock.............................        67,227,058        67,427,662       63,051,015
                                                                              ===========       ===========      ===========
   Basic EPS...........................................................       $    (1.86)       $     0.03       $     0.31
                                                                              ==========        ==========       ==========
Diluted EPS:
   Weighted average shares of common stock.............................        67,227,058        67,427,662       63,051,015
   Effect of dilutive securities:
     Stock options (1).................................................                --            36,381           39,267
                                                                              -----------       -----------      -----------
                                                                               67,227,058        67,464,043       63,090,282
                                                                              ===========       ===========      ===========
   Diluted EPS.........................................................       $    (1.86)       $     0.03       $     0.31
                                                                              ==========        ==========       ==========

<FN>
(1)   Excludes the effect of 1,718,133 and 1,565,343 of options that are
      antidilutive for 2000 and 1999, respectively.
</FN>
</TABLE>



NOTE 21: DERIVATIVE FINANCIAL INSTRUMENTS

      We use derivative financial instruments for the purpose of managing our
exposure to adverse fluctuations in interest and foreign currency exchange
rates.

      Because interest rate futures, swaptions, put options and foreign currency
futures contracts are exchange traded, holders of these instruments look to the
exchange for performance under these contracts and not the entity holding the
offsetting futures contract, thereby minimizing the risk of nonperformance under
these contracts. We are exposed to credit loss in the event of nonperformance by
the counterparty to the interest and currency swaps and control this risk
through credit monitoring procedures. The notional principal amount does not
represent our exposure to credit loss.

Interest Rate Management

      In managing our interest rate risk, we enter into interest rate swaps from
time to time. Under interest rate swaps, we agree with other parties to
exchange, at specified intervals, the difference between fixed-rate and
floating-rate interest amounts calculated by reference to an agreed upon
notional amount. The terms of the interest rate swaps provided for us to receive
a floating rate of interest based on the London Interbank Offered Rate ("LIBOR")
and to pay fixed interest rates. We used these interest rate swaps to alter the
interest rate on LIBOR rate debt incurred to fund our acquisitions of real
estate, subordinate and residual securities and securities sold under agreements
to repurchase.

      We are exposed to credit loss when we enter into interest rate swaps if:
(i) the counterparty to the interest rate swap does not perform and (ii) the
floating interest rate that we receive exceeds the fixed interest rate that we
pay. All the counterparties had long-term debt ratings of A+ or above by
Standard and Poor's and A1 or above by Moody's. Although a swap generally may
not be sold or transferred without the consent of the counterparty, management
does not believe that this consent would be withheld. Although none of our
interest rate swaps were exchange-traded, there are a number of financial
institutions which enter into these types of transactions as part of their
day-to-day activities.

                                       99

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      We had no interest rate swaps outstanding at December 31, 2001. The terms
of our outstanding interest swaps at December 31, 2000 are as follows:


<TABLE>
<CAPTION>
                                Notional             LIBOR
        Maturity                 Amount              Index             Fixed Rate        Floating Rate         Fair Value
-------------------------     ------------     -----------------     --------------     ---------------     ----------------
<S>                           <C>                   <C>                    <C>                <C>             <C>         
April 2001............        $     33,000          1-Month                6.00%              6.80%           $         59
                              ============                                                                    ============
</TABLE>


      Our swaps had the effect of increasing (decreasing) net interest income by
$2, $(148) and $(72) for the years ended December 31, 2001, 2000 and 1999,
respectively. During 2001 and 2000, we realized gains (losses) of $(9) and $575
on swaps that we included in net operating gains on investments in real estate.

      We have purchased amortizing caps and floors to hedge our interest rate
exposure relating to our match funded loans and securities. An interest rate cap
or interest rate floor is designed to provide protection against the interest
rate on a floating-rate instrument rising above some level (cap) or falling
below some level (floor). The interest rate representing the cap or the floor is
referred to as the "strike rate." We receive payments from the seller on caps
when the current interest rate rises above the strike rate and on floors when
the current interest rate falls below the strike rate. The amount received
represents the difference between the current rate and the strike rate applied
to the notional amount. The terms of our outstanding caps and floors at December
31, 2001 and 2000 are as follows:


<TABLE>
<CAPTION>
                                      Notional
                                       Amount              Maturity              Index          Strike Rate      Fair Value
                                  -----------------     --------------     ----------------     -----------     -------------
<S>                                   <C>               <C>                  <C>                <C>             <C>         
December 31, 2001:
Caps........................          $     125,933     October 2003         LIBOR 1-Month           7.00%       $        104
Floors......................                 34,100     October 2003          CMT 2-Year             4.35                 300
                                                                                                                 ------------
                                                                                                                 $        404
                                                                                                                 ============
December 31, 2000:
Caps........................          $     141,674     October 2003         LIBOR 1-Month           7.00%       $        345
Floors......................                 37,787     October 2003          CMT 2-Year             4.35                 154
                                                                                                                 ------------
                                                                                                                 $        499
                                                                                                                 ============
</TABLE>


      During 2001, we determined that our caps and floors no longer qualified
for hedge accounting. Unrealized gains included in earnings to record our caps
and floors at fair value during 2001 amounted to $404. Amortization of the caps
and floors amounted to $1,181and $295 during the years ended December 31, 2000
and 1999, respectively.

      We have also managed our interest rate risk by purchasing European
swaptions and put options and U.S. Treasury and U.S. Agency futures contracts to
hedge anticipated future fundings related to affordable housing properties.
During the fourth quarter of 1999, these financial instruments ceased to qualify
for hedge accounting and subsequent gains or losses were included in earnings.
We closed these financial instruments during the fourth quarter of 2000.

      We purchased no swaptions, put options, U.S. Treasury futures contracts or
US Agency futures contracts during 2001. The following table summarizes our net
realized gains and (losses) on the following financial instruments included in
earnings for years ended December 31, 2000 and 1999:

                                                          2000          1999
                                                       ----------    ----------
Swaptions and put options.........................     $     (374)   $      588
U.S. Treasury and Agency futures..................           (617)          208

                                      100

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The fair value of our interest rate swaps and caps and floors represents
the estimated amount that we would receive or pay to terminate these agreements
taking into account current interest rates. Market quotes are available for
these agreements. The following table summarizes our use of interest rate risk
management instruments:


<TABLE>
<CAPTION>
                                                                          Notional Amount
                                      -------------------------------------------------------------------------------------
                                          U.S.
                                      Treasury and
                                         Agency                      European       European
                                      Futures Sold     Interest      Treasury     Treasury Put
                                          Short       Rate Swaps     Swaptions       Options         Caps          Floors
                                      ------------    ----------     ---------    ------------     ---------      ---------
<S>                                     <C>            <C>           <C>            <C>            <C>            <C>      
Balance, December 31, 1999.......       $  19,000      $ 200,780     $  18,400      $   2,500      $ 159,211      $  41,899
Purchases........................          54,700             --        14,500             --             --             --
Maturities.......................         (15,600)            --       (26,900)        (2,500)       (17,537)        (4,112)
Terminations.....................         (58,100)      (167,780)       (6,000)            --             --             --
                                        ---------      ---------     ---------      ---------      ---------      ---------
Balance, December 31, 2000.......              --         33,000            --             --        141,674         37,787
Maturities.......................              --        (33,000)           --             --        (15,741)        (3,686)
                                        ---------      ---------     ---------      ---------      ---------      ---------
Balance, December 31, 2001.......       $      --      $      --     $      --      $      --      $ 125,933      $  34,101
                                        =========      =========     =========      =========      =========      =========
</TABLE>


Foreign Currency Management

      We enter into foreign currency derivatives to hedge our investments in our
foreign subsidiaries which own residual interests backed by residential loans
originated in the UK ("UK residuals") and in our shopping center located in
Halifax, Nova Scotia ("the Nova Scotia shopping center"). It is our policy to
periodically adjust the amount of foreign currency derivative contracts we have
entered into in response to changes in our investments in these assets. Currency
futures are commitments to either purchase or sell foreign currency at a future
date for a specified price.

      We have determined that the local currency of our investment in UK
residuals and our investment in the Nova Scotia Shopping Center is the
functional currency. Our foreign currency derivative financial instruments
qualify for hedge accounting. Accordingly, we include the gains or losses in the
net unrealized foreign currency translation in accumulated other comprehensive
income in stockholders' equity.

      The following table sets forth the terms and values of our foreign
currency financial instruments at December 31, 2001 and 2000:


<TABLE>
<CAPTION>
                                                                                                 Strike
                                                  Position      Maturity      Notional Amount      Rate         Fair Value
                                                  --------      --------    ------------------- ----------    -------------
<S>                                               <C>           <C>         <C>      <C>         <C>            <C>       
December 31, 2001:
Canadian Dollar currency futures.............      Short        March 2002    C$     34,000       0.6380        $      353

British Pound currency futures...............      Short        March 2002  (pound)  17,250       1.4350              (235)
                                                                                                                ----------
                                                                                                                $      118
                                                                                                                ==========
December 31, 2000:
Canadian Dollar currency futures.............      Short        March 2001    C$     33,000       0.6795        $     (242)

British Pound currency futures...............      Short        March 2001  (pound)  14,688       1.5139              (339)
                                                                                                                ----------
                                                                                                                $     (581)
                                                                                                                ==========
</TABLE>


      Before the sale of our equity investment in Kensington in 2000, we entered
into a British Pound currency forward ("currency forward") with a AAA-rated
counterparty to hedge our equity investment in Kensington. In connection with
the sale of the equity investment in Kensington, the currency forward was closed
in November 2000.

                                      101

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 22: INCOME TAXES

      The components of income tax expense (benefit) were as follows:


<TABLE>
<CAPTION>
                                                                                          Years Ended December 31,
                                                                                  ----------------------------------------
Current:                                                                             2001           2000            1999
                                                                                  ----------     ----------     ----------
<S>                                                                               <C>            <C>            <C>       
Federal.....................................................................      $       --     $  (24,744)    $   33,930
State.......................................................................              --            261          3,293
                                                                                  ----------     ----------     ----------
                                                                                          --        (24,483)        37,223
                                                                                  ----------     -----------    ----------
Deferred:
Federal.....................................................................         (22,752)        14,724        (41,734)
Foreign.....................................................................              --             --          5,987
State.......................................................................          (2,009)           216         (1,368)
Provision for valuation allowance on prior year's deferred tax asset........          83,000         17,500          2,500
Provision for valuation allowance on current year's deferred tax asset......          23,348             --             --
                                                                                  ----------     ----------     ----------
Income tax expense before extraordinary gains...............................          81,587          7,957          2,608
Income tax expense on extraordinary gains...................................           1,413         10,990          1,491
                                                                                  ----------     ----------     ----------
Total.......................................................................      $   83,000     $   18,947     $    4,099
                                                                                  ==========     ==========     ==========
</TABLE>


      Income tax expense before extraordinary gains differs from the amounts
computed by applying the U.S. Federal corporate income tax rate of 35% as
follows:


<TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                  ----------------------------------------
                                                                                     2001           2000           1999
                                                                                  ----------     ----------     ----------
<S>                                                                               <C>            <C>            <C>       
Expected income tax expense (benefit) at statutory rate..................         $  (15,945)    $   (2,997)    $    5,187
Differences between expected and actual expense (benefit):
   Excess of cost over net assets acquired, net..........................              1,108          1,078          1,249
   Excess of net assets acquired over purchase price.....................             (6,416)        (4,939)            --
   State tax (after Federal tax benefit).................................             (1,306)           310          1,251
   Low-income housing tax credits........................................             (2,078)        (2,577)       (18,242)
   Sale of Ocwen UK......................................................                 --             --          9,730
   OAC loss not included in consolidated tax group.......................                 --             --            223
   Deferred tax asset valuation allowance current year tax benefit.......             23,348             --             --
   Deferred tax asset valuation allowance prior year.....................             83,000         17,500          2,500
   Other.................................................................               (124)          (418)           710
                                                                                  ----------      ---------     ----------
     Actual income tax expense (benefit).................................         $   81,587     $    7,957     $    2,608
                                                                                  ==========     ==========     ==========
</TABLE>


      For taxable years beginning before January 1, 1996, a savings institution
that met certain definitional tests relating to the composition of its assets
and the sources of its income (a "qualifying savings institution") was permitted
to establish reserves for bad debts and make annual additions thereto under the
experience method. Alternatively, a qualifying savings institution could elect,
on an annual basis, to use the percentage of taxable income method to compute
its allowable addition to its bad debt reserve on qualifying real property loans
(generally loans secured by an interest in improved real estate). The applicable
percentage was 8% for tax periods after 1987. The Bank utilized the percentage
of taxable income method for these years.

      On August 20, 1996, President Clinton signed the Small Business Job
Protection Act (the "Act") into law. One provision of the Act repealed the
reserve method of accounting for bad debts for savings institutions effective
for taxable years beginning after 1995. The Bank, therefore, was required to use
the specific charge-off method on its 1996 and subsequent federal income tax
returns. The Bank will be required to recapture its "applicable excess
reserves," which are its federal tax bad debt reserves in excess of the base
year reserve amount described in the following paragraph. The Bank will include
one-sixth of its applicable excess reserves in taxable income in each year from
1996 through 2001. As of December 31, 1995, the Bank had approximately $42,400
of applicable excess reserves. As of December 31, 1996, the Bank had fully
provided for the tax related to this recapture.

