UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                       ----------------------------------

                                    FORM 10-Q

           |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                     FOR THE QUARTER ENDED October 31, 1998

                                       OR

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

               For the transition period from ______ to _______ .


                         Commission File Number: 0-18076


                 PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
                  ---------------------------------------------
             (Exact name of registrant as specified in its charter)


            Delaware                                           04-3038480
            --------                                           ----------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)


265 Franklin Street, Boston, Massachusetts                          02110
------------------------------------------                         -------
(Address of principal executive offices)                           (Zip Code)


Registrant's telephone number, including area code  (617) 439-8118
                                                    --------------

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

 <PAGE>

              PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

                              BALANCE SHEETS
              October 31, 1998 and July 31, 1998 (Unaudited)
                              (In thousands)

                                  ASSETS
                                                  October 31     July 31
                                                  ----------     -------
Investments in Debt Securities:
   Mortgage-Backed Securities available
     for sale                                     $   3,832     $   4,178
   Participating Insured Mortgage Loans
     available for sale                              18,177        18,447
                                                  ---------      --------
                                                     22,009        22,625

Cash and cash equivalents                             1,960         1,702
Interest and other receivables                          153           156
Deferred expenses, net                                  310           354
                                                  ---------      --------
                                                  $  24,432      $ 24,837
                                                  =========      ========

                        LIABILITIES AND PARTNERS' CAPITAL

Accounts payable - affiliates                     $      27      $     27
Accounts payable and accrued expenses                    40            50
Partners' capital                                    24,365        24,760
                                                  ---------      --------
                                                  $  24,432      $ 24,837
                                                  =========      ========



















                          See accompanying notes.


<PAGE>


                 PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

                  STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
        For the three months ended October 31, 1998 and 1997 (Unaudited)
                      (In thousands, except per Unit data)

                                                 1998        1997
                                                 ----        ----

Revenues:
   Interest income - Debt Securities           $   442     $   475
   Interest income - Money Market                   26          19
                                               -------     -------
                                                   468         494

Expenses:
   Management fees                                  49          52
   General and administrative                       43          43
   Amortization expense                             44          44
                                               -------     -------
                                                   136         139
                                               -------     -------

Net income                                     $   332     $   355

Other comprehensive income (loss):
   Unrealized holding gains and (losses)
    on debt securities                            (249)         27
                                               -------     -------

Comprehensive income                           $    83     $   382
                                               =======     =======


Net income per Unit of Depositary Receipt       $ 0.60      $ 0.64
                                                ======      ======

Cash distributions per Unit of 
  Depositary Receipt                            $ 0.86      $ 0.89
                                                ======      ======

      The above net income and cash distributions per Unit of Depositary Receipt
are based upon the 551,604 Units outstanding for each period.








                          See accompanying notes.


<PAGE>


                 PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

               STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT
        For the three months ended October 31, 1998 and 1997 (Unaudited)
                                 (In thousands)

                                                            Corporate Limited
                                                General        Partner and
                                                Partner        Unitholders
                                                -------        -----------

Balance at July 31, 1997                       $    (2)        $ 25,905

Comprehensive income:
    Net income                                       4              351

    Net unrealized holding gains
      on debt securities                             -               27
                                               -------         --------

                                                     4              378

Cash distributions                                  (5)            (488)
                                               -------         --------

Balance at October 31, 1997                    $    (3)        $ 25,795
                                               =======         ========

Balance at July 31, 1998                       $    (4)        $ 24,764

Comprehensive income:
    Net income                                       3              329

    Net unrealized holding losses
      on debt securities                             -             (249)
                                               -------         --------

                                                     3               80

Cash distributions                                  (4)            (474)
                                               -------         --------


Balance at October 31, 1998                    $    (5)        $ 24,370
                                               =======         ========









                          See accompanying notes.


