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 QUARTERLY PERIOD ENDED  JANUARY 31, 1997

                                       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
                 January 31, 1997 and July 31, 1996 (Unaudited)
                                 (In thousands)

                                     ASSETS
                                                       January 31     July 31
                                                       ----------     -------

Investments in Debt Securities:
   Mortgage-Backed Securities available for sale      $  5,937       $  6,280
   Participating Insured Mortgage Loans 
     available for sale                                 18,717         18,539
                                                      --------       --------
                                                        24,654         24,819

Cash and cash equivalents                                3,617          3,637
Interest and other receivables                             169            172
Deferred expenses, net                                     574            615
                                                      --------       --------
                                                      $ 29,014       $ 29,243
                                                      ========       ========

                        LIABILITIES AND PARTNERS' CAPITAL

Accounts payable - affiliates                         $     33       $     30
Accounts payable and accrued expenses                       36             51
      Partners' capital                                 28,945         29,162
                                                      --------       --------
                                                      $ 29,014       $ 29,243
                                                      ========       ========

                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
         For the six months ended January 31, 1997 and 1996 (Unaudited)
                                 (In thousands)
                                                                  Corporate
                                                                  Limited
                                                   General        Partner and
                                                   Partner        Unitholders
                                                   -------        -----------

Balance at July 31, 1995                           $   1          $ 30,244
Net unrealized holding gains on debt securities        -               283
Cash distributions                                    (9)           (1,412)
Net income                                             9               894
                                                   -----          --------
Balance at January 31, 1996                        $   1          $ 30,009
                                                   =====          ========

Balance at July 31, 1996                           $   1          $ 29,161
Net unrealized holding gains on debt securities        -               292
Cash distributions                                   (10)           (1,373)
Net income                                             9               865
                                                   -----          --------
Balance at January 31, 1997                        $   -          $ 28,945
                                                   =====          ========


                             See accompanying notes.


<PAGE>


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

                              STATEMENTS OF INCOME
    For the three and six months ended January 31, 1997 and 1996 (Unaudited)
                      (In thousands, except per Unit data)

                                    Three Months Ended      Six Months Ended
                                         January 31,           January  31,
                                    ------------------     ------------------
                                     1997        1996       1997       1996
                                     ----        ----       ----       ----

Revenues:
   Interest income - Investments   $  502       $ 527      $1,009      $1,060
   Interest income - Money Market      50          49         100          98
                                   ------       -----      ------      ------
                                     552          576       1,109       1,158


Expenses:
   Management fees                    53           56         108         113
   General and administrative         40           56          85         100
   Amortization expense               21           21          42          42
                                  ------        -----      ------      ------
                                     114          133         235         255
                                  ------        -----      ------      ------
Net income                        $  438       $  443      $  874      $  903
                                  ======       ======      ======      ======

Net income per Unit of 
Depositary Receipt                $ 0.78        $0.79       $1.57      $ 1.62
                                  ======        =====       =====      ======

Cash distributions per Unit
    of Depositary Receipt         $ 1.24        $1.28       $2.49      $ 2.56
                                  ======        =====       =====      ======

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 CASH FLOWS
         For the six months ended January 31, 1997 and 1996 (Unaudited)
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)

                                                           1997          1996
                                                           ----          ----
Cash flows from operating activities:
  Net income                                           $    874      $    903
  Adjustments to reconcile net income to
   net cash provided by operating activities:
   Amortization expense                                      41            42
   Amortization of discount/premium on debt securities        9             9
   Changes in assets and liabilities:
     Interest receivable                                      3             6
     Accounts payable - affiliates                            3             -
     Accounts payable and accrued expenses                  (15)          (10)
                                                       --------      --------
      Total adjustments                                      41            47
                                                       --------      --------
      Net cash provided by operating activities             915           950
                                                       --------      --------

Cash flows from investing activities:
  Principal collections on Mortgage-Backed Securities       411           582
  Principal collections on Participating Insured
    Mortgage Loans                                           37            34
                                                       --------      --------
      Net cash provided by investing activities             448           616
                                                       --------      --------

Cash flows from financing activities:
  Distributions to Unitholders and partners              (1,383)       (1,421)
                                                       --------      --------

Net (decrease) increase in cash and cash equivalents        (20)          145

Cash and cash equivalents, beginning of period            3,637         3,274
                                                       --------      --------

Cash and cash equivalents, end of period               $  3,617      $  3,419
                                                       ========      ========



                             See accompanying notes.