                                      102

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The base year reserves will continue to be subject to recapture, and the
Bank could be required to recognize a tax liability if: (1) the Bank fails to
qualify as a "bank" for federal income tax purposes, (2) certain distributions
are made with respect to the stock of the Bank, (3) the bad debt reserves are
used for any purpose other than to absorb bad debt losses or (4) there is a
change in federal tax law. The enactment of this legislation has had no material
impact on the Bank's or OCN's operations or financial position.

      We have not recognized a deferred tax liability for the tax bad debt base
year reserves of the Bank. The base year reserves are generally the balance of
reserves as of December 31, 1987, reduced proportionately for reductions in the
Bank's loan portfolio between that date and December 31, 1995. At December 31,
2001 and 2000, the amount of those reserves was approximately $5,700. This
reserve could be recognized in the future under the conditions described in the
preceding paragraph.

      The net deferred tax asset was comprised of the following as of:


<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                    ----------------------------
                                                                                        2001            2000
                                                                                    ------------    ------------
<S>                                                                                 <C>             <C>         
Deferred Tax Assets:
   Tax residuals and deferred income on tax residuals ...........................   $      3,176    $      4,374
   State taxes ..................................................................          5,685           6,197
   OAC purchase accounting adjustments ..........................................             --           8,117
   Accrued profit sharing .......................................................          2,271           1,972
   Accrued other liabilities ....................................................            206             249
   Interest expense related to discount loan portfolio ..........................          7,031           9,936
   Valuation allowance on real estate owned .....................................          6,873           6,360
   Gain on loan foreclosure .....................................................          7,009          12,834
   Bad debt and allowance for loan losses .......................................         11,021          16,210
   Impairment on securities available for sale and unrealized gains and losses on
     trading securities .........................................................         71,866          57,951
   Mortgage servicing rights amortization .......................................          5,971           2,208
   Goodwill amortization ........................................................            451              21
   Foreign currency exchange ....................................................          1,068           1,068
   Capital loss carryforward ....................................................          4,160           4,160
   Net operating loss carryforward ..............................................         15,647              --
   Partnership losses and low-income housing tax credits ........................         40,782          30,022
   Other ........................................................................             --           2,679
                                                                                    ------------    ------------
                                                                                         183,217         164,358
                                                                                    ------------    ------------
Deferred Tax Liabilities:
   Deferred interest income on discount loan portfolio ..........................          6,421           7,047
   Research and development costs ...............................................          1,294           1,719
   Foreign currency translation adjustment ......................................             --             229
   Other ........................................................................          1,870             499
                                                                                    ------------    ------------
                                                                                           9,585           9,494
                                                                                    ------------    ------------
                                                                                         173,632         154,864
Valuation allowances ............................................................       (165,221)        (58,873)
                                                                                    ------------    ------------
Net deferred tax asset ..........................................................   $      8,411    $     95,991
                                                                                    ============    ============
</TABLE>


      As of December 31, 2001, we had a deferred tax asset valuation allowance
totaling $165,221. This allowance is comprised of $38,873 relating to built-in
loss limitations arising from our acquisition of OAC and $103,000 relating to
our evaluation of the future realization of prior years deferred tax asset and
$23,348 related to the future realization of our current year tax benefit.

      We conduct periodic evaluations to determine whether it is more likely
than not that the deferred tax asset can be realized in future periods. Among
the factors considered in this evaluation are estimates of future earnings, the
future reversal of temporary differences and the impact of tax planning
strategies that can be implemented if warranted. As a result of this evaluation,
we included in the tax provision an increase of $106,348, $17,500 and $2,500 to
the valuation allowance for 2001, 2000 and 1999 respectively.

                                      103

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      Before our acquisition of OAC, OAC was a REIT for federal tax purposes and
filed a REIT federal income tax return through October 20, 1999. We have
included OAC in our consolidated federal income tax return since October 21,
1999. OAC had, at October 6, 1999, approximately $131,567 of net unrealized
built-in losses. Any such losses recognized within the five-year period
beginning on October 7, 1999 (the "recognition period") are treated as
pre-change losses and, as such, are subject to an annual limit as to the amount
which may offset the taxable income of Ocwen Financial Corporation and its
subsidiaries ("the IRC section 382 limitation"). A net unrealized built-in loss
is an amount by which the tax basis of the corporation's assets at the time of
the change in ownership exceeds the aggregate fair market value of those assets
at that time. The IRC section 382 limitation is determined by multiplying the
value of OAC's stock by the federal long-term tax-exempt rate and amounts to
approximately $5,700. If a deduction is denied for any recognized built-in loss
in any post-change year, the loss is carried forward to subsequent years under
rules similar to the standard loss carryforward rules. As a result of these
limitations, we established a corresponding deferred tax asset valuation
allowance at the acquisition date as part of purchase accounting in the amount
of $38,873.

      International Hotel Group ("IHG"), a wholly-owned subsidiary of IMI, and
IHG's subsidiaries had at December 31, 2001, approximately $1,079 of Separate
Return Limitation Year ("SRLY") net operating loss carryforwards. The SRLY net
operating loss carryforward can only offset the future taxable income of IHG and
its subsidiaries. The $1,079 operating loss carryforward will expire, if unused,
in the year 2008. At December 31, 2001 we had net operating loss carryforwards
of $44,706, of which $12,898 expire in 2018 and $31,808 expire in 2021. At
December 31, 2001, we had tax credit carryforwards of $30,479 related to our
low-income housing tax credits, which expire in 2018, 2019, 2020 and 2021.


NOTE 23: EMPLOYEE BENEFIT AND COMPENSATION PLANS

      We maintain a defined contribution plan to provide postretirement benefits
to our eligible employees. We also adopted a number of compensation plans for
certain of our employees. We designed these plans to facilitate a
pay-for-performance policy, further align the interests of our officers and key
employees with the interests of our shareholders and assist in the attraction
and retention of employees vital to our long-term success. These plans are
summarized below.

Retirement Plan

      We maintain a defined contribution 401(k) plan. We match 50% of each
employee's contributions, limited to 2% of the employee's compensation. Our
contributions to the 401(k) plan for the years ended December 31, 2001, 2000 and
1999, were $613, $694 and $702, respectively.

      In connection with our acquisition of Berkeley Federal Savings Bank in
June 1993, the Bank assumed the obligations under a noncontributory defined
benefit pension plan (the "Plan") covering substantially all employees upon
their eligibility under the terms of the Plan. We froze and fully funded the
Plan after the plan year ended December 31, 1993.

Annual Incentive Plan

      In May 1998, our shareholders approved the Ocwen Financial Corporate 1998
Annual Incentive Plan (the "AIP") to replace our former annual incentive plan
(the "Former Plan"). Participation in the AIP is limited to officers and other
key employees and designated subsidiaries that are selected by the AIP
Committee. We establish performance targets based on the achievement of
specified levels of increases in net earnings, return on equity, average net
equity used or growth in assets, as well as individual participant performance
targets. We base awards under the AIP on achieving the performance targets, and
we pay them in cash or a combination of cash and non-qualified stock options to
purchase common stock of Ocwen Financial Corporation. We grant such
non-qualified stock options pursuant to the Ocwen Financial Corporation 1991
Non-Qualified Stock Option Plan.

                                      104

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The following table provides a summary of our stock option activity for
the years ended December 31, 2001, 2000 and 1999, respectively, and stock
options exercisable at the end of each of those year:


<TABLE>
<CAPTION>
                                                     2001                        2000                        1999
                                            ------------------------   -------------------------    -------------------------
                                                           Weighted                   Weighted                     Weighted
                                                           Average                    Average                      Average
                                             Number of     Exercise     Number of     Exercise       Number of     Exercise
                                              Options        Price       Options        Price         Options        Price
                                            -----------   ----------   -----------   -----------    -----------   -----------
<S>                                           <C>           <C>          <C>           <C>            <C>           <C>     
Outstanding at beginning of year.......       3,424,594     $ 13.11      2,013,201     $ 14.09        1,918,181     $  15.64
Granted (1)............................       1,584,093        7.67      1,617,461        4.09          358,858         6.25
Exercised..............................        (128,156)       4.59             --          --           (5,080)        2.82
Forfeited..............................        (225,262)       4.87       (206,068)      14.74         (258,758)       14.92
                                            -----------                -----------                  -----------
Outstanding at end of year.............       4,655,269        9.01      3,424,594        9.33        2,013,201        14.09
                                            ===========                ===========                  ===========
Exercisable at end of year.............       2,483,697       11.29      1,885,048       13.11        1,559,850        15.77
                                            ===========                ===========                  ===========

<FN>
(1)   The weighted average grant-date fair value was $7.67 in 2001, $5.84 in
      2000 and $6.25 in 1999.
</FN>
</TABLE>


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


<TABLE>
<CAPTION>
                                                                  Options Outstanding                Options Exercisable
                                                      -----------------------------------------  ------------------------------
                                                                        Weighted                                    Weighted
                                                                         Average     Remaining                      Average
                                                         Number of      Exercise    Contractual     Number of       Exercise
Granted For Service In:                                   Options         Price         Life         Options         Price
---------------------------------------------------   --------------   -----------  -----------  ---------------  -------------
<S>                                                      <C>           <C>             <C>             <C>        <C>     
2001...............................................        1,584,093     $   7.67        10              228,819    $   7.67
2000...............................................        1,343,601         4.09         9              606,412        4.09
1999...............................................          237,327         6.25         8              158,218        6.25
1998...............................................          122,545        12.31         7              122,545       12.31
1997...............................................          746,071        20.35         6              746,071       20.35
1996...............................................          532,632        11.00         5              532,632       11.00
1995...............................................           89,000         2.88         4               89,000        2.88
                                                         -----------                               -------------
                                                           4,655,269         9.01                      2,483,697       11.29
                                                         ===========                               =============
</TABLE>


      After the award of 1,584,093 options in 2002 for service in 2001,
7,359,764 authorized shares remain and are available for future awards of stock
options.

      Stock options we awarded under the Former Plan have a one-year vesting
period. Stock options we awarded under the AIP in 1998 and 1999 vest ratably
over a three-year period. Stock options we awarded under the AIP in 2001 and
2000 vest ratably over a five-year period including the award year. The term of
all options granted is ten years from the grant date. We treat the difference,
if any, between the fair market value of our stock at the date of grant and the
exercise price as compensation expense. We record compensation expense ratably
over the vesting period of the grant. Included in compensation expense for the
years ended December 31, 2001 and 2000 was $568 and $572, respectively, related
to options granted. There was no compensation expense recognized for the year
ended December 31, 1999 related to options granted.

Long-Term Incentive Plan

      In May 1998, our shareholders approved the Ocwen Financial Corporation
Long-Term Incentive Plan (the "LIP"). Participation in the LIP was limited to
officers and other key employees and designated subsidiaries that were selected
by the LIP Administrator. We suspended the LIP in 2000 and reversed the related
accrual of $6,012 for 1999 and 1998. We recorded compensation expense of $3,645
and $2,367 in 1999 and 1998, respectively, under the LIP.

                                      105

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


Pro Forma Effect of SFAS No. 123

      We have retained our current accounting method for our stock-based
employee compensation plans under the provisions of APB 25. However, entities
such as ours continuing to apply APB 25 are required to disclose pro forma net
income and earnings per share as if the fair value method of accounting for
stock-based employee compensation plans as prescribed by SFAS No. 123,
Accounting for Stock-Based Compensation, had been utilized. The following is a
summary of our pro forma information for the years ended December 31:


<TABLE>
<CAPTION>
                                                                                 2001             2000              1999
                                                                              ----------       ----------        ----------
<S>                                                                           <C>              <C>               <C>      
Net income (loss), as reported.........................................       $(124,782)       $    2,192        $  19,832
Pro forma net (loss) income............................................        (127,914)             (228)          18,917
Earnings per share, as reported:
   Basic...............................................................          (1.856)            0.032            0.314
   Diluted.............................................................          (1.856)            0.032            0.314
Pro forma earnings per share:
   Basic...............................................................          (1.903)            0.003            0.300
   Diluted.............................................................          (1.903)            0.003            0.300
</TABLE>


      We estimate the fair value of our option grants using the Black-Scholes
option-pricing model with the following assumptions:


<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                              ---------------------------------------------
                                                                                 2001             2000              1999
                                                                              ----------       ----------        ----------
<S>                                                                           <C>               <C>              <C>  
Expected dividend yield................................................           0.00%             0.00%            0.00%
Expected stock price volatility........................................          52.00             54.00            47.00
Risk-free interest rate................................................           4.23              4.98             6.34
Expected life of options...............................................           5 years           5 years          5 years
</TABLE>



NOTE 24: STOCKHOLDERS' EQUITY

      On April 16, 1999, we announced that our Board of Directors authorized the
repurchase of up to six million of our issued and outstanding shares of common
stock. As of December 31, 1999, we had repurchased 4,611,700 shares at an
average price of $6.66 per share. During the first quarter of 2000, we
repurchased the remaining 1,388,300 authorized shares at an average price of
$6.48 per share. On May 9, 2000, we announced that our Board of Directors
approved an additional stock repurchase program to repurchase up to an
additional six million of our issued and outstanding shares of common stock. As
of December 31, 2001, we had not repurchased any additional shares.

      On October 7, 1999, as a result of our acquisition of OAC, we issued to
OAC shareholders (except for Ocwen Financial Corporation or its subsidiaries)
0.71 shares of Ocwen Financial Corporation stock for each outstanding share of
OAC common stock, or a total of 12,371,750 shares. See Note 2.