<PAGE>
                 PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

                            STATEMENTS OF CASH FLOWS
              For the three months ended October 31, 1998 and 1997
          Increase (Decrease) in Cash and Cash Equivalents (Unaudited)
                                 (In thousands)

                                                      1998        1997
                                                      ----        ----
Cash flows from operating activities:
  Net income                                       $     332   $     355
  Adjustments to reconcile net income to
   net cash provided by operating activities:
   Amortization expense                                   44          44
   Amortization of discount/premium on debt
      securities                                          19          15
   Changes in assets and liabilities:
     Interest receivable                                   3           2
     Accounts payable and accrued expenses               (10)          2
                                                   ---------   ---------
      Total adjustments                                   56          63
                                                   ---------   ---------
      Net cash provided by operating activities          388         418
                                                   ---------   ---------

Cash flows from investing activities:
  Principal collections on Mortgage-Backed 
     Securities                                          326         174
  Principal collections on Participating 
     Insured Mortgage Loans                               22          20
                                                   ---------   ---------
      Net cash provided by investing activities          348         194
                                                   ---------   ---------

Cash flows from financing activities:
  Distributions to Unitholders and partners             (478)       (493)
                                                   ---------   ---------

Net increase in cash and cash equivalents                258         119

Cash and cash equivalents, beginning of period         1,702       1,310
                                                   ---------   ---------

Cash and cash equivalents, end of period           $   1,960   $   1,429
                                                   =========   =========








                          See accompanying notes.


<PAGE>


              PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.
                       Notes to Financial Statements
                                (Unaudited)


1.  General
    -------

      The accompanying financial statements,  footnotes and discussion should be
read in conjunction with the financial statements and footnotes contained in the
Partnership's  Annual Report for the year ended July 31, 1998. In the opinion of
management, the accompanying financial statements,  which have not been audited,
reflect all adjustments  necessary to present fairly the results for the interim
period. All of the accounting  adjustments reflected in the accompanying interim
financial statements are of a normal recurring nature.

      The  accompanying  financial  statements have been prepared on the accrual
basis of accounting in accordance with generally accepted accounting  principles
which  requires  management to make  estimates and  assumptions  that affect the
reported amounts of assets and liabilities and disclosures of contingent  assets
and  liabilities  as of October  31,  1998 and July 31,  1998 and  revenues  and
expenses for each of the  three-month  periods  ended October 31, 1998 and 1997.
Actual results could differ from the estimates and assumptions used.

2.  Mortgage-Backed Securities
    --------------------------  

      At  October   31,  1998  and  July  31,   1998,   the   Partnership   held
non-participating  mortgage-backed securities ("MBS") backed by single-family or
multi-family  mortgage loans issued or originated in connection with the housing
programs  of  the  Government  National  Mortgage  Association   ("GNMA"),   and
guaranteed by GNMA, as follows (in thousands):
<TABLE>
<CAPTION>
                                        October 31, 1998                           July 31, 1998
                         -------------------------------------        ---------------------------------------
                         Estimated                                    Estimated
                         Market         Face         Amortized        Market           Face         Amortized
     Description         Value          Value        Cost             Value            Valu         Cost
     <S>                 <C>            <C>          <C>              <C>              <C>          <C>

    9.5% GNMA Pool       $ 1,266       $ 1,180       $ 1,173          $ 1,394          $ 1,294      $ 1,286

    9.0% GNMA Pool           162           159           164              178              174          181

    8.0% GNMA Pool         2,194         2,107         2,175            2,382            2,289        2,376

    7.5% GNMA Pool           210           203           203              224              218          216
                         -------       -------       -------          -------          -------      -------
                         $ 3,832       $ 3,649       $ 3,715          $ 4,178          $ 3,975      $ 4,059
                         =======       =======       =======          =======          =======      =======
</TABLE>

      The  Partnership's  investments  in MBS are  carried  at fair  value as of
October  31,  1998 and July 31,  1998.  Investments  in MBS are valued  based on
quoted market prices. The amortized cost of the MBS represents the face value of
the securities net of unamortized premium or discount. Beginning in fiscal 1998,
the premiums and discounts are being amortized on a straight-line basis over the
expected remaining holding periods of the investments,  of three years. Prior to
fiscal 1998,  the premium and discounts  were being  amortized  over an original
estimated holding period of fifteen years.  Investments in non-participating MBS
were limited to no more than 30% of the  original net offering  proceeds per the
terms of the Partnership's offering prospectus.

