Exhibit 10.8

 

CITIGROUP GLOBAL MARKETS REALTY CORP.

390 Greenwich Street, 6th Floor

New York, New York 10013

 

October 1, 2004

 

NC Capital Corporation

18400 Von Karman, Suite 1000

Irvine, California 92612

Attention: Patrick Flanagan, President

 

New Century Mortgage Corporation

18400 Von Karman, Suite 1000

Irvine, California 92612

Attention: Brad Morrice, Chief Executive Officer

 

New Century Credit Corporation

18400 Von Karman, Suite 1000

Irvine, California 92612

Attention: Patrick Flanagan, President

 

Ladies and Gentlemen:

 

This letter agreement (the “Letter Agreement”) confirms the understanding and
agreements among NC Capital Corporation (“NC Capital”), New Century Mortgage
Corporation (“NC Mortgage”), New Century Credit Corporation (“NC Credit”) and
Citigroup Global Markets Realty Corp. (“Citigroup”), under the terms set forth
herein, regarding Citigroup’s agreement to provide a committed financing line
(the “Financing Line”) to NC Capital and NC Credit in connection with certain
adjustable-rate and fixed-rate, first lien and second lien mortgage loans that
are originated by NC Mortgage (the “Mortgage Loans”), and amends and restates
that certain letter agreement among NC Capital, NC Mortgage and Citigroup dated
January 1, 2002 (the “Original Letter Agreement”).

 

1. Mortgage Loans.

 

(a) In General. Citigroup agrees to make available to NC Capital and NC Credit
the Financing Line from October 1, 2004 until December 31, 2004; provided,
however, that the availability of the Financing Line may be extended beyond
December 31, 2004 by mutual agreement among the parties hereto. The amount of
Mortgage Loans on the Financing Line at any time shall not exceed $650,000,000;
provided, however, that NC Mortgage shall have the option to increase the amount
of Mortgage Loans on the Financing Line at any one time to an amount not in
excess of $800,000,000; provided, further, however, that any increase in the
amount of Mortgage Loans on the Financing Line in excess of $650,000,000 shall
take into account the Purchase Price paid by Citigroup under the Master
Repurchase Agreement dated as of May 30, 2002, between Citigroup as Buyer and
New Century Funding SB-1, as amended (the

 

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“Repurchase Agreement”), as Seller such that the sum of the amount of Mortgage
Loans on the Financing Line plus the Purchase Price paid by Citigroup under the
Repurchase Agreement shall not at any time exceed $800,000,000.

 

(b) Servicing of the Mortgage Loans. The purchase by Citigroup of a Mortgage
Loan pursuant to the Financing Line shall include the purchase of the related
servicing rights for such Mortgage Loan. Unless otherwise agreed to between
Citigroup and NC Capital and NC Credit, Citigroup hereby covenants and agrees to
hire NC Mortgage to service; and NC Mortgage hereby covenants and agrees to
service the Mortgage Loans for a term beginning on the related Settlement Date
(as defined in Section 2(a) hereof) and ending on the related repurchase date as
provided for in the Purchase and Sale Agreement (as defined in Section 2(a)
hereof); provided that if a Termination Event (as defined in Section 4(b)
hereof) has occurred, NC Mortgage shall immediately be terminated as servicer.
In connection with its servicing duties, NC Mortgage can service the Mortgage
Loans itself or through such other sub-servicer which Citigroup has accepted in
writing, as the sub-servicer (the “Sub-Servicer”) provided that, Citigroup shall
have the right to perform due diligence on any entity appointed as servicer or
sub-servicer of the Mortgage Loans and may require NC Mortgage to select another
servicer or sub-servicer to the extent that Citigroup is not satisfied with the
results of such due diligence. The Mortgage Loans shall be serviced in
accordance with the servicing provisions specified in the Pooling and Servicing
Agreement, Series 2000-NC1 dated as of March 1, 2000 among Firstar Bank, N.A.,
U.S. Bank National Association, Salomon Brothers Mortgage Securities VII, Inc.
and NC Mortgage. NC Mortgage or the Sub-Servicer shall enforce “due-on-sale”
provisions to the extent permitted by law, shall administer all escrow/impound
deposits, shall pay compensating interest on principal prepayments in any month
up to the amount of its servicing compensation in such month and shall make all
servicing advances on any Mortgage Loan (including advances of delinquent
principal and interest payments). NC Mortgage or the Sub-Servicer shall be
required to make advances in respect of delinquent payments of principal and
interest on the Mortgage Loans through foreclosure, subject to NC Mortgage’s or
the Sub-Servicer’s determination regarding recoverability. The Mortgage Loans
shall be serviced for a servicing fee equal to 0.50% per annum payable monthly
on the then outstanding principal balance of each Mortgage Loan (the “Servicing
Fee”). Any fee payable to the Sub-Servicer shall be paid by NC Mortgage without
any right of reimbursement by Citigroup. Any Sub-Servicer shall execute a letter
agreement recognizing Citigroup’s interest in the Mortgage Loans in the form of
Exhibit A. Notwithstanding the foregoing, in the event NC Capital or NC Credit
fails to repurchase a Mortgage Loan on the related repurchase date or if a
Termination Event occurs, NC Mortgage and any related Sub-Servicer will no
longer be servicer with respect to such Mortgage Loan or Mortgage Loans, unless
the term of servicing is extended by Citigroup in its sole discretion. In such
event, Citigroup shall have the right to transfer such servicing to another
servicer without payment of any fee to NC Mortgage. NC Mortgage will cooperate
in good faith to effect such servicing transfer and shall pay all costs
associated with such servicing transfer. In connection with a termination of NC
Mortgage as servicer, none of NC Capital, NC Mortgage or NC Credit shall be
responsible for the costs (other than the costs of transferring servicing files)
associated with the appointment of a successor servicer.

