**UNITED        STATES**

**SECURITIES        AND EXCHANGE COMMISSION**

**Washington,        D.C. 20549**

**FORM        10-Q**

**000-32409**

**UNITED        MORTGAGE TRUST**

| **Maryland**                                                                    | **75-6493585**                                        |
|---------------------------------------------------------------------------------|-------------------------------------------------------|
| (State                  or other jurisdiction of incorporation or organization) | (I.R.S.                  Employer Identification No.) |

**1702        N. Collins Blvd, Suite 100**

**Richardson,        Texas 75080**

**(214)        237-9305**

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**UNITED        MORTGAGE TRUST**

**INDEX**

**PART        I - FINANCIAL INFORMATION**

|                                             |                                                                                                                                                             | **Page** |
|--------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------|
| **ITEM                  1.**                     | **Financial                  Statements**                                                                                                                        |     |
|                                             |                                                                                                                                                             |     |
|                                             | **UNITED                  MORTGAGE TRUST:**                                                                                                                      |     |
|                                             | Consolidated                  Balance Sheets as of September 30, 2006 and December 31, 2005                  (unaudited)                                         |  1  |
|                                             | Consolidated                  Statements of Income for the three and nine months ended September                  30,                  2006 and 2005 (unaudited) |  3  |
|                                             | Consolidated                  Statements of Cash Flows for the nine months ended September 30,                  2006 and                  2005 (unaudited)       |  4  |
|                                             | Notes                  to Consolidated Financial Statements as of September 30, 2006                  (unaudited)                                                |  5  |
|                                             |                                                                                                                                                             |     |
| **ITEM                  2.**                     | **Management’s                  Discussion and Analysis of Financial Condition and Results of                  Operations**                                |  9  |
| **ITEM                  3.**                     | **Quantitative                  and Qualitative Disclosures about Market Risk**                                                                                  |  14 |
| **ITEM                  4.**                     | **Controls                  and Procedures**                                                                                                                     |  15 |
|                                             |                                                                                                                                                             |     |
| **PART                  II - OTHER INFORMATION** |
|                                             |                                                                                                                                                             |     |
| **ITEM                  1.**                     | **Legal                  Proceedings**                                                                                                                           |  15 |
| **ITEM                  1A.**                    | **Risk                  Factors**                                                                                                                                |  15 |
| **ITEM                  2.**                     | **Unregistered                  Sales of Equity Securities and Use of Proceeds**                                                                                 |  15 |
| **ITEM                  3.**                     | **Defaults                  Upon Senior Securities**                                                                                                             |  16 |
| **ITEM                  4.**                     | **Submission                  of Matters to a Vote of Security Holders**                                                                                         |  16 |
| **ITEM                  5.**                     | **Other                  Information**                                                                                                                           |  16 |
| **ITEM                  6.**                     | **Exhibits**                                                                                                                                                     |  16 |

