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, 1998

[    ]    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 ___



UNITED MORTGAGE TRUST
INDEX TO FORM 10-QSB
                                                 Page Number


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

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

     Balance Sheets
        March 31, 1998 and December 31, 1997...........F1

     Statements of Operations
        Three Months Ending March 31, 1998 and 1997....F2

     Statements of Cash Flows
        Three Months Ending March 31, 1998 and 1997....F3

     Notes to Financial Statements.....................4

Item 2. Management's Discussion and Analysis 
  of Financial Condition and Results of Operations.....6

PART II -- OTHER INFORMATION...........................9

Item 6. Exhibits and Reports on Form 8-K...............9

SIGNATURE..............................................9



PART I  -- FINANCIAL INFORMATION

ITEM 1. Financial Statements

UNITED MORTGAGE TRUST







BALANCE SHEETS







March 31, 1998 and December 31, 1997















ASSETS



March 31,

December 31,





1998

1997





(unaudited)

(audited)




 




Cash



 $   256,114 

 $      248 

Investment in first lien mortgage notes



   4,591,702 

2,722,036 

Interim mortgage notes



   1,200,785 

877,275 

Accrued interest receivable



      58,815 

     38,746 

Receivable from affiliate (Note 4)



         -   

     12,116 

Equipment, less accumulated depreciation



       1,721 

      1,850 


 of $866 and $736






Other assets



       8,042 

      2,337 













   6,117,179 

  3,654,608 









LIABILITIES AND SHAREHOLDERS' EQUITY















Liabilities:








Note payable (Note 3)


     325,254 

    138,000 


Dividend payable


      56,942 

33,799 


Accounts payable and accrued liabilities


       1,762 

        883 





383,958 

172,682 









Commitments and contingencies 



         -   

       -    









Shareholders' equity:








Shares of beneficial interest; $.01 par







    value; 100,000,000 shares authorized;







    327,694 and 202,508 shares outstanding


       3,277 

      2,025 


Additional paid-in capital


   5,707,177 

3,467,964 


Retained earnings (deficit)


      22,766 

11,937 




Total shareholders' equity
5,733,220 

3,481,926 













 $ 6,117,178 

 $3,654,608 









See accompanying notes to financial statements.










F1





UNITED MORTGAGE TRUST






STATEMENTS OF OPERATIONS






Quarters Ended March 31, 1998 and 1997
















March 31,

March 31,




1998

1997








Revenues:







Interest income

 $  164,116 

 $       556 








Expenses:







Salaries and wages

16,447 

16,447 


General and administrative

     28,967 

       1,582 


Interest expense

      3,646 

           - 


Expense reimbursements from







 affiliate (Note 4)
    (35,813)

           - 




13,247 

18,029 








Net income (loss)


 $  150,869 

 $   (17,473)








Net income (loss) per share







 of beneficial interest

 $     0.54 

 $     (1.75)








Weighted average shares outstanding


277,850 

10,000 















See accompanying notes to financial statements.








F2





UNITED MORTGAGE TRUST







STATEMENTS OF CASH FLOWS







Quarters Ended March 31, 1998 and 1997



















March 31,

March 31,





1998

1997









Cash flows from operating activities:








Net income (loss)


 $  150,869 

 $   (17,473)


Adjustments to reconcile net income







  to net cash provided by operating activities:








Depreciation and amortization

175 

67 



Amortization of discount on mortgage notes

(11,921)

           - 



Accrued interest receivable

(20,069)

137 



Other assets

(5,750)

           - 



Accounts payable and accrued liabilities

879 

29,315 




Net cash provided by operating 
activities:
114,183 

12,046 









Cash flows from investing activities:








Investment in first lien mortgage notes


(1,807,988)

           - 


Principal receipts on first lien mortgage notes


7,967 

38 


Investment in interim mortgage notes


(323,510)

           - 


Loan acquisition cost


(57,724)

           - 




Net cash used in investing activities
(2,181,255)

38 









Cash flows from financing activities:








