THIRD AMENDMENT
                                       TO
              UDC MASTER REVOLVING LINE OF CREDIT (BORROWING BASE)
                                 LOAN AGREEMENT


         This THIRD AMENDMENT TO UDC MASTER REVOLVING LINE OF CREDIT  (BORROWING
BASE) LOAN AGREEMENT (the "Third Amendment"), dated as  of December 23, 1996, is
made and entered  into by and between UDC HOMES,  INC.,  a Delaware  corporation
("Borrower");  BANK ONE, ARIZONA,  NA, a national banking association  ("BOAZ");
BANKERS TRUST COMPANY, a New York banking corporation  ("Bankers Trust");  WELLS
FARGO BANK, NATIONAL ASSOCIATION,  a national banking association,  successor by
merger to First Interstate Bank of California,  a banking corporation  organized
and existing  under the laws of California  ("WFB");  THE FIRST NATIONAL BANK OF
BOSTON,  a national  banking  association  ("BkB");  WELLS FARGO REALTY ADVISORS
FUNDING,  INCORPORATED,  a Colorado  corporation  ("Wells Fargo");  and GUARANTY
FEDERAL BANK, F.S.B., a federal savings bank ("Guaranty Federal").

                                    RECITALS:

         A. Borrower,  BOAZ,  Bankers Trust, WFB, BkB, Wells Fargo, and Guaranty
Federal are parties to the UDC Master Revolving Line of Credit  (Borrowing Base)
Loan   Agreement,   dated  November  8,  1995  (the  "Original   Revolving  Loan
Agreement").  BkB  became  a party  to the  Original  Revolving  Loan  Agreement
pursuant to an Assignment and Acceptance,  dated November 30, 1995,  between BkB
and Bankers  Trust.  Wells Fargo became a party to the Original  Revolving  Loan
Agreement  pursuant to an Assignment  and  Acceptance,  dated  December 5, 1995,
between  Bankers Trust and Wells Fargo.  Guaranty  Federal became a party to the
Original  Revolving  Loan Agreement  pursuant to an Assignment  and  Acceptance,
dated December 14, 1995, between Bankers Trust and Guaranty Federal and pursuant
to an  Assignment  and  Acceptance,  dated  December 14, 1995,  between BOAZ and
Guaranty Federal. As of December 14, 1995, Borrower,  the Administrative  Agent,
the  Co-Agents,  and the Banks  entered  into a First  Amendment  to UDC  Master
Revolving   Line  of  Credit   (Borrowing   Base)  Loan  Agreement  (the  "First
Amendment").  As of  May  1,  1996,  Borrower,  the  Administrative  Agent,  the
Co-Agents, and the Banks entered into a Second Amendment to UDC Master Revolving
Line of Credit  (Borrowing  Base) Loan Agreement (the "Second  Amendment").  The
Original  Revolving Loan  Agreement,  as amended by the First  Amendment and the
Second Amendment,  is referred to in this Third Amendment as the "Revolving Loan
Agreement".  Capitalized  terms used in this Third  Amendment and not defined in
this Third  Amendment  have the meanings  ascribed to them in the Revolving Loan
Agreement.

         B. Borrower has requested  modifications  to certain  provisions of the
Revolving Loan Agreement and waivers of certain  covenants in the Revolving Loan
Agreement. The Administrative Agent, the Co-Agents, and the Banks are willing to
agree to the modifications and waivers provided in this Third Amendment,  on the
terms and conditions set forth in this Third Amendment.

                                   AGREEMENT:

         NOW  THEREFORE,  For good and valuable  consideration,  the receipt and
sufficiency  of which are  hereby  acknowledged,  Borrower,  the  Administrative
Agent, the Co-Agents, and the Banks agree as follows:
<PAGE>
         1.       Waivers.