----

**PART        I -- FINANCIAL INFORMATION**

**ITEM        1. FINANCIAL STATEMENTS**

**UNITED        MORTGAGE TRUST**

**CONSOLIDATED        BALANCE SHEETS**

|                                                                                                                                                                                                                                                         |   | **September                  30,****2006** |        | **December                  31,****2005** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|-------------|-------------------------------------------|--------|
|                                                                                                                                                                                                                                                         |   | **(unaudited)**                            |        | **(audited)**                             |   |
| **Assets**                                                                                                                                                                                                                                                   |
| Cash                  and cash equivalents                                                                                                                                                                                                                   |   | $                                          | 869,140     |                                      | $      | 5,548,421 |   |
| Mortgage                  investments:                                                                                                                                                                                                                       |   |                                       |             |                                      |   |  |   |
| Investment                  in trust receivable                                                                                                                                                                                                              |   |                                       | 5,660,512   |                                      |   | 5,815,712 |   |
| Interim                  mortgages, affiliates                                                                                                                                                                                                               |   |                                       | 60,177,157  |                                      |   | 48,411,728 |   |
| Interim                  mortgages                                                                                                                                                                                                                           |   |                                       | 22,196,251  |                                      |   | 24,543,944 |   |
| Allowance                  for loan losses                                                                                                                                                                                                                   |   |                                       | (844,414    | )                                         |   | (698,712 | ) |
|                                                                                                                                                                                                                                                         |   |                                       |             |                                      |   |  |   |
| Total                  mortgage investments                                                                                                                                                                                                                  |   |                                       | 87,189,506  |                                      |   | 78,072,672 |   |
|                                                                                                                                                                                                                                                         |   |                                       |             |                                      |   |  |   |
| Line                  of credit receivable, affiliate                                                                                                                                                                                                        |   |                                       | 33,806,189  |                                      |   | 30,317,037 |   |
| Accrued                  interest receivable                                                                                                                                                                                                                 |   |                                       | 371,735     |                                      |   | 251,594 |   |
| Accrued                  interest receivable, affiliate                                                                                                                                                                                                      |   |                                       | 2,568,599   |                                      |   | 1,294,829 |   |
| Receivable                  from affiliate                                                                                                                                                                                                                   |   |                                       | 327,961     |                                      |   | 377,685 |   |
| Recourse                  obligations, affiliates                                                                                                                                                                                                            |   |                                       | 11,534,095  |                                      |   | 9,264,233 |   |
| Residential                  mortgages and contracts for deed foreclosed                                                                                                                                                                                     |   |                                       | 154,668     |                                      |   | 874,602 |   |
| Interim                  mortgages foreclosed                                                                                                                                                                                                                |   |                                       | 1,259,238   |                                      |   | 1,805,340 |   |
| Equipment,                  less accumulated depreciation of $22,120 and $11,709,                  respectively                                                                                                                                              |   |                                       | 3,736       |                                      |   | 14,147 |   |
| Other                  assets                                                                                                                                                                                                                                |   |                                       | 692,757     |                                      |   | 2,083,731 |   |
|                                                                                                                                                                                                                                                         |   |                                       |             |                                      |   |  |   |
| Total                  assets                                                                                                                                                                                                                                |   | $                                          | 138,777,624 |                                      | $      | 129,904,291 |   |
|                                                                                                                                                                                                                                                         |   |                                       |             |                                      |   |  |   |
| **Liabilities                  and Shareholders' Equity**                                                                                                                                                                                                    |
| Liabilities:                                                                                                                                                                                                                                                 |   |                                       |             |                                      |   |  |   |
| Line                  of credit payable                                                                                                                                                                                                                      |   | $                                          | 24,948,542  |                                      | $      | 13,808,080 |   |
| Dividend                  payable                                                                                                                                                                                                                            |   |                                       | 808,582     |                                      |   | 822,000 |   |
| Accounts                  payable and accrued liabilities                                                                                                                                                                                                    |   |                                       | --          |                                      |   | 114,583 |   |
|                                                                                                                                                                                                                                                         |   |                                       |             |                                      |   |  |   |
| Total                  liabilities                                                                                                                                                                                                                           |   |                                       | 25,757,124  |                                      |   | 14,744,663 |   |
|                                                                                                                                                                                                                                                         |   |                                       |             |                                      |   |  |   |
| Commitments                  and contingencies                                                                                                                                                                                                               |   |                                       |             |                                      |   |  |   |
|                                                                                                                                                                                                                                                         |   |                                       |             |                                      |   |  |   |
| Shareholders'                  equity:                                                                                                                                                                                                                       |   |                                       |             |                                      |   |  |   |
| Shares                  of beneficial interest; $.01 par value; 100,000,000 shares authorized;                  7,954,174 and 7,854,037 shares issued, respectively; and 6,926,392                  and                  7,055,119 outstanding, respectively |   |                                       | 79,542      |                                      |   | 78,541 |   |
| Additional                  paid-in capital                                                                                                                                                                                                                  |   |                                       | 140,144,861 |                                      |   | 138,130,095 |   |
| Advisor's                  reimbursement                                                                                                                                                                                                                     |   |                                       | 397,588     |                                      |   | 397,588 |   |

