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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 1994

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

Commission File Number 1-9977

HOMEPLEX MORTGAGE INVESTMENTS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)

Maryland 86-061123
(State or Other Jurisdiction) (I.R.S.Employer
of Incorporation or Organization) Identification No.)

5333 North 7th Street,Suite 219 85014
Phoenix, Arizona (Zip Code)
(Address of Principal Executive Offices)

(602) 265-8541
(Registrant's Telephone Number,Including Area Code)

Not Applicable
Former Name,Former Address and Former Fiscal Year,
if Changed Since Last Report.

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

AS OF MAY 12, 1994; 9,716,517 SHARES OF HOMEPLEX MORTGAGE INVESTMENTS
CORPORATION COMMON STOCK WERE OUTSTANDING.

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PART I. FINANCIAL INFORMATION

ITEM 1 Financial Statements

HOMEPLEX MORTGAGE INVESTMENTS CORPORATION
CONSOLIDATED BALANCE SHEETS
As Of March 31, 1994 and December 31, 1993
(Dollars In Thousands Except Per Share Data)
(Unaudited)

March 31, Dec. 31,
1994 1993
--------- --------
ASSETS

Cash and cash equivalents . . . . . . . . . . . . . $ 13,187 $ 16,247
Residual interest certificates . . . . . . . . . . 11,719 14,025
Funds held by Trustee . . . . . . . . . . . . . . . 7,600 8,761
Interests relating to mortgage participation
certificates . . . . . . . . . . . . . . . . . . . 3,351 3,710
Mortgage loans receivable . . . . . . . . . . . . . 2,901 320
Other assets . . . . . . . . . . . . . . . . . . . 705 819
-------- --------

Total Assets . . . . . . . . . . . . . . . . . . . $ 39,463 $ 43,882
======== ========
LIABILITIES

Long-term debt . . . . . . . . . . . . . . . . . . $ 16,530 $ 19,926
Accounts payable and other liabilities . . . . . . 1,071 1,093
Accrued interest payable . . . . . . . . . . . . . 162 194
Dividend payable . . . . . . . . . . . . . . . . . - 292
-------- --------

Total Liabilities . . . . . . . . . . . . . . . . . 17,763 21,505
-------- --------
Contingencies

STOCKHOLDERS' EQUITY

Common stock, par value $.01 per share;
50,000,000 shares authorized;
issued and outstanding - 9,875,655 shares . . . . 99 99
Additional paid-in capital . . . . . . . . . . . . 84,046 84,046
Cumulative net loss . . . . . . . . . . . . . . . . (21,005) (20,330)
Cumulative dividends . . . . . . . . . . . . . . . (41,045) (41,045)
Treasury stock - 145,538 shares in 1994 and
143,938 shares in 1993 . . . . . . . . . . . . . (395) (393)
-------- --------

Total Stockholders' Equity . . . . . . . . . . . . 21,700 22,377
-------- ---------

Total Liabilities and Stockholders' Equity . . . . $ 39,463 $ 43,882
======== ========

See notes to consolidated financial statements.

HOMEPLEX MORTGAGE INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF NET INCOME (LOSS)
For The Three Months Ended March 31, 1994 and 1993
(Dollars In Thousands Except Per Share Data)
(Unaudited)

1994 1993
---- ----
INCOME (LOSS) FROM MORTGAGE ASSETS

Income (loss) from residual interest certificates $(116) $(4,944)
Income (loss) from interests relating to mortgage
participation certificates . . . . . . . . . . 154 (4,917)
Interest income on mortgage loans receivable . . 118 -
Other income . . . . . . . . . . . . . . . . . . 16 156
---------- ----------
172 (9,705)
---------- ----------

INTEREST EXPENSE. . . . . . . . . . . . . . . . . 429 641
---------- ----------

Income (Loss) Before Other Expenses . . . . . . . (257) (10,346)
---------- ----------

OTHER EXPENSES

General and administrative . . . . . . . . . . . 369 466
Hedging expense . . . . . . . . . . . . . . . . . 49 12
---------- ----------

Total Other Expenses . . . . . . . . . . . . . . 418 478
---------- ----------

Net Income (Loss) . . . . . . . . . . . . . . . . $ (675) $ (10,824)
========== ==========

SHARE DATA

Net Income (Loss) Per Share . . . . . . . . . . . $ (.07) $ (1.11)
========== ==========

Weighted Average Number Of Shares Of Common Stock
And Common Stock Equivalents Outstanding . . . 9,731,415 9,733,075
========== ==========

See notes to consolidated financial statements.

