Form 10-QSB



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

         For the quarterly period ended June 30, 2001

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

         For the transition period from _________ to _________


                  Commission file number 000-32409


                       UNITED MORTGAGE TRUST


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

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



                    5740 Prospect Avenue
                        Suite 1000
                    Dallas, Texas 75206
                      (214) 237-9305



     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 ___

                               (i)



UNITED MORTGAGE TRUST
INDEX TO FORM 10-QSB
                                                      Page Number

PART I  -- FINANCIAL INFORMATION . . . . . . . . . . . . . .2

Item 1. Financial Statements . . . . . . . . . . . . . . . .2

     Balance Sheets
        June 30, 2001 and December 31, 2000. . . . . . . . .2

     Statements of Income
        Three Months and Six Months
        ended June 30, 2001 and 2000. . . . . . . . . . . . 3

     Statements of Cash Flows
        Six Months Ended June 30, 2001 and 2000. . . . . . .4

     Notes to Financial Statements. . . . . . . .  . . . . .5

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

PART II -- OTHER INFORMATION . . . . . . . . . . . . . . . 13

Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . 13

SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . .14

Accountants' Review Report . . . . . . . . . . . . . . . . 15

Exhibit 1 . . . . . . . . . . . . . . . . . . . . . . . . .16






















                                 -1-


PART I  -- FINANCIAL INFORMATION
<TABLE>

                         UNITED MORTGAGE TRUST
                            BALANCE SHEETS
                   June 30, 2001 and December 31, 2000
<CAPTION>
                                           June 30,        December 31,
                                             2001              2000
                                         (unaudited)        (audited)
                                         ------------------------------
<S>                                        <C>              <C>
ASSETS

Cash                                       $    15,494      $   200,912
Investment in residential mortgages
  and contracts for deed                    37,607,959       33,419,399
Interim mortgages                           10,729,608        6,453,111
Accrued interest receivable                    785,024          667,513
Receivable from affiliates                      91,894          105,765
Equipment, less accumulated depreciation
  of $2,556 and $2,296, respectively             2,156            2,415
Other assets, less accumulated
  Amortization of $16,895                      278,261           56,971
                                           -----------       ----------
Total Assets                               $49,510,396      $40,906,086
                                           -----------       ----------
LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
  Line of credit (Note 3)                  $ 3,650,000      $ 7,000,000
  Dividend payable                             423,556          308,239
  Accounts payable & accrued
    liabilities                                 24,928            3,606
                                           -----------       ----------
      Total Liabilities                    $ 4,098,484      $ 7,311,845
                                           -----------       ----------
Shareholders' equity:
  Shares of beneficial interest; $.01 par
    Value; 100,000,000 shares authorized
      2,578,529 and 1,884,043 shares
    outstanding                            $    25,785      $    18,840
  Additional paid-in capital (Note 4)       45,575,478       33,541,746
  Retained earnings (deficit)                 (189,351)          33,655
                                           -----------       ----------
      Total Shareholders' Equity           $45,411,912      $33,594,241
                                           -----------       ----------
Total Liabilities & Shareholders Equity    $49,510,396      $40,906,086
                                           -----------       ----------
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>


                                 -2-


<TABLE>

                           UNITED MORTGAGE TRUST
                            STATEMENTS OF INCOME
                  For the Three Months and Six Months Ended
                      June 30, 2001 and 2000 (unaudited)
<CAPTION>
                                       Three Months Ended         Six Month Ended
                                             June 30,                 June 30,
                                        2001        2000         2001         2000
                                     ---------------------    -----------------------
<S>                                  <C>          <C>         <C>          <C>
Income:
  Interest income                    $1,334,244   $884,703    $2,537,042   $1,701,044
  Gain on sale of notes                  10,267      3,925        10,267        7,942
                                      ---------    -------    ----------   ----------
                                      1,344,511    888,628     2,547,309    1,708,986
                                      ---------    -------    ----------   ----------
Expense:
  Salaries and wages (Note 4)             --        43,032        --           77,011
  General and administrative (Note 4)    56,318     85,646       109,037      162,153
  Interest expense                      135,043    125,134       315,770      253,662
  Expense reimbursement from
    affiliate (Note 4)                    --       (61,812)       --         (116,000)
  Management Fee (Note 4)                57,587       --         109,470        --
                                      ---------    -------    ----------   ----------
                                        248,948    192,000       534,277      376,826
                                      ---------    -------    ----------   ----------
Net income                           $1,095,563   $696,628    $2,013,032   $1,332,160
                                      =========   ========    ==========   ==========
Net income per share of beneficial
  interest                              $0.4521    $0.4785       $0.9002      $0.9868
                                      =========   ========    ==========   ==========

Weighted average shares outstanding   2,423,289  1,455,832     2,236,106    1,349,968
                                      =========  =========    ==========   ==========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>











