Master Repurchase Agreement (2007 Servicing Rights) among Wachovia Bank, N.A., Wachovia Capital Markets, LLC, and NovaStar Mortgage, Inc.

 MASTER REPURCHASE AGREEMENT (2007 SERVICING RIGHTS) Dated as of April 25, 2007 AMONG: Wachovia Bank, N.A. ("Buyer", which term shall include any "Principal" as defined and provided for in Annex I), as buyer, and Wachovia Capital Markets, LLC, as agent pursuant hereto ("Agent"); and NovaStar Mortgage, Inc. ("NMI") (the "Seller"). 1. APPLICABILITY Buyer shall, from time to time, upon the terms and conditions set forth herein, agree to enter into transactions in which the Seller transfers to Buyer Eligible Assets against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to the Seller such Purchased Assets at a date certain, against the transfer of funds by the Seller. Each such transaction shall be referred to herein as a "Transaction", and, unless otherwise agreed in writing, shall be governed by this Agreement. 2. DEFINITIONS AND INTERPRETATION a. Defined Terms. "2006 Dividend" shall mean the dividend distribution to be made by NFI to comply with U.S. federal income tax law requirements for REITs to distribute at least 90% of their REIT taxable income. "Adjusted Tangible Net Worth" shall mean at any date: (a) Book Net Worth plus the notional amount of any Trust Preferred Securities, minus (b) The sum of (1) all assets which would be classified as intangible assets of NFI and its consolidated Subsidiaries under GAAP (except purchased and capitalized value of servicing rights), including, without limitation, goodwill (whether representing the excess cost over book value of assets acquired or otherwise), patents, trademarks, trade names, copyrights, franchises and deferred charges (including, without limitation, unamortized debt discount and expense, organization costs and research and product development costs) plus (2) all receivables from directors, officers and shareholders of NFI and its consolidated Subsidiaries, minus (c) The amount of unrealized gains on debt securities (as defined in FASB 115) of NFI and any Subsidiaries of NFI Holding, plus 1 

 (d) The amount of unrealized losses on debt securities (as defined in FASB 115) of NFI and any Subsidiaries of NFI Holding. Provided that in all cases such amounts shall be determined by combining the relevant figures for NFI and its consolidated Subsidiaries and its Affiliates, as accounted for under the equity method. "Affiliate" means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting equity, by contract or otherwise. "Agency Contract" means any contract or agreement for the sale and/or servicing of Mortgage Loans entered into between Seller and an Agency, and all amendments thereto. "Agency" shall mean Freddie Mac, Fannie Mae or Ginnie Mae, as applicable. "Agent" means Wachovia Capital Markets, LLC or any successor. "Agreement" means this Master Repurchase Agreement (2007 Servicing Rights), as it may be amended, supplemented or otherwise modified from time to time. "Ancillary Income" shall mean all income derived from the Serviced Loans related to Servicing Rights sold hereunder, excluding Servicing Fees and any Prepayment Charges that may be attributable thereto, including but not limited to interest received on funds deposited in the custodial account or any escrow account, late charges, fees received with respect to checks or bank drafts returned by the related bank for non-sufficient funds, assumption fees, optional insurance administrative fees or insurance premium fees and all other incidental fees and charges that may be referred to as "ancillary income" in the Servicing Agreements, with respect to which the right to receive or collect such income is owned by Seller as Servicer. "Book Net Worth" shall mean the excess of total assets of NFI and its consolidated Subsidiaries over Total Liabilities of NFI and its consolidated Subsidiaries determined in accordance with GAAP (or such non-GAAP principles as may be disclosed to and approved by Buyer from time to time). "Breakage Costs" shall have the meaning assigned thereto in Section 3(c) herein. "Business Day" means any day other than (i) a Saturday or Sunday or (ii) a day upon which the New York Stock Exchange or the Federal Reserve Bank of New York is obligated by law or executive order to be closed. "Buyer's Margin Amount" means, with respect to any Transaction as of any date of determination, the amount obtained by application of Buyer's Margin Percentage to the Repurchase Price for such Transaction as of such date. "Buyer's Margin Percentage" shall have the meaning assigned thereto in the Side Letter. 2 

 "Call Rights" means all rights of Seller under any Eligible Servicing Agreements, if any, to purchase the remaining mortgage loans and all other related assets under the optional termination or any similar provision contained in any Eligible Servicing Agreement. "Call Rights Assignment" shall mean, with respect to each Purchased Asset, an assignment of all right, title and interest of the holder of the Call Rights in the related Call Rights to Buyer, substantially in the form attached hereto as Exhibit I. "Call Rights Assignment Notice" shall mean, with respect to any Purchased Asset, a notice to the applicable Trustee of the assignment of the related Call Rights to Buyer hereunder, substantially in the form of Exhibit J. "Capital Stock" shall mean any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all similar ownership interests in a Person (other than a corporation) and any and all warrants or options to purchase any of the foregoing. "Change of Control" shall mean any person or group of persons (other than (i) any subsidiary of NFI or (ii) any employee or director benefit plan or stock plan of NFI or any subsidiary of NFI or any trustee or fiduciary with respect to any such plan when acting in that capacity or any trust related to any such plan) shall have acquired beneficial ownership of shares representing more than 50% of the combined voting power represented by the outstanding common stock of NFI (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, and the applicable rules and regulations thereunder). "Change in Law" means (a) the adoption of any law, rule or regulation after the date of this Agreement, (b) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (c) compliance by Buyer (or any Affiliate of Buyer) with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Collateral" shall have the meaning assigned thereto in Section 8 hereof. "Collateral Security, Setoff and Netting Agreement" means the Collateral Security, Setoff and Netting Agreement dated as of April 18, 2007 among Buyer and certain Affiliates and NFI, NMI and certain Affiliates as it may be further amended from time to time "Combined Market Value" means the aggregate Market Value of the Purchased Assets and the market value of the residual securities and other assets, if any, that are purchased pursuant to the Master Repurchase Agreement (2007 Residual Securities). "Combined Maximum Aggregate Purchase Price" shall have the meaning assigned thereto in the Side Letter. 3 

 "Combined Purchase Price" means the aggregate Purchase Price of the Purchased Assets and the purchase price of the residual securities and other assets, if any that are purchased pursuant to the Master Repurchase Agreement (2007 Residual Securities). "Commitment Letter" means the commitment letter, dated as of April 11, 2007, among the Buyer, the Agent, Wachovia Investment Holdings, LLC, the Seller and NFI. "Confirmation" shall have the meaning assigned thereto in Section 4(b) hereof. "Default" means any event, that, with the giving of notice or the passage of time or both, would constitute an Event of Default. "Default Rate" means, as of any date of determination, the lesser of (i) the Prime Rate plus 4% and (ii) the maximum rate permitted by applicable law. "Dividend Securities" shall mean notes, bonds, debentures or common or preferred stock of NFI or its subsidiaries that qualify as property and will be treated as a deductible dividend to NFI shareholders under the Code, and are reasonably acceptable to the Buyer. "Effective Date" shall mean the date set forth on the top of the first page of this Agreement. "Eligible Assets" shall mean Eligible Servicing Rights. "Eligible Servicing Agreement" shall mean a Servicing Agreement in respect of which the following eligibility requirements have been satisfied: (a) such Servicing Agreement is in form and substance satisfactory to, and has been reviewed and approved by, the Buyer in its sole discretion, and such Servicing Agreement contains servicing and assignment of servicing rights provisions acceptable to the Buyer and with respect to the Servicing Agreements identified in Sections (a) and (b) of Schedule 1, Buyer shall have received the Resignation Letter and the Trustee Side Letter. The Buyer shall hold the Resignation Letter and Trustee Side Letter in escrow until the earliest of: (i) the resignation of the Seller as Servicer or (ii) the occurrence of an Event of Default. (b) such Servicing Agreement is in full force and effect, and is in all respects genuine as appearing on its face or as represented in the books and records of the Seller, and no event of default, early amortization event, termination event, or other event giving any party thereto (including with notice or lapse of time or both) the right to terminate the Seller as servicer thereunder for cause has occurred and is continuing; (c) the Servicing Rights arising thereunder are free and clear of liens in favor of any Person, except as provided hereunder, and are not subject to any dispute or other adverse claim, counterclaim, defense or right of set-off, exclusive of 4 

 any ordinary course of business disputes or claims with related mortgagors/borrowers; (d) the Seller has not resigned or been terminated as servicer under such Servicing Agreement and has no actual knowledge of any pending or threatened action to terminate the Seller, as servicer (whether for cause or without cause); and (e) the whole loan owner or the securitization trustee under the Servicing Agreements identified in Sections (a) and (b) of Schedule 1, has acknowledged and agreed to the form and substance of the Trustee Side Letter and Resignation Letter. "Eligible Servicing Rights" shall mean Servicing Rights in respect of which the following eligibility requirements have been satisfied: (a) such Servicing Rights constitute a "general intangible" within the meaning of Section 9-102(a)(42) (or the corresponding provision of the applicable jurisdiction) of the UCC of all applicable jurisdictions; (b) such Servicing Right arises under and is attributable to an Eligible Servicing Agreement; (c) the sale and grant of a security interest by the Seller to the Buyer on such Servicing Rights under the related Eligible Servicing Agreement, as collateral for the Obligations, does not and will not violate any Requirement of Law, the effect of which violation is to render void or voidable such assignment, or to permit the termination of the Servicing Rights of the Seller under such Eligible Servicing Agreement; (d) the Seller is the sole owner of such Servicing Rights, unless otherwise approved in writing by the Buyer; (e) the servicing obligations under the related Eligible Servicing Agreement are being performed, and will be performed, directly by the Servicer or the Subservicer, and not by any other person; and (f) the representations and warranties contained on Exhibit C hereto are true and correct at all times. (g) the Serviced Loans serviced under the related Eligible Servicing Agreement do not constitute open-ended home equity lines of credit, unless otherwise approved in writing by the Buyer. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time. "ERISA Affiliate" shall mean any corporation or trade or business that is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which Seller is a member 5 

 and (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Seller is a member. "Event of Default" shall have the meaning assigned thereto in Section 18 hereof. "Existing Agreements" shall include the agreements and facilities regarding the transactions set forth on Schedule 4 attached hereto. "GAAP" shall mean generally accepted accounting principles in the United States of America in effect from time to time. "Governmental Authority" shall mean any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions over Seller. "Guarantee" means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person. "Guaranty and Pledge Agreement" shall mean the guaranty and pledge agreement in substantially the form attached hereto as Exhibit E governing the pledge by NFI Holding of Pledged Stock to Buyer and the guaranty of the Guarantors in favor of Buyer. "Guarantors" means NFI, NFI Holding Corporation, NMI, and Homeview Lending, Inc. "Hedge Instrument" means, any interest rate cap agreement, interest rate floor agreement, interest rate swap agreement or other interest rate hedging agreement or instrument entered into by Seller with respect to the Servicing Rights and/or Transactions. "Income" means, with respect to any Purchased Asset at any time, all Servicing Fees, Ancillary Income, and any and all other income that may be related thereto that is received or retained by Seller as Servicer, net of any amounts required to be paid by Servicer (including, but not limited to any Subservicing Fees) to any other Person, but only to the extent not otherwise pledged to investors in a pass-through transfer with respect to the related Serviced Loans. "Indebtedness" shall mean, for any Person: (a) all obligations for borrowed money; (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable and paid within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (c) indebtedness of others secured by a lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued for account of such Person; (e) capital lease obligations of such Person; (f) obligations of such Person under repurchase agreements or like arrangements financially equivalent to obligations for borrowed money; (g) indebtedness of others guaranteed on a recourse basis by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by 6 

 such Person; (i) indebtedness of general partnerships of which such Person is a general partner; and (j) any other contingent liabilities of such Person for the liabilities or obligations of any other Person. "Investment Company Act" means the Investment Company Act of 1940, as amended, including all rules and regulations promulgated thereunder. "LIBOR" shall mean, for each day of a Transaction, a rate based on the offered rates of the Reference Banks for one-month U.S. dollar deposits, as determined by Buyer for the related Purchase Date. "Lien" shall mean, any mortgage, lien, pledge, charge, security interest, option or claim or similar encumbrance. "Margin Call" shall have the meaning assigned thereto in Section 6(a) hereof. "Margin Deficit" shall have the meaning assigned thereto in Section 6(a) hereof. "Market Value" means (i) with respect to any Purchased Asset that is an Eligible Asset, as of any date of determination, the value ascribed to such asset by Buyer in its sole discretion, and (ii) with respect to a Purchased Asset that is not an Eligible Asset, zero. "Master Repurchase Agreement (2007 Residual Securities)" means that certain master repurchase agreement (2007 Residual Securities), dated as of April 18, 2007, among Wachovia Investment Holdings, LLC, Wachovia Capital Markets, LLC, NovaStar Mortgage, Inc., NovaStar Certificates Financing Corporation and NovaStar Assets Corp., as amended from time to time. "Material Adverse Change" means any material adverse change in the business, financial performance, assets, operations or condition (financial or otherwise) of NFI and its consolidated subsidiaries taken as a whole of such Person. "Material Adverse Effect" means (a) a Material Adverse Change with respect to a Guarantor or a Guarantor and its Affiliates that are party to any Program Document taken as a whole; (b) a material impairment of the ability of a Guarantor or any Affiliate that is a party to any Program Document to perform under any Program Document and to avoid any Event of Default or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Document against a Guarantor or any Affiliate that is a party to any Program Document. "Maximum Aggregate Purchase Price" shall have the meaning assigned thereto in the Side Letter. "MBS" shall mean collateralized mortgage obligations and other mortgage-backed securities. "Mortgage" shall mean with respect to a Mortgage Loan, the mortgage, deed of trust or other instrument, which creates a lien on the fee simple or a leasehold estate in such real property, which secures the Mortgage Note. 7 