HOMEPLEX MORTGAGE INVESTMENTS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For The Three Months Ended March 31, 1994
(Dollars In Thousands)
(Unaudited)

Additional Cumulative
Number Par Paid-In Net Income Cumulative Treasury
Of Shares Value Capital (Loss) Dividends Stock Total

Balance at December 31, 1993 9,875,655 $99 $84,046 $(20,330) $(41,045) $(393) $22,377

Treasury stock acquired -
1,600 shares . . . . . - - - - - (2) (2)

Net loss . . . . . . . . - - - (675) - - (675)
--------- --- ------- -------- -------- ----- -------

Balance at March 31, 1994 9,875,655 $99 $84,046 $(21,005) $(41,045) $(395) $21,700
========= === ======= ======== ======== ===== =======

HOMEPLEX MORTGAGE INVESTMENTS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Three Months Ended March 31, 1994 and 1993
Increase (Decrease) In Cash
(Dollars In Thousands)
(Unaudited)

1994 1993
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES

Net loss . . . . . . . . . . . . . . . . . . . . . $ (675) $(10,824)
Adjustments to reconcile net loss to net cash
used in operating activities:
Write-downs and non-cash losses on residual
interest certificates . . . . . . . . . . . . 472 5,280
Amortization of debt costs . . . . . . . . . . 73 42
Amortization of hedging costs . . . . . . . . . 49 12
Increase (decrease) in accrued interest payable (32) 209
Decrease in accounts payable and other
liabilities . . . . . . . . . . . . . . . . . (22) (151)
Increase in other assets . . . . . . . . . . . (8) (328)
Write-downs on interests relating to mortgage
participation certificates . . . . . . . . . - 4,917
-------- --------

Net Cash Used In Operating Activities . . . . . . . (143) (843)
-------- --------

CASH FLOWS FROM INVESTING ACTIVITIES

Mortgage loans receivable funded . . . . . . . . . (2,630) -
Amortization of residual interest certificates . . 1,834 3,973
(Increase) decrease in funds held by Trustee . . . 1,161 (1,688)
Amortization of interests relating to mortgage
participation certificates . . . . . . . . . . . 359 1,440
Principal payments received on mortgage loans
receivable . . . . . . . . . . . . . . . . . . . 49 -
-------- --------

Net Cash Provided By Investing Activities . . . . . 773 3,725
-------- --------

CASH FLOWS FROM FINANCING ACTIVITIES

Principal payments made on long-term debt . . . . . (3,396) -
Dividends paid . . . . . . . . . . . . . . . . . . (292) -
Repurchases of common stock . . . . . . . . . . . . (2) (49)
-------- --------

Net Cash Used In Financing Activities . . . . . . . (3,690) (49)
-------- --------

Net Increase (Decrease) In Cash . . . . . . . . . . (3,060) 2,833

Cash And Cash Equivalents At Beginning Of Period . 16,247 14,172
-------- --------

Cash And Cash Equivalents At End Of Period . . . . $ 13,187 $ 17,005
======== ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION

Cash paid for interest . . . . . . . . . . . . . . $ 388 $ 390
======== ========

See notes to consolidated financial statements.

HOMEPLEX MORTGAGE INVESTMENTS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1994
(Unaudited)

NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION

Homeplex Mortgage Investments Corporation, a Maryland Corporation (the
Company) seeks to generate income primarily through the origination or
acquisition of mortgage loans and mortgage certificates and the acquisition
of mortgage interests in or from entities which own and finance mortgage
loans and mortgage certificates. As described in Notes 2, 3 and 4, the
Company has purchased interests in mortgage certificates securing
collateralized mortgage obligations (CMOs), interests relating to mortgage
participation certificates (MPCs) (collectively Mortgage Interests) and
funded certain mortgage receivables.

The accompanying interim financial statements do not include all of the
information and disclosures generally required for annual financial
statements. In the opinion of management, however, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. Operating results for the three months
ended March 31, 1994 and 1993 are not necessarily indicative of the results
that may be expected for the entire year. These financial statements should
be read in conjunction with the December 31, 1993 financial statements and
notes thereto.

NOTE 2 - GENERAL AND SUMMARY OF ACCOUNTING POLICIES

Basis Of Presentation

The consolidated financial statements include the accounts of the
Homeplex Mortgage Investments Corporation and its wholly owned subsidiaries.
All significant intercompany balances and transactions have been eliminated
in consolidation.

Income Taxes

The Company has elected to be taxed as a real estate investment trust
(REIT) under the Internal Revenue Code. As a REIT, the Company must
distribute annually at least 95% of its taxable income to its stockholders.
No provision has been made for income taxes in the accompanying financial
statements as the Company believes it will not be subject to any significant
income taxation.

The income reported in the accompanying financial statements is
different than taxable income because some income and expense items are
reported in different periods for income tax purposes. The principal
differences relate to the amortization of Mortgage Interests and the
treatment of stock option expense.

At December 31, 1993, the Company had available, for income tax
purposes, a net operating loss carryforward of approximately $49,300,000.
Such loss may be carried forward, with certain restrictions, for up to 15
years to offset future taxable income, if any. Until the tax loss
carryforward is fully utilized the Company will not be required to pay
dividends to its stockholders except for income that is deemed to be excess
inclusion income.

