FOURTH AMENDMENT TO BORROWING BASE REVOLVING LINE OF CREDIT AGREEMENT

Exhibit 10.1

FOURTH AMENDMENT TO BORROWING BASE

REVOLVING LINE OF CREDIT AGREEMENT

This Fourth Amendment to Borrowing Base Revolving Line of Credit Agreement (“ Amendment ”) is entered into to as of May 14, 2008 between WILLIAM LYON HOMES, INC., a California corporation (“ Borrower ”) and WACHOVIA BANK, NATIONAL ASSOCIATION, a national banking association (“ Lender ”), formerly referenced as Agent for Wachovia Financial Services, Inc., a North Carolina corporation, which Amendment is consented to by Guarantor WILLIAM LYON HOMES, a Delaware corporation (“ Guarantor ”).

RECITALS :

A. Borrower has received a revolving line of credit from Lender in the maximum commitment amount of $50,000,000.00 (the “ Loan ”) for the acquisition and development of Approved Subdivisions pursuant to the terms of that certain Borrowing Base Revolving Line of Credit Agreement dated as of February 14, 2006, between Borrower and Lender, and as amended by that certain First Amendment to Borrowing Base Revolving Line of Credit Agreement dated as of September 29, 2006, as further amended by that certain Second Amendment to Borrowing Base Revolving Line of Credit Agreement dated as of March 30, 2007, and as further amended by that certain Third Amendment to Borrowing Base Revolving Line of Credit Agreement dated as of January 23, 2008 (as the same may be further amended, modified, extended, renewed, restated or supplemented from time to time, the “ Loan Agreement ”) and as further evidenced by that certain Amended and Restated Borrowing Base Secured Promissory Note executed by Borrower and payable to the order of Lender (as amended, restated and otherwise modified from time to time, the “ Note ”). All capitalized terms used herein and not otherwise defined shall have the meanings given to such terms in the Loan Agreement.

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

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

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

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

AGREEMENT :

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

Borrower and Lender acknowledge the accuracy of the recitals.

2.1 Definitions .

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

“ Commitment Amount ” means TWENTY-FIVE MILLION AND NO/100THS DOLLARS ($25,000,000.00) subject to such increases or decreases thereof pursuant to Section 2.1(d) and Section 2.1(e) ; provided, however, upon the occurrence of a Term Out Date pursuant to Section 2.1(h) , the Commitment Amount shall be deemed to be that amount which is equal to the aggregate amount of Outstanding Loan Borrowings as of such Term Out Date.

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

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

(a) At such time as the amount of Compensating Balances is equal to or greater than $10,000,000, (i) the LIBOR Rate plus 3.00%, or (ii) the Prime Rate plus 0.75%, in either case, rounded upwards to the nearest one-eighth percent (.125%), or

(b) At such time as the amount of Compensating Balances is equal to or greater than $5,000,000 but less than $10,000,000, (i) the LIBOR Rate plus 3.75%, or (ii) the Prime Rate plus 1.50%, in either case, rounded upwards to the nearest one-eighth percent (.125%), or

(c) At such time as the amount of Compensating Balances is less than $5,000,000, (i) the LIBOR Rate plus 4.00%, or (ii) the Prime Rate plus 2.00%, in either case, rounded upwards to the nearest one-eighth percent (.125%).

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As used herein, “ LIBOR Based Rate ” means an Interest Rate based on the LIBOR Rate, and “ Prime Based Rate ” means an Interest Rate based on the Prime Rate. LIBOR Based Rates shall be adjusted from time to time as of each Interest Rate Adjustment Date. Prime Based Rates shall be adjusted from time to time as and when the Prime Rate is adjusted. Borrower may not elect to convert or otherwise change the Interest Rate except in connection with an Advance Request. Interest shall accrue on the entire outstanding balance of the Loan at the Interest Rate selected by Borrower until such time as Borrower elects to convert such Interest Rate to the other available Interest Rate (i.e., LIBOR Based Rate or Prime Based Rate); provided that the applicable Interest Rate shall be the Default Rate at any time an Event of Default has occurred and is continuing. In the event no such Interest Rate election is made by Borrower, the Interest Rate shall be deemed to be the LIBOR Based Rate.

2.1.3 The definition of “ Facility LC Sublimit ” set forth in Section 1.1 of the Loan Agreement is hereby amended and restated as follows:

“ Facility LC Sublimit ” means the amount of Ten Million Dollars ($10,000,000).

2.1.4 The definition of “ LIBOR Rate ” in Section 1.1 of the Loan Agreement is hereby amended to provide that in no event shall the LIBOR Rate be less than 2.00%.

2.1.5 The definition of “ Maturity Date ” in Section 1.1 of the Loan Agreement is hereby amended by deleting the reference therein to “May 14, 2008” and inserting in place thereof “May 12, 2009”.

2.1.6 The definition of “ Maximum Allowed Advance ” in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety as follows:

“ Maximum Allowed Advance ” means the maximum advance rate with respect to any Pre-Development, Land, Lot or Unit, with such rate being equal to the following:

(a) With respect to Pre-Development Land:

(i) which constitutes Detached Lots, the lesser of (i) 50% of the Appraised Value of the Pre-Development Land, or (ii) 50% of the Pre-Development Land Acquisition Cost; and

(ii) which constitutes Attached Lots, the lesser of (i) 50% of the Appraised Value of the Pre-Development Land, or (ii) 60% of the Pre-Development Land Acquisition Cost.

