CONTINUING UNCONDITIONAL GUARANTY

This Continuing Unconditional Guaranty (this “ Guaranty ”) dated as of the 19 ^th day of December, 2006 (the “ Effective Date ”), is made by Buffington Hidden Lakes GP, Inc., a Texas corporation (the “ Guarantor ”), for the benefit of United Development Funding III, L.P., a Delaware limited partnership and its successors and assigns (“ Lender ”).

A.   Lender has agreed to advance funds to Buffington Hidden Lakes, Ltd., a Texas limited partnership (“ Borrower ”) as borrower under that certain   Secured Promissory Note dated as of the Effective Date in the original principal amount of U.S. $4,484,077.00 (the “ Note ”).

B.   Guarantor is an affiliate of, and the general partner of, Borrower and shall benefit, directly or indirectly, from the loan made to Borrower under the Note.

C.   Guarantor is willing to execute this Guaranty in favor of Lender and hereby agree to be bound by its terms and conditions.

NOW, THEREFORE, for good and valuable consideration, and intending to be legally bound hereby, Guarantor agrees and covenants with Lender as follows:

1.   Definitions . Capitalized terms not defined in this Guaranty shall have the respective meanings given to such terms in the Note.

2.   Guaranty and Surety . Guarantor hereby absolutely and unconditionally, guarantees, and becomes surety for, the full, timely and complete payment when due, whether by lapse of time, by acceleration of payment, or otherwise, of all indebtedness, liabilities and obligations of every kind and nature of Borrower to Lender, whether now existing or hereinafter arising, including, without limitation, all indebtedness, liabilities and obligations arising under or related to (a) the Note and the other Loan Documents and all amounts due thereunder, pursuant to or in connection therewith, (b) all costs reasonably incurred by Lender to obtain, preserve, perfect and enforce the security interests granted by the Loan Documents and to maintain, preserve and collect any collateral, and all taxes, assessments, insurance premiums, repairs, reasonable attorneys’ fees and legal expenses, rent, storage charges, advertising costs, brokerage fees and expenses of sale related thereto, and (c) all renewals, extensions, modifications and substitutions of all or any part of the indebtedness and obligations described in the foregoing clauses (a) through (b) (collectively, the “ Guaranteed Obligations ”). Guarantor’s obligations under this Guaranty are unconditional, absolute and enforceable, irrespective of (a) the validity or enforceability of the Guaranteed Obligations in whole or in part or of the Note and the other Loan Documents or any provision thereof, (b) whether recovery against Borrower with respect to the Guaranteed Obligations in whole or in part is prevented by bankruptcy, the operation of law, or otherwise, and (c) any other circumstance that might otherwise cause a legal or equitable discharge or defense of Guarantor.

3.   Subsequent Acts by Lender . Lender may, in its sole discretion and without notice, take or refrain from taking any action that might otherwise be deemed a legal or equitable release or discharge of Guarantor’s obligations under this Guaranty, without either impairing or affecting the joint and several liability of Guarantor for the full, timely and complete payment of the Guaranteed Obligations, which actions might include, by way of illustration and not limitation:

(a)   the renewal or extension of any of the Guaranteed Obligations or any payments thereunder, or the acceleration or change of time for payment of the Guaranteed Obligations, any increase in the principal amount of any promissory note or other instrument comprising a part of the Guaranteed Obligations and/or any additional funds advanced under the Guaranteed Obligations;

(b)   the modification, amendment or change in any of the terms relating to any promissory note or other agreement, document or instrument executed by Borrower at any time in the past, present or future in favor of Lender, including, without limitation, the Note and the other Loan Documents;

(c)   the absence of any attempt to collect the Guaranteed Obligations from Borrower or any other person or entity primarily or secondarily liable for the Guaranteed Obligations or any other action to enforce Lender's rights with respect to the Guaranteed Obligations;

(d)   the waiver, consent, or delay in enforcement by Lender with respect to any provision of any instrument evidencing the Guaranteed Obligations, including, without limitation, the Note and the other Loan Documents;

(e)   any failure by Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral given for the Guaranteed Obligations, or the release or compromise of any lien or security held by Lender as security for the Guaranteed Obligations;

(f)   the compounding, rearrangement or consolidation by Lender of all or any part of the Guaranteed Obligations;

(g)   the release from liability of Borrower or any other guarantor or person or entity primarily or secondary liable for the Guaranteed Obligations who may guarantee or provide security for the Guaranteed Obligations in whole or in part; or

(h)   the settlement, release, compromise or cancellation of all or any part of the Guaranteed Obligations, or the acceptance of partial payment of all or any part of the Guaranteed Obligations.

4.   Expenses . Guarantor agrees to pay all costs and expenses, including, without limitation, all court costs and reasonable attorneys' fees paid or incurred by Lender in

endeavoring to collect all or any part of the Guaranteed Obligations, or in enforcing or pursuing its remedies with respect to the Guaranteed Obligations.

5.   Payment by Guarantor . Guarantor agrees to pay on demand, all of the Guaranteed Obligations and all other costs, expenses and other amounts payable under this Guaranty. Lender shall not be required to liquidate any lien or any other form of security, instrument, or note held by Lender prior to making such demand. THIS IS A GUARANTY OF PAYMENT AND NOT OF COLLECTION, and Guarantor specifically agrees that Lender shall not be required to assert any claim, file suit, or proceed to obtain a judgment against Borrower or any other guarantor, endorser or surety for the Guaranteed Obligations, or make any effort at collection of the Guaranteed Obligations, or foreclose against or seek to realize upon any security or collateral now or hereafter existing for the Guaranteed Obligations, or exercise or assert any other right or remedy to which Lender is or may be entitled in connection with the Guaranteed Obligations, before or as a condition of enforcing the liability of Guarantor under this Guaranty or requiring payment of the Guaranteed Obligations under this Guaranty. Guarantor agrees, to the full extent it may legally do so, that suit may be brought against Guarantor with or without making Borrower or any other person or entity a party to such suit, as Lender may elect. Guarantor agrees that he shall remain fully liable under this Guaranty regardless of whether Borrower is held to be not liable on the Guaranteed Obligations and regardless of whether all or any portion of the Guaranteed Obligations are “non-recourse” or “limited recourse” to Borrower.

6.   Application of Payments . Lender shall have the exclusive right to determine the time and manner of application of any payments or credits to the Guaranteed Obligations, whether received from Borrower or any other source, and such determination shall be binding on Guarantor. All such payments and credits may be applied, reversed and reapplied,