      The 9.5% MBS,  which were  purchased  at a discount on December  14, 1988,
carry a coupon  interest rate of 9.5% per annum and include loans with scheduled
maturities  between  June  2009 and  December  2009.  The 9.0% MBS,  which  were
purchased  at a premium on November 16, 1989,  carry a coupon  interest  rate of
9.0% per annum and include loans with scheduled maturities between June 2001 and
September  2002.  The 8.0% MBS,  which were  purchased  at a premium on July 30,
1992,  carry a coupon  interest  rate of 8.0% per annum and  include  loans with
scheduled  maturities  in June 2022.  The 7.5% MBS,  which were  purchased  at a
discount on October 30, 1992,  carry a coupon  interest  rate of 7.50% per annum
and include loans with scheduled maturities in March 2022. The loans included in
these GNMA pool programs may be prepaid, without penalty, at any time.
<PAGE>

3.  Investments in Participating Insured Mortgage Loans
    ---------------------------------------------------

      Participating   Insured   Mortgage   Loans  secured  by  GNMA   securities
outstanding at October 31, 1998 and July 31, 1998 are comprised of the following
(in thousands):
<TABLE>
<CAPTION>

                                                 October 31, 1998               July 31, 1998
                                             ----------------------        ----------------------
    GNMA                                      Estimated                    Estimated
    Certificate                  Interest     Market      Amortized        Market        Amortized
    Number       Property        Rate         Value        Cost            Value         Cost
    ------       --------        ----         -----        ----            -----         ----
    <S>          <C>             <C>          <C>          <C>             <C>           <C>

    279985       Quarter Mill    8.50%        $  7,336     $ 7,122         $  7,403      $ 7,132
    279119       Emerald Cove    8.75%          10,841      10,563           11,044       10,576
                                              --------     -------         --------      -------
                                              $ 18,177     $17,685         $ 18,447      $17,708
                                              ========     =======         ========      =======
</TABLE>

      The Partnership's  investments in Participating Insured Mortgage Loans are
carried at fair value as of October 31, 1998 and July 31, 1998.  Investments  in
Participating  Insured  Mortgage  Loans,  for which quoted market prices are not
available,  are valued by an independent  pricing  service which  determines the
valuations  based on a comparison of recent  market  trades of  securities  with
similar  characteristics.  Because of the inherent  uncertainty  of  valuations,
estimated  values,  as reflected  herein,  may differ from the values that would
have been used had a ready market for the securities  existed.  Descriptions  of
the  properties  financed  by the  Partnership's  loans and the loan  agreements
themselves are summarized below:

      Quarter Mill Apartments
      -----------------------

      The  Partnership  acquired  a  Participating  Insured  Mortgage  Loan with
respect to a 266-unit apartment complex known as Quarter Mill Apartments located
in Richmond,  Virginia (the "Virginia  Project").  Construction  of the Virginia
Project was completed in November of 1990. Initial closing of this Participating
Insured Mortgage loan took place on August 2, 1989. The project owner is Amurcon
Corporation.  The Base Component of this Participating  Insured Mortgage Loan is
coinsured by FHA and  represented by GNMA  Securities with an initial face value
of $7,316,600,  which GNMA Securities bore interest at the rate of 10.25% during
construction  of the Virginia  Project and 8.50%  thereafter.  Effective  May 1,
1991, the  construction  loan was converted to a permanent loan with a principal
balance of  $6,525,000.  On June 21,  1991 an  additional  $791,600  was funded,
completing  the  Partnership's  investment of  $7,316,600.  Monthly  payments of
principal and interest totalling approximately $53,549 are due through maturity,
on October 15,  2031.  Scheduled  principal  repayments  of  $194,111  have been
received through October 31, 1998.