 "Mortgage Loan" shall mean any first or second lien, one-to-four-family residential mortgage loan relating to Servicing Rights, which includes, without limitation, (i) a Mortgage Note, the related Mortgage and all other related documents and (ii) all right, title and interest of the Mortgagee in and to the Mortgaged Property covered by the related Mortgage. "Mortgage Note" shall mean the original executed promissory note or other evidence of the indebtedness of a mortgagor/borrower with respect to a Mortgage Loan. "Mortgaged Property" means the real property (including all improvements, buildings, fixtures, building equipment and personal property thereon and all additions, alterations and replacements made at any time with respect to the foregoing) and all other collateral securing repayment of the debt evidenced by a Mortgage Note. "Non-Seller Affiliate" means an Affiliate of Seller or Guarantor that is not, itself, a Seller or Guarantor. "Notice Date" shall have the meaning assigned thereto in Section 4 hereof. "NFI" means NovaStar Financial, Inc. and its permitted successors and assigns. "NFI Holding" means NFI Holding Corporation and its permitted successors and assigns. "Obligations" means (a) all of Seller's and Guarantors' obligation to pay the Repurchase Price on the Repurchase Date, and other obligations and liabilities of Seller and Guarantors, to Buyer or its Affiliates arising under, or in connection with, the Program Documents or otherwise, whether now existing or hereafter arising; (b) any and all sums paid by Buyer or on behalf of Buyer pursuant to the Program Documents in order to preserve any Purchased Asset or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of Seller's or Guarantors' indebtedness, obligations or liabilities referred to in clause (a), the reasonable expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Purchased Asset, or of any exercise by Buyer or such Affiliate of its rights under the related agreements, including without limitation, reasonable attorneys' fees and disbursements and court costs; and (d) all of Seller's and Guarantors' obligations to Buyer or any other Person pursuant to the Program Documents. "Person" shall mean any legal person, including any individual, corporation, partnership, association, joint-stock company, trust, limited liability company, unincorporated organization, governmental entity or other entity of similar nature. "Plan" shall mean an employee benefit or other plan established or maintained by Seller or any ERISA Affiliate and covered by Title IV of ERISA, other than a Multiemployer Plan. "Prepayment Charges" means, with respect to any Serviced Loan related to any Servicing Rights sold hereunder, the charges or premiums, if any, due in connection with a full or partial prepayment of such Serviced Loan in accordance with the terms thereof, as to which the right to receive such charges and premiums may be owned by the Seller as Servicer under the Servicing 8 

 Agreements. "Pledged Stock" shall mean all of the shares of Capital Stock of Seller, together with all stock certificates, options or rights of any nature whatsoever which may be issued or granted by Seller while this Agreement is in effect. "Price Differential" means, with respect to each Transaction as of any date, the aggregate amount obtained by daily application of the Pricing Rate for such Transaction to the Purchase Price on a 360-day-per-year basis for the actual number of days during the period commencing on (and including) the Purchase Date and ending on (but excluding) the date of determination (reduced by any amount of such Price Differential in respect of such period previously paid by the Seller to Buyer) with respect to such Transaction. "Pricing Rate" shall have the meaning assigned thereto in the Side Letter. "Prime Rate" means the daily prime loan rate as reported in The Wall Street Journal or if more than one rate is published, the highest of such rates. "Principal" shall have the meaning given to it in Annex I. "Program Documents" means this Agreement, the Collateral Security, Setoff and Netting Agreement, the Pledge Agreement, the Commitment Letter, the Master Repurchase Agreement (2007 Residual Securities), the Side Letter, the Resignation Letter, the Trustee Side Letter, and any other agreement entered into by any of the Seller and/or a Guarantor, on the one hand, and Buyer or one of its Affiliates on the other, in connection herewith or therewith. "Property" means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible. "Purchase Date" means the date on which Purchased Assets are to be transferred by the Seller to Buyer. "Purchase Price" means the price at which Purchased Assets are transferred by Seller to Buyer in a Transaction, which shall (unless otherwise agreed) be equal to the Purchase Price Percentage times the Market Value of the related Purchased Assets. "Purchase Price Percentage" shall have the meaning assigned thereto in the Side Letter. "Purchased Assets" shall mean any of the following assets sold by Seller to Buyer pursuant to and subject to any Transaction: the Eligible Assets, together with the related Records and Servicing Rights, such other property, rights, titles or interest as are specified on a related Transaction Notice, and all instruments, chattel paper, and general intangibles comprising or relating to all of the foregoing. The term "Purchased Asset" with respect to any Transaction at any time shall also include Substitute Assets delivered pursuant to Section 16 hereof. "Qualified Originator" shall mean (a) Seller and (b) any other originator of Servicing Rights 9 

 approved by Seller pursuant to the guidelines and procedures approved by Buyer in writing from time to time, which approval may not be unreasonably withheld. For purposes of this Agreement, the originators under the Servicing Agreement entitled Series 2006-MTA are hereby approved. "Qualified Successor Servicer" shall mean any servicer acceptable to Buyer and that satisfies the eligibility criteria for successor servicers as set forth in the relevant Servicing Agreements. "Rating Agency" means each of Moody's Investors Service, Inc., Standard & Poor's, a division of The McGraw Hill Companies, Inc. or Fitch Ratings. "Records" means all files, data tapes, loan schedules, material documents, instruments, surveys (if available), certificates, correspondence, appraisals, computer records, computer storage media, accounting records and other books and records with respect to any Purchased Asset and any other instruments necessary to document or service a Purchased Asset. "Recourse Servicing Agreement" shall mean a Servicing Agreement with respect to which the Servicer is obligated to repurchase or indemnify the holder for the related Mortgage Loans in respect of defaults on such Mortgage Loans. "Reference Banks" mean any leading banks selected by the Agent which are engaged in transactions in Eurodollar deposits in the international Eurocurrency market with an established place of business in London. "Resignation Letter" shall mean that certain letter of resignation in substantially the form attached hereto as Exhibit G, regarding the resignation of Servicer to Trustee under the related Servicing Agreement. The Resignation Letter with respect to any Servicing Agreement shall be held in escrow by the Buyer until such time as is necessary for Buyer to deliver the Resignation Letter to the Trustee, as set forth in clause (a) of the definition of Eligible Servicing Agreement. "REIT" shall mean a real estate investment trust, as defined in Section 856 of the Code. "Related Security" shall mean with respect to any Servicing Rights, (a) all security interests or Liens and property subject thereto from time to time, if any, purporting to secure payment of such Servicing Rights, whether pursuant to the related Servicing Agreement or otherwise, together with all financing statements covering any collateral securing such Servicing Rights; (b) all guarantees, indemnities, letters of credit, insurance or other agreements or arrangements of any kind from time to time supporting or securing the payment of such Servicing Rights whether pursuant to the related Servicing Agreement or otherwise; (c) the rights to payment in respect of such Servicing Rights under the related Servicing Agreement, and all records relating to, and any other contracts associated with, such Servicing Rights, and (d) any and all proceeds of the foregoing. "REMIC" means a "real estate mortgage investment conduit" within the meaning of Section 860D of the Code. "Repurchase Date" shall have the meaning assigned thereto in Section 3(b) and shall also include the date determined by application of Section 19. 10 

 "Repurchase Price" means the price at which Purchased Assets are to be transferred from Buyer to the Seller upon the Repurchase Date for a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price and the Price Differential as of the date of such determination. "Required Equity" shall mean, with respect to NFI (and its consolidated Subsidiaries) (together, the "Companies"), the sum of the dollar amounts calculated after multiplying the amount determined by combining the relevant figures for NFI and its consolidated Subsidiaries for each asset class set forth in the table below (or if such asset class is owned by NFI or a consolidated Subsidiary but cannot be determined by combining the relevant figures for NFI and its consolidated Subsidiaries, the fair market value thereof as calculated by the Companies subject, however, to the approval of Buyer which will not be unreasonably withheld) by the Percentage Multipliers set forth opposite such asset class in the table below: Percentage Asset Class Multiplier --------------------------------------------------------------------------- Percentage Asset Class Multiplier --------------------------------------------------------------------------- Cash 0% --------------------------------------------------------------------------- Mortgage Loans held-for-sale including accrued interest 5% --------------------------------------------------------------------------- Mortgage Loans held-in-portfolio including accrued interest 5% (securitized in an owners trust) --------------------------------------------------------------------------- Mortgage Loans held-in-portfolio including accrued interest (securitized in a REMIC trust) 1.75% --------------------------------------------------------------------------- AAA-Rated I/O and Prepay (P) Certificates booked on-B/S 25% --------------------------------------------------------------------------- BBB NIM Certificates 25% --------------------------------------------------------------------------- Residuals from whole loan securitizations 35% --------------------------------------------------------------------------- Residuals from NIM/CAPS 100% --------------------------------------------------------------------------- Non-rated subordinate bonds (excluding residuals) 100% --------------------------------------------------------------------------- A-Rated Mortgage-Backed Securities not in CDO 20% --------------------------------------------------------------------------- BBB-Rated Mortgage-Backed Securities not in CDO 25% --------------------------------------------------------------------------- BB-Rated Mortgage-Backed Securities not in CDO 50% --------------------------------------------------------------------------- Mortgage-Backed Securities in CDO 5% --------------------------------------------------------------------------- CDO Equity Sub Notes 100% --------------------------------------------------------------------------- CDO BBB Bonds 5% --------------------------------------------------------------------------- Agency Securities 3% --------------------------------------------------------------------------- Servicing Agreements (Mortgage Servicing Rights) 35% --------------------------------------------------------------------------- Servicing Advances 15% --------------------------------------------------------------------------- REO + Non-performing (90+ & foreclosures from bond collateral 35% 11 

 --------------------------------------------------------------------------- Percentage Asset Class Multiplier --------------------------------------------------------------------------- calls) --------------------------------------------------------------------------- Other assets - Hedging Agreements (Value of reserves that are not reflected 100% in Marks to Market that impact equity) - All Other Assets (all else remaining - including Other Receivables & PP&E) 35% --------------------------------------------------------------------------- Intangible Assets 100% --------------------------------------------------------------------------- provided that the Required Equity shall be reduced by any Dividend Securities with a maturity date of more than one year issued in connection with the 2006 Dividend. "SEC" shall mean the Securities and Exchange Commission. "Serviced Loan" shall mean a Mortgage Loan serviced or required to be serviced by Servicer under any Servicing Agreement, regardless of whether the actual servicing is done by a subservicer retained by Servicer. "Servicer" shall mean, with respect to a Serviced Loan related to Servicing Rights, the Seller, or any successor or permitted assigns or any other Person approved by Buyer in writing.. "Servicing Agreements" shall mean, collectively, those servicing agreements that are not Recourse Servicing Agreements and all related agreements, under which the Seller is the Servicer of Serviced Loans relating to Servicing Rights, and are set forth on Schedule 1 hereto and which, (a) is with a holder or custodian for a holder of the Serviced Loans who is acceptable to the Buyer, (b) is not a subservicing arrangement, (c) is owned by the Seller free and clear of all Liens (other than the Buyer's Lien granted hereunder) and (d) has been reviewed and approved by Buyer for purposes of financing the Seller's acquisition or retention of Eligible Servicing Rights hereunder. Schedule 1 may be amended to provide for additional securitizations for which the related additional Servicing Agreement contains the required servicing provisions as set forth on Exhibit F and otherwise complies with terms and conditions set for herein. "Servicing Fee" shall mean, with respect to any Servicing Rights pledged hereunder, the servicing fee specified on the related Servicing Rights Schedule that is payable to Seller as Servicer of the related Serviced Loan. "Servicing Rights" shall mean the Seller's rights and interests under any Servicing Agreement, including (i) the rights to service the Serviced Loans identified on the related Servicing Rights Schedule that are the subject matter of such Servicing Agreement in the manner set forth in such Servicing Agreement; (ii) the right to receive compensation (whether direct or indirect) for such servicing, including the right to receive and retain the Servicing Fee and all other Income with respect to such Serviced Loans; (iii) all rights, powers and privileges incidental to the foregoing, together with all Records relating thereto; (iv) any related Call Rights with respect any Servicing Agreement relates to and (v) the nonexclusive right to use (in common with the Seller any other 12 

 secured party that has a valid and enforceable security interest therein and that agrees that its security interest is similarly nonexclusive) the Seller's operating systems to manage and administer the Servicing Rights and any of the data and information related thereto, or that otherwise relates to the Servicing Rights, together with the media on which the same are stored to the extent stored with material information or data that relates to property other than the Servicing Rights, and the Seller's rights to access the same, whether exclusive or nonexclusive, to the extent that such access rights may lawfully be transferred or used by the Seller's permittees, and any computer programs that are owned by the Seller (or licensed to the Seller under licenses that may lawfully be transferred or used by the Seller's permittees) and that are used or useful to access, organize, input, read, print or otherwise output and otherwise handle or use such information and data. "Servicing Rights File" shall mean, with respect to any Servicing Rights pledged hereunder, the documents and materials retained by the Servicer that includes without limitation, (i) the mortgage loan documents pertaining to the related Serviced Loan(s), (ii) the credit documentation relating to the origination of such Serviced Loan(s), (iii) copies of all documents, correspondence, notes and all other materials of any kind held by the Servicer, and (iv) all other information or materials necessary or required to board such Serviced Loans onto the Servicer's servicing system. "Servicing Rights Schedule" means the list of Servicing Rights delivered by Seller to Buyer together with each Transaction Notice. Each Servicing Rights Schedule (which may be provided in the form of an electronic data file) shall set forth the following information with respect to the Servicing Rights proposed to be sold on any Purchase Date: (i) the number of the related Serviced Loan, (ii) the related Mortgagor's name, (iii) the original principal amount of the related Serviced Loan, (iv) the current principal balance of the related Serviced Loans, (v) a listing and description of any defaults that are continuing under the related Serviced Loan, (vi) the name of each Servicing Agreement, (vii) the amount of the related Servicing Fee, (viii) the amount of the related Subservicing Fee, if any; (ix) whether Seller as Servicer is entitled to receive or collect Ancillary Income and/or Prepayment Charges, (x) a description of the Ancillary Income, if applicable, (xi) the amount of the Prepayment Charges, if applicable, and (xii) any other information required by Buyer. "Side Letter" means the Pricing Side Letter, dated as of April 25, 2007, among the Seller, Guarantors and Buyer. "Structuring Fee" shall have the meaning assigned thereto in the Side Letter. "Subsidiary" means, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person; provided, however, that for purposes of Section 18 hereof, "Subsidiary" shall not include any of the entities listed on Exhibit D hereto, which may be revised by Seller from time to time upon consent of Buyer. 13 