                                   -3-


<TABLE>
                      UNITED MORTGAGE TRUST
                       STATEMENTS OF CASH FLOWS
                       For the Six Months Ended
                   June 30, 2001 and 2000 (unaudited)
<CAPTION>
                                                       June 30,
                                                  2001          2000
                                              (unaudited)   (unaudited)
                                              ------------------------
<S>                                           <C>           <C>
Cash flows from operating activities:
  Net income                                  $ 2,013,032   $1,332,160
  Adjustments to reconcile net income
    to net cash provided by operating
    activities:
      Depreciation and amortization                   259          260
      Net amortization of discount on
        mortgage investments                       (1,892)     (22,936)
      Changes in assets and liabilities:
        Accrued interest receivable              (117,511)     (91,259)
        Other assets                             (221,290)        --
        Accounts payable and accrued
          liabilities                              21,322        4,367
          Net cash provided by operating      -----------    ---------
            activities:                         1,693,920    1,222,592
                                              -----------    ---------
Cash flows from investing activities:
  Investment in residential mortgages
    and contracts for deed                     (5,684,372)  (6,210,204)
  Principal receipts on residential
    mortgages and contracts for deed            1,497,705      397,838
  Investment in interim mortgages              (9,738,891)  (4,786,001)
  Principal receipts on interim mortgages       5,462,394    4,773,174
  Loan acquisition costs (Note 4)                   --        (181,296)
        Net cash used in investing            -----------   ----------
         activities:                           (8,463,164)  (6,006,489)
                                              -----------   ----------
Cash flows from financing activities:
  Proceeds from issuance of shares of
    beneficial interest                        12,040,677    6,230,508
  Net borrowings on credit line                (3,350,000)     (81,000)
  Receivable from affiliate                        13,871      (44,762)
  Dividends                                    (2,120,722)  (1,315,769)
        Net cash provided by financing        -----------   ----------
          activities:                           6,583,826    4,788,977
                                              -----------   ----------
Net increase (decrease)in cash                   (185,418)       5,080

Cash at beginning of period                       200,912       14,331
                                              -----------   ----------
Cash at end of period                         $    15,494   $   19,411
                                              -----------   ----------
Interest paid                                 $   315,770   $  253,662
                                              -----------   ----------
<FN>
See accompanying note to financial statements.
</FN>
</TABLE>

                                  -4-


                   UNITED MORTGAGE TRUST
               Notes to Financial Statements
                     June 30, 2001

1. Description of Business

The Company

     United Mortgage Trust is a real estate investment trust (a "REIT")
administered by its Advisor, UMT Advisors, Inc., ("UMTA"). It invests
in residential mortgages, contracts for deed and interim mortgage
loans. Most, if not all, of the mortgages and contracts for deed that
are purchased are not insured or guaranteed by a federally owned or
guaranteed mortgage agency. Approximately 75% 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.

     Operations commenced on March 5, 1997 when approval was given by
the Securities and Exchange Commission for the Company's initial public
offering of 2,500,000 shares at an offering price of $20 per share. On
June 4, 2001 an additional 5,750,000 shares were approved for offer at
the same offering price. Seven hundred fifty thousand of the new shares
offered have been allocated for the Company's Dividend Reinvestment
Plan.

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 ended December 31, 2000 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 six months ended June 30, 2001 are
not necessarily indicative of the results that may be expected for the
year ended December 31, 2001.

3. Line-of-Credit

     The Company has a twelve-month credit facility with a maximum
borrowing limit of $10,000,000, which expires on July 10, 2002. The
line-of-credit is collateralized with the assignment of certain
Residential Mortgages.  Interest is currently calculated at 7.25%
based on 0.50% above the bank's prime rate. The outstanding balance
on the line-of-credit at June 30, 2001 was $3,650,000 compared to
$4,919,000 for the 2000 period.

                                 -5-



4. Related Party Transactions

     In 1997 the Company entered into a Funding Agreement with its
former Advisor whereby the Advisor agreed to fund the Company's general
and administrative expenses. In consideration of the Agreement, the
Company contributed to the Advisor an amount equal to one-half of one
percent annually (.5%) of the Company's average invested assets for the
immediately preceding month. In connection with that Agreement, the
Company received $62,000 and $116,000 in expense reimbursements during
the three months and six months ended June 30, 2000, respectively. The
agreement expired on December 31, 2000 when the Company entered into an
Advisory Agreement with its new Advisor, UMTA. Under the terms of the
new agreement UMTA assumed the day-to-day operations of the Company and
generally, the day-to-day expenses associated with running the Company
are born by UMTA. The Company is charged a monthly management fee that
equaled $58,000 and $109,000 for the three months and six months ended
June 30, 2001, respectively. The new management fee is equal to 1/12th
of 1/2 of 1% of the first $50,000,000 of income producing assets (which
will increase to 1/12th of 1% when income producing assets exceed
$50,000,000.)

