**Exhibit 10.57**

**THIRD AMENDMENT TO BORROWING BASE**

**REVOLVING LINE OF CREDIT AGREEMENT**

This Third Amendment to Borrowing Base Revolving Line of Credit Agreement (“Amendment”) is entered into to as of January 23,2008 between WILLIAM LYON HOMES, INC., a California corporation (“Borrower”) and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (“Lender”), formerly referenced as Agent for Wachovia FinancialServices, Inc., a North Carolina corporation, which Amendment is consented to by Guarantor WILLIAM LYON HOMES, a Delaware corporation (“Guarantor”). 

RECITALS: 

****A. Borrower has received a revolving line of credit from Lender in the maximumcommitment amount of $50,000,000.00 (the “Loan”) for the acquisition and development of Approved Subdivisions pursuant to the terms of that certain Borrowing Base Revolving Line of Credit Agreement dated as of February 14,2006, between Borrower and Lender, and as amended by that certain First Amendment to Borrowing Base Revolving Line of Credit Agreement dated as of September 29, 2006, and as further amended by that certain Second Amendment to Borrowing BaseRevolving Line of Credit Agreement dated as of March 30, 2007, (as the same may be further amended, modified, extended, renewed, restated or supplemented from time to time, the “Loan Agreement”) and as further evidenced by thatcertain Amended and Restated Borrowing Base Secured Promissory Note executed by Borrower and payable to the order of Lender (as amended, restated and otherwise modified from time to time, the “Note”). All capitalized terms usedherein and not otherwise defined shall have the meanings given to such terms in the Loan Agreement. ****

B. The Loan is secured by,among other things, duly recorded Construction Deeds of Trust and Fixture Filing (With Assignment of Rents and Security Agreement), duly filed UCC-1 Financing Statements naming Borrower as Debtor and Lender as Secured Party, and such certain otherassignments (collectively, as amended, restated and otherwise modified from time to time, the “Security Documents”). 

C.Guarantor has executed certain documents in favor of Lender in connection with the Loan, including that certain Payment and Completion Guaranty Agreement (together with any other documents executed by any Guarantor in favor of Lender in connectionwith the Loan, each as may be amended, restated and otherwise modified from time to time, the “Guarantor Documents”). 

D.The Note, the Security Documents, the Guaranty Documents, and all other agreements, documents, and instruments evidencing, securing, or otherwise relating to the Loan, as may be amended, modified, extended or restated from time to time, aresometimes referred to individually and collectively as the “Loan Documents”. Hereinafter, the Loan Documents shall mean such documents as modified in this Amendment. 

E. The parties desire to modify the Loan Agreement and the Loan Documents as set forth below. 

AGREEMENT: 

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 

1. ACCURACY OF RECITALS. 

Borrower and Lender acknowledge the accuracy of the recitals. 

2. MODIFICATION OF THE LOAN AGREEMENT AND LOAN DOCUMENTS. 

2.1 The definition of “Commitment Amount” in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to provide as follows: 

“Commitment Amount” means THIRTY MILLION AND NO/100THS DOLLARS ($30,000,000.00) subject to such decreases thereof pursuant toSection 2.1(e); provided, however, upon the occurrence of a Term Out Date pursuant to Section 2.1(h), the Commitment Amount shall be deemed to be that amount which is equal to the aggregate amount of Outstanding Loan Borrowings as of suchTerm Out Date. 

2.2 Section 1.1 of the Agreement is hereby amended by deleting the definition of “Facility Increase”.

2.3 The definition of “Interest Rate” in Section 1.1 of the Loan Agreement is hereby amended and restated in its entiretyto provide as follows: 

“Interest Rate” means, at the election of Borrower in connection with any Advance Request pursuant toSection 2.2(a) (and otherwise subject to the provisions of Section 2.3 and Section 3 of the Note), either: 

(a) The LIBORRate plus (i) 2.30% if the Leverage Ratio is less than or equal to 3.25 or (ii) 2.50% if the Leverage Ratio is greater than 3.25, which combined figure shall be rounded upwards to the nearest one-eighth percent (.125%), with such interestrate being adjusted from time to time as of each Interest Rate Adjustment Date (“LIBOR Based Rate”) or 

(b) The Prime Rate plus(i) 0.30% if the Leverage Ratio is less than or equal to 3.25 or (ii) 0.50% if the Leverage Ratio is greater than 3.25, which combined figure shall be rounded upwards to the nearest one-eighth percent (.125%), with such interest rate beingadjusted from time to time as and when the Prime Rate is adjusted (“Prime Based Rate”). 