----

**UNITED        MORTGAGE TRUST**

**CONSOLIDATED        BALANCE SHEETS - (Continued)**

|                                                                                                         |   | **September                  30,****2006** |        | **December                  31,****2005** |    |
|--------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------|-------------|-------------------------------------------|---------|
|                                                                                                         |   | **(unaudited)**                            |        | **(audited)**                             |    |
|                                                                                                         |   |                                       |        |                                      |    |   |   |
| Cumulative                  distributions in excess of earnings                                              |   |  $                                    | (7,757,963  | )                                         |  $ | (7,680,676 | ) |
|                                                                                                         |   |                                       |             |                                      |    |  |   |
|                                                                                                         |   |                                       | 132,864,028 |                                      |    | 130,925,548 |   |
| Less                  treasury stock of 1,027,782 and 797,582 shares, respectively, at                  cost |   |                                       | (19,843,528 | )                                         |    | (15,765,920 | ) |
|                                                                                                         |   |                                       |             |                                      |    |  |   |
| Total                  shareholders' equity                                                                  |   |                                       | 113,020,500 |                                      |    | 115,159,628 |   |
|                                                                                                         |   |                                       |             |                                      |    |  |   |
| Total                  liabilities and shareholders' equity                                                  |   | $                                          | 138,777,624 |                                      | $       | 129,904,291 |   |

----

**UNITED        MORTGAGE TRUST**

**CONSOLIDATED        STATEMENTS OF INCOME**

**(unaudited)**

|                                                          |   | **Three                  Months Ended****September                  30,** |      | **Nine                  Months Ended****September                  30,** |   |
|---------------------------------------------------------------|--------|---------------------------------------------------------------------------|-----------|--------------------------------------------------------------------------|--------|
|                                                          |   | **2006**                                                                  |      | **2005**                                                                 |   | **2006** |   | **2005** |   |
| **Revenues:**                                                 |   |                                                                      |      |                                                                     |   |   |   |   |   |   |   |   |   |
| Interest                  income derived from affiliates      |   | $                                                                         | 3,380,556 |                                                                     | $      | 2,583,980 |   | $ | 9,477,248 |   |  $ | 7,780,826 |   |
| Interest                  income                              |   |                                                                      | 1,053,695 |                                                                     |   | 1,293,188 |   |   | 3,162,011 |   |   | 3,362,917 |   |
|                                                          |   |                                                                      | 4,434,251 |                                                                     |   | 3,877,168 |   |   | 12,639,259 |   |   | 11,143,743 |   |
| **Expenses:**                                                 |   |                                                                      |      |                                                                     |   |   |   |   |   |   |   |   |   |
| Trust                  administration fee                     |   |                                                                      | 214,714   |                                                                     |   | 260,449 |   |   | 641,916 |   |   | 725,368 |   |
| Loan                  servicing fee                           |   |                                                                      | 3,434     |                                                                     |   | 8,235 |   |   | 38,220 |   |   | 99,919 |   |
| General                  and administrative                   |   |                                                                      | 392,934   |                                                                     |   | 126,869 |   |   | 796,363 |   |   | 453,418 |   |
| Provision                  for loan losses                    |   |                                                                      | 507,136   |                                                                     |   | 720,568 |   |   | 1,783,769 |   |   | 2,444,108 |   |
| Interest                  expense                             |   |                                                                      | 486,909   |                                                                     |   | 160,606 |   |   | 1,040,388 |   |   | 273,547 |   |
| Merger                  costs                                 |   |                                                                      | 11,975    |                                                                     |   | - |   |   | 1,039,606 |   |   | - |   |
|                                                          |   |                                                                      | 1,617,102 |                                                                     |   | 1,276,727 |   |   | 5,340,262 |   |   | 3,996,360 |   |
|                                                          |   |                                                                      |      |                                                                     |   |   |   |   |   |   |   |   |   |
| Net                  income                                   |   | $                                                                         | 2,817,149 |                                                                     | $      | 2,600,441 |   | $ | 7,298,997 |   | $ | 7,147,383 |   |
|                                                          |   |                                                                      |      |                                                                     |   |   |   |   |   |   |   |   |   |
| Net                  income per share of beneficial interest  |   | $                                                                         | 0.40      |                                                                     | $      | 0.37 |   | $ | 1.04 |   | $ | 1.02 |   |
|                                                          |   |                                                                      |      |                                                                     |   |   |   |   |   |   |   |   |   |
| Weighted                  average shares outstanding          |   |                                                                      | 7,001,511 |                                                                     |   | 6,999,276 |   |   | 6,991,424 |   |   | 7,022,454 |   |
|                                                          |   |                                                                      |      |                                                                     |   |   |   |   |   |   |   |   |   |
| Distributions                  per weighted share outstanding |   | $                                                                         | 0.35      |                                                                     | $      | 0.35 |   | $ | 1.06 |   | $ | 1.15 |   |