Mortgage Loans Receivable

Mortgage loans receivable consist of three separate loans secured by
various First Deeds of Trust on real properties located in Arizona. Such
loans bear interest at rates between 16% and 24% per annum, payable monthly,
with all principal due within one year. Two of the loans, aggregating
$621,000, may be extended for one year under certain conditions.

Interests Relating To Mortgage Participation Certificates and Residual
Interest Certificates

Interests relating to mortgage participation certificates and residual
interest certificates are accounted for as described in Notes 3, 4 and 8.

Cash and Cash Equivalents

Cash and cash equivalents include demand deposits and certificates of
deposit with maturities of less than three months.

Amortization of Hedging

The cost of the Company's LIBOR ceiling rate agreement (see Note 6) is
amortized using the straight-line method over the life of the agreement.

Net Income (Loss) Per Share

Primary net income (loss) per share is calculated using the weighted
average shares of common stock outstanding and common stock equivalents.
Common stock equivalents consist of dilutive stock options. Net income
(loss) per share is the same for both primary and fully diluted
calculations.

Reclassifications

Certain balances in prior periods have been reclassified to conform to
the current year's presentation.

NOTE 3 - RESIDUAL INTEREST CERTIFICATES

The Company owns 100% of the residual interest certificates in five
real estate mortgage investment conduits (REMICs). The assets of these five
REMICs consist of mortgage certificates, accrued interest thereon and cash
funds held by a Trustee. The liabilities consist of collateralized mortgage
obligations (CMOs), accrued interest thereon and administrative expenses
payable. The CMOs have been issued through Westam Mortgage Financial
Corporation (Westam) or American Southwest Financial Corporation (ASW). The
mortgage certificates securing the CMOs all have fixed interest rates.
Certain of the classes of CMOs have fixed interest rates, and certain have
interest rates that are determined monthly based on the London Interbank
Offered Rates (LIBOR) for one month Eurodollar deposits, subject to
specified maximum interest rates.

Each series of CMOs consists of several serially maturing classes
collateralized by mortgage certificates. Generally, principal payments
received on the mortgage certificates, including prepayments on such
mortgage certificates, are applied to principal payments on the classes of
CMOs in accordance with the respective indentures. Scheduled payments of
principal and interest on the mortgage certificates securing each series of
CMOs and reinvestment earnings thereon are intended to be sufficient to make
timely payments of interest on such series and to retire each class of such
series by its stated maturity. Certain series of CMOs are subject to
redemption according to the specific terms of the respective indentures.

The following summarizes the Company's investment at March 31, 1994:

Company's Amortized
Cost (See Note 8)
CMO Series (In Thousands)
---------- --------------------

Westam 1 . . . . . . . . . . . . $ 2,922
Westam 3 . . . . . . . . . . . . 804
Westam 5 . . . . . . . . . . . . 484
Westam 6 . . . . . . . . . . . . 46
ASW 65 . . . . . . . . . . . . . 7,463
--------
$ 11,719
========

The following summarizes the combined assets and liabilities
of the five REMICs at March 31, 1994 (in thousands):

Assets:
Outstanding Principal Balance of
Mortgage Certificates . . . . . . $373,604
Funds Held By Trustee . . . . . . . 20,466
Accrued Interest Receivable . . . . 3,000
--------
$397,070
========

Range of Stated Coupon Rate of Mortgage
Certificates . . . . . . . . . . . . 9.0%-10.5%

Liabilities:
Outstanding Principal Balance of CMOs:
Fixed Rate . . . . . . . . . . . . $312,333
Floating Rate - LIBOR Based . . . . 76,999
--------
Total CMO Principal Balance . . . . $389,332
Accrued Interest Payable . . . . . . 3,443
--------
$392,775
========

Range of Stated Interest Rates on CMOs 0% to 9.9%

The Company's 100% residual interests entitle the Company to receive
the excess of payments received from the pledged mortgage certificates
together with reinvestment income thereon over amounts required to make debt
service payments on the related CMOs and to pay related administrative
expenses of the REMICs. The Company also has the right, under certain
conditions, to cause an early redemption of the CMOs. Under the early
redemption feature, the mortgage certificates are sold at the then current
market price and the CMOs repaid at par value. The Company is entitled to
any excess cash flow from such early redemptions. The conditions under
which such early redemptions may be elected vary, but generally cannot be
effected until the remaining outstanding CMO balance is less than 10% of
the original balance.

Effective December 31, 1993, the Company adopted the prospective net
level yield method with respect to these investments (see Note 8). The
cumulative effect of the change was recorded as of December 31, 1993.
Income for the three months ended March 31, 1994 has been determined using
the prospective net level yield method. The consolidated financial
statements have been reclassified on a basis consistent with the prospective
net level yield method, with no effect on previously reported net income
(loss).

