Form 10-QSB



     [ x ] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934

         For the quarterly period ending March 31, 1999

     [   ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF
              THE SECURITIES EXCHANGE ACT OF 1934

         For the transition period from _________ to _________


                  Commission file number 333-10109


                       UNITED MORTGAGE TRUST


          (Exact Name of Registrant as Specified in its 
                      Governing Instruments)

     (a Maryland trust)        (IRS Employer Identification 
                                     Number 75-6496585)



                    1701 N. GREENVILLE, SUITE 403
                        RICHARDSON TX 75081
                            (972) 705-9805



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

<PAGE>
UNITED MORTGAGE TRUST
INDEX TO FORM 10-QSB
                                                      Page Number


PART I  -- FINANCIAL INFORMATION . . . . . . . . . . . . . .3

Item 1. Financial Statements . . . . . . . . . . . . . . . .3

     Balance Sheets
        March 31, 1999 and December 31, 1998. . . . . . . . 3

     Statements of Income
        Three Months Ending 
        March 31, 1999 and 1998. . . . . . . . . . . . . . .4

     Statements of Cash Flows
        Three Months Ending 
        March 31, 1999 and 1998. . . . . . . . . . . . . . .5

     Notes to Financial Statements. . . . . . . .  . . . . .6

Item 2. Management's Discussion and Analysis 
  of Results of Operations and Financial Condition . . . . .7

PART II -- OTHER INFORMATION . . . . . . . . . . . . . . . 11

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 11

SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . .12
<PAGE>

PART I  -- FINANCIAL INFORMATION

ITEM 1. Financial Statements
<TABLE>
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
<CAPTION>
                                           March 31,     December 31,
                                             1999            1998
                                          (unaudited)     (audited)
ASSETS
<S>                                        <C>           <C>
Cash                                       $   159,036   $    58,054
Investment in residential mortgages
   and contracts for deed                   13,689,358    11,159,863
Interim mortgages                            3,295,965     3,285,023
Accrued interest receivable                    157,127       133,478
Receivable from affiliate (Note 4)              13,443        15,185
Equipment, less accumulated depreciation
     of $1,386 and $1,256, respectively          1,856         1,986
Other assets                                    40,350         5,350
                                           -----------   -----------
Total Assets                               $17,357,135   $14,658,939
                                           ===========   ===========
LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
  Line of credit (Note 3)                    2,869,000     1,484,308
  Dividend payable                             134,152       121,164
  Accounts payable & accrued 
      liabilities                                   80         1,519
                                           -----------   -----------
      Total Liabilities                      3,003,232     1,606,991
                                           -----------   -----------

Shareholders' equity:
  Shares of beneficial interest; $.01 par
    Value; 100,000,000 shares authorized
    805,141 and 734,271 shares
    outstanding                                  8,052         7,343
  Additional paid-in capital                14,242,543    12,974,938
  Retained earnings                            103,308        69,667
                                           -----------   -----------
      Total Shareholders' Equity           $14,353,903   $13,051,948
                                           -----------   -----------
Total liabilities & shareholders' equity   $17,357,135   $14,658,939
                                           ===========   ===========
<FN> 
See accompanying notes to financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDING MARCH 31, 1999 AND 1998
<CAPTION>
                                                      March 31,
                                                1999            1998
                                            (unaudited)    (unaudited)
<S>                                         <C>             <C>
Income:
  Gain on sale of notes                     $  1,068        $   --
  Interest income                            484,450         164,116
                                            --------        --------
                                             485,518         164,116
                                            --------        --------
Expense:
  Salaries and wages                          16,228          16,447
  General and administrative                  62,302          28,967
  Interest expense                            31,732           3,646
  Expense reimbursement from
    affiliate(Note 4)                        (48,060)        (35,813)
                                            --------        --------
                                              62,202          13,247
                                            --------        --------
Net income                                  $423,316        $150,869
                                            ========        ========

Net income per share of beneficial
  interest                                     $0.54           $0.54
                                            ========        ========

Weighted average shares outstanding          778,380         277,850
                                            ========        ======== 
<FN>
See accompanying notes to financial statements.
Page F2
</FN>
</TABLE>

<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDING MARCH 31, 1999 AND 1998
<CAPTION>
                                                       March 31,
                                                  1999         1998
                                              (unaudited)  (unaudited)
<S>                                           <C>           <C>
Cash flows from operating activities:
  Net income                                  $   423,316   $ 150,869
  Adjustments to reconcile net income
    to net cash provided by operating 
    activities:
      Depreciation and amortization                   130         175
      Amortization of discount on 
        mortgage investments                      (27,111)    (11,921)
      Accrued interest receivable                 (23,649)    (20,069)
      Other assets                                (35,000)     (5,750)
      Accounts payable and accrued 
       liabilities                                 (1,439)        879
        Net cash provided by operating        -----------   ---------  
          activities:                             336,247     114,183
                                              -----------   ---------
Cash flows from investing activities:
  Investment in residential mortgages 
    and contracts for deed                    (2,576,928)   (1,807,988)
  Principal receipts on residential 
    mortgages and contracts for deed             153,006         7,967
  Investment in interim mortgages             (2,532,075)     (700,250)
  Principal receipts on interim mortgages      2,521,133       376,740
  Loan acquisition costs                         (78,462)      (57,724)
        Net cash used in investing             ---------     ---------
         activities:                          (2,513,326)   (2,181,255)
                                               ---------     ---------
Cash flows from financing activities:
  Proceeds from issuance of shares of 
    beneficial interest                        1,268,314     2,240,465
  Net borrowings on credit line                1,384,692       187,254
  Receivable from affiliate                        1,743        12,116
  Dividends                                     (376,688)     (116,897)
        Net cash provided by financing        ----------    ---------- 
          activities:                          2,278,061     2,322,938
                                              ----------    ----------
Net increase in cash                             100,982       255,866
                                              
Cash at beginning of period                       58,054           248
                                              ----------    ----------
Cash at end of period                          $ 159,036    $  256,114 
                                              ----------    ----------
Interest paid                                  $  31,732    $    3,646
                                              ----------    ----------
<FN>
See accompanying note to financial statements.

Page F3
</FN>
</TABLE>

                   UNITED MORTGAGE TRUST
               Notes to Financial Statements
                     March 31, 1999

1. Description of Business

The Company

     United Mortgage Trust is a self administered real estate 
investment trust (a "REIT") that invests in mortgages and contracts for 
deed. Most, if not all, of the mortgages and contracts for deed that we 
purchase are not insured or guaranteed by a federally owned or 
guaranteed mortgage agency and involve borrowers who do not satisfy all 
of the income ratios, credit record criteria, loan-to-value ratios, 
employment history and liquidity requirements of conventional mortgage 
financing. The advisor to the Company is Mortgage Trust Advisors, Inc. 
(the "Advisor"), a Texas corporation. 

     Operations commenced on March 5, 1997 when approval was given by 
the Securities and Exchange Commission for the Company's initial public 
offering of shares. The Company is currently offering up to 2,500,000 
shares at an offering price of $20 per share. 

2. Basis of Presentation

     The accompanying unaudited financial statements have been prepared 
in accordance with generally accepted accounting principles for interim 
financial information and with the instructions to Form 10-QSB of 
Regulation S-B. They do not include all information and footnotes 
required by generally accepted accounting principles for complete 
financial statements. However, except as disclosed herein, there has 
been no material change in information disclosed in the notes to the 
financial statements for the year ending December 31, 1998 included in 
the Company's 10-KSB filed with the Securities and Exchange Commission. 
The interim unaudited financial statements should be read in 
conjunction with those financial statements. In the opinion of 
management, all adjustments considered necessary for a fair 
presentation, consisting solely of normal recurring adjustments, have 
been made. Operating results for the three months ending March 31, 1999 
are not necessarily indicative of the results that may be expected for 
the year ending December 31, 1999.

