FORM 10-QSB/A--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
                     THE SECURITIES EXCHANGE ACT OF 1934
                        Quarterly or Transitional Report



                   U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  Form 10-QSB/A

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

                 For the quarterly period ended June 30, 2001


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


             For the transition period from _________to _________

                         Commission file number 0-14458


                 NATIONAL  HOUSING  PARTNERSHIP  REALTY  FUND TWO
       (Exact name of small business issuer as specified in its charter)


           Maryland                                              52-1365317
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                       55 Beattie Place, P.O. Box 1089
                       Greenville, South Carolina 29601
                   (Address of principal executive offices)

                                 (864) 239-1000
                           (Issuer's telephone number)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Securities  Exchange  Act  during the past 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___

<PAGE>

                         PART I - FINANCIAL INFORMATION

(This  document  amends the Form 10-QSB for the  quarter  ended June 30, 2001 to
properly reflect the forgiveness of debt by the holder of the Partnership's note
payable.)

ITEM 1.     FINANCIAL STATEMENTS

a)
                 NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                                  Balance Sheet
                                   (Unaudited)
                       (in thousands, except unit data)

                                  June 30, 2001

<TABLE>
<CAPTION>

ASSETS
<S>                                                                          <C>
   Cash and cash equivalents                                                 $   1
   Investments in and advances to Local Limited
      Partnerships (Note 2)                                                    603

                                                                            $  604
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

Liabilities
   Accrued expenses                                                          $  26
   Accrued interest on acquisition note (Note 4)                               241
   Administrative and reporting fees payable to
      General Partner (Note 3)                                               1,321

Partners' capital (deficit)
   General Partner -- The National Housing
      Partnership (NHP)                                      $ 633
   Original Limited Partner -- 1133 Fifteenth
      Street Two Associates                                    (177)
   Other Limited Partners -- 18,258 investment
      units                                                  (1,440)          (984)

                                                                            $ 604

                See Accompanying Notes to Financial Statements

</TABLE>

<PAGE>
b)

                 NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                            Statements of Operations
                                   (Unaudited)
                     (in thousands, except per unit data)


<TABLE>
<CAPTION>
                                                  Three Months Ended       Six Months Ended
                                                       June 30,                June 30,
                                                   2001        2000        2001        2000
Revenues:
  Share of profits from Local Limited
<S>                                                <C>           <C>        <C>          <C>
     Partnership                                   $   18        $ 27       $ 459        $ 29
  Interest income                                       1          --           1          --
  Other income                                          1          34          98          34
                                                       20          61         558          63
costs and Expenses:
  Administrative and reporting fees to
    General Partner                                    10          21          25          41
  Interest on notes payable                            --          61          10         117
  Other operating expenses                             23          29          47          41
                                                       33         111          82         199

Income (loss) before extraordinary item               (13)        (50)        476        (136)
Extraordinary gain on forgiveness of debt
  (Note 4)                                             --          --         708          --

NET (LOSS) INCOME                                  $ (13)      $ (50)     $ 1,184     $ (136)

allocation of net (loss) income:
  General Partner - NHP                            $ --        $ (1)        $ 5        $ (1)
  Original Limited Partner - 1133 Fifteenth
    Street Two Associates                              --          (1)         12          (1)
  Other limited partners                              (13)        (48)      1,167        (134)

                                                   $ (13)      $ (50)     $ 1,184     $ (136)
PER LIMITED PARTNERSHIP UNIT:
  Income (loss) before extraordinary item           (0.71)      (2.63)      25.53       (7.34)
  Extraordinary gain on forgiveness of debt            --          --       38.39          --

NET (LOSS) INCOME PER LIMITED PARTNERSHIP
  INTEREST                                        $ (0.71)    $ (2.63)   $ 63.92      $ (7.34)

                See Accompanying Notes to Financial Statements

</TABLE>

<PAGE>

c)

                 NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                   Statement of Partners' Capital (Deficit)
                                   (Unaudited)
                                (in thousands)


<TABLE>
<CAPTION>

                                  The National      1133
                                     Housing     Fifteenth       Other
                                   Partnership   Street Two     Limited
                                      (NHP)      Associates     Partners        Total

Partners' deficit at
<S>        <C> <C>                   <C>           <C>          <C>            <C>
  December 31, 2000                  $ (177)       $ (181)      $(1,810)       $(2,168)