 "Substitute Assets" has the meaning assigned thereto in Section 16(a). "Termination Date" has the meaning assigned thereto in Section 27. "Total Liabilities" shall mean total liabilities of NFI and its consolidated Subsidiaries determined in accordance with GAAP (or with such non-GAAP principles as may be disclosed to and approved by Buyer from time to time); provided; for purposes of this Agreement, such term shall not include any Trust Preferred Securities. "Transaction" has the meaning assigned thereto in Section 1. "Transaction Notice" means a written request of the Seller to enter into a Transaction, in the form attached hereto as Exhibit B which is delivered to Buyer. "Trust Preferred Securities" shall mean (i) the $50,000,000 of unsecured floating rate securities issued by NovaStar Capital Trust I, a statutory trust 100 percent owned by NMI, pursuant to the indenture dated March 15, 2005, between NMI and JP Morgan Chase Bank, NA, as trustee and (ii) the $35,000,000 of unsecured floating rate securities issued by NovaStar Capital Trust II, a statutory trust 100 percent owned by NMI, pursuant to the indenture dated April 18, 2006, between NMI and JP Morgan Chase Bank, NA, as trustee. "Trustee" shall mean (i) the Bank of New York as successor in interest to JPMorgan Chase Bank, National Association, as trustee under the Servicing Agreements attached hereto on Schedule 1, Section (a); (ii) the Bank of New York as successor in interest to JPMorgan Chase Bank, National Association, as indenture trustee under the Servicing Agreements attached hereto on Schedule 1, Section (b) and (iii) Deutsche Bank National Trust Company, as trustee under the Servicing Agreements attached hereto on Schedule 1, Section (c). "Trustee Side Letter" shall mean that certain letter agreement among the Buyer, the Seller and the Trustee regarding: (i) the resignation of Seller as Servicer under the Servicing Agreements identified on Schedule 1, Section (a), (ii) the appointment of Buyer or its designee as successor servicer to Servicer under a related Servicing Agreement and (iii) the designation of Buyer as an additional addressee for any required notices to be sent to Seller pursuant to the Servicing Agreements, substantially in the form attached hereto as Exhibit H. "Uniform Commercial Code" means the Uniform Commercial Code as in effect on the date hereof in the State of New York or the Uniform Commercial Code as in effect in the applicable jurisdiction. "Usage Fee" shall have the meaning assigned thereto in the Side Letter. b. Interpretation. Headings are for convenience only and do not affect interpretation. The following rules of this subsection (b) apply unless the context requires otherwise. The singular includes the plural and conversely. A gender includes all genders. Where a word or phrase is defined, its other grammatical 14 

 forms have a corresponding meaning. A reference to a subsection, Section, Annex or Exhibit is, unless otherwise specified, a reference to a Section of, or annex or exhibit to, this Agreement. A reference to a party to this Agreement or another agreement or document includes the party's successors and permitted substitutes or assigns. A reference to an agreement or document is to the agreement or document as amended, modified, novated, supplemented or replaced, except to the extent prohibited by any Program Document. A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it. A reference to writing includes a facsimile transmission and any means of reproducing words in a tangible and permanently visible form. A reference to conduct includes, without limitation, an omission, statement or undertaking, whether or not in writing. An Event of Default subsists until it has been waived in writing by the Buyer or has been timely cured. The words "hereof", "herein", "hereunder" and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement. The term "including" is not limiting and means "including without limitation." In the computation of periods of time from a specified date to a later specified date, the word "from" means "from and including", the words "to" and "until" each mean "to but excluding", and the word "through" means "to and including." This Agreement may use several different limitations, tests or measurements to regulate the same or similar matters. All such limitations, tests and measurements are cumulative and shall each be performed in accordance with their terms. Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed, and all financial computations required under this Agreement shall be made, in accordance with GAAP, consistently applied. References herein to "fiscal year" and "fiscal quarter" refer to such fiscal periods of the Seller. Except where otherwise provided in this Agreement any determination, statement or certificate by the Buyer or an authorized officer of the Buyer provided for in this Agreement is conclusive and binds the parties in the absence of manifest error. A reference to an agreement includes a security interest, guarantee, agreement or legally enforceable arrangement whether or not in writing. A reference to a document includes an agreement (as so defined) in writing or a certificate, notice, instrument or document, or any information recorded in computer disk form. Where the Seller or a Guarantor is required to provide any document to the Buyer under the terms of this Agreement, the relevant document shall be provided in writing or printed form unless the Buyer requests otherwise. At the request of the Buyer, the document shall be provided in computer disk form or both printed and computer disk form. This Agreement is the result of negotiations among and has been reviewed by counsel to the Buyer, Guarantors and the Seller, and is the product of all parties. In the interpretation of this Agreement, no rule of construction shall apply to disadvantage one party on the ground that such party proposed or was involved in the preparation of any particular provision of this Agreement or this Agreement itself. Except where otherwise expressly stated, the Buyer may give or withhold, or give conditionally, approvals and consents, and may form opinions and make determinations at their absolute discretion. Any requirement of good faith, discretion or judgment by the Buyer shall not be construed to require Buyer to request or await receipt of information or documentation not immediately available from or with respect to the Seller, a Guarantor, a servicer of the Purchased Assets, any other Person or the Purchased Assets themselves. With respect to any information set forth on Schedules 1, 2 and 3 attached hereto, Buyer has reviewed and consented to such information on such schedules as of the Effective Date; provided, however, that to the extent any facts or circumstances relating to the matters disclosed on such schedules change after the Effective Date, Buyer shall not be deemed to have consented to any such change and such change may result in an Event of Default. 15 

 3. THE TRANSACTIONS a. The Seller shall repurchase Purchased Assets from Buyer on each related Repurchase Date. Each obligation to repurchase subsists without regard to any prior or intervening liquidation or foreclosure with respect to each Purchased Asset. The Seller is obligated to obtain the Purchased Assets from Buyer or its designee at the Seller's expense on (or after) the related Repurchase Date. b. Provided that the applicable conditions in Sections 9(a) and (b) have been satisfied, each Purchased Asset that is repurchased by the Seller on the 26th day of each month (or, if such 26th day is not a Business Day, the immediately following Business Day) following the related initial Purchase Date (the day of the month so determined for each month, or any other date designated by the Seller to Buyer for such a repurchase on at least one Business Day's prior notice to Buyer, a "Repurchase Date", which term shall also include the date determined by application of Section 19) shall automatically become subject to a new Transaction unless Buyer is notified by the Seller at least one (1) Business Day prior to any Repurchase Date, provided that if the Repurchase Date so determined is later than the Termination Date, the Repurchase Date for such Transaction shall automatically reset to the Termination Date, and the provisions of this sentence as it might relate to a new Transaction shall expire on such date for each new Transaction, unless otherwise agreed, (y) the accrued and unpaid Price Differential shall be settled in cash on each related Repurchase Date, and (z) the Pricing Rate shall be as set forth in the Side Letter. c. If the Seller repurchases Purchased Assets on any day which is not a Repurchase Date for such Purchased Assets, the Seller shall indemnify Buyer and hold Buyer harmless from any losses, costs and/or expenses which Buyer may sustain or incur arising from the reemployment of funds obtained by Buyer hereunder or from fees payable to terminate the deposits from which such funds were obtained ("Breakage Costs"), in each case for the remainder of the applicable 30 day period. Buyer shall deliver to the Seller a statement setting forth the amount and basis of determination of any Breakage Costs in such detail as determined in good faith by Buyer to be adequate, it being agreed that such statement and the method of its calculation shall be adequate and shall be conclusive and binding upon the Seller, absent manifest error. This Section shall survive termination of this Agreement and the repurchase of all Purchased Assets subject to Transactions hereunder. 4. ENTERING INTO TRANSACTIONS, TRANSACTION NOTICE CONFIRMATIONS Under the terms and conditions of the Program Documents, Buyer hereby agrees to enter into Transactions with a Purchase Price up to the Maximum Aggregate Purchase Price. In no event shall Buyer be required to enter into more than one Transaction in any day. Unless otherwise agreed, the Seller shall give Buyer notice of any proposed Purchase Date prior to 2:00 p.m. New York City time on the second (2nd) preceding Business Day (the date on which such notice is so given, the "Notice Date"), provided that the initial Transaction shall only require one (1) Business Day prior notice. On the Notice Date, the Seller or a Guarantor shall request that Buyer enter into a Transaction by furnishing to Buyer a Transaction Notice. On the Notice Date, the Seller or a Guarantor shall request that Buyer enter into a Transaction by furnishing to Buyer a Transaction Notice substantially in the form of Exhibit B with a copy to the Agent, (the "Transaction Notice"), together with copies of any related Servicing Agreements to Buyer and Agent. Such Transaction Notice shall (i) contain the Purchase Price of the requested Transaction which shall in all events be at least equal to 16 

 $500,000 or such lesser amount as mutually agreed upon by the buyer and the Seller, (ii) specify the requested Purchase Date, which shall not be earlier than the second Business Day following the date of such Transaction Notice and (iii) contain (by attachment) such other information reasonably requested by the Buyer from time to time. In the event that the parties hereto desire to enter into a Transaction on terms other than as set forth in this Agreement and the Transaction Notice, Buyer shall deliver to Seller, in electronic or other format, a "Confirmation" specifying such terms prior to entering into such Transaction, including, without limitation, the Purchase Date, the Purchase Price, the Pricing Rate therefore and the Repurchase Date. Any such Transaction Notice and the related Confirmation, if any, together with this Agreement, shall constitute conclusive evidence of the terms agreed to between Buyer and Seller with respect to the Transaction to which the Transaction Notice and Confirmation, if any, relates. By entering in to a Transaction with Buyer, Seller consents to the terms set forth in any related Confirmation. In the event of any conflict between this Agreement and a Confirmation, the terms of the Confirmation shall control with respect to the related Transaction. Any delivery of a Purchased Asset in accordance with this subsection, or any other method acceptable to Buyer in its sole discretion, shall be sufficient to cause Buyer to have a perfected, first priority security interest in the Purchased Asset. Without the prior written consent of Buyer, Seller will not (i) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the Purchased Assets, or (ii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Purchased Assets, or any interest therein, except for the lien provided for by this Agreement, or (iii) enter into any agreement or undertaking (other than pursuant to this Agreement) restricting the right or ability of the Seller or Buyer to sell, assign or transfer any of the Purchased Assets. 5. PAYMENT AND TRANSFER Unless otherwise agreed, all transfers of funds hereunder shall be in immediately available funds and all Purchased Assets transferred shall be transferred to Buyer. Any Repurchase Price or Price Differential received by Buyer after 12:00 noon New York City time shall be applied on the next succeeding Business Day. 6. MARGIN MAINTENANCE a. If at any time the aggregate Market Value of all Purchased Assets subject to all Transactions is less than the aggregate Buyer's Margin Amount for all such Transactions (a "Margin Deficit"), then Buyer may by notice to the Seller require the Seller in such Transactions to transfer to Buyer cash so that the cash and aggregate Market Value of the Purchased Assets will thereupon equal or exceed such aggregate Buyer's Margin Amount (such requirement, a "Margin Call"). b. Notice required pursuant to Section 6(a) may be given by any means provided in Section 35 hereof. Any notice received before 11:00 a.m. New York time on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. New York time on such Business Day; notice received after 11:00 a.m. New York time on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. New York time on the following Business Day. The failure of Buyer, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer to do so at a later date. The Seller, each Guarantor and the Buyer each agree that a failure or delay by 17 

 Buyer to exercise its rights hereunder shall not limit or waive Buyer's rights under this Agreement or otherwise existing by law or in any way create additional rights for the Seller or any Guarantor. 7. INCOME PAYMENTS Prior to the occurrence of an Event of Default, where a particular term of a Transaction extends over the date on which Income is paid in respect of any Purchased Assets subject to that Transaction, such Income may be applied to general corporate and business purposes of Seller. Upon the occurrence of an Event of Default any Income which is paid in respect of any Purchased Assets shall be deposited directly into the related collection account relating to the underlying Servicing Agreement. Following the occurrence of such Event of Default, the Servicer shall not retain, strip or otherwise deduct from such Income any fees (including without limitation, the Servicing Fees or Ancillary Income) and such Income shall be deposited directly into the related collection account. No more than weekly, the Seller and Buyer shall reconcile the collections made during the previous week under the related Servicing Agreement to determine the amount of any Servicing Fees, which Seller is entitled to be reimbursed for, and the amount of any Ancillary Income and shall allocate a portion of such Servicing Fees to Seller as follows: the lesser of: (i) Seller's verifiable actual cash expenses or (ii) an amount equal to three-fifths (3/5ths) of the related Servicing Fee regarding the related Mortgage Loans (the "Servicing Costs"), upon the presentation of an accounting of such Servicing Costs incurred by Seller. Any excess Servicing Fees after such allocation and any and all Ancillary Income shall be the property of the Buyer and shall be applied to the payment of the Obligations. 8. SECURITY INTEREST The Seller and Buyer intend that the Transactions hereunder be sales to Buyer of the Purchased Assets and not loans from Buyer to the Seller secured by the Purchased Assets. However, in order to preserve Buyer's rights under this Agreement in the event that a court or other forum recharacterizes the Transactions hereunder as other than sales, and as security for the Seller's performance of all of its Obligations, the Seller hereby grants Buyer a fully perfected first priority security interest in all of Seller's rights, title and interest in and to the following property, whether now existing or hereafter acquired: (i) all Purchased Assets identified on a Transaction Notice delivered by the Seller to the Buyer and sold to Buyer in a Transaction; (ii) all Servicing Agreements related to such Servicing Rights; (iii) all records, instruments or other documentation evidencing such Servicing Rights; (iv) all related Hedge Instruments, (v) all Income relating to such Servicing Rights; (vi) the Call Rights (vi) all Related Security related to such Servicing Rights; (vii) any other collateral pledged or otherwise relating to the Servicing Rights; (viii) all "accounts", "chattel paper", "commercial tort claims", "deposit accounts", "documents," "equivalent", "general intangibles", "goods", "instruments", "inventory", "investment property", "letter of credit rights", and "securities' accounts" as each of those terms is defined in the Uniform Commercial Code and all cash and Cash Equivalents and all products and proceeds relating to or constituting any or all of the foregoing (including, without limitation, in the case of Servicing Rights, all of the Seller's rights, title and interest in and under the Servicing Agreements); and (ix) any and all replacements, substitutions, distributions on or proceeds of any or all of the foregoing (collectively the "Collateral"). Seller acknowledges and agrees that its rights with respect to the Collateral (including without limitation, any security interest Seller may have in the Collateral and any other collateral granted by Seller to Buyer pursuant to any other agreement) are and shall continue to be at all times junior and 18 