Borrower may not elect to convert orotherwise change the Interest Rate except in connection with an Advance Request. Interest shall accrue on the entire outstanding balance of the Loan at the Interest Rate selected by Borrower until such time as Borrower elects to convert suchInterest Rate to the other available Interest Rate (i.e., LIBOR Based Rate or Prime 

 

-2- 

Based Rate); provided that the applicable Interest Rate shall be the Default Rate at any time an Event of Default has occurred and is continuing. In theevent no such Interest Rate election is made by Borrower, the Interest Rate shall be deemed to be the LIBOR Based Rate. 

2.4 The definitionof “Maturity Date” in Section 1.1 of the Loan Agreement is hereby amended by deleting the reference therein to “February 14, 2008” and inserting in place thereof “May 14, 2008”. 

2.5 Section 2.1(d) is hereby amended and restated in its entirety to provide as follows: [Intentionally Omitted]. 

2.6 Section 2.5 of the Loan Agreement is hereby amended by inserting the following new subsection (d): 

(d) Unused Commitment Fee. In addition, commencing as of January 1, 2008 and continuing thereafter until the Commitment has been terminatedand the Loan paid in full, Borrower agrees to pay Lender a quarterly Unused Commitment Fee for each quarterly period that the Average Quarterly Outstandings is less than fifty percent (50%) of the Commitment Amount then in effect. As usedherein, the term “Unused Commitment Fee” means that amount which is equal to the result of multiplying: (i) the difference between the Commitment Amount in effect during the applicable period and the Average QuarterlyOutstandings for that same period by (ii) 0.15%. As used herein the term “Average Quarterly Outstanding” means, for each quarter (or portion thereof), the aggregate amount of the daily amount of outstanding Advances during theapplicable period divided by the actual number of days in that period. Each Unused Commitment Fee shall be calculated by Lender with each such calculation being deemed conclusive absent manifest error. Each Unused Commitment Fee shall be due andpayable in arrears within ten (10) days after the end of each quarterly period; provided that any such Unused Commitment Fee, whether for the full quarterly period or any portion thereof, shall become immediately due and payable on the earlierof the Maturity Date or the occurrence of an Event of Default; provided, however, Unused Commitment Fees shall continue to accrue and be due and payable during the existence of any such Event of Default. 

2.7 Sections 7.1 and 7.2 of the Loan Agreement are hereby amended and restated in their entirety to provide as follows: 

7.1 Minimum Tangible Net Worth Covenant. WLH will maintain at all times, on a consolidating basis, a minimum Tangible Net Worth equal to orgreater than $175,000,000.00. 

7.2 Leverage Ratio. WLH will maintain at all times, on a consolidating basis, a ratio of(a) Total Liabilities to (b) Tangible Net 

 

-3- 

Worth that is equal to or less than 5.00 to 1. As used herein, the term “Total Liabilities” shall mean the book value of WLH’s assetsless (i) Tangible Net Worth, (ii) “off-balance sheet” liabilities complying with the Financial Accounting Standards For Financial Interpretation No. 46 and (iii) minority interests in WLH consolidated entities, all asdetermined in accordance with GAAP. 

2.8 Effective Date of Modifications. The modifications to the financial covenants set forth inSection 2.7 above shall be deemed to be effective as of December 31, 2007 and applicable to the 2007 fourth quarter and year end reporting and financial covenant requirements of WLH. All other modifications set forth in this Section 2shall be deemed to be effective as of January 23, 2008, the date of this Amendment. 

3. RATIFICATION OF LOAN DOCUMENTS ANDCOLLATERAL. 

The Loan Documents are ratified and affirmed by Borrower and will remain in full force and effect as modified herein, andas those Loan Documents may have been amended, restated or otherwise modified. Any property or rights to or interest in property granted as security in the Loan Documents will remain as security for the Loan and the obligations of Borrower in theLoan Documents. Each reference in any Loan Document to any other Loan Document will be a reference to such Loan Document as modified by this Amendment or as otherwise restated, amended or modified. 

4. REPRESENTATIONS AND WARRANTIES. 

Borrower represents and warrants to Lender: 

4.1 To the best of its knowledge, no Event of Default under the Loan Agreement, asmodified herein, or any other Loan Document, as those Loan Documents may have been amended, restated or otherwise modified, has occurred and is continuing. 

4.2 There has been no Material Adverse Change as of the date hereof. 

4.3 Each and all representations andwarranties of Borrower in the Loan Documents, as such Loan Documents may have been amended, restated or otherwise modified, are accurate on the date hereof in all material respects. 

4.4 Borrower has no claims, counterclaims, defenses, or set-offs with respect to the Loan Documents as modified by this Amendment or otherwise amended,restated or modified. 