3. Line of Credit

     On March 23, 1999 the Company renewed and increased its Revolving 
Loan Agreement (the "Agreement") with Legacy Bank of Texas (the 
"Bank"), wherein the Company can borrow up to $5,000,000 on a revolving 
basis for a term of one year from the date of the Agreement. Interest 
on the outstanding principal balance of the loan is paid monthly at a 
varying rate per annum of one and one-half percent (1-1/2%) in excess 
of the Bank's prime rate of interest. The borrowing base in the 
Agreement is an amount equal to fifty percent (50%) of the aggregate 
unpaid principal of the Collateral pledged to the Bank. Collateral for 
the Agreement is $10,000,000 unpaid principal balance of residential 
mortgages owned by the Company. As security for the prompt satisfaction 
of all obligations of the Agreement, the Company agreed to assign, 
transfer and set over to the Bank all of its right, title and interest 
in and to the Collateral. The outstanding balance of the Revolving Line 
of Credit was $2,869,000 and $325,254 for the March 31, 1999 and 1998 
periods, respectively. The Company used the funds to purchase Mortgage 
Investments.

4. Related Party Transactions

     In 1997 the Company entered into a Funding Agreement with the 
Advisor whereby the Advisor agreed to fund the Company's general and 
administrative expenses. In connection with this Agreement, the Company 
received $48,060 and $35,813 in expense reimbursements for the three 
months ending March 31, 1999 and 1998, respectively. In consideration 
of the Agreement, the Company contributed to the Advisor an amount 
equal to one-half of one percent (.5%) of the Company's average 
invested assets for the immediately preceding month.

     The Company also paid the Advisor Acquisition Fees of $78,462 and 
$57,724 during the three months ending March 31, 1999 and 1998, 
respectively. The fee is calculated at 3% of the unpaid principal 
balance of the Residential Mortgages as of the purchase date.

<PAGE>
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS 

RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 31, 1999 AND 1998
 
     We were formed on July 12, 1996, however our business operations 
commenced in March 1997 when the Securities and Exchange Commission 
issued an order of registration for our initial public offering of 
Shares. The following table sets forth certain information about the 
Mortgage Investments that we purchased during the periods set forth 
below.

<TABLE>
<CAPTION>
                                            Three Months Ending
                                                 March 31, 
                                            1999           1998

RESIDENTIAL MORTGAGES
<S>                                     <C>            <C>
Purchase price                          $2,071,297     $1,807,041
Total number                                    44             43
Number purchased from affiliates                28             32
Number purchased from other sources             16             11
Blended interest rate                       11.28%         11.51%
Aggregate principal balance             $2,164,626     $1,924,147
Average principal balance                  $49,196        $44,750
Remaining term in months (1)                   351            338
Current yield (1)                           11.78%         12.26%
Purchase price/principal balance (1)        95.69%         93.91%
Investment-to-value ratio (1)(2)            85.07%         84.29%

CONTRACTS FOR DEED
<S>                                     <C>            <C>
Purchase price                            $498,210              0
Total number                                    12              0
Number purchased from affiliates                 3              0
Number purchased from other sources              9              0
Blended interest rate                       11.77%              0
Aggregate principal balance               $509,445              0
Average principal balance                  $42,453              0
Remaining term in months(1)                    352              0
Current yield (1)                           12.04%              0
Purchase price/principal balance (1)        97.79%              0
Investment-to-value ratio (1)(2)            88.90%              0

INTERIM MORTGAGES
<S>                                     <C>            <C>
Dollars invested during period          $2,532,075       $700,250
Total number participated in 
  during period                                 73             27
Number purchased from affiliates                73             27
Number purchased from other sources              0              0
Blended interest rate                       12.75%         13.07%
Remaining term in months                <12 months     <12 months
Current yield at year-end (1)               12.93%         13.25%
Purchase price/principal balance (1)          100%           100%
Investment-to-value ratio (1)(2)               50%            50%
<FN>
(1) These amounts were determined at the time the Mortgage Investments 
were purchased.

(2) The investment-to-value ratio is determined at the time a Mortgage 
Investment is acquired and is determined by dividing the amount paid 
to acquire that Mortgage Investment by the value of the underlying 
real estate that is security for that Mortgage Investment.
</FN>
</TABLE>

     As of March 31, 1999, our mortgage portfolio in the aggregate 
consisted of 281 Residential Mortgages and 41 Contracts for Deed. As 
of the dates of purchase, the portfolio had an unpaid principal 
balance of $13,950,463, and was purchased for a discounted price of 
$13,249,293 (94.97% of the unpaid principal balance). The average loan 
in the portfolio had a blended interest rate of 11.44%, an unpaid 
principal balance of $43,324, a term remaining of 333 months, and a 
current annual yield of 12.04%, and an investment-to-value ratio of 
84.10%. As of March 31, 1999 we also had 115 active interim mortgages 
with an outstanding principal balance of $3,295,965. 

     By comparison, our portfolio as the end of March 31, 1998 
consisted of 115 Residential Mortgages with an unpaid principal 
balance of $4,748,005, and was purchased for a discounted price of 
$4,442,567 (93.56% of the unpaid principal balance). The average loan 
in the portfolio had a blended interest rate of 11.44%, an unpaid 
principal balance of $41,228, a term remaining of 319 months, and a 
current annual yield of 12.22%, and an investment-to-value ratio of 
84.25%. As of March 31, 1998 we had 46 active Interim Mortgages with 
an outstanding principal balance of $1,200,785.
 
     All of the properties that are security for the Residential 
Mortgages and Interim Mortgages were located in Texas. Each of the 
properties was adequately covered by a mortgagee title insurance 
policy and hazard insurance.

     Our Mortgage Investments generated $485,518 and $164,116 of total 
income during the quarters ending March 31, 1999 and 1998, 
respectively, which represents a 196% increase. The rise was 
attributed to the significant addition of Mortgage Investments 
purchased using Net Offering Proceeds derived from the sale of our 
Shares during the year proceeding the current period. Expenses of 
$110,262 in the 1999 quarter were offset by reimbursement from the 
Advisor to us of $48,060. Expenses of $49,060 in the 1998 quarter were 
offset by reimbursement from the Advisor of $35,813. The 57% rise in 
the 1999 quarter was attributed to an additional interest expense 
commensurate with and substantially higher borrowing on our credit 
line. 

      Net income of $423,316 and $150,869 for the quarters ending 
March 31, 1999 and 1998, respectively, represented a 181% increase. 
Earnings per weighted average share remained constant at $0.54 for the 
1999 and 1998 quarters.

     As of March 31, 1999, 11 of our Mortgage Investments, or 2.52% of 
our active portfolio, were in default.  This compares to 3 defaulted 
investments at March 31, 1998, or 1.86% of our active portfolio. As a 
result of the recourse provisions under which the Mortgage Investments 
were purchased, we did not experience a loss of interest income due to 
the defaults in either quarter.

    Dividends declared and paid per share of beneficial interest for 
the quarters ending March 31, 1999 and 1998 were $0.504 and $0.527, 
respectively. Both quarters exceed a 10% annualized rate of return for 
our shareholders.