Prior to December 31, 1993 (see Note 8), the Company accounted for its
investment in these five REMICs using the equity method of accounting.
Accordingly, the Company consolidated the financial statements of the REMICs
in its financial statements and included the respective REMICs income or
loss in its consolidated statement of net income (loss). In the event the
undiscounted estimated future net cash flows from the residual interest were
less than the Company's financial reporting basis, the residual interest was
considered to be impaired and the Company established a reserve for the
difference. The reserves were then amortized to income as the loss actually
occurred. Because of the continuing low interest rate environment,
beginning in the quarter ended September 30, 1993, the Company incorporated
redemption proceeds into the undiscounted cash flow estimates used to
establish reserves. The estimated redemption proceeds were adjusted each
quarter as part of the Company's undiscounted cash flow estimates. These
redemption proceeds estimates were calculated assuming that the current
interest rate environment exists at the time redemptions are possible.
The following summarizes the Company's combined income (loss) from these
REMICs for the three months ended March 31, 1993 (in thousands) prior to the
cumulative effect of the change in accounting principle described in Note 8:

Interest income, including amortization of mortgage
premium or discount and reinvestment income from
mortgage collateral . . . . . . . . . . . . . . $ 16,292
CMO interest, including amortization of debt
discount, and administration expense . . . . . . (16,050)
Writedown of investment to estimated undiscounted
cash flows, net of amortization . . . . . . . . (5,186)
--------

Income (loss) from residual interest certificates $ (4,944)
========

The average LIBOR-reset rates on the floating rate CMO classes were
3.33% and 3.23%, respectively, for the three months ended March 31, 1994 and
1993. At March 31, 1994, LIBOR was 3.69%.

NOTE 4 - INTERESTS RELATING TO MORTGAGE PARTICIPATION CERTIFICATES

The Company owns interests in REMICs with respect to three separate
series of Mortgage Participation Certificates (MPCs) issued by the Federal
Home Loan Mortgage Corporation (FHLMC) or by the Federal National Mortgage
Association (FNMA). The certificates entitle the Company to receive its
proportionate share of the excess (if any) of payments received from the
mortgage certificates underlying the MPCs over amounts required to make
principal and interest payments on such MPCs. The Company is not entitled
to reinvestment income earned on the underlying mortgage certificates, is
not required to pay any administrative expenses of the MPCs and does not
have the right to elect early redemption of any of the MPC classes. The
mortgage certificates underlying the MPCs all have fixed interest rates.
Certain of the classes of the MPCs have fixed interest rates, and certain
have interest rates that are determined monthly based on LIBOR or based on
the Monthly Weighted Average Cost of Funds (COFI) for Eleventh District
Savings Institutions as published by the Federal Home Loan Bank of San
Francisco, subject to specified maximum interest rates.

The Company accounts for its interests relating to these mortgage
participation certificates using the prospective net level yield method as
described in Note 8. In the event the undiscounted estimated future net
cash flows from the MPC Series are less than the Company's financial
reporting basis, the Company reduces its financial reporting basis. The
Company took a charge of $4,917,000 for the three months ended March 31,
1993 to reduce the MPC Series to their undiscounted estimated future net
cash flows. Effective December 31, 1993, the Company changed its method of
accounting for impairment on these investments to the method described in
Note 8. The following summarizes the Company's investment relating to MPCs
at March 31, 1994:

Company's Amortized Cost Company's Percentage Ownership
MPC Series At March 31, 1994 Of Interests Relating To MPCs
- ----------- -------------------------- --------------------------------
(In Thousands)

FHLMC 17 $ 300 100.00%
FNMA 1988-24 2,100 20.20%
FNMA 1988-25 951 45.07%
------
$3,351
======

The following summarizes the Company's proportionate interest in the
aggregate mortgage certificates and MPCs at March 31, 1994 (in thousands):

Mortgage Certificates Underlying MPCs:
Outstanding Principal Balance . . . . . $172,325
Range of Stated Coupon Rates . . . . . 9.5%-10.0%

MPCs:
Outstanding Principal Balance:
Fixed Rate . . . . . . . . . . . . . . $154,890
Floating Rate - LIBOR Based . . . . . 10,364
Floating Rate - COFI Based . . . . . . 7,071
--------

Total MPCs Principal Balance . . . . . $172,325
========

Range of Stated Interest Rates on MPCs . 2.14%-9.9%

The average LIBOR and COFI rates used to determine income from the
interests relating to the above MPCs for the three months ended March 31,
1994 and 1993 were as follows:

1994 1993
---- ----

LIBOR . . . . . . . . . . . . . . . . . . . 3.33% 3.23%
COFI . . . . . . . . . . . . . . . . . . . 3.80% 4.43%

The LIBOR and COFI rates as of March 31, 1994 were 3.69% and 3.68%,
respectively.

