EXHIBIT 10.11

                          SECOND MODIFICATION AGREEMENT

         THIS SECOND MODIFICATION AGREEMENT  ("Agreement") is entered into as of
October 9, 1997, among CONTINENTAL  HOMES HOLDING CORP., a Delaware  corporation
("Borrower"),  the Banks listed on the signature  pages of this  Agreement,  and
BANK ONE,  ARIZONA,  NA, a national banking  association,  as Agent. The parties
hereto agree as follows:

RECITALS:
---------

         A. Agent,  Banks and Borrower  entered into a Credit Agreement dated as
of June 27, 1996, as amended by that First  Modification  Agreement  dated as of
April 11,  1997  (the  "Credit  Agreement")  pursuant  to which the banks  named
therein  (the  "Banks"),  among  other  things,  established  a credit  facility
("Credit Facility") for Borrower,  which is evidenced by the Notes.  Capitalized
terms not otherwise defined herein shall have the same meanings ascribed to such
terms in the Credit Agreement.

         B. Borrower has requested that Banks decrease the interest rate payable
by Borrower under the Credit Facility. Additionally, Borrower has requested that
Banks add  certain  subsidiaries  of  Borrower  as  guarantors  under the Credit
Facility.  Banks have agreed to so modify the Credit  Facility  and to amend the
Credit  Agreement  and other  Loan  Documents  on the terms and  subject  to the
conditions set forth in this Agreement.

AGREEMENTS:
-----------

         For good and valuable  consideration,  the receipt and  sufficiency  of
which are hereby acknowledged, Borrower, Banks and Agent agree as follows:

SECTION 1. ACCURACY OF RECITALS.
           --------------------

         The parties acknowledge the accuracy of the Recitals.

SECTION 2. MODIFICATION OF CREDIT AGREEMENT.
           --------------------------------

         Effective as of the Effective Date (as hereafter  defined),  the Credit
Agreement shall be modified as follows:

         2.1 Subject to the  provisions  of Section 4.3 of this  Agreement,  the
definition  of  "Guarantors"  in  Article I of the  Credit  Agreement  is hereby
modified in its entirety to read as follows:

                  "Guarantors"  means  ACHETER,  INC., a Texas  corporation,  CH
         MORTGAGE COMPANY, a Colorado corporation,  CHI CONSTRUCTION COMPANY, an
         Arizona corporation,  CONTINENTAL HOMES, INC., a 
<PAGE>
         Delaware  corporation,  CONTINENTAL  HOMES  OF  AUSTIN,  L.P.,  a Texas
         limited partnership, CONTINENTAL HOMES OF DALLAS, L.P., a Texas limited
         partnership, CONTINENTAL HOMES OF FLORIDA, INC., a Florida corporation,
         CONTINENTAL  HOMES OF SAN ANTONIO,  L.P., a Texas limited  partnership,
         CONTINENTAL  HOMES OF TEXAS,  INC.,  a Texas  corporation,  CONTINENTAL
         RANCH, INC., a Delaware  corporation  formerly known as RANCHO CARILLO,
         INC., KDB HOMES, INC., a Delaware corporation,  L & W INVESTMENTS INC.,
         a  California   corporation,   MILBURN   INVESTMENTS,   INC.,  a  Texas
         corporation,  MILTEX  MANAGEMENT,  INC.,  a Texas  corporation,  MILTEX
         MORTGAGE OF TEXAS LIMITED  PARTNERSHIP,  a Texas  limited  partnership,
         R.O.S.  CORPORATION,  a Texas corporation,  SETTLEMENT  CORPORATION,  a
         Texas  corporation,  TRAVIS COUNTY TITLE COMPANY,  a Texas corporation,
         and  their  successors  and  assigns,  and any  Subsidiary  that  shall
         hereafter  become a Guarantor in  accordance  with Section 11.4 hereof,
         and any  successors  and assigns of any of the  foregoing.  "Guarantor"
         means any one of the Guarantors.

         2.2 Section  2.11(a) of the Credit  Agreement is hereby modified in its
entirety to read as follows:

                  (a)  Senior  Debt  Rating.  The  Applicable  Margins  shall be
         determined by reference to the Senior Debt Rating,  in accordance  with
         the following table:

                                     Applicable         Applicable
                  Senior Debt        LIBOR Rate        Floating Rate
                    Rating           Margin (%)          Margin (%)
                  -----------        ----------        -------------

                  BBB-/Baa3 or           .75                 0
                   higher             
                  BB+/Ba1                .95                 0
                  BB/Ba2                1.15                 0
                  BB-/Ba3               1.35               0.10
                  B+/B1 or lower        1.55               0.20
                   or no rating      

         2.3 The references to "Applicable  Unused  Commitment Rate" in Sections
2.11(b) and (c) of the Credit Agreement are hereby deleted.

         2.4 The  following  Section  2.11(d)  is  hereby  added  to the  Credit
Agreement:

                  (d) Applicable  Unused  Commitment Rate. The Applicable Unused
         Commitment   Rate  shall  be   determined  by  reference  to  aggregate
         Commitments  and the aggregate  "average  daily  outstandings"  for the
         month (or portion thereof) with 
                                      -2-
<PAGE>
         respect  to which  the  Unused  Commitment  Fee is being  computed,  in
         accordance with the following table:

        Aggregate of each Bank's                        Applicable Unused
       Average Daily Outstandings                      Commitment Rate (%)
       --------------------------                      -------------------

66% or more of the aggregate Commitments                      0.15

More than 33%, but less than 66%, of the                      0.20
aggregate Commitments

33% or less of the aggregate Commitments                      0.275

         2.5 The number  "$10,000,000.00",  as it appears in Section  4.2(ii) of
the Credit Agreement, is hereby amended to be "$15,000,000.00."

         2.6 Section  4.7(b) of the Credit  Agreement  is hereby  amended in its
entirety to read as follows:

                  (b)  Calculation  of Fee.  The  Facility  Letter of Credit Fee
         shall  be  determined  by  reference  to the  Senior  Debt  Rating,  in
         accordance with the following table:

                                                          Applicable
                  Senior Debt                          Letter of Credit
                    Rating                                 Rate (%)
                  -----------                          ----------------

                  BBB-/Baa3 or higher                         .75
                  BB+/Ba1                                     .85
                  BB/Ba2                                      .90
                  BB-/Ba3                                    1.10
                  B+/B1or lower                              1.30
                  or no rating

         2.7 The number "$6,000,000.00",  as it appears in Section 8.5(v) of the
Credit Agreement, is hereby amended to be "$15,000,000.00."

         2.8 The following Section 8.12 is hereby added to the Credit Agreement:

                  8.12  Negative  Pledge.  Borrower will not, nor will it permit
         any  Guarantor  to,  directly or  indirectly  enter into any  agreement
         (other  than this  Agreement  and the  Indenture)  with any Person that
         prohibits  or  restricts  or limits  the  ability  of  Borrower  or any
         Guarantor to create, incur, pledge or suffer to exist any Lien upon any
         assets of Borrower or any Guarantor (except that agreements
                                      -3-
<PAGE>
         creating Liens permitted under Sections  8.6(ii),  (iii),  (vi), (vii),
         (viii) and (xiii) may prohibit,  restrict or limit other Liens on those
         assets encumbered by the Liens created by such agreements).

         2.9 Exhibit  J  to  the  Credit  Agreement  is  hereby modified  in its
entirety to mean that document attached hereto as Exhibit J.

SECTION 3. OTHER MODIFICATIONS; RATIFICATION OF LOAN DOCUMENTS.
           ---------------------------------------------------

         3.1 As of the Effective  Date,  each reference in the Loan Documents to
any of the Loan  Documents is hereby  amended to be a reference to such document
as modified herein.

         3.2 The Loan  Documents are ratified and affirmed by Borrower and shall
remain in full force and effect as modified herein.

SECTION 4. CONSENT OF BANKS.
           ----------------

         4.1 Consent to Assumption by New  Guarantors.  Banks hereby  consent to
Borrower's formation and capitalization of

                  (a)  Continental  Homes  of  Dallas,  L.P.,  a  Texas  limited
partnership  ("CHD"),  and its  constituent  partners  CHTEX of Dallas,  Inc., a
Delaware corporation, and CH Investments of Texas, Inc., a Delaware corporation;

                  (b)  Continental  Homes of San Antonio,  L.P., a Texas limited
partnership ("CHS"), and its constituent partners CHTEX of San Antonio,  Inc., a
Delaware  corporation,  and CH  Investments  of  Texas  III,  Inc.,  a  Delaware
corporation; and

                  (c)  Continental  Homes  of  Austin,  L.P.,  a  Texas  limited
partnership  ("CHA")  and its  constituent  partners  CHTEX of Austin,  Inc.,  a
Delaware  corporation,  and  CH  Investments  of  Texas  II,  Inc.,  a  Delaware
corporation.

Banks hereby consent to the addition of CHD, CHS and CHA as Guarantors under the
Credit Facility,  and the assumption by CHD, CHS and CHA of the obligations of a
Guarantor as set forth in the attached Consent and Agreement of Guarantor.