CAPITAL RESOURCES AND LIQUIDITY FOR THE QUARTERS ENDING MARCH 31, 1999 
AND 1998

     We utilize funds made available from the sale of our Shares, 
funds made available on our bank line of credit and payment of 
principal on our Mortgage Investments to purchase Mortgage 
Investments.  During the 1999 quarter we sold 70,870 shares of 
beneficial interest for Gross Offering Proceeds of $1,417,400 and Net 
Offering Proceeds (after the deduction of selling commissions and 
fees) to us of $1,268,314. By comparison, 125,186 shares of beneficial 
interest were sold during the 1998 quarter, for Gross Offering 
Proceeds of $2,503,720 and Net Offering Proceeds to us of $2,240,465. 
Net borrowing on our line of credit in the 1999 quarter was $1,384,692 
compared to $187,254 in the 1998 quarter. Payments of principal on our 
Mortgage Investments for the 1999 and 1998 quarters were $2,674,139 
and $384,707, respectively.

     Using a combination of Net Offering Proceeds, borrowing on our 
credit line and payments of principal on our Mortgage Investments, we 
purchased 129 Mortgage Investments with and unpaid principal balance 
of $5,206,146 and 70 Mortgage Investments with an unpaid principal 
balance of $2,624,397, in 1999 and 1998, respectively.

     As of March 31, 1999, we had sold an aggregate total of 795,141 
Shares for Gross Offering Proceeds of $15,902,820 and Net Offering 
Proceeds to us of $14,225,594. Total shares outstanding at March 31, 
1999 were 805,141, which included 10,000 sold to the Advisor before 
the public offering commenced. This compares to an aggregate total of 
317,694 Shares for Gross Offering Proceeds of $6,353,880 and Net 
Offering Proceeds to us of $5,685,463 as of March 31, 1998. Total 
shares outstanding at March 31, 1998 were 327,694, which included 
10,000 sold to the Advisor before the public offering commenced.

      On March 23, 1999 we renewed and increased our Revolving Loan 
Agreement (the "Legacy Agreement") with Legacy Bank of Texas, a Texas 
State Bank ("Legacy"), wherein we could borrow up to $5,000,000 on a 
revolving basis for a term of one year from the date of the agreement. 
Interest on the outstanding principal balance of the loan was paid 
monthly at a varying rate per annum which was one and one-half percent 
(1-1/2%) above the "Wall Street Journal Prime" rate of interest. As 
security for the prompt satisfaction of all obligations of the Legacy 
Agreement, we pledged through collateral assignment $10,000,000 of 
residential mortgages. The outstanding loan balance at March 31, 1999 
was $2,869,000.

YEAR 2000 ISSUES

     Certain computer programs and embedded logic devices that utilize 
two digit rather than four to define the applicable year may fail to 
properly recognize date sensitive information when the year changes to 
2000 (the "Year 2000 Issue").

     We are conducting a comprehensive review to determine if the Year 
2000 Issue will affect our computer system. We currently believe that 
we do not face "legacy" computer systems and software issues because 
we commenced operations within the past five years. Thus, we do not 
anticipate incurring internal Year 2000 Issue costs that would be 
material to our financial position, results of operations, or cash 
flows in future periods. Through March 31, 1999, we incurred less than 
$1,000 of expenses in connection with our review of the Year 2000 
Issue.

     There can be no assurance, however, that our lenders, custodians, 
loan servicers, vendors, clients and other third-party partners 
(collectively, "Contract Parties") will resolve their own Year 2000 
Issues in a timely manner, or that any failure by these contract 
Parties to resolve such issues would not have an adverse effect on our 
operations and financial condition. Each Contract Party is in turn 
subject to the Year 2000 Issues of various third parties with which it 
does business, making our exposure to the noncompliance of any 
Contract Party difficult to assess.  We believe we are devoting the 
necessary resources to address all of the Year 2000 Issues over which 
we have control. With respect to the Year 2000 Issues of Contract 
Parties, over which we have no control, our contingency plan is to 
identify replacement vendors, where possible.

PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

    Exhibit 1 - One Year $5,000,000 Revolving Loan (Renewal) Agreement 
dated March 23, 1999 between United Mortgage Trust and Legacy Bank of 
Texas.

(b) Reports on Form 8-K

     During the period covered by this report, the Company filed 
reports on Form 8-K dated March 3, 1999 to report the status of its 
offering of shares.


SIGNATURES

     In accordance with the requirements of the Exchange Act, the 
registrant caused this report to be signed on its behalf by the 
undersigned, thereunder duly authorized.


                                    UNITED MORTGAGE TRUST
                                        (Registrant)



Date:  May 14, 1999                 /S/Christine A. Griffin
                                      Christine A. Griffin
                                           President
<PAGE>
Exhibit 1
                                     ONE (1) YEAR
                                     $5,000,000.00
                               REVOLVING LOAN AGREEMENT
                                (RENEWAL AND INCREASE)


THIS REVOLVING LOAN AGREEMENT (RENEWAL AND INCREASE), dated the 
24th day of March, 1999, by and between UNITED MORTGAGE TRUST, a Trust 
organized under the laws of the State of Maryland (the "Borrower"), and 
LEGACY BANK OF TEXAS, a Texas state bank (the "Bank").

                                  WITNESSETH:

BACKGROUND. Borrower is in the business of buying mortgage notes 
secured by first and prior liens on residential properties located 
within the State of Texas (collectively called the "Residential 
Paper").  Borrower has requested the Bank to extend a loan not to 
exceed FIVE MILLION DOLLARS ($5,000,000.00), in aggregate, on a 
revolving loan basis (the "Loan") from which to reimburse Borrower up 
to $5,000,000.00 for all or part of Borrower's cost of acquisition of 
Residential Paper obtained for investment; and, Borrower maintains an 
inventory (?Eligible Inventory?) of unencumbered current Residential 
Paper of not less than $10,000,000.00 with which to secure Loan. Bank 
is willing to advance the Loan upon the terms and conditions 
hereinafter set forth.

NOW, THEREFORE, in consideration of the promises herein 
contained, and each intending to be legally bound hereby, the parties 
agree as follows:

Section I: The Loan

1.01 Disbursement of the Loan. Subject to the terms hereof, Bank 
will credit the proceeds of the revolving Loan advanced from time to 
time to the Borrower's deposit account with the Bank or, at Bank's 
discretion, to other depository accounts designated by Borrower.

1.02 General Terms. Subject to the terms hereof and the Note 
(defined below), the Bank will lend the Borrower, from time to time 
until twelve months (12) months after this date (the "Loan Termination 
Date"), such sums as the Borrower may request by draw ("Draw") request 
to the Bank, received by the Bank not less than one (1) banking day 
before Bank is requested to fund such Draw and which shall not exceed, 
in the aggregate principal amount at any one time outstanding, an 
amount (the "Loan Commitment") equal to the lesser of $5,000,000.00 or 
the Borrowing Base, defined in Section 1.06. The Borrower may borrow, 
repay without penalty or premium and reborrow hereunder, from the date 
of this Agreement until the Loan Termination Date, either the full 
amount of the Loan Commitment or any lesser sum. It is the intention of 
the parties that the outstanding principal amount of the Loan shall at 
no time exceed the amount of the then existing Borrowing Base, and if, 
at any time, an excess shall for any reason exist, the full amount of 
such excess, together with accrued and unpaid interest thereon as 
herein provided, shall  be immediately due and payable in full.

This Loan will be secured inter alia by Pledged Residential Paper 
(hereinafter defined) which shall at all times during the term of the 
loan have an aggregate outstanding principal balance equal to at least 
200% of the outstanding principal balance of the Loan.

1.03 Draws and Draw Fees.   Draws will be submitted not more 
frequently than weekly on forms acceptable to Bank accompanied in each 
case by a $50.00 fee to process each Draw.