                                      106

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 25: REGULATORY REQUIREMENTS

      The Financial Institutions Reform, Recovery and Enforcement Act of 1989
and the regulations promulgated thereunder established certain minimum levels of
regulatory capital for savings institutions subject to OTS supervision. The Bank
must follow specific capital guidelines stipulated by the OTS which involve
quantitative measures of the Bank's assets, liabilities and certain off-balance
sheet items. An institution that fails to comply with its regulatory capital
requirements must obtain OTS approval of a capital plan and can be subject to a
capital directive and certain restrictions on its operations. At December 31,
2001, the minimum regulatory capital requirements were:

      o  Tangible and core capital of 1.50% and 3.00% of total adjusted assets,
         respectively, consisting principally of stockholders' equity, but
         excluding most intangible assets, such as goodwill and any net
         unrealized gains or losses on debt securities available for sale.
         Effective April 1, 1999, the OTS minimum core capital ratio provides
         that only those institutions with a Uniform Financial Institution
         Rating System rating of "1" are subject to a 3.00% minimum core capital
         ratio. All other institutions are subject to a 4.00% minimum core
         capital ratio.

      o  Risk-based capital consisting of core capital plus certain subordinated
         debt and other capital instruments and, subject to certain limitations,
         general valuation allowances on loans receivable, equal to 8.00% of the
         value of risk-weighted assets.

      At December 31, 2001 and 2000, the Bank was "well capitalized" under the
prompt corrective action regulations adopted by the OTS pursuant to the Federal
Deposit Insurance Corporation Improvement Act of 1991. To be categorized as
"well capitalized," the Bank must maintain minimum core capital, Tier 1
risk-based capital and risk-based capital ratios as set forth in the following
table. The Bank's capital amounts and classification are subject to review by
federal regulators regarding components, risk-weightings and other factors.
There are no conditions or events since December 31, 2001 that we believe have
changed the Bank's category.

      Following an examination by the OTS in late 1996 and early 1997, the Bank
committed to the OTS to maintain a core capital (leverage) ratio and a total
risk-based capital ratio of at least 9.00% and 13.00%, respectively. The Bank
continues to be in compliance with this commitment as well as with the
regulatory capital requirements of general applicability (as indicated in the
table below). Based on discussions with the OTS, the Bank believes that this
commitment does not affect its status as a "well-capitalized" institution,
assuming the Bank's continued compliance with the regulatory capital
requirements required to be maintained by it pursuant to such commitment.

      As a result of an examination in 2000, the Bank was required to submit a
written plan to the OTS by October 16, 2000 to address issues raised by the
agency under Part 570 of the rules and regulations. Under the plan, the Bank is
taking certain actions regarding its operations with respect to asset reviews
and the management of interest rate risk exposure and has periodic reporting
obligations to the OTS. In addition, as part of the plan, the Bank submitted a
business plan and budget outlining the Bank's operations through 2003. The
business plan submitted reflects proposed changes in the Bank's deposit
gathering strategies and potential future sources of revenue as the Bank
continues its shift away from capital-intensive businesses into fee-based
sources of income. On November 9, 2000 the OTS requested the Bank to supply
additional information regarding the plan. The Bank responded to this request on
November 29, 2000, December 28, 2000 and January 10, 2001, and the OTS approved
the plan on February 2, 2001.

                                      107

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


      The following table summarizes the Bank's actual and required regulatory
capital at December 31, 2001 and 2000:


<TABLE>
<CAPTION>
                                                                                                   To Be Well
                                                                                                   Capitalized       Committed
                                                                       Minimum For Capital   For Prompt Corrective    Capital
                                                        Actual          Adequacy Purposes      Action Provisions    Requirements
                                                ---------------------  --------------------  ---------------------  ------------
                                                  Ratio      Amount      Ratio      Amount     Ratio      Amount       Ratio
                                                --------   ----------  ---------  ---------  ---------  ----------  ------------
<S>                                             <C>        <C>         <C>        <C>        <C>        <C>         <C>         
December 31, 2001:
Stockholders' equity, and ratio to total assets    14.62%  $  204,640
Non-includable subsidiary......................                (1,233)
Disallowed deferred tax assets.................                (4,515)
Disallowed servicing assets....................               (10,077)
                                                           -----------
Tier 1 (core) capital, and ratio to adjusted
   total assets................................    13.64%     188,815    4.00%    $  55,359      5.00%  $  69,199        9.00%
                                                                                  =========             =========
Non-mortgage servicing assets..................                (3,447)
                                                           ----------
Tangible capital ratio to tangible assets......    13.43%  $  185,368    1.50%    $  20,708
                                                           ==========             =========

Tier 1 capital, and ratio to risk-weighted
   assets......................................    18.41%  $  188,815                            6.00%  $  61,546
                                                           ----------                                   =========
Allowance for loan losses......................                10,290
Qualifying subordinated debentures.............                40,200
                                                           ----------
Tier 2 capital.................................                50,490
                                                           ----------
Total risk-based capital, and ratio to
   risk-weighted assets........................    23.33%  $  239,305    8.00%   $   82,062     10.00%  $ 102,577       13.00%
                                                           ==========            ==========             =========

Total regulatory assets........................            $1,399,676
                                                           ==========
Adjusted total assets..........................            $1,383,980
                                                           ==========
Tangible assets................................            $1,380,533
                                                           ==========
Risk-weighted assets...........................            $1,025,775
                                                           ==========

December 31, 2000:
Stockholders' equity, and ratio to total assets    16.09%  $  267,295
Non-includable subsidiary......................                (7,801)
Acquired real estate...........................                  (850)
Disallowed deferred tax assets.................               (29,397)
Disallowed servicing assets....................                (5,027)
                                                           ----------
Tangible capital, and ratio to adjusted total
   assets....................................      13.83%  $  224,220    1.50%    $  24,313
                                                           ==========             =========
Tier 1 (core) capital, and ratio to adjusted
   total assets..............................      13.83%  $  224,220    4.00%    $  64,834      5.00%  $  81,042        9.00%
                                                           ==========             =========             =========

Tier 1 capital, and ratio to risk-weighted
   assets....................................      16.70%  $  224,220                            6.00%  $  80,571
                                                           ----------                                   =========
Allowance for loan losses....................                  15,273
Qualifying subordinated debentures...........                  53,600
                                                           ----------
Tier 2 capital...............................                  68,873
                                                           ----------
Total risk-based capital, and ratio to
   risk-weighted assets......................      21.83%  $  293,093    8.00%     $ 107,429    10.00%   $ 134,286      13.00%
                                                           ==========              =========             =========

Total regulatory assets......................              $1,660,767
                                                           ==========
Adjusted total assets/tangible assets........              $1,620,846
                                                           ==========
Risk-weighted assets.........................              $1,342,858
                                                           ==========
</TABLE>


      The OTS amended its capital distribution regulation effective April 1,
1999. Under the revised regulation, the Bank is required to file a notice with
the OTS at least 30 days before making a capital distribution unless (a) it is
not eligible for expedited treatment under the OTS application processing
regulations, (b) the total amount of the Bank's capital distributions (including
the proposed distribution) for the calendar year exceeds the Bank's net income
for the year to date plus retained net income for the previous two years, (c)
the Bank would not be "adequately capitalized" following the proposed
distribution or (d) the proposed distribution would violate any applicable
statute, regulation or agreement between the Bank and the OTS, or a condition
imposed upon the Bank by an OTS-approved application or notice. If one of these
four criteria is present, the Bank is required to file an application with the
OTS at least 30 days before making the proposed capital distribution. The OTS
may deny the Bank's application or disapprove its notice if the OTS determines
that (a) the Bank will be "under capitalized," "significantly under capitalized"
or "critically under capitalized," as defined in the OTS capital regulations,
following the capital distribution, (b) the proposed capital distribution raises
safety and soundness concerns or (c) the proposed capital distribution

                                      108

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


violates a prohibition contained in any statute, regulation or agreement between
the Bank and the OTS or a condition imposed on the Bank in an application or
notice approved by the OTS. The revised rule also amended the definition of
"capital distribution" to include any payment to repurchase, redeem, retire or
otherwise acquire debt instruments included in total risk-based capital.

      In addition to these OTS regulations governing capital distributions, the
indenture governing the Debentures limits the declaration or payment of
dividends and the purchase or redemption of common or preferred stock in the
aggregate to the sum of 50% of consolidated net income and 100% of all capital
contributions and proceeds from the issuance or sale (other than to a
subsidiary) of common stock, since the date the Debentures were issued.


NOTE 26: NET INTEREST INCOME (EXPENSE) BEFORE PROVISION FOR LOAN LOSSES

      The following table presents the components of net interest income
(expense) for each category of our interest-earning assets and interest-bearing
liabilities for the years ended December 31:


<TABLE>
<CAPTION>
                                                                                 2001             2000              1999
                                                                             ------------     ------------      ------------
<S>                                                                          <C>              <C>               <C>         
Interest income:
  Federal funds sold and repurchase agreements.......................        $      7,328     $      8,700      $      8,847
  Trading securities.................................................              18,865            8,200                --
  Securities available for sale......................................                  --           42,507            62,698
  Loans available for sale...........................................                 526            2,474            25,724
  Investment securities and other....................................                 743            1,501             2,181
  Loan portfolio.....................................................               6,807           20,586            28,683
  Match funded loans and securities..................................              10,345           11,022             3,237
  Discount loan portfolio............................................              38,757           89,826           121,854
                                                                             ------------     ------------      ------------
                                                                                   83,371          184,816           253,224
                                                                             ------------     ------------      ------------
Interest expense:
  Deposits...........................................................              59,967           98,224            98,370
  Securities sold under agreements to repurchase.....................                 529           10,729             7,456
  Bonds - match funded agreements....................................               7,315           11,484             2,101
  Obligations outstanding under lines of credit......................               5,511           13,881            16,318
  Notes, debentures and other interest bearing obligations...........              20,007           34,772            31,297
                                                                             ------------     ------------      ------------
                                                                                   93,329          169,090           155,542
                                                                             ------------     ------------      ------------
  Net interest income (expense) before provision for loan losses.....        $     (9,958)    $     15,726      $     97,682
                                                                             ============     ============      ============
</TABLE>



NOTE 27: OTHER INCOME

      The following table presents the principal components of other income we
earned during the years ended December 31:


<TABLE>
<CAPTION>
                                                                                2001              2000             1999
                                                                             -----------       -----------      -----------
<S>                                                                          <C>               <C>              <C>        
Software revenue (OTX)................................................       $     2,181       $     2,236      $     2,043
Consulting fees.......................................................             2,041                78               84
Brokerage commissions (1).............................................             1,386                --           12,896
Management fees (2)...................................................                80                --            4,503
Other.................................................................             3,071             3,770            4,820
                                                                             -----------       -----------      -----------
                                                                             $     8,759       $     6,084      $    24,346
                                                                             ===========       ===========      ===========

<FN>
(1)   Brokerage commissions for 1999 were earned by Ocwen UK.

(2)   Management fees for 1999 were earned for management services we provided
      to OAC prior to our acquisition of OAC in October 1999.
</FN>
</TABLE>


                                      109

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 28: OTHER OPERATING EXPENSES

      The following table presents the principal components of other operating
expenses we incurred during the years ended December 31:


<TABLE>
<CAPTION>
                                                                                2001              2000             1999
                                                                             -----------       -----------      -----------
<S>                                                                          <C>               <C>              <C>        
Travel, lodging, meals and entertainment..............................       $     2,388       $     2,864      $     4,107
Amortization of deferred costs........................................               917             1,878            1,226
Acquisition expenses..................................................               330             1,912              441
Marketing.............................................................               757             1,820            5,556
Deposit related expenses..............................................               897               531              406
Conferences and seminars..............................................               534               530              773
Investment and treasury services......................................               272               332              448
Other.................................................................             2,840             2,240            3,131
                                                                             -----------       -----------      -----------
                                                                             $     8,935       $    12,107      $    16,088
                                                                             ===========       ===========      ===========
</TABLE>



NOTE 29: BUSINESS SEGMENT REPORTING

      Public enterprises like ours are required to report financial and
descriptive information about their reportable operating segments. An operating
segment is defined as a component of an enterprise that (a) engages in business
activities from which it may earn revenues and incur expenses, (b) whose
operating results are regularly reviewed by the enterprise's chief operating
decision maker to make decisions about resources to be allocated to the segment
and assess its performance and (c) for which discrete financial information is
available. We conduct a variety of business activities within the following
segments:


<TABLE>
<CAPTION>
                                                      Net
                                                   Interest     Provision                               Pre-Tax             
                                                    Income      for Loan    Non-Interest  Non-Interest   Income         Total
                                                   (Expense)     Losses       Income        Expense      (Loss)        Assets
                                                   ----------   ----------   ----------   ----------   ----------    ----------
<S>                                                <C>          <C>          <C>          <C>          <C>           <C>       
At or for the year ended December 31, 2001:
Residential Loan Servicing......................   $  (16,529)  $       --   $  119,503   $   68,383   $   34,591    $  420,134
OTX.............................................           --           --        2,150       38,542      (36,392)       13,231
Ocwen Realty Advisors...........................           --           --       11,913       10,968          944         1,351
Unsecured Collections...........................          140        1,176        3,058        7,042       (5,020)           --
Residential Discount Loans......................       15,125        6,060       (4,733)       8,727       (4,396)      115,691
Commercial Loans................................         (400)       7,223       (1,574)      13,043      (22,236)      280,220
Affordable Housing..............................       (7,917)       1,207         (849)      19,945      (29,917)      132,724
Commercial Real Estate..........................       (2,820)          --        4,941          898        1,222        83,794
Subprime Residential Lending....................        2,657           --       13,742        2,849       13,549        83,599
Corporate Items and Other.......................         (214)          --       21,190       12,049        2,098       580,406
                                                   ----------   ----------   ----------   ----------   ----------    ----------
                                                   $   (9,958)  $   15,666   $  169,341   $  182,446   $  (45,557)   $1,711,150
                                                   ==========   ==========   ==========   ==========   ==========    ==========