 

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Notwithstanding the foregoing, the parties hereto agree that Ocwen Federal Bank
FSB shall be the Sub-Servicer on behalf of NC Mortgage.

 

(c) Conditions Precedent to Mortgage Loan Purchases. Citigroup’s obligation to
purchase any Mortgage Loans and related servicing rights which it accepts for
its Financing Line shall be subject to each of the following conditions:

 

(i) there shall have been delivered to Citigroup a Trust Receipt issued by U.S.
Bank National Association (“U.S. Bank”) with a mortgage loan schedule attached
thereto and an exception report which is acceptable to Citigroup in its sole
discretion, at least 24 hours prior to purchase;

 

(ii) Citigroup shall have had an opportunity to perform a due diligence review
of each Mortgage Loan and shall have arranged for reappraisals of value with
respect to each Mortgage Loan if desired by Citigroup;

 

(iii) NC Capital and NC Credit shall have provided to Citigroup such other
documents which are then required to have been delivered under the Purchase and
Sale Agreement or which are reasonably requested by Citigroup, which other
documents may include UCC financing statements, a favorable opinion or opinions
of counsel with respect to matters which are reasonably requested by Citigroup,
and/or an officer’s or secretary’s certificate;

 

(iv) there shall have been delivered to Citigroup a limited guaranty of New
Century Financial Corporation (“NC Financial”), in the form of Exhibit B hereto,
by which NC Financial guarantees the obligations of NC Capital and NC Credit
under this Letter Agreement and the Purchase and Sale Agreement; and

 

(v) No Termination Event has occurred and is continuing and, in SBRC’s good
faith judgment, no material adverse change has occurred and is continuing with
respect to the business, properties, assets or condition (financial or
otherwise) of NC Capital, NC Mortgage or NC Credit.

 

(d) Commitment Fee. NC Capital has paid to Citigroup a commitment fee (the
“Commitment Fee”) initially of 0.125% of $600,000,000 on or before the date of
the Original Letter Agreement. If NC Mortgage and Citigroup agree to increase
the amount of Mortgage Loans subject to the Financing Line, the Commitment Fee
shall equal 0.125% of the amount in excess of $650,000,000.

 

(e) Information. NC Capital, NC Mortgage and NC Credit will furnish Citigroup
with all financial and other information concerning NC Capital, NC Mortgage and
NC Credit as Citigroup deems reasonably appropriate in connection with the
performance of the services contemplated by this letter, including (without
limitation) “Monthly Cash Flow Projections and Sensitivity Analyses,” and will
provide Citigroup with reasonable access during normal business hours to NC
Capital’s, NC Mortgage’s and NC Credit’s officers, directors, employees,
accountants, and other representatives. NC Capital, NC Mortgage and NC Credit
acknowledge

 

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and confirm that Citigroup (i) will rely on such information in the performance
of the services contemplated by this letter without independently investigating
or verifying any of it, (ii) assumes no responsibility for the accuracy or
completeness of such information and (iii) will not disclose such information to
any third party without the prior written consent of NC Capital, NC Mortgage or
NC Credit, as applicable.

 

2. Financing Line.

 

(a) In General. Pursuant to the terms of this Financing Line, Citigroup shall
simultaneously purchase from, and sign a forward commitment to resell to, NC
Capital and NC Credit Mortgage Loans and the related servicing rights that are
deemed acceptable for such Financing Line as set forth below. The Financing Line
shall be more fully documented pursuant to the Amended and Restated Purchase and
Sale Agreement (“Purchase and Sale Agreement”) entered into among NC Capital, NC
Credit, NC Mortgage and Citigroup, but shall provide for servicing provisions
similar to those set forth in Section 1(b) of this Letter Agreement. Under the
Purchase and Sale Agreement, NC Capital and NC Credit will make standard
secondary market corporate representations and warranties as of the date such
Purchase and Sale Agreement is executed and as of any settlement date for the
purchase and sale of any Mortgage Loans pursuant to such Purchase and Sale
Agreement (each such date, a “Settlement Date”) and NC Capital and NC Credit
shall make standard secondary market representations and warranties with respect
to each Mortgage Loan as of the Settlement Date on which such Mortgage Loan is
sold to Citigroup.

 

The Financing Line at any one time shall be initially limited to $650,000,000 in
amount of Mortgage Loans and shall have a term of one month; provided, however,
NC Mortgage shall have the option to increase the amount of Mortgage Loans on
the Financing Line at any one time to an amount not in excess of $800,000,000;
provided, further, however, that any increase in the amount of Mortgage Loans on
the Financing Line in excess of $650,000,000 shall take into account the
Purchase Price paid by Citigroup under the Repurchase Agreement such that the
sum of the amount of Mortgage Loans on the Financing Line plus the Purchase
Price paid by Citigroup under the Repurchase Agreement shall not at any time
exceed $800,000,000.