1.04 The Note.  The Loan shall be evidenced by a note ("Note"), 
having a stated maturity on the Loan Termination Date, in form 
acceptable to Bank.

1.05 The Origination and/or Commitment Fees.  In exchange for 
Bank's agreement to set aside funds to accommodate Borrower's rights to 
draw hereunder, Borrower will pay Bank $35,000.00 upon execution of 
this Agreement by Borrower.

1.06 Borrowing Base. The Borrowing Base is an amount equal to 
fifty (50%) percent of the aggregate unpaid principal of the Pledged 
Residential Paper.  For purposes hereof, the term ?Pledged Residential 
Paper? shall mean Residential Paper pledged to Bank by Borrower and 
secured by a first and prior deed of trust lien encumbering residential 
real property located within the Texas counties of Dallas, Collin, 
Tarrant, Ellis, Rockwall, Denton and Harris, excluding any Residential 
Paper which is or becomes past due by more than sixty (60) days.  
Borrower will remove from the Pledged Residential Paper pledged to the 
Bank at once and without demand any Residential Paper that is more than 
sixty (60) days past due and will replace the same with unpledged 
Residential Paper that is current, i.e. not more than sixty (60) days 
past due; and, such replenishment will be accomplished by Borrower 
promptly without notice from Bank to do so. Borrower will submit a 
reconciliation of collateral and debt on the first day of each month 
(the "Settlement Date") on which will be reported the Borrowing Base 
for that month. If the reconciliation shows available borrowing, the 
Borrower may draw up to the available amount for borrowing. If the 
reconciliation shows available borrowing to be less than the amount 
outstanding, the Loan will be paid down to the available amount, i.e. 
the Borrowing Base, at that time. No Draw will be funded if any default 
by Borrower is threatened or has occurred under any of Bank's Loan 
Documents in Bank's reasonable commercial judgment.

1.07 Residential Paper Tracking. In order to induce Bank to enter 
into this Agreement, Borrower has represented to Bank that Borrower 
will furnish Bank with all information needed/requested by Bank to 
track each item of Pledged Residential Paper ("Item") viz. each first 
lien note and each first lien securing the payment of such first lien 
note pledged to Bank in order to independently determine its currency, 
and to remain assured that no Item of Pledged Residential Paper 
considered in the Borrowing Base is more than sixty (60) days past due. 
In addition, Borrower will furnish any certification of Residential 
Paper currency under oath that Bank may request from time to time 
during the term of the Loan.

1.08 Interest Rate and Payments of Interest.  

(A) Except as otherwise provided under ? 1.08(B), interest on the 
principal balance of the Loan from time to time outstanding will 
be payable in monthly installments at a varying rate per annum 
(the ?Variable Rate?) which is one and one half (1.50%) percent 
per annum in excess of "Wall Street Journal Prime" rate of 
interest, as published from time to time and as further defined in 
the Note, but in no event to exceed the maximum rate of 
nonusurious interest allowed by law, as may hereafter be in effect 
(hereinafter called the "Highest Lawful Rate"), with adjustments 
in such Variable Rate to be made on the same day as any change in 
the Wall Street Journal Prime Rate. All past due principal and 
interest shall bear interest at a rate per annum which is equal to 
the Highest Lawful Rate from maturity until paid. Notwithstanding 
the foregoing provisions concerning such varying rate, if at any 
time the Variable Rate exceeds the Highest Lawful Rate, the rate 
of interest to accrue on the Note shall be limited to the Highest 
Lawful Rate, but if thereafter the Variable Rate is  less than the 
Highest Lawful Rate, the rate of interest to accrue on the Note 
shall be the Highest Lawful Rate until the total amount of 
interest accrued on the Note equals the amount of interest which 
would have accrued if the Variable Rate had at all times been in 
effect.

(B) It is the intention of the parties hereto to comply with the 
usury laws applicable to the Loan; accordingly, it is agreed that 
notwithstanding any provision to the contrary in Agreement or in 
any of the documents securing payment of the Loan, no such 
provision shall require the payment or permit the collection of 
interest in excess of the maximum permitted by law. If any excess 
interest is provided for, contracted for, charged for or received, 
then the provisions of this paragraph shall govern and control and 
neither the Borrower hereof nor any other party liable for the 
payment thereof shall be obligated to pay the amount of such 
excess interest. Any such excess interest which may have been 
collected shall be, at the Bank's option, either applied as a 
credit against the then unpaid amount hereof or refunded to 
Borrower. The effective rate of interest shall be automatically 
subject to reduction to the maximum lawful contract rate allowed 
under the usury laws as now or hereafter construed. It is further 
agreed that without limitation of the foregoing, all calculations 
of the rate of interest contracted for, charged for, or received 
under this Agreement which are made for the purposes of 
determining whether such rate exceeds the maximum lawful rate, 
shall be made, to the extent permitted by law, by amortizing, 
prorating, allocating and spreading in equal parts during the full 
stated term of the Loan, all interest contracted for, charged for 
or received from the Borrower or otherwise by the Bank.

1.09 Payment to the Bank.  All sums payable to the Bank hereunder 
shall be paid directly to the Bank in immediately available funds. The 
Bank may send the Borrower statements of all amounts due hereunder, 
which statements shall be considered correct and conclusively binding 
on the Borrower unless the Borrower notifies the Bank to the contrary 
within thirty (30) days of its receipt of any statement that it deems 
to be incorrect.  Alternatively, at its sole discretion, the Bank may 
charge against any deposit account of the Borrower all or any part of 
any amount due hereunder.

1.10 Audit of Pledged Residential Paper.  The Borrower shall 
permit representatives of Lender, including independent auditors, 
collateral verification agents, attorneys and any other parties from 
time to time to audit and inspect Borrower's property, including 
Borrower's books and records, make photocopies thereof, and record 
information relating thereto, and Borrower shall reimburse Lender upon 
demand for the fees, costs and expenses of such audits and inspections 
up to the maximum sum of $6,000.00 per year.

                     Section II. Conditions Precedent

In addition to the provisions set forth in 3.06 below, the 
obligation of the Bank to make any advance on the Loan is subject to 
the following conditions precedent:

2.01 Documents Required for the Closing. The Borrower shall have 
delivered to the Bank, prior to the initial disbursement of any Loan 
amounts (the "Closing"), the following:

(A) The Note (Exhibit A), duly executed by the Borrower, in the 
form acceptable to Bank;

(B) A duly executed Guaranty Agreement (Exhibit B) ("Guaranty"), 
in form acceptable to Bank signed by Theodore F. Etter, Jr. 
("Guarantor"), together with his current financial statement in 
form/substance acceptable to Bank;

(C) Borrower's current financial statements (the "Financial 
Statements") reviewed by its certified public accountant, which 
shall be satisfactory in form/content to Bank;

(D) Assignments of Notes/Liens (Exhibit C) ("Assignments") 
encumbering the Residential Paper comprising the Pledged 
Residential Paper acceptable to Bank, including physical 
possession of the Notes endorsed to Bank and Financing Statements 
mentioned in Section III;

(E) A copy, certified as of the date of the Closing, of 
resolutions of the Trustees of the Borrower (Exhibit D), 
authorizing the execution, delivery, and performance of this 
Agreement, the Note, and all other documents to be delivered 
pursuant hereto at such time.

The documents evidencing, securing or otherwise furnished by Bank in 
connection with the Loan, including this Agreement, collectively are 
called "Loan Documents".