At or for the year ended December 31, 2000:
Residential Loan Servicing......................       (5,756)          --       84,137       58,773       19,609       218,981
OTX.............................................         (719)          --        2,424       35,655      (33,951)       20,462
Ocwen Realty Advisors (1).......................           --           --       12,738       12,824          (86)        1,625
Unsecured Collections...........................         (104)       6,867        1,481        8,908      (14,398)        8,417
Residential Discount Loans......................       24,549         (637)       7,725       11,757       21,154       396,305
Commercial Loans................................        9,917        9,195       16,703       16,853          648       555,040
Affordable Housing..............................       (9,912)        (248)         702       14,702      (23,664)      171,070
Commercial Real Estate..........................      (18,121)          --       37,299        2,649       16,530        80,561
Subprime Residential Lending....................         (180)          --      (22,267)       2,086      (24,532)      135,617
Corporate Items and Other.......................       16,052           --       36,583        5,802       30,126       661,342
                                                   ----------   ----------   ----------   ----------   ----------    ----------
                                                   $   15,726   $   15,177   $  177,525   $  170,009   $   (8,564)   $2,249,420
                                                   ==========   ==========   ==========   ==========   ==========    ==========
</TABLE>


                                      110

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)



<TABLE>
<CAPTION>
                                                      Net
                                                   Interest     Provision                               Pre-Tax
                                                    Income      for Loan    Non-Interest  Non-Interest   Income         Total
                                                   (Expense)     Losses       Income        Expense      (Loss)        Assets
                                                   ----------   ----------   ----------   ----------   ----------    ----------
<S>                                                <C>          <C>          <C>          <C>          <C>           <C>       
At or for the year ended December 31, 1999:
Residential Loan Servicing......................   $    5,630   $       --   $   59,876   $   44,990   $   20,515    $  219,048
OTX.............................................           --           --        2,056       20,398      (18,343)        4,829
Ocwen Realty Advisors...........................           --           --           --           --           --            --
Unsecured Collections...........................          477          870           17        6,373       (6,750)       16,401
Residential Discount Loans......................       27,669        8,435      (12,773)      26,912      (20,451)      711,104
Commercial Loans................................       54,146        4,610       19,633       40,908       28,404     1,016,366
Affordable Housing..............................       (9,360)        (105)       6,605       15,284      (17,934)      169,521
Commercial Real Estate..........................       (1,803)          --        3,443        4,976       (3,336)      301,438
Subprime Residential Lending....................       14,972           --      (31,102)      13,974      (30,103)      223,403
Corporate Items and Other.......................        5,951       (7,100)      96,887       21,253       62,817       619,564
                                                   ----------   ----------   ----------   ----------   ----------    ----------
                                                   $   97,682   $    6,710   $  144,642   $  195,068   $   14,819    $3,281,674
                                                   ==========   ==========   ==========   ==========   ==========    ==========

<FN>
(1)   Non-interest income for the year ended December 31, 2000 included $975 of
      intercompany revenues we have eliminated in consolidation.
</FN>
</TABLE>


      A brief description of our segments follows:

      o  Residential Loan Servicing. Includes our fee-for-services business of
         providing loan servicing, including asset management and resolution
         services, to third-party owners of non-performing, underperforming and
         subprime assets.

      o  OTX. Formed in 1998, develops and markets advanced technology solutions
         for the mortgage and real estate industries, including residential and
         commercial mortgage servicing systems.

      o  Ocwen Realty Advisors. Provides property valuation services and real
         estate research for residential and commercial properties.

      o  Unsecured Collections. Primarily comprised of activities related to our
         charged-off unsecured credit card receivables, which were acquired at a
         discount.

      o  Residential Discount Loans. Activities of this segment include asset
         acquisition and resolution of single family residential loans and the
         related real estate owned.

      o  Commercial Loans. Activities of this segment include our resolution of
         commercial discount loans and related real estate owned. Commercial
         loan activities previously included our origination of multi-family and
         commercial real estate loans held for investment, a business which we
         ceased in 1999.

      o  Affordable Housing Properties. Includes our investments, primarily
         through limited partnerships, in qualified low-income rental housing
         for the purpose of obtaining Federal income tax credits pursuant to
         Section 42 of the Code.

      o  Commercial Real Estate. Principally comprised of activities related to
         our real estate investments acquired in connection with our acquisition
         of OAC in October 1999.

      o  Subprime Residential Lending. In August 1999, we closed our domestic
         subprime origination business, which had been conducted primarily
         through OFS. Previously, activities of this segment included our
         acquisition and origination of single family residential loans to
         non-conforming borrowers.

      o  Corporate Items and Other. Consists primarily of extraordinary gains on
         repurchases of debt, individually insignificant business activities,
         amounts not allocated to our operating segments, distributions on our
         Capital Securities, transfer pricing mismatches, other general
         corporate expenses and the results of the securities portfolio other
         than residuals and subordinates. Residuals and subordinate interests,
         including those related to our securitization activities have been
         included in the related business activity. Also includes our UK
         operations, including our equity investment in Kensington, which was
         sold during November 2000, as well as the activities of our previously
         owned subsidiary, Ocwen UK, which was sold on September 30, 1999. Ocwen
         UK was primarily engaged in the origination and servicing of subprime
         loans in the United Kingdom.

      We allocate interest income and expense to each business segment for the
investment of funds raised or funding of investments made taking into
consideration the duration of such liabilities or assets. Ocwen Realty Advisors
charges other segments based on cost

                                      111

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


plus a standard mark-up that varies based on the type valuation service being
provided. We make allocations of non-interest expense generated by corporate
support services to each business segment based upon our estimate of time and
effort spent in the respective activity. As such, the resulting amounts
represent estimates of the contribution of each business activity to our overall
results.


NOTE 30: COMMITMENTS AND CONTINGENCIES

      We lease certain premises under various non-cancelable operating leases
with terms expiring at various times through 2007, exclusive of renewal option
periods. Our annual aggregate minimum rental commitments under these leases are
summarized as follows:

2002..........................................................      $     4,033
2003..........................................................            3,914
2004..........................................................            3,181
2005..........................................................              966
2006..........................................................               71
Thereafter....................................................               --
                                                                    -----------
Minimum lease payments .......................................      $    12,165
                                                                    ===========

      We converted rental commitments for our facilities outside the United
States of America to U.S. dollars using exchange rates in effect at December 31,
2001. Rent expense for the years ended December 31, 2001, 2000 and 1999 was
$3,533, $3,374 and $6,101, respectively.

      At December 31, 2001, we had commitments of $3,432 to fund construction
loans (including loans accounted for as investments in real estate) secured by
multi-family and commercial properties. In addition, we had commitments under
outstanding letters of credit in the amount of $210. Through our investment in
subordinated securities and subprime residuals, which had a fair value of
$65,058 at December 31, 2001, we support senior classes of securities.

      On April 20, 1999, a complaint was filed on behalf of a putative class of
public shareholders of the Company in the Circuit Court of the Fifteenth
Judicial Circuit, Palm Beach County, Florida against OCN and OAC. On April 23,
1999, a complaint was filed on behalf of a putative class of public shareholders
of OAC in the Circuit Court of the Fifteenth Judicial Circuit, Palm Beach
County, Florida, against OAC and certain directors of OAC. The plaintiffs in
both complaints sought to enjoin consummation of the acquisition of OAC by OCN.
The cases were consolidated, and on September 13, 1999 a consolidated amended
complaint was filed. The injunction was denied, and on October 14, 1999 OCN was
dismissed as a party. Plaintiffs' remaining claims were for damages for alleged
breaches of common law fiduciary duties. In October 2001, the parties reached an
agreement in principle.

      On June 3, 1999, Walton Street Capital, L.L.C. ("Walton") filed suit
against OAC and Ocwen Partnership, L.P. in the Circuit Court of Cook County,
Illinois. Walton has alleged that OAC committed an anticipatory breach of
contract with respect to the proposed sale by OAC of all of its interest in its
commercial mortgage-backed securities portfolio to Walton. Walton has claimed
damages in an amount in excess of $20,000. As of October 20, 2000, both Walton
and OAC filed motions for Summary Judgement. On December 21, 2000, the Circuit
Court granted Walton's Limited Motion for Summary Judgement concerning
liability. Ocwen filed a Motion for Certification of an Interlocutory Appeal and
is seeking an Entry of Stay pending appeal. On February 20, 2001, Ocwen filed a
motion for reconsideration requesting the Circuit Court vacate its order
granting summary judgment to Walton. On January 29, 2002, after oral argument,
the Circuit Court reversed its earlier ruling by vacating the order granting
summary judgment. The parties are engaged in discovery.

      On February 4, 2002 we were notified by the California Tax Credit
Allocation Committee of a challenge to our receipt of previously allocated
federal low-income housing tax credits for a recently constructed affordable
housing development in which we invested. We intend to contest this challenge,
which stems from an issue regarding a determination of the date the development
was made available for occupancy. If the Committee prevails in its challenge, we
could incur a loss of up to $7,500.

      We are subject to various other pending legal proceedings. In management's
opinion, the resolution of these other claims will not have a material effect on
the consolidated financial statements.

                                      112

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 31: PARENT COMPANY ONLY FINANCIAL INFORMATION

Condensed Statements of Financial Condition of Ocwen Financial Corporation


<TABLE>
<CAPTION>
                                                                                                      December 31,
                                                                                               ----------------------------
                                                                                                  2001              2000
                                                                                               -----------      -----------
<S>                                                                                            <C>              <C>        
Assets:
Cash and cash equivalents..............................................................        $     1,114      $    77,244
Cash held at Bank subsidiary...........................................................             26,872           13,482
Investments in subsidiaries:
   Bank subsidiary.....................................................................            198,813          256,833
   Non-Bank subsidiaries...............................................................            400,297          399,187
Advance due from Bank subsidiary.......................................................              3,138            2,808
Investment in unconsolidated entity....................................................                113               --
Loan portfolio, net....................................................................                 --              408
Discount loan portfolio, net...........................................................                 --            8,417
Investment in real estate..............................................................              1,797            3,300
Income taxes receivable................................................................             16,824           17,749
Deferred tax asset.....................................................................                 --           22,375
Other assets...........................................................................              2,631            2,737
                                                                                               -----------      -----------
                                                                                               $   651,599      $   804,540
                                                                                               ===========      ===========
Liabilities and Stockholders' Equity:
11.875% Note payable...................................................................        $    87,025      $   100,050
Notes and debentures payable to non-Bank subsidiaries..................................            131,251          137,251
Accrued interest payable to non-Bank subsidiaries......................................              7,847            7,537
Advance due to non-Bank subsidiaries...................................................             20,515           47,388
Deferred tax liability.................................................................             16,249               --
Other liabilities......................................................................              9,606            8,888
                                                                                               -----------      -----------
   Total liabilities...................................................................            272,493          301,114
Stockholders' equity...................................................................            379,106          503,426
                                                                                               -----------      -----------
                                                                                               $   651,599      $   804,540
                                                                                               ===========      ===========
</TABLE>


                                      113

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


Condensed Statements of Operations of Ocwen Financial Corporation


<TABLE>
<CAPTION>
                                                                                   For the Years Ended December 31,
                                                                             ----------------------------------------------
                                                                                2001             2000              1999
                                                                             -----------       -----------      -----------
<S>                                                                          <C>               <C>              <C>        
Interest income.......................................................       $     1,946       $       907      $     2,510
Interest income from subsidiaries:
     Bank subsidiary..................................................               776             1,438            1,941
     Non-Bank subsidiaries............................................                --             2,394            3,669
Interest expense......................................................            11,465            12,293           14,656
Interest expense - non-Bank subsidiaries..............................            14,387            14,518           14,372
                                                                             -----------       -----------      -----------
Net interest expense before provision for loan losses.................           (23,130)          (22,072)         (20,908)
Provision for loan losses.............................................             1,495             7,504            1,176
                                                                             -----------       -----------      -----------
Net interest expense after provision for loan losses..................           (24,625)          (29,576)         (22,084)
Non-interest income...................................................               527            22,499           51,464
Non-interest expense..................................................                --             3,783            5,721
Servicing fee expense - Bank subsidiary...............................             5,907             7,173            3,074
Equity in earnings (losses) in unconsolidated entities................                --            (5,280)          (9,154)
                                                                             -----------       -----------      -----------
     Income (loss) before income taxes and extraordinary gain.........           (30,005)          (23,313)          11,431
Income tax expense (benefit)..........................................            37,175           (16,271)          (3,990)
                                                                             -----------       -----------      -----------
     Income (loss) before equity in net income (losses) of subsidiaries
        and extraordinary gain........................................           (67,180)           (7,042)          15,421
Equity in net income (losses) of subsidiaries:
     Bank subsidiary..................................................           (57,590)            6,043           45,166
     Non-bank subsidiaries............................................               (45)            2,915          (41,182)
Extraordinary gain on repurchase of debt, net of tax..................                33               276              427
                                                                             -----------       -----------      -----------
Net income (loss).....................................................       $  (124,782)      $     2,192      $    19,832
                                                                             ===========       ===========      ===========
</TABLE>