----

**UNITED        MORTGAGE TRUST**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS**

**(unaudited)**

|                                                                                                                |   | **Nine                  Months Ended****September                  30,** |        |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|-------------|
|                                                                                                                |   | **2006**                                                                 |        | **2005** |   |
|                                                                                                                |   |                                                                     |        |   |   |   |   |
| **Cash                  Flows from Operating Activities:**                                                          |   |                                                                     |        |   |   |   |   |
| Net                  income                                                                                         |   | $                                                                        | 7,298,997   |   | $ | 7,147,383 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities: |   |                                                                     |        |   |   |   |   |
| Provision                  for loan losses                                                                          |   |                                                                     | 1,783,769   |   |   | 2,444,108 |   |
| Depreciation                                                                                                        |   |                                                                     | 10,411      |   |   | 2,664 |   |
| Net                  amortization of discount on mortgage investments                                               |   |                                                                     | 166,404     |   |   | 11,670 |   |
| Changes                  in assets and liabilities:                                                                 |   |                                                                     |        |   |   |   |   |
| Accrued                  interest receivable                                                                        |   |                                                                     | (1,393,911  | ) |   | (606,320 | ) |
| Other                  assets                                                                                       |   |                                                                     | 1,305,570   |   |   | (581,966 | ) |
| Accounts                  payable and accrued liabilities                                                           |   |                                                                     | (128,001    | ) |   | (75,098 | ) |
| Net                  cash provided by operating activities                                                          |   |                                                                     | 9,043,239   |   |   | 8,342,441 |   |
|                                                                                                                |   |                                                                     |        |   |   |   |   |
| **Cash                  Flows from Investing Activities:**                                                          |   |                                                                     |        |   |   |   |   |
| Investment                  in residential mortgages and contracts for deed                                         |   |                                                                     | (762,162    | ) |   | (635,893 | ) |
| Principal                  receipts on residential mortgages and contracts for deed                                 |   |                                                                     | 1,491,000   |   |   | 863,125 |   |
| Proceeds                  from the sale of mortgage loans, securitization                                           |   |                                                                     | --          |   |   | 7,260,871 |   |
| Investment                  in interim mortgage notes                                                               |   |                                                                     | (70,452,168 | ) |   | (56,800,155 | ) |
| Principal                  receipts on interim mortgage notes                                                       |   |                                                                     | 56,827,360  |   |   | 62,653,375 |   |
| Proceeds                  from recourse obligations, affiliates                                                     |   |                                                                     | 910,541     |   |   | -- |   |
| Line                  of credit receivable, affiliate, net                                                          |   |                                                                     | (3,489,152  | ) |   | (362,461 | ) |
| Receivable                  from affiliate                                                                          |   |                                                                     | 49,724      |   |   | (7,592 | ) |
| Net                  cash provided by (used in) investing activities                                                |   |                                                                     | (15,424,857 | ) |   | 12,971,270 |   |
|                                                                                                                |   |                                                                     |        |   |   |   |   |
| **Cash                  Flows from Financing Activities:**                                                          |   |                                                                     |        |   |   |   |   |
| Proceeds                  from issuance of shares of beneficial interest                                            |   |                                                                     | 2,015,767   |   |   | 2,635,148 |   |
| Purchase                  of treasury stock                                                                         |   |                                                                     | (4,077,608  | ) |   | (3,080,260 | ) |
| Net                  borrowing (payments) on line of credit payable                                                 |   |                                                                     | 11,140,462  |   |   | (6,823,857 | ) |
| Dividends                                                                                                           |   |                                                                     | (7,376,284  | ) |   | (8,197,068 | ) |
| Net                  cash provided by (used in) financing activities                                                |   |                                                                     | 1,702,337   |   |   | (15,466,037 | ) |
|                                                                                                                |   |                                                                     |        |   |   |   |   |
| Net                  increase (decrease) in cash and cash equivalents                                               |   |                                                                     | (4,679,281  | ) |   | 5,847,674 |   |
| Cash                  and cash equivalents at beginning of period                                                   |   |                                                                     | 5,548,421   |   |   | 1,331,798 |   |
| Cash                  and cash equivalents at end of period                                                         |   | $                                                                        | 869,140     |   | $ | 7,179,472 |   |
|                                                                                                                |   |                                                                     |        |   |   |   |   |
| **Supplemental                  Disclosure of Cash Flow Information:**                                              |   |                                                                     |        |   |   |   |   |
| Cash                  paid during the period for interest                                                           |   | $                                                                        | 1,040,388   |   | $ | 273,547 |   |
|                                                                                                                |   |                                                                     |        |   |   |   |   |
| **Supplemental                  Disclosure of Non-Cash Information:**                                               |   |                                                                     |        |   |   |   |   |
| Transfer                  of loans into recourse obligations, affiliates                                            |   | $                                                                        | 3,180,403   |   | $ | -- |   |