     Under the terms of the Advisory Agreement the Company paid
Acquisition Fees to the Advisor for providing services related to
identifying and purchasing loans. The former Advisory Agreement called
for the fee to be calculated at 3% of the unpaid principal balance of
each Residential Mortgage and Contract for Deed purchased by the
Company. Under the new Advisory Agreement 3% of Net Proceeds are paid
to UMTA for those services (Net Proceeds are Gross Proceeds less
selling concessions.) Fees paid during the three months and six months
ended June 30, 2000 were $108,000 and $181,000, respectively or 3.6%
and 2.64% of Gross Proceeds. Fees during the three months and six
months ended June 30, 2001 were $181,000 and $378,000, respectively or
2.47% and 2.72% of Gross Proceeds, respectively.

     The Company has a Mortgage Servicing Agreement with SCMI,
incurring service fees of $46,000 and $33,000 during the three months
ended June 30, 2001 and 2000 and $90,000 and $61,000 during the six
months of the 2001 and 2000 period, respectively.















                                 -6-



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

               RESULTS OF OPERATIONS FOR THE THREE MONTHS
                 AND SIX MONTHS ENDED JUNE 30, 2001

     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. A new registration was effective with the Securities and
Exchange Commission order dated June 4, 2001. The new registration
offers for sale an additional 5,750,000 shares of beneficial interest.
Of that amount, 750,000 shares were registered specifically for our
Dividend Reinvestment Plan. The new registration also has a provision
for limited liquidity with our quarterly Share Repurchase Plan. For
more information please refer to the prospectus dated June 4, 2001.

     The following table sets forth certain information about the
Mortgage Investments that we purchased during the periods set forth
below.

                                            Three Months Ended
                                                 June 30,
                                        2001                   2000
                                        ---------------------------

RESIDENTIAL MORTGAGES
Purchase price                          $ 1,250,000     $ 2,895,000
Total number                                     23              63
Number purchased from affiliates                  6              19
Number purchased from other sources              17              44
Blended interest rate                        12.87%          11.59%
Aggregate principal balance             $ 1,253,000     $ 2,940,000
Average principal balance                   $54,500         $47,000
Remaining term in months (1)                    328             333
Current yield (1)                            12.90%          11.78%
Investment-to-value ratio (1)(2)             77.13%          86.10%

CONTRACTS FOR DEED
Purchase price                          $ 1,112,000     $   827,000
Total number                                     23              17
Number purchased from affiliates                  1               8
Number purchased from other sources              22               9
Blended interest rate                        11.88%          11.37%
Aggregate principal balance             $ 1,117,000     $   834,000
Average principal balance                   $48,600         $49,000
Remaining term in months (1)                    340             348
Current yield (1)                            11.94%          11.78%
Investment-to-value ratio (1)(2)             80.18%          87.70%

                                -7-


(Continued)                                 Three Months Ended
                                                 June 30,
                                        2001                   2000
                                        ---------------------------
FORECLOSURE RESALE
Unpaid principal balance new loan       $   287,000     $   726,000
Unpaid principal balance FCL loan       $   274,000     $   694,000
Total number                                      6              14
Blended interest rate new loan               12.75%          12.00%
Blended interest rate FCL loan               12.64%         12.18%
Average principal balance new loan          $47,800         $51,900
Average principal balance FCL loan          $45,700         $49,600
Remaining term in months new loan (1)           360             360
Remaining term in months FCL loan (1)           357             356
Current yield new loan (1)                   12.64%          12.18%
Current yield FCL loan (1)                   12.11%          12.10%
Investment-to-value ratio new (1)(2)         91.59%          94.18%
Investment-to-value ratio FCL (1)(2)         87.71%          89.46%

INTERIM MORTGAGES
Portfolio beginning balance at 3/31     $ 8,575,000     $ 4,336,000
Portfolio ended balance at 6/30         $10,755,000     $ 4,212,000
Net increase in portfolio
  from prior period                     $ 2,180,000     $  (124,000)
Total number participated in
  during period                                 362             105
Number purchased from affiliates                362             105
Number purchased from other sources               0               0
Blended interest rate                        12.83%          12.75%
Remaining term in months: less than       12 months       12 months
Current yield at year-end (1)                13.01%          12.93%
Investment-to-value ratio (1)(2)                54%             52%





