 subordinate to the rights of Buyer hereunder. 9. CONDITIONS PRECEDENT a. As conditions precedent to the initial Transaction, Buyer shall have received on or before the day of such initial Transaction the following, in form and substance satisfactory to Buyer and duly executed by each party thereto: (i) Agent shall have received the Program Documents, including collateral documents, required legal opinions and certificates, each duly executed and in form and substance reasonably satisfactory to the Agent; (ii) Agent shall be satisfied that all material Liens granted to Buyer hereunder with respect to the Collateral are valid and perfected liens and have the priorities indicated herein; (iii) Except as disclosed on Schedule 3 hereto, there are no actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or threatened) or other legal or arbitrable proceedings affecting Seller or any of their Subsidiaries or affecting any of the Property of any of them before any Governmental Authority which (i) questions or challenges the validity or enforceability of the Program Documents or otherwise materially impairs the transactions contemplated hereby or (ii) individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect. (iv) The Program Documents shall be duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver; (v) Except as disclosed on Schedule 2 attached hereto, there shall have been no Material Adverse Change in the business, financial performance, assets, operations or condition (financial or otherwise) of Seller and their subsidiaries, taken as a whole since December 31, 2006; (vi) The Sellers shall have delivered to the Agent and the Buyer (i) an unaudited consolidated balance sheet of NFI dated not earlier than February 28, 2007 prior to the date hereof showing Adjusted Tangible Net Worth of not less than $400,000,000 (which may or may not have been prepared in accordance with GAAP), (ii) an unaudited summary schedule of estimated consolidated financial results of NFI and its subsidiaries for the three months ended March 31, 2007 (which may or may not have been prepared in accordance with GAAP) and (iii) a certificate of the Chief Financial Officer of NFI certifying to the best of his knowledge as to such balance sheet after reasonable inquiry and further stating that he is not aware of any information or other matter that 19 

 would make the financial information set forth therein materially inaccurate or incomplete; (vii) There shall not exist any violation of applicable laws and regulations (including, without limitation, ERISA, margin regulations and environmental laws) which could reasonably be expected to result in a Material Adverse Change, except as disclosed on Schedule 2 attached hereto; (viii) [reserved]; (ix) A listing of the insurance required by Section 13(y) of this Agreement; (x) The representations and warranties contained herein and any exhibit, annex, schedule or appendix hereto, shall be true and correct in all material respects as of the date hereof. (xi) No event shall have occurred and be continuing that would constitute an Event of Default or a Default. (xii) Agent shall have received a certified copy of Seller's and each Guarantor's consents or corporate resolutions, as applicable, approving the Program Documents and Transactions thereunder (either specifically or by general resolution), and all documents evidencing other necessary corporate action or governmental approvals as may be required in connection with the Program Documents; (xiii) Agent shall have received an incumbency certificate of the secretaries of Seller and each Guarantor certifying the names, true signatures and titles of Seller's and each Guarantor's representatives duly authorized to request Transactions hereunder and to execute the Program Documents and the other documents to be delivered thereunder; (xiv) Agent shall have received an opinion of Seller's and each Guarantor's counsel as to such matters as Buyer (including, without limitation, a corporate opinion, a New York law enforceability opinion, a security interest opinion, an investment company act opinion) as Buyer may reasonably request; (xv) The Pledge Agreement; (xvi) All of the conditions precedent in the Pledge Agreement shall have been satisfied; (xvii) The Seller shall have delivered to the Buyer with respect to each Eligible Asset: (i) an executed copy of any related Servicing Agreement and any supplements thereto, (iii) with respect to any Servicing Rights regarding 20 

 any Loans which are subject to a securitization transaction, the related securitization offering documents, certified by the Seller, the related trustee or the related master servicer as a true, correct and complete copy of the original, and all ancillary documents required to be delivered to the certificateholders for such securitization transaction; [i.e. offering circular, prospectus supplement, pooling agreements, servicing agreements, indenture, assignment, assumption and recognition agreements (if affecting servicing)] (xviii) All of the conditions precedent in the Pledge Agreement shall have been satisfied; (xix) an executed copy of each related Call Rights Assignment and each related Call Rights Assignment Notice; and (xx) Any other documents reasonably requested by Buyer. b. The obligation of Buyer to enter into each Transaction (including the initial Transaction) pursuant to this Agreement is subject to the following conditions precedent: (i) Buyer or its designee shall have received on or before the day of a Transaction with respect to such Purchased Assets (unless otherwise specified in this Agreement) the following, in form and substance satisfactory to Buyer and (if applicable) duly executed: (A) Transaction Notice delivered pursuant to Section 4(a); (B) each Servicing Agreement with respect to each Purchased Asset; and (D) such certificates, customary opinions of counsel or other documents as Buyer may reasonably request, provided that such opinions of counsel shall not be required in connection with each Transaction but shall only be required from time to time as deemed necessary by Buyer in its good faith. (ii) No Default or Event of Default shall have occurred and be continuing. (iii) Buyer shall not have reasonably determined that a change in any requirement of law or in the interpretation or administration of any requirement of law applicable to Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Buyer to enter into Transactions with a Pricing Rate based on LIBOR, unless Seller shall have elected pursuant to Section 15(a) hereof that the Pricing Rate for all Transactions be based upon the Prime Rate. (iv) All representations and warranties in the Program Documents shall be true and correct in all material respects on the date of such Transaction and Seller and Guarantors are in compliance with the terms and conditions of the Program Documents. 21 

 (v) The then aggregate outstanding Purchase Price for all Purchased Assets, when added to the Purchase Price for the requested Transaction, shall not exceed the Maximum Aggregate Purchase Price. (vi) No event or events shall have been reasonably determined by Buyer to have occurred and be continuing resulting in the effective absence of a whole loan or asset-backed securities market. (vii) If requested, Buyer shall have received satisfactory information regarding the hedging strategy, arrangements and general policy of the Guarantors with respect to Hedge Instruments. (viii) Satisfaction of any conditions precedent to the initial Transaction as set forth in clause (a) of this Section 9 that were not satisfied prior to such initial Purchase Date. (ix) The Purchase Price for the requested Transaction shall not be less than $500,000, or an integral multiple of $500,000 thereafter. (x) Agent shall have determined that all actions necessary or, in the opinion of Buyer, desirable to maintain Buyer's perfected interest in the Purchased Assets and other Collateral have been taken, including, without limitation, duly executed and filed Uniform Commercial Code financing statements on Form UCC-1. (xi) Buyer shall not be obligated to enter into more than one Transaction per week (excluding any automatic Transaction pursuant to Section 3(b)). (xii) Any other documents reasonably requested by Buyer. (xiii) Buyer shall have received from the Seller payment of the applicable Usage Fee as set forth in the Side Letter. 10. RELEASE OF PURCHASED ASSETS Upon timely payment in full of the Repurchase Price and all other Obligations owing with respect to a Purchased Asset, if no Default or Event of Default has occurred and is continuing, Buyer shall release such Purchased Asset unless such release would give rise to or perpetuate a Margin Deficit. Except as set forth in Sections 6(a) and 16, the Seller shall give at least three (3) Business Days' prior written notice to Buyer if such repurchase shall occur on other than a Repurchase Date. If such a Margin Deficit is applicable, Buyer shall notify the Seller of the amount thereof and the Seller may thereupon satisfy the Margin Call in the manner specified in Section 6. 11. RELIANCE With respect to any Transaction, Buyer may conclusively rely upon, and shall incur no liability to the Seller or the Guarantor in acting upon, any request or other communication that Buyer 22 

 reasonably believes to have been given or made by a person authorized to enter into a Transaction on the Seller's or the Guarantor's behalf. 12. REPRESENTATIONS AND WARRANTIES Seller and each Guarantor hereby represents and warrants, and shall on and as of the Purchase Date for any Transaction and on and as of each date thereafter through and including the related Repurchase Date be deemed to represent and warrant, that: a. Due Organization and Qualification. Seller and each Guarantor is duly organized, validly existing and in good standing under the laws of the jurisdiction under whose laws it is organized. Seller and each Guarantor is duly qualified to do business, is in good standing and has obtained all necessary licenses, permits, charters, registrations and approvals necessary for the conduct of its business as currently conducted and the performance of its obligations under the Program Documents, except to the extent any failure to be so qualified and in good standing or to obtain such a license, permit, charter, registration or approval will not cause a Material Adverse Effect or impair the enforceability of any Purchased Asset. b. Power and Authority. Seller and each Guarantor has all necessary power and authority to conduct its business as currently conducted, to execute, deliver and perform its obligations under the Program Documents and to consummate the Transactions. c. Due Authorization. The execution, delivery and performance of the Program Documents by Seller and each Guarantor have been duly authorized by all necessary action and do not require any additional approvals or consents or other action by or any notice to or filing with any Person other than any that have heretofore been obtained, given or made. d. Noncontravention. None of the execution and delivery of the Program Documents by the Seller or the related Guarantor or the consummation of the Transactions and transactions thereunder: i) conflicts with, breaches or violates any provision of Seller's charter documents, bylaws, operating agreement or any similar agreement, any material agreement of Seller or the Guarantor or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to the Seller or the related Guarantor or its properties, except as would not have a Material Adverse Effect; ii) constitutes a default by the Seller or the Guarantor under any loan or repurchase agreement, mortgage, indenture or other material agreement or instrument to which the Seller or the related Guarantor is a party or by which it or any of its properties is or may be bound or affected; or iii) results in or requires the creation of any lien upon or in respect of any of the assets of the Seller or the related Guarantor except the Lien relating to the Program Documents. 23 

 e. Legal Proceeding. Except as disclosed on Schedule 3 attached hereto, there is no action, proceeding or investigation by or before any court, governmental or administrative agency or arbitrator affecting any of the Purchased Assets, Seller, any Guarantor or any of their Affiliates, pending or threatened, which is reasonably likely to be adversely determined and which, if decided adversely, would have a Material Adverse Effect. f. Valid and Binding Obligations. Each of the Program Documents to which Seller or any Guarantor is a party, when executed and delivered by Seller or such Guarantor, as applicable, will constitute the legal, valid and binding obligations of the Seller or such Guarantor, as applicable, enforceable against the Seller or such Guarantor, as applicable, in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally and general equitable principles. g. Financial Statements. The financial statements and pro forma balance sheet of Seller, copies of which have been furnished to Buyer, (i) are, as of the dates and for the periods referred to therein, complete and correct in all material respects, (ii) present fairly the financial condition and results of operations of NFI as of the dates and for the periods indicated and (iii) have been prepared in accordance with GAAP consistently applied, except as noted therein (subject as to interim statements to normal year-end adjustments). Since the date of the most recent financial statements, there has been no Material Adverse Change with respect to NFI, except as disclosed on Schedule 2 attached hereto. Except as disclosed in such financial statements, no Guarantor is subject to any contingent liabilities or commitments that, individually or in the aggregate, have a material possibility of causing a Material Adverse Change with respect to such Guarantor. Buyer hereby acknowledges that only the annual and quarterly financial statements are prepared in accordance with GAAP. h. Accuracy of Information. None of the documents or information prepared by or on behalf of Seller or any Guarantor and provided by Seller or any Guarantor to Buyer relating to Seller's or the Guarantor's financial condition contain any statement of a material fact with respect to Seller or any Guarantor or the Transactions that was untrue or misleading in any material respect when made. Since the most recent furnishing of such documents or information, there has been no change, nor any development or event involving a prospective change known to Seller or any Guarantor, that would render any of such documents or information untrue or misleading in any material respect. i. No Consents. No consent, license, approval or authorization from, or registration, filing or declaration with, any regulatory body, administrative agency, or other governmental, instrumentality, nor any consent, approval, waiver or notification of any creditor, lessor or other non-governmental person, is required in connection with the execution, delivery and performance by Seller or any Guarantor of this Agreement or the consummation by Seller or any Guarantor of any other Program Document, other than any that have heretofore been obtained, given or made. j. Compliance With Law. Etc. No practice, procedure or policy employed or proposed to be employed by Seller or any Guarantor in the conduct of its businesses violates 24 

 any law, regulation, judgment, agreement, order or decree applicable to it which, if enforced, would result in either a Material Adverse Change with respect to Seller or any Guarantor or a Material Adverse Effect. k. Solvency: Fraudulent Conveyance. Seller and each Guarantor is solvent and will not be rendered insolvent by the Transaction and, after giving effect to such Transaction, neither Seller nor any Guarantor will be left with an unreasonably small amount of capital with which to engage in its business. Neither Seller nor any Guarantor intends to incur, nor believes that it has incurred, debts beyond its ability to pay such debts as they mature. Neither Seller nor any Guarantor is contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of Seller or any Guarantor or any of their assets. The amount of consideration being received by Seller upon the sale of the Purchased Assets to Buyer constitutes reasonably equivalent value and fair consideration for such Purchased Assets. Seller are not transferring any Purchased Assets with any intent to hinder, delay or defraud any of its creditors. l. Investment Company Act Compliance. Seller is not required to be registered as an "investment company" as defined under the Investment Company Act nor as an entity under the control of an "investment company" as defined under the Investment Company Act. m. Taxes. Seller and each Guarantor has filed all federal and state tax returns which are required to be filed and paid all taxes, including any assessments received by it, to the extent that such taxes have become due (other than for taxes that are being contested in good faith or for which it has established adequate reserves). Any taxes, fees and other governmental charges payable by the Seller or any Guarantor in connection with a Transaction and the execution and delivery of the Program Documents have been paid. n. Additional Representation. With respect to each Purchased Asset, the Seller hereby makes all of the applicable representations and warranties set forth in each Confirmation to which such Purchased Asset is or has been subject, in each case as of the related Purchase Date, and the Seller understands that if the substance of any such representation or warranty ceases to be true because of events occurring after such date, the Market Value could be adversely affected. o. No Broker. Neither Seller nor any Guarantor has dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Assets pursuant to this Agreement; provided, that if Seller or any Guarantor has dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Assets pursuant to this Agreement, such commission or compensation shall have been paid in full by the Seller or such Guarantor, as applicable. p. Adequate Capital. The capital of Seller and each Guarantor is adequate for the respective business and undertakings of Seller and each Guarantor. 25 