         4.2 Consent to Transfer of Assets. Banks hereby consent to the transfer
(pursuant  to a  multi-survivor  merger) of all,  or  substantially  all, of the
assets of Milburn Investments,  Inc., a Texas corporation,  to CHA. Banks hereby
consent  to the  transfer  (pursuant  to a  multi-survivor  merger)  of all,  or
substantially  all, of the assets of Continental  Homes of Texas,  Inc., a Texas
corporation, to CHS. Such consent shall not constitute a consent to the transfer
of any  other  assets  of  Borrower  or any  other  Guarantor  except  as may be
specifically permitted under the Credit Agreement.
                                      -4-
<PAGE>
         4.3 Consent to Dissolution.  Banks hereby consent to the dissolution of
CHI Finance  Corp.,  an Arizona  corporation,  as described  in Section  5.1(a).
Contemporaneously herewith, Borrower is dissolving the following Guarantors, and
Banks hereby consent to the  dissolution of such  Guarantors in accordance  with
the  dissolution  documents  approved  by Agent  pursuant to Section 8.7 of this
Agreement: Acheter, Inc., a Texas corporation, Continental Homes of Texas, Inc.,
a Texas corporation,  Milburn  Investments,  Inc., a Texas  corporation,  Miltex
Management,  Inc.,  a  Texas  corporation,  Miltex  Mortgage  of  Texas  Limited
Partnership,   a  Texas  limited  partnership,   R.O.S.  Corporation,   a  Texas
corporation, and Settlement Corporation, a Texas corporation. Such consent shall
not constitute a consent to any dissolution of any other entity except as may be
specifically permitted under the Credit Agreement.  Upon the dissolution of each
such  Guarantor,   such  Guarantor  shall  be  deleted  automatically  from  the
definition of "Guarantors" in Article I of the Credit Agreement.

         4.4 No Other Consent.  The consents granted by Banks herein shall in no
way affect the liability or obligations  of Borrower or any Guarantor  under the
Loan  Documents.  Such  consent  shall not  constitute  a  consent  to any other
matters, similar or dissimilar, other than those specifically enumerated above.

SECTION 5. WAIVER OF VARIANCES.
           -------------------

         5.1 Waiver.  Banks hereby waive the following variances with the Credit
Agreement by Borrower:

                  (a) Non-Compliance with under Section 10.12 as a result of the
dissolution of CHI Finance Corp., an Arizona  corporation,  pursuant to Articles
of Dissolution filed with the Arizona Secretary of State on May 2, 1997;

                  (b)  Non-compliance  with  Section  8.4  as a  result  of  the
transfer of  substantially  all of the assets of Milburn  Investments,  Inc.,  a
Texas  corporation,  to CHA  pursuant to the  Articles of Merger  filed with the
Texas Secretary of State on July 25, 1996;

                  (c)  Non-compliance  with  Section  8.4  as a  result  of  the
transfer of substantially all of the assets of Continental Homes of Texas, Inc.,
a Texas  corporation,  to CHS  pursuant to the Articles of Merger filed with the
Texas Secretary of State on July 25, 1996;

                  (d)  Non-compliance  with  Section  6.10  as a  result  of the
submission of Borrowing  Base  Certificates  from July 1996 through  August 1997
which did not reflect the transfer of assets described in subparagraphs  (b) and
(c) above, and which showed Borrowing Base assets not owned by a Guarantor;

                  (e)  Non-compliance  with  Section  11.4  as a  result  of the
addition of CHS, CHA and CHD as a  "Guarantor"  (as defined  therein)  under the
Indenture pursuant to that First Supplemental  Indenture dated February 4, 1997,
and the  subsequent  failure  to add CHS,  CHA and CHD as  Guarantors  under the
Credit Agreement; and
                                      -5-
<PAGE>
                  (f) Non-compliance with Section 8.5(v) as a result of Borrower
permitting  Continental Homes, Inc., a Delaware corporation,  to extend loans in
1997 to the Surprise Entities in excess of $6 million.

         5.2 Effect of Waiver. The waivers of Borrower's non-compliance with the
covenants  specified  in Section 5.1 hereof are  specific in time and intent and
are granted only with respect to the specific matters and covenants specified in
Section 5.1 hereof and for the times stated in Section 5.1 hereof. These waivers
shall  not be  construed  as a waiver  of any  other  provisions  of the  Credit
Agreement.  These waivers do not  constitute an agreement or obligation of Agent
or Banks to waive any other existing or future event that would,  absent consent
or waiver,  constitute  non-compliance  with the terms of the Credit  Agreement.
Except for the waivers  specifically set forth herein, Agent and Banks do not in
any way waive or  relinquish  any rights  they have or may have under the Credit
Agreement or  otherwise,  nor do the waivers  herein in any way affect or impair
the terms of, or the rights of Agent or Banks under, the Credit Agreement.

SECTION 6. BORROWER REPRESENTATIONS AND WARRANTIES.
           ---------------------------------------

         Borrower represents and warrants to Banks and Agent:

         6.1 As of October 6, 1997,  the  outstanding  principal  balance of the
Notes is $20,000,000.00; interest has been paid through the due date.

         6.2 No default or event of default  under any of the Loan  Documents as
modified herein,  nor any event,  that, with the giving of notice or the passage
of time or both,  would be a  default  or an event  of  default  under  the Loan
Documents as modified herein has occurred and is continuing.

         6.3  There  has  been  no  material  adverse  change  in the  financial
condition  of Borrower or any  Guarantor  or any other  person  whose  financial
statement  has been  delivered to Agent in connection  with the Credit  Facility
from the most recent financial statement received by Agent.

         6.4 Each and all representations and warranties of Borrower in the Loan
Documents are accurate on the date hereof.

         6.5 Borrower has no claims,  counterclaims,  defenses, or set-offs with
respect to the Credit Facility or the Loan Documents as modified herein.

         6.6 The Loan  Documents as modified  herein are the legal,  valid,  and
binding obligation of Borrower,  enforceable against Borrower in accordance with
their terms.

         6.7  Borrower  is validly  existing  under the laws of the State of its
formation or  organization  and has the requisite power and authority to execute
and deliver this Agreement and to perform the Loan Documents as modified herein.
The execution and delivery of this  Agreement  and the  performance  of the Loan
Documents as modified herein have been duly
                                      -6-
<PAGE>
authorized by all requisite  action by or on behalf of Borrower.  This Agreement
has been duly executed and delivered on behalf of Borrower.

         6.8  CHD,  CHS  and CHA  are  each  (a) a  Wholly-Owned  Subsidiary  of
Borrower,  (b) a Restricted Subsidiary,  as defined in the Indenture,  and (c) a
"Guarantor" (as defined  therein) under the Indenture.  The addition of CHD, CHS
and CHA as a Guarantor shall not cause an Event of Default or an Unmatured Event
of Default to occur.

SECTION 7. BORROWER COVENANTS.
           ------------------

         Borrower covenants with Agent and Banks:

         7.1  Borrower  shall  execute,  deliver,  and  provide  to  Agent  such
additional  agreements,  documents,  and  instruments as reasonably  required by
Agent to effectuate the intent of this Agreement.

         7.2 Borrower fully,  finally,  and absolutely and forever  releases and
discharges Agent and Banks and their present and former directors, shareholders,
officers, employees, agents, representatives,  successors and assigns, and their
separate and respective heirs, personal representatives, successors and assigns,
from any and all actions,  causes of action,  claims, debts,  damages,  demands,
liabilities,  obligations,  and suits,  of  whatever  kind or nature,  in law or
equity that Borrower has or in the future may have, (i) in respect of the Credit
Facility,  the Loan Documents,  or the actions or omissions of Agent or any Bank
in respect of the Credit  Facility or the Loan  Documents  and (ii) arising from
events  occurring  prior to the date of this  Agreement,  and which are known to
Borrower.

SECTION 8. CONDITIONS PRECEDENT.
           --------------------

         The  agreements  of Banks  and Agent  and the  modifications  contained
herein shall not be binding upon Banks and Agent until Borrower has executed and
delivered this Agreement and Agent has received,  at Borrower's expense,  all of
the following on or before October 9, 1997 (the "Effective  Date"),  and each
of which shall be in form and content satisfactory to Agent and shall be subject
to prior approval by Agent:

         8.1 An  original of this  Agreement  fully  executed  by  Borrower  and
Guarantors;

         8.2 With respect to CHD, CHA and CHS and their  respective  constituent
partners:

                  (i)  Copies  of  its  partnership  agreement,  certificate  of
         incorporation,  and articles of merger,  together with all  amendments,
         and a certificate  of good standing,  all certified by the  appropriate
         governmental officer in the jurisdiction of incorporation or formation.
                                      -7-
<PAGE>
                  (ii)  Copies,   certified   by  the   Secretary  or  Assistant
         Secretary,  of the  respective  corporations,  of its  by-laws and with
         respect to the general partners, of its Board of Directors' resolutions
         (and  resolutions  of other  bodies,  if any are  deemed  necessary  by
         counsel for any Bank)  authorizing  the  assumption of the  Guarantors'
         obligations  under  the  Guaranty  and any  Loan  Documents  obligating
         Guarantors  and the execution of the attached  Consent and Agreement of
         Guarantor,  all in its capacity as general  partner of CHS, CHA or CHD,
         as applicable.

                  (iii)  Incumbency  certificates,  executed by the Secretary or
         Assistant  Secretary of the respective  general  partner of CHS, CHA or
         CHD,  which shall  identify by name and title and bear the signature of
         the officers of the such  corporation  authorized  to sign the attached
         Consent and Agreement of Guarantor,  upon which  certificates Agent and
         Banks shall be entitled to rely until informed of any change in writing
         by the applicable Guarantor.

         8.3 Such  resolutions  or  authorizations  and such other  documents as
Agent may require  relating to the  existence  and good standing of Borrower and
each  Guarantor,  and the authority of any person  executing  this  Agreement or
other documents on behalf of Borrower and each Guarantor.

         8.4 A written  opinion  of  Timothy  C.  Westfall,  general  counsel to
Borrower and Guarantors,  addressed to Agent and Banks in substantially the form
of Exhibit A hereto.

         8.5 A written opinion of Terry Mitchell,  Texas counsel to Borrower and
Guarantors,  addressed to Agent and Banks in substantially the form of Exhibit B
hereto.

         8.6 A written opinion of Cahill, Gordon & Reindel,  counsel to Borrower
and  Guarantors,  addressed  to Agent  and  Banks in  substantially  the form of
Exhibit C hereto.

         8.7  Articles  of  Dissolution  and such other  documents  as Agent may
require relating to the dissolutions described in Section 4.3 of this Agreement.