                                  -8-



                                         Six Months Ended June 30,
                                         2001                 2000
                                        ---------------------------
RESIDENTIAL MORTGAGES
Purchase price                          $ 2,974,000     $ 4,410,000
Total number                                     61              93
Number purchased from affiliates                 13              39
Number purchased from other sources              48              54
Blended interest rate                        12.34%          11.51%
Aggregate principal balance             $ 2,992,000     $ 4,460,000
Average principal balance                   $48,700         $48,000
Remaining term in months (1)                    323             336
Current yield (1)                            12.41%          11.79%
Investment-to-value ratio (1)(2)             77.58%          85.20%

CONTRACTS FOR DEED
Purchase price                          $ 2,621,000     $ 1,800,000
Total number                                     53              37
Number purchased from affiliates                  1               8
Number purchased from other sources              52              29
Blended interest rate                        11.72%          11.73%
Aggregate principal balance             $ 2,628,000     $ 1,816,000
Average principal balance                   $49,600         $49,000
Remaining term in months (1)                    333             350
Current yield (1)                            11.75%          11.86%
Investment-to-value ratio (1)(2)             82.19%          86.00%

FORECLOSURE RESALE
Unpaid principal balance new loan       $   937,000     $ 1,157,000
Unpaid principal balance FCL loan       $   898,000     $ 1,092,000
Total number                                     20              23
Blended interest rate new loan               12.66%          12.11%
Blended interest rate FCL loan               11.85%          11.61%
Average principal balance new loan          $46,800         $50,300
Average principal balance FCL loan          $44,900         $47,500
Remaining term in months new loan (1)           360             360
Remaining term in months FCL loan (1)           357             349
Current yield new loan (1)                   12.66%          12.11%
Current yield FCL loan (1)                   12.12%          12.11%
Investment-to-value ratio new loan(1)(2)     92.73%          90.33%
Investment-to-value ratio (1)(2)             87.16%          87.92%

INTERIM MORTGAGES
Portfolio beginning balance at 12/31    $ 6,453,000     $ 4,199,000
Portfolio ended balance at 6/30         $10,729,000     $ 4,212,000
Net increase in portfolio
  from prior period                     $ 4,276,000     $    13,000
Total number participated in
  during period                                 414             174
Number purchased from affiliates                414             174
Number purchased from other sources               0               0
Blended interest rate                        12.83%          12.75%
Remaining term in months: less than       12 months       12 months
Current yield at year-end (1)                13.01%          12.93%
Investment-to-value ratio (1)(2)                54%             52%


(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.

     As of June 30, 2001 our mortgage portfolio in the aggregate
consisted of 571 Residential Mortgages, 243 Contracts for Deed and 291
Interim Mortgages. As of the dates of purchase, the portfolio had an
unpaid principal balance of $48,350,000, and was purchased for a
discounted price of $47,450,000 (98.14% of the unpaid principal
balance). The average loan in the portfolio had a blended interest
rate of 11.97%, a current annual yield of 12.20%, an investment-to-
value ratio of 74.54%, an unpaid principal balance of $43,800, and a
term remaining of 338 months for Residential Mortgages and Contracts
for Deed and less than 12 months for Interim Mortgages.

     By comparison as of June 30, 2000, our mortgage portfolio in the
aggregate consisted of 445 Residential Mortgages, 177 Contracts for
Deed and 111 Interim Mortgages. As of the dates of purchase, the
portfolio had an unpaid principal balance of $32,293,000, and was
purchased for a discounted price of $31,353,000 (97.09% of the unpaid
principal balance). The average loan in the portfolio had a blended
interest rate of 11.70%, a current annual yield of 12.05%, an
investment-to-value ratio of 78.44%, an unpaid principal balance of
$44,000, and a term remaining of 329 months for Residential Mortgage
and Contracts for Deed and less than 12 months for Interim Mortgages.

     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's title insurance
policy and hazard insurance.

     During the three months and six months ended June 30, 2001 our
Mortgage Investments generated $1,344,000 and $2,547,000 of income,
respectively. During the comparable periods in 2000 income was
$889,000 and $1,709,000, respectively. The increase from 2000 to 2001
of 51% for the three-month periods and 49% for the six-month
comparable periods was attributable to portfolio growth from period to
period. Mortgage Investments were purchased using Net Offering
Proceeds derived from the sale of our Shares during the periods.

     Operating expenses, which includes day-to-day operating expenses,
salaries and wages, expense reimbursement, management fees, and loan
servicing fees for the three months and six months of 2001 were
$114,000 and $218,000, respectively, as compared to the 2000 periods
when they were $69,000 and $123,000, respectively. The increases
between periods were 70% and 77%, respectively. Generally, fees paid
and net general and administrative were calculated by taking our total
income producing assets times 1/12 of 1/2 of 1% monthly. Similarly,
loan servicing fees were calculated at 1/12 of 1/2 of 1% of the unpaid
principal balance of the Residential Mortgages and Contracts for Deed.
                                -10-
     Our portfolio of income producing assets on which we calculated
fees grew more than 79% from June 30, 2000 to June 30, 2001, making
increases in operating expenses commensurate with overall portfolio
growth.  Operating expense as a percentage of net income was 8.45% and
8.57% for the 2001 three and six month periods, and 7.52% and 7.21%
for the 2000 periods. Operating expenses as a percentage of Average
Invested Assets were 0.24% and 0.48% during the three and six month
periods of 2001 and 0.22% and 0.42% in the 2000 periods, respectively.