 

Except as described below, the “Purchase Price” with respect to each Mortgage
Loan and related servicing rights which conforms to the Underwriting Standards
of NC Mortgage which were most recently reviewed and approved by Citigroup and
which is not a Special Risk Mortgage Loan (as defined in Section 2(b) hereof), a
High Balance/High LTV Mortgage Loan (as defined in Section 2(c) hereof) or a
Fallout Mortgage Loan (as defined in Section 2(d) hereof) (a “Standard Mortgage
Loan”) shall be equal to the lesser of (i) 100.00% of the unpaid principal
balance of such Standard Mortgage Loan and (ii) the fair market value of such
Standard Mortgage Loan in Citigroup’s sole discretion. The “Purchase Price” for
each Special Risk Mortgage Loan and related servicing rights shall be equal to
the amount determined in accordance with the provisions of Section 2(b)(ii)
hereof, the “Purchase Price” for each High Balance/High LTV Mortgage Loan and
related servicing rights shall be equal to the amount determined in accordance
with the provisions of Section 2(c)(ii) hereof and the “Purchase Price” for each
Fallout Mortgage Loan and related servicing rights shall be equal to the amount

 

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determined in accordance with the provisions of Section 2(d)(ii) hereof.
Notwithstanding the foregoing, the “Purchase Price” for each Mortgage Loan will
be reduced by the amount of any Collateral Value Deficiency paid by NC Capital
or NC Credit with respect to such Mortgage Loan.

 

The repurchase price shall reflect the agreed upon return to Citigroup for
providing the Financing Line (the “Financing Cost”). With respect to any
Mortgage Loan subject to the Financing Line, the Financing Cost shall equal One
Month LIBOR (as defined herein) plus 0.67%. NC Capital shall retain principal
and interest on any Mortgage Loans subject to the Financing Line.

 

“One Month LIBOR” means the 30 day London Interbank Offered Rate as of 11:00
a.m. (London time) on a date, as indicated on page number 3750 of the Telerate
Service (rounded upwards if necessary to the nearest whole multiple of 1/16%).
If One Month LIBOR cannot be determined by reference to the Telerate Service,
then One Month LIBOR shall mean the rate determined by Citigroup in its sole
discretion. Citigroup shall have the sole discretion to reset One Month LIBOR
daily.

 

The maximum amount of Special Risk Mortgage Loans on the Financing Line shall
not exceed 4% of the aggregate principal balance of all of the Mortgage Loans on
the Financing Line at any one time.

 

The maximum amount of High Balance Mortgage Loans (Mortgage Loans with unpaid
principal balances greater than $1,000,000) on the Financing Line shall not
exceed 2% of the aggregate principal balance of all of the Mortgage Loans on the
Financing Line at any one time.

 

The maximum amount of High LTV Mortgage Loans (Mortgage Loans with a
loan-to-value ratio in excess of 90.00%) on the Financing Line shall not exceed
4% of the aggregate principal balance of all of the Mortgage Loans on the
Financing Line at any one time.

 

The maximum amount of Fallout Mortgage Loans on the Financing Line shall not
exceed 12.5% of the aggregate principal balance of all of the Mortgage Loans on
the Financing Line at any one time.

 

The Special Risk Mortgage Loans, the High Balance/High LTV Mortgage Loans and
the Fallout Mortgage Loans are collectively referred to herein as the
“Non-Standard Mortgage Loans”; and together with the Standard Mortgage Loans,
the “Mortgage Loans”.

 

Each of NC Capital and NC Credit shall have the right to add Mortgage Loans to
the Financing Line up to eight times each month. Standard Mortgage Loans may be
removed from the Financing Line up to eight times a month (one of which shall be
on the roll date). Non-Standard Mortgage Loans may be removed from the Financing
Line with 24 hours prior written notice by NC Capital and NC Credit to
Citigroup.

 

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(b) Special Risk Mortgage Loans. A “Special Risk Mortgage Loan” is defined as
any Mortgage Loan (i) that is a second lien Mortgage Loan; (ii) that is a first
lien Mortgage Loan with an unpaid principal balance of less than $50,000.
Special Risk Mortgage Loans shall be subject to the following qualifications
with respect to the Financing Line:

 

(i) the maximum Financing Line with respect to Special Risk Mortgage Loans shall
equal 4% of the aggregate principal balance of all of the Mortgage Loans on the
Financing Line at any one time (of which no more than 2% shall be second lien
Mortgage Loans and no more than 2% shall be first lien Mortgage Loans that have
unpaid principal balances less than $50,000);

 

(ii) with respect to the Special Risk Mortgage Loans, the Purchase Price shall
be equal to the lesser of (i) 80.00% of the unpaid principal balance of such
Special Risk Mortgage Loan and (ii) the fair market value of such Special Risk
Mortgage Loan in Citigroup’s sole discretion.