4.5 The Loan Documents, as modified by this Amendment or as otherwise amended, restated or modified, are the legal,valid, and binding obligation of Borrower, enforceable against Borrower in accordance with their terms. 

4.6 Borrower is validly existingunder the laws of the state of its formation and has the requisite power and authority to execute and deliver this Amendment and to perform the Loan Documents, as modified herein or as otherwise amended, restated or modified. Each of 

 

-4- 

the certificates and resolutions previously delivered to Lender in connection with the Loan continue to be true and accurate in all material respects, havenot been rescinded, revoked, terminated, limited, restricted or otherwise modified and continue in full force and effect. The execution and delivery of this Amendment and the performance of the Loan Documents, as modified herein or as otherwiseamended, restated or modified, have been duly authorized by all requisite action by or on behalf of Borrower and all other requisite persons. This Amendment has been duly executed and delivered on behalf of Borrower. 

5. COVENANTS. 

Borrower covenantswith Lender that Borrower shall execute, deliver, and provide to Lender such additional agreements, documents, and instruments as reasonably required by Lender to effectuate the intent of this Amendment. 

6. RELEASE. 

Borrower represents andwarrants that Borrower has no claims, counterclaims, defenses, or offsets with respect to the enforcement by Lender against Borrower of the Loan or the Loan Documents. Borrower further fully, finally and forever releases and discharges Lender andits 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 thatit has or in the future may have, whether known or unknown, with respect to the Loan and the Loan Documents or the actions or omissions of Lender in respect thereof to the extent such claims, counterclaims, defenses or offsets arose from eventsoccurring prior to the date of this Agreement. It is the intention of Borrower that the above release shall be effective as a full and final release of each and every matter specifically and generally referred to in this paragraph. Borroweracknowledges and represents that it has been advised by independent legal counsel with respect to the agreements contained herein and with respect to the provisions of California Civil Code Section 1542, which provides as follows: “AGENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THEDEBTOR.” Borrower, being aware of said code section, expressly waives any and all rights it may have thereunder, as well as under any other statute or common law principle of similar effect, with respect to any of the matters released herein.The Agreement shall act as a release of all included claims, rights and causes of action, whether such claims are currently known, unknown, foreseen or unforeseen and regardless of any present lack of knowledge as to such claims. Borrowerunderstands and acknowledges the significance and consequence of this waiver of California Civil Code Section 1542, and hereby assumes full responsibility for any injuries, damages, losses or liabilities released herein. 

7. CONDITIONS PRECEDENT TO THIS AMENDMENT. 

This Amendment shall become effective and binding on Lender only upon satisfaction, as determined by Lender in its sole and absolute discretion, of the following conditions precedent: 

 

-5- 

7.1 No Event of Default. No Event of Default, Unmatured Event of Default or Material AdverseChange shall have occurred and be continuing as of the date of this Amendment. 

7.2 No Mechanics’ Lien and/or Labor Claims againstthe Land. Borrower shall provide evidence to Lender, in a form and manner satisfactory to Lender in its sole and absolute discretion, that, there are no mechanic lien claims, labor claims or other claims for service or goods that could result ina lien or encumbrance against the Land (as that term is defined in the Loan Agreement). 

7.3 Execution and Delivery of Amendment.Borrower shall have delivered to Lender a fully executed original of this Amendment and the attached Consent and Agreement. Lender has executed and delivered a fully executed copy of this Amendment to Borrower. 

7.4 Payment of Extension Fee. Borrower shall pay to Lender an earned in full upon receipt, non-refundable extension fee equal to 0.125% of theCommitment Amount (i.e., $37,500.00). 

7.5 Payment of Lender Costs. Borrower shall have paid, in immediately available funds toLender all of Lender’s fees, costs and charges incurred by Lender in connection herewith, including without limitation reasonable attorneys’ fees and costs. 

7.6 Other Documents and Information. Borrower shall have delivered to Lender such other documents and information as Lender may reasonably require as a condition of the effectiveness of this Amendment.

8. ENTIRE AGREEMENT, CHANGE, DISCHARGE, TERMINATION, OR WAIVER. 

The Loan Documents, as modified herein, and as otherwise amended, restated or modified, contain the entire understanding and agreement of Borrower inrespect of the subject matter thereto and supersedes all prior representations, warranties, agreements, arrangements, and understandings. No provision of such Loan Documents may be further changed, discharged, supplemented, terminated, or waivedexcept in a writing signed by Lender and Borrower. 

9. BINDING EFFECT. 

The Loan Documents as modified herein are binding upon, and inure to the benefit of Borrower and Lender and their respective successors and assigns.

10. CHOICE OF LAW. 

This Amendment and the attached Consent is governed by and construed in accordance with the laws of the State of California, without giving effect to conflicts of law principles. 

11. COUNTERPART EXECUTION. 

 

-6- 

This Amendment and the attached Consent may be executed in one or more counterparts, each of which isdeemed an original and all of which together constitute one and the same document. Signature pages may be detached from the counterparts and attached to a single copy of this Amendment and the attached Consent to physically form one document.

**[Signature Page Follows]**

DATED as of the date first above stated. 

**BORROWER:**

WILLIAM LYON HOMES, INC., 

a California corporation 

By: /s/ Michael D. Grubbs

Name: Michael D. Grubbs

Its: Senior Vice President 

By: /s/ Richard S. Robinson

Name: Richard S. Robinson

Its: Senior Vice President

**[Signature Pages Continue on Following Page]**

**LENDER:**

WACHOVIA BANK, NATIONAL 

ASSOCIATION, a national banking 

association 

By: /s/ KurtHuisman                        

Name: KurtHuisman                        

Its: VicePresident                            

**[End of Signature Pages – Consent and Agreement of Guarantor Follows]**

 

**CONSENT AND AGREEMENT OF GUARANTOR**

Guarantor hereby consents to the foregoing Third Amendment to Borrowing Base Revolving Line of Credit Agreement (“Amendment”) and agreesto the terms and conditions thereof. Guarantor further represents, warrants and covenants to Lender as follows: 

1. To the best ofGuarantor’s knowledge, no Event of Default has occurred and is continuing. 

2. There has been no Material Adverse Change with respectto Borrower or the Land. 

3. Borrower continues to be validly existing under the laws of the state of its formation or organization and(1) Borrower has the requisite power and authority to execute and deliver the Amendment and to perform the Loan Documents as modified by the Amendment, and (2) the Guarantor has the requisite power and authority to execute and deliver thisConsent and Agreement of Guarantor and to perform the Loan Documents to which it is a party, as those Loan Documents may have been amended, restated or otherwise modified. 

4. Guarantor acknowledges: (i) receiving a copy of and reading the Amendment and all other Loan Documents, including any new Loan Documents and anyrestatements, amendments or modifications with respect to any existing Loan Documents, (ii) the accuracy of the Recitals in the Amendment, and (iii) the continued effectiveness of the Loan Documents to which the Guarantor is a party asthose Loan Documents may have been amended, restated or otherwise modified by the Amendment or otherwise, and any other agreements, documents, or instruments securing or otherwise relating to thereto (collectively, the “Guarantor LoanDocuments”). 

5. Guarantor consents to the modification of the Loan Documents as set forth in the Amendment, and as set forth inany restatements, amendments or modifications with respect to any existing Loan Documents or Guarantor Documents, and as to all other matters as set forth in the Amendment and affirms and covenants to Lender that: (a) such Loan Documents andGuarantor Loan Documents (as restated, amended or otherwise modified) continue to be the legal, valid and binding obligation of Borrower and Guarantor (as applicable), enforceable against Borrower and the Guarantor (as applicable) in accordance withtheir terms, subject only to bankruptcy, insolvency, moratorium, reorganization or similar laws affecting creditors’ rights generally and by equitable principles of general application, and (b) any property or rights to or interests inproperty granted as security in the Guarantor Documents shall remain as security. 

6. Guarantor represents and warrants that Guarantor hasno claims, counterclaims, defenses, or off-sets with respect to the enforcement against Guarantor of the Guarantor Loan Documents. Guarantor further fully, finally and forever releases and discharges Lender and its 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 that it has or in the future may have, whetherknown or unknown, with respect to the Loan and the Loan Documents (including without limitation, the Guarantor 

 

-1- 

Loan Documents) or the actions or omissions of Lender in respect thereof to the extent such claims, counterclaims, defenses or off-sets arose from eventsoccurring prior to the date of the Amendment. It is the intention of Guarantor that the above release shall be effective as a full and final release of each and every matter specifically and generally referred to in this paragraph. Guarantoracknowledges and represents that he has been advised by independent legal counsel with respect to the agreements contained herein and with respect to the provisions of California Civil Code Section 1542, which provides as follows: “AGENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THEDEBTOR.” Guarantor, being aware of said Code section, expressly waives any and all rights he may have thereunder, as well as under any other statute or common law principle of similar effect, with respect to any of the matters released herein.

**[Signature Page Follows]**

 

-2- 

DATED as of the date of the Amendment. 

**GUARANTOR:**

WILLIAM LYON HOMES, 

a Delaware corporation 

By: /s/ Michael D.Grubbs                        

Name: Michael D.Grubbs                        

Its: Senior VicePresident                        

By: /s/ Richard S.Robinson                     

Name: Richard S. Robinson                     

Its: Senior VicePresident