                  (a) The  Administrative  Agent,  the Co-Agents,  and the Banks
         waive compliance by Borrower with the following  Financial Covenants as
         of September 30, 1996:

                           (i) The  Maximum  Total  Debt to  Tangible  Net Worth
                  Covenant of Section 6.22.3 of the Revolving Loan Agreement;

                           (ii) The  Minimum  Tangible  Net  Worth  Covenant  of
                  Section 6.22.4 of the Revolving Loan Agreement;

                           (iii) The Debt Service  Coverage  Covenant of Section
                  6.22.5 of the  Revolving  Loan  Agreement as of September  30,
                  1996; and

                           (iv) The Interest Coverage Covenant of Section 6.22.6
                  of the Revolving Loan Agreement as of September 30, 1996.

                  (b) The  foregoing  waivers shall relate only to the Financial
         Covenants  referred  to above and only as of the date  stated.  Nothing
         contained  herein shall waive  compliance with any other  provisions of
         the Loan Documents or with respect to any other date or period. Nothing
         contained herein shall obligate  Administrative Agent, Co-Agents or the
         Banks to grant any additional waivers to Borrower.

         2.       Amendment.

         (a)      Section 3.7.5(h) of the Revolving Loan Agreement is amended in
its entirety to read as follows:

                  "Unit Completion  Percentage"  means, for any Unit, the lesser
         of (i) the current percentage of construction completed as reflected in
         each Borrowing  Base Report,  based upon the ratio of (A) costs already
         incurred  and paid for by  Borrower  for  material  and labor  actually
         incorporated into such Unit pursuant to the Unit Budget (other than the
         Unit Lot  Cost),  to (B) the  Unit  Budget;  and  (ii)  the  applicable
         percentages set forth in the  Construction  Draw Schedules set forth on
         Exhibit  3.7.5(h),  based on the stage of completion of the  particular
         Unit; provided,  however,  that prior to March 1, 1997, Unit Completion
         Percentages  will be determined  without regard to this clause (ii) but
         shall instead be in increments of 5%.

         (b)      Section 3.7.5(e)(v) of the Revolving Loan Agreement is amended
in its entirety to read as follows:

                  (v) With respect to each A&D Land  Project,  the lesser of (A)
         60% of the A&D Project  Appraised Value (A&D Project  Appraised  Values
         being determined as set forth in Section 3.10) for that A&D Project, or
         (B) 60% of the  A&D  Project  Cost  for  that  A&D  Project;  provided,
         however,  that if the A&D Project for which the Maximum Allowed Advance
         is being  determined  for  purposes  of this  clause  (v),  and for the
         purposes of clause (vi) and clause (vii)  below,  consists of more than
         125 lots,  then the  percentages in this clause (v) and the percentages
         in clause (vi) and clause (vii) will each be reduced by  subtracting 5%
         from the  stated  percentages;  provided  further,  that if an A&D Land
         Project  consists of Existing A&D Entitled  Land  Collateral  or of the
         MountainBrook  Village  Collateral  added pursuant to Section 3.4.4 and
         is, on the following adjustment dates, still entitled to be included as
         Eligible Collateral, then on the first day of the 13th
                                        2
<PAGE>
         Calendar  Month  following the A&D  Eligibility  Date for such A&D Land
         Project and on the first day of each 6th Calendar Month thereafter, the
         percentages  set forth in this clause (v) (as adjusted  pursuant to the
         first  proviso in this clause (v),  if  applicable)  will be reduced on
         each such day by  subtracting  5% from the  percentage  that  otherwise
         would  apply;  provided  further  that  with  respect  to any A&D  Land
         Project,  A&D  Development  Project and A&D Finished Lot Project  first
         included as Eligible Collateral after November 1, 1996, the percentages
         that would  otherwise  be  applicable  pursuant  to this  clause (v) or
         pursuant  to clause (vi) or clause  (vii)  shall be further  reduced on
         March 1, 1997 by five  percent  (5%)  from the  percentage  that  would
         otherwise apply (after giving effect to the adjustments pursuant to the
         first and second provisos of this sentence).

