Amendment No. 1 to Master Repurchase Agreement (2007 Non-Investment Grade Securities) among Wachovia and NovaStar Entities

 Exhibit 10.3 AMENDMENT NUMBER ONE to the MASTER REPURCHASE AGREEMENT (2007 NON-INVESTMENT GRADE SECURITIES) Dated as of May 31, 2007 AMONG WACHOVIA INVESTMENT HOLDINGS, LLC WACHOVIA CAPITAL MARKETS, LLC, NOVASTAR MORTGAGE, INC., NOVASTAR CERTIFICATES FINANCING LLC, NOVASTAR CERTIFICATES FINANCING CORPORATION, NOVASTAR FINANCIAL, INC., AND NFI HOLDING CORPORATION, AMENDMENT NUMBER ONE ("Amendment Number One"), dated as of September 7, 2007, by and among Wachovia Investment Holdings, LLC, as buyer ("Buyer"), Wachovia Capital Markets, LLC ("Agent"), NovaStar Mortgage, Inc. ("NMI"), NovaStar Certificates Financing LLC ("NCF") and NovaStar Certificates Financing Corporation ("NovaStar Financing", together with NMI and NCF, each a "Seller" and collectively, jointly and severally, the "Sellers") and NovaStar Financial, Inc. ("NFI") and NFI Holding Corporation ("NFI Holding", together with NFI, each a "Guarantor" and collectively, jointly and severally, the "Guarantors") to the Master Repurchase Agreement (2007 Non-Investment Grade Securities), dated as of May 31, 2007, (as amended, the "Master Repurchase Agreement"), among the Buyer, Agent, Sellers and Guarantors. RECITALS WHEREAS, Buyer, the Sellers, the Guarantors and the Agent have agreed to amend the Master Repurchase Agreement pursuant to the terms and conditions set forth herein. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: SECTION 1. Defined Terms. Any terms capitalized but not otherwise defined herein shall have the respective meanings set forth in the Master Repurchase Agreement. SECTION 2. Amendments. Effective as of the date hereof, the Master Repurchase Agreement is hereby amended as follows: (a) The first sentence in Section 9(a)(vi) of the Master Repurchase Agreement is hereby amended by deleting the reference to "$517,000,000" therein and 

 replacing it with "$150,000,000". (b) Section 13(u) of the Master Repurchase Agreement is hereby amended and restated in its entirety as follows: u. Maintenance of Adjusted Tangible Net Worth. The Adjusted Tangible Net Worth of NFI at any time shall be greater than $150,000,000. (c) Section 18(p) of the Master Repurchase Agreement is hereby amended and restated in its entirety as follows: p. [reserved]; (d) Section 18(q) of the Master Repurchase Agreement is hereby amended and restated in its entirety as follows:. q. the Adjusted Tangible Net Worth of NFI, on a consolidated basis, is less than or equal to $150,000,000 at any time;" (e) Clause (i) of Exhibit A-2 to the Master Repurchase Agreement is hereby deleted in its entirety and replaced with the following: (i) [reserved]; (f) Clause (ii) of Exhibit A-2 to the Master Repurchase Agreement is hereby amended by deleting the reference to "$517,000,000" therein and replacing it with "$150,000,000". SECTION 3. Conditions Precedent. This Amendment Number One shall become effective only when: (a) this Amendment Number One is executed and delivered by duly authorized officers of each of Buyer, Seller, Guarantors and Agent; (b) Buyer shall have received all fees and other amounts due and payable on or prior to the date hereof, including reimbursement of all out-of pocket expenses required to be reimbursed or paid by Seller hereunder or any other Program Document; (c) Any other deliverable due as the date hereof to Buyer; and (d) Buyer has received any other documents as the Buyer or counsel to the Buyer may reasonably request. 

 SECTION 4. Governing Law. THIS AMENDMENT NUMBER ONE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. SECTION 5. Counterparts. This Amendment Number One may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. SECTION 6. Costs. Sellers shall promptly reimburse Buyer for all out-of-pocket costs and expenses of Buyer in connection with the preparation, execution and delivery of this Amendment Number One (including, without limitation, the fees and expenses of counsel for Buyer). SECTION 7. Limited Effect. Except as amended hereby, the Master Repurchase Agreement shall continue in full force and effect in accordance with its respective terms. Reference to this Amendment Number One need not be made in the Master Repurchase Agreement or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to, or with respect to, the Master Repurchase Agreement, any reference therein to the Master Repurchase Agreement, being sufficient to refer to the Master Repurchase Agreement, as amended thereby. Sellers shall be responsible for all costs associated with this Amendment Number One. [SIGNATURE PAGE FOLLOWS] 

 IN WITNESS WHEREOF, Sellers, Buyer, Agent and Guarantors have caused their names to be signed to this Amendment Number One by their respective officers thereunto duly authorized as of the date first above written. NOVASTAR MORTGAGE, INC., as Seller By: /s/ Todd M. Phillips ------------------------------- Name: Todd M. Phillips Title: Vice President, Treasurer & Controller NOVASTAR CERTIFICATES FINANCING LLC, as Seller By: /s/ Todd M. Phillips ------------------------------- Name: Todd M. Phillips Title: Vice President, Treasurer & Controller NOVASTAR CERTIFICATES FINANCING CORPORATION, as Seller By: /s/ Todd M. Phillips ------------------------------- Name: Todd M. Phillips Title: Vice President, Treasurer & Controller Amendment No. 1 to the Master Repurchase Agreement (Non-Investment Grade Securities) 

 WACHOVIA INVESTMENT HOLDINGS, LLC, as Buyer By: /s/ Andrew W. Riebe -------------------------------------- Name: Andrew W. Riebe ------------------------------------ Title: Director ----------------------------------- WACHOVIA CAPITAL MARKETS, LLC, as Agent By: /s/ Scott Schuman -------------------------------------- Name: Scott Schuman ------------------------------------ Title: Vice President ----------------------------------- Amendment No. 1 to the Master Repurchase Agreement (Non-Investment Grade Securities) 

 Acknowledged and Agreed: NFI HOLDING CORPORATION, as Guarantor By: /s/ Todd M. Phillips ------------------------------- Name: Todd M. Phillips Title: Vice President, Treasurer & Controller NOVASTAR FINANCIAL, INC., as Guarantor By: /s/ Todd M. Phillips ------------------------------- Name: Todd M. Phillips Title: Vice President, Treasurer & Controller Amendment No. 1 to the Master Repurchase Agreement (Non-Investment Grade Securities)