NOTE 5 - LONG-TERM DEBT

On December 17, 1992, a wholly owned, limited purpose subsidiary of the
Company issued $31,000,000 of Secured Notes under an Indenture to a group of
institutional investors. The Notes bear interest at 7.81% and require
quarterly payments of principal and interest with the balance due on
November 14, 1998. In connection with the financing, the Company paid fees
of $635,000 which are included in other assets in the accompanying
consolidated balance sheet and are being amortized to interest expense over
the life of the financing. The Notes are secured by the Company's residual
interests in Westam 1, Westam 3, Westam 5, Westam 6 and ASW 65 (see Note
3), by the Company's Interests relating to mortgage participation
certificates FNMA 1988-24 and FNMA 1988-25 (see Note 4), and by Funds held
by Trustee. The Company used $3,100,000 of the proceeds to establish a
reserve fund. The reserve fund, which has a specified maximum balance of
$7,750,000, is to be used to make the scheduled principal and interest
payments on the Notes if the cash flow available from the collateral is not
sufficient to make the scheduled payments. Depending on the level of
certain specified financial ratios relating to the collateral, the cash flow
from the collateral is required to either prepay the Notes at par, increase
the reserve fund up to its $7,750,000 maximum or is remitted to the Company.
At March 31, 1994, Funds held by Trustee consisted of $5,911,000 in the
reserve fund and $1,689,000 of other funds pledged under the Indenture.

NOTE 6 - HEDGING

On May 12, 1992, the Company entered into a LIBOR ceiling rate
agreement with a bank for a fee of $245,000. The agreement, which has a
term of two years beginning July 1, 1992, requires the bank to pay a monthly
amount to the Company equal to the product of $175,000,000 multiplied by the
percentage, if any, by which actual one-month LIBOR (measured on the first
business day of each month) exceeds 9.0%. Through March 31, 1994, LIBOR has
remained under 9.0% and, accordingly, no amounts have been payable under the
agreement.

NOTE 7 - CONTINGENCIES

On February 18, 1993, following a routine audit of the Company by the
Internal Revenue Service (IRS) for the year 1990, the IRS sent to the
Company a Proposed Adjustment (the Proposed Adjustment) of taxes due of
$10,890,000 and penalties totaling $2,260,000 for the tax years ending
December 31, 1989, 1990 and 1991.

The IRS claimed that the Company did not meet the statutory
requirements to be taxed as a REIT for the years ending December 31, 1989,
1990 and 1991 because the Company did not demand certain stockholder
information pursuant to Regulation Section 1.857-8 under the Internal
Revenue Code within the specified 30-day period of each of the Company's
year-end. The information required consisted of sending standardized
request letters to six stockholders in 1989, five stockholders in 1990 and
eight stockholders in 1991.

On March 18, 1993, the Company filed a protest with the District
Director of the IRS challenging the Proposed Adjustment (the Protest). In
the Protest, the Company stated that it has made all the required demands of
its shareholders for each year and has thus complied with Regulation Section
1.857-8. Additionally, the Company stated that Regulation Section 1.857-
8(e), under which the IRS relied upon to revoke the Company's REIT status,
was incorrectly applied and Regulation Section 1.857-8 was substantially
complied with by the Company. The Company also requested relief under
Regulation Section 301.9100-1 from the requirement in Regulation Section
1.857-8 that certain stockholder demands be made within 30 days from the end
of the calendar year. The Company also stated in the Protest that the
penalties under the Proposed Adjustment were incorrectly applied.

In April 1994, the IRS notified the Company that it was withdrawing the
Proposed Adjustment and that no taxes or penalties would be due for the tax
years ending December 31, 1989, 1990 and 1991.

NOTE 8 - ACCOUNTING MATTERS

Accounting principles and disclosure practices for Mortgage Interests
have historically varied throughout the industry. At a May 1990 meeting,
the Emerging Issues Task Force (EITF) reached a consensus (Issue Number 89-
4) that certain Mortgage Interests should be accounted for using a
prospective net level yield method.

Under this method, a Mortgage Interest would be recorded at cost and
amortized over the life of the related CMO issuance. The total expected
cash flow would be allocated between principal and interest as follows:

1. An effective yield is calculated as of the date of purchase based
on the purchase price and anticipated future cash flows.

2. In the initial accounting period, interest income is accrued on
the investment balance using the effective yield calculated as of the date
of purchase.

3. Cash received on the investment is first applied to accrued
interest with any excess reducing the recorded principal balance of the
investment.

4. At each reporting date, the effective yield is recalculated based
on the amortized cost of the investment and the then-current estimate of the
remaining future cash flows.

5. The recalculated effective yield is then used to accrue interest
income on the investment balance in the subsequent accounting period.

6. The above procedure continues until all cash flows from the
investment have been received.

At the end of each period, the amortized balance of the investment
should equal the present value of the estimated cash flows discounted at the
newly calculated effective yield. In the event that the yield is negative,
the investment is to be written down to an amount equal to the undiscounted
estimated future cash flows.