Proceeds from issuance of shares of 








beneficial interest

2,240,465 

           - 


Offering costs


          - 

(42,587)


Net borrowings on note payable


187,254 

22,469 


Receivable from affiliate


     12,116 

           - 


Dividends 


(116,897)

           - 




Net cash provided by financing 
activities:
2,322,938 

(20,118)









Net increase (decrease) in cash



    255,866 

      (8,034)









Cash at beginning of period



        248 

      13,051 









Cash at end of period



 $  256,114 

 $     5,017 









Interest paid



 $    3,646 

 $         - 

















See accompanying notes to financial statements.










F3







                   UNITED MORTGAGE TRUST
               Notes to Financial Statements
                     March 31, 1998

1. Description of Business

The Company

     United Mortgage Trust ("UMT" or the "Company") is a 
Maryland real estate investment trust which intends to 
qualify as a real estate investment trust under federal 
income tax laws. The advisor to the Company is Mortgage 
Trust Advisors, Inc. (the "Advisor"), a Texas corporation. 
The Company invests in the following types of Mortgage 
Investments: (1)  first lien, fixed rate mortgages secured 
by single family residential property throughout the United 
States ("Residential Mortgages"), and (2) loans of 12 months 
or less in term, made to borrowers for the purchase, 
renovation and sale of single family homes ("Interim 
Mortgages"). Such loans will be originated by others to the 
Company's specifications or to specifications approved by 
the Company. Most, if not all, of such loans are not insured 
or guaranteed by a federally owned or guaranteed mortgage 
agency. 

     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, expect 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, 1997 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, 1998 are not necessarily indicative 
of the results that may be expected for the year ending 
December 31, 1998.

3. Notes Payable

     On March 27, 1998 the Company renewed and increased its 
Revolving Loan Agreement (the "Agreement") with Abrams 
Centre National Bank (the "Bank"), wherein the Company can 
borrow up to $500,000 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 $1,000,000 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. As of March 31, 1998 the outstanding balance of 
the Revolving Line of Credit was $325,254. The Company used 
the funds to purchase Mortgage Investments.

4. Related Party Transactions

     In 1997 UMT 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 $35,813 in expense 
reimbursement from the Advisor in the quarter ending March 
31, 1998. 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 an Acquisition Fee of 
$57,724 calculated at 3% of the unpaid principal balance of 
the Residential Mortgages as of the purchase date.




ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF 
OPERATION

Results of Operations

     During the quarter ending March 31, 1998 UMT purchased 
43 Residential Mortgages secured by single family, 
residential property in Texas. The Residential Mortgages had 
a blended annual interest rate of 11.51%, a current annual 
yield of 12.26% and an investment-to-value ratio of 84.29% 
(the Company's investment in the note divided by the value 
of the home that is security for the note.) On average, the 
notes had an unpaid principal balance $44,750, a term 
remaining of 338 months, and were acquired for 93.91% of the 
outstanding unpaid principal balance of the notes, as of the 
purchase date. Thirty-two of the notes were acquired from 
South Central Mortgage, Inc. and 11 were acquired from 
private individuals. 

     This compares to the quarter ending March 31, 1997 
during which UMT owned one Residential Mortgage with 
interest at 11.5%, a current annual yield of 12.34% and an 
investment-to-value ratio of 83.34%, as of the purchase date 
of the mortgage note. The note had an unpaid principal 
balance of $29,990, a term remaining of 356 months and was 
acquired for 92.81% of the unpaid principal balance as of 
the purchase date.

     UMT's total portfolio of Residential Mortgages as of 
March 31, 1998 consisted of 115 Residential Mortgages with 
an aggregate unpaid principal balance of $4,748,005 as of 
the purchase dates of the notes. The Residential Mortgages 
were acquired for an aggregate sum of $4,442,567, or for 
93.56% of the outstanding principal balance of the notes as 
of the purchase date. The Residential Mortgages had a 
blended annual interest rate of 11.44%, a current annual 
yield of 12.22% and an investment-to-value ratio of 84.25%. 
On average the notes had an unpaid principal balance of 
$41,228 and a term remaining of 319 months.