     Interest expense for the 2001 periods was $135,000 and $316,000
compared to $125,000 and $254,000 during the 2000 periods. The
increases in both comparable periods were a result of higher
outstanding principal balances and higher interest rates in 2001.

     Net income of $1,095,000 and $2,013,000 for the three and six
months ended June 30, 2001 compares to $697,000 and $1,332,000 for the
2000 periods, respectively. Earnings per weighted average share were
$0.45 and $0.90 for the 2001 three and six month periods and $0.48 and
$0.99 per shares during the 2000 comparable periods.

    Dividends declared and paid per share of beneficial interest for
the three and six-month periods ended June 30, 2001 and 2000 were
$0.50 and $1.00 per shares, respectively, for comparable periods.
Dividends paid during both quarters were at a 10% annualized rate of
return for our shareholders.

     As of June 30, 2001, 3.53% of our Mortgage Investments were in
default compared to 2.68% at June 30, 2000. Of the defaulted loans at
June 30, 2001 recoursed loans accounted for 1.45% and 2.08% were non-
recoursed. During the comparable period in 2000 approximately one-half
were recoursed. We believe the increase in defaults was due to a
slowing in the economy, which we believed caused a slow down of sales
of defaulted properties. Sales of defaulted properties during the
three months ended June 30, 2001 were six compared to 14 sales of
defaulted properties in the 2000 quarter.










                                 -11-




               CAPITAL RESOURCES AND LIQUIDITY FOR
  THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000

     We utilize funds made available from the sale of our Shares,
funds made available on our bank line of credit and repayment of
principal on our Residential Mortgages and Contracts for Deed to
purchase Mortgage Investments.

                                                  THREE-MONTH PERIODS
                                                    ENDED JUNE 30,
                                             2001                    2000
                                             ----------------------------
Shares issued                                    327,602          194,449
Number of new shareholders                           135               67
Gross offering proceeds                      $ 6,554,000       $3,889,000
Net offering proceeds (after deduction
  of selling commissions and fees)           $ 6,085,000       $2,481,000
Principal receipts from Residential
  Mortgages and Contracts for Deed           $ 1,008,000       $  113,000
Principal receipts from Interim Mortgages    $ 2,969,000       $3,187,000
Net borrowing from credit line               $(1,720,000)      $   81,000

                                                  SIX-MONTH PERIODS
                                                    ENDED JUNE 30,
                                             2001                    2000
                                             ----------------------------

Shares issued                                    694,492          348,165
Number of new shareholders                           258              134
Gross offering proceeds                      $13,892,000       $6,963,000
Net offering proceeds (after deduction
  of selling commissions and fees)           $12,050,000       $6,230,000
Principal receipts from Residential
  Mortgages and Contracts for Deed           $ 1,498,000       $  398,000
Principal receipts from Interim Mortgages    $ 5,462,000       $4,773,000
Net borrowing from credit line               $(3,350,000)      $   81,000


     On June 4, 2001 the Securities and Exchange Commission issued its
order of effectiveness for the sale of an additional 5,750,000 shares
of beneficial interest over and above the original registration of
2,500,000 shares. Of the new shares offered for sale, 750,000 were set
aside for the Dividend Reinvestment Plan.

   As of June 30, 2001, we had issued an aggregate of 2,591,928 shares
of beneficial interest and repurchased into treasury, through our
Share Repurchase Plan, 13,399 shares. Gross Offering Proceeds through
June 30, 2001 were $51.40 million with Net Offering Proceeds to us of
$45.60 million. By comparison at the end of the 2000-quarter we had
sold 1,533,709 shares resulting in Gross Offering Proceeds of $30.50
million and Net Offering Proceeds to us of $27.30 million.


                                  -12-


     With Trustee approved, effective July 11, 2001 we extended and
increased our credit facility with the same lender in the amount of
$10,000,000, which will expire on July 10, 2002. The line-of-credit
was collateralized with the assignment of certain Residential
Mortgages.  Interest will be calculated at bank's prime rate plus
1/4 of one percent (.25%) translating to 7.25% at July 11, 2001. We
utilized the credit facility to acquire and warehouse Mortgage
Investments as they become available. The outstanding balance of the
line-of-credit was reduced as new offering proceeds were received.
The outstanding loan balance at June 30, 2001 was $3,650,000 and at
June 30, 2000 was $7,000,000.

