Release and Termination Agreement Relating to Master Repurchase Agreement between Wachovia Entities and NovaStar Entities (January 4, 2008)

 Exhibit 10.2 EXECUTION COPY Wachovia Investment Holdings, LLC Wachovia Capital Markets LLC 301 South College Street Charlotte, North Carolina ###-###-#### January 4, 2008 NovaStar Mortgage, Inc. NovaStar Certificates Financing LLC NovaStar Certificates Financing Corporation NFI Holding Corporation NovaStar Financial, Inc. Homeview Lending, Inc. 8140 Ward Parkway, Suite 300 Kansas City, Missouri 64114 Re: Release of Security Interest relating to Master Repurchase Agreement (2007 Residual Securities), dated as of April 18, 2007 Ladies and Gentlemen: Reference is made to: (i) the Master Repurchase Agreement (2007 Residual Securities), dated as of April 18, 2007 (as amended, supplemented or otherwise modified, the "Repurchase Agreement"), among Wachovia Investment Holdings, LLC (the "Buyer"), Wachovia Capital Markets, LLC (the "Agent"), NovaStar Mortgage, Inc. ("NMI"), as a seller, NovaStar Certificates Financing LLC ("NCFLLC"), as a seller and NovaStar Financing Corporation ("NFC"), as a seller (NMI, NCFLLC and NFC each a "Seller" and collectively, jointly and severally, the "Sellers"); (ii) the Guaranty, dated as of April 18, 2007 (as amended, supplemented or otherwise modified), among NMI, NFI Holding Corporation ("NFI Holding"), NovaStar Financial, Inc. ("NFI") and Homeview Lending, Inc. ("Homeview", together with NMI, NFI Holding and NFI each a "Guarantor" and collectively, jointly and severally, the "Guarantors") and (iii) all other Program Documents (as amended, supplemented or otherwise modified from time to time), among the Sellers, Buyer, Agent and the Guarantors, as applicable. Capitalized terms used herein but not otherwise defined herein shall have the meanings provided in the Repurchase Agreement. Provided no Default or Event of Default has occurred and is continuing, upon receipt by the Buyer of payment in full of $5,648,181.44 (the "Payment Amount") in immediately available funds and fulfillment of all other Obligations contained in the Program Documents owing with respect to the Purchased Assets by the Sellers and the Guarantors (including without limitation any and all fees required to be paid by the Sellers under any Program Document), (i) the Buyer hereby releases all of its right, title and interest in, to and under the Collateral and acknowledges that it does not have a security interest in, to and under, or any other lien or encumbrance on, 

 EXECUTION COPY such Collateral and (ii) the Buyer hereby authorizes the Sellers, as applicable, to file UCC-3 termination statements, substantially in the form attached hereto as Exhibit A, to evidence the release of any and all liens or encumbrances in favor of the Buyer with respect to such Collateral. The Buyer and the Sellers acknowledge and agree that the Payment Amount is comprised of (i) the Repurchase Price owed to the Buyer by the Sellers under the terms of the Repurchase Agreement in the amount of $1,648,181.44 and (ii) the termination fee in accordance with the Repurchase Agreement in the amount of $4,000,000.00. The Buyer and the Sellers further acknowledge and agree that the Collateral released in accordance with this letter agreement shall, simultaneously with the execution of this letter agreement, be purchased by the Buyer pursuant to the terms of that certain Master Repurchase Agreement (2007 Non-Investment Grade Securities), dated as of May 31, 2007 (as amended, supplemented or otherwise modified, the "Non-Investment Grade Securities Repurchase Agreement"), among Buyer, Agent, NMI, NCFLLC, NCFC, NFI and NFI Holding. Both the Buyer and the Sellers acknowledge and agree that any failure, arising from any action or omission on the part of any Seller, to sell the Collateral to the Buyer as contemplated herein shall constitute an Event of Default (as defined in the Non-Investment Grade Securities Repurchase Agreement) under the terms of the Non-Investment Grade Securities Repurchase Agreement. Both the Buyer and the Sellers further acknowledge and agree that (i) this letter agreement is deemed to be an amendment to the Non-Investment Grade Securities Repurchase Agreement and any related Program Document (as defined in the Non-Investment Grade Securities Repurchase Agreement) and (ii) in the event of any conflict between the terms of this letter agreement and any Program Document (as defined in the Non-Investment Grade Securities Repurchase Agreement), the terms of this letter agreement shall control. Upon the Buyer's receipt of the Payment Amount as set forth above, (i) the Buyer and the Sellers hereby agree that the Repurchase Agreement shall be deemed to be terminated, together with all of the respective rights and obligations of the Buyer and the Sellers thereunder, except for any obligations that survive termination pursuant to the terms of the Repurchase Agreement, in all respects as of the date hereof, and (ii) the Buyer and the Guarantors hereby agree that the Guaranty shall be deemed to be terminated, together with all of the respective rights and obligations of the Buyer and the Guarantors thereunder, except for any obligations that survive termination pursuant to the terms of the Guaranty or the Repurchase Agreement, in all respects as of the date hereof. This letter agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. The Sellers shall promptly reimburse Buyer for all out-of-pocket costs and expenses of Buyer in connection with the preparation, execution and delivery of this letter agreement (including, without limitation, the fees and expenses of counsel for Buyer). This letter agreement shall be construed in accordance with and governed by the laws of the State of New York. This letter agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and 

 EXECUTION COPY the same agreement. The parties may execute facsimile copies of this letter agreement and the facsimile (or electronic) signature of any such party shall be deemed an original and fully binding on said party. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 

 EXECUTION COPY Very truly yours, WACHOVIA INVESTMENT HOLDINGS, LLC By: /s/ Andrew W. Riebe -------------------------------------- Name: Andrew W. Riebe Director WACHOVIA CAPITAL MARKETS, LLC By: /s/ Goetz Rokahr -------------------------------------- Name: Goetz Rokahr Vice President Acknowledged and Agreed: NOVASTAR MORTGAGE, INC. By: /s/ Rodney E. Schwatken -------------------------------- Name: Rodney E. Schwatken SVP, CFO & Secretary NOVASTAR CERTIFICATES FINANCING LLC By: /s/ Rodney E. Schwatken -------------------------------- Name: Rodney E. Schwatken SVP, CFO & Secretary NOVASTAR CERTIFICATES FINANCING CORPORATION By: /s/ Rodney E. Schwatken -------------------------------- Name: Rodney E. Schwatken SVP, CFO & Secretary NFI HOLDING CORPORATION By: /s/ Rodney E. Schwatken -------------------------------- Name: Rodney E. Schwatken SVP, CFO & Secretary NOVASTAR FINANCIAL, INC. By: /s/ Rodney E. Schwatken -------------------------------- Name: Rodney E. Schwatken SVP, CFO & Secretary HOMEVIEW LENDING, INC. By: /s/ Rodney E. Schwatken -------------------------------- Name: Rodney E. Schwatken SVP, CFO & Secretary