<PAGE>


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





1.  Organization

      The accompanying financial statements, footnotes and discussions should be
   read in conjunction with the financial  statements and footnotes contained in
   the  Partnership's  Annual  Report for the year ended July 31,  1996.  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.  The  accounting   adjustments   included  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 require  management to make estimates and assumptions  that
   affect the reported  amounts of assets and  liabilities  and  disclosures  of
   contingent  assets and  liabilities  as of January 31, 1997 and July 31, 1996
   and revenues and expenses for the three and six months ended January 31, 1997
   and 1996.  Actual  results could differ from the  estimates  and  assumptions
   used.

2.  Mortgage-Backed Securities

      At  January   31,  1997  and  July  31,   1996,   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):

                             January 31, 1997                 July 31, 1996
                    -----------------------------    --------------------------
                     Estimated                        Estimated
                     Market      Face    Amortized    Market   Face    Amortized
     Description     Value       Value   Cost         Value    Value   Cost
     -----------     -----       -----   ----         -----    -----   ----

    9.5% GNMA Pool  $ 2,104    $ 1,937  $ 1,923      $ 2,228 $ 2,071  $ 2,055

    9.0% GNMA Pool      318        303      314          362     347      358

    8.0% GNMA Pool    3,194      3,104    3,240        3,363   3,326    3,468

    7.5% GNMA Pool      321        319      316          327     330      328
                    -------    -------  -------      ------- -------  -------
                    $ 5,937    $ 5,663  $ 5,793      $ 6,280 $ 6,074  $ 6,209
                    =======    =======  =======      ======= =======  =======


        As discussed further in the Annual Report, the Partnership's investments
    in MBS are carried at fair value as of January  31, 1997 and July 31,  1996.
    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.  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 January  31,  1997 and July 31,  1996 are  comprised  of the
    following (in thousands):

                                       January 31, 1997        July 31, 1996
                                   ---------------------   -------------------
    GNMA                            Estimated              Estimated
    Certificate           Interest  Market     Amortized   Market    Amortized
    Number    Property    Rate      Value      Cost        Value     Cost
    ------    --------    ----      -----      ----        -----     ----

    279985  Quarter Mill  8.50%   $ 7,519     $ 7,183     $ 7,441   $ 7,198
    279119  Emerald Cove  8.75%    11,198      10,671      11,098    10,697
                                  -------     -------     -------   -------
                                  $18,717     $17,854     $18,539   $17,895
                                  =======     =======     =======   =======

        As discussed further in the Annual Report, the Partnership's investments
    in  Participating  Insured  Mortgage  Loans are  carried at fair value as of
    January 31, 1997 and July 31, 1996.  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
    the reported financial results of the underlying properties and a comparison
    of recent market trades of securities with similar characteristics.

        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.  Scheduled principal
    repayments of $133,982 have been received through January 31, 1997.

         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 $108,000 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.  The  premium  is  included  in  the  balance  of the
    Participating Insured Mortgage Loan on the accompanying balance sheet and is
    being  amortized  on  the  straight-line   method,  which  approximates  the
    effective interest method, over 15 years.  Scheduled principal repayments of
    $173,438 have been received through January 31, 1997.
<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
    $108,000 and  $113,000  for the six months ended  January 31, 1997 and 1996,
    respectively.  Such management fees include an Asset Management Fee equal to
    0.75% per annum of the outstanding  principal  balance of the  Partnership's
    mortgage  securities and additional asset management fees equal to 2% of the
    Partnership's  distributable  cash, as defined. Of the total management fees
    incurred for the six months ended January 31, 1997 and 1996, $19,000 in each
    period  represents  additional asset management fees paid to PWPI.  Accounts
    payable -  affiliates  at January  31,  1997 and July 31,  1996  consists of
    $33,000 and $30,000, respectively, of management fees payable to the General
    Partner and its affiliates.

        Included in general and administrative expenses for the six months ended
    January 31, 1997 and 1996 is $48,000 and $47,000, 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 six-month
    periods ended January 31, 1997 and 1996 is $3,500 and $7,300,  respectively,
    representing fees earned by an affiliate,  Mitchell  Hutchins  Institutional
    Investors, Inc., for managing the Partnership's cash assets.

5.  Subsequent Event

        On February 28, 1997,  the General  Partner  authorized the payment of a
    special   distribution  to  Unitholders  in  the  amount  of   approximately
    $2,600,000,  or $47.13 per original  $1,000  investment,  in addition to the
    regular quarterly  distribution of $12.31 per original $1,000 investment for
    the quarter ended January 31, 1997. Both distributions will be paid on March
    14,  1997 to  Unitholders  of record as of January  31,  1997.  The  special
    distribution  consists of Partnership  cash reserves  which exceed  expected
    future requirements.