PART II - OTHER INFORMATION

Item 6. Exhibits

Exhibit 1 - Loan Agreement between First State Bank of Texas, N.A. and
United Mortgage Trust dated July 11, 2001.
































                                 -13-




SIGNATURES

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


                                    UNITED MORTGAGE TRUST
                                        (Registrant)



Date:  August 14, 2001                /S/Christine A. Griffin
                                      Christine A. Griffin
                                           President



































                                  -14-


    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



Board of Directors
United Mortgage Trust


We have reviewed the accompanying balance sheets of United Mortgage
Trust as of June 30, 2001 and the related statements of income and cash
flows for the three months then ending. These financial statements are
the responsibility of the Company's management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants.  A review of
interim financial information consists principally of analytical
procedures applied to financial data and making inquiries of persons
responsible for financial and accounting matters.  It is substantially
less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an
opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying financial statements in order
for them to be in conformity with generally accepted accounting
principles.

We have previously audited, in accordance with generally accepted
auditing standards, the balance sheet of United Mortgage Trust as of
December 31, 2000 and the related statements of earnings and cash flows
for the year then ending (not presented separately herein), and in our
report dated February 5, 2001, we expressed an unqualified opinion on
those financial statements.  In our opinion, the information set forth
in the accompanying balance sheet as of December 31, 2000 is fairly
stated, in all material respects, in relation to the balance sheet from
which it has been derived.

                                     Jackson & Rhodes P.C.

Dallas, Texas
August 8, 2001












                                  -15-



Exhibit 1.

                            AMENDED AND RESTATED
                          REVOLVING LOAN AGREEMENT

     THIS AMENDED AND RESTATED REVOLVING LOAN AGREEMENT (this
"Agreement"), dated the 11th day of July, 2001, by and between
UNITED MORTGAGE TRUST, a Maryland real estate investment trust
(the "Borrower"), and FIRST STATE BANK OF TEXAS (the "Bank").

                                 WITNESSETH:

     BACKGROUND. Borrower is in the business of buying mortgage
notes secured by first and prior liens on residential properties
and installment contracts for deed for the sale of residential
properties located within the State of Texas (collectively called
the "Residential Paper").  The Bank has extended a loan in an
amount not to exceed SEVEN MILLION DOLLARS ($7,000,000.00) upon
the terms set forth in that certain One (1) Year $7,000,000
Revolving Loan Agreement (the "Prior Loan Agreement") dated August
21, 2000. Borrower has requested the Bank to increase the amount
of the loan to TEN MILLION DOLLARS ($10,000,000), in aggregate, on
a revolving loan basis (the "Loan") from which to reimburse
Borrower up to $10,000,000.00 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
$21,000,000.00 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 intended to be legally bound hereby, the
parties have entered into this Agreement in order to evidence the
amended terms of the parties relationship and intend this
Agreement to amend, restate and supersede the Prior Loan
Agreement;

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 $10,000,000.00 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 (as
defined in Section 1.06), 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 Renewal
Revolving Line of Credit Promissory Note (the "Note"), having a
stated maturity on the Loan Termination Date, with a face amount
of $10,000,000.00, executed by Borrower and payable to the order
of 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 $25,000.00 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 State of
Texas, or fee simple titles to the residential properties,
excluding any Residential Paper which is or becomes past due by
more than sixty (60) days, and excluding any Residential Paper
secured by property located outside of Texas or is modified,
renewed or extended beyond its original terms. Residential Paper
that is more than sixty (60) days past due or any Residential
Paper that has been renewed, modified or extended in anyway from
the initial obligations represented thereby will not be considered
in determining the Borrowing Base and Borrower will replace the
same with new Residential Paper that is current, i.e. not more
than sixty (60) days past due and without any modifications,
renewals or extensions; 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 shall be immediately paid down by the Borrower 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 Pledged Residential Paper Tracking. In order to induce
Bank to enter into this Agreement, Borrower has represented to
Bank that Borrower will promptly furnish Bank with all information
needed/requested by Bank from time to time to track each item of
Pledged Residential Paper ("Item") specifically, each first lien
note and installment contract for deed or first lien securing the
payment of such first lien note pledged to Bank, in order to
independently determine its qualification for the Borrowing Base,
and to remain assured that no item of Pledged Residential Paper
considered in the Borrowing Base is more than sixty (60) days past
due or otherwise disqualified. In addition, Borrower will furnish
any certification of Pledged Residential Paper qualification 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 section 1.08(B),
interest on the principal balance of the Loan from time to
time outstanding will be payable in monthly installments (as
set forth in the Note)  at a floating rate of one-half
percentage point (0.5%) above the Prime Rate (herein defined)
(the "Floating 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 Floating 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 Floating
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
Floating 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.