         8.8  True and  correct  Borrowing  Base  Certificates  for the  periods
described in Section 5.1(d) of this Agreement, together with payment of any sums
owing under  Section 2.2 of the Credit  Agreement as a result of any  previously
submitted Borrowing Base Certificates.

         8.9 Payment of all  external  costs and  expenses  incurred by Agent in
connection with this Agreement  (including,  without limitation,  attorneys' and
processing costs, expenses, and fees).

SECTION 9. GENERAL.
           -------

         9.1  The  Loan  Documents  as  modified  herein  contain  the  complete
understanding  and  agreement  of  Borrower,  Banks and Agent in  respect of the
Credit Facility and supersede all prior
                                      -8-
<PAGE>
representations,   warranties,  agreements,  arrangements,  understandings,  and
negotiations.  No  provision  of the Loan  Documents  as modified  herein may be
changed,  discharged,  supplemented,  terminated,  or waived except in a writing
signed by the parties thereto.

         9.2 The Loan  Documents  as modified  herein  shall be binding upon and
shall inure to the benefit of Borrower, Banks and Agent and their successors and
assigns;  provided,  however,  Borrower  may not  assign  any of its  rights  or
delegate  any of its  obligations  under the Loan  Documents  and any  purported
assignment or delegation shall be void.

         9.3 This  Agreement  shall be governed by and  construed in  accordance
with the laws of the State of Arizona, without giving effect to conflicts of law
principles.

         9.4 This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same document. Signature pages may be detached from the counterparts and
attached to a single copy of this Agreement to physically form one document.

         IN WITNESS  WHEREOF,  Borrower,  Banks,  and Agent have  executed  this
Agreement as of the date set forth above.
                                                     
                                      BORROWER:

                                      CONTINENTAL HOMES HOLDING CORP., a
                                      Delaware corporation

                                      By:     /s/ W. Thomas Hickcox
                                         ---------------------------------------
                                      Name:   W. Thomas Hickcox
                                      Title:  Chief Executive Officer, President
                                              and Chief Operating Officer

                                      BANKS AND AGENT:

                                      BANK ONE, ARIZONA, NA, a national banking
                                      association, Individually and as Agent

                                      By:     /s/ Rhonda R. Williams
                                         ---------------------------------------
                                      Name:   Rhonda R. Williams
                                      Title:  Vice President
                                      -9-
<PAGE>
                                      THE FIRST NATIONAL BANK OF BOSTON

                                      By:     /s/ Nick Whiting
                                         ---------------------------------------
                                      Name:   Nick Whiting
                                      Title:  Vice President

                                      NORWEST BANK ARIZONA, N.A., a national
                                      banking association

                                      By:     /s/ E. Kevin Kosan
                                         ---------------------------------------
                                      Name:   E. Kevin Kosan
                                      Title:  Vice President

                                      GUARANTY FEDERAL BANK, FSB

                                      By:     /s/ Randall S. Reid
                                         ---------------------------------------
                                      Name:   Randall S. Reid
                                      Title:  Vice President
                                      -10-
<PAGE>
                       CONSENT AND AGREEMENT OF GUARANTOR
                       ----------------------------------


         With respect to the Second  Modification  Agreement,  dated  October 9,
1997   ("Agreement"),   among   CONTINENTAL  HOMES  HOLDING  CORP.,  a  Delaware
corporation  ("Borrower"),  the  Banks  listed  on the  signature  pages  of the
Agreement, and BANK ONE, ARIZONA, NA, a national banking association,  as Agent,
the undersigned (severally and collectively,  "Guarantor") agree for the benefit
of Agent and Banks as follows:

         1.  Guarantor  acknowledges  (i)  receiving  a copy of and  reading the
Agreement,  (ii) the  accuracy of the Recitals in the  Agreement,  and (iii) the
effectiveness  of  (A)  the  Guaranty  dated  June  27,  1996  executed  by  the
undersigned  for the  benefit of Agent and Banks,  as  modified  pursuant to the
Consent  and  Agreement  of  Guarantors  executed in  connection  with the First
Modification  Agreement,  and as modified herein (the  "Guaranty"),  and (B) any
other agreements,  documents,  or instruments  securing or otherwise relating to
the  Guaranty,  as modified  herein.  The  Guaranty  and such other  agreements,
documents, and instruments, as modified herein, are referred to individually and
collectively as the "Guarantor Documents."

         2. Guarantor consents to the modification of the Loan Documents and all
other matters in the Agreement.

         3. Guarantor  fully,  finally,  and absolutely and forever releases and
discharges Agent and Banks and their present and former directors, shareholders,
officers, employees, agents, representatives,  successors and assigns, and their
separate and respective heirs, personal representatives, successors and assigns,
from any and all actions,  causes of action,  claims, debts,  damages,  demands,
liabilities,  obligations,  and suits,  of  whatever  kind or nature,  in law or
equity  that  Guarantor  has or in the  future  may have,  (i) in respect of the
Credit Facility, the Loan Documents,  the Guarantor Documents, or the actions or
omissions  of Agent or any Bank in  respect  of the  Credit  Facility,  the Loan
Documents,  or the Guarantor  Documents  and (ii) arising from events  occurring
prior to the date hereof and which are known to Guarantor.

         4.  Guarantor  agrees that all  references,  if any, to the Notes,  the
Credit Agreement,  and any other Loan Documents in the Guarantor Documents shall
be deemed to refer to such agreements, documents, and instruments as modified by
the Agreement.

         5.  Guarantor  reaffirms  the  Guarantor  Documents and agrees that the
Guarantor  Documents  continue  in full force and  effect and remain  unchanged,
except as specifically modified by this Consent and Agreement of Guarantors. Any
property  or rights to or  interests  in  property  granted as  security  in the
Guarantor   Documents  shall  remain  as  security  for  the  Guaranty  and  the
obligations of Guarantor in the Guaranty.

         6.  Guarantor  agrees  that  the Loan  Documents,  as  modified  by the
Agreement,  and  the  Guarantor  Documents,  as  modified  by this  Consent  and
Agreement of Guarantors, are the legal,
                                      -11-
<PAGE>
valid, and binding  obligations of Borrower and the  undersigned,  respectively,
enforceable in accordance with their terms against Borrower and the undersigned,
respectively.

         7.  Guarantor  agrees  that  Guarantor  has no  claims,  counterclaims,
defenses,  or offsets with respect to the enforcement  against  Guarantor of the
Guarantor Documents.

         8.  Guarantor  represents  and warrants that there has been no material
adverse change in the financial  condition of any Guarantor from the most recent
financial statement received by Agent.

         9.  Guarantor  is validly  existing  under the laws of the State of its
formation or  organization  and has the requisite power and authority to execute
and deliver this  Agreement and to perform the  Guarantor  Documents as modified
herein.  The execution and delivery of this Agreement and the performance of the
Guarantor  Documents  as  modified  herein  have  been  duly  authorized  by all
requisite  action by or on behalf of  Guarantor.  This  Agreement  has been duly
executed and delivered on behalf of Guarantor.

         10. CHD, CHS and CHA each hereby assume the obligations for payment and
performance of all covenants,  conditions,  provisions and agreements  under the
Guaranty and the Loan Documents to be performed by  Guarantors,  all as modified
by this Agreement.  This assumption has been agreed to by and between  Borrower,
the other Guarantors and CHD, CHS and CHA. CHD, CHS and CHA shall each be deemed
to be one of the Guarantors for purposes of the Credit Agreement,  the Guaranty,
and the other Loan Documents. CHD, CHS and CHA each hereby covenant, promise and
agree (i) to pay the  indebtedness  under the Guaranty and the Loan Documents to
be paid by Guarantors at the times,  in the manner and in all other  respects as
therein  provided or as it may be modified in writing from time to time; (ii) to
perform each and all of the covenants, conditions,  provisions and agreements in
the Guaranty and the Loan Documents to be performed by Guarantors,  at the time,
in the manner and in all other  respects  as therein  provided;  and (iii) to be
bound by each and every term,  condition  and  provision of the Guaranty and the
Loan Documents as though such  documents and  instruments  had  originally  been
made, executed and delivered by CHD, CHS and CHA as Guarantors.

         DATED as of the date of the Agreement.

                                       GUARANTORS:
                                       -----------

                                       ACHETER, INC., a Texas corporation

                                       By:    /s/ Timothy C. Westfall
                                          --------------------------------------
                                       Name:  Timothy C. Westfall
                                       Title: Secretary
                                      -12-
<PAGE>
                                       CH MORTGAGE COMPANY, a Colorado
                                       corporation

                                       By:    /s/ Randall C. Present
                                          --------------------------------------
                                       Name:  Randall C. Present
                                            ------------------------------------
                                       Title: Chairman and President
                                            ------------------------------------


                                       CHI CONSTRUCTION COMPANY, an Arizona
                                       corporation

                                       By:    /s/ Timothy C. Westfall
                                          --------------------------------------
                                       Name:  Timothy C. Westfall
                                            ------------------------------------
                                       Title: Vice President
                                            ------------------------------------


                                       CONTINENTAL HOMES, INC., a Delaware
                                       corporation

                                       By:    /s/ Timothy C. Westfall
                                          --------------------------------------
                                       Name:  Timothy C. Westfall
                                            ------------------------------------
                                       Title: Vice President, General Counsel 
                                            ------------------------------------
                                              and Assistant Secretary


                                       CONTINENTAL HOMES OF AUSTIN, L.P., a 
                                       Texas limited partnership

                                       BY:    CHTEX OF AUSTIN, INC., a Delaware 
                                              corporation, General Partner

                                              By:    /s/ Timothy C. Westfall
                                                 -------------------------------
                                              Name:  Timothy C. Westfall
                                                   -----------------------------
                                              Title: Vice President and 
                                                   -----------------------------
                                                     Assistant  Secretary
                                      -13-
<PAGE>
                                     CONTINENTAL HOMES OF DALLAS, L.P., a 
                                     Texas limited partnership

                                     BY:   CHTEX OF DALLAS, INC., a Delaware 
                                           corporation, General Partner

                                           By:    /s/ Timothy C. Westfall
                                              ----------------------------------
                                           Name:  Timothy C. Westfall
                                           Title: Vice President and Secretary


                                     CONTINENTAL HOMES OF FLORIDA, INC., a
                                     Florida corporation

                                     By:   /s/ Timothy C. Westfall
                                        ----------------------------------------
                                     Name: Timothy C. Westfall
                                     Title:Vice President and Secretary


                                     CONTINENTAL HOMES OF SAN ANTONIO, 
                                     L.P., a Texas limited partnership

                                     BY:   CHTEX OF SAN ANTONIO, INC., a 
                                           Delaware corporation, General Partner

                                           By:    /s/ Timothy C. Westfall
                                              ----------------------------------
                                           Name:  Timothy C. Westfall
                                           Title: Vice President and 
                                                  Assistant  Secretary
                                      -14-
<PAGE>
                                     CONTINENTAL HOMES OF TEXAS, INC., a
                                     Texas corporation

                                     By:    /s/ W. Thomas Hickcox
                                        ----------------------------------------
                                     Name:  W. Thomas Hickcox
                                     Title: Vice President


                                     CONTINENTAL RANCH, INC., a Delaware 
                                     corporation formerly  known  as  RANCHO
                                     CARILLO, INC.