<PAGE>



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

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

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

    The Partnership's investments are structured to provide safety of principal.
The Partnership's  principal  investments in both Participating Insured Mortgage
Loans and conventional mortgage-backed securities are 100% guaranteed by GNMA in
the event of defaults by the underlying property owners. Obligations of GNMA are
backed by the full faith and credit of the Federal  government.  The Partnership
does face potential market risk in the event that the Partnership,  as expected,
liquidates  its  investments  in   Participating   Insured  Mortgage  Loans  and
non-participating  mortgage-backed  securities  prior to the scheduled  maturity
dates of such  investments.  Depending on the general  level of market  interest
rates  at the  time of the sale of any of the  Partnership's  mortgage  security
investments, the market value of the investments may be higher or lower than the
outstanding  principal  balances.  Nonetheless,  since  the  Partnership  is not
required to be liquidated prior to the scheduled maturity dates,  management can
limit the exposure to market risk by attempting to time the  liquidation  of the
Partnership's investments to coincide with a period of favorable interest rates.
However,  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.  The market value of the  Partnership's  Participating  Insured
Mortgage Loans is also affected by the value,  if any, that is attributed to the
participation  features  of such loans.  Such value is impacted by overall  real
estate  market  conditions  and by the specific  performance  of the  properties
securing  the   Partnership's   participation   interests.   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 would be expected to be slightly above both
their face value and amortized cost, which includes any unamortized discounts or
premiums.  As of January  31,  1997,  the  Partnership's  Participating  Insured
Mortgage  Loans,  which  carry  coupon  interest  rates of 8.5% and  8.75%,  had
estimated  market  values  slightly  above their face values due to a variety of
factors,  including the  participation  features.  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  Insured
Mortgage  Loans and the  portfolio of MBS  investments  to fall below face value
and/or amortized cost. However, fluctuating market conditions will not result in
realized  gains or losses unless the  Partnership's  investments  are prepaid or
sold prior to maturity.  Secondary market sales of the Partnership's investments
would  likely  only  occur  as part of a  formal  plan  of  liquidation  for the
Partnership.

     The Partnership is also subject to possible reinvestment risk to the extent
that its principal  investments are prepaid prior to the Partnership's  expected
liquidation  period.  Depending on the general level of market interest rates at
the time of such a prepayment, the Partnership or an individual Unitholder might
be unable to earn a comparable yield on a similar  low-risk  investment upon the
reinvestment  of such funds.  Over the past several years,  generally low market
interest rates have prompted a high level of refinancing activity,  resulting in
significant prepayments on the Partnership's  non-participating  mortgage-backed
securities.  Such prepayments have reduced the  Partnership's  investment income
and  increased  the  outstanding  balance of the  Partnership's  cash  reserves.
Current  rates of return do not  warrant  the  reinvestment  of these  principal
prepayments in additional non-participating mortgage backed securities. Since is
unlikely  that  there  will be a  default  on either  of the  Partnership's  two
remaining  multi-family  participating  loans,  management has concluded that it
would be in the best  interests of the  Unitholders to return the portion of the
Partnership's   cash  reserves  which  exceeds  expected  future   requirements.
Consequently,  the Partnership will distribute  approximately  $2,600,000 of its
excess reserves, or $47.13 per original $1,000 investment,  in a special capital
distribution  to be made on March 14, 1997,  which is in addition to the regular
quarterly  distribution of $12.31 per original  $1,000  investment to be paid on
the same date for the quarter ended January 31, 1997.

    Regular  quarterly  distributions  are  comprised of  investment  income and
return of capital which results from amortization of mortgage  principal as well
as  principal  prepayments  from  the  non-participating   GNMA  mortgage-backed
securities.  Such principal  prepayments  are  unpredictable  and have been high
during recent years,  but have declined  during the past two quarters.  Based on
this decline in the rate of principal  prepayments and the expectation that this
decline will  continue in the future,  the  Partnership  will reduce the regular
quarterly  distribution rate effective for the third quarter of fiscal 1997 from
8.25% per annum to 6.5%,  of which  approximately  5.5% is expected to represent
net  investment  income and 1% is  expected  to be a return of  capital.  If the
actual payment levels exceed  anticipated  levels during the next twelve months,
the  Partnership  is expected  to make a Special  Distribution  of these  excess
amounts  in  March  1998 and each  subsequent  March,  if  warranted  by  future
principal repayment levels.
<PAGE>
     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 90% for the current fiscal  quarter,  compared to
96% for the prior  quarter and 94% for the same quarter a year ago. The decrease
in occupancy is primarily  attributable to the  competition  from the four newly
developed  properties which opened in this submarket during the past six months.
These  competing  properties  offered rental  concessions in order to accelerate
their  leasing   progress.   Prepayment  of  the   Partnership's   Emerald  Cove
Participating  Insured  Mortgage Loan is restricted  through March 1997 and then
requires a prepayment  penalty which declines  ratably,  from 5% to 2%, over the
next four years.  There are no ongoing  prepayment  discussions with the Emerald
Cove owner at the present time.