(C) As used herein, the term "Prime Rate" shall mean the
Prime Rate then most recently published in the Money Rates
Section of The Wall Street Journal and described as the prime
or base rate of interest per annum on corporate loans posted
by at least seventy-five percent (75%) of the nation's thirty
(30) largest banks.  In the event The Wall Street Journal
fails to publish such Prime Rate, or such Prime Rate ceases
to exist for a period of more than ninety (90) consecutive
days, then the prime rate of interest announced by the Bank
from time to time shall be substituted in its place.

     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 fifteen (15)
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 $1,000.00 per
calender quarter.

     1.11 Servicing Rights.  The Borrower covenants that the
servicing rights to the Pledged Residential Paper will not be sold
or assigned and upon an Event of Default the Bank will have
control of such rights.

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 duly executed Note, (Exhibit "A"), having a stated
maturity on the Loan Termination Date, with a face amount of
$10,000,000.00, executed by Borrower and payable to the order
of Bank;

(B) A duly executed Guaranty Agreement (Exhibit "B")
("Guaranty"), in form acceptable to Bank signed by Todd F.
Etter ("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) Collateral Assignment of Notes and Liens (Exhibit "C")
("Assignment of Notes and Liens"), duly executed by Borrower
in favor of Bank, 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) Assignment of Life Insurance Policy  (Exhibit "D")
("Assignment of Life Insurance"), duly executed by Borrower
in favor of Bank, assigning to Bank $1,000,000 face value key
man life insurance policy on Guarantor;

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

(G) Statute of Frauds Notice (Exhibit "F") duly executed by
Bank, Borrower and Guarantor; and

(H) Errors and Omissions Letter (Exhibit "G") duly executed
by Bank and Borrower.

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, installment
contract for deed,  mortgage, guarantee, loan document, title
policy, insurance policy, or any other right ancillary to or
securing or relating to the pledged 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 chattel paper,
investment accounts, goods and 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 after 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: "PAY TO
THE ORDER OF FIRST STATE BANK OF TEXAS, WITH FULL RECOURSE".

     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 interests.

     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) The Pledged Residential Paper has been assigned to Bank
as follows:

(1) Borrower has executed an Assignment of Notes and Liens
(Exhibit "H") for each County in which the Residential Paper
is located, assigning the Residential Paper to Bank;

(2) the original promissory notes and the original
installment contracts evidencing the indebtedness have been
delivered and endorsed by Borrower to Bank with full recourse
against Borrower with such endorsement being evidenced by an
Allonge (Exhibit "I") affixed to each promissory note and the
installment contract for deed, and executed by Borrower in
form/content acceptable to Bank;

(3) the deeds of trust and and installment contracts for deed
(collectively the"Mortgages") securing payment of such
Pledged Residential Paper have been transferred to Bank; and

(4) if the Pledged Residential Paper includes any installment
contracts for deed then Borrower will have delivered a
Warranty Deed (Exhibit "J") in form/content acceptable to
Bank, conveying the real property covered by the installment
contract for deed to the Bank in fee simple, free and clear
of any liens, subject only to such installment contract for
deed.

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

(D) Borrower has delivered an Estoppel Certificate (Exhibit
"M") in form/content acceptable to Bank for each Pledged
Residential Paper;

(E) Borrower has delivered a Notice Letter (Exhibit "N") in
form/content acceptable to Bank for each Pledged Residential
Paper;

(F) Borrower has provided 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 or
in the case of an installment contract for deed a copy of
Borrower's owner's policy of title insurance showing Borrower
as the fee simple owner of the property, free and clear of
liens) for each Pledged Residential Paper;

(G) The real properties described in each of the Mortgages
are currently 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;

(H) Borrower has delivered 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 has obtained a current appraisal of any
such property, which is deemed satisfactory by the Bank; and

(I) 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;

(J) Borrower has delivered 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 eligible Pledged Residential Paper;
and

(K) 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. Borrower has the full power
and authority to own its properties and to transact the
businesses in which it is presently engaged or presently
proposes to engage.  Borrower also is duly qualified and is
in good standing in all states in which the failure to so
qualify would have a material adverse effect on its
businesses or financial condition.

(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 pended
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 6f 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  or
installment contracts for deed 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 $23,900,000.00 as determined in accordance with the
audited financial statements of Borrower based upon generally
accepted accounting principles.

(R) Borrower owns clear title to all Residential Paper free
and clear of any liens or security interests, except for the
liens and security interests of Bank.  The Residential Paper
is payable to the order of Borrower prior to endorsement of
same to Bank.