----

**UNITED        MORTGAGE TRUST**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS**

**(unaudited)**

**1.        Nature of Business**

| **2.** | **Basis                  of Presentation** |
|--------|--------------------------------------------|

**3.        Line of Credit Payable**

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**UNITED        MORTGAGE TRUST**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)**

**(unaudited)**

**4.        Related Party Transactions**

| **Name** | ** ** | **Principal                  Balance at                  December 31, 2005** | ** ** | **Principal                  Balance at                  September 30, 2006** | ** ** | **Maximum                  Note Amount** |   |
|----------|------------|------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|------------------------------------------|--------|
|     |       |                                                                         |       |                                                                          |       |                                     |   |   |   |   |
| CRG      |       | $                                                                            | 2,725,442  |                                                                          | $          | 3,310,982                                |   | $ | 3,372,904 |   |
| SCMI     |       | $                                                                            | 3,295,422  |                                                                          | $          | 3,436,955                                |   | $ | 3,448,643 |   |
| RAFC     |       | $                                                                            | 3,243,369  |                                                                          | $          | 4,786,157                                |   | $ | 5,274,436 |   |

----

**UNITED        MORTGAGE TRUST**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)**

**(unaudited)**

----

**UNITED        MORTGAGE TRUST**

**NOTES        TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)**

**(unaudited)**

**5.        Merger Agreement**

----

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

**RESULTS        OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS**

**ENDED        SEPTEMBER 30, 2006 AND 2005**

**General        Investment Information**

----

**Loans        Purchased**

|                                                                                                                   |   | **Three                  Months Ended****September                  30,** |       | **Nine                  Months Ended****September                  30,** |   |
|------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|--------|
|                                                                                                                   |   | **2006**                                                                  |       | **2005**                                                                 |   | **2006** |   | **2005** |   |
| **Interim                  Mortgages**                                                                                 |   |                                                                      |       |                                                                     |   |   |   |   |   |   |   |   |   |
| Funded                  with affiliates                                                                                |   | $                                                                         | 19,645,000 |                                                                     | $      | 12,391,000 |   | $ | 53,395,000 |   | $ | 31,300,000 |   |
| Funded                  with others                                                                                    |   | $                                                                         | 6,533,000  |                                                                     | $      | 4,449,000 |   | $ | 17,057,000 |   | $ | 24,126,000 |   |
| Total                  funded                                                                                          |   | $                                                                         | 26,178,000 |                                                                     | $      | 16,840,000 |   | $ | 70,452,000 |   | $ | 55,426,000 |   |
|                                                                                                                   |   |                                                                      |       |                                                                     |   |   |   |   |   |   |   |   |   |
| Number                  of loans funded with affiliates                                                                |   |                                                                      | 320        |                                                                     |   | 207 |   |   | 776 |   |   | 446 |   |
| Number                  of loans funded with others                                                                    |   |                                                                      | 74         |                                                                     |   | 39 |   |   | 118 |   |   | 204 |   |
| Total                  number of loans funded                                                                          |   |                                                                      | 394        |                                                                     |   | 246 |   |   | 894 |   |   | 650 |   |
|                                                                                                                   |   |                                                                      |       |                                                                     |   |   |   |   |   |   |   |   |   |