     As of March 31, 1998 the Company had investments in 46 
Interim Mortgages for an aggregate total of $1,200,785. The 
Interim Mortgages had terms of no greater than 12 months and 
were made to borrowers for the purchase, renovation and sale 
of single family homes. These loans, which are first lien 
mortgage notes secured by properties in Texas, had a blended 
interest rate of 14.57% and investment-to-values of no 
greater than 50%. 

     UMT had no Interim Mortgages during the quarter ending 
March 31, 1997.

     All of the properties that are security for the 
Residential Mortgages and Interim Mortgages are located in 
Texas. Each of the properties was adequately covered by a 
mortgagees title insurance policy and hazard insurance.

     The Company's Residential Mortgages and Interim 
Mortgages generated $164,116 of interest income during the 
quarter ending March 31, 1998. Expenses of $49,060 were 
offset by reimbursement from the Advisor of $35,813. During 
the quarter the Company realized net income of $150,869 and 
earnings per share of $.54. 

     This compares to interest income during the quarter 
ending March 31,1997 of $556 and expenses of $18,029, 
resulting in a net loss of $17,473 or $1.75 per share.

Capital Resources and Liquidity

     During the quarter ending March 31, 1998 UMT added 59 
new shareholders increasing the total number of shareholders 
to 231. The Company issued 125,186 shares of beneficial 
interest thereby increasing the outstanding shares to 
327,694. Gross Offering Proceeds increased by $2,503,721 
resulting in aggregate Gross Offering Proceeds of 
$6,553,880. Gross Offering Proceeds for the quarter ending 
March 31, 1998 were distributed as follows: $2,240,465 to 
the Company as Net Offering Proceeds; 10% or $250,372 to the 
Selling Group Manager for Selling Commissions; 0.5% or 
$12,519 to the Selling Group Manager for Due Diligence Fees; 
and $365 to the Escrow Agent as compensation for 
distributing interest accrued to subscribers. 

     This compares to the quarter ending March 31, 1997 when 
UMT had one shareholder, its Advisor, Mortgage Trust 
Advisors, Inc. and had been initially capitalized with 
$200,000 from the sale to the Advisor of 10,000 shares of 
beneficial interest.

     During the quarter ending March 31, 1998 UMT used 
$1,924,147 of the Net Offering Proceeds to purchase 43 
Residential Mortgages for $1,807,041, or for 93.91% of the 
unpaid principal balance of the notes as of the purchase 
date. Net Offering Proceeds were also used to pay an 
Acquisition Fee of $57,724 to the Advisor, calculated at 3% 
of the unpaid principal balance of the Residential Mortgages 
as of the purchase date.

     During the quarter ending March 31, 1997 UMT used part 
of the proceeds from its initial capitalization to purchase 
one Residential Mortgage for $27,834, or for 92.81% of the 
unpaid principal balance of the note as of the purchase 
date. No acquisition fee was paid to the Advisor in the 
transaction.

     As of March 31, 1998 UMT had invested $1,200,785 in 46 
Interim Mortgages. The Interim Mortgages bore interest at a 
blended rate of 14.57%.

	UMT declared and paid three dividends to shareholders 
during the quarter ending March 31, 1998. The annualized 
rate-of-return to shareholders was 10.6%. 

     No dividends were paid during the quarter ending March 
31, 1997.

     On March 27, 1998 UMT renewed and increased its 
Revolving Loan Agreement (the "Agreement") with its lending 
bank (the "Bank") wherein the Company can borrow up to 
$500,000 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 which is one and one-half percent (1-1/2%) in 
excess of the Bank's prime rate of interest. The outstanding 
balance of the line of credit at March 31, 1998 was 
$325,254. The Company uses the line of credit to purchase 
Mortgage Investments prior to its two monthly closings.