As described in Note 4, the Company's investments in the REMICs
relating to three separate series of MPCs (FHLMC 17, FNMA 24 and FNMA 25)
entitle the Company to receive its proportionate share of the excess (if
any) of the payments received from the mortgage certificates underlying MPCs
over amounts required to pass through principal and interest to the holders
of such MPCs. The Company is not entitled to reinvestment income earned on
the underlying mortgage certificates, is not required to pay administrative
expenses of the MPCs and does not have the right to elect early termination
of any of the MPC classes. The Company's investments in FHLMC 17, FNMA 24
and FNMA 25 are accounted for using the prospective net level yield method.

As described in Note 3, the Company's residual interest certificates
with respect to five separate series of CMOs (Westam 1, 3, 5, 6 and ASW 65)
entitle the Company to receive 100% of the excess of payments received from
the pledged mortgage certificates together with reinvestment income thereon
over amounts required to make debt service payment on such CMOs and to pay
related administrative expenses relating to such CMOs. The Company also has
the right, under certain conditions, to cause an early redemption of the
CMOs. The Company previously used the equity method of accounting for its
investments in Westam 1, 3, 5, 6 and ASW 65 and consolidated the accounts of
these REMICs in the Company's consolidated financial statements. Effective
December 31, 1993, the Company adopted the prospective net level yield
method with respect to these investments to be consistent with the change in
accounting for impaired assets as described below. The consolidated
financial statements have been reclassified on a basis consistent with the
prospective net level yield method, with no effect on previously reported
net income (loss).

In May 1993, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities". SFAS No. 115 is
applicable to debt and equity securities including investments in REMICs and
requires all investments to be classified into one of three categories: held
to maturity, available for sale, or trading. The Company acquired its
residual interest certificates and interests relating to mortgage
participation certificates without the intention to resell the assets. The
Company has both the intent and ability to hold these investments to
maturity and believes these investments meet the "held to maturity" criteria
of SFAS No. 115.

The primary difference between SFAS No. 115 and the method of
accounting previously used by the Company relates to accounting for
impairment of both residual interest certificates (see Note 3) and interests
relating to mortgage participation certificates (see Note 4) (collectively
Mortgage Interests). Previously, if the undiscounted estimated future net
cash flows from these Mortgage Interests were less than the Company's
financial reporting basis, the Mortgage Interest was considered to be
impaired and the Company would establish a reserve for the difference so
that the Mortgage Interest's projected yield would be 0%. Under SFAS No.
115, if a security is determined to have other than temporary impairment,
the security is to be written down to a fair value. The Company reviewed
all of its impaired Mortgage Interests and recorded a charge of $6,078,000
to record impaired Mortgage Interests at their fair value at December 31,
1993 in accordance with SFAS No. 115. For the three months ended March 31,
1994, the Company recorded additional charges of $472,000 to record
impaired Mortgage Interests at their fair value as of March 31, 1994. Under
SFAS No. 115, net income (loss) of prior years or periods is not restated.
In determining fair value, the Company considered that the market for
Mortgage Interests is volatile and thinly traded. Moreover, the Company
acquired its Mortgage Interests without intention to resell those assets.
Generally, Mortgage Interests are priced by discounting projected net cash
flows from the Mortgage Interests at an assumed internal rate of return.
Projected net cash flows have been estimated using the Public Securities
Association median projected prepayment speeds and using current short-term
interest rates in effect for floating rate CMO or MPC classes and assuming
such short-term rates will stay in effect over the lives of the floating
rate classes. The internal rates of return then used to discount the cash
flows vary but management believes a reasonable rate for its Mortgage
Interests at March 31, 1994 to be 20% if early redemptions are not
considered. Using these assumptions, a comparison of the amortized cost
and market value of the Company's Mortgage Interests at March 31, 1994, is
as follows (in thousands):

Amortized Estimated
Cost Fair Value
--------- ----------

Residual Interest Certificates . . . . $11,719 $10,661
Interests Relating to Mortgage
Participation Certificates . . . . . 3,351 3,382
------- -------
Total Mortgage Interests . . . . . . . $15,070 $14,043
======= =======

The estimated prospective net level yield at March 31, 1994 of the
Company's Mortgage Interests based on the amortized cost balance of
$15,070,000, in the aggregate, is 15% without early redemptions being
considered and 25% if early redemptions are considered. The timing and
amount of redemption cash flows is highly uncertain because it is dependent
upon levels of prepayments, interest rates and other factors.

The assumptions used in calculating the above estimated fair value, net
cash flows and the prospective net level yield were the March 31, 1994 LIBOR
and COFI rates of 3.69% and 3.68%, respectively, and the March 31, 1994
Public Securities Association Prepayment median projected prepayment speeds
for particular collateral as follows:

Prepayment Assumptions
- -------------------------------------------------------------
Mortgage Interest Collateral Coupon PSA%
----------------- ---------- ------ ----
Westam 1 GNMA I 10.5% 358
Westam 3 GNMA I 9.5% 385
Westam 5 GNMA I 9.0% 325
Westam 6 GNMA I 9.5% 385
ASW 65 GNMA I 10.0% 365
FHLMC 17 FHLMC 10.0% 448
FNMA 24 FNMA 10.0% 448
FNMA 25 FNMA 9.5% 450

The projected yield and discounted present values of projected net cash
flows are based on the assumptions at March 31, 1994 as described above.
There will be differences, which may be material, between the projected
yields and the actual yields and between the present values of projected net
cash flows and the present values of actual net cash flows.

