Amendment Number Two to Master Repurchase Agreement (2007 Whole Loan) Among Wachovia Bank, NFI Repurchase Corporation, NMI Repurchase Corporation, HomeView Lending, NMI Property Financing, NFI Holding, NovaStar Financial, and NovaStar Mortgage

 Exhibit 10.4 AMENDMENT NUMBER TWO to the MASTER REPURCHASE AGREEMENT (2007 WHOLE LOAN) Dated as of May 9, 2007 AMONG WACHOVIA BANK, NATIONAL ASSOCIATION, NFI REPURCHASE CORPORATION, NMI REPURCHASE CORPORATION, HOMEVIEW LENDING, INC., NMI PROPERTY FINANCING, INC., NFI HOLDING CORPORATION, NOVASTAR FINANCIAL, INC. AND NOVASTAR MORTGAGE, INC AMENDMENT NUMBER TWO ("Amendment Number Two"), dated as of April 30, 2008, by and among Wachovia Bank, National Association, as buyer and agent (in its capacity as buyer, the "Buyer" and in its capacity as agent, the "Agent"), NFI Repurchase Corporation ("NFI Repurchase"), NMI Repurchase Corporation ("NMI Repurchase"), HomeView Lending, Inc. ("HVL") and NMI Property Financing, Inc. ("NovaStar Asset" together with NFI Repurchase, NMI Repurchase and HVL each a "Seller" and collectively, jointly and severally, the "Sellers") NovaStar Financial, Inc. ("NFI"), NFI Holding Corporation ("NFI Holding"), NovaStar Mortgage, Inc. ("NMI" together with HVL, NFI and NFI Holding, each a "Guarantor" and collectively, jointly and severally, the "Guarantors") to the Master Repurchase Agreement (2007 Non- Investment Grade Securities), dated as of May 9, 2007, (as amended, the "Master Repurchase Agreement"), among the Buyer, 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) Section 27 (i) is hereby modified by deleting the reference to "May Amendment No.2 to the Master Repurchase Agreement (Whole Loan) 

 8, 2008" therein and replacing it with "May 29, 2008". SECTION 3. Conditions Precedent. This Amendment Number Two shall become effective only when: (a) this Amendment Number Two 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 TWO 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 Two 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-ofpocket costs and expenses of Buyer in connection with the preparation, execution and delivery of this Amendment Number Two (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 Two 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 Two. [SIGNATURE PAGE FOLLOWS] Amendment No.2 to the Master Repurchase Agreement (Whole Loan) 

 IN WITNESS WHEREOF, Sellers, Buyer, Agent and Guarantors have caused their names to be signed to this Amendment Number Two by their respective officers thereunto duly authorized as of the date first above written. NFI REPURCHASE CORPORATION, as a Seller By: /s/ Rodney E. Schwatken -------------------------------------- Title: SVP, Chief Financial Officer and Secretary NMI REPURCHASE CORPORATION, as a Seller By: /s/ Rodney E. Schwatken -------------------------------------- Title: SVP, Chief Financial Officer and Secretary HOMEVIEW LENDING, INC., as a Seller By: /s/ Rodney E. Schwatken -------------------------------------- Title: SVP, Chief Financial Officer and Secretary NMI PROPERTY FINANCING, INC., as a Seller By: /s/ Rodney E. Schwatken -------------------------------------- Name: Rodney E. Schwatken Title: SVP, Chief Financial Officer and Secretary Amendment No.2 to the Master Repurchase Agreement (Whole Loan) 

 WACHOVIA BANK, NATIONAL ASSOCIATION, as Buyer and Agent By: /s/ Andrew W. Riebe -------------------------------------- Name: Andrew W. Riebe Title: Director Amendment No.2 to the Master Repurchase Agreement (Whole Loan) 

 Acknowledged and Agreed: NFI HOLDING CORPORATION, as a Guarantor By: /s/ Rodney E. Schwatken -------------------------------------- Name: Rodney E. Schwatken Title: SVP, Chief Financial Officer and Secretary NOVASTAR FINANCIAL, INC., as a Guarantor By: /s/ Rodney E. Schwatken -------------------------------------- Name: Rodney E. Schwatken Title: SVP, Chief Financial Officer and Secretary NOVASTAR MORTGAGE INC., as a Guarantor By: /s/ Rodney E. Schwatken -------------------------------------- Name: Rodney E. Schwatken Title: SVP, Chief Financial Officer and Secretary HOMEVIEW LENDING, INC., as a Guarantor By: /s/ Rodney E. Schwatken -------------------------------------- Name: Rodney E. Schwatken Title: SVP, Chief Financial Officer and Secretary Amendment No.2 to the Master Repurchase Agreement (Whole Loan)