 q. [reserved]. r. Servicing Agreements. Each Servicing Agreement is in full force and effect and has not been modified, amended or supplemented except for any modifications, amendments and supplements approved by Buyer. s. [reserved]. t. ERISA. Each Plan to which Seller or any of their Subsidiaries make direct contributions, and, to the knowledge of the Seller, each other Plan is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other applicable Federal or State law. As of the date hereof and on any date prior to the Termination Date, no Plan is a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) or a "defined benefit plan" (within the meaning of Section 3(35) of ERISA). u. Compliance with Anti-Money Laundering Laws. Within thirty (30) days following the issuance of regulations pursuant to the USA Patriot Act of 2001, or any similar federal, state or local anti-money laundering laws and regulations (collectively, the "Anti-Money Laundering Laws"), Seller shall have implemented and shall thereafter maintain a compliance program to the extent required by law, that meets the requirements of such Anti-Money Laundering Laws. The representations and warranties set forth in this Agreement (including but not limited to those representations and warranties set forth in this Section 12 and in Exhibit C attached hereto) shall survive transfer of the Purchased Assets to Buyer and shall continue for so long as the Purchased Assets are subject to this Agreement. 13. COVENANTS OF SELLER AND GUARANTOR Seller and each Guarantor, as applicable, hereby covenants with Buyer as follows: a. Defense of Title. Seller and each Guarantor warrants and will defend the right, title and interest of Buyer in and to all Collateral against all adverse claims and demands. b. No Amendment or Compromise. Without Buyer's prior written consent, neither Seller, any Guarantor nor those acting on Seller's or any Guarantor's behalf shall amend or modify, or waive any term or condition of, or settle or compromise any claim in respect of, any item of the Purchased Assets, any related rights or any of the Program Documents. c. No Assignment. Except as permitted herein, neither Seller nor any Guarantor shall sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Program Documents), any of the Purchased Assets or any interest therein, 26 

 provided that this Section shall not prevent any transfer of Purchased Assets in accordance with the Program Documents. d. Servicing of Serviced Loans. (i) Seller covenants to maintain or cause the servicing of the Serviced Loans related to the Purchased Assets to be maintained in conformity with the standards set forth in the applicable Servicing Agreements; (ii) In accordance with Section 19, Seller agrees that upon the occurrence of an Event of Default, Buyer may terminate Seller in its capacity as Servicer under any or all Servicing Agreements and sell, assign and/or transfer the related Servicing Rights to a Qualified Successor Servicer, at no cost or expense to Buyer. Seller agrees to cooperate in all respects with Buyer in connection with any such sale, assignment and/or transfer of any such Servicing Rights; (iii) Seller shall permit Buyer to inspect upon reasonable prior written notice Seller's or its Affiliate's servicing facilities, as the case may be, for the purpose of satisfying Buyer that Seller or its Affiliate, as the case may be, has the ability to service the Serviced Loans related to Purchased Assets in accordance with the standards set forth in the applicable Servicing Agreements; and (iv) Seller shall not permit any Person other than Seller to service the related Serviced Loans without the prior written consent of Buyer, which consent shall not be unreasonably withheld. e. Preservation of Collateral: Collateral Value. Seller and each Guarantor shall do all things necessary to preserve the Collateral so that it remains subject to a first priority perfected security interest hereunder. Without limiting the foregoing, Seller and each Guarantor will comply with all rules, regulations and other laws of any Governmental Authority necessary to preserve the Collateral so that it remains subject to a first priority perfected security interest hereunder. Neither Seller nor any Guarantor will allow any default for which Seller or any Guarantor is responsible to occur under any Collateral or any Program Documents and Seller and each Guarantor shall fully perform or cause to be performed when due all of its obligations under any Collateral or the Program Documents. f. Maintenance of Papers, Records and Files. Seller and each Guarantor shall acquire, and Seller shall create, maintain (or cause the related subservicer to maintain) and have available, a complete file in accordance with industry custom and practice for the Purchased Assets. Seller and each Guarantor will maintain (or cause the related subservicer to maintain) all such Servicing Rights Files in good and complete condition in accordance with industry practices and preserve them against loss. Seller and each Guarantor will not cause or authorize any such papers, records or files that are an original or an only copy to leave its or in the related subservicer's possession. For so long as Buyer has an interest in or lien on any Purchased Assets, Seller will hold or cause to be held the related Servicing Rights Files in trust for Buyer. Seller and each Guarantor shall notify, or cause to be notified, every other party holding any such Servicing Rights Files (including the related 27 

 subservicer) of the interests and liens granted hereby. Upon reasonable advance notice from Buyer, Seller shall (x) make any and all such Servicing Rights Files available to Buyer to examine any records held therein, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, (y) permit Buyer or its authorized agents to discuss the affairs, finances and accounts of Seller with its respective chief operating officer and chief financial officer and to discuss the affairs, finances and accounts of Seller with its independent certified public accountants. g. Financial Statements: Accountants' Reports: Other Information. Seller and each Guarantor shall keep or cause to be kept in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of Purchased Assets to Buyer. Seller and NFI shall furnish or cause to be furnished to Buyer the following: i) Financial Statements. (w) As soon as available and in any event within 90 days after the end of each fiscal year, the consolidated and consolidating, audited balance sheets of NFI as of the end of each fiscal year of NFI, and the audited financial statements of income and changes in equity of NFI, and the audited statement of cash flows of NFI, for such fiscal year, (x) as soon as available and in any event within 45 days after the end of each quarter, the consolidated and consolidating, unaudited balance sheets of NFI as of the end of each quarter, and the unaudited financial statements of income and changes in equity of NFI and the unaudited statement of cash flows of NFI for the portion of the fiscal year then ended, (y) within 30 days after the end of each month, monthly consolidated and consolidating and unaudited statements (excluding cash flow statements) and balance sheets as provided in clause (x), and (z) within 10 days after the end of each month, NFI's monthly cash activity report, the items in clauses (w) and (x) having been prepared in accordance with GAAP (subject, in the case of interim statements, to normal year-end adjustments) and certified by NFI's treasurer. ii) Monthly Certification. Seller shall execute and deliver a monthly certification substantially in the form of Exhibit A-1 attached hereto and NFI shall execute and deliver a monthly certification substantially in the form of Exhibit A-2 attached hereto within thirty (30) days following the end of each month. iii) Additional Data. Monthly reports in form and scope satisfactory to Buyer (such report may be provided in the form of a data tape), setting forth data on (1) the Purchased Assets for the immediately preceding month, including, without limitation, all collections and recoveries related to the Purchased Assets, (2) any other information regarding the Purchased Assets reasonably requested by Buyer, (3) the performance of the related Serviced Loans, including with respect to Serviced Loans (i) in default for thirty (30) days or more and categorized by age of delinquency for thirty (30), sixty (60) and ninety (90) or more days, (ii) in foreclosure, or (iii) in bankruptcy, and (4) any other financial information regarding Seller reasonably requested by Buyer. 28 

 h. Notice of Material Events. Seller and each Guarantor shall promptly inform Buyer in writing of any of the following: i) any Default, Event of Default or default or breach by Seller or any Guarantor of any other material obligation under any Program Document, or the occurrence or existence of any event or circumstance that Seller or such Guarantor reasonably expects will with the passage of time become a Default, Event of Default or such a default or breach by Seller or any Guarantor; ii) any material change in the insurance coverage required of Seller or any Guarantor or any other Person pursuant to any Program Document, with copy of evidence of same attached; iii) any material dispute, litigation, investigation, proceeding or suspension between Seller or any Guarantor, on the one hand, and any Governmental Authority or any other Person; iv) any material change in accounting policies or financial reporting practices of Seller or any Guarantor; v) the occurrence of any material employment dispute and a description of the strategy for resolving it; and vi) any event, circumstance or condition that has resulted, or has a reasonable possibility of resulting, in either a Material Adverse Change with respect to Seller or any Guarantor or a Material Adverse Effect. i. Maintenance of Licenses. Except as would not be reasonably likely to have a Material Adverse Effect, (i) Seller and each Guarantor shall maintain, all material licenses, permits or other approvals necessary for Seller and each Guarantor to conduct its business and to perform its obligations under the Program Documents, and (ii) Seller and each Guarantor shall conduct its business in accordance with applicable law. j. No Withholdings for Taxes. Any payments made by the Seller to Buyer shall be free and clear of, and without deduction or withholding for, any taxes; provided, however, that if the Seller shall be required by law to deduct or withhold any taxes from any sums payable to Buyer, then the Seller shall (A) make such deductions or withholdings and pay such amounts to the relevant authority in accordance with applicable law, (B) pay to Buyer the sum that would have been payable had such deduction or withholding not been made, and (C) at the time the Price Differential is paid, pay to Buyer all additional amounts as specified by Buyer to preserve the after-tax yield Buyer would have received if such tax had not been imposed. This provision does not apply to income taxes payable by Buyer on its taxable income. 29 

 k. Change in Nature of Business. Neither Seller nor any Guarantor shall enter into any new material lines of business except those currently engaged in as of the date hereof. l. Limitation on Distributions. If an Event of Default has occurred and is occurring, neither Seller nor any Guarantor shall pay any dividends or distributions with respect to any Capital Stock or other equity interests in Seller or any Guarantor (except any dividends or distributions required by law in order for such party to maintain its status as a real estate investment trust), whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller or any Guarantor, except with respect to transfers in the form of inter-company loans made in the ordinary course of business, as permitted by Section 5.01(o) of the Guaranty and Pledge Agreement. m. Merger of Guarantor. No Guarantor shall at any time, directly or indirectly, without Buyer's prior consent (i) liquidate or dissolve or (ii) form or enter into any partnership, joint venture, syndicate or other combination which would have a Material Adverse Effect. n. Insurance. Seller will obtain and maintain insurance with responsible companies in such amounts and against such risks as are customarily carried by business entities engaged in similar businesses similarly situated, and will furnish Buyer on request full information as to all such insurance, and provide within (15) days after receipt of such request the certificates or other documents evidencing renewal of each such policy. o. Affiliate Transactions. Neither Seller nor any Guarantor will at any time, directly or indirectly, sell, lease or otherwise transfer any material property or assets to, or otherwise acquire any material property or assets from, or otherwise engage in any material transactions with, any of their Non-Seller Affiliates unless the terms thereof are no less favorable to the Seller or such Guarantor, as applicable, than those that could be obtained at the time of such transaction in an arm's length transaction with a Person who is not an Affiliate. p. Change of Fiscal Year. Neither Seller nor any Guarantor will at any time, directly or indirectly, except upon thirty (30) days' prior written notice to Buyer, change the date on which the Seller's or such Guarantor's fiscal year begins from the Seller's or such Guarantor's current fiscal year beginning date. q. Exercising Call Rights. (i) Prior to the occurrence of an Event of Default, Seller shall exercise any Call Rights it may have under the Servicing Agreements in the month in which such Call Rights first become exercisable by Seller pursuant to the related Servicing Agreement; provided that, Seller shall, at such time, have the ability to finance the exercise of such Call Rights and provided further that, Seller shall not have to exercise such Call Rights if Buyer consents in writing to such non-exercise of such Call Rights. In the event that Buyer consents to 30 

 allow Seller to elect not to exercise any Call Rights in any month in which such Call Rights are exercisable by Seller (each an "Exercisable Month"), such consent shall only apply to the related Exercisable Month and Seller shall exercise such Call Rights in the next succeeding month following such Exercisable Month unless otherwise directed by Buyer in writing. (ii) Following the occurrence of an Event of Default Seller shall exercise any Call Rights it may have under the Servicing Agreements in the month in which such Call Rights become exercisable by Seller pursuant to the related Servicing Agreement, provided that, that Seller shall, at such time, have the ability to finance the exercise of such Call Rights and provided further that, Buyer has not directed Seller otherwise in writing. In the event that Buyer directs Seller not to exercise any applicable Call Rights in any Exercisable Month, Seller shall exercise such Call Rights in the next succeeding month following such Exercisable Month unless otherwise directed by Buyer in writing. r. Excluded Subsidiaries. No material change in the nature of the business including without limitation, capitalization or change in significant investors shall occur for any Subsidiaries listed on Exhibit D, without thirty (30) days prior written notice to the Buyer. s. Maintenance of Liquidity. At all times NFI shall have, on a consolidated basis, cash, Cash Equivalents and unused borrowing capacity under committed warehouse or repurchase facilities ("Liquidity") that could be drawn against (taking into account required haircuts) in an amount of not less than $30,000,000. In the event that NFI's Liquidity falls below $40,000,000 at any time or NFI's management believes such event is reasonably likely, Seller shall provide notice of such event or likelihood of event to the Agent. t. Maintenance of Adjusted Tangible Net Worth. The Adjusted Tangible Net Worth of NFI at any time shall be greater than $400,000,000, provided however that such amount shall be reduced by the amount of the 2006 Dividend. u. Payment of Dividends. No Guarantor, Seller or Subsidiary of any of the foregoing shall pay dividends (other than dividends paid in stock) without the prior consent of Buyer, exclusive of (i) dividends paid, directly or indirectly through one or more other Subsidiaries, to a Seller or to a Guarantor and (ii) subject to the further provisions of this clause (t), NFI's 2006 Dividend to its shareholders. No dividend other than the 2006 Dividend, to the extent permitted by this clause (t), shall be paid in cash without the prior consent of Buyer. As of the date hereof, NFI's best estimate of the maximum amount of the 2006 Dividend is $175,000,000. 31 

