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                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549



                                  FORM 10-Q/A



   [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
             ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1996



                         Commission File Number 0-10503



                     CONTINENTAL MORTGAGE AND EQUITY TRUST
-------------------------------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)



          California                                           94-2738844
--------------------------------                          ---------------------
(State or Other Jurisdiction of                             (I.R.S. Employer
 Incorporation or Organization)                            Identification No.)



       10670 North Central Expressway, Suite 300, Dallas, TX    75231   
-------------------------------------------------------------------------------
       (Address of Principal Executive Offices)               (Zip Code)


                                 (214) 692-4700
                      -----------------------------------
                        (Registrant's Telephone Number,
                              Including Area Code)


Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No
                                              ---     ---



Shares of Beneficial Interest,
        no par value                                  4,185,240           
------------------------------            --------------------------------
          (Class)                          (Outstanding at July 26, 1996)





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This Form 10-Q/A amends the Registrant's quarterly report on Form 10-Q for the
quarter ended September 30, 1996 as follows:


PART I - FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS - page 4




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                     CONTINENTAL MORTGAGE AND EQUITY TRUST
                     CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                       For the Three Months             For the Nine Months
                                        Ended September 30,              Ended September 30,  
                                   ----------------------------    ----------------------------
                                       1996            1995            1996            1995 
                                   ------------    ------------    ------------    ------------
                                               (dollars in thousands, except per share)
<S>                                <C>             <C>             <C>             <C>         
Revenue
 Rentals .......................   $     11,435    $      9,612    $     33,205    $     27,318
 Interest ......................            268             196             821             600
                                   ------------    ------------    ------------    ------------
                                         11,703           9,808          34,026          27,918


Expenses
 Property operations ...........          7,188           5,896          20,091          16,456
 Interest ......................          3,254           2,481           9,317           6,998
 Depreciation ..................          1,271           1,103           3,565           3,133
 Provision for losses ..........           (884)           --              (884)            541
 Advisory fee to affiliate .....            449             394           1,300           1,139
 General and administrative ....            461             299           1,400             928
                                   ------------    ------------    ------------    ------------
                                         11,739          10,173          34,789          29,195
                                   ------------    ------------    ------------    ------------


Loss from operations ...........            (36)           (365)           (763)         (1,277)

Equity in income of
  partnerships .................             21              28             197             213
Gain on sale of real estate ....          3,598            --             9,397            --   
                                   ------------    ------------    ------------    ------------

Income (loss) before
  extraordinary gain ...........          3,583            (337)          8,831          (1,064)
Extraordinary gain .............            149            --               812            --   
                                   ------------    ------------    ------------    ------------

Net income (loss) ..............   $      3,732    $       (337)   $      9,643    $     (1,064)
                                   ============    ============    ============    ============



Earnings per share
 Income (loss) before extra-
   ordinary gain ...............   $        .86    $       (.08)   $       2.08    $       (.24)
 Extraordinary gain ............            .04            --               .20            --   
                                   ------------    ------------    ------------    ------------
 Net income (loss) .............   $        .90    $       (.08)   $       2.28    $       (.24)
                                   ============    ============    ============    ============

Weighted average shares of
 beneficial interest used in
 computing earnings per share ..      4,184,086       4,377,156       4,243,754       4,377,171
                                   ============    ============    ============    ============
</TABLE>




The accompanying notes are an integral part of these Consolidated Financial
Statements.





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