                   Section III. Security Agreement

3.01 Grant of Security Interest. (a) As collateral security for 
the payment and performance of the Note and any and all other 
liabilities of Borrower to Bank, direct or contingent, of any nature 
whatsoever, including both purchase money and non-purchase money 
transactions, and whether now existing or hereafter arising 
(collectively the "Obligations"), Borrower hereby grants to Bank a 
continuing security interest in the following as collateral security 
for the payment and performance of the Obligations, wherever the 
following is located and whether the following is now owned or existing 
or is owned, acquired, or arises hereafter, including, without 
limitation, acquisition by contract or by operation of law (all terms 
used in this Section 3.01 which are defined in the Uniform Commercial 
Code shall have the meanings given to such terms in the Uniform 
Commercial Code as adopted in the statutes of Texas):  (i) all right, 
title and interest of the Borrower in and to the promissory notes 
constituting the ?Pledged Residential Paper?; (ii) all right, title and 
interest of the Borrower in and to each and every deed of trust, 
mortgage, guarantee, loan document, title policy, insurance policy, or 
any other right ancillary to or securing or relating to the promissory 
notes; (iii) all accounts and receivables of Borrower arising out of or 
relating to the Pledged Residential Paper; (iv) all general intangibles 
of Borrower relating to or arising out of the Pledged Residential 
Paper; (v) all of the rights of Borrower to the payment of money, 
including, without limitation, tax refund and insurance proceeds, 
relating to the Pledged Residential Paper or the real properties 
securing same; (vi) all files, records, books, ledger cards (including 
without limitation, computer programs, tapes and related electronic 
data processing software) and writings of Borrower or in which it has 
an interest in any way relating to the Pledged Residential Paper; (vii) 
all other personal property of Borrower of any kind or type whatsoever 
relating to the Pledged Residential Paper; (viii) all additions, 
substitutions, replacements, proceeds and products of each of the 
foregoing described in this Section 3.01.

3.02 Power of Attorney.  Borrower hereby designates and/or 
appoints Bank and each of its designees or agents as attorney-in-fact 
of Borrower, irrevocably and with power of substitution, with authority 
to take any or all of the following actions upon the occurrence of an 
Event of Default: (i) with respect to any Pledged Residential Paper, 
demand, collect, receive, settle, compromise, adjust, foreclose and 
resell and/or give discharges and releases, all as Bank may determine; 
(ii) commence and prosecute any actions in any court for the purposes 
of collecting amounts owed on Pledged Residential Paper and enforcing 
any other rights in respect thereof; (iii) defend, settle or compromise 
any action brought and, in connection therewith, give such discharge or 
release as Bank may deem appropriate; (iv) receive, open and dispose of 
mail addressed to Borrower and endorse checks, notes, drafts, 
acceptances, money orders, bills of lading, warehouse receipts or other 
instruments or documents evidencing payment made on account of or funds 
paid relating to Pledged Residential Paper on behalf of and in the name 
of Borrower; (v) sell, assign, transfer, make any agreement in respect 
of, or otherwise deal with or exercise rights in respect of, any 
Pledged Residential Paper as fully and completely as though Bank were 
the absolute owner thereof for all purposes; (vi) adjust and settle 
claims under any insurance policy related thereto; and (vii) execute 
financing statements or amendments thereto or any other documents or 
writing deemed necessary by Bank to evidence or perfect Bank?s security 
interest in the Pledged Residential Paper; provided that Bank agrees to 
furnish copy of any document executed hereunder to Borrower, as 
applicable, upon request; and (viii) enter on the premises of Borrower 
in order to exercise any of Bank's rights and remedies.  The 
appointment of Bank as attorney-in-fact is coupled with an interest and 
is irrevocable.

3.03 No Duty of Bank.  Bank shall have no duty as to the 
collection or protection of the Pledged Residential Paper nor as to the 
preservation of any rights pertaining thereto.  Borrower hereby 
releases Bank from any claims, causes of action and demands at any time 
arising out of the Pledged Residential Paper and its use and/or any 
actions taken by Bank with respect thereto, and Borrower hereby agrees 
to indemnify Bank and to hold Bank harmless from any and all such 
claims, causes of action and demands.

3.04 Collection of Pledged Residential Paper.  Prior to the Bank 
exercising its right to collect the Pledged Residential Paper pursuant 
to this section 3.04, Borrower shall collect with diligence all 
payments due under the Pledged Residential Paper.  After the occurrence 
of an Event of Default, Borrower shall, at the request of Bank, notify 
the account debtors of the Pledged Residential Paper provided for in 
this Agreement and direct such Account Debtors to make all such 
payments directly to Bank.  Bank itself may at any time after the 
occurrence of an Event of Default, so notify the account debtors and/or 
collect payments due under the Pledged Residential Paper.

3.05 Perfection and Protection of Liens and Security Interest.  
Borrower will from time to time deliver to Bank any financing 
statements, continuation statements, extension agreements and other 
documents, properly completed and executed (and acknowledged when 
required) by Borrower in form and substance satisfactory to Bank for 
the purpose of perfecting confirming, or protecting Bank's security 
interest and other rights in the Pledged Residential Paper.

3.06 Notice of Assignment.  All Pledged Residential Paper and all 
promissory notes, instruments, documents and other agreements entered 
into by Borrower and covering any of the use or proceeds of Pledged 
Residential Paper shall contain (by way of stamp or other means 
satisfactory to Bank) the following language: "COLLATERALLY ASSIGNED TO 
LEGACY BANK OF TEXAS".

3.07 Rights in Property Held by the Bank.   As further security 
for the prompt satisfaction of all Obligations, the Borrower hereby 
assigns, transfers, and sets over to the Bank all of its right, title, 
and interest in and to, and grants the Bank a lien on and a security 
interest in, all amounts that may be owing, from time to time, by the 
Bank to the Borrower in any capacity, including, but without 
limitation, any deposit or other account with the Bank, which lien and 
security interest shall be independent of, and in addition to, any 
right of set-off that the Bank has hereunder or otherwise, excluding 
escrow accounts.

3.08 Priority of Liens. The foregoing liens and security interest 
in favor of Bank shall be first and prior liens and security interest 
except for any liens heretofore approved by Bank in writing.

3.09 Financing Statements. Assignments and Deeds of Trust.

(A) The Borrower will:

(1)  Join with the Bank in executing such financing statements 
(including amendments thereto and continuation statements 
thereof), Assignments and any other collateral documents in form 
satisfactory to the Bank as the Bank, from time to time, may 
specify;

(2)   Pay, or reimburse the Bank for paying, all costs and taxes 
of filing or recording the same in such public offices as the Bank 
may designate; and

(3)   Take such other steps as the Bank, from time to time, may 
direct to perfect, to the satisfaction of the Bank, the Bank's 
interest in the Pledged Residential Paper.