 Buyer acknowledges that the 2006 Dividend must be paid in order for NFI to continue to maintain its status as a REIT, and that such dividend may be paid in cash or Dividend Securities. Buyer further acknowledges that U.S. income tax laws require that any Dividend Securities be valued at their fair market value at the time of issuance (which, in the case of debt-like securities, may be less than the face amount thereof) for purposes of determining compliance with the REIT distribution test. Unless Buyer otherwise consents, the 2006 Dividend shall be paid in the form of Dividend Securities, provided that if, in the joint determination of NFI and Buyer, either excess cash is available or it is financially impractical for NFI to satisfy the requirement to pay the 2006 Dividend entirely by means of Dividend Securites, then all or a portion of the 2006 Dividend may be paid in cash, provided further that (i) Buyer will permit all or a portion of the 2006 Dividend to be paid in cash if, following payment in cash of such 2006 Dividend, NFI's Liquidity shall be greater than $125,000,000 and (ii) NFI will neither pay nor declare the 2006 Dividend earlier than fifteen (15) days before payment or declaration of such dividend is required by applicable law. Buyer hereby waives, and will cause its Affiliates likewise to waive, any covenant herein, in the Master Repurchase Agreement (2007 Servicing Rights), in the Existing Agreements and in any replacement facility which covenant would prevent or restrict the issuance of any Dividend Securities, or which would result in the occurrence of an Event of Default hereunder or thereunder as a result of the issuance of such Dividend Securities. v. Backup Servicing. If the Agent reasonably believes that an event may occur which would cause a trustee to be permitted to require a backup servicer under a Servicing Agreement, the Agent may request that the Seller enter into backup servicing arrangements reasonably acceptable to the Agent within thirty (30) days. If an event occurs that would permit the trustee to require the servicer to be replaced, the Agent may request that the Seller replace the servicer with a servicer acceptable to the Agent, subject to the requirements, if any, of the Servicing Agreements. w. Margin Calls. If at any time after the date hereof Seller or any of their Affiliates receive margin calls under any repurchase or financing facilities in excess of $5,000,000 in the aggregate, Seller shall provide notice to Buyer and Buyer shall cause the Seller to repurchase the assets subject to such margin calls and include such assets under the Existing Agreements (provided there is additional capacity) on mutually acceptable terms to Buyer and Seller. x. [reserved]. y. Maintenance of Property; Insurance. Seller shall keep all property useful and necessary in its business in good working order and condition. Seller and Guarantor shall and shall cause all Servicers to maintain errors and omissions insurance and/or mortgage impairment insurance and blanket bond coverage in such amounts as are in effect on the Effective Date (as disclosed to Buyer in writing) and shall not reduce such coverage without the written consent of Buyer, and shall also maintain such other insurance with financially sound and reputable insurance companies, and with respect to property and risks of a 32 

 character usually maintained by entities engaged in the same or similar business similarly situated, against loss, damage and liability of the kinds and in the amounts customarily maintained by such entities. z. Appointment of Sub-Servicer. Seller shall agree to the appointment of any subservicer under a related Servicing Agreement upon written direction from Buyer, on commercially reasonable terms. aa. [reserved]. bb. Servicing Agreements. The Seller will not (a) enter into any Servicing Agreement for the servicing of any Serviced Loans as to which the Servicing Rights are sold hereunder that has not been reviewed and approved in writing by the Buyer, or (b) approve or acquiesce to the sale or transfer of servicing of any such Serviced Loans to another servicer, or pursuant to a Servicing Agreement, that has not been approved by the Buyer. Promptly upon the applicability of a new Servicing Agreement to any Purchased Assets, Seller shall provide Buyer with certified, true copies of all such Servicing Agreements. 14. REPURCHASE DATE PAYMENTS/COLLECTIONS/HEDGING (a) On each Repurchase Date, the Seller shall remit or shall cause to be remitted to Buyer the Repurchase Price. (b) Seller shall have the right to enter into one or more Hedge Instruments to hedge any or all interest rate risk with respect to Servicing Rights subject to this Transactions hereunder; provided that each such Hedge Instrument shall meet the following criteria: (i) to the extent it provides for any payment obligation on the part of Seller, it shall be without recourse to the Purchased Assets (except to the extent of general unsecured claims in the event of the bankruptcy of Seller and except as permitted in the Netting Agreement), and (ii) it shall not impose any obligations on Buyer (except if the Hedge Instrument is entered into with Buyer). Further, Seller shall use reasonable efforts to require that each such Hedge Instrument prohibits the counterparty from setting off or netting other obligations of Seller or its Affiliates against such counterparty's payment obligations thereunder. Each Hedge Instrument entered into by Seller pursuant to this Section 14 shall be assigned to Buyer; provided that only the rights and none of the obligations under such Hedged Instruments shall be assigned to Buyer. Upon Buyer's request, the Seller shall deliver to the Buyer any and all information relating to any and all third party confirmations relating to all such Hedge Instruments. 15. REPURCHASE OF PURCHASED ASSETS PURSUANT TO BREACH/CHANGE OF LAW a. Upon discovery by Seller of a breach of any of the representations, warranties or covenants set forth on Exhibit C hereto or in the Pricing Side Letter, Seller shall give prompt written notice thereof to Buyer. Upon any such discovery by Buyer, Buyer will notify Seller. It is understood and agreed that the representations, warranties and covenants set forth on Exhibit C hereto and in the Pricing Side Letter with respect to the Purchased Assets shall survive delivery of the Purchased Assets to Buyer and shall inure to the benefit of Buyer. The fact that Buyer has 33 

 conducted or has failed to conduct any partial or complete due diligence investigation in connection with its purchase of any Servicing Rights shall not affect Buyer's right to demand repurchase as provided under this Agreement. Seller shall, within two (2) Business Days of the earlier of Seller's discovery or receipt of notice with respect to any Purchased Assets of (i) any breach of a representation, warranty or covenant set forth on Exhibit C or contained in the Pricing Side Letter, or (ii) any failure to deliver any of the items required to be delivered to Buyer pursuant to Section 9(b)(i) hereof within the time period required for delivery, promptly cure such breach or delivery failure in all material respects. If within two (2) Business Days after the earlier of Seller's discovery of such breach or delivery failure or Seller's receipt of notice thereof that such breach or delivery failure has not been remedied by Seller, Seller shall promptly upon receipt of written instructions from Buyer, at Buyer's option, either (i) repurchase such Purchased Assets at a purchase price equal to the Repurchase Price with respect to such Purchased Assets by wire transfer to the account designated by Buyer, or (ii) transfer comparable Substitute Servicing Rights to Buyer, as provided in Section 16 hereof. b. If Buyer determines that the introduction of, any change in, or the interpretation or administration of any requirement of law has made it unlawful or commercially impracticable to engage in any Transactions with a Pricing Rate based on LIBOR, then the Seller (i) shall, upon its receipt of notice of such fact and demand from Buyer, repurchase the Purchased Assets subject to the Transaction on the next succeeding Business Day and, at the Seller's election, concurrently enter into a new Transaction with Buyer with a Pricing Rate based on the Prime Rate plus the margin set forth in the Side Letter as part of the Pricing Rate and (ii) may elect, by giving notice to Buyer, that all new Transactions shall have Pricing Rates based on the Prime Rate plus such margin. c. If Buyer determines in its sole discretion that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on Buyer's capital or on the capital of any Affiliate of Buyer as a consequence of such Change in Law on this Agreement, then from time to time the Seller will compensate Buyer or Buyer's Affiliate, as applicable, for such reduced rate of return suffered as a consequence of such Change in Law on terms similar to those imposed by Buyer on its other similarly affected customers. Buyer shall provide the Seller with prompt notice as to any Change in Law. Notwithstanding any other provisions in this Agreement, in the event of any such Change in Law, the Seller will have the right to terminate all Transactions then outstanding without any prepayment penalty as of a date selected by the Seller, which date shall be prior to the then applicable Repurchase Date and which date shall thereafter for all purposes hereof be deemed to be the Repurchase Date. Nothing in this Section 15 shall be deemed to limit Buyer's ability to invoke a Margin Call pursuant to Section 6. 16. SUBSTITUTION a. The Seller may, subject to agreement with and acceptance by Buyer, substitute other assets which are substantially the same as the Purchased Assets (the "Substitute Assets") for any Purchased Assets. Such substitution shall be made by transfer to Buyer of such other Substitute Assets and transfer to the Seller of such Purchased Assets. After substitution, the Substitute Assets shall be deemed to be Purchased Assets. b. In the case of any Transaction for which the Repurchase Date is other than the Business Day immediately following the Purchase Date and with respect to which the Seller does 34 

 not have any existing right to Substitute Assets for the Purchased Assets, the Seller shall have the right, subject to the proviso to this sentence, upon notice to Buyer, which notice shall be given at or prior to 10 a.m. (New York City time) on the second preceding Business Day, to Substitute Assets for any Purchased Assets; provided, however, that Buyer may elect, by the close of business on the Business Day following which such notice is received, or by the close of the next Business Day if notice is given after 10 a.m. (New York City time) on such day, not to accept such substitution. In the event such substitution is accepted by Buyer, such substitution shall be made by the Seller's transfer to Buyer of such Substitute Assets and Buyer's transfer to the Seller of such Purchased Assets, and after such substitution, the Substitute Assets shall be deemed to be Purchased Assets. In the event Buyer elects not to accept such substitution, Buyer shall offer the Seller the right to terminate the Transaction. c. In the event the Seller exercises its right to substitute or terminate under subsection (b), the Seller shall be obligated to pay to Buyer, by the close of the Business Day of such substitution, as the case may be, an amount equal to (A) Buyer's actual cost in bona fide third party transactions (including all fees, expenses and commissions) of (i) entering into replacement transactions; (ii) entering into or terminating hedge transactions; and/or (iii) terminating transactions or substituting securities in like transactions with third parties in connection with or as a result of such substitution or termination, and (B) to the extent Buyer determines not to enter into replacement transactions, the Breakage Costs incurred by Buyer directly arising or resulting from such substitution or termination. Nothing in this Section 16 shall be deemed to limit Buyer's ability to invoke a Margin Call pursuant to Section 6. 17. REPURCHASE TRANSACTIONS Buyer may, in its sole election, engage in repurchase transactions with the Purchased Assets or otherwise pledge, hypothecate, assign, transfer or otherwise convey the Purchased Assets with a counterparty of Buyer's choice, in all cases subject to Buyer's obligation to reconvey the Purchased Assets (and not substitutes therefor) on the Repurchase Date. In the event Buyer engages in a repurchase transaction with any of the Purchased Assets or otherwise pledges or hypothecates any of the Purchased Assets, Buyer shall have the right to assign to Buyer's counterparty any of the applicable representations or warranties with respect to the Purchased Assets hereunder and the remedies for breach thereof, as they relate to the Purchased Assets that are subject to such repurchase transaction. 18. EVENTS OF DEFAULT With respect to any Transactions covered by or related to this Agreement, the occurrence of any of the following events shall constitute an "Event of Default": a. Seller fails to transfer the Purchased Assets to Buyer on the applicable Purchase Date (provided Buyer has tendered the related Purchase Price); b. Seller either fails to repurchase the Purchased Assets on the applicable Repurchase Date or fails to perform its obligations under Section 6; 35 

 c. either Seller or a Guarantor shall fail to perform, observe or comply with any other material term, covenant or agreement contained in the Program Documents and such failure is not cured within the time period expressly provided or, if no such cure period is provided, within two (2) Business Days of the earlier of (i) such party's receipt of written notice from Buyer of such breach or (ii) the date on which such party obtains notice or knowledge of the facts giving rise to such breach; d. any representation or warranty made by Seller or a Guarantor (or any of Seller's or such Guarantor's officers) in the Program Documents or in any other document delivered in connection therewith shall have been incorrect or untrue in any material respect when made or repeated or to have been made or repeated if such inaccuracy would constitute Material Adverse Change with respect to any Seller or Guarantor, except for the representations and warranties set forth in Section 12(n) and Exhibit C hereof with respect to the Purchased Assets, which shall be considered solely for determining whether such assets constitute Eligible Assets and the Market Value thereof; e. any Seller, any Guarantor, or any of Seller's or any Guarantor's Subsidiaries shall fail to pay any of Seller's, such Guarantor's or Seller's or such Guarantor's Subsidiaries' Indebtedness, or any interest or premium thereon when due (whether by scheduled maturity, requirement prepayment, acceleration, demand or otherwise), or shall fail to make any payment when due under Seller's, such Guarantor's or Seller's or such Guarantor's Subsidiaries' Guarantee of another person's Indebtedness for borrowed money, and such failure shall entitle any related counterparty to declare any such Indebtedness or Guarantee to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof provided that such Indebtedness is in excess of (i) $5,000,000 with respect to the Guarantor and (ii) $1,000,000 with respect to all other parties referenced in this subsection (e) and such failure is not cured within two (2) Business Days; f. a custodian, receiver, conservator, liquidator, trustee, sequestrator or similar official for Seller, a Guarantor or any of Seller's or a Guarantor's Subsidiaries, or of any of Seller's, a Guarantor's or their respective Property (as a debtor or creditor protection procedure), is appointed or takes possession of such property; or Seller, a Guarantor or any of Seller's or a Guarantor's Subsidiaries generally fails to pay Seller's, such Guarantor's or Seller's or such Guarantor's Subsidiaries' debts as they become due; or Seller, a Guarantor or any of Seller's or a Guarantor's Subsidiaries is adjudicated bankrupt or insolvent; or an order for relief is entered under the Federal Bankruptcy Code, or any successor or similar applicable statute, or any administrative insolvency scheme, against Seller, a Guarantor or any of Seller's or a Guarantor's Subsidiaries; or any of Seller's, Guarantor's or Seller's or a Guarantor's Subsidiaries' Property is sequestered by court or administrative order; or a petition is filed against Seller, a Guarantor or any of Seller's or a Guarantor's Subsidiaries under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution, moratorium, delinquency or liquidation law of any jurisdiction, whether now or subsequently in effect; g. Seller, a Guarantor or any of Seller's or a Guarantor's Subsidiaries files a voluntary petition in bankruptcy seeks relief under any provision of any bankruptcy, reorganization, moratorium, delinquency, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction whether now or subsequently in effect; or consents to the filing of any 36 

 petition against it under any such law; or consents to the appointment of or taking possession by a custodian, receiver, conservator, trustee, liquidator, sequestrator or similar official for Seller, any Guarantor or any of Seller's or any Guarantor's Subsidiaries, or of all or any part of Seller's, any Guarantor's or Seller's or any Guarantor's Subsidiaries' Property; or makes an assignment for the benefit of Seller, any Guarantor or Seller's or any Guarantor's Subsidiaries' creditors; h. any final, nonappealable judgment or order for the payment of money in excess of (i) $5,000,000 with respect to the Guarantor and (ii) $1,000,000 with respect to all other parties referenced in this subsection (h), in the aggregate (to the extent that it is, in the reasonable determination of Buyer, uninsured and provided that any insurance or other credit posted in connection with an appeal shall not be deemed insurance for these purposes) shall be rendered against Seller, the Guarantor or any of Seller's or Guarantor's Affiliates and Subsidiaries by one or more courts, administrative tribunals or other bodies having jurisdiction over them and the same shall not be discharged (or provisions shall not be made for such discharge), satisfied, or bonded, or a stay of execution thereof shall not be procured, within sixty (60) days from the date of entry thereof and Seller, the Guarantor or any of Seller's or Guarantor's Affiliates and Subsidiaries, as applicable, shall not, within said period of sixty (60) days, appeal therefrom and cause the execution thereof to be stayed during such appeal; i. any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of Seller, any Guarantor or any of Seller's or any Guarantor's Subsidiaries, or shall have taken any action to displace the management of Seller, any Guarantor or any of Seller's or any Guarantor's Subsidiaries or to materially curtail its authority in the conduct of the business of Seller, any Guarantor or any of any Seller's or any Guarantor's Subsidiaries, or takes any action in the nature of enforcement to remove or materially limit or restrict the approval of Seller, any Guarantor or any of Seller's or any Guarantor's Subsidiaries as an issuer, buyer or a seller/servicer of the Purchased Assets or similar securities; j. any Seller, any Guarantor or any of Seller's or any Guarantor's Subsidiaries shall default under, or fail to perform as requested under, or shall otherwise breach the material terms of any instrument, agreement or contract relating to Indebtedness, and such default, failure or breach shall entitle any counterparty to declare an amount of such Indebtedness in excess of (i) $5,000,000 with respect to the Guarantor and (ii) $1,000,000 with respect to all other parties referenced in this subsection (j), to be due and payable prior to the maturity thereof; k. in the reasonable good faith judgment of Buyer any Material Adverse Change shall have occurred with respect to the financial condition of NFI and its Subsidiaries taken as a whole; l. Seller or any Guarantor shall admit in writing its inability to, or intention not to, perform any of Seller's or such Guarantor's respective material Obligations; m. Seller or any Guarantor dissolves or sells, transfers, or otherwise disposes of a material portion of Seller's or such Guarantor's (as applicable) business or assets (other than pursuant to a securitization or similar transaction in the ordinary course of business) unless Buyer's written consent is given; 37 