ITEM 2. Management's Discussion and Analysis of Financial Condition,
Results of Operations and Interest Rates and Other Information

Results of Operations For The Three Months Ended March 31, 1994 and 1993

The Company incurred a net loss of $675,000 or $.07 per share for the
three months ended March 31, 1994 compared to a net loss of $10,824,000 or
$1.11 per share for the three months ended March 31, 1993.

The Company's income (loss) from mortgage assets was $172,000 of income
in 1994 as compared to $9,705,000 of loss in 1993. The 1994 and 1993
amounts included charges of $472,000 and $10,103,000, respectively, to write
down the Company's investments in several of its Mortgage Interests.
Writedowns on Mortgage Interests declined because of a decrease in the
average balance of Mortgage Interests owned by the Company and also a
decline in projected mortgage prepayment rates. See "Interest Rates and
Prepayments".

The Company's interest expense declined from $641,000 in 1993 to
$429,000 in 1994 as a result of the Company reducing its long-term debt.

Liquidity, Capital Resources and Commitments

The Company raised $80,593,000 in connection with its initial public
offering on July 27, 1988. The proceeds were immediately utilized to
purchase Mortgage Interests. Subsequently, through October 1988, the
Company purchased an additional $59,958,000 of Mortgage Interests which were
initially financed using a combination of borrowings under repurchase
agreements and the Company's bank line of credit.

The Company has not purchased any Mortgage Interests since October
1988.

On December 17, 1992, a wholly owned, limited purpose subsidiary of the
Company issued $31,000,000 of Secured Notes under an Indenture to a group
of institutional investors. The Notes bear interest at 7.81% and require
quarterly payments of principal and interest with the balance due on
February 15, 2001. The Notes are secured by the Company's residual
interests in Westam 1, Westam 3, Westam 5, Westam 6 and ASW 65 (see Note 3
to the financial statements), by the Company's interests relating to
mortgage participation certificates FNMA 1988-24 and FNMA 1988-25 (see Note
4 to the financial statements), and by funds held by Trustee. The Company
used $3,100,000 of the proceeds to establish a reserve fund. The reserve
fund has a specified maximum balance of $7,750,000 and is to be used to
make the scheduled principal and interest payments on the Notes if the cash
flow available from the collateral is not sufficient to make the scheduled
payments. Depending on the level of certain specified financial ratios
relating to the collateral, the cash flow from the collateral is required to
either repay the Notes at par, increase the reserve fund up to its
$7,750,000 maximum or is remitted to the Company. At March 31, 1994,
$7,600,000 of funds held by Trustee are pledged under the Indenture.

At March 31, 1994, the Company did not have any used or unused short-
term debt or line of credit facilities.

The Company has historically used its cash flow from operations for
payment of dividends, operating expenses and payment of interest and
principal on its short and long-term indebtedness. As a real estate
investment trust (REIT), the Company is not subject to income tax at the
corporate level so long as it distributes 95% of its taxable income to its
shareholders. The Company has, in the past, distributed 100% of its taxable
income to its stockholders. However, primarily as a result of the
significant mortgage refinancing activity in both 1992 and 1993 (see
"Interest Rates and Prepayments") the Company has accumulated a net
operating loss carryforward, for income tax purposes, of approximately
$49,300,000 as of December 31, 1993. This tax loss may be carried forward,
with certain restrictions, for up to 15 years to offset future taxable
income, if any. Until the tax loss carryforward is fully utilized, the
Company will not be required to distribute dividends to its stockholders
except for income that is deemed to be excess inclusion income. The Company
anticipates that future cash flow from operations will be used for payment
of operating expenses and debt service with the remainder, if any, available
for investment in mortgage or real estate related assets. At March 31,
1994, the Company had $13,187,000 of cash and cash equivalents available for
investment purposes.

Interest Rates and Prepayments

One of the Company's major sources of income is its income from
Mortgage Interests which consists of the Company's net investment in eight
real estate mortgage investment conduits ("REMICs') as described in Notes 3
and 4 to the financial statements. The Company's cash flow and return on
investment from its Mortgage Interests are highly sensitive to the
prepayment rate on the related Mortgage Certificates and the variable
interest rates on variable rate CMOs and MPCs.