     Occupancy at the Quarter Mill Apartments  during the current fiscal quarter
averaged 98%, unchanged from the prior quarter.  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 1996, the Partnership received
approximately  $46,000,  representing  its 30%  share of the  surplus  cash,  as
defined,  generated  by the  Quarter  Mill  property  for  calendar  year  1995.
Effective in fiscal 1996, the Quarter Mill  Participating  Insured Mortgage Loan
became open to prepayment  with a specified  prepayment  penalty which  declines
ratably,  from 10% to 2%, over the next five years.  To date,  the Quarter  Mill
owner has given no indication of an intent to prepay the outstanding loan in the
near term.

     At January 31,  1997,  the  Partnership  had cash and cash  equivalents  of
approximately $3,617,000. 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.

Results of Operations
Three Months Ended January 31, 1997
-----------------------------------

     Net income decreased by $5,000 for the three months ended January 31, 1997,
when compared to the same period in the prior year, due to a $24,000  decline in
total  revenues which was partially  offset by a $19,000  reduction in operating
expenses.  The decrease in revenues can be  attributed  primarily to the $25,000
decline  in  interest  income  from  Participating  Insured  Mortgage  Loans and
non-participating MBS. This decline in interest income resulted from a reduction
in the  average  outstanding  principal  balances  of  such  investments  due to
scheduled  principal  amortization  and  prepayments  on the MBS. An increase of
$1,000  in money  market  interest  income  in the  current  three-month  period
partially offset the decline in revenues  generated from the investments in debt
securities.  The increase in money market  interest income was mainly the result
of an increase in the average outstanding balance of the Partnership's  invested
cash  reserves.  Future  money  market  interest  income is  expected to decline
subsequent to the $2.6 million  special  distribution of excess cash reserves to
be made on March 14, 1997, as discussed further above. The decrease in operating
expenses resulted from a $16,000 decrease in general and administrative expenses
and a $3,000 decrease in management fees.  General and  administrative  expenses
decreased  primarily  due  to  a  reduction  in  certain  required  professional
services, while the decrease in management fees reflects the declining principal
balances of the Partnership's  outstanding mortgage securities,  upon which such
fees are primarily based.

Six Months Ended January 31, 1997
---------------------------------

     Net income  decreased by $29,000 for the six months ended January 31, 1997,
when compared to the same period in the prior year, due to a $49,000  decline in
total  revenues which was partially  offset by a $20,000  reduction in operating
expenses.  The decrease in revenues can be  attributed  to a $51,000  decline in
interest income from Participating  Insured Mortgage Loans and non-participating
MBS.  This decline in interest  income  resulted from a reduction in the average
outstanding  principal  balances of such investments due to scheduled  principal
amortization  and  prepayments on the MBS. An increase of $2,000 in money market
interest income in the current  six-month period partially offset the decline in
revenues  generated  from the  investments in debt  securities.  The increase in
money market interest income was mainly the result of an increase in the average
outstanding  balance of the Partnership's  invested cash reserves.  Future money
market  interest  income is expected to decline  subsequent  to the $2.6 million
special  distribution  of excess cash  reserves to be made on March 14, 1997, as
discussed  further  above.  The decrease in operating  expenses  resulted from a
$15,000 reduction in general and administrative expenses and a $5,000 decline in
management fees. General and administrative  expenses decreased primarily due to
reduction  in certain  required  professional  services,  while the  decrease in
management fees reflects the declining  principal  balances of the Partnership's
outstanding mortgage securities, upon which such fees are primarily based.


<PAGE>



                                     PART II
                                Other Information

Item 1. Legal Proceedings

     With regard to the proposed  settlement of the New York Limited Partnership
Actions described in the  Partnership's  Annual Report on Form 10-K for the year
ended July 31, 1996, a final hearing on the fairness of the proposed  settlement
was held in December  1996,  and a ruling by the court as a result of this final
hearing is currently  pending.  


     Mediation with respect to the Abbate and Barstad  actions  described in the
Partnership's  Annual  Report  was held in  December  1996.  As a result of such
mediation,  a tentative  settlement  between  PaineWebber and the plaintiffs was
reached which would provide for complete resolution of both actions. PaineWebber
anticipates  that releases and  dismissals  with regard to these actions will be
received by March 1997.


Item 2. 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: March 13, 1997          By:   /s/ Walter V. Arnold
                                    --------------------
                                    Walter V. Arnold
                                    Vice President and
                                    Chief Financial Officer