 

(c) High Balance/High LTV Loans. A “High Balance/High LTV Mortgage Loan” is
defined as any Mortgage Loan (i) with an unpaid principal balance in excess of
$1,000,000; (ii) that has a loan-to-value ratio in excess of 90.00% (up to a
maximum of 95.00%); or (iii) that is a first lien mortgage loan with a
loan-to-value ratio in excess of 95.00% (up to a maximum of 100.00%). High
Balance/High LTV Mortgage Loans shall be subject to the following qualifications
with respect to the Financing Line:

 

(i) the maximum Financing Line with respect to Mortgage Loans with an unpaid
principal balance in excess of $1,000,000 shall equal 2% of the aggregate
principal balance of all of the Mortgage Loans on the Financing Line at any one
time;

 

(ii) the maximum Financing Line with respect to Mortgage Loans with
loan-to-value ratios in excess of 90.00 (up to a maximum of 95.00%) shall equal
4% of the aggregate principal balance of all of the Mortgage Loans on the
Financing Line at any one time;

 

(iii) the maximum Financing Line with respect to first lien Mortgage Loans with
loan-to-value ratios in excess of 95.00% (up to a maximum of 100.00%) shall
equal 2% of the maximum amount of the Financing Line;

 

(iv) with respect to the High Balance/High LTV Mortgage Loans, the Purchase
Price shall be the lesser of (i) 100.00% of the unpaid principal balance of such
High Balance/High LTV Loan and (ii) the fair market value of such High
Balance/High LTV Loan in Citigroup’s sole discretion.

 

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(d) Fallout Mortgage Loans. A “Fallout Mortgage Loan” is defined as any Mortgage
Loan which was removed from the Financing Line by NC Capital or NC Credit, as
applicable, and sold to a third party in a whole loan sale or securitization and
which was subsequently rejected by the buyer in such whole loan sale or removed
from such securitization due to any of the following: (i) failure of such
Mortgage Loan to comply with applicable federal and state laws (any such Fallout
Mortgage Loan, a “Non-Compliant Fallout Mortgage Loan”); (ii) rejection of the
credit profile of the borrower of such Mortgage Loan (any such Fallout Mortgage
Loan, a “Credit Risk Fallout Mortgage Loan”) or (iii) rejection of the appraisal
relating to such Mortgage Loan (any such Fallout Mortgage Loan, a “Appraisal
Risk Fallout Mortgage Loan”). Fallout Mortgage Loans shall be subject to the
following qualifications with respect to the Financing Line:

 

(i) the maximum Financing Line with respect to Fallout Mortgage Loans shall
equal 12.5% of the aggregate principal balance of all of the Mortgage Loans on
the Financing Line at any one time (of which no more than 1% shall be
Non-Compliant Fallout Mortgage Loans, no more than 7% shall be Credit Risk
Fallout Mortgage Loans and no more than 4.5% shall be Appraisal Risk Fallout
Mortgage Loans);

 

(ii) with respect to any Non-Compliant Fallout Mortgage Loan that is not
delinquent, the Purchase Price shall be the lesser of (i) 98% of the unpaid
principal balance of such Non-Compliant Fallout Mortgage Loan and (ii) the
market value of such Non-Compliant Fallout Mortgage Loan as determined by
Citigroup acting in good faith; provided, however, with respect to any
Non-Compliant Fallout Mortgage Loan that (a) is 30 days delinquent, (b) has been
30 days delinquent at least once in the preceding 12 months or (c) is more than
180 days past the date of its origination, the Purchase Price shall be the
lesser of (i) 90% of the unpaid principal balance of such Non-Compliant Fallout
Mortgage Loan and (ii) the market value of such Non-Compliant Fallout Mortgage
Loan as determined by Citigroup acting in good faith, until such Non-Compliant
Fallout Mortgage Loan (a) goes into foreclosure or (b) becomes 90 days
delinquent or (c) reaches 365 days past the date of its origination, at which
time such Non-Compliant Fallout Mortgage Loan shall be financed pursuant to the
terms of the Master Loan and Security Agreement, dated April 1, 2000 (the “Loan
and Security Agreement”), among NC Mortgage, NC Capital and Salomon Brothers
Realty Corp.

 

(iii) with respect to any Credit Risk Fallout Mortgage Loan that is not
delinquent, the Purchase Price shall be the lesser of (i) 98% of the unpaid
principal balance of such Credit Risk Fallout Mortgage Loan and (ii) the market
value of such Credit Risk Fallout Mortgage Loan as determined by Citigroup
acting in good faith; provided, however, with respect to any Credit Risk Fallout
Mortgage Loan that (a) is 30 days delinquent or (b) has been 30 days delinquent
at least once in the preceding 12 months or (c) is more than 180 days past the
date of its origination, the Purchase Price shall be the lesser of (i) 90% of
the unpaid principal balance of such Non-Compliant Fallout Mortgage Loan and
(ii) the market value of such Credit Risk Fallout Mortgage Loan as determined by
Citigroup acting in good faith, until such Credit Risk Fallout Mortgage Loan (a)
goes into foreclosure or (b) becomes 90 days delinquent or (c) reaches 365 days
past the date of its origination, at which time such Credit Risk Fallout
Mortgage Loan shall be financed pursuant to the terms of the Loan and Security
Agreement.