         3.  Extension of  Eligibility  for Certain  Existing A&D Entitled Land.
Notwithstanding the provisions of Section 3.4.1 of the Revolving Loan Agreement,
the A&D Land Projects  consisting of the Existing A&D Entitled Land described on
Exhibit 3.2.5(k) of the Revolving Loan Agreement as the Villages-Hidalgo project
and the  Villages-Del  Lago project shall be entitled to be included as Eligible
Collateral  (as A&D Land  Projects)  from November 1, 1996 through  February 28,
1997.

         4. Inducements to the Banks. As additional consideration and inducement
to the Administrative  Agent, the Co-Agents,  and the Banks to grant the waivers
and  modifications  set forth in this Third  Amendment and to agree to the other
terms of this Third Amendment, with knowledge that the Administrative Agent, the
Co-Agents,  and the Banks would not enter into this Third  Amendment but for the
provisions of this Paragraph 4:

                  (a)     Borrower represents and warrants to the Administrative
         Agent, the Co-Agents, and the Banks that:

                           (i)  All   Obligations   under  the  Revolving   Loan
                  Agreement  (as amended by this Third  Amendment)  and the Loan
                  Documents   are  and   continue  to  be  valid,   binding  and
                  enforceable obligations of Borrower, enforceable in accordance
                  with their  terms,  and are and  continue to be secured by the
                  Collateral;

                           (ii) All of the  representations  and  warranties set
                  forth in the  Revolving  Loan  Agreement  (as  amended by this
                  Third  Amendment) and the other Loan Documents  continue to be
                  true and correct as of the date hereof;

                           (iii) With respect to the  Revolving  Loan  Agreement
                  (as amended  hereby),  all property and interests  (including,
                  without  limitation,  property and interests  that  constitute
                  Eligible  Collateral  and property and interests  that are not
                  included  in the  Eligible  Collateral)  encumbered  under any
                  Deeds of Trust  constitute,  and shall  continue to be,  first
                  priority  liens  and  collateral   security  for  all  of  the
                  Obligations,  and the value of such  Collateral  is and has at
                  all times been, in the  aggregate,  greater than the amount of
                  the Obligations;

                           (iv)  Borrower  has  no  defense,  setoff,  claim  or
                  counterclaim against the Administrative  Agent, the Co-Agents,
                  or the Banks in regard to its obligations  under the Revolving
                  Loan Agreement, as amended by this Third Amendment,  any other
                  Loan Document, any document,  instrument,  transaction, act or
                  omission  arising  out of or related to the  Obligations,  the
                  Revolving Loan Agreement (as amended by this Third Amendment),
                  or any other obligation to the Banks, the Administrative Agent
                  or the Co-Agents, or any of them.
                                        3
<PAGE>
                  (b) Borrower and all guarantors  fully,  finally,  and forever
         release and discharge the Administrative Agent, the Co-Agents,  and the
         Banks, and their respective successors,  assigns, directors,  officers,
         employees, agents, and representatives from any and all actions, causes
         of action, claims, debts, demands, liabilities, obligations, and suits,
         of whatever kind or nature,  in law or equity of Borrower or any of the
         guarantors  whether  now known or  unknown:  (i) in respect of the loan
         made pursuant to the Revolving  Credit Agreement (as amended hereby) or
         the acts or  omissions  of the  Administrative  Agent,  the  Co-Agents,
         and/or the Banks,  or any of them, in respect  thereto and (ii) arising
         from events occurring prior to the execution and delivery of this Third
         Amendment by Borrower.

                  (c) In  connection  with the  releases  and waivers  contained
         herein,  Borrower and each guarantor hereby expressly waive any and all
         rights and benefits conferred upon it by the provisions of Section 1542
         of the  California  Civil  Code (or  similar  provisions  of any  other
         applicable law) which provides:

                           "A general  release  does not extend to claims  which
                  the creditor does not know or suspect to exist in his favor at
                  the time of executing the release,  which if known by him must
                  have materially affected his settlement with the debtor."