PART II - OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

     Exhibit 1 - One (1) Year $500,000 Revolving Loan 
(Renewal) Agreement dated March 27, 1998 between United 
Mortgage Trust and Abrams Centre National Bank.........Pg 10

(b) Reports on Form 8-K

     During the period covered by this report, the Company 
filed reports on Form 8-K dated January 14, 1988, February 
10, 1998 and March 27, 1998 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, 1998                /S/Christine A. Griffin
                                      Christine A. Griffin
                                           President




EXHIBIT 1

ONE (1) YEAR 
$500,000
REVOLVING LOAN (RENEWAL) AGREEMENT

     THIS REVOLVING LOAN AGREEMENT, dated the  27th March 
1998, by and between UNITED MORTGAGE TRUST (the "Borrower"), 
and ABRAMS CENTRE NATIONAL BANK (the "Bank").

WITNESSETH:

BACKGROUND. Borrower is in the business of buying first 
lien mortgage notes secured by liens on residential properties 
collectively called the "Residential Paper" as an investment 
in Residential Paper and in the past has obtained a 
$150,000.00 line of credit for such purpose. Borrower has 
request the Bank to renew, extend and increase said loan by 
$350,000, viz. to lend it up to the sum of FIVE HUNDRED 
THOUSAND ($500,000) DOLLARS, in aggregate, on a revolving loan 
basis (the "Loan") from which to reimburse Borrower up to 
$500,000 for all or part of Borrower's cost of acquisition of 
Residential Paper obtained for investment; and, Borrower 
maintains an inventory ("Inventory") of unencumbered current 
Residential Paper of not less than $1,000,000 with which to 
secure the Loan. Bank is willing to advance the Loan upon the 
terms and conditions hereinafter set forth. This Agreement 
renews (and supersedes) said $150,000 revolving loan line of 
credit agreement dated on or about the 20th day of March, 
1997.

     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 thereof, 
Bank will credit the proceeds of the revolving Loan advanced 
from time to time to the Borrower's deposit account with the 
Bank or a title company 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 (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 three (3) banking days 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 equal to the lesser of $500,000.00 (the "Loan 
Commitment") or the Borrowing Base, defined in 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 thereof as herein provided, 
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 the Inventory 
containing not less than $1,000,000 in current insured first 
lien notes, as below provided.

1.03 Draws and Draw Fees. Draws will be submitted on forms 
acceptable to Bank; and, Bank will invoice Borrower for a 
$50.00 fee to process each Draw, as requested by Borrower.

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 Fee. In exchange for 
Bank's agreement to set aside funds to accommodate Borrower's 
right to draw hereunder, Borrower will pay Bank $3,750 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 
Inventory, viz. the unpaid principal balances of all 
Residential Paper pledged to Bank by Borrower (not to exceed 
the Loan Commitment) without considering any Residential Paper 
past due by more than sixty (60) days held by Bank in 
connection with the Loan and subject to Bank's liens ("Liens") 
mentioned herein. Borrower will remove from the Inventory at 
once and without demand any Residential Paper that is more 
than sixty (60) days past due and will replace the same and 
replenish the Inventory with 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 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 in any 
default by Borrower is threatened 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 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 not Item of Inventory 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 S 1.08(B), interest on 
the principal balance of the Loan from time to time 
outstanding will be payable monthly at a varying rate per 
annum which is one and one-half (1-1/2%) percent per annum 
(the "Margin Percentage") in excess of "Wall Street Journal 
Prime" rate of interest, as published from time to 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 
varying rate to be made on the same day as any change in such 
prime commercial 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 sum of the Margin Percentage plus such prime 
commercial 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 if the sum of the Margin 
Percentage plus such prime commercial 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 equal the amount of interest 
which would have accrued if a varying rate per annum equal to 
the sum of the Margin Percentage plus such prime commercial 
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 under the Note or hereunder.