                                     By:    /s/ W. Thomas Hickcox
                                        ----------------------------------------
                                     Name:  W. Thomas Hickcox
                                     Title: Vice President


                                     KDB HOMES, INC., a Delaware corporation

                                     By:    /s/ Timothy C. Westfall
                                        ----------------------------------------
                                     Name:  Timothy C. Westfall
                                     Title: Vice President


                                     L & W INVESTMENTS INC., a California
                                     corporation

                                     By:    /s/ Timothy C. Westfall
                                        ----------------------------------------
                                     Name:  Timothy C. Westfall
                                     Title: Vice President
                                      -15-
<PAGE>
                                     MILBURN INVESTMENTS, INC., a Texas
                                     corporation

                                     By:    /s/ Timothy C. Westfall
                                        ----------------------------------------
                                     Name:  Timothy C. Westfall
                                     Title: Vice President


                                     MILTEX MANAGEMENT, INC., a Texas
                                     corporation

                                     By:    /s/ Timothy C. Westfall
                                        ----------------------------------------
                                     Name:  Timothy C. Westfall
                                     Title: Secretary


                                     MILTEX MORTGAGE OF TEXAS LIMITED
                                     PARTNERSHIP, a Texas limited partnership

                                     BY:    MILTEX MANAGEMENT, INC., a Texas 
                                            corporation, General Partner

                                            By:    /s/ Timothy C. Westfall
                                               ---------------------------------
                                            Name:  Timothy C. Westfall
                                            Title: Secretary


                                     R.O.S. CORPORATION, a Texas corporation

                                     By:    /s/ Timothy C. Westfall
                                        ----------------------------------------
                                     Name:  Timothy C. Westfall
                                     Title: Secretary
                                      -16-
<PAGE>
                                     SETTLEMENT CORPORATION, a Texas
                                     corporation

                                     By:    /s/ Timothy C. Westfall
                                        ----------------------------------------
                                     Name:  Timothy C. Westfall
                                     Title: Secretary


                                     TRAVIS COUNTY TITLE COMPANY, a Texas
                                     corporation

                                     By:    /s/ Timothy C. Westfall
                                        ----------------------------------------
                                     Name:  Timothy C. Westfall
                                     Title: Vice President

                                                                       GUARANTOR
                                      -17-
<PAGE>
                                    EXHIBIT A
                                    ---------

                                                                 October 9, 1997
Bank One, Arizona, NA,
in its capacity as Agent
and in its individual capacity
Western Region Real Estate
241 North Central Avenue
Phoenix, Arizona  85004
Attention:     Rhonda R. Williams, Vice President

Norwest Bank Arizona, N.A.
3300 North Central Avenue, MS-9008
Phoenix, AZ  85012-2501
Attention:     Vicki Slade, Vice President

BankBoston, N.A., formerly known as
-----------------------------------
The First National Bank of Boston
---------------------------------
115 Perimeter Center Place, N.E., Ste. 1500
Atlanta, GA  30346
Attention:     Nick Whiting, Vice President

Guaranty Federal Bank, FSB
8333 Douglas Avenue, 10th Floor
Dallas, TX  75225
Attention:     Randall S. Reid

         Re:      Unsecured   Revolving   Line  of  Credit  in  the   amount  of
                  $140,000,000.00  ("Loan")  made by Bank  One,  Arizona,  NA, a
                  national banking association,  Norwest Bank Arizona,  N.A. and
                  BankBoston, N.A., formerly known as The First National Bank of
                  Boston,  and Guaranty  Federal Bank,  FSB  (collectively,  the
                  "Banks"),  to  Continental  Homes  Holding  Corp.,  a Delaware
                  corporation  ("Borrower"),  and  guaranteed by the  guarantors
                  listed on Schedule "1" hereto  ("Guarantors"),  with Bank One,
                  Arizona,  NA acting as agent for the Banks  ("Agent");  Second
                  Modification  Agreement dated October ___, 1997 ("Modification
                  Agreement)

Ladies & Gentlemen:

         I am general counsel of Borrower and Guarantors.  Each capitalized term
used and not otherwise defined in this letter shall have the meaning ascribed to
such term in the Modification  Agreement.  In addition,  as used in this letter,
the phrase  "consummation  of the  modification",  means the closing of the loan
modification contemplated in the
<PAGE>
                                                           Bank One, Arizona, NA
                                                      Norwest Bank Arizona, N.A.
                                               The First National Bank of Boston
                                                      Guaranty Federal Bank, FSB
                                                                 October 9, 1997
                                                                          Page 2


Modification Agreement and the performance of the obligations to be performed by
Borrower and Guarantors  prior to the closing of the loan  modification but does
not include  performance of obligations or compliance  with terms and conditions
of the Modification Agreement after the closing of the loan modification.

         For purposes of this letter,  I have examined such questions of law and
fact and such documentation as I have determined to be necessary or appropriate.

         Based on the foregoing and subject to the assumptions,  qualifications,
and limitations set forth below, it is my opinion that:

         1. Borrower has the requisite  corporate power and corporate  authority
to carry out the terms and  conditions  applicable to it under the  Modification
Agreement. The execution, delivery and performance of the Modification Agreement
by Borrower has been duly  authorized by all requisite  corporate  action on the
part of Borrower and the consent or approval of  shareholders of Borrower is not
required.  The  Modification  Agreement  has been duly executed and delivered on
behalf of Borrower.

         2. Each  Guarantor has the  requisite  corporate  (or  partnership,  as
applicable) power and corporate  authority to carry out the terms and conditions
applicable to it under the Modification Agreement. The execution,  delivery, and
performance  of the  Modification  Agreement  by each  Guarantor  has been  duly
authorized by all requisite  corporate or partnership action on the part of each
such  Guarantor  and the consent or approval of  shareholders  or  partners,  as
applicable,  of such Guarantor is not required.  The Modification  Agreement has
been duly executed and delivered on behalf of each such Guarantor.

         3.  The  execution  and  delivery  of the  Modification  Agreement  and
consummation  of the  modification by Borrower will not conflict with, or result
in violation of, any  applicable  law,  ordinance,  regulation or rule (federal,
state  or  local)  affecting  Borrower  of  which I am  aware,  except  for such
conflicts  or  violations  which would not be  reasonably  likely to result in a
Material Adverse Effect. By the foregoing  opinion,  I do not intend to express,
and you agree that I do not express,  any opinion concerning any securities law,
regulation  or rule or any law,  regulation,  or rule  regulating  the making of
secured loans by banks or non-banking subsidiaries of bank holding companies.
<PAGE>
                                                           Bank One, Arizona, NA
                                                      Norwest Bank Arizona, N.A.
                                               The First National Bank of Boston
                                                      Guaranty Federal Bank, FSB
                                                                 October 9, 1997
                                                                          Page 3

         4.  The  execution  and  delivery  of the  Modification  Agreement  and
consummation  of the  modification  by each Guarantor will not conflict with, or
result in a violation  of, any  applicable  law,  ordinance,  regulation or rule
(federal,  state or local)  affecting any Guarantor of which I am aware,  except
for such conflicts or violations which would not be reasonably  likely to result
in a Material  Adverse  Effect.  By the  foregoing  opinion,  I do not intend to
express,  and you  agree  that I do not  express,  any  opinion  concerning  any
securities law,  regulation,  or rule or any law,  regulation or rule regulating
the making of secured loans by banks or non-banking subsidiaries of bank holding
companies.

         5. No consent, approval,  authorization,  or other action by, or filing
with,  any  federal,  state,  or local  governmental  authority  is  required in
connection  with the  execution  and  delivery by  Borrower of the  Modification
Agreement and the consummation of the modification,  other than those which have
been obtained prior to the consummation of the modification.

         6. No consent, approval,  authorization,  or other action by, or filing
with,  any  federal,  state,  or local  governmental  authority  is  required in
connection with the execution and delivery by any Guarantor of the  Modification
Agreement and the consummation of the modification,  other than those which have
been obtained prior to the consummation of the modification.

         7.  The  execution  and  delivery  of the  Modification  Agreement  and
consummation of the modification by Borrower will not conflict with or result in
a violation of the Articles of Incorporation and Bylaws of Borrower.

         8.  The  execution  and  delivery  of the  Modification  Agreement  and
consummation  of the  modification  by each  Guarantor will not conflict with or
result  in a  violation  of the  Articles  of  Incorporation  and  Bylaws or the
Partnership Agreement, as applicable, of any such Guarantor.

         9. The  Modification  Agreement  constitute  legal,  valid, and binding
obligations  of Borrower,  enforceable  in  accordance  with their terms against
Borrower.