| Principal                  paid off with affiliates                                                                    |   | $                                                                         | 13,254,000 |                                                                     | $      | 10,680,000 |   | $ | 41,630,000 |   | $ | 32,223,000 |   |
| Principal                  paid off with others                                                                        |   | $                                                                         | 11,523,000 |                                                                     | $      | 14,551,000 |   | $ | 19,405,000 |   | $ | 30,430,000 |   |
| Total                  principal paid off                                                                              |   | $                                                                         | 24,777,000 |                                                                     | $      | 25,231,000 |   | $ | 61,035,000 |   | $ | 62,653,000 |   |
|                                                                                                                   |   |                                                                      |       |                                                                     |   |   |   |   |   |   |   |   |   |
| Number                  of loans with affiliates paid off                                                              |   |                                                                      | 196        |                                                                     |   | 98 |   |   | 661 |   |   | 347 |   |
| Number                  of loans with others paid off                                                                  |   |                                                                      | 81         |                                                                     |   | 149 |   |   | 159 |   |   | 279 |   |
| Total                  number of loans paid off                                                                        |   |                                                                      | 277        |                                                                     |   | 247 |   |   | 820 |   |   | 626 |   |
|                                                                                                                   |   |                                                                      |       |                                                                     |   |   |   |   |   |   |   |   |   |
| **Line                  of Credit, Affiliate**                                                                         |   |                                                                      |       |                                                                     |   |   |   |   |   |   |   |   |   |
| Draws                  funded                                                                                          |   | $                                                                         | 6,153,000  |                                                                     | $      | 4,640,000 |   | $ | 15,562,000 |   | $ | 15,295,000 |   |
| Pay                  downs                                                                                             |   | $                                                                         | 3,900,000  |                                                                     | $      | 5,533,000 |   | $ | 12,073,000 |   | $ | 14,933,000 |   |
| Total                  change in balance                                                                               |   | $                                                                         | 2,253,000  |                                                                     | $      | (893,000 | ) | $ | 3,489,000 |   | $ | 362,000 |   |
|                                                                                                                   |   |                                                                      |       |                                                                     |   |   |   |   |   |   |   |   |   |
| **Investment                  in Trust Receivable (Residential Mortgages and Contracts****for                  Deed)** |   |                                                                      |       |                                                                     |   |   |   |   |   |   |   |   |   |
| Purchase                  price                                                                                        |   | $                                                                         | 176,000    |                                                                     | $      | -- |   | $ | 693,000 |   | $ | 239,000 |   |
| Number                  purchased from other sources                                                                   |   |                                                                      | 3          |                                                                     |   | -- |   |   | 16 |   |   | 13 |   |
| Aggregate                  principal balance                                                                           |   | $                                                                         | 176,000    |                                                                     | $      | -- |   | $ | 693,000 |   | $ | 239,000 |   |
| Average                  principal balance                                                                             |   | $                                                                         | 58,667     |                                                                     | $      | -- |   | $ | 43,313 |   | $ | 18,385 |   |