                                      114

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


Condensed Statements of Cash Flows of Ocwen Financial Corporation


<TABLE>
<CAPTION>
                                                                                   For the Years Ended December 31,
                                                                             ----------------------------------------------
                                                                                2001              2000             1999
                                                                             -----------       -----------      -----------
<S>                                                                          <C>               <C>              <C>        
Cash flows from operating activities:
Net income (loss)......................................................      $  (124,782)      $     2,192      $    19,832
Adjustments to reconcile net income to net cash
       (used) provided by operating activities:
     Equity in income of Bank subsidiary...............................           57,590            (6,043)         (45,166)
     Equity in (income) loss of non-Bank subsidiaries..................               45            (2,915)          41,182
     Equity in loss (income) of unconsolidated entity, net.............               --             5,280            9,154
     Premium amortization, net.........................................              408                (3)          (5,913)
     Provision for loan losses.........................................            1,495             7,503            1,176
     Loss on interest-earning assets...................................               --                --              (81)
     Extraordinary gain on repurchase of long-term debt................              (53)             (439)          (1,322)
     Gain on sale of real estate held for investment...................               --            (1,155)            (297)
     Gain on sale of Ocwen UK..........................................               --                --          (50,371)
     Gain on sale of investment in Kensington Group plc................               --           (20,025)              --
     Decrease (increase) in deferred tax assets........................           38,624            21,988          (22,581)
     Increase (decrease) in deferred tax liability.....................               --               (50)          (1,952)
     Decrease (increase) in other assets...............................             (152)              (70)          21,483
     Decrease (increase) in income taxes receivable....................              925            (2,556)          21,718
     Increase (decrease) in income taxes payable.......................               --              (637)            (953)
     Increase (decrease) in accrued expenses and other liabilities.....              719            (5,305)          (2,962)
                                                                             -----------       -----------      -----------
     Net cash provided (used) by operating activities..................          (25,181)           (2,235)         (17,053)
                                                                             -----------       -----------      -----------

Cash flows from investing activities:
     Net investments in and advances to subsidiaries...................          (33,731)          (21,967)         (21,603)
     Proceeds from sale of Ocwen UK....................................               --                --          122,101
     Proceeds from sale of investment in Kensington Group plc..........               --            48,556               --
     Distributions from (investment in) unconsolidated entity..........               --             3,143               --
     Principal payments received on loans held for investment..........               --                --            2,119
     Principal payments received on discount loans.....................            6,922            10,207           17,596
     Purchase of discount loans........................................               --            (9,730)          (8,788)
     Increase in investment in real estate.............................            1,503            (2,145)              --
                                                                             -----------       -----------      -----------
     Net cash provided (used) by financing activities..................          (25,306)           28,064          111,425
                                                                             -----------       -----------      -----------

Cash flows from financing activities:
     Repurchase of notes...............................................          (13,233)           (3,361)         (19,828)
     Repayments of loans to executive officers, net....................               --                --              763
     Exercise of common stock options..................................              902                --               23
     Issuance of shares of common stock................................               78                56               43
     Repurchase of common stock........................................               --            (8,996)         (30,691)
                                                                             -----------       -----------      -----------
Net cash provided (used) by investing activities.......................          (12,253)          (12,301)         (49,690)
                                                                             -----------       -----------      -----------

Net increase (decrease) in cash and cash equivalents...................          (62,740)           13,528           44,682
Cash and cash equivalents at beginning of year.........................           90,726            77,198           32,516
                                                                             -----------       -----------      -----------
Cash and cash equivalents at end of year...............................      $    27,986       $    90,726      $    77,198
                                                                             ===========       ===========      ===========
</TABLE>


                                      115

<PAGE>

                  OCWEN FINANCIAL CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                        DECEMBER 31, 2001, 2000, AND 1999
                    (Dollars in thousands, except share data)


NOTE 32: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                     Quarters Ended
                                                            ----------------------------------------------------------------
                                                            December 31,     September 30,       June 30,         March 31,
                                                               2001              2001              2001              2001
                                                            ------------     ------------       -----------      -----------
<S>                                                          <C>              <C>               <C>              <C>        
Interest income.........................................     $    14,742      $    18,594       $    25,218      $    24,817
Interest expense........................................          19,414           22,307            24,728           26,880
Provision for loan losses...............................          (2,363)            (388)           10,297            8,120
                                                             -----------      -----------       -----------      -----------
   Net interest income (expense) after provision for
     loan losses........................................          (2,309)          (3,325)           (9,807)         (10,183)
Non-interest income.....................................          41,107           41,742            43,362           43,130
Non-interest expense....................................          44,132           44,602            42,856           50,856
Distributions on Capital Securities.....................           1,719            1,663             1,697            2,053
Equity in income (losses) of investments in
   unconsolidated entities..............................             204              (84)              139               45
                                                             -----------      -----------       -----------      -----------

Income (loss) before income taxes and extraordinary
 gain ..................................................          (6,849)          (7,932)          (10,859)         (19,917)
Income taxes expense (benefit)..........................              --           65,000            10,825            5,762
                                                             -----------      -----------       -----------      -----------
Income (loss) before extraordinary gain.................          (6,849)         (72,932)          (21,684)         (25,679)
Extraordinary gain (loss) on repurchase of debt, 
 net of tax ............................................             (44)              --               243            2,163
                                                             -----------      -----------       -----------      -----------
Net income (loss).......................................     $    (6,893)     $   (72,932)      $   (21,441)     $   (23,516)
                                                             ===========      ===========       ===========      ===========
Earnings (loss) per share:
   Basic................................................     $    (0.10)      $    (1.08)       $    (0.32)      $    (0.35)
                                                             ==========       ==========        ==========       ==========
   Diluted..............................................     $    (0.10)      $    (1.08)       $    (0.32)      $    (0.35)
                                                             ==========       ==========        ==========       ==========

<CAPTION>
                                                                                     Quarters Ended
                                                            ----------------------------------------------------------------
                                                            December 31,     September 30,        June 30,        March 31,
                                                               2000              2000              2000             2000
                                                            ------------     ------------       -----------      -----------
<S>                                                          <C>              <C>               <C>              <C>        
Interest income.........................................     $    40,984      $    45,287       $    50,455      $    48,090
Interest expense........................................          35,599           44,433            45,662           43,396
Provision for loan losses...............................           2,573            6,861             3,134            2,609
                                                             -----------      -----------       -----------      -----------
   Net interest income (expense) after provision for
    loan losses.........................................           2,812           (6,007)            1,659            2,085
Non-interest income.....................................          59,810           49,536            37,234           30,945
Non-interest expense....................................          45,391           44,700            41,844           38,074
Distributions on Capital Securities.....................           2,538            2,730             2,918            3,194
Equity in income (losses) of investments in
 unconsolidated entities................................            (284)            (893)           (1,812)          (2,260)
                                                             -----------      -----------       -----------      -----------

Income (loss) before income taxes and extraordinary 
 gain ..................................................          14,409           (4,794)           (7,681)         (10,498)
Income taxes expense (benefit)..........................          15,079           (1,486)           (2,381)          (3,255)
                                                             -----------      -----------       -----------      -----------
Income (loss) before extraordinary gain.................            (670)          (3,308)           (5,300)          (7,243)
Extraordinary gain (loss) on repurchase of debt, 
 net of tax ............................................          10,039            2,628             3,901            2,145
                                                             -----------      -----------       -----------      -----------
Net income (loss).......................................     $     9,369      $      (680)           (1,399)     $    (5,098)
                                                             ===========      ===========       ===========       ==========
Earnings (loss) per share:
   Basic................................................     $     0.14       $    (0.01)       $    (0.02)      $     0.07
                                                             ==========       ==========        ==========       ==========
   Diluted..............................................     $     0.14       $    (0.01)       $    (0.02)      $     0.07
                                                             ==========       ==========        ==========       ==========
</TABLE>


                                      116

<PAGE>

SHAREHOLDER INFORMATION

Price Range of the Company's Common Stock

      Our common stock is traded under the symbol "OCN" on the New York Stock
Exchange ("NYSE"). The following table sets forth the high and low sales prices
for our common stock, as traded on the NYSE:

                                                         High           Low
                                                      ----------     ----------
2001:
First quarter....................................     $     9.80     $     6.38
Second quarter...................................          10.44           8.54
Third quarter....................................          11.20           6.40
Fourth quarter...................................           9.01           6.75

2000:
First quarter....................................     $     9.25     $     5.25
Second quarter...................................           8.63           5.44
Third quarter....................................           6.88           5.44
Fourth quarter...................................           6.44           4.50

      At the close of business on March 8, 2002, our common stock price was
$6.90.

      We do not currently pay cash dividends on common stock and have no current
plans to do so in the future. The timing and amount of future dividends, if any,
will be determined by our Board of Directors and will depend, among other
factors, upon our earnings, financial condition, cash requirements, the capital
requirements of the Bank and other subsidiaries and investment opportunities at
the time any such payment is considered. In addition, the indentures relating to
the Notes and the Junior Subordinated Debentures contain certain limitations on
the payment of dividends by us.

      As a holding company, the payment of any dividends by us will be
significantly dependent on dividends and other payments received from our
subsidiaries, including the Bank. For a description of limitations on our
ability to pay dividends on our common stock and on the ability of the Bank to
pay dividends, see Notes 18, 19 and 25 to our Consolidated Financial Statements.

Number of Holders of Common Stock

      At March 8, 2002, 67,308,819 shares of our common stock were outstanding
and held by approximately 1,255 holders of record. Such number of stockholders
does not reflect the number of individuals or institutional investors holding
our stock in nominee name through banks, brokerage firms and others.

                                      117



                                                                    Exhibit 21.0


                   Subsidiaries of Ocwen Financial Corporation



Name                                                    State of Organization
----                                                    ---------------------

Ocwen Federal Bank FSB                                  New Jersey
Ocwen Partnership, L.P.                                 Virginia
Ocwen Asset Investment Corp.                            Florida
Ocwen General, Inc.                                     Virginia
Investors Mortgage Insurance Holding Company            Delaware
Ocwen Properties, Inc.                                  New York
Ocwen Capital Trust I                                   Delaware
Ocwen Asset Investment - UK, LLC                        Delaware
NHP Affordable Housing Partners, L.P.                   Pennsylvania
First Service Corporation                               Delaware
Ocwen Technology Xchange, Inc.                          Florida
REALTrans.com, Inc.                                     Florida
Rocaille Acquisition Subsidiary, Inc.                   Florida






                                                                    Exhibit 23.0



               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 filed on January 27, 1998 (Registration No. 333-44999),
Registration Statement on Form S-8 filed on August 25, 1998 (Registration No.
333-62217) and Registration Statement on Form S-3 filed on November 5, 1998
(Registration No. 333-64915) of Ocwen Financial Corporation of our report dated
February 12, 2002 relating to the financial statements, which appears on page 63
of the 2001 Annual Report to Shareholders, which is incorporated in this Annual
Report on Form 10-K.




PricewaterhouseCoopers LLP
West Palm Beach, Florida
March 29, 2002





                                                                    Exhibit 99.1


RISK FACTORS (Dollars in thousands)

         Each of the factors set forth below could, directly or indirectly,
affect the results of operations and financial condition of Ocwen Financial
Corporation ("OCN"). Capitalized terms that are not defined herein shall have
the meanings ascribed to them in our Annual Report on Form 10-K to which this
Exhibit relates.

Changing Nature of Risks; No Assurances as to Consistency of Earnings

         Changing Nature of Risks. In the past, our corporate strategy
emphasized the identification, development and management of specialized
businesses that we believed were not accurately evaluated and priced by the
marketplace due to market, economic and competitive conditions. This strategy
can result in the entry into or development of businesses and investment in
assets which produce substantial initial returns, which may be followed by an
exit from any of those businesses or the sale of those assets if, for example,
results decrease because markets become more efficient in the evaluation and
pricing of such businesses and assets. For example, historically, our efforts
have focused on lending, the acquisition and resolution of discounted loans, and
investment in various
 types of mortgage-related securities. However, on October
26, 1998, we announced that we would refocus our resources on our core
competencies, namely the acquisition and management of servicing-intensive
assets and the development of exportable loan servicing technology for the
mortgage and real estate industries. This strategy involves the potential to
enter into and exit from different businesses; therefore, past financial
performance may not be considered a reliable indicator of future performance and
historical trends may not be reliable indicators of anticipated results or
trends in future periods. In addition, there can be no assurance that we will be
able to accomplish our strategic objectives as a result of changes in the nature
of our operations over time or that such changes will not have a material
adverse effect from time to time or generally on our business, financial
condition or results of operations.

         Inconsistency of Results and Non-Recurring Items. In addition to
inconsistency in results caused by our entry into or exit from businesses, the
consistency of our operating results has and may continue to be significantly
affected by inter-period variations in our current operations, including:

         o   The amount of servicing rights acquired;
         o   The amount of resolutions of discounted loans, particularly large
             multi-family residential and commercial real estate loans;
         o   The amount of multi-family residential and commercial real estate
             loans which mature or are prepaid, particularly loans with terms
             pursuant to which we participate in the profits of the underlying
             real estate; and
         o   Sales by us of loans and/or securities acquired from our
             securitization of loans.