3.10 Residential Paper Draw Agreements. No Draw will be submitted, 
processed or approved until all of the following special conditions 
relating to the Draw have been satisfied:

(A) Bank has approved the form/content of any and all Residential 
Paper to be pledged to the Bank; 

(B) such Pledged Residential Paper has been assigned to Bank as 
follows:

(1) the promissory notes evidencing the indebtedness have 
been delivered and endorsed by Borrower to Bank with full 
recourse against Borrower;

(2) the deeds of trust ("Mortgages") securing payment of such 
Pledged Residential Paper have been transferred to Bank;

(C) Borrower has delivered a Request for Advance (Exhibit E) and a 
Borrowing Base Certificate (Exhibit F) in form/content acceptable 
to Bank;

(D) If required by Lender, Borrower has delivered an estoppel 
certificate in form/content acceptable to Bank regarding the 
Pledged Residential Paper;

(E) evidence that each of the Mortgages is an insured first lien 
has been delivered to Bank (including the original mortgage title 
insurance policies together with such endorsements as Bank may 
deem necessary;

(F) the real properties described in each of the Mortgages have 
been insured against loss by fire and other casualty in the full 
amount of the indebtedness secured by such Mortgages and Bank is 
shown as a loss payee in such policies, as its interests may 
appear;

(G) appraisals relating to the properties described in such 
Mortgages, and, if the Bank rejects any such appraisals for any 
reason, in its sole discretion, Borrower shall obtain a current 
appraisal of any such property, which is deemed satisfactory by 
the Bank; and

(H) Borrower has submitted to Bank such evidence of such 
environmental safety and soundness as Bank may request regarding 
any of the properties described in the Mortgages;

(I) Evidence acceptable to Bank is provided establishing that no 
Pledged Residential Paper comprising the Borrowing Base is more 
than sixty (60) days past due, and that the outstanding principal 
balance of the Loan is not more than 50% of the aggregate 
outstanding principal balance of the Pledged Residential Paper; 
and

(J) No Event of Default has occurred hereunder.

3.11 Real Property Described in the Residential Paper. Bank does 
not make any warranties or representations, expressed or implied with 
respect to the Pledged Residential Paper or the real property securing 
the Pledged Residential Paper or its quality, marketability fitness, 
suitability, or condition; and, Borrower agrees that Bank is not 
responsible for (and Borrower indemnifies Bank against) any claim, 
loss, damage, liability or expense of any kind incurred by Bank arising 
directly or remotely from such real property and/or Pledged Residential 
Paper or any sale, disposition, use, inadequacy, defect or deficiency 
thereof.

	Section IV. Covenants, Representations and Warranties of Borrower and 
Guarantor

4.01 Agreements. To induce the Bank to enter into this Agreement, 
the Borrower and Guarantor jointly and severally represent and warrant 
to and covenant with the Bank as follows:

(A) The Borrower is a real estate investment trust duly organized, 
validly existing, and in good standing under the laws of the State 
of Maryland.

(B) Borrower is not directly or indirectly controlled by, or 
acting on behalf of, any person which is an "Investment Company", 
within the meaning of the Investment Company Act of 1940, as 
amended;

(C)   Borrower and Guarantor are not in default with respect to 
any of their existing indebtedness, and the making and performance 
of this Agreement, the Note, and the other Loan Documents will not 
(immediately or with the passage of time, the giving of notice, or 
both):

(1) Violate the documents of formation or constitution of the 
Borrower, or violate any laws or result in a default under 
any contract, agreement, or instrument to which the Borrower 
or the Guarantor are a party or by which the Borrower, the 
Guarantor or their respective properties are bound; or

(2) Result in the creation or imposition of any security 
interest in, or lien or encumbrance upon, any of the assets 
of the Borrower except in favor of the Bank;

(D) The Borrower (and Guarantor, to the extent applicable to him) 
has the power and authority to enter into and perform this 
Agreement, the Note, and the other Loan Documents, and to incur 
the obligations herein and therein provided for, and has taken all 
actions necessary to authorize the execution, delivery, and 
performance thereof;

(E) This Agreement, the Note, and the other Loan Documents are, or 
when delivered will be, valid, binding and enforceable in 
accordance with their respective terms;

(F)  Except as otherwise shown herein, there is no pending order, 
notice, claim, litigation, proceeding, or investigation against or 
affecting the Borrower or Guarantor, whether or not covered by 
insurance, that would or could materially or adversely affect the 
financial condition or business prospects of the Borrower or 
Guarantor if adversely determined;

(G) As of the date hereof, except for any other indebtedness owed 
by Borrower to Bank, the Borrower has no material indebtedness of 
any nature, including, but without limitation, liabilities for 
taxes and any interest or penalties relating thereto, except the 
extent disclosed in Borrower's financial statement or disclosed 
in, or permitted by, this Agreement;

(H) Borrower understands that Borrower only may collect monthly 
installments due on the Pledged Residential Paper as they mature 
monthly and then only for so long as an Event of Default has not 
occurred. All amounts, if any, representing principal prepayments 
or payoffs and all amounts, if any, collected by Borrower after 
the occurrence of any Event of Default represent trust funds which 
are assigned and belong to Bank and which are to be immediately 
delivered to the Bank, and any retention of such funds by Borrower 
after the occurrence of an Event of Default shall be deemed a 
conversion by Borrower of Bank's property, ipso facto;

(I) Borrower will take all actions and pay all costs to keep and 
maintain the validity, enforceability, security, priority and 
collectability of the Pledged Residential Paper and will pay all 
other amounts which may be necessary or desirable to preserve, 
maintain and protect Bank's interest in the Pledged Residential 
Paper. Borrower will pay or reimburse Bank for all costs incurred 
by Bank to document, protect and enforce the Loan including legal 
fees, mortgage title insurance, etc;

(J) Bank shall have all rights, benefits and remedies provided in 
the Loan Documents as well as those provided by law and may (but 
is not obligated to) perform any act or pay any amount which 
Borrower is required and fails to pay or perform, as the case may 
be, at the cost and for the account of the Borrower; and, Borrower 
agrees to reimburse Bank upon demand for any and all such 
expenditures, together with interest thereon at the highest lawful 
contract rate together with all cost of collection;

(K) Borrower and Guarantor will take all necessary action to 
prevent the occurrence of any default/dispute under any agreement 
or obligation between Borrower or Guarantor and any other persons 
or entities in connection with any matter including but not 
limited to the Pledged Residential Paper or any part thereof;

(L) To the best of Borrower's knowledge, no hazardous substances 
or solid wastes have been disposed of or otherwise released on or 
to any of the properties described in the Mortgages securing the 
Pledged Residential Paper. The terms "hazardous substance" and 
"release" shall have the meanings specified in the Comprehensive 
Environmental Response Compensation and Liability Act of 1980, as 
amended, ("CERCLA"), and the terms "solid waste" and "disposal" 
(or "disposed") shall have the meanings specified in the Resource 
Conservation and Recovery Act of 1976, as amended, ("RCRA"); 
provided, to the extent that the laws of the State of Texas 
establish a meaning for hazardous substance," "release," "solid 
waste," or "disposal" which is broader than that specified in 
either CERCLA or RCRA, such broader meaning shall apply;

(M) Borrower and Guarantor indemnify Bank against any loss to 
Bank, including without limitation attorney's fees and costs of 
site investigation and cleanup, incurred by or imposed on Bank as 
a result of any use, handling, storage, transportation, or 
disposal of hazardous or toxic materials on or about any property 
described in the liens comprising the Pledged Residential Paper. 
This indemnity at the election of Bank shall survive repayment of 
the Loan and shall continue as long any risk of loss or liability 
by Bank exists;

(N) As additional security for the punctual payment and 
performance of the Note, and as part of the security therefor, 
Borrower hereby grants to Bank a security interest, and a pledge 
and assignment of, any and all money, property, deposit accounts, 
accounts, securities, documents, chattel paper, claims, demands, 
instruments, items or deposits of the Borrower, now held or 
hereafter coming within Bank's custody or control, including 
without limitation, all certificates of deposit and other 
depository accounts whether such have matured or the exercise of 
Bank's rights result in loss of interest or principal or other 
penalty on such deposits, but excluding deposits subject to tax 
penalties if assigned and excluding escrow accounts. Without prior 
notice or demand upon the Borrower, Bank may exercise its rights 
granted above at any time when a default has occurred. Bank's 
rights and remedies under this paragraph shall be in addition to 
and cumulative of any other rights or remedies at law and equity 
including, without limitation, any rights of set-off to which Bank 
may be entitled; and,

(O) Borrower and Guarantor will give immediate written notice to 
the Bank of (1) any default of Borrower or Guarantor hereunder; 
(2) any litigation or proceeding in which it is a party if any 
adverse decision therein would require it to pay more than 
$5,000.00 or deliver assets the value of which exceeds such sum 
(whether or not the claim is considered to be covered by 
insurance); and (3) the institution of any other suit or 
proceeding involving it that might materially and adversely affect 
its operation financial condition, property, or business 
prospects.