         Borrower and each  guarantor  have been advised by their legal counsel,
         or Borrower and each  guarantor have made a reasoned and fully informed
         decision  not to be so  represented  by  counsel,  and  understand  and
         acknowledge the  significance  and  consequences of this release and of
         this specific  waiver of Section 1542,  and Borrower and each guarantor
         expressly  consent  that the releases  contained  herein shall be given
         full force and effect  according  to each and all of its express  terms
         and  provisions  including  those  relating to unknown and  unsuspected
         claims, demands and causes of action, if any, as well as those relating
         to  any  other  claims,   demands  and  causes  of  action  hereinabove
         specified.  The foregoing shall not be deemed to be an agreement by the
         Administrative Agent, the Co-Agents or the Banks that California law is
         the governing law under the Loan Documents.

         5.  Ratification.  As modified by this Third  Amendment,  the Revolving
Loan Agreement is ratified and confirmed and continues in full force and effect.

         6. Counterpart  Execution.  This Third Amendment may be executed in one
or more counterparts,  each of which will be deemed an original and all of which
together  will  constitute  one and the same  document.  Signature  pages may be
detached  from the  counterparts  and  attached  to a single  copy of this Third
Amendment to physically  form one document.  Telecopied  signature pages will be
acceptable,  provided  originally signed signature pages are provided to each of
the other parties by overnight courier.

         7.  Integration.  This Third Amendment shall constitute one of the Loan
Documents, and the Loan Documents,  together with this Third Amendment,  contain
the complete  understanding and agreement of Borrower, the Administrative Agent,
the Co-Agents and the Banks with respect to the transactions contemplated by the
Revolving Loan Agreement  (except as between the  Administrative  Agent, the Co-
Agents   and  the   Banks   with   respect   to   matters   set   forth  in  the
Agency/Participation   Agreement)  and  supersede  all  prior   representations,
warranties,   agreements,   arrangements,   understandings,   and  negotiations,
including the Loan Commitment.
                                        4
<PAGE>
         IN  WITNESS  WHEREOF,  the  parties  hereto  have  executed  this Third
Amendment.

BORROWER:                           UDC HOMES, INC.,
                                    a Delaware corporation


                                    By:  /s/ Kenda B. Gonzales
                                      --------------------------------
                                    Name:  Kenda B. Gonzales
                                        ------------------------------
                                    Title: Sr. Exec. VP
                                         -----------------------------
 

BOAZ:                               BANK ONE,  ARIZONA,  NA, a national  banking
                                    association,  individually  as a Bank and in
                                    its capacity as the Administrative Agent and
                                    as one of the Co-Agents


                                    By: /s/ Rhonda R. Williams
                                      --------------------------------
                                    Name: Rhonda R. Williams
                                        ------------------------------
                                    Title: Vice President
                                         -----------------------------


BANKERS TRUST:                      BANKERS  TRUST  COMPANY,  a New York banking
                                    corporation,  individually  as a Bank and in
                                    its capacity as one of the Co-Agents


                                    By: /s/ A.B.U. Johnson
                                      -------------------------------
                                    Name: A.B.U. Johnson
                                        -----------------------------
                                    Title: M.D.
                                         ----------------------------

WFB:                                WELLS FARGO BANK,  NATIONAL  ASSOCIATION,  a
                                    national banking  association,  successor by
                                    merger   to   First   Interstate   Bank   of
                                    California,  a banking corporation organized
                                    and existing under the laws of California


                                    By: /s/ John W. McKinny
                                      ------------------------------
                                    Name: John W. McKinny
                                        ----------------------------
                                    Title: Vice President
                                         ---------------------------

                                        5
<PAGE>
BkB:                                THE FIRST NATIONAL BANK OF BOSTON, 
                                    a national banking association


                                    By: /s/ Nicholas Whiting
                                      ------------------------------
                                    Name: Nicholas Whiting
                                        ----------------------------
                                    Title: Vice President
                                         ---------------------------

WELLS FARGO:                        WELLS FARGO REALTY ADVISORS FUNDING,
                                    INCORPORATED, a Colorado corporation

                                    By       WELLS FARGO REAL ESTATE GROUP,
                                             a California corporation, as agent


                                             By: /s/ John W. McKinny
                                               ------------------------
                                             Name: John W. McKinny
                                                 ---------------------- 
                                             Title: Vice President
                                                  ---------------------