(S) Borrower warrants that there are no offsets or defenses
to the payment of the indebtedness advanced under the Prior
Loan Agreement and Borrower, as a material inducement for
Bank to enter into this Agreement, does hereby fully, finally
and completely remise, acquit, disclaim, covenant not to sue,
release and discharge Bank, and any and all of its officers,
directors, shareholders, employees, agents, attorneys and
successors in interests and assigns (collectively, "Bank et
al") from any and all demands, claims, damages, judgments,
executions, actions or cause of action, known or unknown,
past or present, liquidated or unliquidated, which Borrower
has or may claim to have against Bank et al, occurring prior
to the date hereof and arising out of or with respect to the
transactions or occurrences which are the subject matter of
the Prior Loan Agreement and this Agreement, including any
other loss, expense and/or detriment, of any kind or
character, growing out of or in any way connected with or in
any way resulting from the acts, actions or omissions of Bank
et al, and including any loss, cost or damage in connection
with any breach of fiduciary duty, breach of any duty of fair
dealing, breach of confidence, breach of funding commitment,
undue influence, duress, economic coercion, conflict of
interest, negligence, bad faith, malpractice, intentional or
negligent infliction of mental distress, tortious
interference with contractual relations, tortious
interference with prospective business advantage, breach of
contract, deceptive trade practices, libel, slander or
conspiracy.

Borrower does hereby fully, finally and completely remise,
acquit, disclaim, covenant not to sue, release and discharge
Bank et al, from any and all claims, or right to claim,
whether known or unknown, that Bank charged, contracted for,
collected or received usurious interest under the note
provided in the Prior Loan Agreement, hereby waiving any such
right to bring any claim or pursue any cause of action
against Lender et al, based on any claim of usury.

(T) Borrower and Guarantor hereby acknowledge and agree that
(i) any and all rights, titles, interests and liens securing
the repayment of the indebtedness advanced under the Prior
Loan Agreement are hereby reaffirmed, renewed and extended,
and shall remain in full force and effect and shall continue
to guarantee the payment of the Loan.

(U) Borrower and Guarantor hereby represent and warrant that
(ii) the representations and warranties contained in the
Prior Loan Agreement are true and correct on and as of the
date hereof as though made on and as of the date hereof,
(iii) no Event of Default as defined in the Prior Loan
Agreement has occurred and is continuing and no event or
condition has occurred that with the giving of notice or
lapse of time or both would be an Event of Default as defined
in the Prior Loan Agreement, and (iv) Borrower is in full
compliance with all covenants and agreements contained in the
Prior Loan Agreement.

     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
section 4.01(0), 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 all
obligations, whether hereunder or otherwise, including without
limitation the entire outstanding principal balance of the Note
and all accrued but unpaid interest thereon, shall immediately
become due and payable without further action of any kind.

     5.03 Servicing Rights. Upon the occurrence of an Event of
Default Bank will have the ability to take over and control all
servicing rights for the Pledged Residential Paper.

     5.04 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.

     5.05 Restricted Payments.  If an Event of Default has
occurred, Borrower will not declare or pay any dividends or make
any other payment on account of its capital stock, or redeem,
purchase or retire any of its capital stock, or grant or issue any
capital stock or any warrant, right or option pertaining to its
capital stock, or issue any security convertible into capital
stock.

Section VI. Partial Release's (Reassignment) Agreements

     6.01 Partial Release. Bank may from time to time partially
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 Event of Default is pended or threatened under the
Loan Documents;

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

(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

     6.02. Release. If the Loan is paid in full and Bank has no
further obligation to make advances hereunder 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).

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. This Agreement amends, restates and supersedes the Prior
Loan Agreement.

     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:
     Statement                              Frequency
Status Reports on Pledged
  Residential Paper                         Monthly
Borrowing Base Certificates;                Monthly or at each
                                              Advance
Audited Financial Statement                 Annually (within
                                              90 days of fiscal
                                              year end)
Financial Statements prepared
  by Borrower                               Quarterly (within 60
                                              days of the end of
                                              each fiscal quarter)
Proof of Insurance on underlying
real properties                             Annually when paid

Guarantor:
     Statement                              Frequency
Financial Statement                         Annually (within 30
                                              days of 1-year
                                              statement date)
Tax Return                                  Annually (within 30
                                              days of filing)

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 to Bank (a) as
principal, surety, endorser, guarantor, accommodation party or
otherwise, (1)) 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 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.

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.

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

BANK
Address:                                FIRST STATE BANK OF TEXAS
5936 West Park Boulevard
Plano, Texas 75093
                                        By:____________________
                                                Ken Mixon
                                             Vice President

BORROWER
Address:                                UNITED MORTGAGE TRUST, a
                                        Maryland real estate
                                        investment trust
5740 Prospect Avenue, Suite
Dallas, Texas 75206

                                        By:_____________________
                                           Christine A. Griffin
                                                 President

GUARANTOR
                                        By:_____________________
                                               Todd F. Etter