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Delta Financial Corporation to Not Pay Semi-Annual Coupon Payment on Its $150 Million of Debt Pending Completion of Its Debt Exchange Offer

WOODBURY, N.Y.--(BUSINESS WIRE)--Aug. 1, 2001--Delta Financial Corporation (OTCBB: DLTO) today announced that it will not make the coupon payment due on August 1, 2001 on its $150 million of 9 1/2% Senior Secured Notes and 9 1/2% Senior Notes due August 2004 (collectively, the ``Notes'').

Holders of these Notes have been offered an opportunity to participate in an exchange offer launched on July 23, 2001, which will remain open until August 20, 2001 - in which all tendering Noteholders will waive their right to receive the August 1st interest coupon. If consummated, the exchange offer will extinguish substantially all of the Notes and, with it, the Company's obligations to make the August 1st interest payment relating to those tendered Notes. If the exchange offer is not consummated, the Company likely will default on its August 1st interest payment. Each Noteholder should have received a prospectus containing a comprehensive description of the exchange offer and all of the risks associated with it; if not, please call D.F. King & Co., Inc., the information agent, at 1-800-488-8095 and reference the Delta Financial Exchange Offer.

``We are in the final stages of the exchange offer, first announced in late February, which we expect will extinguish substantially all $150 million of the outstanding Notes,'' said Hugh Miller, President & Chief Executive Officer. ``In doing so, we will remove the uncertainty surrounding our ability to repay the Notes at maturity and eliminate the financial burden of approximately $14 million per year in interest payments on the Notes tendered in the exchange offer. We also will then be able to operate our business model without the encumbrance of the outstanding debt. The holders of just over 50% of the Notes comprised of Putnam Investment Management, Fidelity Investment and Prudential Investments already have committed to tender their Notes in the exchange, pursuant to a letter of intent signed in February 2001,'' added Miller.

Noteholders who tender their Notes in the exchange offer will receive the Company's newly-issued preferred stock and membership interests in a newly formed LLC, into which the Company will transfer all of the mortgage-related securities currently securing the senior secured notes. The exchange offer is conditioned upon at least 95% of the existing Noteholders tendering their Notes, although the Company has the option of waiving this condition to the exchange offer. If the exchange offer is consummated, following such consummation, only Noteholders who fail to tender their Notes in the exchange will receive their August 1, 2001 interest coupon. The indentures governing the Notes provide the Company with a 30-day grace period within which to make the interest payment, without triggering an event of default under such indentures. Non-tendering Noteholders, however, will no longer have any collateral securing their Notes; nor will they be protected by any of the restrictive covenants in the indentures governing the Notes, which previously limited our ability to engage in certain activities, like incurring additional debt or disposing our assets. Further, the trading market for Notes not tendered in the exchange offer is likely to be significantly more limited than it is currently.

As previously announced, the Company expects to record a substantial loss for the second quarter of 2001 of approximately $1.04 per share, related to its continued efforts to restructure its business and strategically reduce its negative cash flow in order to return to profitability by, as planned, as soon as the fourth quarter of 2001. The expected loss was primarily related to (1) the costs of maintaining an unprofitable servicing platform until it was transferred to Ocwen in May 2001, plus the associated costs of transferring the portfolio, (2) debt restructuring costs, and (3) a change in the useful life of computer-related equipment.

``I am encouraged about the future of the Company. With the successful transfer of servicing behind us, and with the completion of the debt extinguishment expected later this month, senior management can now focus its time and efforts on improving and growing our mortgage banking business,'' added Miller.

Founded in 1982, Delta Financial Corporation is a Woodbury, New York-based specialty consumer finance company engaged in originating, securitizing and selling (and until May 2001, servicing) non-conforming home equity loans. Delta's loans are primarily secured by first mortgages on one- to four-family residential properties. Delta originates home equity loans primarily in 20 states. Loans are originated through a network of approximately 1,500 brokers and the Company's retail offices. Prior to July 1, 2000, loans were also purchased through a network of approximately 120 correspondents. Since 1991, Delta has sold approximately $6.7 billion of its mortgages through 29 AAA rated securitizations. At March 31, 2001, Delta's servicing portfolio was approximately $3.1 billion.

This announcement is not an offer to purchase, a solicitation of an offer to purchase or a solicitation of consents with respect to the Notes. The exchange offer is being made solely by the Preliminary Prospectus.

``Safe Harbor'' Statement under the Private Securities Litigation Reform Act of 1995: Certain statements contained in this press release, which are not historical fact, may be deemed to be ``forward-looking'' statements under federal securities laws that involve risk and uncertainties. There are many important factors that could cause Delta Financial Corporation and its subsidiaries' actual results to differ materially from those indicated in the forward-looking statements. Such factors include, but are not limited to the Company's ability or inability to consummate all facets of its debt restructuring, including without limitation, the exchange offer; the availability of funding at favorable terms and conditions, including without limitation, warehouse, residual and other credit facilities; the Company's ability or inability to continue to access the securitization and whole loan markets at favorable terms and conditions; costs associated with litigation, the Company's regulatory settlements with state and federal agencies and other regulatory compliance matters and changes (legislative or otherwise) affecting mortgage lending activities and the real estate market; competition, loan losses, loan prepayment rates, delinquency and default rates, general economic conditions, including interest rate risk, future residential real estate values, demand for Delta Financial Corporation and its subsidiaries' services, and other risks identified in Delta Financial Corporation's Securities and Exchange Commission filings.

Delta Financial Corporation
Richard Blass,

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