(P) Borrower shall not incur any indebtedness other than 
indebtedness owed by Borrower to Bank and trade debt incurred and 
paid in the ordinary course of business, and Borrower shall not 
assign, pledge, grant any security interests or liens in or 
otherwise transfer or encumber any of the Residential Paper now 
owned and held or subsequently acquired by Borrower; it being the 
intent of this provision that although the Bank shall not have a 
direct lien or security interest in the Residential Paper which is 
not or does not become Pledged Residential Paper, such unpledged 
Residential Paper shall constitute a secondary source of repayment 
of the Loan, and the continued availability of such unpledged 
Residential Paper constitutes a material inducement for the Bank 
to make and advance the loan.

(Q) Borrower currently has and shall maintain at all times 
throughout the term hereof, a tangible net worth of not less than 
$10,000,000.00, as determined in accordance with the audited 
financial statements of Borrower based upon generally accepted 
accounting principles.

4.02 Survival. All of the covenants representations and warranties 
set forth in Section 4.01 shall survive until all Obligations are 
satisfied in full and there remain no outstanding Commitments 
hereunder; and, in the case of subparagraph 4.01 (M), such indemnity 
will remain in effect for so long as the risk of loss to be indemnified 
against exists.

                        Section V. Default

5.01 Events of Default. The occurrence of any one or more of the 
following events shall constitute an "Event of Default" hereunder:

(A) The Borrower shall fail to pay when due any installment of 
principal or interest or fee payable hereunder or under the Note 
or any of the other Loan Documents, and such failure shall 
continue for a period of ten (10) days;

(B) The Borrower shall fail to observe or perform any other 
obligation to be observed or performed by it hereunder or under 
any of the Loan Documents, and such failure shall continue for ten 
(10) days after: (1) notice of such failure from Bank; or (2) the 
Bank is notified of such failure or should have been so notified 
pursuant to the provision of 4.01 (O), whichever is earlier;

(C) The Borrower shall fail to pay any indebtedness due any third 
persons, and such failure shall continue beyond any applicable 
grace period, or the Borrower shall suffer to exist any other 
event of default under any agreement binding the Borrower;

(D) Any financial statement, representation, warranty, or 
certificate made or furnished by or with respect to Guarantor or 
Borrower to the Bank in connection with this Agreement, or as an 
inducement to the Bank to enter into this Agreement, or in any 
separate statement or document delivered or to be delivered to the 
Bank hereunder, shall be materially false, incorrect, or 
incomplete when made;

(E) The dissolution of Borrower or death of Guarantor, or Borrower 
shall admit its inability to pay its debts as they mature or shall 
make an assignment for the benefit of itself or any of its 
creditors;

(F) Proceedings in bankruptcy, or for reorganization of the 
Borrower or Guarantor, or for the readjustment of any of their 
respective debts under the Bankruptcy Code, as amended, or any 
part thereof, or under any other laws, whether state or federal, 
for the relief of debtors, now or hereafter existing, shall be 
commenced against or by the Borrower or Guarantor and, except with 
respect to any such proceedings instituted by the Borrower, shall 
not be discharged within thirty (30) days of their commencement;

(G) In Bank's discretion, if any item of Pledged Residential Paper 
becomes more than sixty (60) days past due without prior 
substitution of alternative Pledged Residential Paper, or if the 
aggregate outstanding principal balance of the Pledged Residential 
Paper shall ever be less than 200% of the outstanding principal 
balance on the Loan, and such continues uncured for ten (10) days 
following written notice from Bank;

(H) The Guarantor shall fail to comply fully with the requirements 
of his Guaranty;

(I)  The occurrence of a material adverse change in the financial 
condition of either the Borrower or the Guarantor; and

(J)  The sale, transfer or assignment of any of the assets or 
properties of the Borrower or the Guarantor except for sales, 
transfers or assignments of individual assets or properties in the 
ordinary course of business and for equivalent value received.

The occurrence of any default by Borrower or Guarantor under any 
other obligations of Borrower to Bank automatically constitutes a 
default by Borrower under the Loan Documents.

5.02 Acceleration. Immediately, at the option of Bank and without 
notice, upon the occurrence of an Event of Default specified in the 
foregoing section 5.01(E) or (F) or at the option of the Bank, but only 
upon notice to the Borrower, upon the occurrence of any other Event of 
Default, all obligations, whether hereunder or otherwise, shall 
immediately become due and payable without further action of any kind.

5.03 Remedies. After any acceleration, as provided for in section 
5.02, the Bank shall have, in addition to the rights and remedies given 
it by this Agreement and the Loan Documents, all those allowed by all 
applicable laws, including, but without limitation, the Uniform 
Commercial Code.

                 Section VI. Release (Reassignment) Agreements

6.01 Bank will release its liens and security interests against 
the Pledged Residential Paper, (i.e. Bank will reassign without 
warranty or recourse the Pledged Residential Paper) under the following 
agreements:

(i)  no default or dispute is pending or threatened under the Loan 
Documents;

(ii) such release is documented, recorded and otherwise 
accomplished without cost to Bank; 

(iii) with respect to any request for a partial release of Pledged 
Residential Paper, the Bank has received (a) substituted Pledged 
Residential Paper with an outstanding principal balance at least 
equal to the outstanding principal balance of the Pledged 
Residential Paper to be released or (b) cash equal to 50% of the 
outstanding principal balance of the Pledged Residential Paper to 
be released; or

(iv) the Loan is paid in full and Bank has no further obligation 
to make advances hereunder.

                     Section VII. Miscellaneous

7.01 Construction. The provisions of this Agreement shall be in 
addition to those of any guaranty, security agreement, note, or other 
evidence of liability now or hereafter held by the Bank, all of which 
shall be construed as complementary to each other. Nothing herein 
contained shall prevent the Bank from enforcing any or all other 
guaranty, pledge or security agreements, notes, or other evidences of 
liability in accordance with their respective terms.

7.02 Further Assurance. From time to time, the Borrower will 
execute and deliver to the Bank such additional documents and will 
provide such additional information, including but not limited, to 
supplementary Financial Statement information as the Bank may 
reasonably require to carry out the terms of this Agreement and be 
informed of the status and affairs of the Borrower and Guarantor.

In particular, Borrower will furnish to Bank (and will cause Guarantor 
to furnish) Financial Statements in form/content acceptable to Bank, as 
follows:

Borrower:                                         Guarantor

Monthly Status Reports on Pledged                 Annual Statement 
Residential Paper;
Monthly Borrowing Base Certificates;
Annual Statement; and 	
Quarterly Statements

The annual statements of Borrower will be audited by such party's 
certified public accountant and the quarterly statements of Borrower 
will be reviewed by such party's certified public accountant. 
Statements will be prepared in form acceptable to Bank and will 
include, inter alia complete contingent liability information, cash 
flow reports and income and expense statements. In addition, Borrower 
and Guarantor will furnish Bank copies of their current (filed) income 
tax returns and future returns as and when they are filed with the 
Internal Revenue Service during the term of the Loan.