 

(iv) (A) with respect to any Appraisal Risk Fallout Mortgage Loan that is not
delinquent, the Purchase Price shall be the lesser of (i) 90% of the unpaid
principal balance of such Appraisal Risk Fallout Mortgage Loan and (ii) the
market value of such Appraisal Risk Fallout Mortgage Loan as determined by
Citigroup acting in good faith;

 

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(B) with respect to any Appraisal Risk Fallout Mortgage Loan that is 30 days
delinquent, the Purchase Price shall be 85% of the lesser of (i) the unpaid
principal balance of such Appraisal Risk Fallout Mortgage Loan and (ii) the BPO
of such Appraisal Risk Fallout Mortgage Loan;

 

(C) with respect to any Appraisal Risk Fallout Mortgage Loan that is 60 days
delinquent, the Purchase Price shall be 80% of the lesser of (i) the unpaid
principal balance of such Appraisal Risk Fallout Mortgage Loan and (ii) the BPO
of such Appraisal Risk Fallout Mortgage Loan; and

 

(D) with respect to any Appraisal Risk Fallout Mortgage Loan that is 90 days or
more delinquent, the Purchase Price shall be 65% of the lesser of (i) the unpaid
principal balance of such Appraisal Risk Fallout Mortgage Loan and (ii) the BPO
of such Appraisal Risk Fallout Mortgage Loan.

 

“BPO” shall mean a broker’s price opinion, obtained at the expense of NC
Mortgage, prepared by a duly licensed real estate broker who has no interest,
direct or indirect, in the Mortgage Loan or in NC Mortgage, NC Capital or NC
Credit or any affiliate of NC Mortgage, NC Capital or NC Credit and whose
compensation is not affected by the results of the broker’s price opinion and
which valuation indicates the expected proceeds for a sale of the related
mortgaged property and, with respect to any condominium development or planned
unit development that was not Fannie Mae or Freddie Mac approved, the amount, if
any, by which the valuation was decreased as a result of such lack of approval,
and includes certain assumptions, including those as to the condition of the
interior of the applicable mortgaged property and marketing time; provided,
however, that the vendor providing such BPO must be approved by Citigroup.

 

Citigroup hereby approves the following vendors: Hanson Quality Loan Services,
Nationwide Appraisal Services Corp., Ocwen Federal Bank FSB, Premiere Real
Estate Services, Inc., Ball Asset Management and Goodman Dean Corporate Real
Estate Services.

 

Citigroup has the right to obtain a new BPO and to perform due diligence on any
Mortgage Loan subject to this Financing Line, at the expense of NC Mortgage,
every three (3) months; provided, however, that the costs of such BPO and/or due
diligence shall not exceed $25,000 in the aggregate; provided, further, that
such $25,000 cap shall not apply to any BPO obtained or due diligence performed
with respect to any Fallout Mortgage Loan.

 

Notwithstanding the foregoing, with respect to any Mortgage Loan that remains
subject to the Financing Line following 120 days from the date of origination of
such Mortgage Loan and not previously classified as a Fallout Mortgage Loan, the
Purchase Price shall be the Purchase Price for a Non-Compliant Fallout Mortgage
Loan, a Credit Risk Fallout Mortgage Loan or an Appraisal Risk Fallout Mortgage
Loan, as applicable.

 

No Mortgage Loan shall be subject to the terms of the Financing Line if: (i) the
unpaid principal balance of such Mortgage Loan exceeds $1,500,000 or (ii) such
Mortgage Loan has a

 

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loan-to-value ratio greater than 95.00%. Furthermore, no Mortgage Loan the
mortgagor of which had a FICO score of less than 500 or any Mortgage Loan
originated in accordance with Section 32 of the Homeownership and Equity
Protection Act of 1994 shall be subject to this Financing Line.

 

Each of NC Capital, NC Mortgage and NC Credit agrees to provide written
notification to Citigroup of any material change in its loan origination,
acquisition or appraisal guidelines or practices and if any of NC Capital, NC
Mortgage or NC Credit fails to provide such notification without Citigroup’s
consent, Citigroup shall have the right to refuse to provide financing for any
Mortgage Loan originated, acquired or appraised under such materially different
guidelines.

 

(e) Mark-to-Market. If with respect to any Mortgage Loan, Citigroup at any time
determines, in its sole discretion, that there exists a Collateral Value
Deficiency (as defined below) and Citigroup notifies NC Capital or NC Credit, as
applicable, in writing of such Collateral Value Deficiency, NC Capital or NC
Credit, as applicable, shall, no later than one (1) Business Day after receipt
of such notice, pay to Citigroup an amount equal to such Collateral Value
Deficiency, such that after giving effect to such payment, the Collateral Value
Deficiency is reduced to zero. With respect to any Mortgage Loan, a “Collateral
Value Deficiency” shall mean any time the excess, if any, of (a) the outstanding
Purchase Price of such Mortgage Loan as defined in Section 2(a) hereof over (b)
the Market Value of such Mortgage Loan. “Market Value” shall mean, as of any
date in respect of any Mortgage Loan, the value of such Mortgage Loan as
determined by Citigroup in its sole discretion. Citigroup shall have the right
to mark-to-market any Mortgage Loan on a daily basis.

 

(f) Mortgage Loan Schedule. No Mortgage Loan shall be included in the Financing
Line unless NC Capital or NC Credit, as applicable, shall have delivered to
Citigroup at least 48 hours prior to such inclusion, a magnetic tape, in a
format acceptable to Citigroup, consisting of the loan characteristics agreed
upon by Citigroup and NC Capital and NC Credit, with respect to each Mortgage
Loan.