At March 31, 1994, the Company's proportionate share of floating-rate
CMOs and MPCs in the eight REMICs was $87,363,000 in principal amount that
pays interest based on LIBOR and $7,071,000 in principal amount that pays
interest based on COFI. Consequently, absent any changes in prepayment
rates on the related Mortgage Certificates, increases in LIBOR and COFI will
decrease the Company's net income, and decreases in LIBOR and COFI will
increase the Company's net income. The average LIBOR and COFI rates for the
three months ended March 31, 1994 and 1993 were as follows:

1994 1993
---- ----

LIBOR . . . . . . . . . . . . . . . 3.33% 3.23%
COFI . . . . . . . . . . . . . . . 3.80% 4.43%

The LIBOR and COFI rates as of March 31, 1994 were 3.69% and 3.68%,
respectively.

The Company's cash flow and return on investment from Mortgage
Interests also is sensitive to prepayment rates on the Mortgage Certificates
securing the CMOs and underlying the MPCs. In general, slower prepayment
rates will tend to increase the cash flow and return on investment from
Mortgage Interests, and faster prepayment rates will tend to decrease the
cash flow and return on investment from Mortgage Interests. The rate of
principal prepayments on Mortgage Certificates is influenced by a variety of
economic, geographic, social and other factors. In general, prepayments of
the Mortgage Certificates should increase when the current mortgage interest
rates fall below the interest rates on the fixed rate mortgage loans
underlying the Mortgage Certificates. Conversely, to the extent that then
current mortgage interest rates exceed the interest rates on the mortgage
loans underlying the Mortgage Certificates, prepayments of such Mortgage
Certificates should decrease. Prepayment rates also may be affected by the
geographic location of the mortgage loans underlying the Mortgage
Certificates, conditions in mortgage loan, housing and financial markets,
the assumability of the mortgage loans and general economic conditions.

The national average contract interest rate for major lenders on
purchase of previously occupied homes, as published by the Federal Housing
Finance Board, decreased from an average of 9.04% in 1991 to an average of
7.84% in 1992 to an average of 6.96% in 1993. This resulted in a
significant increase in refinancing activity beginning in the fourth quarter
of 1991 and continuing throughout 1992 and 1993. As a result, the Company
incurred a charge of $10,103,000 to writedown its Mortgage Interests to
their estimated undiscounted cash flows for the three months ended March 31,
1993. This mortgage interest rate has subsequently risen from 6.65% in
December 1993 to 6.84% in March 1994 and projected prepayment rates have
declined. The Company's income from mortgage assets was $172,000 for the
three months ended March 31, 1994.

PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

On February 18, 1993, the Internal Revenue Service sent to the
Company a proposed adjustment (the "Proposed Adjustment") to the amount of
taxes owed by the Company for the years ending December 31, 1989, December
31, 1990 and December 31, 1991 as indicated below:

Penalties
-----------------------------------
Year Tax Section 6661 Section 6662
---- --- ------------ ------------
December 31, 1989 $1,646,582 $411,645
December 31, 1990 $3,852,589 $ 770,518
December 31, 1991 $5,391,042 $1,078,203

The Proposed Adjustment did not include any amounts for interest which
might be owed by the Company. The Internal Revenue Service claimed that the
Company did not meet the statutory requirements to be taxed as a REIT for
the years ending December 31, 1989, 1990 and 1991 because the Company did
not demand certain stockholder information pursuant to Regulation Section
1.857-8 under the Internal Revenue Code within the specified 30-day period
of each of the Company's year-ends.

On March 18, 1993, the Company filed a protest with the District
Director of the Internal Revenue Service challenging the proposed
adjustments (the "Protest"). In the Protest, the Company has stated that
(i) the Company has made all the requisite demands of its stockholders for
each applicable year and has thus complied with Regulation Section 1.857-8,
(ii) Regulation Section 1.857-8(e), under which the revenue agent relied
upon to revoke the Company's REIT status, was incorrectly applied, and (iii)
the Company substantially complied with Regulation Section 1.857-8.

The Company also requested relief under Regulation Section 301.9100-1
from the requirement in Regulation Section 1.857-8 that certain stockholder
demands be made within 30 days from the end of a calendar year. The Company
also stated in the Protest that the penalties imposed under the Proposed
Adjustment were incorrectly applied.

In April 1994, the IRS notified the Company that it was withdrawing
the Proposed Adjustment and that no taxes or penalties would be due for the
tax years ending December 31, 1989, 1990 and 1991.

ITEM 2. Changes in Securities

Not applicable

ITEM 3. Defaults Upon Senior Securities

Not applicable

ITEM 4. Submission of Matters to a Vote of Security Holders

Not applicable

ITEM 5. Other Information

Not applicable

ITEM 6. Exhibits and Reports on Form 8-k

(a) Exhibits - None

(b) Reports on Form 8-K - None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on behalf by
the undersigned thereunto duly authorized.

HOMEPLEX MORTGAGE INVESTMENTS CORPORATION

May 12, 1994 By JAY R. HOFFMAN
-----------------------------------
Jay R. Hoffman, Vice President,
Treasurer, Chief Financial Officer
and a Duly Authorized Officer