(b) With respect to Land Under Development:

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(i) which constitutes Detached Lots, the lesser of (A) 70% of the Appraised Value of the Land Under Development, or (B) 75% of the A&D Lot Development Budget Costs for such Land Under Development;

(ii) which constitutes Attached Lots (but excluding any High Density Lots), the lesser of (A) 65% of the Appraised Value of the Land Under Development, or (B) 70% of the A&D Lot Development Budget Costs for such Land Under Developments;

(iii) which constitutes High End Lots (but excluding any High Density Lots), the lesser of (A) 60% of the Appraised Value of the Land Under Development, or (B) 65% of the A&D Lot Development Budget Costs for such Land Under Development; and

(iv) with respect to any Land Under Development which constitutes High Density Lots, the Maximum Allowed Advance shall be determined by Lender as a condition precedent to the inclusion of the applicable Subdivision as an Approved Subdivision.

(c) With respect to A&D Completed Lots:

(i) which constitute Detached Lots, the lesser of (A) 75% of the Appraised Value of the A&D Completed Lot, or (B) 75% of the Total Lot Cost for the A&D Completed Lot;

(ii) which constitute Attached Lots (but excluding High Density Lots), the lesser of (A) 75% of the Appraised Value of the A&D Completed Lot, or (B) 75% of the Total Lot Cost for the A&D Completed Lot;

(iii) which constitute High End Lots (but excluding High Density Lots), the lesser of (A) 70% of the Appraised Value of the A&D Completed Lot, or (B) 70% of the Total Lot Cost for the A&D Completed Lot; and

(iv) which constitute High Density Lots, the Maximum Allowed Advance shall be determined by Lender as a condition precedent to the inclusion of the applicable Subdivision as an Approved Subdivision;

provided , however , that in the event the Lot term for A&D Completed Lots is extended pursuant to Section 3.2(c) , the maximum advance rate with respect to A&D Completed Lots, whether constituting an Attached Unit or a Detached Unit, shall be the lesser of (A) 50% of the Appraised Value of the A&D

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Completed Lot, or (B) 50% of the Total Lot Cost for the A&D Completed Lot.

(d) With respect to each Detached Unit:

(i) For each Presold Unit, the lesser of (A) 75% of the lower of the Appraised Value for that Unit or the estimated Net Sales Proceeds to be received with respect to that Unit pursuant to the applicable Purchase Contract, or (B) 95% of the Unit Cost for that Unit;

(ii) For each Spec Unit, the lesser of (A) 75% of the Appraised Value for that Unit or (B) 90% of the Unit Cost for that Unit; and

(iii) For each Model Unit, the lesser of (A) 75% of the Appraised Value for that Unit or (B) 85% of the Unit Cost for that Unit.

(e) With respect to each Attached Unit:

(i) For each Presold Unit, the lesser of (A) 75% of the lower of the Appraised Value for that Unit or the estimated Net Sales Proceeds to be received with respect to that Unit pursuant to the applicable Purchase Contract of the Appraised Value for that Unit, or (B) 90% of the Unit Cost for that Unit;

(ii) For each Spec Unit, the lesser of (A) 75% of the Appraised Value for that Unit or (B) 85% of the Unit Cost for that Unit; and

(iii) For each Model Unit, the lesser of (A) 75% of the Appraised Value for that Unit or (B) 75% of the Unit Cost for that Unit.

Provided, however, notwithstanding the foregoing in clauses (d) and (e), (i) with respect to each High End Unit, the foregoing Maximum Allowed Advance Rates with respect to such High End Unit, whether constituting an Attached Unit or a Detached Unit, shall be reduced by 5%; and (ii) with respect to any High Density Units, the Maximum Allowed Advance shall be determined by Lender as a condition precedent to the inclusion of the applicable Subdivision (which contains such High Density Units) as an Approved Subdivision.

2.1.7 The following definitions are hereby added to Section 1.1 of the Agreement:

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“ Compensating Balances ” means the aggregate amount of deposits of WLH and any Affiliate of WLH maintained with Lender, including deposits in any interest-bearing account; provided , however , that such amount shall exclude the amount of any collateralized funds in any deposit account, including, without limitation, those funds in which Borrower has granted Lender a security interest in exchange for the issuance of any letter of credit.

“ Facility Increase ” means as defined in Section 2.1(d)(i) .

2.2 Increase In Commitment Amount . The following Section 2.1(d) is hereby amended and restated in its entirety as follows:

(d) Increase In Commitment Amount .

(i) Request for Increase . Provided that no Event of Default or Unmatured Event of Default has occurred and is continuing, Borrower may, at any time and from time to time, request, by notice to Lender, Lender’s approval of an increase of the Commitment Amount (a “ Facility Increase ”) within the limitations hereafter described, which request shall set forth the amount of each such requested Facility Increase. Within twenty (20) days of such request, Lender shall advise Borrower of its approval or disapproval of such request, and failure to so advise Borrower shall constitute disapproval. If Lender approves of any such Facility Increase, then the Commitment Amount may be so increased up to the amount of such approved Facility Increase.

(ii) Requirements . Any Facility Increase shall be subject to the following requirements, limitations and conditions: (A) any increase in the Commitment Amount shall not be less than $5,000,000 (and shall be in integral multiples of $5,000,000 if in excess thereof); (B) after giving effect to the Facility Increase and all prior Facility Increases, the Commitment Amount shall not exceed Forty Million Dollars ($40,000,000); (C) Borrower shall have executed and delivered to Lender such Note or Notes as Lender shall require to reflect such Facility Increase; (D) Borrower shall have delivered to Lender appropriate opinions of counsel as to such matters as Lender may request; (E) any other Person who has executed any Loan Documents, shall have consented in writing to the Facility Increases and shall have agreed that their obligations under such Loan Documents continue in full force and effect; and (F) Borrower, and Lender shall otherwise have executed and delivered such other instruments and documents as Lender shall have reasonably requested in connection with such Facility Increase. The form and substance of the documents