 

(g) Marketing of Mortgage Loans. Citigroup may (subject to the consent of NC
Capital or NC Credit, as applicable, unless a Termination Event has occurred)
market the Non-Standard Mortgage Loans on behalf of NC Capital or NC Credit, as
applicable, for a purchase price acceptable to NC Capital or NC Credit, as
applicable, and shall provide NC Capital or NC Credit, as applicable, with a
copy of a trade ticket or letter of intent with respect to any commitment to
sell such Mortgage Loans.

 

(h) Hedging. NC Capital will have the option to establish one or more securities
or commodities accounts at Salomon Smith Barney Inc. and to enter into
transactions in such accounts (and only in such accounts) that are intended to
hedge the interest rate risk on related Mortgage Loans included in the Financing
Line.

 

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3. Reserved.

 

4. Termination.

 

(a) Each of NC Capital and NC Credit shall have the right to terminate its
obligations hereunder upon (i) any material default by Citigroup of its
obligations under this Letter Agreement which is not cured within 30 days
following written notice of such default to Citigroup by NC Capital and NC
Credit.

 

(b) Citigroup shall have the right to terminate this Letter Agreement upon the
occurrence of any of the following events (each, a “Termination Event”):

 

(i) Reserved;

 

(ii) Citigroup shall reasonably request, specifying the reasons for such
request, information, and/or written responses to such requests, regarding the
financial well-being of NC Capital or NC Credit and such information and/or
responses shall not have been provided within three business days of such
request;

 

(iii) Either (A) a change in control of NC Capital or NC Credit shall have
occurred without the consent of Citigroup, other than in connection with and as
a result of the issuance and sale by NC Capital of registered, publicly offered
common stock; or (B) Citigroup determines in its sole discretion that any
material adverse change has occurred in the management of NC Capital or NC
Credit;

 

(iv) There is (A) a material breach by NC Capital or NC Credit of any
representation and warranty set forth on Exhibit C hereto, and Citigroup has
reason to believe in good faith either that such breach is not curable within 30
days or that such breach may not have been cured in all material respects at the
expiration of 30 days following discovery thereof by NC Capital or NC Credit or
(B) a failure by NC Capital or NC Credit to make any payment payable by it under
the Purchase and Sale Agreement or (C) any other failure by NC Capital or NC
Credit to observe and perform in any material respect its material covenants,
agreements and obligations with Citigroup, including without limitation those
contained in the Purchase and Sale Agreement, and Citigroup has reason to
believe in good faith that such failure may not have been cured in all material
respects at the expiration of 30 days following discovery thereof by NC Capital
or NC Credit;

 

(v) There shall have occurred any outbreak or material escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis, the effect of which on the financial markets is such
as to make it, in the judgment of Citigroup, impracticable to continue the
commitment;

 

(vi) A default by NC Residual II Corporation under the provisions of the Global
Master Repurchase Agreement, dated as of December 11, 1998, between Salomon
Smith Barney Inc., as agent for Salomon Brothers International Ltd. and NC
Residual II Corporation; or

 

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(vii) NC Capital or NC Credit default in the payment of the amount of any
Collateral Value Deficiency for more than one (1) Business Day after receipt of
written notice of such Collateral Value Deficiency as provided in Section 2(d)
hereof;

 

provided, that Citigroup shall have the right to dispose of any collateral held
by Citigroup pursuant to this Letter Agreement. In connection with a Termination
Event under this Section 4, Citigroup shall have the right to transfer servicing
as provided in Section 1(b).

 

With respect to any Termination Event set forth under (b)(i), (ii), (iii) or (v)
above, Citigroup will refund the Commitment Fee less an amount equal to the
Commitment Fee multiplied by a fraction the numerator of which is the number of
days the Mortgage Loans were subject to the Financing Line and the denominator
of which is 365.

 

(c) Subject to the provisions of this Section 4, this Letter Agreement shall
terminate on December 31, 2004; provided, however, that the parties hereto may,
upon mutual agreement, extend the term of this Letter Agreement beyond December
31, 2004.

 

Notwithstanding any other provision of this Section 4, any grace or notice
period provided herein in respect of a notice to be given or action to be taken
by Citigroup (other than with respect to the notice provided by Citigroup in
Section 4(c)(ii)) may be shortened or eliminated by Citigroup if, in its sole
good faith discretion, it is unreasonable to do so under the circumstances,
taking into consideration, among other things, the volatility of the market for
the Mortgage Loans involved, the extent and nature of any Termination Event (or
events which with the giving of such notice and passage of time would constitute
Termination Events) and the risks inherent in deferring the exercise of remedies
for the otherwise applicable grace or notice period.

 

5. General Provisions.

 

(a) Citigroup’s Discretion. It is understood that Citigroup shall have absolute
discretion in determining whether to accept or reject any Mortgage Loan.
Notwithstanding the foregoing, however, subject to NC Capital’s and NC Credit’s
representations, warranties and covenants as set forth herein and in any related
agreements, all Mortgage Loans originated by NC Mortgage in accordance with the
underwriting standards of NC Mortgage which were most recently approved by
Citigroup shall be eligible for financing under the Financing Line in accordance
with the terms hereof. It is further understood that Citigroup shall have
absolute discretion in determining whether any Mortgage Loan is a Standard
Mortgage Loan or Non-Standard Mortgage Loan and Citigroup shall have the right
to approve or disapprove any Mortgage Loan with an unpaid principal balance in
excess of $1,000,000 (for which such Mortgage Loans, NC Capital or NC Credit, as
applicable, shall have obtained two appraisals).