         10. The Modification  Agreement  constitutes legal,  valid, and binding
obligations  of each  Guarantor,  enforceable  in  accordance  with their  terms
against each Guarantor.
<PAGE>
                                                           Bank One, Arizona, NA
                                                      Norwest Bank Arizona, N.A.
                                               The First National Bank of Boston
                                                      Guaranty Federal Bank, FSB
                                                                 October 9, 1997
                                                                          Page 4

         11. The  execution  and  delivery  of the  Modification  Agreement  and
consummation  of the  modification by Borrower will not conflict with, or result
in a violation of, any judgments,  orders,  or decrees of any arbitrator,  other
private adjudicator, court, or governmental authority (federal, state, or local)
to which Borrower is a party or by which Borrower or the property of Borrower is
bound,  except for such conflicts or violations  which, in the aggregate,  would
not be reasonably likely to result in a Material Adverse Effect.

         12. The  execution and delivery of the  Modification  Agreement by each
Guarantor  and  consummation  of the  modification  by each  Guarantor  will not
conflict with, or result in a violation of, any judgments, orders, or decrees of
any arbitrator,  other private  adjudicator,  court,  or governmental  authority
(federal,  state,  or local) to which any such  Guarantor is a party or by which
such  Guarantor  or the  property of such  Guarantor  is bound,  except for such
conflicts or violations which, in the aggregate,  would not be reasonably likely
to result in a Material Adverse Effect.

         13. The  execution  and  delivery  of the  Modification  Agreement  and
consummation  of the  modification by Borrower will not conflict with, or result
in a violation of, any  contract,  or any other  agreement to which  Borrower is
currently a party or by which it is currently  bound (except for the  Indenture,
the Old Indenture and the  Convertible  Notes Indenture as to which I express no
opinion).

         14. The  execution  and  delivery  of the  Modification  Agreement  and
consummation  of the  modification  by each Guarantor will not conflict with, or
result in a violation  of, any  contract,  or any other  agreement to which such
Guarantor is currently a party or by which it is currently bound (except for the
Indenture,  the Old Indenture and the Convertible  Notes Indenture as to which I
express no opinion).

         15. I have no actual  knowledge  of any  pending or overtly  threatened
litigation or other proceeding before any arbitrator, other private adjudicator,
court, or governmental agency (federal,  state or local) against Borrower which,
in the  aggregate,  would be reasonably  likely to result in a Material  Adverse
Effect .

         16. I have no actual  knowledge  of any  pending or overtly  threatened
litigation or other proceeding before any arbitrator, other private adjudicator,
court, or governmental  agency  (federal,  state or local) against any Guarantor
which,  in the  aggregate,  would be  reasonably  likely to result in a Material
Adverse Effect.
<PAGE>
                                                           Bank One, Arizona, NA
                                                      Norwest Bank Arizona, N.A.
                                               The First National Bank of Boston
                                                      Guaranty Federal Bank, FSB
                                                                 October 9, 1997
                                                                          Page 5

         17. CHI Finance Corporation,  an Arizona corporation,  was dissolved in
accordance with  applicable law upon filing of Articles of Dissolution  with the
Arizona Corporation Commission on May 2, 1997.

         18. The formation and  capitalization of new entities,  as described in
Section 4.1 of the Modification Agreement;  (i) did not conflict with, or result
in a violation of, any judgments,  orders,  or decrees of any arbitrator,  other
private adjudicator, court, or governmental authority (federal, state, or local)
to  which  Borrower  or any  Guarantor  is a party  or any of  their  respective
properties  is bound,  and (ii) did not conflict  with, or result in a violation
of, any contract,  or any other  agreement to which Borrower or any Guarantor is
currently a party or by which it is currently  bound,  except for such conflicts
or  violations,  if any, as have been  corrected or consented to by the Banks in
the Modification  Agreement and except for the Indenture,  the Old Indenture and
the Convertible Notes Indenture as to which I express no opinion.

         19. The transfer of assets described in Section 4.2 of the Modification
Agreement:  (i)  did not  conflict  with,  or  result  in a  violation  of,  any
judgments,  orders,  or decrees of any  arbitrator,  other private  adjudicator,
court, or governmental authority (federal, state, or local) to which Borrower or
any  Guarantor is a party or by which  Borrower or any Guarantor or any of their
respective  properties is bound,  and (ii) did not conflict with, or result in a
violation  of, any  contract,  or any other  agreement to which  Borrower or any
Guarantor  is currently a party or by which it is  currently  bound,  except for
such conflicts or violations,  if any, as have been corrected or consented to by
the Banks in the  Modification  Agreement and except for the Indenture,  the Old
Indenture and the Convertible Notes Indenture as to which I express no opinion.

         20. The dissolution of CHI Finance Corporation,  an Arizona corporation
(i) did not conflict with, or result in a violation of, any  judgments,  orders,
or decrees of any arbitrator, other private adjudicator,  court, or governmental
authority  (federal,  state,  or local) to which  Borrower or any Guarantor is a
party  or by  which  Borrower  or  any  Guarantor  or any  of  their  respective
properties  is bound,  and (ii) did not conflict  with, or result in a violation
of, any contract,  or any other  agreement to which Borrower or any Guarantor is
currently a party or by which it is currently  bound (except for the  Indenture,
the Old Indenture and the  Convertible  Notes Indenture as to which I express no
opinion), and the dissolution of the remaining entities described in Section 4.3
of the  Modification  Agreement;  (i) will not  conflict  with,  or  result in a
violation of, any judgments, orders, or decrees of any arbitrator, other private
adjudicator, court, or governmental authority (federal, state, or local)
<PAGE>
                                                           Bank One, Arizona, NA
                                                      Norwest Bank Arizona, N.A.
                                               The First National Bank of Boston
                                                      Guaranty Federal Bank, FSB
                                                                 October 9, 1997
                                                                          Page 6

to which  Borrower  or any  Guarantor  is a party or by  which  Borrower  or any
Guarantor  or any of their  respective  properties  is bound,  and (ii) will not
conflict with, or result in a violation of, any contract, or any other agreement
to  which  Borrower  or any  Guarantor  is  currently  a party or by which it is
currently bound (except for the Indenture, the Old Indenture and the Convertible
Notes Indenture as to which I express no opinion).

         21. Borrower's  non-compliance  with the terms of the Credit Agreement,
as identified and described in Section 5.1 of the  Modification  Agreement:  (i)
did not conflict  with, or result in a violation of, any judgments,  orders,  or
decrees of any  arbitrator,  other private  adjudicator,  court, or governmental
authority  (federal,  state or local) to which  Borrower or any  Guarantor  is a
party  or by  which  Borrower  or  any  Guarantor  or any  of  their  respective
properties  is bound,  and (ii) did not conflict  with, or result in a violation
of, any contract,  or any other  agreement to which Borrower or any Guarantor is
currently a party or by which it is currently  bound (except for the  Indenture,
the Old Indenture and the  Convertible  Notes Indenture as to which I express no
opinion).

                  In rendering the  foregoing  opinions I have assumed with your
permission and without investigation:

                  (i) The  genuineness  of the  signatures  not  witnessed,  the
         authenticity of documents submitted as originals, and the conformity to
         originals of documents submitted as copies;

                  (ii) The legal capacity of all natural  persons  executing the
         Modification Agreement;

                  (iii) The  Modification  Agreement  accurately  describes  and
         contains  your  understanding,   and  there  are  no  oral  or  written
         statements  or  agreements  by you,  that modify,  amend,  or vary,  or
         purport to modify, amend, or vary, any of the terms of the Modification
         Agreement;

                  (iv) Borrower owns all  property,  interests in property,  and
         rights purported to be owned by it;

                  (v) Each Bank is a national  banking  association or a federal
         savings bank  validly  existing  under the law of the United  States of
         America;
<PAGE>
                                                           Bank One, Arizona, NA
                                                      Norwest Bank Arizona, N.A.
                                               The First National Bank of Boston
                                                      Guaranty Federal Bank, FSB
                                                                 October 9, 1997
                                                                          Page 7

                  (vi) Agent and each Bank have the  requisite  corporate  power
         and  corporate   authority  to  carry  out  the  terms  and  conditions
         applicable to them under the Modification Agreement;

                  (vii)  The   execution,   delivery  and   performance  of  the
         Modification Agreement by Agent and each Bank have been duly authorized
         by all requisite corporate action on their part; and

                  (viii) The  Modification  Agreement  is the  legal,  valid and
         binding  obligation of Banks and Agent and is enforceable in accordance
         with its terms against Banks and Agent.

         The   opinions   set  forth   above  are   subject  to  the   following
qualifications and limitations:

                  (a)  The  validity  and  enforceability  of  the  Modification
         Agreement  may be  subject  to,  or  limited  by,  (i)  any  applicable
         bankruptcy,  insolvency,  reorganization,  arrangement,  moratorium, or
         fraudulent transfer laws (including without limitation,  Section 548 of
         the Federal  Bankruptcy  Code) or any other laws or judicial  decisions
         affecting  creditors'  rights  and  remedies  generally;  (ii)  general
         principles of equity; (iii) forfeiture or similar laws (including court
         decisions)  of the State of Arizona or of the United  States;  and (iv)
         the rights and remedies of the Pension  Benefits  Guaranty  Corporation
         under the Employee  Retirement  Income  Security Act of 1974, or of the
         United States under the Federal Tax Lien Act of 1966.