7.03 Enforcement and Waiver by the Bank. The Bank shall have the 
right at all times to enforce the provisions of this Agreement and the 
Loan Documents in strict accordance with the terms hereof and thereof, 
notwithstanding any conduct or custom on the part of the Bank in 
refraining from so doing at any time or times. The failure of the Bank 
at any time or times to enforce its rights under such provisions, 
strictly in accordance with the same, shall not be construed as having 
created a custom in any way or manner modified or waived the same. All 
rights and remedies of the Bank are cumulative and concurrent and the 
exercise of one right or remedy shall not be deemed a waiver or release 
of any other right or remedy. In the event and to the extent, if any, 
that Borrower is indebted to Bank under any obligation arising prior to 
the execution of this Loan Agreement ("Prior Indebtedness"), Borrower 
agrees that Borrower has no off-sets, defense or counterclaims to 
payment of the Prior Indebtedness.

7.04 Future Advances Secured. The Pledged Residential Paper 
mentioned herein secures and enforces the payment of the Obligations 
including but not limited to all sums advanced by Bank to Borrower 
pursuant to the Note and all other present and future debts, 
obligations and liabilities of Borrower and/or Guarantor to Bank (a) as 
principal, surety, endorser, guarantor, accommodation party or 
otherwise, (b) arising by operation of law or otherwise, (c) as a 
member of any partnership, joint venture, firm, trust or other 
association or (d) payable to or in favor of third parties and 
hereafter acquired by Bank with or without the knowledge, consent or 
insistence of Borrower, it being contemplated that Borrower and/or 
Guarantor will from time to time become additionally indebted to Bank 
all of which indebtedness shall be secured by said Pledged Residential 
Paper unless and until released by Bank.

7.05 Expenses of the Bank. The Borrower will, on demand, reimburse 
the Bank for all expenses, including the reasonable fees and expenses 
of legal counsel for the Bank, incurred by the Bank in connection with 
the preparation, administration, amendment, modification, or 
enforcement of this Agreement and the Loan Documents and the collection 
or attempted collection of the Note.

7.06 Notices. Any notices or consents required or permitted by this 
Agreement shall be in writing and shall be deemed delivered if 
delivered in person or if sent by certified mail postage prepaid, 
return receipt requested, or telegraph to the parties at their address 
shown by their names below, unless such address is changed by written 
notice hereunder.

7.07 Waiver Release and Indemnity by the Guarantor and Borrower. To 
the maximum extent permitted by applicable laws, each of the Guarantor 
and the Borrower:

(A) Waives (1) protest of all commercial paper at any time held by 
the Bank on which the Borrower is in any way liable; (2) except as 
the same may herein be specifically granted, notice of acceleration 
and of intention to accelerate; and (3) notice and opportunity to 
be heard, after acceleration before exercise by the Bank of the 
remedies of self-help, set-off, or of other summary procedures 
permitted by any applicable laws or by any agreement with the 
Guarantor or Borrower, and, except where required hereby or by any 
applicable laws, notice of any other action taken by the Bank;

(B) Releases the Bank and its officers, attorneys, agents, and 
employees from all claims for loss or damage caused by any act or 
omission on the part of any of them except for willful misconduct; 
and

(C)  Indemnifies Bank against any loss, claim, cost, damage or 
liability incurred by Bank in connection with or arising from any 
failure, breach or default of any statement, warranty, agreement, 
obligation or agreement of Borrower or Guarantor contained herein 
or made/delivered to Bank in connection herewith without regard to 
any act or omission of Bank and waives trial by jury.

7.08 Applicable Law. This Agreement is entered into and performable 
in Plano, Collin County, Texas and shall be subject to and construed 
and enforced in accordance with the laws of the State of Texas.

7.09 Binding Effect. Assignment and Entire Agreement. This 
Agreement shall inure to the benefit of, and shall be binding upon, the 
respective successors and permitted assigns of the parties hereto. The 
Borrower has no right to assign any of its rights or obligations 
hereunder without the prior written consent of the Bank. This 
Agreement, including any Exhibits hereto, all of which are hereby 
incorporated herein by reference, and the documents executed and 
delivered pursuant hereto, constitute the entire agreement between the 
parties and may be amended only by a writing signed on behalf of each 
party.

7.10 Severability. If any provision of this Agreement shall be held 
invalid under any applicable laws, such invalidity shall not affect any 
other provision of this Agreement that can be given effect without the 
invalid provision, and to this end, the provisions hereof are 
severable.

7.11 Counterparts. This Agreement may be executed in any number of 
counterparts, each of which shall be deemed to be an original, but all 
of which together shall constitute but one and the same instrument.

7.12 Renewal, Increase and Extension.  The Loan described and 
governed hereby is in part a renewal, increase and extension of that 
certain loan evidenced by a promissory note dated October 28, 1998 in 
the original principal sum of $1,500,000.00, executed by Borrower, 
payable to Lender, and secured by the security interest created and 
described in that certain Revolving Loan Agreement, dated October 28, 
1999.  The security interests, liens, charges and encumbrances set 
forth in the security agreement dated October 28, 1998 are hereby 
carried forward as security interests, liens, charges and encumbrances 
securing the Loan, and nothing herein contained and nothing done 
pursuant hereto shall affect or be construed to affect the validity of 
said security interests, liens, charges or encumbrances or the priority 
thereof over any other security interests, liens, charges or 
encumbrances.  Further, as a material inducement to cause Lender to 
execute and deliver this Agreement and extend the Loan, Borrower and 
Guarantor hereby acknowledge that they hold no existing claims, 
defenses (personal or otherwise), counterclaims or rights of set-off 
whatsoever with respect to the loan described in the October 28, 1998 
loan agreement.

THIS WRITTEN LOAN AGREEMENT (AND ALL RELATED DOCUMENTS MENTIONED HEREIN 
OR PREPARED OR APPROVED IN WRITING BY LENDER CONCURRENTLY HEREWITH, 
INCLUDING THE NOTE) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES 
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS. OR 
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL 
AGREEMENTS BETWEEN THE PARTIES. LENDER:


IN WITNESS WHEREOF, the parties hereto have duly executed this 
Agreement as of the day and year first above written.


Address:                            LEGACY BANK OF TEXAS
3512 Preston Rd.
Dallas, Texas 75093                 By:   /Ken Mixon/
 Ken Mixon
 Its: Vice President

BORROWER:

Address:                            UNITED MORTGAGE TRUST
1701 N. Greenville Avenue
Suite 403                           By: /Christine A. Griffin/
Richardson, Texas 75081                 Christine A. Griffin
Its: President

                                    GUARANTOR:

                                    /Theodore F. Etter, Jr./
                                    Theodore F. Etter, Jr.


THE STATE OF TEXAS

COUNTY OF COLLIN

This instrument was acknowledged before me, on the 23 rd day of 
March, 1999, by, Ken Mixon, Vice President of Legacy Bank of Texas, on 
behalf of said bank.

_______________________
Notary Public, State of Texas

My commission expires: _________


THE STATE OF TEXAS

COUNTY OF COLLIN

This instrument was acknowledged before me, on the 23 day of March, 
1999, by, Christine Griffin, President of United Mortgage Trust, on 
behalf of said real estate investment trust.

_______________________
Notary Public, State of Texas

My commission expires: _________




THE STATE OF TEXAS

COUNTY OF COLLIN

This instrument was acknowledged before me, on the 23 rd day of 
March, 1999, by Theodore F. Etter, Jr.

_______________________
Notary Public, State of Texas

My commission expires:_________






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