 n. this Agreement shall for any reason cease to create a valid, first priority security interest or ownership interest upon transfer in any material portion of the Purchased Assets or Collateral purported to be covered hereby; o. either Seller's or any Guarantor's audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of Seller or such Guarantor as a "going concern" or a reference of similar import; p. [reserved]; q. the ratio of NFI's Adjusted Tangible Net Worth to Required Equity on a consolidated basis at any date is less than 1:1; r. the Adjusted Tangible Net Worth of NFI, on a consolidated basis, is less than or equal to $400,000,000 at any time, provided that such amount shall be reduced by the amount of the 2006 Dividend; s. any (a) termination by Seller of any Servicer or subservicer or the Mortgage Assets without the prior written consent of Buyer to the extent Seller's consent is required for such termination or (b) amendment of any Servicing Agreement without the prior written consent of Buyer to the extent Seller's consent is required for such occurrences. t. [reserved]. u. any failure of NFI, on a consolidated basis, to maintain Liquidity of at least $30,000,000 at any time or failure of NFI to notify the Agent if NFI's Liquidity falls below $45,000,000 at any time; v. any failure by Seller or Guarantors to pay any Price Differential, Margin Deficit or other amount payable under this Agreement or the Existing Agreements after any applicable grace periods. w. any event of default under the Existing Agreements. x. [reserved]. y. [reserved]. z. any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, which could reasonably be expected to have a Material Adverse Effect. aa. [reserved]. bb. failure of the Seller to provide same day notification to Buyer of any margin call under any repurchase or financing facility if such margin call is made before 1:00 p.m. (NYC time); 38 

 otherwise, if such margin call is made after 1:00 p.m. (NYC time), failure to provide notification to Buyer by 1:00 pm (NYC time) the following day; dd. failure to allow Buyer to exercise its options as set forth in Section 13(w) hereof with respect to any margin calls under any repurchase or financing facility which exceeds $5,000,000 in the aggregate; or ee. an Event of Default (as defined in each Hedge Instrument) shall have occurred under any Hedge Instrument, beyond the expiration of any applicable grace period; ff. [reserved]; gg. [reserved]; hh. Seller's rights to service Serviced Loans, in the aggregate, under one or more Servicing Agreements, the value of which rights, in the aggregate, to Seller (as reasonably estimated by Buyer) equals or exceeds ten percent (10%) or more of the Servicer's portfolio of Servicing Rights, shall be terminated for cause (i.e., on account of act(s) or omission(s) by Seller); ii. Servicer's current servicing rating is downgraded: (i) with respect to Moody's, to or below SQ3-, (ii) with respect to S&P to or below "Average" and (iii) with respect to Fitch, to or below RPS3-; or jj. Seller shall either (i) omit to take any action required to keep all such Servicing Agreements in full force and effect or (ii) pledge or grant a security interest in or Lien on any existing or future Servicing Agreements held by the Seller and relating to the Purchased Assets to a Person other than the Buyer. 19. REMEDIES Upon the occurrence of an Event of Default, Buyer, at its option, shall have any or all of the following rights and remedies, which may be exercised by Buyer in good faith: a. The Repurchase Date for each Transaction hereunder shall be deemed immediately to occur. b. The Seller's obligations hereunder to repurchase all Purchased Assets at the Repurchase Price therefor on the Repurchase Date in such Transactions shall thereupon become immediately due and payable; all Income paid after such exercise or deemed exercise shall be retained by Buyer and applied to the aggregate Repurchase Prices and any other amounts owing by the Seller hereunder; the Seller and each Guarantor shall immediately deliver to Buyer or its designee any and all original papers, records and files relating to the Purchased Assets subject to such Transaction then in Seller's and any Guarantor's possession and/or control; and all right, title and interest in and entitlement to such Purchased Assets thereon shall be deemed transferred to Buyer. c. Buyer may (A) sell, on or following the Business Day following the date on which the Repurchase Price became due and payable pursuant to Section 19(b) without notice or demand of 39 

 any kind, at a public or private sale and at such price or prices as Buyer may reasonably deem satisfactory any or all Purchased Assets or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Assets, to give the Seller credit for such Purchased Assets in an amount equal to the Market Value of the Purchased Assets against the aggregate unpaid Repurchase Price and any other amounts owing by the Seller hereunder. The Seller shall remain liable to Buyer for any amounts that remain owing to Buyer following a sale or credit under the preceding sentence. The proceeds of any disposition of Purchased Assets shall be applied first to the reasonable costs and expenses incurred by the Buyer in connection with or as a result of an Event of Default; second to Breakage Costs, costs of cover and/or related hedging transactions; third to the aggregate Repurchase Prices; and fourth to all other Obligations. d. The parties recognize that it may not be possible to purchase or sell all of the Purchased Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Assets may not be liquid. In view of the nature of the Purchased Assets, the parties agree that liquidation of a Transaction or the underlying Purchased Assets does not require a public purchase or sale and that a good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner. Accordingly, the Buyer may elect the time and manner of liquidating any Purchased Asset and nothing contained herein shall obligate Buyer to liquidate any Purchased Asset on the occurrence of an Event of Default or to liquidate all Purchased Assets in the same manner or on the same Business Day or constitute a waiver of any right or remedy of Buyer. Notwithstanding the foregoing, the parties to this Agreement agree that the Transactions have been entered into in consideration of and in reliance upon the fact that all Transactions hereunder constitute a single business and contractual obligation and that each Transaction has been entered into in consideration of the other Transactions. e. Buyer shall have the right to forthwith, with respect to the Servicing Rights pledged hereunder, terminate Seller as servicer with respect to any or all of the related Serviced Loans and sell, assign and/or transfer such Servicing Rights to a Qualified Successor Servicer in accordance with the terms of the Servicing Agreements. f. Buyer shall have the right to obtain physical possession of the Servicing Rights Files and all other files of Seller relating to the Purchased Assets and all documents relating to the Purchased Assets which are then or may thereafter come into the possession of Seller or any third party acting for Seller and Seller shall deliver to Buyer such assignments as Buyer shall request. g. Buyer shall have the right to direct all Persons servicing the Purchased Assets to take such action with respect to the Purchased Assets as Buyer determines appropriate. h. Buyer shall, without regard to the adequacy of the security for the Obligations, be entitled to the appointment of a receiver by any court having jurisdiction, without notice, to take possession of and protect, collect, manage, liquidate, and sell the Purchased Assets and any other Purchased Assets or any portion thereof, collect the payments due with respect to the Purchased Assets and any other Purchased Assets or any portion thereof, and do anything that Buyer is authorized hereunder to do. Seller shall pay all costs and expenses incurred by Buyer in connection with the appointment and activities of such receiver. 40 

 i. In addition to its rights hereunder, Buyer shall have the right to proceed against any of the Seller's assets which may be in the possession of Buyer, Buyer's Affiliates or its designee, including the right to liquidate such assets and to set-off the proceeds against monies owed by the Seller to Buyer pursuant to this Agreement. Buyer may set off cash, the proceeds of the liquidation of the Purchased Assets, any other Collateral or its proceeds and all other sums or obligations owed by Buyer to the Seller hereunder against all of the Seller's Obligations to Buyer, whether under this Agreement, under a Transaction, or under any other agreement between the parties (including, without limitation, the Existing Agreements), or otherwise, whether or not such Obligations are then due, without prejudice to Buyer's right to recover any deficiency. j. Buyer may direct all Persons servicing the Purchased Assets to take such action with respect to the Purchased Assets as Buyer determines appropriate. k. The Seller shall be liable to Buyer for the amount of all expenses (plus interest thereon at a rate equal to the Default Rate), and Breakage Costs and all costs and expenses incurred within 30 days of the Event of Default in connection with hedging or covering transactions related to the Purchased Assets. l. Seller and each Guarantor shall cause all sums received by it with respect to the Purchased Assets to be remitted to Buyer (or such other Person as Buyer may direct) after receipt thereof. m. Buyer shall without regard to the adequacy of the security for the Obligations, be entitled to the appointment of a receiver by any court having jurisdiction, without notice, to take possession of and protect, collect, manage, liquidate, and sell the Purchased Assets and any other Collateral or any portion thereof, collect the payments due with respect to the Purchased Assets and any other Collateral or any portion thereof, and do anything that the Buyer is authorized hereunder to do. The Seller shall pay all costs and expenses incurred by Buyer in connection with the appointment and activities of such receiver. n. Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and the Seller hereby expressly waives, to the extent permitted by law, any right the Seller might otherwise have to require Buyer to enforce its rights by judicial process. The Seller also waives, to the extent permitted by law, any defense the Seller might otherwise have to the Obligations, arising from use of nonjudicial process, enforcement and sale of all or any portion of the Purchased Assets and any other Collateral or from any other election of remedies. The Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arm's length. o. In addition to all the rights and remedies specifically provided herein, Buyer shall have all other rights and remedies provided by applicable federal, state, foreign, and local laws, whether existing at law, in equity or by statute. p. Upon the occurrence of an Event of Default, Buyer shall have, except as otherwise expressly provided in this Agreement, the right to exercise any of its rights and/or remedies without presentment, demand, protest or further notice of any kind other than as expressly set forth herein, all of which are hereby expressly waived by the Seller. 41 

 q. The Seller hereby authorizes Buyer, at the Seller's expense, to file such financing statement or statements relating to the Purchased Assets and the Collateral without the Seller's signature thereon as Buyer at its option may deem appropriate, and appoints each Buyer as the Seller's attorney-in-fact to execute any such financing statement or statements in the Seller's name and to perform all other acts which Buyer deems appropriate to perfect and continue the lien and security interest granted hereby and to protect, preserve and realize upon the Purchased Assets and the Collateral, including, but not limited to, the right to endorse notes, complete blanks in documents and execute assignments on behalf of the Seller as its attorney-in-fact. This power of attorney is coupled with an interest and is irrevocable without Buyer's consent. r. Seller hereby agrees that the occurrence and continuance of an Event of Default hereunder shall operate in Buyer's sole discretion as a resignation of Seller as Servicer from all Servicing Agreements related to Purchased Assets that require resignation or similar action on the part of the Servicer in order for Buyer or its designee to succeed to Servicer's obligations thereunder, and Seller shall immediately take all steps necessary to effectuate such resignation and succession, including but not limited to obtaining all necessary consents, approvals and waivers. s. Buyer shall be entitled to charge a fee equal to the product of: (i) two percent 2% multiplied by the (ii) Combined Maximum Aggregate Purchase Price (the "Default Fee"); provided that such Default Fee shall not be duplicative with any such fee payable under the Master Repurchase Agreement (2007 Residual Securities). The Default Fee shall be paid to the Agent. t. Upon the occurrence of an Event of Default, in addition to any other remedy available to Buyer, Buyer may, in its sole discretion, retain all Income, net of Servicing Costs, and apply such Income to Seller's Obligations. 20. DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE No failure on the part of Buyer to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by Buyer of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All rights and remedies of Buyer provided for herein are cumulative and in addition to any and all other rights and remedies provided by law, the Program Documents and the other instruments and agreements contemplated hereby and thereby, and are not conditional or contingent on any attempt by Buyer to exercise any of its rights under any other related document. Buyer may exercise at any time after the occurrence of an Event of Default one or more remedies, as it so desires, and may thereafter at any time and from time to time exercise any other remedy or remedies. 21. USE OF EMPLOYEE PLAN ASSETS No assets of an employee benefit plan subject to any provision of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") shall be used by either party hereto in a Transaction. 22. INDEMNITY 42 

 a. The Seller agrees to pay on demand (i) all reasonable out-of-pocket costs and expenses of Agent and Buyer in connection with the preparation, execution, delivery, modification and amendment of this Agreement (including, without limitation, (A) all collateral review and UCC search and filing fees and expenses and (B) the reasonable fees and expenses of counsel for Agent and Buyer with respect to advising Agent and Buyer as to its rights and responsibilities, or the perfection, protection or preservation of rights or interests, under this Agreement, with respect to negotiations with the Seller or with other creditors of the Seller or any of its Subsidiaries arising out of any-Default or any events or circumstances that may arise to a Default and with respect to presenting claims in or otherwise participating in or monitoring any bankruptcy, insolvency or other similar proceeding involving creditors' rights generally and any proceeding ancillary thereto); and (ii) all costs and expenses of Agent and Buyer in connection with the enforcement of this Agreement, whether in any action, suit or litigation, any bankruptcy, insolvency or other similar proceeding affecting creditors' rights generally (including, without limitation, the reasonable fees and expenses of counsel for Agent and Buyer) whether or not the transactions contemplated hereby are consummated. b. The Seller agrees to indemnify and hold harmless Agent and each of its respective Affiliates and Buyer and each of its respective Affiliates and their officers, directors, employees, agents and advisors (each, an "Indemnified Party") from and against (and will reimburse each Indemnified Party as the same is incurred) any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel and allocated costs of internal counsel) that may be incurred by or asserted or awarded against any Indemnified Party, in each case arising out of or in connection with or by reason of (including, without limitation, in connection with any investigation, litigation or other proceeding (whether or not such Indemnified Party is a party thereto) relating to, resulting from or arising out of any of the Program Documents and all other documents related thereto (including but not limited to any claims of indemnity made by the Trustee against Buyer pursuant to the Trustee Side Letter), any breach of a representation or warranty of Seller or any Guarantor or Seller's or any Guarantor's officers in this Agreement or any other Program Document, and all actions taken pursuant thereto) (i) the Transactions, the actual or proposed use of the proceeds of the Transactions, this Agreement or any of the transactions contemplated thereby, including, without limitation, any acquisition or proposed acquisition or (ii) the actual or alleged presence of hazardous materials on any Property or any environmental action relating in any way to any Property, except to the extent such claim, damage, class, liability or expense is found in a final, non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's gross negligence or willful misconduct or is the result of a claim made by Seller or any Guarantor against the Indemnified Party, and the Seller or such Guarantor is ultimately the successful party in any resulting litigation or arbitration. The Seller also agrees not to assert any claim against Agent or any of its Affiliates, Buyer or any of its Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Program Documents, the actual or proposed use of the proceeds of the Transactions, this Agreement or any of the transactions contemplated thereby. THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE, BAD FAITH OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES. 43 