         In addition, our operating results have been significantly affected by
certain non-recurring items. For example, we have earned significant
non-interest income from gains on sales of interest-earning assets and real
estate owned. Gains on sales of interest-earning assets and real estate owned
generally are dependent on various factors that are not within our control,
including market and economic conditions and accounting regulations. In
addition, in the third quarter of 1999, we decided to discontinue the practice
of structuring securitizations as sales transactions, thus precluding
recognition of gain-on-sale accounting. There can be no assurance that the level
of gains on sales of interest-earning assets and real estate owned reported by
us in prior periods will be repeated in future periods or that there will not be
substantial inter-period variations in the results from such activities or as a
result of other non-recurring items.

Risks Related to Non-Traditional Operating Activities

         As discussed below, we are engaged in a variety of businesses that
generally involve more uncertainties and risks than the single-family
residential lending activities historically emphasized by savings institutions.
In addition, many of our business activities are conducted on a nationwide
basis, which reduces the risks associated with concentration in any one
particular market area but involves other risks because, among other things, we
may not be as familiar with market conditions and other relevant factors as we
would be in the case of activities that are conducted in the market areas in
which our executive offices and branch office are located.

         Discounted Loan and Servicing Rights Acquisition and Loan Resolution
Activities. Our activities have included the acquisition (in 2000 and prior
years), sale and resolution of non-performing or underperforming single-family
(one to four units) residential loans, multi-family (over four units)
residential loans and commercial real estate loans that were purchased at a
discount. Non-performing and subperforming mortgage loans may be in default or
may have a greater than normal risk of future defaults and delinquencies, as
compared to newly-originated, high-quality loans of comparable type, size and
geographic concentration. Returns on an investment of this type depend on the
borrower's ability to make required payments or, in the event of default, the
ability of the loan's servicer to foreclose and liquidate the mortgage loan.
There can be no assurance that the servicer can liquidate a defaulted mortgage
loan successfully or in a timely fashion.

                                        1

<PAGE>

         We have acquired discounted loans from governmental agencies, which in
the early years of the program consisted primarily of the Federal Deposit
Insurance Corporation (the "FDIC") and the Resolution Trust Corporation, a
federal agency that was formed to resolve failed savings institutions and has
since ceased operations, and in recent years has consisted primarily of the U.S.
Department of Housing and Urban Development. In addition to governmental
agencies, we have acquired discounted loans from various private sector sellers,
such as banks, savings institutions, mortgage companies and insurance companies.
We acquire servicing rights principally from private sellers. Although we
believe that a permanent market for the acquisition of servicing rights to
non-performing and underperforming mortgage loans has emerged in recent years,
there can be no assurance that we will be able to acquire the desired amount and
type of servicing rights in future periods or that there will not be significant
inter-period variations in the amount of such acquisitions. There also can be no
assurance that the discount on the non-performing and underperforming loans
acquired by us will enable us to resolve discounted loans in the future as
profitably as in prior periods. Adverse changes in national economic conditions
or in the economic conditions in regions in which we have acquired pools of
loans and servicing rights could impair our ability successfully to resolve
loans and could have an adverse effect on the value of those loan pools and
servicing rights. The yield on our discounted portfolio also is subject to
significant inter-period variations as a result of the timing of resolutions of
discounted loans, particularly multi-family residential and commercial real
estate loans and non-performing single-family residential loans, interest on
which is recognized on a cash basis, and the mix of the overall portfolio
between performing and non-performing loans. In addition, the volume of
servicing rights acquired by us may vary over time, thereby affecting results of
operations in future periods.

         Multi-Family Residential, Commercial Real Estate and Construction
Lending Activities. Prior to our decision to cease origination of such loans in
1999, our lending activities included nationwide loans secured by existing
commercial real estate, particularly hotels and office buildings, and existing
multi-family residential real estate. In addition, from time to time we have
originated loans for the construction of multi-family residential real estate
and land acquisition and development loans. Multi-family residential real
estate, commercial real estate and construction lending generally are considered
to involve a higher degree of risk than single-family residential lending due to
a variety of factors, including generally larger loan balances, the dependency
on successful completion or operation of the project for repayment, the
difficulties in estimating construction costs and loan terms which often require
little or no amortization of the loan over its term (typically five years) and,
instead, provide for a balloon payment at stated maturity. Furthermore,
mezzanine loans, which are subordinate to senior loans, and construction loans
generally have higher loan-to-value ratios than conventional loans. Although our
borrowers generally have an equity investment of 10% to 15% of total project
costs, such equity may not be sufficient to protect our investment in these
higher-yielding loans. There can be no assurance that any multi-family
residential, commercial real estate and construction lending activities engaged
in by us previously will not be adversely affected by these and the other risks
related to such activities.

         Subprime Family Residential Lending Activities. We closed our domestic
subprime origination business in August 1999 and exited the UK subprime
origination business by selling our investment in our Ocwen UK subsidiary in
September 1999 and our investment in Kensington Group plc in November 2000.
Prior to these dates, our lending activities also included the origination or
purchase on a nationwide basis of single family residential loans made to
borrowers who have significant equity in the properties that secure the loans
but who, because of prior credit problems, the absence of a credit history or
other factors, were unable or unwilling to qualify as borrowers under federal
agency guidelines. These loans were offered pursuant to various programs,
including programs that provide for reduced or no documentation for verifying a
borrower's income and employment. Subprime loans present a higher level of risk
of delinquency or default than loans made to more creditworthy borrowers, and
may not be as saleable as loans that conform to the guidelines established by
various federal agencies. While we believe that the business practices that we
employ enable us to reduce higher risks inherent in these loans, no assurance
can be given that such practices will afford adequate protection against higher
delinquencies, foreclosures or losses than anticipated, and as a result, our
financial condition or results of operation could be adversely affected.

         Environmental Risks of Loan Acquisition and Lending Activities. We
evaluated the potential for significant environmental problems prior to
acquiring or originating a loan because there is a risk for any mortgage loan,
particularly a multifamily residential and commercial real estate loan, that
hazardous substances or other environmentally restricted substances could be
discovered on the related real estate. Through foreclosure, we could become the
owner of the real estate that secured our loan and might be required to remove
such substances from the affected properties or to engage in abatement
procedures at our sole cost and expense. There can be no assurance that the cost
of such removal or abatement will not substantially exceed the value of the
affected properties or the loans secured by such properties, that we would have
adequate remedies against the prior owners or other responsible parties or that
we would be able to resell the affected properties either prior to or following
completion of any such removal or abatement procedures. If such environmental

                                        2

<PAGE>

problems are discovered prior to foreclosure, we generally will not foreclose on
the related loan; however, the value of such property as collateral will
generally be substantially reduced, and as a result, we may suffer a loss upon
collection of the loan.

         Investments in Low-Income Housing Tax Credit Interests. We invest in
affordable housing (generally limited partnerships) in order to obtain federal
income tax credits that are allocated pursuant to Section 42 of the Internal
Revenue Code of 1986, as amended (the "Code"). There are many uncertainties and
risks associated with an investment in low-income housing tax credit interests,
including the risks involved in the construction, lease-up and operation of
multi-family residential real estate, the investor's ability to earn sufficient
income to utilize the tax credits resulting from such investments in accordance
with the requirements of the Code and the possibility of required recapture of
previously-earned tax credits. In addition, there are numerous tax risks
associated with tax credits resulting from potential changes to the Code.
Potential changes in the Code, which have been discussed from time to time,
could reduce the benefits associated with our existing investments in low-income
housing tax credit interests, including the replacement of the current graduated
income taxation provisions in the Code with a "flat tax" based system and
increases in the alternative minimum tax, which cannot be reduced by tax
credits. We are unable to predict whether any of the foregoing or other changes
to the Code will be subject to future legislation and, if so, what the contents
of such legislation will be and its effects, if any, on us.

         Investments in Mortgage-Related Securities. From time to time we invest
in a variety of mortgage-related securities, such as senior, subordinate and
residual interests in collateralized mortgage obligations ("CMOs"), including
CMOs which have qualified as Real Estate Mortgage Investment Conduits. Some
mortgage-related securities exhibit considerably more price volatility than
mortgages or ordinary mortgage pass-through securities, due in part to the
uncertain cash flows that result from changes in the prepayment rates of the
underlying mortgages. Other mortgage-related securities, such as subordinate
interests, also involve substantially more credit risk than the senior classes
of the mortgage-related securities to which such interests relate and generally
are not as liquid as such senior classes. We have generally acquired subordinate
and residual interests primarily in connection with the securitization of our
loans, particularly single-family residential loans to non-conforming borrowers
and discounted loans, and under circumstances in which we continue to service
the loans that back the related securities. We have sought to offset the risk of
changing interest rates on certain of our mortgage-related securities by selling
U.S. Treasury futures contracts and through other hedging techniques, and
believe that the resulting interest-rate sensitivity profile compliments our
overall exposure to changes in interest rates. See "Economic Conditions" below.
Although generally intended to reduce the effects of changing interest rates on
us, investments in certain mortgage-related securities and hedging transactions
could cause us to recognize losses depending on the terms of the instrument and
the interest rate environment.

         Ability to Manage Growth. We have undergone rapid and significant
growth and are continuing to pursue a policy of rapid growth, including growth
in foreign countries. Our rapid growth has imposed a significant strain on our
management resources and there can be no assurance that we will be able to
attract and retain the necessary personnel to manage our operations effectively,
in which event our business, operating results and financial condition could be
materially and adversely affected.

Risk of Future Adjustments to Allowances for Losses

         We believe that we have established adequate allowances for losses for
each of our loan portfolio, discounted loan portfolio and match funded loans in
accordance with generally accepted accounting principles. Future additions to
these allowances, in the form of provisions for losses on loans, discounted
loans and match funded loans, may be necessary, however, due to changes in
economic conditions and the performance of our loan and discounted loan
portfolios. In addition, the OTS, as part of its examination process,
periodically reviews our allowances for losses and the carrying value of our
assets. As a result of OTS reviews, we, in the past, have increased our
allowances for losses on loans and discounted loans and written down the
carrying value of certain loans. There can be no assurance that we will not
determine, at the request of the OTS or otherwise, to further increase our
allowances for losses on loans and discounted loans or adjust the carrying value
of our real estate owned or other assets. Increases in our provisions for losses
on loans would adversely affect our results of operations.

Risks Related to Real Estate Owned

         General. Our real estate owned consists almost entirely of
single-family residential real estate and multi-family residential and
commercial real estate acquired by foreclosure or deed-in-lieu thereof on loans
in our discounted loan portfolio. Generally, real estate owned properties are
non-earning assets, although multi-family residential and commercial real estate
owned may provide some operating income to us depending on the circumstances.
Such operating income may be affected by problems experienced by lessees, which
may weaken their financial condition and result in failure to make rental
payments when due. At any time, a lessee of our properties may seek the
protection of bankruptcy laws, which could result in rejection and termination
of the lessee's lease and thereby cause a reduction in cash flow available for
distribution to us. Moreover, the value of real estate can be significantly
affected by adverse changes in national or local economic conditions,

                                        3

<PAGE>

competition from other properties offering the same or similar services, changes
in interest rates and in the availability, cost and terms of mortgage funds,
acts of nature, including earthquakes, hurricanes and other natural disasters,
and other factors which are beyond our control. These factors may require the
establishment of provisions for losses to ensure that real estate owned
properties are carried at the lower of cost or fair value, less estimated costs
to dispose of the properties, which may adversely affect operations. Real estate
owned may also require increased allocation of resources and expense to the
management and work out of the asset, payment of property taxes and costs
associated with compliance with environmental laws and the Americans with
Disabilities Act of 1990, which can also adversely affect operations. There can
be no assurance that the amount of our real estate owned will not increase in
the future as a result of our discounted loan resolution activities and our
single-family residential, multi-family residential, commercial real estate and
construction loan portfolio.

         Environmental Risks. Operating costs and the value of real property may
be affected by the obligation to pay for the cost of complying with existing
environmental laws, ordinances and regulations, as well as the cost of future
legislation. Under various federal, state and local environmental laws,
ordinances and regulations, a current or previous owner or operator of real
property may be liable for the costs of removal or remediation of hazardous or
toxic substances on, under or in such property. Such laws often impose liability
whether or not the owner or operator knew of, or was responsible for, the
presence of such hazardous or toxic substances. Therefore, an environmental
liability could have a material adverse effect on the underlying value of a real
property, and the revenue therefrom. Although we believe that our
pre-acquisition due diligence identified all material environmental concerns
which relate to our current investments in real estate and accurately assessed
the costs and liabilities to be incurred by us in this regard, there can be no
assurance that such investments will not raise material unanticipated
environmental concerns or costs in the future.

Risks Associated with Acquisitions and Divestitures

         Acquiring businesses and business assets has been and may continue to
be an important focus of our strategic efforts. Any acquisitions could vary in
size and may include those that are large relative to OCN. There can be no
assurance that suitable acquisition candidates can be identified, that financing
for such acquisitions would be available on satisfactory terms, that we would be
able to accomplish our strategic objectives as a result of any such
acquisitions, that any business or business assets acquired by us would be
integrated successfully or that integration of acquired businesses would not
divert management resources or otherwise have a material adverse effect on our
business, financial condition or results of operations. We are continually
evaluating possible acquisitions and engage in discussions with acquisition
candidates from time to time.