      Emerald Cove Apartments
      -----------------------

      The  Partnership  acquired  a  Participating  Insured  Mortgage  Loan with
respect to a 276-unit  apartment  complex  known as Emerald Cove  Apartments  in
Charlotte,  North Carolina (the "North  Carolina  Project").  Initial closing of
this  Participating  Insured  Mortgage Loan took place on October 16, 1989.  The
project  owners are Ronald Curry and Ralph  Abercia.  The Base Component of this
Participating  Insured Mortgage Loan is coinsured by FHA and represented by GNMA
Securities  with an initial  face value of  $10,783,900  at closing,  which GNMA
Securities bore interest at the rate of 10.25% during  construction of the North
Carolina  Project and 8.75%  thereafter.  During  fiscal 1992,  the  Partnership
funded its remaining  commitment on the investment of  approximately  $1,184,000
and,  effective May 1, 1992,  the  investment  was converted to a permanent loan
with a  principal  balance of  $10,776,500.  The  Partnership  paid a premium of
$107,840 to the GNMA issuer to obtain the original  loan  commitment  due to the
fact that the permanent  loan interest  rate was higher than  comparable  market
rates at the time of the initial closing.  Prior to fiscal 1998, the premium had
been amortized on the straight-line  method over a 15-year  amortization period.
Beginning in fiscal 1998, the amortization  rate has been increased to reflect a
reduction in the expected  remaining  holding period of the investment.  Monthly
payments of  principal  and  interest  totalling  approximately  $81,135 are due
through maturity, on August 15, 2031. Scheduled principal repayments of $258,397
have been received through October 31, 1998.
<PAGE>

4.  Related Party Transactions
    --------------------------

      Management  fees earned by the  General  Partner  and its  affiliates  for
services rendered in managing the business of the Partnership aggregated $49,000
and $52,000 for the three months ended October 31, 1998 and 1997,  respectively.
Included  in both of these  amounts  is  $9,000  representing  additional  asset
management  fees  paid  to  PWPI  which  are  based  on the  Partnership's  cash
distributions of operating  income,  as discussed  further in the  Partnership's
Annual Report. Accounts payable affiliates at both October 31, 1998 and July 31,
1998 consist of $27,000 of  management  fees payable to the General  Partner and
its affiliates.

      Included in general and administrative expenses for the three months ended
October  31, 1998 and 1997 is $24,000 and  $23,000,  respectively,  representing
reimbursements  to an affiliate  of the General  Partner for  providing  certain
financial, accounting and investor communication services to the Partnership.

      Also included in general and  administrative  expenses for the three-month
periods  ended  October 31,  1998 and 1997 is $2,000 and  $1,000,  respectively,
representing  fees  earned  by an  affiliate,  Mitchell  Hutchins  Institutional
Investors, Inc., for managing the Partnership's cash assets.



<PAGE>

                 PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information Relating to Forward-Looking Statements
--------------------------------------------------

      The following  discussion of financial condition includes  forward-looking
statements  which  reflect  management's  current  views with  respect to future
events and  financial  performance  of the  Partnership.  These  forward-looking
statements  are  subject to certain  risks and  uncertainties,  including  those
identified  in Item 7 of the  Partnership's  Annual  Report on Form 10-K for the
year ended July 31, 1998 under the heading  "Certain  Factors  Affecting  Future
Operating  Results",  which could cause actual results to differ materially from
historical  results  or  those  anticipated.   The  words  "believe,"  "expect,"
"anticipate,"  and  similar  expressions  identify  forward-looking  statements.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements,  which were made based on facts and conditions as they existed as of
the date of this report.  The  Partnership  undertakes no obligation to publicly
update or revise  any  forward-looking  statements,  whether  as a result of new
information, future events or otherwise.