                  (b)  The  enforceability  of  the  Modification  Agreement  is
         further subject to the qualification that certain waivers,  procedures,
         remedies and other  provisions  of the  Modification  Agreement  may be
         unenforceable  under,  or limited  by, the law of the State of Arizona.
         However,  such  limitations  do not, in my opinion,  interfere (i) with
         practical  enforcement  by you of the  obligation of Borrower under the
         Modification  Agreement to pay to you the principal  amount of the Loan
         and interest  thereon as provided in the Notes,  or (ii) with practical
         enforcement  by you of the  obligation  of  each  Guarantor  under  the
         Guaranty  to pay to you the  unpaid  principal  amount  of the Loan and
         interest  thereon as provided in the Notes upon  failure by Borrower to
         pay such  principal  amount  and  interest  when due,  except  (A) with
         respect to (i) and (ii) for the economic consequences of any procedural
         delays that may result from such  limitations,  and (B) with respect to
         (ii), on the basis of events,  actions, or circumstances that may occur
         or arise  after  consummation  of the  Loan,  the law of  guaranty  and
         suretyship may prevent the enforcement of the Guaranty.
<PAGE>
                                                           Bank One, Arizona, NA
                                                      Norwest Bank Arizona, N.A.
                                               The First National Bank of Boston
                                                      Guaranty Federal Bank, FSB
                                                                 October 9, 1997
                                                                          Page 8


                  (c) I express  no  opinion  with  respect  to your  ability to
         enforce the Modification Agreement against Borrower or any Guarantor if
         the Loan fails to comply with any  statutory,  regulatory or other loan
         limits applicable to you, or if the Loan fails to comply with any other
         state or federal law (including  court  decisions),  rule or regulation
         which prescribes  permissible and lawful investments for you (either as
         to type, amount, percentage of total investments, or otherwise).


         I am qualified  to practice  law in the State of Arizona.  The opinions
expressed  in this  letter are based upon the  presently  effective  laws of the
State of Arizona only,  and I assume no obligation to revise or supplement  this
opinion should such law be changed by legislative action,  judicial decision, or
otherwise.  I  express  no  opinion  with  respect  to the  laws  of  any  other
jurisdiction.  The opinions  expressed  herein are limited to the matters stated
herein and no opinion is implied or may be inferred beyond the matters expressly
stated.

         This opinion is rendered  solely to you and solely in  connection  with
the Loan and may not be relied upon by you or by any other  person for any other
purpose,  provided,  however, that this opinion may be relied upon by any person
to  which  all or a  part  of  the  Loan,  or a  participation  therein,  may be
transferred, provided that such reliance is only in connection with the Loan and
that this opinion  remains  effective only as of the date hereof and will not be
considered to be effective or restated as of any other date. This opinion is not
to be referred to, or quoted, in any document, report, or financial statement or
filed with, or delivered to, any  governmental  agency or other person or entity
without  my prior  written  consent,  provided,  however,  this  opinion  may be
delivered  to  your   auditors,   governmental   regulators,   transferees   and
participants of any person entitled to rely on this opinion.

                                        Very truly yours,


                                        /s/Timothy C. Westfall
                                        Timothy C. Westfall
<PAGE>
                                   SCHEDULE 1
                                   ----------

                                 ("Guarantors")

               Acheter, Inc.
               CH Mortgage Company
               CHI Construction Company
               Continental Homes, Inc.
               Continental Homes of Austin, L.P.
               Continental Homes of Dallas, L.P.
               Continental Homes of Florida, Inc.
               Continental Homes of San Antonio, L.P.
               Continental Homes of Texas, Inc.
               Continental Ranch, Inc. (formerly known as Rancho Carrillo, Inc.)
               KDB Homes, Inc.
               L & W Investments Inc.
               Milburn Investments, Inc.
               Miltex Management, Inc.
               Miltex Mortgage of Texas Limited Partnership
               R.O.S. Corporation
               Settlement Corporation
               Travis County Title Company
<PAGE>
                                   EXHIBIT A

                                   SCHEDULE 2
                                   ----------

                         List of Modification Agreement


1.       First  Modification  Agreement,   dated  October  ____,  1997,  between
         Borrower,  Banks and Agent,  with Consent and Agreement of  Guarantors,
         dated  October ____,  1997, by Guarantors  for the benefit of Banks and
         Agent ("Modification Agreement").

2.       Promissory  Note,  dated October ____, 1997, in the principal amount of
         $30,000,000 executed by Borrower payable to Guaranty Federal Bank, FSB.

3.       Letter  Agreement  dated October ____,  1997 between  Borrower and Bank
         One, Arizona, NA.

         (The   Modification   Agreement   identified   above  are   hereinafter
         collectively referred to as the "Modification Agreement".)
                                      A-10
<PAGE>
                                    EXHIBIT B
                                    ---------

                                    Milburn
                                  Welcome Home

                                October 9, 1997

Bank One, Arizona, NA, 
in its capacity as Agent 
and in its individual capacity
Western Region Real Estate 
241 North Central Avenue 
Phoenix, AZ 85004
Attention:     Rhonda R. Williams, Vice President

Norwest Bank Arizona, N.A.
3300 North Central Avenue, MS-9008
Phoenix, AZ  85012-2501
Attention:     Vicki Slade, Vice President

BankBoston, N.A.
115 Perimeter Center Place, N.E., Ste. 1500
Atlanta, GA  30346
Attention:     Nick Whiting, Vice President

Guaranty Federal Bank, FSB
8333 Douglas Avenue, 10th Floor
Dallas, TX  75225
Attention:     Randall S. Reid

         RE:      Unsecured   Revolving   Line  of  Credit  in  the   amount  of
                  $140,000,000.00  ("Loan")  made by Bank  One,  Arizona,  NA, a
                  national banking  association,  Norwest Bank Arizona, NA, N.A.
                  and  BankBoston,  N.A.,  formerly  known as The First National
                  Bank of Boston,  and Guaranty Federal Bank, FSB (collectively,
                  the "Banks"),  to Continental  Homes Holding Corp., a Delaware
                  corporation  ("Borrower"),  and  guaranteed by the  guarantors
                  listed on Schedule "1" hereto  ("Guarantors"),  with Bank One,
                  Arizona,  NA acting as agent for the Banks  ("Agent");  Second
                  Modification  Agreement  dated October 9, 1997  ("Modification
                  Agreement")

Ladies & Gentlemen:

         I am general counsel of certain Guarantors.  Each capitalized term used
and not otherwise defined in this letter shall have the meaning ascribed to such
term in the Modification  Agreement.  In addition,  as used in this letter,  the
phrase  "consummation  of the  modification",  means  the  closing  of the  loan
modification  contemplated in the Modification  Agreement and the performance of
the obligations to be performed by Borrower and Guarantors  prior to the closing
of the loan  modification  but does not include  performance  of  obligations or
compliance  with terms and conditions of the  Modification  Agreement  after the
closing of the loan modification.
                                      B-1
<PAGE>
                                   EXHIBIT B
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
BankBoston, N.A.
Guaranty Federal Bank, FSB
October 9, 1997
Page 2


         For purposes of this letter,  I have examined such questions of law and
fact and such documentation as I have determined to be necessary or appropriate.

         Based on the foregoing and subject to the assumptions,  qualifications,
and limitations set forth below, it is my opinion that:

         1. Continental  Homes of Austin,  L.P.  ("CHA"),  Continental  Homes of
Dallas, L.P. ("CHD") and Continental Homes of San Antonio, L.P. ("CHS") are each
a limited  partnership duly organized,  validly  existing,  and in good standing
under the laws of the State of Texas.

         2. Each of CHA, CHD and CHS has the  requisite  power and authority (I)
to own and operate its properties and assets, and (ii) to carry out its business
as such business is currently being conducted.

         3.  CHTEX of  Austin,  Inc.,  CHTEX of  Dallas,  Inc.  and CHTEX of San
Antonio,  Inc. are each a corporation duly organized,  validly existing,  and in
good standing under the laws of the State of Delaware and each has the requisite
corporate  power and corporate  authority (I) to own and operate its  properties
and assets,  and (ii) to carry out its  business as such  business is  currently
being conducted.

         4. All  actions  necessary  to  dissolve  R.O.S.  Corporation,  a Texas
corporation,  have been taken except the filing of the  Articles of  Dissolution
thereof with the Texas Secretary of State. Upon such filing, R.O.S.  Corporation
will be dissolved in accordance with applicable law.

         5.  All  actions   necessary  to  dissolve   Acheter,   Inc.,  a  Texas
corporation,  have been taken except the filing of the  Articles of  Dissolution
thereof with the Texas Secretary of State. Upon such filing,  Acheter, Inc. will
be dissolved in accordance with applicable law.

         6. All actions necessary to dissolve Milburn Investments, Inc., a Texas
corporation,  have been taken except the filing of the  Articles of  Dissolution
thereof  with  the  Texas  Secretary  of  State.   Upon  such  filing,   Milburn
Investments, Inc. will be dissolved in accordance with applicable law.

         7. All actions necessary to dissolve Continental Homes of Texas, Inc. a
Texas  corporation,  have  been  taken  except  the  filing of the  Articles  of
Dissolution  thereof  with the  Texas  Secretary  of State.  Upon  such  filing,
Continental Homes of Texas, Inc. will be dissolved in accordance with applicable
law.

         8. All actions necessary to dissolve Miltex  Management,  Inc., a Texas
corporation,  have been taken except the filing of the  Articles of  Dissolution
thereof with the Texas Secretary of State. Upon such filing,  Miltex Management,
Inc. will be dissolved in accordance with applicable law.

         9. All actions  necessary to dissolve  Miltex Mortgage of Texas Limited
Partnerships, a Texas limited partnership,  have been taken except the filing of
the Certificate of Cancellation  thereof with the Texas Secretary of State. Upon
such filing,  Miltex Mortgage of Texas Limited  Partnership will be dissolved in
accordance with applicable law.
                                      B-2
<PAGE>
                                   EXHIBIT B
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
BankBoston, N.A.
Guaranty Federal Bank, FSB
October 9, 1997
Page 3

         In rendering the foregoing opinions I have assumed with your permission
and without investigation:

                  (i) The  genuineness  of the  signatures  not  witnessed,  the
authenticity  of  documents  submitted  as  originals,  and  the  conformity  to
originals of documents submitted as copies;

                  (ii) The legal capacity of all natural  persons  executing the
documents.