Transfer of interest                     805           (8)         (797)            --

Net income - six months ended
  June 30, 2001                            5           12         1,167          1,184

Partners' capital (deficit) at
  June 30, 2001                       $ 633        $ (177)      $(1,440)       $ (984)

Percentage interest at
  June 30, 2001                          1%           1%            98%         100%
                                         (A)          (B)           (C)


(A)   General Partner
(B)   Original Limited Partner
(C)   Consists of 18,258 investment units

                See Accompanying Notes to Financial Statements

</TABLE>

<PAGE>

d)
                 NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                            Statements of Cash Flows
                                   (Unaudited)
                                (in thousands)

<TABLE>
<CAPTION>

                                                                   Six Months Ended June 30,
                                                                      2001           2000
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                   <C>            <C>
  Interest income received                                            $ 1            $ --
  Distributions received in excess of investment in Local
   Limited Partnership                                                   98             34
  Advances made in excess of investment in Local Limited
   Limited Partnership                                                   (3)            --
  Operating expenses paid                                               (60)           (41)
  Payment of interest on note payable                                (1,575)            --
        Net cash used in operating activities                        (1,539)            (7)

Cash flows from investing activities:
  Distributions from Local Limited Partnerships                       2,027              5
  Advances to Local Limited Partnership                                  (3)            --
        Net cash provided by investing activities                     2,024              5

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of advances from General Partner                            (33)            --
  Payments on deferred acquisition note payable                        (452)            --
        Net cash used in financing activities                          (485)            --

NET DECREASE IN CASH AND CASH EQUIVALENTS                                --             (2)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                          1              2

CASH AND CASH EQUIVALENTS AT END OF PERIOD                            $ 1            $ --

RECONCILIATION OF NET INCOME (LOSS) TO NET CASH USED IN
  OPERATING ACTIVITIES:
   Net income (loss)                                                $ 1,184         $ (136)
   Adjustments to reconcile net income (loss) to net
     cash used in operating activities:
      Share of income from Local Limited Partnerships                  (459)           (29)
        Changes in operating assets and liabilities:
        Extraordinary gain on forgiveness of debt                      (708)            --
        (Decrease) increase in accrued interest on deferred
          acquisition note                                           (1,564)           117
        Increase in administrative and reporting fees payable            25             41
        Decrease in other accrued expenses                              (17)            --
        Total adjustments                                            (2,723)           129

Net cash used in operating activities                               $(1,539)         $ (7)


                See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>
e)

                 NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                          Notes to Financial Statements
                                   (Unaudited)


(1)   ACCOUNTING POLICIES

Organization

National  Housing   Partnership  Realty  Fund  Two  (the  "Partnership"  or  the
"Registrant")  is a limited  partnership  organized  under the Maryland  Revised
Uniform Limited  Partnership Act on January 22, 1985. The Partnership was formed
for the purpose of raising capital by offering and selling  limited  partnership
interests  and  then   investing  in  limited   partnerships   ("Local   Limited
Partnerships"),  each of which owns and  operates  an  existing  rental  housing
project  which is  financed  and/or  operated  with one or more  forms of rental
assistance or financial assistance from the U.S. Department of Housing and Urban
Development  ("HUD").  On April 30, 1985, the Partnership  began raising capital
and acquiring interests in Local Limited Partnerships.

The National Housing  Partnership,  a District of Columbia  limited  partnership
("NHP" or the  "General  Partner"),  was  authorized  to raise  capital  for the
Partnership by offering and selling to additional limited partners not more than
18,300  interests  at a price of  $1,000  per  unit.  During  1985,  the sale of
interests  was closed after the sale of 18,300  interests  to limited  partners.
Apartment  Investment  and  Management  Company  ("AIMCO")  and  its  affiliates
ultimately  control the General  Partner.  The original  Limited  Partner of the
Partnership is 1133 Fifteenth Street Two Associates, whose limited partners were
key  employees  of the general  partner of NHP at the time the  Partnership  was
formed. The general partner of 1133 Fifteenth Street Two Associates is NHP.

Basis of Presentation

The accompanying  unaudited interim financial statements reflect all adjustments
which are, in the opinion of  management,  necessary for a fair statement of the
financial condition and results of operations for the interim periods presented.
All such adjustments are of a normal and recurring nature.

