From Where Legends Rule:
French movie magazine "Cine-Encore" has apparently confirmed that an Urban Legend 3 is in the works! Here is the translation of the article itself:
"Talk about not knowing when to stop! News has emerged that Phoenix Pictures are making an Urban Legend 3! It seems that poor box office showings by the first two installments have not put off bosses at the movie studio and we can reveal that the second sequel - as yet untitled - has been given the green light. Filming is expected to commence late 2001, with a United States cinematic release of October 2002. The plot is being heavily guarded by Sony at present -- as if anyone cares..."
As they say, "any UL3 news is good news!"