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, duly executed by the Borrower, in the form 
acceptable to Bank; 

(B) A duly executed Guaranty Agreement ("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, 
satisfactory in form/content to Bank;

(D)Collateral Assignments of Notes/Liens ("Assignments") 
encumbering the Residential Paper comprising the Inventory 
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 board of directors of the Borrower, 
authorizing the execution, delivery, and performance of this 
Agreement, the Note, Security Agreement and all other 
documents to be delivered pursuant hereto at such item.

Documents evidencing, securing or otherwise furnished by Bank 
in connection with providing for the Loan Collectively are 
called Loan Documents.

Section III. Collateral Security

3.01 Composition of the Collateral. The property in which a 
collateral interest is granted pursuant to the provisions of 
3.02 and 3.03 (including Bank's Liens) is herein collectively 
called the "Collateral". The Collateral, together with all 
other property of the Borrower of any kind held by the Bank, 
shall stand as one general, continuing collateral security for 
all obligations (the "Obligations") of Borrower to Bank herein 
created or mentioned herein or hereafter made including the 
Note, Security Agreement, etc. and may be retained by the Bank 
until all Obligations have been satisfied in full. The 
Collateral at all times will include the Inventory, in 
addition to all assets of Borrower mentioned in 3.02 and 3.03.

3.02 Rights in Residential Paper Held Either by the Borrower 
or by the Bank. As security for the prompt satisfaction of all 
Obligations, the Borrower hereby assigns to the Bank all of 
its rights, title, and interest in and to, and grants the Bank 
a lien upon and a security interest in, all Residential Paper 
acquired by Borrower in connection with the Loan, together 
with all replacements therefor and proceeds (including, but 
without limitation, insurance proceeds) and products thereof. 

3.03 Rights in Property Held by the Bank. As 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 balance or 
share belonging to the Borrower, or 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.

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

3.05 Financing Statements, Assignments and Deeds of Trusts. 

(A) The Borrower will: 

(1) Join with the Bank in executing such financing statements 
(including amendments thereto and continuation statements 
thereof) 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 Collateral. 

3.06 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 within the Inventory pledged to Bank; 

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

(1) the indebtedness has been delivered and endorsed to Bank 
with full recourse against Borrower; 

(2) the mortgage ("Mortgage") securing payment of such 
indebtedness has been transferred to Bank; 

(C) Borrower and each of the original payee and the maker of 
the Residential Paper has delivered an estoppel certificate in 
form/content acceptable to Bank; 

(D) evidence that such mortgage is an insured first lien (viz. 
the title insurance policy)has been delivered to Bank;

(E) the property described in such Mortgage has been insured 
against loss by fire and other casualty in the full amount of 
the indebtedness secured by such Mortgage and Bank is shown as 
a loss payee in such policy, as its interests may appear; 

(F) the property described in such Mortgage has been appraised 
by an appraiser acceptable to Bank and Bank has accepted the 
form/content of such appraisal; and 

(G) Borrower has submitted to Bank such evidence of such 
environmental safety and soundness as Bank may request 
regarding any property(ies) mentioned in any such Residential 
Paper.

(H) Evidence acceptable to Bank that no Residential Paper of 
which the Borrowing Base is comprised (i.e. no Item of 
Inventory) is more than sixty (60) days past due.

3.07 Real Property Described in the Residential Paper. Bank 
does not make any warranties or representations, expressed or 
implied with respect to the Residential Paper or the real 
property mentioned in the Residential Paper comprising a part 
of the Collateral 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 
arising directly or remotely from such real property and/or 
Residential Paper or any use, inadequacy, defect or deficiency 
thereof.