While the General Partner  believes that the disclosures  presented are adequate
to make the  information  not  misleading,  it is suggested that these financial
statements  be read in  conjunction  with the  financial  statements  and  notes
included in the  Partnership's  Annual  Report filed on Form 10-KSB for the year
ended December 31, 2000.

(2)   INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS

During 1985, the Partnership  acquired a 94.5% limited partnership interest (98%
with respect to allocation of losses) in twenty-one Local Limited  Partnerships.
At June 30,  2001,  the  Partnership  continues to hold an interest in six Local
Limited   Partnerships:   Esbro  Limited  Partnership,   Mayfair  Manor  Limited
Partnership,  San Juan del Centro  Limited  Partnership,  Caroline  Arms Limited
Partnership,  Harold  House  Limited  Partnership  and West Oak Village  Limited
Partnership.  During  the six  months  ended June 30,  2001,  the  Partnership's
interest in Hurbell II and Hurbell III Limited Partnerships were foreclosed upon
and the property owned by Windsor Apartments  Associates Limited Partnership was
sold.  During 2000,  the  Partnership's  interests in Park Avenue West I Limited
Partnership,  Park  Avenue  West II Limited  Partnership,  Rodeo  Drive  Limited
Partnership,  Hurbell I Limited  Partnership,  Hilltop  Limited  Partnership and
Kimberton Limited Partnership were foreclosed upon.

In  addition,  Caroline  Arms,  Harold  House,  and San Juan Del Cantro  Limited
Partnerships  all  have  notes  payable  which  are  currently  in  default  and
accordingly, the Local Limited Partnership interests are subject to foreclosure.
West Oak Village Limited  Partnership is currently in default due to non-payment
of required  annual interest  payments,  and this  partnership  interest is also
subject  to  foreclosure.   Continuation  of  the  Local  Limited  Partnerships'
operations  in the  present  form is  dependent  on their  ability to extend the
maturity date of the respective notes, or to repay or refinance their notes. The
financial  statements do not include any adjustments which might result from the
outcome of this uncertainty.

Since the Partnership,  as a limited partner, does not exercise control over the
activities of the Local Limited  Partnerships in accordance with the partnership
agreements,  these investments are accounted for using the equity method.  Thus,
the  investments are carried at cost less the  Partnership's  share of the Local
Limited  Partnerships'  losses and distributions plus the Partnership's share of
Local Limited  Partnerships'  profits.  However,  since the  Partnership  is not
legally liable for the obligations of the Local Limited Partnerships, and is not
otherwise committed to provide additional support to them, it does not recognize
losses once its investment in each of the individual Local Limited  Partnerships
reduced for its share of losses and cash  distributions,  reaches zero.  Once an
investment account has been reduced to zero, profits reported by a Local Limited
Partnership  are not  recognized  by the  Partnership  until such profits  equal
losses not recognized plus distributions  received and previously  recognized as
revenue. As a result, the Partnership did not recognize  approximately  $462,000
and $363,000 of losses from six and ten Local  Limited  Partnerships  during the
six months  ended June 30,  2001 and 2000,  respectively.  During the six months
ended June 30, 2001 and 2000, the Partnership's share of profits in one and two,
respectively,  Local Limited  Partnerships in the amount of approximately $6,000
and $25,000,  respectively,  was offset against prior years' losses taken. As of
June 30, 2001, the Partnership has not recognized  approximately  $11,100,000 of
its allocated cumulative share of losses from five Local Limited Partnerships in
which its  investment  has been  reduced to zero.  The  Partnership's  allocated
cumulative  share of losses  in the Local  Limited  Partnerships  foreclosed  on
during the six months ended June 30, 2001 was approximately $1,366,000.

During the six months ended June 30, 2001, the Partnership  made working capital
advances  of  approximately  $6,000  to  two  Local  Limited  Partnerships.   No
repayments  were received  during the six months ended June 30, 2001. No working
capital  advances or repayments  were made between the Partnership and the Local
Limited  Partnerships  for the six months ended June 30, 2000.  During 1993, the
Partnership  re-evaluated the timing of the  collectibility  of the advances and
determined,  based on the  Local  Limited  Partnerships'  operations,  that such
advances  are  not  likely  to  be  collected.   For  accounting  purposes,  the
Partnership  treated the advance balance as additional  investments in the Local
Limited Partnerships. The balance was then reduced to zero, with a corresponding
charge to operations to reflect a portion of the previously  unrecognized losses
on investments.