         In addition, in the event that we choose to divest any business or sell
any asset in the future, there can be no assurance that a suitable purchaser
could be identified, that we would be able to accomplish our strategic
objectives as a result of any such sale, that any proposed asset or business
sold by us would be completed or that the separation of any such asset or
business from us would not diminish management resources or otherwise have a
material adverse effect on our business, financial condition or results of
operations.

Risks Associated with Technology

         Our wholly-owned subsidiary, Ocwen Technology Xchange, Inc. ("OTX"),
licenses our mortgage loan servicing resolution and work flow technology to
third parties in the mortgage and real estate industries. The products offered
by OTX have resulted from the enhancement of software products acquired through
our purchases of Amos, Inc., a developer of residential mortgage loan servicing
software, DTS Communications, Inc., a real estate technology company, and the
assets of Synergy Software, LLC, a developer of commercial and multi-family
mortgage servicing software, with our own proprietary technology.

         Revenue Recognition. A portion of our revenue attributable to OTX
operations includes license fees and implementation fees related to the
installation of our technology solutions. In certain instances, customers
receive certain elements of OTX's products or services over a period of time and
in some instances, fees received may be refundable based on the provisions of
the underlying agreements. Consequently, certain revenue is deferred and
recognized over future periods.

         Rapid Technological Change and Competition. Rapid change, uncertainty
due to new and emerging technologies, and fierce competition characterize the
software industry. OTX's ability to grow is dependent upon our ability to
develop and introduce new products and enhance existing products to satisfy
consumer demand for new technologies. Because the pace of change continues to
accelerate, new opportunities for competitors are created and OTX's business
planning is subject to substantial uncertainty. Competitors, working with new
technology, may arrive at a technology that creates a new market altogether and
renders our product offerings obsolete. If we do not successfully identify new
product opportunities and develop and bring new products to market in a timely
and efficient manner, our business growth will suffer and demand for our
products will decrease. Competing platforms and products may gain popularity
with customers, vendors and loan originators, reducing or eliminating the
potential for OTX's future revenue.

                                        4

<PAGE>

         Future Initiatives. We plan to continue significant investments in
software research and development including the ongoing development of increased
functionality for OTX's products, including REALTransSM, REALServicingTM and
REALSynergyTM, where we have the opportunity to capture significant market share
through improved efficiencies offered by these products. We anticipate that
these investments in research and development will increase over historical
spending levels without corresponding growth in revenue in the near future.
Significant revenue from these product opportunities may not be achieved for a
number of years, if at all.

         Software Development. The software industry is inherently complex. New
products and product enhancements can require long development and testing
periods. While we believe we have developed products attractive to the mortgage
and real estate industries, the computer software industry is subject to rapid
technological change, changing customer requirements, frequent new product
introductions and evolving industry standards that may render existing products
and services obsolete. There can be no assurance that OTX will not experience
future difficulties that could delay or prevent the successful development,
introduction or marketing of our products, or that our products and product
enhancements will meet the requirements of the marketplace and achieve market
acceptance. If OTX is unable to develop and introduce products of acceptable
quality in a timely manner in response to changing market conditions or customer
requirements, our business, operating results and financial condition could be
adversely affected.

         Prices. The competitive factors described above may require OTX to
lower product prices to meet competition, reducing our net income.

         International Operations. We are continuing to conduct more of our
business outside the United States. The costs of selling our products and
providing our services in foreign countries may be higher than our prices in the
United States because of the costs incurred in localizing both products and
financial services for non-U.S. markets. While we seek to set our prices for our
products and services higher to compensate for the additional expense, pressure
to globalize our pricing structures might require that we reduce the sales price
of our financial services and software in other countries, even though the costs
continue to be higher than in the United States. Our business and results of
operations outside of the United States could also be impacted by: difficulties
in staffing and managing foreign operations; unexpected changes in regulatory
requirements for financial services and software; negative changes in software
"piracy" trade protection laws, policies and measures and other regulatory
requirements affecting trade and investment; social, political, labor or
economic conditions in a specific country or region; and potential adverse
foreign tax consequences, among other factors.

Risks Associated with Mortgage Loan Servicing

         Extensive Use of Financial Leverage. We are highly leveraged and will
continue to be highly leveraged. Our ability to make payments of principal or
interest on or to refinance our indebtedness depends on our future operating
performance and our ability to effect additional debt and/or equity financing,
which is subject to economic, financial, competitive and other factors beyond
our control, including restrictions on our ability to obtain additional debt
financing contained in the indentures relating to our 11.875% Notes and 10.875%
Junior Subordinated Debentures.

         We intend to continue financing the servicing advances that we are
required to make in connection with the acquisition of servicing rights for
pools of loans and the servicing of the loans throughout the life of the
mortgage loan. Generally, we expect to be able to finance up to ninety percent
of these advance amounts. While the leveraged nature of our assets offers the
opportunity for increased rates of return on our invested capital, it involves a
greater degree of risk.

         This degree of leverage also makes us more vulnerable to a downturn in
real estate values or the economy generally. Although we generally expect to
repay any indebtedness incurred in connection with a servicing acquisition from
the related servicing fees, a downturn in the economy or real estate market
could reduce those proceeds. An increase in market interest rates or a decline
in the value of the collateral securing the pool of loans for which we have
acquired the servicing rights could adversely effect servicing fees and our
ability to repay our borrowings and could have a material adverse effect on our
results of operations and financial condition.

         Need for Additional Financing. Our expansion strategy will result in
the need for additional debt and/or equity financing in the future, and there
can be no assurance that we will be able to obtain such financing on acceptable
terms. In addition, the indentures relating to our 11.875% Notes and 10.875%
Junior Subordinated Debentures restrict our ability to obtain additional debt
financing. Our degree of leverage may make it more difficult for us to obtain
additional financing for future working capital, capital expenditures, servicing
related acquisitions, general corporate purposes or other purposes and may cause
us to dedicate a substantial portion of our cash flow from operations to the
payment of principal and interest on indebtedness, thereby reducing the funds
available for operations and future business opportunities. To the extent we are

                                        5

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unable to extend or replace existing facilities or generate sufficient cash flow
from the servicing rights, we may have to curtail our acquisition of servicing
rights, which could have a material adverse effect on our financial position and
results of operations.

         Risks Related to Acquired Servicing Rights on Pools of Loans. In
determining the purchase price for servicing rights, management makes certain
assumptions regarding, among other things, the rates of prepayment and repayment
within the pools, the credit categories of the borrowers within the pools, the
collateral values and loan-to-value ratios of the pools, the origination
practices of the loan originators, the real estate market and our ability
successfully to service and resolve loans and to dispose of any foreclosed real
estate. To the extent that our underlying assumptions prove to be inaccurate or
the basis for those assumptions change (for example, an unanticipated decline in
the real estate market), or there is some other diminution in the value of the
assets, the price paid by us for servicing rights may prove to have been
excessive, resulting in a lower yield or a loss to us. Therefore, our success is
highly dependent on our pricing of servicing rights as well as general economic
conditions in the geographic areas in which the foreclosed real estate or
properties underlying the loans that we service are located. Adverse changes in
national economic conditions or in the economic conditions in regions in which
we have acquired pools of loans could impair our ability to successfully resolve
loans and have an adverse effect on the value of those pools of loans. In
addition, because non-performing loans do not make regular cash payments and in
various servicing relationships, we are repaid for advances out of proceeds from
the loans, the return to us may be significantly influenced by the time it takes
to resolve the loan, which varies based on, among other things, state consumer
protection and foreclosure laws, both of which are subject to change. Both our
initial and ongoing valuations and the rate of amortization of mortgage
servicing rights are significantly affected by interest rates, prepayment speeds
and the payment performance of the underlying loans. In general, during periods
of declining interest rates, the value of mortgage servicing assets declines due
to increasing prepayments attributable to increased mortgage refinance activity.
We amortize mortgage servicing rights over the period of estimated net servicing
income based on our projections of the amount and timing of future cash flows.
The amount and timing of servicing asset amortization is adjusted periodically
based on actual results and updated projections.

         Risks Related to International Servicing Operations. We have invested
in joint ventures with servicing operations currently in Italy and anticipated
in Japan, Korea, Europe and Taiwan. The ventures plan to use our servicing
system, which must be adapted for servicing loans in Europe and the Far East.
Our international servicing operations are subject to most of the same risks
associated with our U.S. operations as well as additional risks as fluctuations
in foreign currency exchange rates, unexpected changes in regulatory
requirements, heightened risks of political and economic instability,
difficulties in managing international operations, potentially adverse tax
consequences, enhanced accounting and control expenses and the burden of
complying with a wide variety of foreign laws. In addition, we have only limited
experience in servicing loans in foreign countries. Accordingly, there can be no
assurance that one or more of these factors will not have a materially adverse
effect on our operations.

         Risk of Increased Capital Requirements. Federally insured savings
associations are required to maintain minimum levels of regulatory capital.
These standards generally are as stringent as the comparable capital
requirements imposed on national banks. The OTS also is authorized to impose
capital requirements in excess of those standards on individual associations on
a case-by-case basis. In making such determination, the OTS can take into
account a number of factors, including the bank's loan portfolio quality, recent
operating losses or anticipated losses, the condition of our holding company and
whether the bank is receiving special supervisory attention, among other
matters. If the OTS were to impose higher capital requirements than it has
currently established for the Bank or additional capital were required as a
result of an adverse determination by the OTS or otherwise, we might inject
additional capital into the Bank, whether or not such usage of capital is
optimal for OCN. Such additional capital contributions may have the effect of
reducing or eliminating our overall net income or requiring us to obtain
additional debt or equity capital. In the event that we were unable or refused
to inject capital into the Bank as required by the OTS, significant adverse
consequences could result. See "Regulation and Regulatory Capital," below.

         Risks Related to Securitization. Under certain circumstances, we may be
required to advance funds to securitization trusts, indemnify the trustee and
the underwriters of a securitization and repurchase certain loans that were
securitized. In connection with a securitization, we may be required to agree
that, in the event of a breach of any representation or warranty made by us that
materially and adversely affects the value of an underlying mortgage loan, we
will repurchase that loan at a price equal to the then outstanding principal
balance of the loan and any accrued and unpaid interest thereon.

International Operations

         We conduct business in the United States, Jamaica and, through a joint
venture, Italy, are exploring opportunities in Japan, Korea, Europe and Taiwan
and may explore opportunities outside of these markets. We are establishing two
software development and servicing operations centers in India. Our foreign
operations are subject to most of the same risks associated with our U.S.
operations, as well as additional risks, such as unexpected changes in local

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regulatory requirements, difficulties in managing international operations,
potentially adverse tax consequences, enhanced accounting and control expenses
and the burden of complying with foreign laws. Changes in foreign currency
exchange rates may also affect the value of our foreign assets and the gains
realized from the sale of such assets. Although we implement hedging strategies
to limit the effects of currency exchange rate fluctuations on our results of
operations, currency hedging strategies, like those for interest rates, may not
perform their intended purpose. See "Economic Conditions". There can be no
assurance that such factors will not have a material adverse effect on our
business, results of operations or financial condition. In addition, we have
only limited international experience outside of the U.S., which could limit our
ability to capitalize on investment opportunities that may arise elsewhere.

Regulation and Regulatory Capital Requirements

         OCN, as a savings and loan holding company, and the Bank, as a
federally-chartered savings institution, are subject to significant governmental
supervision and regulation, which is intended primarily for the protection of
depositors. Statutes and regulations affecting OCN and the Bank may be changed
at any time, and the interpretation of these statutes and regulations by
examining authorities also is subject to change. There can be no assurance that
future changes in applicable statutes and regulations or in their interpretation
will not adversely affect our business. The applicable regulatory authorities
may, as a result of such regulation and examination, impose regulatory sanctions
upon OCN or the Bank, as applicable, as well as various requirements or
restrictions which could adversely affect our business activities. A portion of
the Bank's operations involve businesses that are not traditionally conducted by
savings institutions and, as a result, there can be no assurance that future
actions by applicable regulatory authorities, or future changes in applicable
statutes or regulations, will not limit or otherwise adversely affect the Bank's
ability to engage in such activities.

         Following an examination of the Bank in late 1996 and early 1997 by the
Office of Thrift Supervision (the "OTS"), the Bank committed to the OTS to
maintain, commencing on June 30, 1997, regulatory capital ratios that
significantly exceed the requirements that are generally applicable to
federally-chartered savings institutions such as the Bank. Specifically, the
Bank has committed to the OTS to maintain a core capital (leverage) ratio and a
total risk-based capital ratio of at least 9% and 13%, respectively (the
requirements of general applicability are 3% and 8%, respectively). At December
31, 2001, the Bank's core capital, Tier 1 risk-based capital and total
risk-based capital ratios amounted to 13.64%, 18.41% and 23.33%, respectively.
Based on discussions with the OTS, the Bank believes that this commitment does
not affect its status as a "well-capitalized" institution, assuming the Bank's
continued compliance with the regulatory capital requirements that it committed
to maintain. Under applicable laws and regulations, an institution is considered
to be "well-capitalized" if it maintains a total risk-based capital ratio of
10.0% or more, a Tier 1 risk-based capital ratio of 6.0% or more and a core
capital (leverage) ratio of 5.0% or more and is not subject to a written
agreement, order or directive issued by an appropriate agency to meet and
maintain a specific capital level for any capital measure.