 

(b) Governing Law. This Letter Agreement shall be governed by and construed in
accordance with the laws of the State of New York (without regard to its
conflicts of laws principles).

 

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NC Capital Corporation    Page 12 NC Mortgage Corporation      NC Credit
Corporation      October 1, 2004     

 

(c) Amendment or Waiver. This Letter Agreement may not be amended or modified
except in writing signed by each of the parties hereto.

 

(d) Counterparts. This Letter Agreement may be executed simultaneously in any
number of counterparts. Each counterpart shall be deemed to be an original, and
all such counterparts shall constitute one and the same instrument.

 

(e) Severability Clause. Any part, provision, representation or warranty of this
Letter Agreement which is prohibited or which is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any part,
provision, representation or warranty of this Letter Agreement which is
prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall be ineffective, as to such jurisdiction, to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof. If the invalidity of any part, provision, representation or
warranty of this Letter Agreement shall deprive any party of the economic
benefit intended to be conferred by this Letter Agreement, the parties shall
negotiate, in good-faith, to develop a structure the economic effect of which is
nearly as possible the same as the economic effect of this Letter Agreement
without regard to such invalidity.

 

(f) No Partnership. Nothing herein contained shall be deemed or construed to
create a co-partnership or joint venture between the parties hereto.

 

(g) Further Agreements. NC Mortgage, NC Capital, NC Credit and Citigroup each
agree to execute and deliver to the other such reasonable and appropriate
additional documents, instruments or agreements as may be necessary or
appropriate to effectuate the purposes of this Letter Agreement.

 

(h) Termination. Other than those sections intended to survive in the letter
agreement dated June 1, 2001 among NC Mortgage, NC Capital and Citigroup, such
letter agreement is hereby terminated.

 

(i) Expenses. NC Capital shall pay the expenses of Thacher Proffitt & Wood, LLP,
counsel for Citigroup, in connection with the Financing Line and any amendment
thereto, which fees and expenses will not exceed $20,000 in connection with the
Financing Line and will not exceed a negotiated cap between the parties in
connection with each amendment thereto, if any.

 

[Signature Page Follows]

 

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Please confirm that the foregoing is in accordance with your understanding by
signing this letter of agreement and two enclosed copies and returning to us the
enclosed copies. The letter signed by you shall constitute a binding agreement
between us as of the date first above written.

 

Yours sincerely,

 

CITIGROUP GLOBAL MARKETS REALTY CORP. By:   /s/ Evan Mitnick Name:   Evan
Mitnick Title:   Director

 

ACCEPTED AND AGREED TO AS OF THE DATE FIRST ABOVE WRITTEN:

 

NEW CENTURY MORTGAGE CORPORATION By:   /s/ Patrick Flanagan Name:   Patrick
Flanagan Title:   President NC CAPITAL CORPORATION By:   /s/ Patrick Flanagan
Name:   Patrick Flanagan Title:   Chief Executive Officer NEW CENTURY CREDIT
CORPORATION By:   /s/ Patrick Flanagan Name:   Patrick Flanagan Title:  
President

 

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EXHIBIT A

 

FORM OF RECOGNITION LETTER

 

Citigroup Global Markets Realty Corp.

390 Greenwich Street, 6th Floor

New York, NY 10013

 

Attention:

   Mr. James Xanthos      Facsimile No. (212) 723-8604

 

Re: [Name and Date of ] Servicing Agreement (“Agreement”) between

[Name of Sub-Servicer] and New Century Mortgage Corporation

 

Ladies and Gentlemen:

 

The undersigned,                      (“Sub-Servicer”), having an address at
                    ,              Attention:                     , has been
informed by New Century Mortgage Corporation (“NC Mortgage”) that NC Mortgage,
NC Capital Corporation (“NC Capital”) and New Century Credit Corporation (“NC
Credit”) from time to time enters into transactions with you (“Citigroup”) in
which Citigroup purchases mortgage loans (including the related servicing
rights) serviced by Sub-Servicer for NC Mortgage pursuant to the captioned
Agreement, and NC Capital and NC Credit, as applicable, agrees to repurchase
such mortgage loans (and related servicing rights) on specified future dates
(the agreement that provides for such purchases and repurchases, the “Purchase
and Sale Agreement”). NC Mortgage has requested that Sub-Servicer provide this
letter agreement to Citigroup in order to, and Sub-Servicer hereby agrees to,
acknowledge that Citigroup owns the servicing rights and, upon a written notice
to Sub-Servicer from Citigroup that NC Capital or NC Credit, as applicable,
failed to repurchase a Mortgage Loan on the related repurchase date or if NC
Capital or NC Credit defaults under the Purchase and Sale Agreement and upon
written notice to Sub-Servicer from U.S. Bank National Association (“Custodian”)
that Custodian holds specified mortgage loans (the “Citigroup Loans”) for
Citigroup, that Sub-Servicer will no longer be sub-servicer with respect to the
Citigroup Loans, unless the term of sub-servicing is extended by Citigroup in
its sole discretion. NC Capital, NC Mortgage and NC Credit hereby agree to
indemnify Sub-Servicer for any loss, liability, damage, judgment, cost or
expense in any way related to the exercise of such termination by Citigroup with
respect to the Citigroup Loans. Any fee payable to the Sub-Servicer shall be
paid by NC Mortgage without any right of reimbursement by Citigroup.

