<PAGE>
 
                                                                EXHIBIT 10.13(C)

                    [LETTERHEAD OF FANNIE MAE APPEARS HERE]

October 23, 1996

Home, Inc.
6836 Austin Center Blvd., Suite 280
Austin, TX 78731
Attention: Mr. John Ballard

Dear Mr. Ballard:

Subject:       Master Agreement Number: MD01546
                      Amendment: THIRD
                      Lender Number: 23772-000-8

Dear Mr. Ballard:

By execution of this Letter Agreement, the Federal National Mortgage Association
("Fannie Mae") and Home, Inc. (the "Lender") agree to amend the above-referenced
Master Agreement and Contract (if applicable). The amended terms and conditions
are set forth in the amended pages to the Master Agreement and (if applicable)
the Contract attached to this Letter Agreement. The attachments should be
inserted into the Lender's Master Agreement binder as described below.
Capitalized terms used but not defined in this Letter Agreement, shall have the
meanings set forth in the Master Agreement.

For your convenience, we have summarized the amended terms and conditions below.
However, the summary set forth below is for reference purposes only. The Lender
and Fannie Mae shall rely solely on the attached amended pages for a complete
description of the amended terms and conditions.

The amended terms and conditions:

1.  Amended term: Increase volume to $75,000,000.00 (Mandatory).

    Instructions:  (1) Replace page MA-4 (EXHIBIT 1) in your Master
                    Agreement binder with the enclosed page MA-4 (EXHIBIT 1).
                   (2) All replaced pages and this letter should be inserted in
                   the "Amendment History" section of your binder.

<PAGE>
 
2.  AMENDED TERM: add Pool Purchase Contract No. D02970 for delivery of FHA
    Title I mortgages.

    INSTRUCTIONS: (1) Insert the attached pages FRM-1 through FRM-4 along with
                  the attached "Fixed-Rate" tab in your Master Agreement binder.
                  (2) Insert this letter under the "Amendment History" tab.

By execution of this Letter Agreement, Fannie Mae and the Lender agree to and
accept the amended terms and conditions as set forth in the attachments to this
Letter Agreement. The effective date of the amendments is the date of execution
of this Letter Agreement by the Lender. The Lender shall return a duly-executed
duplicate original of this Letter Agreement to Fannie Mae within ten business
days of the date this Letter Agreement is executed by Fannie Mae. If Fannie Mae
does not receive an executed duplicate original of this Letter Agreement from
the Lender within ten business days, Fannie Mae may, at its option, declare this
Letter Agreement null and void.

Sincerely,

FEDERAL NATIONAL MORTGAGE ASSOCIATION



By:_________________________________________________
           (Authorized Signature)

Name:      Jerome Brister, Regional Vice President
     -----------------------------------------------
           (Name and Title)

Agreed, acknowledged and accepted this 25th day of October, 1996.

HOME, INC.



By:_________________________________________________
           (Authorized Signature)

Name:  John W. Ballard, President/CEO
       ---------------------------------------------
           (Name and Title)

                                                                        10/23/96

                          Master No. MD01546 - Amd.3



                                     Page 2

                                                   
<PAGE>
 
                                   EXHIBIT 1
 
Master Agreement Number:      MD01546

Effective Date:               MAY 1, 1996

Expiration Date:              APRIL 30, 1997

Parties to Agreement:         HOME, INC. AND THE FEDERAL NATIONAL MORTGAGE
                              ASSOCIATION

Lender Number:                23772-4}00-8

Agreed Amount:                $75,000,000.00, PLUS OR MINUS 5.00% (MANDATORY)
                              $-0- (OPTIONAL)

Back-end Buyout Fee:          The greater of $1,000.00 OR 12.50 BASIS POINTS
                              (.1250%) multiplied by the undelivered and
                              uncommitted portion of the Mandatory Agreed
                              Amount.

                                                                        10/23/96



                          Master No. MD01546 - Amd.3
                                     MA-4