AGREEMENT FOR FIRST MODIFICATION OF AMENDED AND RESTATED LOAN AGREEMENT, DEEDS OF TRUST AND OTHER LOAN INSTRUMENTS

Exhibit 10.1

William Lyon Homes, Inc.

Loan No. 906-0100

AGREEMENT FOR FIRST MODIFICATION OF AMENDED AND RESTATED LOAN AGREEMENT,

DEEDS OF TRUST AND OTHER LOAN INSTRUMENTS

This Agreement for First Modification of Amended and Restated Loan Agreement, Deeds of Trust and Other Loan Instruments (this “Modification” or “First Modification”) is made as of December 5, 2008 by and between WILLIAM LYON HOMES, INC., a California corporation (“Borrower”) and GUARANTY BANK, a federal savings bank organized and existing under the laws of the United States (“Lender”), and effective upon recordation of the Memorandum (as defined below) against each Deed of Trust (as defined below) encumbering each Property, subject to Section 2 of this Modification, with reference to the following facts:

A. Borrower and Lender entered into an Amended and Restated Master Loan Agreement dated as of January 28, 2008 (the “Loan Agreement”), which provides for a loan of FIFTY MILLION DOLLARS ($50,000,000.00) (the “Loan”) to Borrower on the terms and conditions specified therein. The Loan is evidenced and secured by a revolving promissory note and other loan instruments (collectively, the “Loan Instruments”). Upon full execution, this Modification shall constitute one of the Loan Instruments. All defined terms used in this Modification shall have the meanings ascribed to them in the Loan Agreement unless the context requires otherwise.

B. At Borrower’s request, Lender has agreed to modify one or more of the Loan Instruments, as herein provided.

NOW, THEREFORE, in consideration of the premises and mutual agreements herein, the parties hereby agree as follows:

1. Modifications . The Loan Instruments specified in Exhibit “A” attached hereto and incorporated herein by this reference are modified as set forth therein, effective upon timely satisfaction of the conditions set forth in Section 2 below. As used in this Modification and the attached Exhibit “A,” the term “Deeds of Trust” refers to the Construction Deeds of Trust (With Security Agreement, Fixture Filing and Assignment of Rents and Leases) each executed by Borrower for the benefit of Lender:

(1) (1132) a certain Deed of Trust dated February 9, 2004 and recorded in the Official Records of Clark County, Nevada, on February 27, 2004 as Instrument No. 2004-0227-04201;

as modified by a Memorandum of Seventh Modification of Deeds of Trust and Other Loan Instruments dated October 6, 2004 and recorded in the Official Records of:

(2) (1161) a certain Deed of Trust dated November 8, 2004 and recorded in the Official Records of Placer County, California, on December 30, 2004 as Instrument No. 2004-0175175;

as modified by a Memorandum of Eighth Modification of Deeds of Trust and Other Loan Instruments dated October 14, 2005 and recorded in the Official Records of:

(3) (1187 & 1188) a certain Deed of Trust dated February 2, 2006 and recorded in the Official Records of Clark County, Nevada, on March 17, 2006 as Instrument No. 2006-0317-0003388;

as modified by a Memorandum of Ninth Modification of Deeds of Trust and Other Loan Instruments dated October 31, 2006 and recorded in the Official Records of:

as modified by a Memorandum of Tenth Modification of Deeds of Trust and Other Loan Instruments dated April 3, 2007 and recorded in the Official Records of:

(8) (1189) a certain Deed of Trust dated April 17, 2007 and recorded in the Official Records of San Bernardino County, California, on July 10, 2007 as Instrument No. 2007-0403960;

(9) (2360) a certain Deed of Trust dated June 20, 2007 and recorded in the Official Records of Los Angeles County, California, on July 9, 2007 as Instrument No. 2007-1620873;

(10) (1190) a certain Deed of Trust dated July 12, 2007 and recorded in the Official Records of Maricopa County, Arizona, on July 20, 2007 as Instrument No. 2007-0826703; and

as modified by a Memorandum of Modification of Deeds of Trust and Other Loan Instruments dated as of January 28, 2008 and recorded in the Official Records of:

(iii) Placer County, California, on March 19, 2008, as Instrument No. 2008-0021877;

(jjj) San Bernardino County, California, on March 19, 2008, as Instrument No. 2008-0120413;

(kkk) Los Angeles County, California, on March 19, 2008, as Instrument No. 2008-0467815;

(mmm) Maricopa County, Arizona, on March 19, 2008, as Instrument No. 2008-0241638; and

(hhh) Clark County, Nevada, on March 28, 2008, as Instrument No. 2008-0328-0001914.

(11) (1191) a certain Deed of Trust dated September 16, 2008 and recorded in the Official Records of Maricopa County, Arizona, on September 26, 2008 as Instrument No. 2008-0833940.