GUARANTY FEDERAL:                  GUARANTY FEDERAL BANK, F.S.B.,
                                   a federal savings bank


                                   By: /s/ Richard V. Thompson
                                     -----------------------------
                                   Name: Richard V. Thompson
                                       ---------------------------
                                   Title: Vice President
                                        --------------------------
                                        6
<PAGE>
                                     CONSENT
                                     -------


         The  undersigned  consent and agree to the foregoing.  The  undersigned
represent and warrant to Administrative  Agent,  Co-Agents and Banks that all of
the  representations  and  warranties of the  undersigned  set forth in the Loan
Documents continue to be true and correct as of the date hereof. The undersigned
ratify and confirm all of their  agreements and  obligations  pursuant to and in
connection with the Loan Documents.  The undersigned  hereby join in the release
and other provisions  contained in the foregoing Third Amendment and agree to be
bound by all of the provisions  thereof,  and the undersigned  otherwise  fully,
finally and forever release and discharge  Administrative  Agent,  Co-Agents and
Banks and their respective successors,  assigns, directors, officers, employees,
agents and representatives from any and all actions, causes of actions,  claims,
debts, demands,  liabilities,  obligations and suits, of whatever nature, in law
or equity of the  undersigned,  whether now known or unknown to the undersigned,
(i) in respect of the loans made pursuant to the Revolving  Credit Agreement (as
amended  by  the  foregoing  Third  amendment)  or  the  acts  or  omissions  of
Administrative  Agent,  the Co-Agents,  and/or Banks, or any of them, in respect
thereto  and (ii)  arising  from events  occurring  prior to the  execution  and
delivery of this Consent.

                                   UDC HOMES CONSTRUCTION, INC.,
                                   an Arizona corporation


                                   By: /s/ Kenda B. Gonzales
                                     ---------------------------------
                                   Its: Sr. Exec. V.P.
                                      --------------------------------

                                   UDC ADVISORY SERVICES, INC.,
                                   an Illinois corporation


                                   By: /s/ Kenda B. Gonzales
                                     ---------------------------------
                                   Its: Sr. Exec. V.P.
                                      --------------------------------


                                   UDC MORTGAGE ACCEPTANCE
                                     CORPORATION, an Arizona corporation


                                   By: /s/ Kenda B. Gonzales
                                     ---------------------------------
                                   Its: Sr. Exec. V.P.
                                      --------------------------------

                                   UDC MORTGAGE FINANCE GENERAL
                                     PARTNERSHIP, an Arizona general partnership

                                   By:  UDC Homes, Inc., a Delaware corporation,
                                        General Partner


                                        By: /s/ Kenda B. Gonzales
                                          ---------------------------------
                                        Its: Sr. Exec. V.P.
                                           --------------------------------
                                        7
<PAGE>
                                   ABERDEEN SERVICES, INC.,
                                   a Florida Corporation


                                   By: /s/ Kenda B. Gonzales
                                     ---------------------------------
                                   Its: Sr. Exec. V.P.
                                      --------------------------------


                                   UDC HOMES OF GEORGIA, INC.,
                                   a Georgia corporation


                                   By: /s/ Kenda B. Gonzales
                                     ---------------------------------
                                   Its: Sr. Exec. V.P.
                                      --------------------------------


                                   REA ACQUISITION CORPORATION,
                                   an Arizona corporation


                                   By: /s/ Kenda B. Gonzales
                                     ---------------------------------
                                   Its: Sr. Exec. V.P.
                                      --------------------------------


                                   MOUNTAINBROOK VILLAGE COMPANY,
                                   an Arizona corporation


                                   By: /s/ Kenda B. Gonzales
                                     ---------------------------------
                                   Its: Sr. Exec. V.P.
                                      --------------------------------


                                   MBV GOLF COURSE, INC.,
                                   an Illinois corporation


                                   By: /s/ Kenda B. Gonzales
                                     ---------------------------------
                                   Its: Sr. Exec. V.P.
                                      --------------------------------
                                        8