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 September 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  September 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)

                               September 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                                                          $  31
   Administrative and reporting fees payable to
      General Partner                                                        1,330
   Advances from General Partner                                                 8
   Accrued interest on acquisition notes (Note 4)                              241

Partners' capital (deficit)
   General Partner -- The National Housing
      Partnership (NHP)                                      $ 640
   Original Limited Partner -- 1133 Fifteenth
      Street Two Associates                                    (177)
   Other Limited Partners -- 18,258 investment
      units                                                  (1,469)        (1,006)

                                                                            $  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       Nine Months Ended
                                                     September 30,           September 30,
                                                   2001        2000        2001        2000
Revenues:
  Share of profits from Local Limited
<S>                                                <C>            <C>       <C>          <C>
    Partnership                                    $   --         $ 4       $ 459        $ 34
  Interest income                                      --          --           1          --
  Distribution in excess of investment in
    Local Limited Partnership                          --          21          98          55
                                                       --          25         558          89
costs and Expenses:
  Administrative and reporting fees to
    General Partner                                     8          19          34          61
  Interest on notes payable                            --          39          10         157
  Other operating expenses                             14          31          60          72
                                                       22          89         104         290

Income (loss) before extraordinary item               (22)        (64)        454        (201)
Extraordinary gain on forgiveness of debt
  (Note 4)                                             --          --         708          --

Net (loss) income                                  $ (22)      $ (64)     $ 1,162     $ (201)

allocation of net (loss) income:
  General Partner - NHP                            $ --        $ (1)        $ 5        $ (2)
  Original Limited Partner - 1133 Fifteenth
    Street Two Associates                              --          (1)         12          (2)
  Other limited partners                              (22)        (62)      1,145        (197)
                                                   $ (22)      $ (64)     $ 1,162     $ (201)
per Limited partnership unit:
  Income (loss) before extraordinary item           (1.21)      (2.85)      24.32      (10.79)
  Extraordinary gain on forgiveness of debt            --          --       38.39          --

net (loss) income per limited partnership
  interest                                        $ (1.21)    $ (2.85)   $ 62.71      $(10.79)

                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 (Note 4)            805           (8)         (797)            --

Net income - nine months ended
  September 30, 2001                       5           12         1,145          1,162

Partners' capital (deficit) at
  September 30, 2001                  $ 633        $ (177)      $(1,462)       $(1,006)

Percentage interest at
  September 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>

                                                                        Nine Months Ended
                                                                          September 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               55
  Advances made in excess of investment in Local Limited
   Limited Partnership                                                   (7)              --
  Operating expenses paid                                               (63)             (62)
  Payment of interest on note payable                                (1,575)              --
        Net cash used in operating activities                        (1,546)              (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:
  Advances from General Partner                                           8               --
  Repayment of advances from General Partner                            (33)              --
  Payments on deferred acquisition note payable                        (452)              --
        Net cash used in financing activities                          (477)              --

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)                                                $ 1,162          $ (201)
   Adjustments to reconcile net income (loss) to net
     cash used in operating activities:
      Share of income from Local Limited Partnerships                  (459)             (34)
        Changes in operating assets and liabilities:
        Extraordinary gain on forgiveness of debt                      (708)              --
        (Decrease) increase in accrued interest on deferred
          acquisition note payable                                   (1,564)             157
        Increase in administrative and reporting fees payable            34               61
        (Decrease) increase in other accrued expenses                   (11)              10
        Total adjustments                                            (2,708)             194

Net cash used in operating activities                               $(1,546)          $ (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 September  30, 2001,  the  Partnership  continues to hold an interest in four
Local Limited  Partnerships:  San Juan del Centro Limited Partnership,  Caroline
Arms Limited Partnership,  Harold House Limited Partnership and West Oak Village
Limited  Partnership.  During the nine months  ended  September  30,  2001,  the
Partnership's  interest in Esbro  Limited  Partnership,  Mayfair  Manor  Limited
Partnership,  Hurbell II Limited Partnership and Hurbell III Limited Partnership
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 Centro  Limited
Partnerships  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  $620,000
and $435,000 of losses from six and nine Local Limited  Partnerships  during the
nine months ended  September  30, 2001 and 2000,  respectively.  During the nine
months ended September 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 $77,000,  respectively, was offset against prior years'
losses  taken.  As of September 30, 2001,  the  Partnership  has not  recognized
approximately  $5,023,000 of its allocated cumulative share of losses from three
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 nine months ended  September 30, 2001 was
approximately $7,600,000.