Liquidity and Capital Resources
-------------------------------

      The Partnership is currently  analyzing potential  disposition  strategies
for its remaining  investments.  As part of these  efforts,  the  Partnership is
evaluating the current  economic  benefits it would receive if the owners of the
Emerald Cove  Apartments  and the Quarter Mill  Apartments  were to prepay their
participating  loans by the end of calendar year 1999.  The current  strength of
the national  real estate  market for the sale or  refinancing  of  multi-family
apartment  properties  has  increased  the  likelihood  of  one or  both  of the
Partnership's  participating  loans being prepaid in the near term. In addition,
while the Partnership  cannot require either of the owners to prepay their loans
for the next several years,  the Partnership  could possibly sell one or both of
the participating loans and some or all of the non-participating mortgage-backed
securities  pools in the near term. In this regard,  a key  consideration is the
strength of the buying markets for these types of investments.  Also, as part of
any sale of its two  participating  mortgage loans, the Partnership would expect
to receive fair value for its  entitlement to participate in potential cash flow
increases  and  capital  appreciation  from  each  property  as  well as for its
entitlement to receive prepayment penalties if either of the participating loans
were  prepaid by the property  owners.  As discussed  further  below,  as of the
present date the amounts of the prepayment  penalties which could be received on
the two  remaining  participating  loans range from 6% to 2% of the  outstanding
loan balances  depending on the date of the  prepayment.  Although no assurances
can be given,  it is currently  contemplated  that sales or  prepayments  of the
Partnership's remaining investments could be completed within the next year. The
disposition  of all of the  Partnership's  investments  would be  followed  by a
formal liquidation of the Partnership.

      The Partnership's non-participating MBS have coupon interest rates ranging
from 7.5% to 9.5%.  Based on current market interest rate levels,  the aggregate
market value of these securities at the present time is above both the aggregate
face value and  amortized  cost,  which  includes any  unamortized  discounts or
premiums. As of October 31, 1998, the Partnership's two remaining  participating
loans, which carry coupon interest rates of 8.5% and 8.75%, had estimated market
values  which were  higher  than their face  values due to a variety of factors,
including the participation features.  However, during the quarter ended October
31, 1998 a reduction in the liquidity in the credit markets reduced the premiums
at  which  securities  comparable  to the  Partnership's  Participating  Insured
Mortgage  Loans  were  trading  in the  secondary  market.  Increases  in market
interest rates and/or  deterioration in general real estate market conditions in
the near term could cause the aggregate market value of the participating  loans
and the portfolio of non-participating  MBS investments to fall below face value
and/or  amortized  cost.  In the event  that such  circumstances  were to occur,
management is not  prohibited  from selling any security at a loss and may do so
if it is  believed  that  such a sale  would  be in the  best  interests  of the
Partnership.