----

|                                                              |   | **2006** |                        | **2005** |   |
|-------------------------------------------------------------------|--------|----------|-----------------------------|----------|--------|
| **Interim                  Mortgages**                            |   |     |                        |     |   |   |   |
| Unpaid                  principal balance, affiliates             |   | $        | 60,177,157                  |     | $      | 44,678,231 |   |
| Unpaid                  principal balance, others                 |   | $        | 22,196,251                  |     | $      | 21,924,513 |   |
|                                                              |   |     |                        |     |   |   |   |
| Loans                  foreclosed, others                         |   | $        | 1,259,238                   |     | $      | 2,426,532 |   |
|                                                              |   |     |                        |     |   |   |   |
| Number                  of loans outstanding, affiliates          |   |     | 819                         |     |   | 685 |   |
| Number                  of loans outstanding, others              |   |     | 268                         |     |   | 338 |   |
|                                                              |   |     |                        |     |   |   |   |
| Average                  unpaid principal balance                 |   | $        | 75,781                      |     | $      | 65,105 |   |
| Remaining                  term in months: less than              |   |     | 12                          |     |   | 12 |   |
| Yield                  on investments                             |   |     | 13.60                       | %        |   | 13.51 | % |
|                                                              |   |     |                        |     |   |   |   |
| **Line                  of Credit, Affiliate**                    |   |     |                        |     |   |   |   |
| Term                  remaining in months                         |   |     | 39                          |     |   | 51 |   |
| Yield                  on investments                             |   |     | 13.86                       | %        |   | 14.87 | % |
|                                                              |   |     |                        |     |   |   |   |
| **Recourse                  Obligations, Affiliates**             |   | $        | 11,534,095                  |     | $      | -- |   |
|                                                              |   |     |                        |     |   |   |   |
| **Investment                  in Trust Receivable**               |   |     |                        |     |   |   |   |
| Loans                  owned outright                             |   |     |                        |     |   |   |   |
| Rental                  properties                                |   |     | 2                           |     |   | 2 |   |
| Unpaid                  principal balance on loans owned outright |   | $        | 1,763,171                   |     | $      | 3,751,855 |   |
| Securitized                  loans “B” piece balance  |   | $        | 3,759,966                   |     | $      | 4,443,440 |   |
| Foreclosed                  properties                            |   | $        | 154,668                     |     | $      | 1,648,737 |   |
| Term                  remaining: less than                        |   |     | 360                  months |     |   | 360                  months |   |
| Yield                  on investments                             |   |     | 13.98                       | %        |   | 7.44 | % |
|                                                              |   |     |                        |     |   |   |   |

|                                                                        |   | **September                  30,** |   |
|-----------------------------------------------------------------------------|--------|------------------------------------|--------|
|                                                                        |   | **2006**                           |   | **2005** |   |
| Interim                  mortgages with affiliates                          |   |                               | 45     | % |   | 43 | % |
| Interim                  mortgages with others                              |   |                               | 17     | % |   | 21 | % |
| Line                  of Credit, Affiliate                                  |   |                               | 25     | % |   | 28 | % |
| Recourse                  obligations, affiliates                           |   |                               | 9      | % |   | -- | % |
| Trust                  receivable - loans owned outright                    |   |                               | 1      | % |   | 4 | % |
| Trust                  receivable - securitized loans “B” piece |   |                               | 3      | % |   | 4 | % |