During the nine months ended  September 30, 2001, the  Partnership  made working
capital  advances  to six  Local  Limited  Partnerships  totaling  approximately
$10,000.  No repayments were received during the nine months ended September 30,
2001.  No  working  capital   advances  or  repayments  were  made  between  the
Partnership  and the  Local  Limited  Partnerships  for the  nine  months  ended
September 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%  (8.00%  at
September  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 nine
months ended  September 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        Nine Months Ended
                                            September 30,            September 30,
                                          2001         2000        2001        2000
                                           (in thousands)           (in thousands)

<S>                                      <C>          <C>         <C>         <C>
Rental income                            $ 950        $2,036      $3,797      $6,686
Other income                                 51           81         177         279
Gain on sale of property                     --           --         667          --
   Total income                           1,001        2,117       4,641       6,965

Operating expenses                          708        1,238       2,579       4,177
Interest, taxes and insurance               207          470       1,077       1,778
Depreciation                                252          423       1,011       1,335
   Total expense                          1,167        2,131       4,667       7,290

Net loss                                 $ (166)      $ (14)       $ (26)     $ (325)

Partnership's share of loss              $ (162)      $ (14)       $ (50)     $ (323)
</TABLE>

(3)   TRANSACTIONS WITH THE GENERAL PARTNER

During the nine month periods ended September 30, 2001 and 2000, the Partnership
accrued  administrative and reporting fees payable to the General Partner in the
amount of approximately $34,000 and $61,000, respectively, for services provided
to the  Partnership.  The  amount  of fees  due to the  General  Partner  by the
Partnership  was  approximately  $1,330,000 at September  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 nine months ended  September 30, 2001, the  Partnership  made working
capital  advances  to six  Local  Limited  Partnerships  totaling  approximately
$10,000  to cover  Partnership  entity  expenses.  This  amount is  included  in
operating  expenses for the nine months ended  September 30, 2001. No repayments
were  received  during the nine months  ended  September  30,  2001.  No working
capital  advances or repayments  were made between the Partnership and the Local
Limited Partnerships for the nine months ended September 30, 2000.

During the nine months ended September 30, 2001 the Partnership received working
capital advances of approximately $8,000 from the General Partner. No repayments
were made during the nine month period  ended  September  30,  2001.  No working
capital  advances or  repayments  were made during the nine month  period  ended
September 30, 2000.

(4)   NOTES PAYABLE

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 September 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.

On July 24, 2000,  the holder  foreclosed  on the note payable of  approximately
$3,177,000  by  the  Partnership  which  was  collaterized  by its  interest  in
Kimberton Apartments Associates Limited Partnership.  The holder of the note was
the General Partner.  As a result of this transaction,  the Partnership lost its
interest in the Local Limited  Partnership  valued at approximately  $2,364,000.
The remaining  balance of  approximately  $813,000 was forgiven and treated as a
capital contribution by the General Partner.

(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  Partnerships'  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 or to 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  September  30,  2001,  the  Partnership  holds an interest in four 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 nine months ended  September 30, 2001, the  Partnership  made working
capital  advances  to six  Local  Limited  Partnerships  totaling  approximately
$10,000  to cover  Partnership  entity  expenses.  This  amount is  included  in
operating  expenses for the nine months ended  September 30, 2001. No repayments
were  received  during the nine months  ended  September  30,  2001.  No working
capital  advances or repayments  were made between the Partnership and the Local
Limited Partnerships for the nine months ended September 30, 2000.

During the nine months ended September 30, 2001 the Partnership received working
capital advances of approximately $8,000 from the General Partner. No repayments
were made during the nine month period  ended  September  30,  2001.  No working
capital  advances or  repayments  were made during the nine month  period  ended
September 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
three of the remaining four Local Limited  Partnerships had been reduced to zero
as of September  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 nine months ended
September  30, 2001.  Distributions  in excess of  investment  in Local  Limited
Partnerships of  approximately  $55,000 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  and/or net proceeds from the sale or refinancing of
the underlying properties.

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  $1,546,000  and $477,000 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 primarily 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 and payments on
advances from the General Partner  partially offset by advances from the General
Partner.  The ability of the Partnership to meet its on-going cash  requirements
in excess of cash on hand at  September  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.  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  $1,330,000 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  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.  Each of these Local
Limited Partnerships are actively attempting to sell their respective assets.

Esbro and  Mayfair  Manor  Limited  Partnerships  had notes  payable  which were
originally 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.  The Local Limited  Partnerships  did
not have the  resources to pay the amounts due. On July 20, 2001,  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  noteholder's  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 Esbro and Mayfair  Manor,  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 partners' individual tax situation.

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 September
30, 2001,  the  Partnership  continues to hold an interest in four Local Limited
Partnerships. To the extent the Partnership still has a carrying basis in one of
the Local Limited Partnerships, 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 September 30, 2001,
the Partnership had no carrying basis in three 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  $1,162,000 for the nine months
ended September 30, 2001,  compared to a net loss of approximately  $201,000 for
the nine months ended  September  30, 2000.  The  Partnership  had a net loss of
approximately $22,000 for the three months ended September 30, 2001, compared to
a net loss of  approximately  $64,000 for the three months ended  September  30,
2000.  Net income per unit of limited  partnership  increased to $62.71 per unit
for the nine months ended  September  30, 2001  compared to a net loss of $10.79
per unit  outstanding  during the nine months  ended  September  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  $620,000 of its allocated share of
losses from six Local Limited  Partnerships  for the nine months ended September
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 nine months ended September 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 $185,000 between periods. The increase is primarily due
to higher net losses at West Oak Village Apartments and Mayfair Manor during the
nine months ended  September  30, 2001 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 September 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: