| [X] | QUARTERLY REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE      ACT OF 1934 |
|-----|---------------------------------------------------------------------------------------------------|

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

| California                                                    |   | 68-0023931                                |
|---------------------------------------------------------------|--------|-------------------------------------------|
| (State      or other jurisdiction                             |   | (I.R.S.      Employer Identification No.) |
| of      incorporation or organization)                        |   |                                      |
|                                                          |   |                                      |
| 2221      Olympic Boulevard                                   |   |                                      |
| Walnut      Creek, California                                 |   | 94595                                     |
| (Address      of principal executive offices)                 |   | (Zip      Code)                           |
|                                                          |   |                                      |
| (925)      935-3840                                           |   |                                      |
| Registrant’s      telephone number, including area code |   |                                      |

|       Large      accelerated filer [   ]                                                 |         Accelerated      filer [   ] |
|---------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|
|       Non-accelerated      filer [   ](Do      not check if a smaller reporting company) |         Smaller      reporting company [X]          |

----

| PART I – FINANCIAL      INFORMATION |
|-------------------------------------------|
|                                      |   | Page |
|                                      |   |   |
| Item      1                               | Financial      Statements | 3 |
|                                      |   |   |
| Item      2                               | Management’s      Discussion and Analysis of Financial Condition and |   |
|                                      | Results of      Operations | 21 |
|                                      |   |   |
| Item      4                               | Controls and      Procedures | 34 |
|                                      |   |   |
| PART II – OTHER      INFORMATION    |
|                                      |   |   |
| Item      1.                              | Legal      Proceedings | 35 |
|                                      |   |   |
| Item      1A                              | Risk      Factors | 35 |
|                                      |   |   |
| Item      6.                              | Exhibits | 35 |
|                                      |   |   |
|                                      |   |   |

----

|                                                                                                                                     |   |               |        |              |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-------------|-------------------|--------|
|                                                                                                                                     |   | September      30, |        | December      31, |   |
|                                                                                                                                     |   | 2008               |        | 2007              |   |
| ASSETS                                                                                                                                   |   |               |        |              |   |   |   |
| Cash      and cash equivalents                                                                                                           |   | $                  | 15,948,152  |              | $      | 9,159,033 |   |
| Restricted      cash                                                                                                                     |   |               | 1,000,000   |              |   | 1,000,000 |   |
| Loans      secured by trust deeds, net of allowance for losses of $7,153,384 in 2008      and $5,042,000 in 2007                         |   |               | 249,967,505 |              |   | 272,333,481 |   |
| Interest      and other receivables, net of allowance for doubtful receivable of      $674,679 in 2008 and 2007                          |   |               | 4,618,493   |              |   | 5,504,698 |   |
| Vehicles      and equipment, net of accumulated depreciation of $83,037 in 2008 and      $10,267 in 2007                                 |   |               | 550,844     |              |   | 310,245 |   |
| Investment      in limited liability company                                                                                             |   |               | 2,159,892   |              |   | — |   |
| Real      estate held for sale                                                                                                           |   |               | 12,715,462  |              |   | 10,572,237 |   |
| Real      estate held for investment, net of accumulated depreciation and      amortization of $3,309,101 in 2008 and $3,091,919 in 2007 |   |               | 51,998,485  |              |   | 42,651,415 |   |
|                                                                                                                                     |   | $                  | 338,958,833 |              | $      | 341,531,109 |   |
|                                                                                                                                     |   |               |        |              |   |   |   |
| LIABILITIES AND      PARTNERS’ CAPITAL                                                                                             |   |               |        |              |   |   |   |
| LIABILITIES:                                                                                                                             |   |               |        |              |   |   |   |
| Accrued      distributions payable                                                                                                       |   | $                  | 618,521     |              | $      | 594,620 |   |
| Due      to general partner                                                                                                              |   |               | 4,528,531   |              |   | 2,278,330 |   |
| Accounts      payable and accrued liabilities                                                                                            |   |               | 1,685,626   |              |   | 972,011 |   |
| Deferred      gain                                                                                                                       |   |               | 884,277     |              |   | 902,009 |   |
| Note      payable                                                                                                                        |   |               | 10,500,000  |              |   | 10,500,000 |   |
| Line      of credit payable                                                                                                              |   |               | 29,817,000  |              |   | 27,432,000 |   |
|                                                                                                                                     |   |               |        |              |   |   |   |
| Total      Liabilities                                                                                                                   |   |               | 48,033,955  |              |   | 42,678,970 |   |
|                                                                                                                                     |   |               |        |              |   |   |   |
| Minority      interest                                                                                                                   |   |               | 77,265      |              |   | 108,509 |   |
|                                                                                                                                     |   |               |        |              |   |   |   |
| PARTNERS’      CAPITAL (units subject to redemption):                                                                              |   |               |        |              |   |   |   |
| General      partner                                                                                                                     |   |               | 2,907,031   |              |   | 2,960,604 |   |
| Limited      partners                                                                                                                    |   |               | 287,940,582 |              |   | 295,783,026 |   |
|                                                                                                                                     |   |               |        |              |   |   |   |
| Total      partners’ capital                                                                                                       |   |               | 290,847,613 |              |   | 298,743,630 |   |
|                                                                                                                                     |   |               |        |              |   |   |   |
|                                                                                                                                     |   | $                  | 338,958,833 |              | $      | 341,531,109 |   |

----

|                                                                                             |   | For      the Three Months Ended |        | For      the Nine Months Ended |   |
|--------------------------------------------------------------------------------------------------|--------|---------------------------------|-------------|--------------------------------|--------|
|                                                                                             |   | September      30,2008          |        | September      30,2007         |   | September      30,2008 |   | September      30,2007 |   |
|                                                                                             |   |                            |        |                           |   |   |   |   |   |   |   |   |   |
| REVENUES:                                                                                        |   |                            |        |                           |   |   |   |   |   |   |   |   |   |
| Interest      income on loans secured by trust deeds                                             |   | $                               | 8,730,598   |                           | $      | 6,350,225 |   | $ | 19,656,933 |   | $ | 19,502,138 |   |
| Gain      on sale of real estate                                                                 |   |                            | 1,144,565   |                           |   | 803,541 |   |   | 1,144,533 |   |   | 991,249 |   |
| Rental      and other income from real estate properties                                         |   |                            | 1,459,510   |                           |   | 1,071,203 |   |   | 3,760,155 |   |   | 2,809,069 |   |
| Income      from investment in limited liability company                                         |   |                            | 30,688      |                           |   | — |   |   | 30,688 |   |   | — |   |
| Other      income                                                                                |   |                            | 51,654      |                           |   | 111,615 |   |   | 188,315 |   |   | 377,123 |   |
| Total      revenues                                                                              |   |                            | 11,417,015  |                           |   | 8,336,584 |   |   | 24,780,624 |   |   | 23,679,579 |   |
|                                                                                             |   |                            |        |                           |   |   |   |   |   |   |   |   |   |
| EXPENSES:                                                                                        |   |                            |        |                           |   |   |   |   |   |   |   |   |   |
| Management      fees to general partner                                                          |   |                            | 4,422,610   |                           |   | 165,983 |   |   | 4,422,610 |   |   | 856,063 |   |
| Servicing      fees to general partner                                                           |   |                            | 522,847     |                           |   | 163,441 |   |   | 522,847 |   |   | 529,136 |   |
| Carried      interest to general partner                                                         |   |                            | —     |                           |   | 46,452 |   |   | — |   |   | 46,452 |   |
| Administrative                                                                                   |   |                            | 15,000      |                           |   | 12,000 |   |   | 45,000 |   |   | 36,000 |   |
| Legal      and accounting                                                                        |   |                            | 103,477     |                           |   | 139,242 |   |   | 346,258 |   |   | 341,605 |   |
| Rental      and other expenses on real estate properties                                         |   |                            | 1,398,978   |                           |   | 836,014 |   |   | 3,701,265 |   |   | 2,105,771 |   |
| Interest      expense                                                                            |   |                            | 566,238     |                           |   | 156,961 |   |   | 1,709,701 |   |   | 1,294,460 |   |
| Environmental      remediation expense                                                           |   |                            | 709         |                           |   | — |   |   | 762,035 |   |   | — |   |
| Minority      interest                                                                           |   |                            | 739         |                           |   | 3,896 |   |   | 5,266 |   |   | 8,718 |   |
| Provision      for (reversal of) loan losses                                                     |   |                            | 1,252,212   |                           |   | (79,000 | ) |   | 2,963,134 |   |   | 1,744,515 |   |
| Recovery      of losses on real estate held for sale                                             |   |                            | —     |                           |   | — |   |   | — |   |   | (349,224 | ) |
| Other                                                                                            |   |                            | 30,219      |                           |   | 19,659 |   |   | 137,226 |   |   | 47,532 |   |
| Total      expenses                                                                              |   |                            | 8,313,029   |                           |   | 1,464,648 |   |   | 14,615,342 |   |   | 6,661,028 |   |
|                                                                                             |   |                            |        |                           |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                  |   | $                               | 3,103,986   |                           | $      | 6,871,936 |   | $ | 10,165,282 |   | $ | 17,018,551 |   |
|                                                                                             |   |                            |        |                           |   |   |   |   |   |   |   |   |   |
| Net      income allocated to general partner                                                     |   | $                               | 31,613      |                           | $      | 67,523 |   | $ | 102,074 |   | $ | 168,165 |   |
|                                                                                             |   |                            |        |                           |   |   |   |   |   |   |   |   |   |
| Net      income allocated to limited partners                                                    |   | $                               | 3,072,373   |                           | $      | 6,804,413 |   | $ | 10,063,208 |   | $ | 16,850,386 |   |
|                                                                                             |   |                            |        |                           |   |   |   |   |   |   |   |   |   |
| Net      income allocated to limited partners per weighted average limited      partnership unit |   | $                               | 0.01        |                           | $      | 0.02 |   | $ | 0.04 |   | $ | 0.06 |   |
|                                                                                             |   |                            |        |                           |   |   |   |   |   |   |   |   |   |
| Weighted      average limited partnership units                                                  |   |                            | 287,576,000 |                           |   | 296,528,000 |   |   | 291,438,000 |   |   | 290,624,000 |   |

----

|                                                                                        |   | September      30, |        | September      30, |   |
|---------------------------------------------------------------------------------------------|--------|--------------------|-------------|--------------------|--------|
|                                                                                        |   | 2008               |        | 2007               |   |
| CASH      FLOWS FROM OPERATING      ACTIVITIES:                                        |   |               |        |               |   |   |   |
| Net      income                                                                             |   | $                  | 10,165,282  |               | $      | 17,018,551 |   |
| Adjustments      to reconcile net income to net cash provided by operating      activities: |   |               |        |               |   |   |   |
| Gain      on sale of real estate properties                                                 |   |               | (1,144,533  | )                  |   | (991,249 | ) |
| Income      from investment in limited liability company                                    |   |               | (30,688     | )                  |   |   |   |
| Provision      for loan losses                                                              |   |               | 2,963,134   |               |   | 1,744,515 |   |
| Recovery      of losses on real estate properties held for sale                             |   |               | --          |               |   | (349,224 | ) |
| Depreciation      and amortization                                                          |   |               | 606,610     |               |   | 513,289 |   |
| Changes      in operating assets and liabilities:                                           |   |               |        |               |   |   |   |
| Interest      and other receivables                                                         |   |               | 349,787     |               |   | (1,225,660 | ) |
| Due      from general partner                                                               |   |               | --          |               |   | -- |   |
| Accounts      payable and accrued liabilities                                               |   |               | 713,615     |               |   | 212,327 |   |
| Due      to general partner                                                                 |   |               | 2,250,201   |               |   | (222,182 | ) |
| Net      cash provided by operating activities                                              |   |               | 15,873,408  |               |   | 16,700,367 |   |
|                                                                                        |   |               |        |               |   |   |   |
| CASH      FLOWS FROM INVESTING      ACTIVITIES:                                        |   |               |        |               |   |   |   |
| Investment      in loans secured by trust deeds                                             |   |               | (86,453,828 | )                  |   | (126,668,426 | ) |
| Principal      collected on loans                                                           |   |               | 84,938,722  |               |   | 92,625,277 |   |
| Sales      of loans to third parties                                                        |   |               | 5,000,000   |               |   | 12,348,525 |   |
| Investment      in real estate properties                                                   |   |               | (1,304,097  | )                  |   | (524,357 | ) |
| Net      proceeds from disposition of real estate properties                                |   |               | 4,732,313   |               |   | 3,156,886 |   |
| Purchases      of vehicles and equipment                                                    |   |               | (313,757    | )                  |   | -- |   |
| Minority      interest in limited liability company                                         |   |               | (31,244     | )                  |   | (25,554 | ) |
| Net      cash provided by (used in) investing activities                                    |   |               | 6,568,109   |               |   | (19,087,649 | ) |
|                                                                                        |   |               |        |               |   |   |   |
| CASH      FLOWS FROM FINANCING      ACTIVITIES:                                        |   |               |        |               |   |   |   |
| Proceeds      from sale of partnership units                                                |   |               | 6,393,625   |               |   | 10,889,750 |   |
| Net      advances on line of credit                                                         |   |               | 2,385,000   |               |   | -- |   |
| Partners’      cash distributions                                                |   |               | (5,169,710  | )                  |   | (5,163,895 | ) |
| Partners’      capital withdrawals                                                    |   |               | (19,261,313 | )                  |   | (12,138,051 | ) |
| Net      cash used in financing activities                                                  |   |               | (15,652,398 | )                  |   | (6,412,196 | ) |
|                                                                                        |   |               |        |               |   |   |   |
| Net      increase (decrease) in cash and cash equivalents                                   |   |               | 6,789,119   |               |   | (8,799,478 | ) |
|                                                                                        |   |               |        |               |   |   |   |
| Cash      and cash equivalents at beginning of period                                       |   |               | 9,159,033   |               |   | 23,283,770 |   |
|                                                                                        |   |               |        |               |   |   |   |
| Cash      and cash equivalents at end of period                                             |   | $                  | 15,948,152  |               | $      | 14,484,292 |   |
|                                                                                        |   |               |        |               |   |   |   |
| Supplemental      Disclosures of Cash Flow Information                                      |   |               |        |               |   |   |   |
| Cash      paid during the period for interest                                               |   | $                  | 1,723,634   |               | $      | 1,307,563 |   |

----

|   | Basis      of Presentation |
|--------|----------------------------|

----

|                                 |   | 2008   |        | 2007   |   |
|--------------------------------------|--------|--------|-------------|--------|--------|
| By Property      Type:               |   |   |        |   |   |   |   |
| Commercial                           |   | $      | 115,723,886 |   | $      | 151,435,333 |   |
| Condominiums                         |   |   | 90,261,637  |   |   | 81,327,519 |   |
| Apartments                           |   |   | 4,267,191   |   |   | 7,903,750 |   |
| Single      family homes (1-4 Units) |   |   | 333,130     |   |   | 336,870 |   |
| Improved      and unimproved land    |   |   | 46,535,045  |   |   | 36,372,009 |   |
|                                 |   |   |        |   |   |   |   |
|                                 |   | $      | 257,120,889 |   | $      | 277,375,481 |   |
| By Deed      Order:                  |   |   |        |   |   |   |   |
| First      mortgages                 |   | $      | 228,199,159 |   | $      | 255,962,228 |   |
| Second      mortgages                |   |   | 28,921,730  |   |   | 21,413,253 |   |
|                                 |   |   |        |   |   |   |   |
|                                 |   | $      | 257,120,889 |   | $      | 277,375,481 |   |

----

|                           |   | Fixed    |        | Variable |   |       |   |
|--------------------------------|--------|----------|-------------|----------|--------|------------|--------|
|                           |   | Interest |        | Interest |   |       |   |
|                           |   | Rate     |        | Rate     |   | Total      |   |
| Year      ending September 30: |   |     |        |     |   |       |   |   |   |   |
| 2008      (past maturity)      |   | $        | 115,433,610 |     | $      | —    |   | $ | 115,433,610 |   |
| 2009                           |   |     | 101,904,101 |     |   | —    |   |   | 101,904,101 |   |
| 2010                           |   |     | 24,307,898  |     |   | 40,488     |   |   | 24,348,386 |   |
| 2011                           |   |     | 1,100,000   |     |   | —    |   |   | 1,100,000 |   |
| 2012                           |   |     | —     |     |   | —    |   |   | — |   |
| 2013                           |   |     | —     |     |   | —    |   |   | — |   |
| Thereafter      (through 2017) |   |     | 83,130      |     |   | 14,251,662 |   |   | 14,334,792 |   |
|                           |   | $        | 242,828,739 |     | $      | 14,292,150 |   | $ | 257,120,889 |   |

|          |   | September      30, 2008 |        | Portfolio  |    | December      31, 2007 |   | Portfolio   |   |
|---------------|--------|-------------------------|-------------|------------|---------|------------------------|--------|-------------|--------|
|          |   | Balance                 |        | Percentage |    | Balance                |   | Percentage  |   |
| Arizona       |   | $                       | 31,236,788  |       | 12.15%  |                   | $      | 28,245,574  |   | 10.18% |   |
| California    |   |                    | 140,423,974 |       | 54.62%  |                   |   | 156,449,351 |   | 56.41% |   |
| Colorado      |   |                    | 13,999,402  |       | 5.45%   |                   |   | 13,999,414  |   | 5.05% |   |
| Florida       |   |                    | 23,482,581  |       | 9.13%   |                   |   | 23,482,581  |   | 8.47% |   |
| Hawaii        |   |                    | —     |       | — |                   |   | 1,300,000   |   | 0.47% |   |
| Idaho         |   |                    | 2,200,000   |       | 0.86%   |                   |   | 3,568,290   |   | 1.29% |   |
| Nevada        |   |                    | 14,101,177  |       | 5.48%   |                   |   | 1,253,209   |   | 0.45% |   |
| New      York |   |                    | 10,495,665  |       | 4.08%   |                   |   | 9,420,000   |   | 3.40% |   |
| Oregon        |   |                    | 83,130      |       | 0.03%   |                   |   | 86,870      |   | 0.03% |   |
| Pennsylvania  |   |                    | 1,320,057   |       | 0.51%   |                   |   | 1,650,071   |   | 0.59% |   |
| Tennessee     |   |                    | —     |       | — |                   |   | 10,547,470  |   | 3.80% |   |
| Texas         |   |                    | 2,635,000   |       | 1.03%   |                   |   | 2,635,000   |   | 0.95% |   |
| Utah          |   |                    | 5,256,077   |       | 2.04%   |                   |   | 4,143,751   |   | 1.49% |   |
| Virginia      |   |                    | —     |       | — |                   |   | 2,230,000   |   | 0.80% |   |
| Washington    |   |                    | 11,887,038  |       | 4.62%   |                   |   | 18,363,900  |   | 6.62% |   |
|          |   | $                       | 257,120,889 |       | 100.00% |                   | $      | 277,375,481 |   | 100.00% |   |

----

----

----

|                              |   | Three      Months Ended September 30, |      | Nine      Months Ended September 30, |   |
|-----------------------------------|--------|---------------------------------------|-----------|--------------------------------------|--------|
|                              |   | 2008                                  |      | 2007                                 |   | 2008 |   | 2007 |   |
| Balance,      beginning of period |   | $                                     | 6,434,000 |                                 | $      | 4,670,000 |   | $ | 5,042,000 |   | $ | 4,225,000 |   |
| Provision                         |   |                                  | 1,252,212 |                                 |   | (79,000 | ) |   | 2,963,134 |   |   | 1,744,515 |   |
| Recovery      of bad debts        |   |                                  | —   |                                 |   | — |   |   | — |   |   | — |   |
| Charge-off                        |   |                                  | (532,828  | )                                    |   | — |   |   | (851,750 | ) |   | (1,378,515 | ) |
| Balance,      end of period       |   | $                                     | 7,153,384 |                                 | $      | 4,591,000 |   | $ | 7,153,384 |   | $ | 4,591,000 |   |

----

|                                                                                                                               |   | 2008   |       | 2007   |   |
|------------------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|
| Manufactured      home subdivision development, Ione, California                                                                   |   | $      | 837,838    |   | $      | 837,838 |   |
| Light      industrial building, Paso Robles, California (transferred from real estate      held for investment – see Note 5) |   |   | 1,637,507  |   |   | — |   |
| Undeveloped      land, San Jose, California (transferred to real estate held for investment      – see Note 5)               |   |   | —    |   |   | 3,025,992 |   |
| Industrial      land and buildings, Santa Clara, California (see Note 3)                                                           |   |   | —    |   |   | 4,258,407 |   |
| Mixed-use      retail building, Sacramento, California                                                                             |   |   | —    |   |   | 2,450,000 |   |
| Two      improved residential lots, West Sacramento, California                                                                    |   |   | 510,944    |   |   | — |   |
| Office/retail      complex, Hilo, Hawaii                                                                                           |   |   | 1,636,196  |   |   | — |   |
| Office      condominium complex (17 units), Roseville, California                                                                  |   |   | 8,092,977  |   |   | — |   |
|                                                                                                                               |   | $      | 12,715,462 |   | $      | 10,572,237 |   |

----

|                              |   | Three      Months Ended September 30, |    | Nine      Months Ended September 30, |   |
|-----------------------------------|--------|---------------------------------------|---------|--------------------------------------|--------|
|                              |   | 2008                                  |    | 2007                                 |   | 2008 |   | 2007 |   |
| Balance,      beginning of period |   | $                                     | — |                                 | $      | — |   | $ | — |   | $ | 405,388 |   |
| Provision                         |   |                                  | — |                                 |   | — |   |   | — |   |   | — |   |
| Recovery      of bad debts        |   |                                  | — |                                 |   | — |   |   | — |   |   | (405,388 | ) |
| Charge-off                        |   |                                  | — |                                 |   | — |   |   | — |   |   | — |   |
| Balance,      end of period       |   | $                                     | — |                                 | $      | — |   | $ | — |   | $ | — |   |

----

|                                                                                                                       |   | 2008   |       | 2007   |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|--------|------------|--------|--------|
| Light      industrial building, Paso Robles, California (transferred to real estate      held for sale – see Note 4) |   | $      | —    |   | $      | 1,608,735 |   |
| Commercial      building, Roseville, California                                                                            |   |   | 1,045,619  |   |   | 800,745 |   |
| Retail      complex, Greeley, Colorado (held within 720 University,    LLC)                                                |   |   | 13,839,884 |   |   | 14,177,355 |   |
| Undeveloped      land, Madera County, California                                                                           |   |   | 5,534,780  |   |   | 5,520,797 |   |
| Manufactured      home subdivision development, Lake Charles, Louisiana (held within Dation,      LLC)                     |   |   | 2,878,956  |   |   | 2,845,403 |   |
| Undeveloped      land, Yuba County, California                                                                             |   |   | 594,610    |   |   | 594,610 |   |
| Golf      course, Auburn, California (held within DarkHorse Golf Club,      LLC)                                           |   |   | 3,541,687  |   |   | 3,340,000 |   |
| 75      improved, residential lots, Auburn, California                                                                     |   |   | 13,763,770 |   |   | 13,763,770 |   |
| Undeveloped      land, San Jose, California (transferred from real estate held for sale –      see Note 4)           |   |   | 3,025,992  |   |   | — |   |
| Undeveloped      land, Half Moon Bay, California                                                                           |   |   | 2,099,187  |   |   | — |   |
| Storage      facility, Stockton, California (transferred from real estate held for sale      – see Note 4)           |   |   | 5,674,000  |   |   | — |   |
|                                                                                                                       |   | $      | 51,998,485 |   | $      | 42,651,415 |   |

----

|                                                 |   | 2008   |       |   | 2007   |   |
|------------------------------------------------------|--------|--------|------------|--------|--------|--------|
| Land                                                 |   | $      | 35,217,761 |   |   | $      | 29,418,728 |   |
| Buildings                                            |   |   | 14,594,015 |   |   |   | 10,756,286 |   |
| Improvements                                         |   |   | 4,625,481  |   |   |   | 4,737,664 |   |
| Other                                                |   |   | 870,329    |   |   |   | 830,656 |   |
|                                                 |   |   | 55,307,586 |   |   |   | 45,743,334 |   |
| Less:      Accumulated depreciation and amortization |   |   | (3,309,101 | )      |   |   | (3,091,919 | ) |
|                                                 |   | $      | 51,998,485 |   |   | $      | 42,651,415 |   |

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----

----

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|                               |   | General |      | Limited      partners |   | TotalPartners’ |   |
|------------------------------------|--------|---------|-----------|-----------------------|--------|----------------------|--------|
|                               |   | partner |      | Units                 |   | Amount               |   | capital |   |
|                               |   |    |      |                  |   |                 |   |   |   |   |   |   |   |
| Balances,      December 31, 2007   |   | $       | 2,960,604 |                  |   | 295,979,046          |   | $ | 295,783,026 |   | $ | 298,743,630 |   |
|                               |   |    |      |                  |   |                 |   |   |   |   |   |   |   |
| Net      income                    |   |    | 102,074   |                  |   | 10,063,208           |   |   | 10,063,208 |   |   | 10,165,282 |   |
| Sale      of partnership units     |   |    | 410,759   |                  |   | 5,982,866            |   |   | 5,982,866 |   |   | 6,393,625 |   |
| Partners’      withdrawals   |   |    | (410,759  | )                     |   | (18,850,554          | )      |   | (18,850,554 | ) |   | (19,261,313 | ) |
| Partners’      distributions |   |    | (155,647  | )                     |   | (5,037,964           | )      |   | (5,037,964 | ) |   | (5,193,611 | ) |
|                               |   |    |      |                  |   |                 |   |   |   |   |   |   |   |
| Balances,      September 30, 2008  |   | $       | 2,907,031 |                  |   | 288,136,602          |   | $ | 287,940,582 |   | $ | 290,847,613 |   |

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----

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| · | Management      Fees - In consideration of the management services rendered to the      Partnership, the General Partner is entitled to receive from the      Partnership a management fee payable monthly, subject to a maximum of      2.75% per annum of the average unpaid balance of the Partnership’s      mortgage loans at the end of each month in the calendar year. Management fees      amounted to approximately $4,423,000 and $166,000 for the three months      ended September 30, 2008 and 2007,respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Servicing      Fees – All of the Partnership’s loans are serviced by the General      Partner, in consideration for which the General Partner is entitled to      receive from the Partnership a monthly fee, which, when added to all other      fees paid in connection with the servicing of a particular loan, does not      exceed the lesser of the customary, competitive fee in the community where      the loan is placed or up to 0.25% per annum of the unpaid principal      balance of the loans at the end of each month. Service fees      amounted to approximately $523,000 and $163,000 for the three months ended      September 30, 2008 and 2007,respectively. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Acquisition      and Origination Fees – The General Partner is entitled to receive      and retain all acquisition and origination fees paid or payable by      borrowers for services rendered in connection with the evaluation and      consideration of potential investments of the Partnership (including any      selection fee, mortgage placement fee, nonrecurring management fee, and      any origination fee, loan fee, or points paid by borrowers). The acquisition and      origination fees are paid by borrowers, and thus, are not an expense of      the Partnership. Such fees earned by OFG amounted to approximately      $709,000 and $1,451,000 on loans originated of approximately $25,331,000      and $36,885,000 for the three months ended September 30, 2008 and 2007,      respectively. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| · | Late      Payment Charges –       The General Partner is entitled to receive all late payment charges by      borrowers on delinquent loans held by the Partnership (including      additional interest and late payment fees).  The late payment      charges are paid by borrowers and collected by the Partnership with      regular monthly loan payments or at the time of loan      payoff.  These are recorded as a liability (Due to General      Partner) when collected and are not recognized as an expense of the      Partnership. The amounts paid to or collected by OFG for such charges      totaled approximately $576,000 and $153,000 for the three months ended      September 30, 2008 and 2007,respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Other      Miscellaneous Fees - The Partnership remits other miscellaneous      fees to the General Partner, which are collected from loan payments, loan      payoffs or advances from loan principal (i.e. funding, demand and partial      release fees). Such fees remitted to OFG totaled approximately $28,000 and      $15,000 for the three months ended September 30, 2008 and 2007,      respectively. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Partnership      Expenses – The General Partner is entitled to be reimbursed by the      Partnership for the actual cost of goods, services and materials used for      or by the Partnership and obtained from unaffiliated entities and the      actual cost of services of non-management and non-supervisory personnel      related to the administration of the Partnership (subject to certain      limitations in the Partnership Agreement).  The amounts      reimbursed to the General Partner by the Partnership were approximately      $36,000 and $12,000 during the three months ended September 30, 2008 and      2007, respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Carried      Interest and Contributed Capital – The General Partner is required      to contribute capital to the Partnership in the amount of 0.5% of the      limited partners’ aggregate capital accounts and, together with its      carried interest; the General Partner has an interest equal to 1% of the      limited partners’ capital accounts. This carried interest of the General      Partner of up to 1/2 of 1% is recorded as an expense of the Partnership      and credited as a contribution to the General Partner’s capital account as      additional compensation. As of September 30, 2008, the General Partner has      made cash capital contributions of $1,497,000 to the Partnership. The      General Partner is required to continue cash capital contributions to the      Partnership in order to maintain its required capital balance. The carried      interest expense charged to the Partnership was $0 and $46,000 for the      three months ended September 30, 2008 and 2007,    respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | the      amount of cash available to invest in mortgage  loans; |
|--------|--------|-----------------------------------------------------------------|

|   | · | the      amount of borrowing to finance mortgage loan  investments; |
|--------|--------|---------------------------------------------------------------------|

|   | · | the      level of real estate lending activity in the markets    serviced; |
|--------|--------|----------------------------------------------------------------------------|

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| · | the      ability to identify and lend to suitable  borrowers; |
|--------|---------------------------------------------------------------|

| · | the      interest rates the Partnership is able to charge on  loans; |
|--------|----------------------------------------------------------------------|

| · | the      level of delinquencies on mortgageloans; |
|--------|---------------------------------------------------|

| · | the      level of foreclosures and related loan and real estate losses experienced;      and |
|--------|----------------------------------------------------------------------------------------------|

| · | the      income or losses from foreclosed properties prior to the time of      disposal. |
|--------|------------------------------------------------------------------------------------------|

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|                                                                                             |   | Three      Months Ended September 30, |        | Nine      Months Ended September 30, |   |
|--------------------------------------------------------------------------------------------------|--------|---------------------------------------|-------------|--------------------------------------|--------|
|                                                                                             |   | 2008                                  |        | 2007                                 |   | 2008 |   | 2007 |   |
|                                                                                             |   |                                  |        |                                 |   |   |   |   |   |   |   |   |   |
| Total      revenues                                                                              |   | $                                     | 11,417,015  |                                 | $      | 8,336,584 |   | $ | 24,780,624 |   | $ | 23,679,579 |   |
| Total      expenses                                                                              |   |                                  | 8,313,029   |                                 |   | 1,464,648 |   |   | 14,615,282 |   |   | 6,661,028 |   |
|                                                                                             |   |                                  |        |                                 |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                  |   | $                                     | 3,103,986   |                                 | $      | 6,871,936 |   | $ | 10,165,282 |   | $ | 17,018,551 |   |
|                                                                                             |   |                                  |        |                                 |   |   |   |   |   |   |   |   |   |
| Net      income allocated to limited partners                                                    |   | $                                     | 3,072,373   |                                 | $      | 6,804,413 |   | $ | 10,063,208 |   | $ | 16,850,386 |   |
|                                                                                             |   |                                  |        |                                 |   |   |   |   |   |   |   |   |   |
| Net      income allocated to limited partners per weighted average limited      partnership unit |   | $                                     | 0.01        |                                 | $      | 0.02 |   | $ | 0.04 |   | $ | 0.06 |   |
|                                                                                             |   |                                  |        |                                 |   |   |   |   |   |   |   |   |   |
| Annualized      rate of return to limitedpartners      (1)                                       |   |                                  | 4.3         | %                                    |   | 9.2 | % |   | 4.6 | % |   | 7.7 | % |
|                                                                                             |   |                                  |        |                                 |   |   |   |   |   |   |   |   |   |
| Distribution      per partnership unit (yield) (2)                                               |   |                                  | 6.8         | %                                    |   | 7.6 | % |   | 6.9 | % |   | 7.7 | % |
|                                                                                             |   |                                  |        |                                 |   |   |   |   |   |   |   |   |   |
| Weighted      average limited partnership units                                                  |   |                                  | 287,576,000 |                                 |   | 296,528,000 |   |   | 291,438,000 |   |   | 290,624,000 |   |

|                     (1) | The      annualized rate of return to limited partners is calculated based upon the      net income allocated to limited partners per weighted average limited      partnership unit as of September 30, 2008 and 2007 divided by the number      of months during the period and multiplied by twelve      (12) months. |
|-----------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                    (2) | Distribution      per partnership unit (yield) is the annualized average of the monthly      yield paid to the partners for the periods indicated. The monthly yield is      calculated by dividing the total monthly cash distribution to partners by      the prior month’s ending partners’ capital  balance. |
|-----------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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----

----

|                                 |   | 2008   |        |   | 2007   |   |
|--------------------------------------|--------|--------|-------------|--------|--------|--------|
| By Property      Type:               |   |   |        |   |   |   |
| Commercial                           |   | $      | 115,723,886 |   |   | $      | 151,435,333 |   |
| Condominiums                         |   |   | 90,261,637  |   |   |   | 81,327,519 |   |
| Apartments                           |   |   | 4,267,191   |   |   |   | 7,903,750 |   |
| Single      family homes (1-4 units) |   |   | 333,130     |   |   |   | 336,870 |   |
| Improved      and unimproved land    |   |   | 46,535,045  |   |   |   | 36,372,009 |   |
|                                 |   | $      | 257,120,889 |   |   | $      | 277,375,481 |   |
| By Deed      Order:                  |   |   |        |   |   |   |   |   |
| First      mortgages                 |   | $      | 228,199,159 |   |   | $      | 255,962,228 |   |
| Second      mortgages                |   |   | 28,921,730  |   |   |   | 21,413,253 |   |
|                                 |   | $      | 257,120,889 |   |   | $      | 277,375,481 |   |

