**SECURED      PROMISSORY NOTE**

| U.S.*** ***$4,484,077.00 | ***Dallas,                Texas*** | December                19, 2006 |
|-------------------------------|------------------------------------|----------------------------------|

**FOR      VALUE RECEIVED**
**BUFFINGTON      HIDDEN LAKES, LTD.,**
**UNITED      DEVELOPMENT FUNDING III, L.P.**

----

** **

----

----

----

----

----

----

***,***

----

----

----

**.      **

----

----

----

----

----

----

**THE      FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS      ARE IN ANY WAY OR TO ANY EXTENT OWED IN WHOLE OR IN PART UNDER ANY CLAIM OR      THEORY OF STRICT LIABILITY, OR ARE CAUSED IN WHOLE OR IN PART, BY ANY NEGLIGENT      ACT OR OMISSION OF ANY KIND BY LENDER;**

----

**.**
**CHOICE      OF LAW; **
**JURISDICTION;      VENUE**
**.      **
**EXCEPT      TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF SECURITY INTERESTS OR REMEDIES      IN RESPECT OF ANY PARTICULAR COLLATERAL IS GOVERNED BY THE LAWS OF A      JURISDICTION OTHER THAN THE STATE OF TEXAS, THIS NOTE AND THE OTHER LOAN      DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE SUBSTANTIVE      LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS CONFLICTS OF LAWS PROVISIONS.      JURISDICTION FOR ALL MATTERS ARISING OUT OF THIS NOTE AND THE OTHER LOAN      DOCUMENTS SHALL BE EXCLUSIVELY IN THE STATE AND FEDERAL COURTS SITTING IN DALLAS      COUNTY, TEXAS, AND EACH OF BORROWER AND THE GENERAL PARTNER HEREBY IRREVOCABLY      SUBMITS ITSELF TO THE JURISDICTION OF SUCH STATE AND FEDERAL COURTS AND AGREES      AND CONSENTS NOT TO ASSERT IN ANY PROCEEDING, THAT ANY SUCH PROCESS IS BROUGHT      IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER, AND FURTHER      AGREES TO A TRANSFER OF SUCH PROCEEDING TO THE COURTS SITTING IN DALLAS COUNTY,      TEXAS. **

----

**25.**
**WAIVER      OF JURY TRIAL, PUNITIVE DAMAGES, ETC**
**.**
**      EACH OF BORROWER AND THE GENERAL PARTNER HEREBY KNOWINGLY, VOLUNTARILY,      INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED      BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION      BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR      IN      CONNECTION WITH THIS NOTE OR THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED      HEREBY OR THEREBY OR ASSOCIATED HEREWITH OR THEREWITH, BEFORE OR AFTER MATURITY      OF THIS NOTE; (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY      RIGHT      IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY “SPECIAL DAMAGES”, AS      DEFINED BELOW, (C) CERTIFIES THAT NO PARTY HERETO NOR ANY REPRESENTATIVE OF      LENDER OR COUNSEL FOR ANY PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE,      OR IMPLIED THAT SUCH PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO      ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT LENDER HAS BEEN INDUCED      TO ENTER INTO THIS NOTE AND THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS      CONTEMPLATED HEREBY AND THEREBY BY AMONG OTHER THINGS, THE WAIVERS AND      CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, “SPECIAL      DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES      (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS WHICH      ANY      PARTY HERETO**

----

**HAS      EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER PARTY      HERETO.**

**26.**
**ENTIRE      AGREEMENT**
**.      THIS NOTE AND THE OTHER LOAN DOCUMENTS TOGETHER CONSTITUTE THE ENTIRE AGREEMENT      AMONG THE PARTIES CONCERNING THE SUBJECT MATTER HEREOF, AND ALL PRIOR      DISCUSSIONS, AGREEMENTS AND STATEMENTS, WHETHER ORAL OR WRITTEN, ARE MERGED      INTO      THIS NOTE AND THE OTHER LOAN DOCUMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS      AMONG THE PARTIES AND THIS NOTE AND THE OTHER LOAN DOCUMENTS MAY NOT BE      CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS      OF THE PARTIES**

*[The      remainder of this page is intentionally left blank.]*

----

**BORROWER:**

|         |                                                                                                                                                    |                                  |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------|
|         | **BUFFINGTON                HIDDEN LAKES, LTD.,**a Texas limited partnership By:  Buffington Hidden Lakes GP, Inc.,Its:  General Partner |
|    |                                                                                                                                               |                             |
|         | By:                                                                                                                                           | /s/ Patrick              Starley |
|         | Patrick Starley                                                                                                                                         |
|         | Vice              President                                                                                                                             |

**LENDER:**

|         |                                                                                                                                                                                          |                               |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------|
|         | **UNITED                DEVELOPMENT FUNDING III, L.P.,**a Delaware limited partnership By:  UMTH Land Development, L.P.Its:  General Partner By:  UMT Services, Inc. |
|    |                                                                                                                                                                                     |                          |
|         | By:                                                                                                                                                                                 | /s/ Jeff              Shirley |
|         | Jeff Shirley                                                                                                                                                                                  |
|         | Executive              Vice President                                                                                                                                                         |

----

**AGREED      AND ACKNOWLEDGED BY:**

**THE      GENERAL PARTNER**

|         |                                                                    |                                  |
|--------------|-------------------------------------------------------------------------|---------------------------------------|
|         | **BUFFINGTON                HIDDEN LAKES GP, INC.,**a Texas corporation |
|    |                                                               |                             |
| Date:   | By:                                                           | /s/ Patrick              Starley |
|         | Patrick Starley                                                         |
|         | Vice              President                                             |