         I am  qualified  to practice  law in the State of Texas.  The  opinions
expressed  in this  letter are based upon the  presently  effective  laws of the
State of Texas only and, for purposes of this opinion, in Paragraph 3 on Page 2,
the laws of the  State of  Delaware,  and I assume  no  obligation  to revise or
supplement  this  opinion  should  such law be  changed by  legislative  action,
judicial decision,  or otherwise.  I express no opinion with respect to the laws
of any other  jurisdiction.  The  opinions  expressed  herein are limited to the
matters  stated  herein and no opinion is implied or may be inferred  beyond the
matters expressly stated.

         This opinion is rendered  solely to you and solely in  connection  with
the Loan and may not be relied upon by you or by any other  person for any other
purpose,  provided,  however, that this opinion may be relied upon by any person
to  which  all or a  part  of  the  Loan,  or a  participation  therein,  may be
transferred, provided that such reliance is only in connection with the Loan and
that this opinion  remains  effective only as of the date hereof and will not be
considered to be effective or restated as of any other date. This opinion is not
to be referred to, or quoted, in any document, report, or financial statement or
filed with, or delivered to, any  governmental  agency or other person or entity
without  my prior  written  consent,  provided,  however,  this  opinion  may be
delivered  to  your   auditors,   governmental   regulators,   transferees   and
participants of nay person entitled to rely on this opinion.

                                        Very truly yours,


                                        /s/Terry E. Mitchell
                                        Terry E. Mitchell
                                      B-3
<PAGE>
                                   EXHIBIT B
Bank One, Arizona, NA
Norwest Bank Arizona, N.A.
BankBoston, N.A.
Guaranty Federal Bank, FSB
October 9, 1997
Page 4


SCHEDULE 1
----------

("Guarantors")

Acheter, Inc.
CH Mortgage Company
CHI Construction Company
Continental Homes, Inc.
Continental Homes of Austin, L.P.
Continental Homes of Dallas, L.P.
Continental Homes of Florida, Inc.
Continental Homes of San Antonio, L.P.
Continental Homes of Texas, Inc.
Continental Ranch, Inc. (formerly known as Rancho Carrillo, Inc.)
KDB Homes, Inc.
L & W Investments Inc.
Milburn Investments, Inc.
Miltex Management, Inc.
Miltex Mortgage of Texas Limited Partnership
R.O.S. Corporation
Settlement Corporation
Travis County Title Company
                                       B-4
<PAGE>
                                    EXHIBIT C
                                    ---------

                            CAHILL GORDON & REINDEL
                               EIGHTY PINE STREET
                           NEW YORK, N.Y. 10005-1702

                                October 9, 1997

          RE:  Unsecured   Revolving   Line  of   Credit   in  the   amount   of
               $140,000,000.00  (`Loan")  made  by  Bank  One,  Arizona,  NA,  a
               national  banking  association,   Norwest  Bank  Arizona,   N.A.,
               BankBoston,  N.A., a national banking association  formerly known
               as The First National Bank of Boston,  and Guaranty Federal Bank,
               FSB  (collectively,  the "Banks"),  to Continental  Homes Holding
               Corp., a Delaware corporation ("Borrower"), and guaranteed by the
               guarantors listed on Schedule 1 hereto ("Guarantors"),  with Bank
               One, Arizona, NA acting as agent for the Banks ("Agent");  Second
               Modification  Agreement  dated  October  9,  1997  ("Modification
               Agreement")

Ladies & Gentlemen:

          We have acted as special counsel to the Borrower and the Guarantors in
connection  with the Loan  Modification  for purposes of rendering this opinion.
You have requested our opinion on certain matters pursuant to Section 8.6 of the
Modification Agreement.  Each capitalized term used and not otherwise defined in
this  letter  shall have the meaning  ascribed to such term in the  Modification
Agreement or the Credit Agreement.
<PAGE>
CAHILL GORDON & REINDEL
                                      -2-

          We have examined the originals, photocopies or conformed copies of all
such  records  of the  borrower  and the  guarantors  and all  such  agreements,
certificates of public officials,  certificates of officers and  representatives
of the Borrower and the  Guarantors  and such other  documents as we have deemed
relevant and  necessary as a basis for the opinions  hereinafter  expressed.  In
such examinations,  we have assumed the genuineness of all signature on original
documents and the  conformity to the originals of all copies  submitted to us as
conformed or photocopies. Based on the foregoing, it is our opinion that:

          1. The  execution  and delivery of the  Modification  Agreement by the
Borrower and each Guarantor will not conflict with, or result in a violation of,
the Indenture, or the Convertible Notes Indenture.

          2. With respect to the Indenture:

          (a) The  execution and delivery of the  Modification  Agreement by the
     Borrower and each  Guarantor  will not  constitute a "Default" or "Event of
     Default",  as said terms are defined in the  Indenture;  provided  that any
     debt incurred under the amended  Credit  Agreement in excess of $10,000,000
     may only be incurred when the Borrower's  Coverage Ratio (as defined in the
     Indenture) is not less than 2.0 to 1.0.

          (b) The formation and capitalization of new entities,  at described in
     Section 4.1 of the Modification Agreement, did not conflict with, or result
     in a violation of the Indenture.

          (c)  The   transfer  of  assets   described  in  Section  4.2  of  the
     Modification  Agreement  did not conflict  with the  Indenture  and did not
     constitute a "Default" or an "Event of Default",  as said terms are defined
     in the Indenture.

          (d) The dissolution of CH Finance Corp., an Arizona  corporation,  did
     not, and the dissolution of the remaining entities described in Section 4.3
     of the Modification  Agreement,  will not,  conflict with the Indenture and
     did not and will not  constitute a "Default"  or an "Event of Default",  as
     said terms are defined in the Indenture.

          (e) Borrower's  non-compliance with the terms of the Credit Agreement,
     as identified  and described in Section 5.1 of the  Modification  Agreement
     did not conflict with, or cause a default or an Event of Default under, the
     Indenture.

          3. With respect to the Convertible Notes Indenture:
<PAGE>
CAHILL GORDON & REINDEL
                                      -3-

          (a) The  execution and delivery of the  Modification  Agreement by the
     Borrower and each  Guarantor  will not  constitute a "Default" or "Event of
     Default", as said terms are defined in the Convertible Notes Indenture.

          (b) The formation and capitalization of new entities,  as described in
     Section 4.1 of the Modification Agreement, did not conflict with, or result
     in a violation of the Convertible Notes Indenture.

          (c)  The   transfer  of  assets   described  in  Section  4.2  of  the
     Modification   Agreement  did  not  conflict  with  the  Convertible  Notes
     Indenture and did not constitute a "Default" or and "Event of Default",  as
     said terms are defined in the Convertible Notes Indenture.

          (d) The dissolution of CH Finance Corp., an Arizona  corporation,  did
     not, and the dissolution of the remaining entities described in Section 4.3
     of the  Modification  Agreement,  will not,  conflict with the  Convertible
     Notes  Indenture  and did not and will not  constitute  a  "Default"  or an
     "Event of  Default",  as said terms are  defined in the  Convertible  Notes
     Indenture.

          (e) Borrower's  non-compliance with the terms of the Credit Agreement,
     as identified  and described in Section 5.1 of the  Modification  Agreement
     did not conflict  with,  or cause a Default or and Event of Default  under,
     the Convertible Notes Indenture.

          We are  members of the bar of the State of New York and do not purport
to be  experts  in,  or to  express  any  opinion  concerning,  the  laws of any
jurisdiction  other  than  the  law  of  the  State  of New  York,  the  General
Corporation  law of the State of  Delaware  ant the  federal  law of the  United
States.

          This  opinion  is  being  furnished  solely  to  you  and  may  not be
distributed  or  relied  upon by any other  person  without  our  prior  written
consent,  provided,  however, that this opinion may be relied upon by any person
to  which  all or a  part  of  the  Loan,  or a  participation  therein,  may be
transferred, provided that such reliance is only in connection with the Loan and
that this opinion  remains  effective only as of the date hereof and will not be
considered to be effective or restated as of any other date. This opinion is not
to be referred to, or quoted, in any document, report, or financial statement or
filed with, or delivered to, any  governmental  agency or other person or entity
without our prior written consent,  provided,  however, that this opinion may be
delivered to your auditors, government regulators,
<PAGE>
CAHILL GORDON & REINDEL
                                      -4-

transferees and participants of any person entitled to rely on this opinion.

                                        /s/ Cahill Gordon & Reindel

                                        CAHILL GORDON & REINDEL


Bank One, Arizona, NA,
  in its capacity as Agent
  and in its individual capacity
Western Region Real Estate
241 North Central Avenue
Phoenix, AZ  85004
Attention:     Rhonda R. Williams, Vice President

Norwest Bank Arizona, N.A.
3300 North Central Avenue, MS-9008
Phoenix, AZ  85012-2501
Attention:     Vicki Slade, Vice President

BankBoston, N.A.
115 perimeter Center Place, N.E., Ste. 1500
Atlanta, GA  30346
Attention:     Nick Whiting, Vice President

Guaranty Federal Bank, FSB
8333 Douglas Avenue, 10th Floor
Dallas, TX  75225
Attention:     Randall S. Reid
<PAGE>
                                   SCHEDULE I
                                   ----------

                                 ("Guarantors")

Acheter, Inc.
CH Mortgage Company
CHI Construction Company
Continental Homes, Inc.
Continental Homes of Austin, L.P.
Continental Homes of Dallas, L.P.
Continental Homes of Florida, Inc.
Continental Homes of San Antonio, L.P.
Continental Homes of Texas, Inc.
Continental Ranch, Inc. (formerly known as Rancho Carrillo, Inc.)
KDB Homes, Inc.
L & W Investments Inc.
Milburn Investments, Inc.
Miltex Management, Inc.
Miltex Mortgage of Texas Limited Partnership
R.O.S. Corporation
Settlement Corporation
Travis County Title Company
<PAGE>
                                   EXHIBIT "J"

                             COMPLIANCE CERTIFICATE


TO:      THE BANK PARTIES TO THE CREDIT AGREEMENT DESCRIBED BELOW

SCHEDULE OF COMPLIANCE AS OF _______________

         This  Compliance  Certificate  is  furnished  pursuant to that  certain
Credit  Agreement  dated as of June 27, 1996 (as amended,  modified,  renewed or
extended from time to time, the  "Agreement")  among  CONTINENTAL  HOMES HOLDING
CORP., a Delaware corporation and the Banks party thereto and BANK ONE, ARIZONA,
NA, as Agent for the Banks.  Unless otherwise defined herein,  capitalized terms
used in this Compliance  Certificate  have the meanings  ascribed thereto in the
Agreement.