|                              |   | 2008   |      | 2007   |   |
|-----------------------------------|--------|--------|-----------|--------|--------|
| Balance,      beginning of period |   | $      | 5,042,000 |   | $      | 4,225,000 |   |
| Provision                         |   |   | 2,963,134 |   |   | 1,744,515 |   |
| Recovery      of bad debts        |   |   | —   |   |   | — |   |
| Charge-off                        |   |   | (851,750  | )      |   | (1,378,515 | ) |
| Balance,      end of period       |   | $      | 7,153,384 |   | $      | 4,591,000 |   |

----

|                                                 |   | 2008   |       | 2007   |   |
|------------------------------------------------------|--------|--------|------------|--------|--------|
| Balance,      beginning of period                    |   | $      | 53,223,652 |   | $      | 29,700,395 |   |
| Real      estate acquired through foreclosure        |   |   | 17,904,365 |   |   | 25,743,465 |   |
| Investment      in real estate properties            |   |   | 1,304,098  |   |   | 524,357 |   |
| Sales      of real estate properties                 |   |   | (5,055,512 | )      |   | (2,172,145 | ) |
| Recovery      of losses on real estate held for sale |   |   | —    |   |   | 349,224 |   |
| Transfer      of real estate to investment in LLC    |   |   | (2,129,204 | )      |   | — |   |
| Depreciation      and amortization                   |   |   | (533,452   | )      |   | (513,289 | ) |
| Balance,      end of period                          |   | $      | 64,713,947 |   | $      | 53,632,007 |   |

----

|                              |   | 2008   |    | 2007   |   |
|-----------------------------------|--------|--------|---------|--------|--------|
| Balance,      beginning of period |   | $      | — |   | $      | 405,388 |   |
| Provision                         |   |   | — |   |   | — |   |
| Recovery      of losses           |   |   | — |   |   | (405,388 | ) |
| Balance,      end of period       |   | $      | — |   | $      | — |   |

----

----

| · | prevailing      economic conditions; |
|--------|--------------------------------------|

| · | the      Partnership’s historical lossexperience; |
|--------|---------------------------------------------------------|

| · | the      types and dollar amounts of loans in the  portfolio; |
|--------|---------------------------------------------------------------|

| · | borrowers’      financial condition and adverse situations that may affect the borrowers’      ability to pay; |
|--------|----------------------------------------------------------------------------------------------------------------------------|

| · | evaluation      of industry trends; |
|--------|-------------------------------------|

| · | review      and evaluation of loans identified as having loss potential;      and |
|--------|-----------------------------------------------------------------------------------|

| · | estimated      net realizable value or fair value of the underlying      collateral. |
|--------|--------------------------------------------------------------------------------------|

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| · | No      withdrawal of Units can be requested or made until at least one year from      the date of purchase of those Units, other than Units received under the      Partnership’s Reinvested DistributionPlan. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Any      such payments are required to be made only from net proceeds and capital      contributions (as defined) during said 91-day  period. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

| · | A      maximum of $100,000 per partner may be withdrawn during any calendar      quarter. |
|--------|-------------------------------------------------------------------------------------------|

| · | The      General Partner is not required to establish a reserve fund for the      purpose of funding suchpayments. |
|--------|--------------------------------------------------------------------------------------------------------------------|

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| · | No      more than 10% of the total outstanding limited partnership interests may      be withdrawn during any calendar year except upon a plan of dissolution of      the Partnership. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | 31.1Section      302 Certification of William C.Owens |
|--------|-------------------------------------------------------|

|   | 31.2Section      302 Certification of Bryan H.Draper |
|--------|------------------------------------------------------|

|   | 32Certifications      Pursuant to U.S.C. 18 Section1350 |
|--------|---------------------------------------------------------|

----

| Dated:                      November      14, 2008 |   | OWENS      MORTGAGE INVESTMENT FUND,a      California Limited Partnership |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|
|                                                                                                                                                             |   |                                                                      |
|                                                                                                                                                             |   | By:                                                                       | OWENS      FINANCIAL GROUP, INC., GENERAL PARTNER |
|                                                                                                                                                             |   |                                                                      |   |
| Dated:                      November      14, 2008 |   | By:                                                                  |  /s/      William C. Owens |
|                                                                                                                                                             |   |                                                                      | William      C. Owens, President |
|                                                                                                                                                             |   |                                                                      |   |
| Dated:                      November      14, 2008 |   | By:                                                                  |  /s/      Bryan H. Draper |
|                                                                                                                                                             |   |                                                                      | Bryan      H. Draper, Chief Financial Officer |
|                                                                                                                                                             |   |                                                                      |   |
| Dated:                      November      14, 2008 |   | By:                                                                  |  /s/      Melina A. Platt |
|                                                                                                                                                             |   |                                                                      | Melina      A. Platt, Controller |

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