 c. Without limitation on the provisions of Section 4, if any payment of the Repurchase Price of any Transaction is made by the Seller other than on the then scheduled Repurchase Date thereto as a result of an acceleration of the Repurchase Date pursuant to Section 19 or for any other reason, the Seller shall, except as otherwise provided in Sections 15 and 24, upon demand by Buyer, pay to Buyer any Breakage Costs incurred as of a result of such payment. d. If the Seller fails to pay when due any costs, expenses or other amounts payable by it under this Agreement, including, without limitation, reasonable fees and expenses of counsel and indemnities, such amount may be paid on behalf of the Seller by Buyer, in its sole discretion. e. Without prejudice to the survival of any other agreement of the Seller hereunder, the easements and obligations of the Seller contained in this Section shall survive the payment in full of the Repurchase Price and all other amounts payable hereunder and delivery of the Purchased Assets by Buyer against full payment therefor. 23. WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS The Seller hereby expressly waives, to the fullest extent permitted by law, every statute of limitation on a deficiency judgment, any reduction in the proceeds of any Purchased Assets as a result of restrictions upon Buyer contained in the Program Documents or any other instrument delivered in connection therewith, and any right that it may have to direct the order in which any of the Purchased Assets shall be disposed of in the event of any disposition pursuant hereto. 24. REIMBURSEMENT All sums reasonably expended by Buyer in connection with the exercise of any right or remedy provided for herein shall be and remain the Seller's obligation. The Seller agrees to pay, with interest at the Default Rate to the extent that an Event of Default has occurred, the reasonable out-of-pocket expenses and reasonable attorneys' fees incurred by Buyer in connection with the preparation, enforcement or administration of the Program Documents, the taking of any action, including legal action, required or permitted to be taken by Buyer (without duplication to Buyer) pursuant thereto, any "due diligence" or loan agent reviews conducted by Buyer or on their behalf or by refinancing or restructuring in the nature of a "workout". If Buyer determines that, due to the introduction of, any change in, or the compliance by Buyer with (i) any eurocurrency reserve requirement or (ii) the interpretation of any law, regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be an increase in the cost to Buyer in engaging in the present or any future Transactions, then the Seller agrees to pay to Buyer, from time to time, upon demand by Buyer the actual cost of additional amounts as specified by Buyer to compensate Buyer for such increased costs. Notwithstanding any other provisions in this Agreement, in the event of any such change in the eurocurrency reserve requirement or the interpretation of any law, regulation or any guideline or request from any central bank or other Governmental Authority, the Seller will have the right to terminate all Transactions then outstanding as of a date selected by the Seller, which date shall be prior to the applicable Repurchase Date and which date shall thereafter for all purposes hereof, be deemed to be the Repurchase Date. In addition, Buyer shall promptly notify Seller if any events in clause (i) or (ii) of this Section 24 occur. 44 

 25. FURTHER ASSURANCES The Seller and each Guarantor agree to do such further acts and things and to execute and deliver to Buyer such additional assignments, acknowledgments, agreements, powers and instruments as are reasonably required by Buyer to carry into effect the intent and purposes of this Agreement, to perfect the interests of Buyer in the Purchased Assets or to better assure and confirm unto Buyer its rights, powers and remedies hereunder. 26. ENTIRE AGREEMENT; PRODUCT OF NEGOTIATION This Agreement supersedes and integrates all previous negotiations, contracts, agreements and understandings between the parties relating to a sale and repurchase of Purchased Assets thereto, and it, together with the other Program Documents, and the other documents delivered pursuant hereto or thereto, contains the entire final agreement of the parties. No prior negotiation, agreement, understanding or prior contract shall have any validity therefor. 27. TERMINATION This Agreement shall remain in effect until the earliest of the following (the "Termination Date"): (i) April 24, 2008 (the "Maturity Date"), subject to automatic renewal for another term of 364 days to the extent Buyer fails to provide Seller with at least 120 days notice of Buyer's intention to terminate this Agreement on the Maturity Date (provided that such automatic renewal shall occur no more than once), (ii) at Buyer's option upon the occurrence of an Event of Default, (iii) Buyer, at its option, terminates the Agreement upon the occurrence of a Change of Control at any time within ninety (90) days following such Change of Control or (iv) at Seller's option upon five (5) business days notice to Buyer of Seller's intention to terminate this Agreement. However, no such termination shall affect the Seller's outstanding obligations to Buyer at the time of such termination. The Seller's obligations to indemnify Buyer pursuant to this Agreement shall survive the termination hereof. Any such termination pursuant to clauses (ii), (iii) or (iv) above shall require payment by Seller of the Repurchase Price plus a fee equal to the amount set forth in the Side Letter. 45 

 28. ASSIGNMENT The Program Documents are not assignable by the Seller. Buyer may from time to time assign all or a portion of its rights and obligations under this Agreement and the Program Documents without consent of the Seller; provided, however, that Buyer shall maintain, for review by the Seller upon written request, a register of assignees and a copy of an executed assignment and acceptance by Buyer and assignee ("Assignment and Acceptance"), specifying the percentage or portion of such rights and obligations assigned. Upon such assignment, (a) such assignee shall be a party hereto and to each Program Document to the extent of the percentage or portion set forth in the Assignment and Acceptance, and shall succeed to the applicable rights and obligations of Buyer hereunder, and (b) Buyer shall, to the extent that such rights and obligations have been so assigned by it to another Person approved by the Seller (such approval not to be unreasonably withheld) which assumes the obligations of Buyer, be released from its obligations hereunder accruing thereafter and under the Program Documents. Unless otherwise stated in the Assignment and Acceptance, the Seller shall continue to take directions solely from Buyer unless otherwise notified by Buyer in writing. Buyer may distribute to any prospective assignee any document or other information delivered to Buyer by the Seller. Notwithstanding any assignment by Buyer pursuant to this Section 28, Buyer shall remain liable as to the Transactions. Buyer and Agent agree that, provided that no Event of Default exists under this Agreement or the Master Repurchase Agreement (2007 Residual Securities), any assignment of this Agreement will be only done in connection with an assignment of the Master Repurchase Agreement (2007 Residual Securities) in a single transaction. 29. AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement nor any consent to any failure to comply herewith or therewith shall in any event be effective unless the same shall be in writing and signed by Seller and Buyer, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. 30. SEVERABILITY If any provision of any Program Document is declared invalid by any court of competent jurisdiction, such invalidity shall not affect any other provision of the Program Documents, and each Program Document shall be enforced to the fullest extent permitted by law. 31. BINDING EFFECT: GOVERNING LAW This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and assigns, except that Seller may not assign or transfer any of its rights or obligations under this Agreement or any other Program Document without the prior written consent of Buyer. THIS AGREEMENT 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. 46 

 32. CONSENT TO JURISDICTION SELLER HEREBY WAIVE TRIAL BY JURY. SELLER HEREBY IRREVOCABLY CONSENT TO THE NON-EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM DOCUMENTS IN ANY ACTION OR PROCEEDING. SELLER HEREBY SUBMIT TO, AND WAIVE ANY OBJECTION SELLER MAY HAVE TO, NON-EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM DOCUMENTS. 33. SINGLE AGREEMENT Seller, each Guarantor and Buyer acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, Seller, each Guarantor and Buyer each agree (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, and (ii) that payments, deliveries and other transfers made by any of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfer in respect of any other Transaction hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted. 34. INTENT Sellers, Guarantors and Buyer recognize that each Transaction is a "securities contract" as that term is defined in Section 741 of Title 11 of the United States Code, as amended ("USC"). It is understood that a Buyer's right to liquidate the Purchased Assets delivered to it in connection with the Transactions hereunder or to exercise any other remedies pursuant to Section 19 hereof is a contractual right to liquidate such Transaction as described in Sections 555 and 559 of Title 11 of the USC. 35. NOTICES AND OTHER COMMUNICATIONS Except as provided herein, any notice required or permitted by this Agreement shall be in writing and shall be effective and deemed delivered only when received by the party to which it is sent; provided, however, that a facsimile transmission shall be deemed to be received when transmitted so long as the transmitting machine has provided an electronic confirmation (without error message) of such transmission. Any such notice shall be sent to a party at the address or facsimile transmission number set forth below: if to Seller 47 

 NovaStar Mortgage, Inc. 8140 Ward Parkway, Suite 300 Kansas City, Missouri 64114 Attention: Todd Phillips Telephone: (816) 237-7559 Facsimile: (816) 237-7515 E-mail:  ***@*** if to Wachovia Bank, N.A.: Wachovia Bank, N.A. One Wachovia Center 301 South College Street Charlotte, NC 28288 Attention: Andrew W. Riebe Telephone: 704 ###-###-#### Facsimile: 704 ###-###-#### With a copy to: Wachovia Capital Markets, LLC One Wachovia Center 301 South College Street Charlotte, NC 28288 Attention: RMC Asset-Backed Lending Telephone: (704) 715-6133 Facsimile: (704) 383-8121 or, for Transaction Notices and related documents: Attention: Chad Cote Telephone: 704 ###-###-#### Facsimile: 704 ###-###-#### E-mail:  ***@*** as such address or number may be changed by like notice. 48 

 36. CONFIDENTIALITY (a) This Agreement and its terms, provisions, supplements and amendments, and transactions and notices hereunder, are proprietary to Buyer and Agent and shall be held by Seller (and Seller shall cause each Guarantor to hold it) in strict confidence and shall not be disclosed to any third party without the consent of Buyer except for (i) disclosure to Seller's direct and indirect parent companies, attorneys, agents or accountants, provided that such attorneys or accountants likewise agree to be bound by this covenant of confidentiality or (ii) upon prior written notice to Buyer, which is hereby given with respect to the Form 8-K NFI will file in connection with entry into this Agreement, disclosure required by law, rule, regulation or order of a court or other regulatory body or (iii) with prior written notice to Buyer, any required Securities and Exchange Commission or state securities' law disclosures or filings, which shall not include the Side Letter unless otherwise agreed by Buyer in writing. Notwithstanding anything herein to the contrary, each party (and each employee, representative, or other agent of each party) may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to it relating to such tax treatment and tax structure. For this purpose, tax treatment and tax structure shall not include (i) the identity of any existing or future party (or any Affiliate of such party) to this Agreement or (ii) any specific pricing information or other commercial terms, including the amount of any fees, expenses, rates or payments arising in connection with the transactions contemplated by this Agreement. (b) Buyer acknowledges that certain of the information provided to it by or on behalf of Seller or the Guarantor in connection with this Agreement and the transactions contemplated hereby is or may be confidential, and Buyer agrees that, unless such Seller or the Guarantor, as applicable, shall otherwise agree in writing (subject to subsections (c) and (d) below), Buyer will not disclose to any other person or entity any information regarding any non-public financial statements, reports and other information furnished by Seller or the Guarantor to Buyer pursuant to or in connection with any Program Document, unless such information was known to Buyer on a non-confidential basis prior to disclosure by Seller or the Guarantor. (c) Each party may disclose certain confidential information to (i) any of such party's attorneys, consultants, accountants, financial advisors and independent auditors, (ii) any actual or potential assignee or participant of Buyer under this Agreement, (iii) any municipal, state, federal or other regulatory body in order to comply with any law, order, regulation, request or ruling or (iv) in the event such party is legally compelled by subpoena or other similar process. After an Event of Default, Buyer may disclose any confidential information in connection with the sale of the Purchased Assets. (d) Notwithstanding anything contained herein to the contrary, Buyer shall not disclose or otherwise take any action with respect to any information furnished by Seller, the Guarantor or any attorney or other representative of Seller or the Guarantor, that would cause Seller, the Guarantor or any affiliate thereof, to be in violation of any requirement of any law, rule or regulation prohibiting the disclosure of information regarding mortgagors. 37. [reserved] 49 

 38. CROSS COLLATERLIZATION. The Purchased Assets subject to any Transaction (i) hereunder, (ii) pursuant to the Repurchase Agreement (2007 Residual Securities) or (iii) pursuant to any Existing Agreement or other repurchase agreement or similar financing agreement among the Buyer, Seller and Guarantors or any affiliates of Seller or Guarantors (collectively the "Wachovia Financing Facilities") shall be cross collateralized with the Purchased Assets subject to any purchase transaction pursuant to any of the Wachovia Financing Facilities. [Signature Page Follows] 50 

 IN WITNESS WHEREOF, Seller, Guarantors and Buyer have caused their names to be signed to this Master Repurchase Agreement by their respective officers thereunto duly authorized as of the date first above written. NOVASTAR MORTGAGE, INC., as Seller By: /s/ Michael L. Bamburg ----------------------------------------- Name: Michael L. Bamburg --------------------------------------- Title: Senior Vice President -------------------------------------- WACHOVIA BANK, N.A., 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 -------------------------------------- 1 

 Acknowledged and Agreed: NFI HOLDING CORPORATION, as Guarantor By: /s/ Gregory S. Metz ----------------------------------------- Name: Gregory S. Metz --------------------------------------- Title: Senior Vice President -------------------------------------- NOVASTAR FINANCIAL, INC., as Guarantor By: /s/ Gregory S. Metz ----------------------------------------- Name: Gregory S. Metz --------------------------------------- Title: Senior Vice President, CFO & Assistant Secretary -------------------------------------- NOVASTAR MORTGAGE INC., as Guarantor By: /s/ Gregory S. Metz ----------------------------------------- Name: Gregory S. Metz --------------------------------------- Title: SVP, CFO & Asst. Secretary -------------------------------------- HOMEVIEW LENDING, INC., as Guarantor By: /s/ Gregory S. Metz ----------------------------------------- Name: Gregory S. Metz --------------------------------------- Title: VP, CFO & Treasurer -------------------------------------- 2