         There can be no assurance that in the future the OTS either will agree
to a decrease in the 9% core capital (leverage) ratio and the 13% total
risk-based capital ratio committed to be maintained by the Bank or will not seek
an increase in such requirements. Unless and until these regulatory capital
requirements are decreased, the Bank's ability to leverage its capital through
future growth in assets (including its ability to continue growing at historical
rates) will be adversely affected, as will OCN's ability to receive dividends
from the Bank. Although OCN and its non-banking subsidiaries will not be
restricted in their growth by these capital requirements, because they do not
have access to the Bank's funding sources, their profitability may be different
from the Bank's for particular types of businesses. In addition, there can be no
assurance that the Bank will continue to meet the regulatory capital
requirements that it has committed to maintain or that the OTS will not formally
impose such requirements pursuant to a written agreement, order or directive,
which would cause the Bank to cease to be a "well-capitalized" institution under
applicable laws and regulations. In the event that the Bank ceased to be a
"well-capitalized" institution, it could become subject to other regulatory
restrictions on its operations.

Economic Conditions

         General. Our success is dependent to a certain extent upon the general
economic conditions in the geographic areas in which we conduct substantial
business activities. Adverse changes in national economic conditions or in the
economic conditions of regions in which we conduct substantial business likely
would impair our ability to collect on outstanding loans or dispose of real
estate owned and would otherwise have an adverse effect on our business,
including the ability of customers to repay loans and the value of both the
collateral pledged to us to secure our loans and our real estate owned.
Moreover, earthquakes, hurricanes and other natural disasters could have similar
effects. Although such disasters have not significantly adversely affected us to
date, the availability of insurance for such disasters in Florida, in which we
conduct substantial business activities, is limited. Moreover, changes in
building codes and ordinances, environmental considerations and other factors
also might make it infeasible to use insurance proceeds to replace a property if
it is damaged or destroyed. Under such circumstances, the insurance proceeds
received by a borrower or by us might not be adequate to restore our economic

                                        7

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position with respect to the affected collateral or real estate. At December 31,
2001, we had loans aggregating $6,590 (including match funded loans and loans
available for sale) secured by properties located in Florida and $50,694 of our
real estate owned was located in Florida, which collectively represented 3.3% of
our total assets at such date.

         Effects of Changes in Interest Rates. Net interest income (expense) is
the difference between the interest income earned on interest-earning assets and
the interest expense incurred in connection with our interest-bearing
liabilities. Changes in the general level of interest rates can affect our net
interest income (expense) by affecting the spread between our return on
interest-earning assets and our cost of interest-bearing liabilities, as well
as, among other things, the value of our interest-earning assets and our ability
to realize gains from the sale of such assets; the average life of our
interest-earning assets; the value of our mortgage servicing rights; and our
ability to obtain deposits in competition with other available investment
alternatives. Interest rates are highly sensitive to many factors, including
governmental monetary policies, domestic and international economic and
political conditions and other factors beyond our control. Although we believe
that the maturities of our assets are well balanced in relation to our
liabilities (which involves various estimates and assumptions, including as to
how changes in the general level of interest rates will impact our assets and
liabilities), there can be no assurance that our profitability would not be
adversely affected during any period of changing interest rates.

         Potential Adverse Effects of Hedging Strategies. We may utilize a
variety of financial instruments, including interest rate swaps, caps, floors
and other interest rate exchange contracts and foreign currency futures
contracts, in order to limit the effects of interest rates or changes in foreign
currency exchange rates on our operations. Among the risks inherent with respect
to the purchase and/or sale of such derivative instruments are:

         o   Interest rate risk, which consists of the risks relating to
             fluctuating interest rates;
         o   Basis risk, which consists of the risk of loss associated with
             variations in the spread between the asset yield and the funding
             and/or hedge costs;
         o   Credit or default risk, which consists of the risk of insolvency or
             other inability of the counterparty to a particular transaction to
             perform our obligations thereunder;
         o   Prepayment risk, which consists of reinvestment risk to the extent
             we are not able to reinvest repayments, if any, at a yield which is
             comparable to the yield being generated on the particular security;
         o   Liquidity risk, which consists of the risk that we may not be able
             to sell a particular security at a particular price;
         o   Legal enforceability risk, which consists of the risks related to
             our ability to enforce the terms of a particular instrument or to
             obtain or collect upon a legal judgment in the United States in the
             event that the counterparty to the transaction is a foreign entity
             or the underlying collateral is located in a foreign jurisdiction;
             and
         o   Volatility risk, which consists of the risk that actual volatility
             (i.e., the degree of uncertainty relating to the price of the
             underlying asset) differs from the historical volatility or
             "implied" volatility of the instrument.

Risks Related to Reliance on Brokered and Other Wholesale Deposits

         We historically have utilized as a source of funds certificates of
deposit obtained through national investment banking firms which obtain funds
from their customers for deposit with us ("brokered deposits") and, to a lesser
extent, certificates of deposit obtained from customers of regional and local
investment banking firms and direct solicitation efforts by us of institutional
investors and high net worth individuals. We believe that the effective cost of
brokered and other wholesale deposits, as well as other non-branch dependent
sources of funds, such as securities sold under agreements to repurchase
("reverse repurchase agreements") and advances from the Federal Home Loan Bank
("FHLB") of New York, generally is more attractive to us than the effective cost
of deposits obtained through branch offices after the general and administrative
costs associated with operating a branch office network are taken into account.
However, such funding sources, when compared to retail deposits attracted
through a branch network, are generally more sensitive to changes in interest
rates and volatility in the capital markets and their availability and terms are
more likely to be subject to competitive pressures. In addition, such funding
sources may be more sensitive to significant changes in our financial condition.
There are also regulatory limitations on an insured institution's ability to
solicit and obtain brokered deposits in certain circumstances. See "Regulation
and Regulatory Capital Requirements" above. As a result of our past reliance on
brokered and other wholesale deposits, significant changes in prevailing
interest rates, in the availability of alternative investments for individual
and institutional investors or in our financial condition, among other factors,
could have a much more significant affect on our liquidity and results of
operations than might be the case with an institution that attracted a greater
portion of its funds from retail or core deposits obtained through a branch
network. During 2001, we did not issue any new brokered certificates of deposit
and presently do not intend to utilize such deposits as a source of new funds in
the foreseeable future.

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Risks Associated with Current Sources of Liquidity and Additional Financing for
Growth

         Current Sources of Liquidity. Our primary sources of funds for
liquidity consist of deposits, FHLB advances, reverse repurchase agreements,
lines of credit, match funded debt, servicing fees and maturities and principal
payments on loans and securities and proceeds from sales thereof. We believe
that our existing sources of liquidity will be adequate to fund planned
activities for the foreseeable future, although there can be no assurances in
this regard. Moreover, we continue to evaluate other sources of liquidity, such
as lines of credit from unaffiliated parties, which will enhance our ability to
increase our liquidity position. Our inability to maintain adequate sources of
liquidity, including as a result of the failure to extend or replace existing
lines of credit or as a result of the factors described under "Risks Related to
Reliance on Brokered and Other Wholesale Deposits" above or "Risks of
Securitization" below, could have a material adverse effect on our business,
financial condition or results of operations.

         Additional Financing for Growth. Our ability to enter into and exit
from certain business lines as opportunities emerge depends to a significant
degree on our ability to obtain additional indebtedness, obtain additional
equity capital or have access to other sources of capital (e.g., through
partnering, joint venturing or other economic or contractual relationships). We
have no commitments for borrowings in addition to those under our current debt
securities, match funded debt and lines of credit, no commitments for future
sales of equity capital and no commitments to provide access to other sources of
capital. There can be no assurance that we will be successful in consummating
future financing transactions, if any, on terms satisfactory to us, if at all.
Factors which could affect our access to the capital markets or other economic
or contractual relationships, or the conditions under which we could obtain
additional financing, involve the perception in the capital markets and the
financial services industry of our business, results of operations, leverage,
financial condition and business prospects. Each of these factors is to a large
extent subject to economic, financial and competitive factors beyond our
control. In addition, covenants under our current debt securities and lines of
credit do, and future ones may, significantly restrict our ability to incur
additional indebtedness, to issue Preferred Stock and to enter into certain
other contractual relationships.

Risks Associated with Holding Company Structure

         As a holding company, our ability to pay dividends, to pay indebtedness
and to conduct our financial operating activities directly or in non-banking
subsidiaries will depend on any cash reserves and other liquid assets held by
us, any proceeds from securities offerings or other borrowings, any dividends
from our non-banking subsidiaries and the receipt of dividends or other
distributions from the Bank. The ability of the Bank to pay dividends or make
other distributions to us generally is dependent on the Bank's compliance with
applicable regulatory capital requirements and regulatory restrictions. The Bank
is also subject to contractual restrictions on its ability to pay dividends
under its subordinated debt indenture.

         The Bank's ability to make capital distributions as a Tier 1
association pursuant to the OTS capital distribution regulation are limited by
the regulatory capital levels that it has committed to the OTS to maintain,
commencing on June 30, 1997. As a result of a verbal agreement between the Bank
and the OTS to dividend subordinate and residual mortgage-related securities
resulting from securitization activities previously conducted by the Bank, the
Bank has been limited in its ability to pay cash dividends to OCN.

         In addition, the right of OCN to participate in any distribution of
assets of any subsidiary, including the Bank, upon such subsidiary's liquidation
or reorganization or otherwise, will be subject to the prior claims of creditors
of that subsidiary, except to the extent that any claims of OCN as a creditor of
such subsidiary may be recognized as such.

Risks of Securitization

         Prior to the third quarter of 1999, we had historically generated a
significant amount of revenues, earnings and cash flows from our pooling and
selling through securitizations of mortgages and other loans originated or
purchased by us. Adverse changes in the secondary market for such loans could
impair our ability to sell mortgages and other loans on a favorable or timely
basis. Accordingly, such impairments could have an adverse effect upon our
business and results of operations. Market and other considerations, including
rating agency requirements, could also affect the timing of such transactions.
Any delay in the sale of loans beyond the reporting period in which such sale is
anticipated to take place may adversely affect our reported earnings for such
reporting period. In addition, we retain some degree of credit risk on
substantially all loans sold. During the period of time that loans are held
pending sale, we are at risk for loan delinquencies and defaults and the risk
that the rapid increase in interest rates would result in a decline in the value
of loans to potential purchasers. For loans sold through a securitization, our
direct risk with respect to loan delinquency or default on such loan is limited
to those circumstances in which we are required to repurchase such loans due to
a breach of a representation or warranty in connection with the securitization.

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Competition

         The businesses in which we are engaged generally are highly
competitive. The acquisitions of servicing rights to pools of loans are
particularly competitive, as such acquisitions are often based on competitive
bidding. Although many of our competitors have access to greater capital and
have other advantages, we believe that we have a competitive advantage relative
to many of our competitors as a result of our experience in managing, servicing
and resolving discount loans, our investment in computer systems, technology and
other resources that are necessary to conduct this business, our reputation and
the strategic relationships and contacts that we have developed in connection
with these activities. We also encounter significant competition in connection
with our investment activities, our deposit-gathering activities, our servicing
activities and our information technology activities. Many of our competitors
are significantly larger than us and have access to greater capital and other
resources. In addition, many of our competitors are not subject to the same
extensive federal regulations that govern federally-insured institutions, such
as the Bank, and their holding companies. As a result, many of our competitors
have advantages over us.

         We also face competition in purchasing the servicing rights to pools of
loans from several other companies that specialize in this business, some of
which have greater resources than us.

         With respect to information technology, OTX's products compete in a
limited market. While we believe REALServicing, REALTrans and REALSynergy each
present to the market greater functionality and a better value than the products
against which they compete, there can be no assurance that we will be successful
in preserving any competitive advantage of our products on value or
functionality, in introducing the products to the market on a commercial basis
or translating the product's business, marketing and pricing models into revenue
sufficient to produce net income.

Importance of the Chief Executive Officer

         William C. Erbey, our Chairman and Chief Executive Officer, has had,
and will continue to have, a significant role in the development and management
of our business. The loss of his services could have an adverse effect on us.
OCN and Mr. Erbey are not parties to an employment agreement, and we currently
do not maintain key man life insurance relating to Mr. Erbey or any of our other
officers.

Control of Current Shareholders

         As of March 15, 2002, our directors and executive officers and their
affiliates in the aggregate beneficially owned or controlled 44.56% of the
outstanding Common Stock of OCN, including 27.49% owned or controlled by William
C. Erbey, Chairman and Chief Executive Officer of OCN, and 13.33% owned or
controlled by Barry N. Wish, currently a director and formerly the Chairman of
OCN. As a result, these shareholders, acting together, would effectively be able
to influence decisively, if not control, virtually all matters requiring
approval by the shareholders of OCN, including amendment of our Articles of
Incorporation, the approval of mergers or similar transactions and the election
of all directors.

Dependence on Proprietary Information

         Our success is in part dependent upon our proprietary information and
technology. We rely on a combination of copyright, trade secret and contract
protection to establish and protect our proprietary rights in our products and
technology. We generally enter into confidentiality agreements with our
management and technical staff and limit access to and distribution of our
proprietary information. There can be no assurance that the steps taken by us in
this regard will be adequate to deter misappropriation of our proprietary rights
or information or independent third party development of substantially similar
products and technology. Although we believe that our products and technology do
not infringe any proprietary rights of others, the growing use of copyrights and
patents to protect proprietary rights has increased the risk that third parties
will increasingly assert claims of infringement in the future.

                                       10