 

Yours sincerely,

 

CITIGROUP GLOBAL MARKETS REALTY CORP. By:     Name:     Title:    

 

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NC CAPITAL CORPORATION By:     Name:     Title:     NEW CENTURY MORTGAGE
CORPORATION By:     Name:     Title:     NEW CENTURY CREDIT CORPORATION By:    
Name:     Title:     [SUB-SERVICER] By:     Name:     Title:    

 

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EXHIBIT B

 

FORM OF LIMITED GUARANTY

 

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EXHIBIT C

 

REPRESENTATIONS AND WARRANTIES

 

Each of NC Capital and NC Credit hereby represent, warrant and covenant to
Citigroup as of the date of this Agreement and as of each date a Mortgage Loan
is purchased hereunder each Purchase Date:

 

(i) It is duly organized, validly existing and in good standing as a corporation
under the laws of the State of California and is and will remain in compliance
with the laws of each state in which any Mortgaged Property is located to the
extent necessary to ensure the enforceability of each Mortgage Loan in
accordance with the terms of this Agreement;

 

(ii) It has the full power and authority to hold each Mortgage Loan, to sell
each Mortgage Loan, and to execute, deliver and perform, and to enter into and
consummate, all transactions contemplated by this Agreement. It has duly
authorized the execution, delivery and performance of this Agreement, has duly
executed and delivered this Agreement, and this Agreement, assuming due
authorization, execution and delivery by Citigroup constitutes a legal, valid
and binding obligation of it, enforceable against it in accordance with its
terms except as the enforceability thereof may be limited by bankruptcy,
insolvency or reorganization;

 

(iii) The execution and delivery of this Agreement by it and the performance of
and compliance with the terms of this Agreement will not violate its articles of
incorporation or by-laws or constitute a default under or result in a breach or
acceleration of, any material contract, agreement or other instrument to which
it is a party or which may be applicable to the it or its assets;

 

(iv) It is not in violation of, and the execution and delivery of this Agreement
by it and its performance and compliance with the terms of this Agreement will
not constitute a violation with respect to, any order or decree of any court or
any order or regulation of any federal, state, municipal or governmental agency
having jurisdiction over it or its assets, which violation might have
consequences that would materially and adversely affect the condition (financial
or otherwise) or the operation of it or its assets or might have consequences
that would materially and adversely affect the performance of its obligations
and duties hereunder;

 

(v) It does not believe, nor does it have any reason or cause to believe, that
it cannot perform each and every covenant contained in this Agreement;

 

(vi) Immediately prior to the payment of the Purchase Price for a related
Mortgage Loan, it was the owner of the related Mortgage and the indebtedness
evidenced by the related Mortgage Note and upon the payment of the Purchase
Price by Citigroup, in the event that it retains record title, it shall retain
such record title to each Mortgage,

 

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each related Mortgage Note and the related Mortgage Files with respect thereto
in trust for the Citigroup as the owner thereof;

 

(vii) There are no actions or proceedings against, investigations known to it
of, it before any court, administrative or other tribunal (A) that might
prohibit its entering into this Agreement, (B) seeking to prevent the sale of
the Mortgage Loans or the consummation of the transactions contemplated by this
Agreement or (C) that might prohibit or materially and adversely affect the
performance by the it of its obligations under, or validity or enforceability
of, this Agreement;

 

(viii) No consent, approval, authorization or order of any court or governmental
agency or body is required for the execution, delivery and performance by it of,
or compliance by it with, this Agreement or the consummation of the transactions
contemplated by this Agreement, except for such consents, approvals,
authorizations or orders, if any, that have been obtained;

 

(ix) The consummation of the transactions contemplated by this Agreement are in
the ordinary course of business of it, and the transfer, assignment and
conveyance of the Mortgage Notes and the Mortgages by it pursuant to this
Agreement are not subject to the bulk transfer or any similar statutory
provisions;

 

(x) This Agreement does not contain any untrue statement of material fact or
omit to state a material fact necessary to make the statements contained herein
not misleading. The written statements, reports and other documents prepared and
furnished or to be prepared and furnished by it pursuant to this Agreement or in
connection with the transactions contemplated hereby taken in the aggregate do
not contain any untrue statement of material fact or omit to state a material
fact necessary to make the statements contained therein not misleading; and

 

(xii) With respect to each Mortgage Loan, it is in possession of a complete
Mortgage File, except for such documents as have been delivered to U.S. Bank.

 

NC Credit further hereby represents, warrants and covenants to Citigroup as of
the date of this Agreement and as of each date a Mortgage Loan is purchased
hereunder each Purchase Date that it (i) is a qualified REIT subsidiary of New
Century Financial Corporation (f/k/a New Century REIT, Inc.), and (ii) is in
compliance with the provisions of the Internal Revenue Code of 1986, as amended,
governing its REIT status.