----

----

* *

**CAPITAL        RESOURCES AND LIQUIDITY FOR**

**THE        THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2006 AND        2005**

|                                                                                  |   | **Three                  Months Ended****September                  30,** |       | **Nine                  Months Ended****September                  30,** |   |
|---------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|------------|--------------------------------------------------------------------------|--------|
|                                                                                  |   | **2006**                                                                  |       | **2005**                                                                 |   | **2006** |   | **2005** |   |
|                                                                                  |   |                                                                      |       |                                                                     |   |   |   |   |   |   |   |   |   |
| Shares                  issued in dividend reinvestment                               |   |                                                                      | 30,717     |                                                                     |   | 40,727 |   |   | 100,137 |   |   | 132,352 |   |
| Gross                  proceeds                                                       |   | $                                                                         | 628,000    |                                                                     | $      | 815,000 |   | $ | 2,016,000 |   | $ | 2,647,000 |   |
| Share                  repurchases                                                    |   | $                                                                         | (1,002,000 | )                                                                        | $      | (1,112,000 | ) | $ | (4,078,000 | ) | $ | (3,080,000 | ) |
| Principal                  receipts from Residential Mortgages and Contracts for Deed |   | $                                                                         | 433,000    |                                                                     | $      | 83,000 |   | $ | 1,491,000 |   | $ | 863,000 |   |
| Principal                  receipts from Interim Mortgages                            |   | $                                                                         | 23,593,000 |                                                                     | $      | 25,254,000 |   | $ | 56,827,000 |   | $ | 62,653,000 |   |
| Securitization                  proceeds                                              |   |                                                                      | --         |                                                                     |   | -- |   |   | -- |   | $ | 7,261,000 |   |
| Fundings                  on Line of Credit, Affiliate                                |   | $                                                                         | 3,900,000  |                                                                     | $      | 5,533,000 |   | $ | 12,073,000 |   | $ | 9,400,000 |   |
| Net                  advances (payments) on Line of Credit payable                    |   | $                                                                         | 4,499,000  |                                                                     | $      | (3,460,000 | ) | $ | 11,140,000 |   | $ | (6,824,000 | ) |
|                                                                                  |   |                                                                      |       |                                                                     |   |   |   |   |   |   |   |   |   |

----

**Critical        Accounting Policies and Estimates **

**ITEM        3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET        RISK**

----

**ITEM        4. CONTROLS AND PROCEDURES**

**Evaluation        of Disclosure Controls and Procedures**

**Changes        in Internal Controls Over Financial Reporting **

**PART        II - OTHER INFORMATION**

**ITEM        1. LEGAL PROCEEDINGS**

**ITEM        1A. RISK FACTORS**

**ITEM        2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF        PROCEEDS**

| Shares                  issued  |   |   | 100,137   |   |
|---------------------------------|--------|--------|-----------|--------|
| Gross                  proceeds |   | $      | 2,015,767 |   |

----

|      |   | **Total                  number of shares                  purchased** | ** ** | **Average                  price per share** | ** ** | **Total                  number of shares purchased as part of publicly announced                  plan** | ** ** | **Total                  number of shares purchased outside of publicly announced                  plan** |   |
|-----------|--------|------------------------------------------------------------------------|------------|----------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------|--------|
|      |   |                                                                   |       |                                         |       |                                                                                                      |       |                                                                                                      |   |   |   |   |   |
| July      |   |                                                                   | 25,634     |                                         | $          | 17.61                                                                                                     |       |                                                                                                      | 8,886  |   |   | 16,748 |   |
| August    |   |                                                                   | 22,384     |                                         | $          | 18.42                                                                                                     |       |                                                                                                      | 12,695 |   |   | 9,689 |   |
| September |   |                                                                   | 8,428      |                                         | $          | 16.34                                                                                                     |       |                                                                                                      | --     |   |   | 8,428 |   |
|      |   |                                                                   |       |                                         |       |                                                                                                      |       |                                                                                                      |   |   |   |   |   |
| Total     |   |                                                                   | 56,446     |                                         | $          | 17.74                                                                                                     |       |                                                                                                      | 21,581 |   |   | 34,865 |   |

**ITEM        3. DEFAULTS UPON SENIOR SECURITIES**

**ITEM        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

**ITEM        5. OTHER INFORMATION**

**ITEM        6. EXHIBITS**

**SIGNATURE**

|                                        |                                                                                 |                                         |
|---------------------------------------------|--------------------------------------------------------------------------------------|----------------------------------------------|
|                                        | **UNITED                MORTGAGE TRUST**                                             |
|                                   |                                                                            |                                    |
| Date: November                14, 2006 | By:                                                                        | /s/ Christine                A. Griffin |
|                                        | Christine A. Griffin                                                                 |
|                                        | *President                and                Chief Executive                Officer* |