2. Conditions . The modifications of Section 1 above shall take effect only upon Borrower’s satisfaction, at its expense, of all of the following conditions not later than the date of this Modification:

(a) if required by Lender, delivery to Lender of one or more endorsements to the Title Policy (whether one or more) insuring the lien of the Deeds of Trust as may be required by Lender, all in form and of content acceptable to Lender, insuring that, except as set forth in this Modification, the priority of such lien is unaffected by the modifications set forth herein and that the Title Policy insuring the Deeds of Trust remains in full force and effect in the full amount of the Loan;

(b) if required by Lender, delivery to Lender of one or more duly executed recordable memorandums of this Modification (collectively, the “Memorandum”);

(c) satisfaction of such other conditions as may be set forth on Exhibit “B” attached hereto and incorporated herein by this reference, if any;

(d) if the Loan has been guarantied (or indemnities given) or if there are junior liens encumbering the property which is encumbered by the Deeds of Trust, delivery to Lender of duly executed

consents to the modifications set forth in this Modification by the guarantor(s) and/or junior lienors, as applicable, as may be set forth in Exhibit “C” attached hereto or as may be attached to the Memorandum, each incorporated herein by this reference;

(e) Borrower has obtained the approval of, and Borrower hereby represents that it has obtained the approval of, any creditor of Borrower, Guarantor or any of their affiliates to the reduction in Guarantor’s Tangible Net Worth requirement and Lender’s waiver of the ratio of Guarantor’s total liabilities to Guarantor’s Tangible Net Worth effective for the quarters ending December 31, 2008 through December 31, 2009 pursuant to paragraphs B and C of “Additional Loan Covenants – Paragraph 15 of the Loan Agreement” of the Specific Loan Terms (as set forth below in Section 3(iii) of Exhibit “A” to this Modification). Borrower shall have provided Lender with satisfactory evidence of such approval by January 15, 2009, provided that such evidence shall not be required to be provided as a condition to the closing of this Modification; and

(f) Neither Borrower, Guarantor nor any of their affiliates (collectively, “Borrower Affiliates”) shall have entered into any agreement with an existing or future lender, where the subject loan has the effect of establishing financial covenants that are more restrictive on Borrower Affiliates or are otherwise more favorable to such lender (the “Additional Lender Rights”) than the financial covenants under the Loan Instruments, including without limitation, provisions relating to recourse liability and restrictive covenants; provided , however , the terms of any loan extended by Residential Funding Corporation (“RFC”) shall not be considered for purposes of the foregoing. Borrower hereby represents and warrants that no Borrower Affiliate has entered into any agreement with an existing or future lender, other than RFC, which provides for Additional Lender Rights.

3. Representations and Warranties . Borrower hereby represents and warrants that no default, event of default, breach or failure of condition has occurred, or would exist with notice or the lapse of time or both, under any of the Loan Instruments; and all representations and warranties herein and in the other Loan Instruments are true and correct, which representations and warranties shall survive execution of this Modification. All parties who execute this Modification and any other documents required hereunder on behalf of Borrower represent and warrant that they have full power and authority to execute and deliver such documents, and that all such documents are enforceable in accordance with their terms. As of the date of this Modification, Borrower hereby acknowledges and agrees that it has no defenses, offsets or claims against Lender or the enforcement of the Loan Instruments and that Lender has not waived any of its rights or remedies under any such documents, except as expressly provided in this Modification.

4. No Impairment . Except as expressly provided herein, nothing in this Modification shall alter or affect any provision, condition or covenant contained in the Loan Instruments or affect or impair any of Lender’s rights, powers or remedies thereunder. It is the intent of the parties hereto that the provisions of the Loan Instruments shall continue in full force and effect except as expressly modified hereby.

5. Miscellaneous . This Modification and the other Loan Instruments shall be governed by and interpreted in accordance with the laws of the State of California, except as they may be preempted by federal law. In any action brought or arising out of this Modification or the Loan Instruments, Borrower, and, if applicable, the general partners, members and joint venturers of Borrower, hereby consent to the jurisdiction of any federal or state court having proper venue within the State of California and also consent to the service of process by any means authorized by California or federal law. The headings used in this Modification are for convenience only and shall be disregarded in interpreting the substantive provisions of this Modification. Time is of the essence of each term of the Loan Instruments, including this Modification. If any provision of this Modification or any of the other Loan Instruments shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed therefrom and the remaining parts shall remain in full force as though the invalid, illegal, or unenforceable portion had never been a part thereof. This Modification may be executed in one or more counterparts, all of which, taken together, shall constitute one and the same Modification.

6. Integration; Interpretation . The Loan Instruments, including this Modification, contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated herein and supersede all prior negotiations. The Loan Instruments shall not be modified except by written instrument executed by all parties. Any reference to the Loan Instruments in any of the Loan Instruments includes this Modification and any amendments, renewals or extensions approved by Lender hereunder.

7. Set-Offs . Notwithstanding any provision of any Loan Document or applicable law to the contrary, including, without limitation, Section 12 of the Loan Agreement, in no event shall Lender, whether with or without demand or notice to Borrower, exercise any right to set-off and apply deposits (whether certificates of deposit, demand, general, savings, special, time, or other, and whether provisional or final) held by Lender for Borrower or any other liabilities or other obligations of Lender to Borrower against or to Borrower’s obligations with respect to the Loan. By its signature below, Lender hereby waives any right it may have to set-off and apply such deposits or other liabilities against or to Borrower’s obligations with respect to the Loan.

[Signature pages to follow.]

IN WITNESS WHEREOF, this Agreement for First Modification of Amended and Restated Loan Agreement, Deeds of Trust and Other Loan Instruments is executed as of the date first hereinabove written.

William Lyon Homes, Inc.

Loan No. 906-0100

EXHIBIT “A”

AGREEMENT FOR FIRST MODIFICATION OF AMENDED AND RESTATED LOAN AGREEMENT,

DEEDS OF TRUST AND