Section IV. Covenants, Representations and Warranties of 
Borrower

4.01 Agreements. To induce the Bank to enter into this 
Agreement, the Borrower represents and warrants to and 
covenants with the Bank as follows:

(A) The Borrower is a corporation duly organized, validly 
existing, and in good standing under the laws of the State of 
Texas;

(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 trust agreement of the Borrower, or violate 
any laws or result in a default under any contract, agreement, 
or instrument to which the Borrower is a party or by which the 
Borrower or its property is 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, 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, or permitted by, this 
Agreement, or fully shown in Borrower's financial statements 
delivered to Bank;

(H) Borrower will not demand or accept any prepayment of any 
amounts on any of the Residential Paper comprising the 
Collateral without Bank's prior written consent. Borrower 
understands that Borrower only may collect monthly 
installments due on said indebtedness as they mature monthly 
and then only for so long as Borrower is not in default under 
any of the Loan Documents. All amounts, if any, collected by 
Borrower after the occurrence of any such default by Borrower 
represent trust funds which are assigned and belong to Bank 
and any retention of such funds by Borrower after such default 
represents a conversion by Borrower of Bank's property, ipso 
facto; 

(I) Borrower will pay all costs to keep and maintain the 
validity, enforceability, security, priority and 
collectability of the Collateral and will pay all other 
amounts which may be necessary or desirable to preserve, 
maintain and protect Bank's interest in the Collateral 
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 and the Guarantor and 
any other persons or entities in connection with any matter 
including but not limited to the Collateral or any part 
thereof; 

(L) Borrower will take all steps reasonably necessary to 
determine and before submitting any Draw will have determined 
that no hazardous substances or solid wastes have been 
disposed of or otherwise released on or to any property 
mentioned in such Draw. The terms "hazardous substance" and 
"release" shall have the meanings specified in the 
Comprehensive Environmental Response Compensation and 
Liability Act of 1980 ("CERCLA"), and the terms "solid waste" 
and "disposal" (or "disposed") shall have the meanings 
specified in the Resource Conservation and Recovery Act of 
1976 ("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 
Collateral. 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 in, 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; 
provided however, that such lien shall not apply to any 
"escrow" accounts maintained by Borrower at the Bank. 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 will give immediate notice to the Bank of (1) any 
default of Borrower 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. 

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 sub 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, 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 any 
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 to be 
delivered to the Bank hereunder, shall be materially false, 
incorrect, or incomplete when made; 

(E) The dissolution of Borrower or death of any 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 any Guarantor, or for the readjustment of any of 
their respective debts under the Bankruptcy Code, as amended, 
or any party 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 any 
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 Residential Paper 
pledged to Bank has passed its stated maturity date or 
otherwise is in default or any Item remains on Borrower's 
books (unsold to any Investor) for more than six (6) months, 
and such aging also creates a deficiency in the Borrowing 
Base;

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

The occurrence of any default by Borrower or any 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 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 S 
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 Agreements

6.01 Bank will release its Liens against the Inventory, i.e. 
Bank will reassign without warranty or recourse the 
Residential Paper assigned to Bank 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; and 
(iii) the Loan is paid in full.

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

Borrower: Annual Statements, Quarterly Statements
Guarantor: Annual Statements

The annual statements of Borrower will be audited by such 
party's certified public accountant and the quarterly 
statements of Borrower will be compiled 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 Collateral 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 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 will from time to time become 
additionally Indebted to bank directly or remotely all of 
which indebtedness shall be secured by said Collateral 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 heir address shown by their names below, unless 
such address is changed by written notice hereunder. 

7.07 Waiver, Release and Indemnity by the Borrower. To the 
maximum extent permitted by applicable laws, 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 Borrower, and, 
except where required hereby or by any applicable laws, notice 
of any other anion 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 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 Dallas, Dallas 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, 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.

THIS WRITTEN LOAN AGREEMENT (AND ALL RELATED DOCUMENTS 
MENTIONED HEREIN OR PREPARED OR APPROVED IN WRITING BY BANK 
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.

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

Bank: 
ABRAMS CENTRE NATIONAL BANK 
9330 LBJ Freeway, Suite 150
Dallas, TX 75243

By: /S/ Bill R. Prince
Its: Senior Vice President


Borrower: 
UNITED MORTGAGE TRUST
1701 N. Greenville Avenue, Suite 403 
Richardson, Texas 75081 

By: /S/ Christine A. Griffin
Its: President

Approved and Agreed 
Guarantor: 
/S/ Theodore F. Etter, Jr. 





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