      As previously reported,  generally low market interest rates have prompted
a high level of refinancing  activity over the past several years,  resulting in
significant prepayments on the Partnership's  non-participating  mortgage-backed
securities.  Such  prepayments  had the  effect of  reducing  the  Partnership's
investment  income and cash flows from  operating  activities and increasing the
outstanding  balance of the  Partnership's  cash  reserves.  Since it was deemed
unlikely  that  there  would be a default  on either  of the  Partnership's  two
remaining  multi-family  participating  loans,  and since the  current  rates of
return available on non-participating  mortgage-backed  security investments did
not warrant reinvestment by the Partnership,  management concluded during fiscal
1997 that it would be in the best  interests  of the  Unitholders  to return the
portion of the  Partnership's  cash  reserves  which  exceeded  expected  future
requirements. Consequently, the Partnership distributed $2,600,000 of its excess
reserves,  or $47.13 per original $1,000 investment,  in a special  distribution
made on March  14,  1997.  Regular  quarterly  distributions  are  comprised  of
investment  income  and  return of  capital  which  results  from the  scheduled
amortization  of mortgage  principal  on all of the debt  securities  as well as
principal   prepayments   from  the   non-participating   GNMA   mortgage-backed
securities.  Such principal  prepayments are unpredictable  and, as noted above,
have been high during recent years but declined during fiscal 1997, resulting in
a reduction in cash flows from  investing  activities.  Based on this decline in
the rate of principal  prepayments and the  expectation  that this decline would
continue  in the future,  the  Partnership  had  reduced  the regular  quarterly
distribution  rate effective for the payment made on June 13, 1997 for the third
quarter of fiscal 1997. The  distribution  rate declined from 8.25% per annum to
6.5%.  During fiscal 1998,  however,  actual  principal  prepayment  levels were
higher than  projected  resulting  in an  increase in cash flows from  investing
activities.  As a result, the Partnership made a special capital distribution of
excess cash  totalling  approximately  $552,000,  or $10.00 per original  $1,000
investment,  to the Limited  Partners  on March 13,  1998,  concurrent  with the
regular   quarterly   distribution  for  the  period  ended  January  31,  1998.
Distributions are expected to continue to be made at a rate of 6.5% per annum on
remaining  invested  capital  during  fiscal 1999,  and the  Partnership's  cash
reserve  levels will be reviewed  again in early calendar year 1999 to determine
whether another special capital distribution will be made in March 1999.

      The Partnership's two remaining  Participating  Insured Mortgage Loans are
secured by the Emerald Cove and Quarter Mill apartment complexes.  The occupancy
level at Emerald  Cove  averaged  96% for the quarter  ended  October 31,  1998,
unchanged  from the fourth  quarter of fiscal 1998. As discussed  further in the
Annual Report,  due to the increased  competition  from several newly  developed
properties in the local Charlotte,  North Carolina submarket,  the use of rental
concessions  had been  necessary  at Emerald  Cove to  maintain  the  property's
occupancy levels. However,  because the property's occupancy level stabilized in
the  mid-90%  range  over  the  past  year,  the  property's  leasing  team  has
discontinued  offering rental  concessions on both new and renewal  leases.  The
property's  rental rates and  occupancy  levels  remain  comparable  to those of
directly  competitive  properties  in  the  local  market.   Prepayment  of  the
Partnership's  Emerald Cove  Participating  Insured Mortgage Loan was restricted
through  March  1997 and then  requires  a  prepayment  penalty  which  declines
ratably, from 5% to 2%, over the next four years. During the quarter ended April
30, 1998, the Emerald Cove owner informed the Partnership  that the property was
being  actively  marketed  for sale and asked that the  Partnership  specify the
terms upon which it would accept  prepayment of the  participating  loan. During
the  quarter  ended July 31,  1998,  the owner of the  Emerald  Cove  Apartments
approached the Partnership regarding a prepayment of the participating  mortgage
loan as part of a potential sale of the Emerald Cove property.  However,  during
the current  quarter,  the Partnership was informed that the potential buyer and
the owner were not able to agree on final terms and that a sale would not occur.
As previously  reported,  the owner of the Emerald Cove Apartments has initiated
discussions  of prepayment on several  occasions  over the past four years,  but
none of those  discussions  have  resulted  in a  prepayment  transaction.  As a
result,  as noted above, the Partnership is presently  reviewing other potential
disposition options for its Participating Insured Mortgage Loan investments.