Advances  to the  Local  Limited  Partnership  remain  due  and  payable  to the
Partnership. Interest is calculated at the prime rate plus 2% (8.75% at June 30,
2001).  Payment of principal and interest is  contingent  upon the Local Limited
Partnerships having available surplus cash, as defined by HUD regulations,  from
operations  or from the sale or  refinancing  of the Local  Limited  Partnership
properties.  Any future  repayment of advances or interest  will be reflected as
Partnership income when received.

The following are unaudited combined statements of operations for the six months
ended  June 30,  2001 and 2000 of the Local  Limited  Partnerships  in which the
Partnership has invested.  The statements are compiled from financial statements
of the Local  Limited  Partnerships  which are prepared on the accrual  basis of
accounting and supplied by the managing agents of the projects.
<TABLE>
<CAPTION>

                        COMBINED STATEMENTS OF OPERATIONS


                                         Three Months Ended        Six Months Ended
                                              June 30,                 June 30,
                                          2001         2000        2001        2000
                                           (in thousands)           (in thousands)

<S>                                      <C>          <C>         <C>         <C>
Rental income                            $1,192       $2,303      $2,847      $4,650
Other income                                 45          113         126         198
Gain on sale of property                     --           --         667          --
   Total income                           1,237        2,416       3,640       4,848

Operating expenses                          681        1,396       1,871       2,939
Interest, taxes and insurance               361          657         870       1,308
Depreciation                                297          464         759         913
   Total expense                          1,339        2,517       3,500       5,160

Net (loss) income                        $ (102)      $ (101)      $ 140      $ (312)

National Housing Partnership
  Realty Fund Two share of income
  (losses)                               $ (102)      $ (101)      $ 112      $ (309)
</TABLE>

(3)   TRANSACTIONS WITH THE GENERAL PARTNER

During the six month  periods  ended  June 30,  2001 and 2000,  the  Partnership
accrued  administrative and reporting fees payable to the General Partner in the
amount of approximately $25,000 and $41,000, respectively, for services provided
to the  Partnership.  The  amount  of fees  due to the  General  Partner  by the
Partnership  was  approximately   $1,321,000  at  June  30,  2001.  The  accrued
administrative and reporting fees payable to the General Partner will be paid as
cash  flow  permits  or  from  the  sale  or  refinancing  of one or more of the
underlying properties of the Local Limited Partnerships.

During the six months ended June 30, 2001, the Partnership  made working capital
advances  of  approximately  $6,000  to  two  Local  Limited  Partnerships.   No
repayments  were received  during the six months ended June 30, 2001. No working
capital  advances or repayments  were made between the Partnership and the Local
Limited Partnerships for the six months ended June 30, 2000.

(4)   SALE OF INVESTMENT PROPERTY OWNED BY LOCAL LIMITED PARTNERSHIP

On January 31, 2001, Windsor Apartment  Associates Limited  Partnership sold its
investment property to an unaffiliated third party for $4,600,000.  After paying
closing costs, the net proceeds were used to repay the mortgage  encumbering the
property.  The  Partnership  received  approximately  $2,027,000  from the local
limited  partnership  as  its  portion  of  the  initial  sales  proceeds.   The
Partnership  used these funds to repay a portion of the note payable and accrued
interest. The remaining principal balance of approximately $708,000 was forgiven
and recognized as income.  Accrued  interest of  approximately  $241,000 remains
unpaid at June 30,  2001.  As part of the  negotiated  settlement  with the note
holder, the accrued interest balance will be repaid with the Partnership's share
of the remaining undistributed proceeds from the sale.

(5)   SEGMENT INFORMATION

The Partnership has only one reportable  segment.  Due to the very nature of the
Partnership's  operations,  the  General  Partner  believes  that  segment-based
disclosures will not result in a more meaningful presentation than the financial
statements as currently presented.

(6)   LEGAL PROCEEDINGS

In October 1997,  NHP received a subpoena from the Inspector  General  ("IG") of
the United States Department of Housing and Urban Development ("HUD") requesting
documents  relating  to any  agreement  whereby  NHP  or  any of its  affiliates
provides  or has  provided  compensation  to  owners  (or their  affiliates)  of
HUD-assisted properties in connection with management of a HUD-assisted property
(the "Transactions").  Documents were produced which may have been responsive to
the HUD subpoena and submitted to the HUD Inspector General in 1998.

In July 1999, NHP received a grand jury subpoena  requesting  documents relating
to the same  subject  matter as the HUD IG  subpoenas  and NHP's  operation of a
group  purchasing  program  created  by NHP,  known as Buyers  Access.  To date,
neither the HUD IG nor the grand jury has  initiated  any action  against NHP or
AIMCO or, to NHP's or AIMCO's knowledge,  any owner of a HUD property managed by
NHP. AIMCO believes that NHP's operations and programs are in compliance, in all
material respects, with all laws, rules and regulations relating to HUD-assisted
or HUD-insured properties. NHP and AIMCO are cooperating with investigations and
do not believe that the investigations  will result in a material adverse impact
on their operations. However, as with any similar investigation, there can be no
assurance  that these  will not result in  material  fines,  penalties  or other
costs.

The  Partnership is unaware of any other pending or outstanding  litigation that
is not of a routine nature arising in the ordinary course of business.

(7)   GOING CONCERN

Certain  of the Local  Partnership's  notes  payable  are past due (see Note 2).
Continuation  of the Local  Partnerships'  operations  in their  present form is
dependent on their ability to extend the maturity date, repay or refinance these
notes.  These  conditions  raise  substantial  doubt  about the  ability  of the
Partnership  to continue as a going  concern.  The  financial  statements do not
include any adjustments which might result from the outcome of this uncertainty.


ITEM 2.     MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
            RESULTS OF OPERATIONS

The  matters  discussed  in this Form  10-QSB  contain  certain  forward-looking
statements  and  involve  risks and  uncertainties  (including  changing  market
conditions,   competitive  and  regulatory   matters,   etc.)  detailed  in  the
disclosures  contained  in this  Form  10-QSB  and the  other  filings  with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the  Registrant's  business and results of  operations,  including
forward-looking  statements  pertaining  to such  matters,  does not  take  into
account the effects of any changes to the  Registrant's  business and results of
operations.  Accordingly,  actual  results  could differ  materially  from those
projected in the forward-looking  statements as a result of a number of factors,
including those identified herein.

This item should be read in conjunction with the financial  statements and other
items contained elsewhere in this report.

Liquidity and Capital Resources

As of June 30, 2001, the Partnership retained an interest in six of its original
twenty-one Local Limited Partnerships. The properties in which the Local Limited
Partnerships  have  invested  receive one or more forms of  assistance  from the
Federal  Government.  As a result,  the Local Limited  Partnerships'  ability to
transfer funds either to the Partnership or among themselves in the form of cash
distributions,   loans,   or  advances   is   generally   restricted   by  these
government-assistance    programs.   These   restrictions   could   impact   the
Partnership's  ability  to meet  its cash  obligations  given  the low  level of
reserves at the Partnership level.

During the six months ended June 30, 2001, the Partnership  made working capital
advances  of  approximately  $6,000  to  two  Local  Limited  Partnerships.   No
repayments  were received  during the six months ended June 30, 2001. No working
capital  advances or repayments  were made between the Partnership and the Local
Limited Partnerships for the six months ended June 30, 2000.

Distributions  received in excess of investment  in Local  Limited  Partnerships
represent the Partnership's proportionate share of the excess cash available for
distribution from the Local Limited Partnerships.  As a result of the use of the
equity method of accounting for the  Partnership's  investments,  investments in
five of the remaining six Local Limited Partnerships had been reduced to zero as
of June 30, 2001. The Partnership  also has an investment in Windsor  Apartments
Limited  Partnership which represents the  Partnership's  share of the remaining
undistributed sales proceeds from the sale of the underlying property. For these
investments, cash distributions received are recorded in income as distributions
received  in excess  of  investment  in Local  Limited  Partnerships.  For those
investments  not  reduced  to  zero,  distributions  received  are  recorded  as
distributions from Local Limited  Partnerships.  A distribution of approximately
$2,027,000 comprised of initial proceeds from the sale of Windsor Apartments and
distributions  in  excess  of  investment  in  Local  Limited   Partnerships  of
approximately  $98,000 were received  during the six months ended June 30, 2001.
Distributions  in  excess  of  investment  in  Local  Limited   Partnerships  of
approximately $34,000 were received during the corresponding period in 2000. The
receipt of  distributions  in future  quarters and years is  dependent  upon the
operations of the  underlying  properties of the Local Limited  Partnerships  to
generate  sufficient  cash for  distribution  in accordance  with applicable HUD
regulations.

There  was no change  in cash and cash  equivalents  since  December  31,  2000.
Approximately  $2,024,000 of cash provided by investing activities was offset by
approximately  $1,539,000  and $485,000 of cash used in operating  and financing
activities,  respectively.  Cash  provided  by  investing  activities  consisted
primarily of the initial  distribution  from the proceeds of the sale of Windsor
Apartments.  Cash used in  operating  activities  consisted  of repayment of the
accrued  interest  on the note  payable in  addition  to  payment  of  operating
expenses offset by distributions received in excess of investment.  Cash used in
financing  activities  consisted  of payments on the note payable to the General
Partner  and  other  advances  from the  General  Partner.  The  ability  of the
Partnership to meet its on-going cash  requirements in excess of cash on hand at
June 30, 2001 is dependent  upon the future  receipt of  distributions  from the
Local Limited  Partnerships or proceeds from sales or refinancing of one or more
of the underlying properties of the Local Limited Partnerships.  Cash on hand at
June 30,  2001 plus any  distributions  from the  underlying  operations  of the
combined  Local  Limited   Partnerships  is  expected  to  adequately  fund  the
operations  of the  Partnership  in the current year.  However,  there can be no
assurance  that future  distributions  will be  adequate to fund the  operations
beyond the current year.

The Partnership currently owes the General Partner approximately  $1,321,000 for
administrative  and  reporting  services  performed.  The  payment of the unpaid
administrative  and reporting fees will most likely result,  if at all, from the
sale  or  refinancing  of  the  underlying   properties  of  the  Local  Limited
Partnerships, rather than through recurring operations.

Each Local  Limited  Partnership  in which the  Partnership  currently  holds an
interest  has a note  payable  due to the  original  owner  of  each  respective
property.  With the  exception of West Oak Village  Limited  Partnership,  these
notes are all past due and are  currently in default.  West Oak Village  Limited
Partnership  is  currently  in default due to  non-payment  of  required  annual
interest payments.

The West Oak Village Limited  Partnership  note bears interest at the rate of 9%
per annum. The note is nonrecourse and is secured by a security  interest in the
Partnership's  interest  in the Local  Limited  Partnership.  During  1997,  the
noteholders  entered into an  agreement  with the  Partnership,  under which the
maturity date of the note was extended  until  November  2013,  assuming  annual
payments  of  interest  are  made to the  noteholders.  Under  the  terms of the
agreement,  payments  are to be made equal to the annual  interest at a variable
rate based on the prior  year's  interest  rate payment  multiplied  by the most
recent Consumer Price Index rate, with any increase subject to a floor of 2% and
a ceiling of 5%. At any time prior to the note's  maturity,  the Partnership has
the option to pay off the  acquisition  note at a  discount  equal to 70% of the
property's annual scheduled rent but not less than $700,000. The required annual
installments of interest,  pursuant to the agreement with the noteholders,  have
not been made.  Accordingly,  the Local  Limited  Partnership  is  currently  in
default on the required annual interest payments and the Partnership's  interest
is subject to foreclosure.  The Local Limited Partnership is actively attempting
to sell this asset.

Caroline  Arms,  Harold House and San Juan Del Centro Limited  Partnerships  all
have notes which were executed by the respective Local Limited Partnerships with
the  seller as part of the  acquisition  of the  property  by the Local  Limited
Partnership.  The notes were nonrecourse notes secured by a security interest in
all Partnership  interests in the Local Limited Partnership and are subordinated
to the  respective  mortgage  notes on each property for as long as the mortgage
notes are insured by HUD. Any payments due from project  income are payable from
surplus cash, as defined by the HUD  Regulatory  Agreement.  Neither the Limited
Partnership  nor any partners  thereof,  present or future,  assume any personal
liability for the payment of the notes.  The notes were due November,  15, 1999,
November 15, 1999 and December 20, 1999,  respectively.  Each note is in default
and the  Partnership's  Local  Limited  Partnership  interests  are  subject  to
foreclosure.  Continuation of the Local Limited Partnerships'  operations in the
present form is dependent on their ability to extend the maturity dates of their
respective notes, or to repay or refinance their notes. Caroline Arms and Harold
House Limited  Partnerships  are actively  attempting  to sell their  respective
assets.

Esbro  and  Mayfair  Manor  Limited  Partnerships  notes  were  executed  by the
respective Local Limited Partnerships with the seller as part of the acquisition
of the  property by the Local  Limited  Partnership.  The notes are  nonrecourse
notes  secured  by a  security  interest  in all  Partnership  interests  in the
respective  Local Limited  Partnership.  The notes were initially due on October
15, 1997.  Effective  February 16, 1998,  both Esbro and Mayfair  Manor  Limited
Partnerships  executed  Amended and Restated  Promissory Notes for each of their
respective  notes.  The  Amended  Notes  extended  the  maturity of the notes to
October 25, 1999. Neither Limited Partnership nor any partners thereof,  present
or future,  assume any  personal  liability  for the payment of the notes.  Both
Local  Limited  Partnerships  received  notice of  demand  for  payment  and the
commencement  of  foreclosure  proceedings.  Such  foreclosure is subject to HUD
approval, which is pending. Continuation of both the Local Limited Partnerships'
operations  in  the  present  form  is  dependent  upon  the  outcome  of  these
proceedings. The financial statements do not include any adjustments which might
result from the outcome of this uncertainty.

Hurbell II and Hurbell III Limited Partnerships had notes payable which were due
on November 2, 1999. The Local Limited  Partnerships  did not have the resources
to pay the amounts due. On April 2, 2001 and March 28, 2001,  respectively,  the
holder of these notes  exercised  its remedy under the security  agreement  with
respect to such notes and was  substituted  as the sole  limited  partner of the
Local  Limited  Partnerships  in place of the  Partnership  and the  noteholders
assignee  was  substituted  as the  general  partner.  No gain or loss  has been
recorded as a result of the transfer of these  partnership  interests.  With the
loss  of  the  Partnership's  interest  in  Hurbell  II  and  Hurbell  III,  the
Partnership  will not  receive  any future  benefits  from these  Local  Limited
Partnerships  and  taxable  income  through  the  date  of  foreclosure  will be
generated and allocated to the Partnership's investors without any distributable
cash. The specific impact of the tax consequence is dependent upon each specific
partners' individual tax situation.

Park Avenue West I, Park Avenue West II and Rodeo Drive Limited  Partnership all
had notes  payable  which were due  December  20,  1999,  December  20, 1999 and
December 6, 1997, respectively.  The Local Limited Partnerships did not have the
resources to pay the amounts due.  During January 2000, the holders of the notes
payable  relating  to Park  Avenue  West I, Park  Avenue West II and Rodeo Drive
Limited  Partnership  properties  exercised  their  remedies  under the security
agreement  with respect to such note payable,  and were  substituted as the sole
limited  partner of the  applicable  Local Limited  Partnership  in place of the
Partnership  and such note  holder's  assignee  was  substituted  as the general
partner.  No gain or loss has been  recorded as a result of the transfer of this
partnership interest. With the loss of the Partnership's interest in Park Avenue
West I, Park Avenue West II and Rodeo Drive to the note holders, the Partnership
will not receive any future benefits from these Local Limited  Partnerships  and
taxable income  through the date of foreclosure  will be generated and allocated
to the  Partnership's  investors  without any  distributable  cash. The specific
impact  of the  tax  consequence  is  dependent  upon  each  specific  partner's
individual tax situation.

Meadows  Apartments and Meadows East Apartments  Limited  Partnerships  both had
notes  payable  which  were  due  on  December  12,  1997.   The  Local  Limited
Partnerships did not have the resources to pay the amounts due. Effective August
5, 2000 and December 1, 2000,  Meadows  Apartments  and Meadows East  Apartments
Limited Partnerships'  properties were foreclosed upon. Pursuant to the security
agreement  of the note  payable,  the note  holder was  substituted  as the sole
limited partner of the Local Limited Partnership in place of the Partnership and
the note holder's  assignee was substituted as the general  partner.  No gain or
loss has been recorded as a result of the transfer of this partnership interest.
With the loss of the  Partnership's  interest in Meadows  Apartments and Meadows
East Apartments to the note holders, the Partnership will not receive any future
benefits from these Local Limited Partnerships.

As a result  of the  conditions  above,  there is  substantial  doubt  about the
Partnership's  ability to continue as a going concern.  The financial statements
do  not  include  any  adjustments  to  reflect  the  possible  effects  on  the
recoverability  and  classification of assets or amounts and  classifications of
liabilities that may result from these uncertainties.