         THE UNDERSIGNED HEREBY CERTIFIES THAT:



I.       I am the duly elected officer of Borrower, as indicated;
 

                  1. I have reviewed the terms of the Agreement and I have made,
or have  caused  to be made  under our  supervision,  a  detailed  review of the
transactions  and  conditions  of  Borrower  and  its  Subsidiaries  during  the
accounting period covered by the attached financial statements;

                  2. The examinations described in paragraph 2 did not disclose,
and I have no  knowledge  of, the  existence  of any  condition  or event  which
constitutes  an Event of Default or Unmatured  Event of Default during or at the
end of the accounting period covered by the attached financial  statements or as
of the date of this Certificate, except as set forth below; and

                  3.  Schedules  I and II attached  hereto sets forth  financial
data and computations  evidencing  compliance with the Financial  Covenant Tests
and certain  covenants in Article VIII of the  Agreement,  respectively,  all of
which data and  computations  are true,  complete  and  correct in all  material
respects.
<PAGE>
                  Described below are the exceptions,  if any, to paragraph 3 by
listing,  in detail,  the nature of the  condition or event,  the period  during
which it has existed and the action  which  Borrower  has taken,  is taking,  or
proposes to take with respect to each such condition or event:

________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________

                  The foregoing  certifications,  together with the computations
set forth in  Schedule I and  Schedule  II hereto and the  financial  statements
delivered with this  Certificate in support hereof,  are made and delivered this
_____ day of ___________________, 19___.


                                        CONTINENTAL HOMES HOLDING CORP., a 
                                        Delaware corporation



                                        By:_____________________________________
                                        Name:___________________________________
                                        Title:__________________________________
                                      -2-
<PAGE>
                                    [SAMPLE]

                      SCHEDULE I TO COMPLIANCE CERTIFICATE


                  Schedule of Compliance  as of  _______________________________
with the Financial Covenant Tests set forth in Article IX of the Agreement.
<PAGE>
<TABLE>
<S>      <C>                                                                   <C>
1.       Consolidated Tangible Net Worth Test (Section 9.1)

         Consolidated Tangible Net Worth:

                  Capital Accounts                                              $__________

                  Less Intangible Assets                                        $__________

                  Less Net loans and advances to directors,
                  officers and employees (excluding mortgage
                  loans)                                                        $__________

                  Equals Consolidated Tangible Net Worth                        $__________

         Minimum Consolidated Tangible Net Worth required:

                  $96,000,000                                                   $96,000,000

                  Plus 50% of Consolidated Net Income
                  earned after March 1, 1996                                    $__________

                  Plus 100% of net proceeds of capital
                  stock issued after March 1, 1996                              $__________

                  Equals Minimum Consolidated Tangible
                  Net Worth required                                            $________

                  Actual Minimum Consolidated Tangible
                  Net Worth per above calculation                               $________

                  Surplus (or deficit) Minimum Consolidated
                  Tangible Net Worth                                            $________
                                                                                  or
                                                                               ($________)

2.       Leverage Test (Section 9.2(a))

         Consolidated Indebtedness:

                  Total Indebtedness                                            $________

                  Less Indebtedness of
                           non-homebuilding Subsidiaries                        $________
</TABLE>
<PAGE>
<TABLE>
<S>      <C>                                                        <C>        <C>
                  Less Indebtedness under Convertible
                  Notes maturing after Facility Termination Date                $________

                  Less other Public Indebtedness
                  constituting similar convertible
                  subordinated notes maturing after
                  Facility Termination Date                                     $________

                  Equals Consolidated Indebtedness                              $________

         Adjusted Consolidated Tangible
         Net Worth:

                  Consolidated Tangible Net Worth                               $________

                  Plus Indebtedness under Convertible
                  Notes maturing after Facility Termination Date                $________

                  Plus other Public Indebtedness
                  constituting similar convertible
                  subordinated notes maturing after
                  Facility Termination Date                                     $________

                  Less Net Worth of mortgage lending and
                  title insurance Subsidiaries:
                           GAAP Net Worth                           $________
                           less advances paid and
                           outstanding from Subsidiary
                           to Borrower                              $________

                           Equals Net Worth                                     $________

                  Equals Adjusted Consolidated Tangible
                  Net Worth                                                     $________

         Times Applicable Leverage Multiplier                                   _________

         Equals Maximum Consolidated Indebtedness
         Permitted                                                              $________

         Actual Consolidated Indebtedness per
         calculation above                                                      $________
</TABLE>
                                      -2-
<PAGE>
<TABLE>
<S>      <C>                                                        <C>        <C>
         Excess (or deficit) Consolidated Indebtedness                          $________
                                                                                   or
                                                                               ($________)

3.       Interest Coverage Test (Section 9.2(b))

         EBITDA:

                  Consolidated Net Income                                       $________

                  Plus Consolidated Interest Expense:

                           Total Interest Expense (per              $________
                           definition)
                           less interest expense
                           for mortgage lending and
                           title insurance Subsidiaries             $________
                           Equals Consolidated Interest
                                    Expense                                     $________

                  Plus taxes                                                    $________

                  Plus depreciation expense                                     $________

                  Plus amortization expense                                     $________

                  Plus other non-cash charges                                   $________

                  Plus extraordinary losses                                     $________

                  Less extraordinary gains                                      $________

                  Equals EBITDA                                                 $________

         Consolidated Interest Incurred:

                  Interest expense                                              $________

                  Plus capitalized interest                                     $________

                  Plus other items per definition
                  (if applicable)                                               $________
</TABLE>
                                      -3-
<PAGE>
<TABLE>
<S>      <C>                                                        <C>        <C>
                  Less interest expense for mortgage
                           lending and title insurance
                           Subsidiaries                                         $________

                  Equals Consolidated Interest Incurred                         $________

Ratio of EBITDA to Consolidated
                   Interest Incurred:  _____________

Minimum Ratio Required:              2.0 to 1

4.       Spec Unit Inventory (Section 9.3)

         a)       Total Spec Units Owned by Guarantors                          ________

         b)       Plus Total Model Units Owned by Guarantors                    ________

         c)       Total Spec and Model Units                                    ________

         d)       Total Housing Unit Closing
                  during preceding 12 months                        _________
                  Times 50%                                                     ________

         e)       Total Housing Closings during
                  preceding 6 months                                _________

                  Times 110%                                                    ________

         f)       Amount in (c) less the greater
                  of amount in (d) or (e)                                       ________

                                                                                   or

                                                                               (________)

         g)       Total Spec Units where certificate
                  of occupancy was issued more than
                  6 months ago (should be zero)                                 ________

5.       Land Owned (Section 9.4)

         Book value of Finished Lots                                            $________
</TABLE>
                                      -4-
<PAGE>
<TABLE>
<S>      <C>                                                        <C>        <C>
         Plus book value of Land
         under development                                                      $________

         Plus book value of vacant land                                         $________

         Equals total book values                                   $________

         Consolidated Tangible Net Worth                                        $________

         Plus Indebtedness under Convertible
         Notes maturing after Facility
         Termination Date                                                       $________

         Plus other Public Indebtedness
         constituting similar convertible
         subordinated notes maturing
         after Facility Termination Date                                        $________

         Equals total net worth/equity                                          $________

         Times 150%                                                             $________

         Excess (or deficit) of total
         book values                                                            $________

                                                                                   or

                                                                               ($________)
</TABLE>
                                      -5-
<PAGE>
                                    [SAMPLE]

                      SCHEDULE II TO COMPLIANCE CERTIFICATE


         Schedule of Compliance as of _______________ with certain covenants set
forth in Article VIII of the Agreement.
<TABLE>
<CAPTION>
Section 8.2
Indebtedness
------------

<S>                                                                             <C>
(iii)    Warehouse Facility Debt [$30 mil. max.]                                $_________________

(viii)   Letters of Credit [$20 mil. max.]                                      $_________________

(ix)     Non-Recourse Debt [$25 mil. max.]                                      $_________________

(xii)    Other Debt [$35 mil. max.]                                             $_________________

Section 8.3
Merger
------

(v)(b)   Net Worth in last 24 months of Non-Related Business                    $_________________
         [$10 mil. max. net worth in 24 months]

Section 8.5
Investments and Acquisitions
----------------------------

(iv)     Investments in Mortgage Lending and Title Insurance                    $_________________
         Subsidiaries [$15 mil. max.]

(v)      Future Investments in Surprise Entities [$15 mil. max.]                $_________________

(vi)     Investments in Joint Ventures [$15 mil. max.]                          $_________________

(vii)    Investments in Subsidiaries in a Non-Related Business                  $_________________
         [$10 mil. max.]

(xiv)    Other Investments [$5 mil. max.]                                       $_________________
</TABLE>
                                      -6-
<PAGE>
<TABLE>
<CAPTION>
Section 8.6
Liens
-----
<S>                                                                    <C>

(iv)     Liens in ordinary course of business [$25 mil. max.]                   $_________________

Section 8.7
Redemption
----------

(ii)     Aggregate Redemption for consideration other than             $__________________________
         CHHC stock after 6/27/96 [$5 mil. max.]
</TABLE>
                                      -7-