      The Quarter Mill  Apartments  continued its strong  operating  performance
during the first quarter of fiscal 1999, with an average occupancy level of 98%,
unchanged from the fourth quarter of 1998.  Because the Quarter Mill  Apartments
participates in the Low Income Housing Tax Credit Program,  its rental rates are
based on the  metropolitan  area's median family  income,  rather than on market
rent levels.  Average  rental rates on new leases being signed are up 3.75% from
one year ago. A strong local rental  market,  combined  with below market rental
rates at Quarter Mill, has resulted in consistently high occupancy levels at the
property.  Property operations continue to generate small amounts of excess cash
flow, a portion of which is payable to the  Partnership as Contingent  Interest.
During  fiscal  1998,  1997 and 1996,  the  Partnership  received  approximately
$54,000,  $49,000 and $46,000,  respectively,  representing its 30% share of the
surplus cash, as defined.  The Quarter Mill Participating  Insured Mortgage Loan
became open to prepayment in February 1996 with a specified  prepayment  penalty
which  declines  ratably,  from 10% to 2%, over a period of five  years.  During
fiscal  1998,  the  Partnership  and the owner of Quarter  Mill  engaged in very
preliminary  discussions  concerning a potential prepayment of the Participating
Insured  Mortgage  Loan.  However,  to date no proposals to prepay the loan have
been received from the owner of Quarter Mill.

      At October 31, 1998,  the  Partnership  had cash and cash  equivalents  of
approximately $1,960,000. Such amounts will be utilized for distributions to the
Unitholders,   as  discussed   further  above,   and  for  the  working  capital
requirements   of  the   Partnership.   The  source  of  future   liquidity  and
distributions  to the Unitholders is expected to be primarily  through  interest
income and principal  repayments  from the  Partnership's  mortgage  securities,
money-market interest income from invested cash reserves, and to a lesser extent
from  Contingent  Interest from  Participating  Insured  Mortgage  Loans and Net
Project  Residuals from the sale or refinancing of the properties  securing such
investments.

      As noted above, the Partnership  expects to be liquidated  within the next
year.  Notwithstanding  this,  the  Partnership  believes  that it has  made all
necessary modifications to its existing systems to make them year 2000 compliant
and does not expect that additional  costs associated with year 2000 compliance,
if any, will be material to the Partnership's results of operations or financial
position.
<PAGE>

Results of Operations
Three Months Ended October 31, 1998
-----------------------------------

      The Partnership reported net income of $332,000 for the three months ended
October 31,  1998,  as compared to net income of $355,000 for the same period in
the prior year. This decrease in net income for the first quarter of fiscal 1999
resulted  from a decrease  in total  revenues of  $26,000,  which was  partially
offset by a decrease in total  expenses of $3,000.  The decrease in revenues was
the result of a $33,000 decline in interest income from debt  securities,  which
was  offset by an  increase  of  $7,000 in money  market  interest  income.  The
decrease in interest  income from debt  securities  resulted from a reduction in
the average  outstanding  principal  balances of Participating  Insured Mortgage
Loans and non-participating  MBS due to scheduled principal  amortization on all
of the debt  securities and prepayments on the MBS. The increase in money market
interest income resulted from an increase in the average  outstanding balance of
the Partnership's invested cash reserves. The decrease in total expenses was the
result of a reduction in management fee expense. Management fee expense declined
due to a decrease in the outstanding balances of debt securities upon which such
fees are based.


<PAGE>



                                  PART II
                             Other Information



Item 1. through 5.   NONE

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits: NONE

(b) Reports on Form 8-K:

     No reports on Form 8-K have been filed by the registrant during the quarter
for which this report is filed.



<PAGE>








              PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.


                                SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Partnership  has duly  caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.


                          PAINEWEBBER INSURED MORTGAGE PARTNERS 1-B, L.P.



                             By: FIRST INSURED MORTGAGE PARTNERS, INC.
                                 ------------------------------------
                                    Managing General Partner





Date: December 8, 1998        By:   /s/ Walter V. Arnold
                                    --------------------
                                    Walter V. Arnold
                                    Senior Vice President and
                                    Chief Financial Officer