ContiFinancial Announces Substantial Loss in Fourth Quarter Fiscal 1999; Banks Agree to Eliminate Financial Covenants.

NEW YORK--(BUSINESS WIRE)--June 4, 1999--

ContiFinancial Corporation (NYSE:CFN) announced that it will report a substantial loss for the fourth quarter of the fiscal year ended March 31, 1999. It is anticipated that the pre-tax loss for the fourth quarter will approximate $247 million. The Company is reviewing the tax effect of this loss. The annual audit of the Company's financial statements has not yet been completed, and it is expected that fourth quarter results and audited full year financial statements will be available at the end of June.

The banks providing the Company's revolving credit facility and the letter of credit facility used by the Company in connection with its commercial paper program have amended those facilities to eliminate all financial covenants until the August 20 maturity date of these facilities. The Company's warehouse lenders whose facilities contain certain covenants have similarly agreed to amend their warehouse facilities to eliminate financial covenant requirements.

The anticipated fourth quarter loss arises mainly from the write-down of excess spread receivables held by the Company because of an increase in the amount of credit losses estimated to occur in future periods and an increase in the rate used to discount anticipated future cash flows from the excess spread receivables. The Company will use these higher assumed future loss rates and discount rate when recording its gain on sale both for the fourth quarter and in future periods.

The anticipated loss also results from additional write-downs with respect to the Company's remaining commercial real estate loan portfolio, which is being held for sale, and increased reserves relating to the Company's relinquishment of its minority interest in Empire Funding Holding Corporation, and the Company's agreement to exchange loans to Empire in return for certain servicing rights, residual interests and interest-only strips. As a part of the agreement with Empire, the Company replaced the former Empire warehouse facility with a smaller, six-month $25 million warehouse facility.

As previously announced, the Company has signed a written indication of interest with Residential Funding Corporation, a subsidiary of General Motors Acceptance Corporation, for the acquisition through merger of 100% of the issued and outstanding shares of the Company. Negotiations with Residential Funding Corporation are continuing.

Continental Grain Company, owner of approximately 78% of the Company, has extended a short-term warehouse financing facility to the Company and has agreed to allow the Company to utilize up to $60 million of availability under the existing $85 million servicer advance facility being provided by Continental Grain Company. This new warehouse financing facility may be used by the Company to fund mortgage loans acquired from time-to-time in the ordinary course of business, provided that the total amount borrowed under these two facilities does not exceed $85 million.

As discussed above, the Company's revolving credit and letter of credit facilities expire on August 20, 1999. The Company's warehouse facilities expire at various times from June 15, 1999 through December 1999. The Company's continued operations are dependent on the extension, renegotiation or refinancing of these facilities. The Company's ability to extend, renegotiate or refinance its facilities may depend on the successful completion of a transaction with Residential Funding Corporation, or with another buyer or equity investor.

ContiFinancial Corporation is a diversified financial services company, with headquarters in New York City and over 3,000 employees nationwide. The Company, through ContiMortgage Corporation and other subsidiaries, is a leading originator, securitizer, servicer and seller of home equity loans made to borrowers whose needs may not be met by traditional financial institutions. In addition, through Keystone Mortgage Partners, LLC, the Company arranges financing for a wide range of commercial real estate. Through ContiTrade Services L.L.C., the Company also provides financing and securitization services and, through ContiFinancial Services Corporation, bond placement services, to subsidiaries and other originators of a broad range of loans including home equity loans; home improvement loans; prime, non-prime and sub-prime auto loans; charged-off consumer debt and franchisee loans. Please visit the Company's Web site at www.contifinancial.com.

Certain statements contained in this news release, including, but not limited to, statements relating to the Company's strategic objectives, raising additional equity and future performance, which are not historical fact, may be deemed to be forward-looking statements under the federal securities laws. There are many important factors that could cause the Company's actual results to differ materially from those indicated in the forward-looking statements, including the ability of the Company, in fact, to raise new equity. Such factors also include, but are not limited to, general economic conditions, interest rate risk; prepayment speeds; delinquency and default rates; credit losses; changes (legislative and otherwise) in the asset securitization industry; demand for the Company's services; residential and commercial real estate values; the ability of the Company to negotiate agreements to sell whole loans; the impact of certain covenants in loan agreements of the Company; the degree to which the Company is leveraged; its needs for financing; the continued availability of the Company's credit facilities; the risk of margin calls on the Company's credit facilities and hedge positions; capital markets conditions, including the markets for asset-backed securities, commercial mortgage-backed securities and net interest margin securities; the performance of the Company's subsidiaries and affiliates; the Company's Year 2000 issues; and other risks identified in the Company's Securities and Exchange Commission filings. In addition, it should be noted that past financial and operational performance of the Company is not necessarily indicative of future financial and operational performance.