Results of Operations

The  Partnership  originally  invested  as a limited  partner  in Local  Limited
Partnerships which operated  twenty-one rental housing  properties.  At June 30,
2001,  the  Partnership  continued  to hold an  interest  in six  Local  Limited
Partnerships.  To the extent  the  Partnership  still has a carrying  basis in a
respective Local Limited  Partnership,  results of operations are  significantly
impacted  by the  Partnership's  share of the  profits  or  losses  in the Local
Limited  Partnership.  These profits or losses include  depreciation and accrued
note payable interest expense which are noncash in nature.  As of June 30, 2001,
the Partnership had no carrying basis in five of the Local Limited  Partnerships
and  therefore  reflected no results of  operations  for its share of profits or
losses for these Local Limited Partnerships.

The  Partnership had net income of  approximately  $1,184,000 for the six months
ended June 30, 2001,  compared to a net loss of  approximately  $136,000 for the
six months ended June 30, 2000. The Partnership had a net loss of  approximately
$13,000  for the three  months  ended June 30,  2001,  compared to a net loss of
approximately  $50,000 for the three months ended June 30, 2000.  Net income per
unit of  limited  partnership  increased  to $63.92  per unit for the six months
ended June 30, 2001 compared to a net loss of $7.34 per unit outstanding  during
the six months  ended June 30, 2000.  The  increase in net income was  primarily
attributable to the  Partnership's  share of the gain recognized  related to the
sale of Windsor  Apartments  and an  extraordinary  gain on  forgiveness of debt
relating to the note payable.  The Partnership  did not recognize  approximately
$462,000 of its allocated  share of losses from six Local  Limited  Partnerships
for the six months ended June 30, 2001, as the  Partnership's net carrying basis
in these Local Limited  Partnerships had been reduced to zero. In addition,  the
Partnership  did not recognize  approximately  $6,000 of its allocated  share of
profits from one of the Local Limited Partnerships for the six months ended June
30, 2001, as the Partnership had cumulative  unrecognized losses with respect to
this Local Limited Partnership. The Partnership's share of losses from the Local
Limited  Partnerships,  if not limited to its investment account balance,  would
have increased  approximately $99,000 between periods. The increase is primarily
due to higher net losses at West Oak Village Apartments and Mayfair Manor during
the six months  ended June 30, 2001 as compared to the  corresponding  period in
2000.
<PAGE>

                           PART II - OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

In October 1997,  NHP received a subpoena from the Inspector  General  ("IG") of
the United States Department of Housing and Urban Development ("HUD") requesting
documents  relating  to any  agreement  whereby  NHP  or  any of its  affiliates
provides  or has  provided  compensation  to  owners  (or their  affiliates)  of
HUD-assisted properties in connection with management of a HUD-assisted property
(the "Transactions").  Documents were produced which may have been responsive to
the HUD subpoena and submitted to the HUD Inspector General in 1998.

In July 1999, NHP received a grand jury subpoena  requesting  documents relating
to the same  subject  matter as the HUD IG  subpoenas  and NHP's  operation of a
group  purchasing  program  created  by NHP,  known as Buyers  Access.  To date,
neither the HUD IG nor the grand jury has  initiated  any action  against NHP or
AIMCO or, to NHP's or AIMCO's knowledge,  any owner of a HUD property managed by
NHP. AIMCO believes that NHP's operations and programs are in compliance, in all
material respects, with all laws, rules and regulations relating to HUD-assisted
or HUD-insured properties. NHP and AIMCO are cooperating with investigations and
do not believe that the investigations  will result in a material adverse impact
on their operations. However, as with any similar investigation, there can be no
assurance  that these  will not result in  material  fines,  penalties  or other
costs.

ITEM 6      EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits

                  None.

            b)    Reports on Form 8-K:

                  None filed during the quarter ended June 30, 2001.


<PAGE>


                                   SIGNATURES



In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.



                                    NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                                    (Registrant)


                                    By:   The National Housing Partnership,
                                          Its sole General Partner


                                    By:   National Corporation for Housing
                                          Partnerships, its sole General Partner


                                    By:   /s/Patrick J. Foye
                                          Patrick J. Foye
                                          President


                                    By:   /s/Martha L. Long
                                          Martha L. Long
                                          Senior Vice President and
                                          Controller


                                      Date: