<PAGE>

                                                                    EXHIBIT 10.4

                         SALOMON BROTHERS REALTY CORP.
                        390 Greenwich Street, 4th Floor
                           New York, New York 10013


                                                 September 1, 1999


NC Capital Corporation
18400 Von Karman, Suite 1000
Irvine, California 92612
Attention:   Mr. Patrick Flanagan
             President

New Century Mortgage Corporation
18400 Von Karman, Suite 1000
Irvine, California 92612
Attention:   Mr. Brad Morrice
             Chief Executive Officer

Ladies and Gentlemen:

             This letter agreement (the "Letter Agreement") confirms the
understanding and agreements among NC Capital Corporation ("NCCC"), New Century
Mortgage Corporation ("New Century"), Salomon Brothers Realty Corp. ("SBRC") and
Salomon Smith Barney Inc. ("Salomon Smith Barney"), under the terms set forth
herein, regarding (i) NCCC's agreement to securitize certain adjustable rate,
one-to-four family, first lien mortgages (the "Mortgage Loans") either (a) using
the Salomon Brothers Mortgage Securities VII Inc. ("SBMSVII") shelf registration
or (b) pursuant to a shelf registration filing of NCCC or its affiliate in
connection with pass-through transfers with respect to which Salomon Smith
Barney or one of its affiliates is the sole underwriter and (ii) SBRC's
agreement to provide an aggregation line to NCCC in connection with certain
mortgage loans that are originated by New Century. Notwithstanding the
foregoing, NCCC may also securitize any fixed rate, one-to-four family, first or
second lien mortgage loans that are subject to the Letter Agreement, dated
December 11, 1998, among NCCC, New Century, SBRC and Salomon Smith Barney.

             1.  Mortgage Loans.
                 --------------

                 (a)  In General.  NCCC hereby agrees to securitize Mortgage
                      ----------
Loans with an unpaid principal balance, as of the date of securitization, of not
less than $750,000,000 between September 1, 1999 and March 31, 2000 securitized
through a program of securitizations (the "Securitizations") of AAA and Aaa-
rated mortgage-backed securities (the "Securities") either (i) using the SBMSVII
shelf registration or (ii) pursuant to a shelf registration filing of NCCC or
its affiliate in connection with pass-through transfers with respect to which
Salomon Smith Barney or one of its affiliates is the sole underwriter.
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                        Page 2.

          (b)  Servicing of the Mortgage Loans.  The purchase by SBRC of a
               -------------------------------
Mortgage Loan pursuant to the Aggregation Line (as defined in Section 3(a))
shall include the purchase of the related servicing rights for such Mortgage
Loan. Unless otherwise agreed to between SBRC and NCCC, SBRC hereby covenants
and agrees to hire New Century to service; and New Century hereby covenants and
agrees to service the Mortgage Loans for a term beginning on the related
Settlement Date and ending on the related repurchase date as provided for in the
Purchase and Sale Agreement (as defined in Section 3(a)); provided that if a
Termination Event (as defined in Section 5(b)) has occurred, New Century shall
immediately be terminated as servicer. In connection with its servicing duties,
New Century can service the Mortgage Loans itself or through such other sub-
servicer which SBRC has accepted in writing, as the sub-servicer (the "Sub-
Servicer") provided that, SBRC shall have the right to perform due diligence on
any entity appointed as servicer or sub-servicer of the Mortgage Loans and may
require New Century to select another servicer or sub-servicer to the extent
that SBRC 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 1999-NC3 dated as of June 1, 1999
among Firstar Bank Milwaukee, N.A., U.S. Bank National Association, SBMSVII and
New Century. New Century or the Sub-Servicer shall remit payments of principal
and interest to SBRC on a date prior to the 25th day of each month beginning
with the month after the Settlement Date (as defined in Section 3(a)) to permit
remittances to certificateholders on the 25th day of each month in connection
with a securitization, 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). New Century 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 and in connection with any properties acquired by the
related trustee in any securitization transaction through liquidation of such
properties, subject to New Century'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 New Century without any right of reimbursement by
SBRC. Any Sub-Servicer shall execute a letter agreement recognizing SBRC's
interest in the Mortgage Loans in the form of Exhibit A. Notwithstanding the
foregoing, in the event NCCC fails to repurchase a Mortgage Loan on the related
repurchase date or if a Termination Event occurs, New Century 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 SBRC in its sole
discretion. In such event, SBRC shall have the right to transfer such servicing
to another servicer without payment of any fee to New Century. New Century will
cooperate in good faith to effect such servicing transfer and shall pay all
costs associated with such servicing transfer.

          (c)  Conditions Precedent to Mortgage Loan Purchases.  SBRC's
               -----------------------------------------------
obligation to purchase any Mortgage Loans and related servicing rights which it
accepts for its Aggregation Line shall be subject to each of the following
conditions:
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                        Page 3.

          (i)   there shall have been delivered to SBRC 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 SBRC in its sole discretion;

          (ii)  SBRC 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 SBRC;

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

          (iv)  there shall have been delivered to SBRC a limited guaranty of
                New Century, in the form of Exhibit B hereto, by which New
                Century guarantees the obligations of NCCC under this Letter
                Agreement and the Purchase and Sale Agreement.

     2.   Securitizations.
          ---------------

     (a)  In General.  As noted above, NCCC shall meet its commitment to SBRC
          ----------
with respect to not less than $750,000,000 in Mortgage Loans between September
1, 1999 and March 31, 2000 by using a shelf registration statement of SBMSVII or
NCCC (or its affiliate) pursuant to transactions in which Salomon Smith Barney
or an affiliate of Salomon Smith Barney shall act as the sole underwriter. NCCC
and SBRC agree, however, that any securitizations scheduled to close in August
1999 shall not be counted toward the $750,000,000 commitment. Additionally,
sales of whole Mortgage Loans by New Century and/or NCCC to SBRC shall not be
counted toward the $750,000,000 commitment. NCCC will pay to Salomon Smith
Barney promptly upon the closing of each Securitization an underwriting discount
equal to the product of (i) the applicable Underwriting Fee Percentage (as
defined herein) multiplied by (ii) the aggregate unpaid principal balance of the
Mortgage Loans subject to such Securitization (the "Underwriting Fee"). The
"Underwriting Fee Percentage" with respect to each Securitization shall be
three-eighths of one percent (0.375%) [1]. In addition, if on March 31, 2000,
NCCC has not paid to Salomon Smith Barney a cumulative Underwriting Fee of at
least $2,812,500, NCCC shall pay to Salomon Smith Barney on the last business
day of such period an amount equal to (i) $2,812,500 less (ii) the cumulative
Underwriting Fee.
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                        Page 4.

     In addition to those fees described above, in the event Salomon Smith
Barney sells on behalf of NCCC a CE Bond (as defined below), Salomon Smith
Barney shall receive a fee equal to 1.0% of the proceeds of the CE Bond, and, if
Salomon Smith Barney sells on behalf of NCCC an Excess Cash Flow Class D Bond,
Salomon Smith Barney shall receive a fee equal to 1.0% of the stated principal
balance of such bond; provided however, that in the event that the CE Bond is
liquidated by Salomon Smith Barney as the result of an event of default, Salomon
Smith Barney shall not receive such fee. In connection with the creation of the
Excess Cash Flow D Bond, the related equity certificates (the "Equity
Certificates") created by such securitization (the "ECF Securitization") will be
delivered to NCCC on the related closing date.

          (b)  Expenses.  NCCC shall pay all reasonable costs and expenses
               --------
arising from the preparation for and execution of the Securitizations, including
but not limited to, the fees and disbursements of legal counsel (including
investor's counsel in any private placement, if retained), rating agency fees
(including those fees associated with the annual monitoring of previously closed
Securitizations), credit enhancement fees, SEC registration fees (or equivalent
ratable fees of a SBRC affiliate in lieu thereof if such affiliate's shelf
registration is utilized), auditors' fees, due diligence expenses (other than
Salomon Smith Barney's), costs of preparing and printing any offering documents
and trustee fees, etc. Salomon Smith Barney shall be responsible for the fees
and disbursements of its own legal counsel and any due diligence expenses
incurred by Salomon Smith Barney. It is understood and agreed that NCCC may
require that the parties incurring or charging such costs and expenses agree in
advance that they are payable or reimbursable by NCCC only to a specified
reasonable extent or cap.

          (c)  Information.  NCCC and New Century will furnish Salomon Smith
               -----------
Barney with all financial and other information concerning NCCC and New Century
as Salomon Smith Barney 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 Salomon Smith Barney with reasonable access during normal business hours
to NCCC's and New Century's officers, directors, employees, accountants, and
other representatives. NCCC and New Century acknowledge and confirm that Salomon
Smith Barney (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 NCCC or New Century, as
applicable.

          (d)  Offering Documents.  In connection with each Securitization, NCCC
               ------------------
will be solely responsible (and New Century will be responsible to the extent of
any servicer information) for the contents of any private placement memorandum,
prospectus supplement or other offering document used in connection with the
placement of the Securities (as such documents may be amended or supplemented
and including any information incorporated therein by reference, the "Offering
Document") and any and all other written communications provided by, or
authorized to be provided on behalf of, NCCC to any actual or prospective
purchaser of the Securities except to the extent such contents of the Offering
Document are provided by Salomon Smith Barney in writing
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                        Page 5.

expressly for use in the Offering Document and provided that any statistical,
tabular or similar information, including computer runs, initially prepared by
or on behalf of Salomon Smith Barney (but as to which Salomon Smith Barney is
not taking responsibility in the Offering Document) shall have been verified by
NCCC's independent public accountants. NCCC shall represent and warrant (and New
Century shall represent and warrant to the extent of any servicer information)
that the Offering Document and such other written communications will not, as of
the date of the offer or sale of the Securities or the closing date of any such
sale, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Such representation and warranty will not cover information
provided in writing by Salomon Smith Barney for use specifically in such
Offering Document. NCCC shall authorize Salomon Smith Barney to provide the
Offering Document to prospective purchasers of the Securities. If at any time
prior to the completion of the offer and sale of the Securities an event occurs
as a result of which the Offering Document (as then supplemented or amended)
would include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, NCCC or New Century,
as applicable, will promptly notify Salomon Smith Barney of such event and
Salomon Smith Barney will suspend solicitations of prospective purchasers of the
Securities until such time as NCCC or New Century, as applicable, shall prepare
(and NCCC or New Century, as applicable, agrees that, if it shall have notified
Salomon Smith Barney to suspend solicitations after orders have been accepted
from prospective purchasers, it will promptly prepare) a supplement or amendment
to the Offering Document which corrects such statement or omission.

          (e)  Indemnification.  New Century and NCCC agree, jointly and
               ---------------
severally, to indemnify and hold harmless (i) Salomon Smith Barney, (ii) SBMSVII
and (iii) each person who controls either Salomon Smith Barney or SBMSVII within
the meaning of either the Securities Act of 1933, as amended (the "Act") or the
Securities Exchange Act of 1934, as amended (the "Exchange Act") ((i) through
(iii) collectively, the "Indemnified Party") against any and all losses, claims,
damages or liabilities, joint or several, suffered or incurred which arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Offering Document or in any revision or amendment
thereof or supplement thereof or arise out of or are based upon the omission or
alleged omission to state in the Offering Document or in any revision or
amendment thereof or supplement thereto a material fact required to be stated
therein or the omission or alleged omission to state a material fact in any
Offering Document or in any revision or amendment thereof or supplement thereto
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and agrees to reimburse each such
Indemnified Party for any legal or other expenses reasonably incurred by it or
him in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however that NCCC and New Century shall not be
liable to any Indemnified Party to the extent that any misstatement or alleged
misstatement or omission or alleged omission was made in reliance upon and in
conformity with the information provided in writing to NCCC or New Century by
Salomon Smith Barney specifically for inclusion in the Offering Document. This
indemnity agreement will be in addition to any liability which NCCC and New
Century may otherwise have.
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                        Page 6.

          In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 2(e) is
due in accordance with its terms but is for any reason held by a court to be
unavailable on grounds of policy or otherwise, the parties entitled to
indemnification thereunder shall be entitled to contribution for the aggregate
losses, claims, damages and liabilities (including legal and other expenses
reasonably incurred in connection with investigating or defending same) to which
it or they may be subject, except that no person guilty of fraudulent
misrepresentation shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, consideration shall
be given to the relative benefits and also the relative fault of the party in
connection with the statements or omissions that resulted in losses, the
parties' relative knowledge and access to information concerning the matter with
respect to which the claim was asserted, the opportunity to correct and/or
prevent the breach, and any other equitable considerations appropriate under the
circumstances. For purposes of this Section 2(e), each person who controls
either Salomon Smith Barney or SBMSVII within the meaning of either the Act or
the Exchange Act shall have the same rights to contribution as Salomon Smith
Barney or SBMSVII, respectively. Any party entitled to contribution will,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against NCCC and/or New Century under this Section 2(e), notify NCCC
and/or New Century, but the omission to so notify NCCC and/or New Century shall
not relieve NCCC and/or New Century from any other obligation it may have
hereunder or otherwise than under this Section 2(e).

          (f)  All financial data and other documentation prepared by Salomon
Smith Barney in connection with the transactions contemplated hereby (including,
without limitation, any computer models, cash flow analyses, and any
documentation prepared by counsel for Salomon Smith Barney) shall be proprietary
to Salomon Smith Barney. Except as otherwise required by law, none of NCCC, New
Century, any of their affiliates, nor any person acting on behalf of any of them
(including, without limitation, counsel and the independent accountants to NCCC
and New Century) shall disseminate, distribute, or otherwise make available such
data or documentation without Salomon Smith Barney's prior written consent
(other than NCCC or New Century making such data available to any NCCC or New
Century affiliate, its counsel or its independent accountants, in each case on a
need-to-know basis).

          This Section 2 shall survive the termination of this Letter Agreement.

          3.   Aggregation Line.
               ----------------

          (a)  In General.  In addition to the rights provided to Salomon Smith
               ----------
Barney and SBRC pursuant to Sections 1 and 2 of this Letter Agreement, SBRC
shall make available to NCCC an aggregation line (the "Aggregation Line")
pursuant to which SBRC shall simultaneously purchase from, and sign a forward
commitment to resell to, NCCC Mortgage Loans and the related servicing rights
that are deemed acceptable for such Aggregation Line as set forth below. The
Aggregation Line shall be more fully documented pursuant to the Mortgage Loan
Purchase and Sale Agreement (the "Purchase and Sale Agreement") to be entered
into among NCCC, New Century and SBRC,
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                        Page 7.

which shall be substantially similar in form to the Mortgage Loan Purchase and
Sale Agreement dated December 11, 1998 between New Century and SBRC 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, NCCC 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 NCCC 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
SBRC. In the event that NCCC satisfies its obligations under the terms of this
Letter Agreement, the Aggregation Line shall terminate on the last day of the
calendar quarter in which NCCC satisfies its obligations to SBRC pursuant to
Section 1(a) of this Letter Agreement.

          The "Purchase Price" with respect to each Mortgage Loan and related
servicing rights which conforms to the Underwriting Standards of New Century
which were most recently reviewed and approved by SBRC and which is not a
Problem Mortgage Loan (as defined in Section 3(b)) or a Non-Standard Mortgage
Loan (as defined in Section 3(c)) (a "Standard Mortgage Loan") shall be equal to
102.25% of the unpaid principal balance of such Standard Mortgage Loan. The
"Purchase Price" for each Non-Standard Mortgage Loan and related servicing
rights shall be equal to the amount determined in accordance with the provisions
of Section 3(c)(iii) of this Letter Agreement. The "Purchase Price" for each
Problem Mortgage Loan and related servicing rights shall be equal to the amount
determined in accordance with the provisions of Section 3(b)(iii) of this Letter
Agreement. Notwithstanding the foregoing, the "Purchase Price" for each Mortgage
Loan will be reduced by the amount of any Collateral Value Deficiency paid by
NCCC with respect to such Mortgage Loan.

          The repurchase price shall reflect the agreed upon return to SBRC for
providing the Aggregation Line (the "Aggregation Cost"). With respect to any
Standard Mortgage Loan, the Aggregation Cost shall equal One Month LIBOR (as
defined herein) plus 1.25%. With respect to any Problem Mortgage Loan or Non-
Standard Mortgage Loan, or in the event that NCCC sells any Mortgage Loan which
is subject to the Aggregation Line to a party other than SBRC, the Aggregation
Cost shall equal One Month LIBOR plus 2.00%. In the event that a Mortgage Loan
is sold to a party other than SBRC, the Mortgage Loan shall be subject to the
foregoing increased rate from the day such Mortgage Loan became subject to the
Aggregation Line until the date of the sale to such third party. A copy of the
letter with the terms to the sale to such third party shall be delivered to
SBRC. NCCC shall retain principal and interest on any Mortgage Loans subject to
the Aggregation Line.

          "One Month LIBOR" means as of the related Settlement Date, the 30 day
London Interbank Offered Rate as of 11:00 a.m. (London time) on such date, as
indicated on page number 3750 of the Telerate Service. If One Month LIBOR cannot
be so determined, then One Month LIBOR shall mean the rate determined by SBRC in
its sole discretion.
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                        Page 8.

          The Aggregation Line, inclusive of any Problem Mortgage Loans, Non-
Standard Mortgage Loans and Mortgage Loans described in Sections 3(c)(ii) and
4(b), at any one time shall be limited to $750 million in amount of Mortgage
                                          ----
Loans and shall have a term of one month. The maximum amount of Problem Mortgage
Loans and Non-Standard Mortgage Loans in the Aggregation Line shall not exceed
$120 million at any one time.

          NCCC shall have the right to add Mortgage Loans to the Aggregation
Line up to four times each month. Standard Loans may be removed from the
Aggregation Line twice a month (one of which shall be on the roll date). Problem
Mortgage Loans and Non-Standard Mortgage Loans may be removed from the
Aggregation Line with one week prior written notice by NCCC to SBRC.

          SBRC shall provide not less than twenty eight days' prior notice to
NCCC and U.S. Bank (or such other warehouse lender as directed by NCCC) in the
event that SBRC elects to not renew the Aggregation Line for any month.

          (b)  Problem Mortgage Loans.  A "Problem Mortgage Loan" is defined as
               ----------------------
any Mortgage Loan (w) which is in SBRC's sole discretion of insufficient quality
to be financed as a Standard Mortgage Loan or a Non-Standard Mortgage Loan or
purchased, provided, however, that if SBRC agrees, it can finance any Mortgage
Loan rejected from a securitization or whole loan purchase as a Non-Standard
Mortgage Loan, (x) which is missing documentation or other information and such
problem is not cured by NCCC in sixty days, (y) which is delinquent at the time
of financing by SBRC, which becomes delinquent during such financing by SBRC or
(z) was more than thirty days but less than sixty days delinquent on more than
one occasion in the prior twelve months and is now current. Problem Mortgage
Loans shall be subject to the following qualifications with respect to the
Aggregation Line:

               (i)   the maximum Aggregation Line with respect to Problem
                     Mortgage Loans shall equal $50,000,000 as of any trade date
                     on which there was formal notification of a trade by a
                     confirmation letter or trade ticket;

               (ii)  if a Mortgage Loan is a Problem Mortgage Loan based on
                     clause (w) or clause (x) above, then the "Purchase Price"
                     shall be equal to (A) for the first ninety-day period after
                     purchase, 90% of the unpaid principal balance of the
                     Problem Mortgage Loan as of the date of purchase and (B)
                     thereafter, 90% of the unpaid principal balance of the
                     Problem Mortgage Loan, minus an additional 10% of the
                     unpaid principal balance of such Problem Mortgage Loan for
                     each additional month after the initial ninety-day period;

               (iii) if a Mortgage Loan is a Problem Mortgage Loan based on
                     clause (y) above, then the "Purchase Price" shall be equal
                     to (A) 90% of the unpaid principal balance of the Problem
                     Mortgage Loan as of the date
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                        Page 9.

                     of purchase if such Mortgage Loan is delinquent one, two or
                     three payments, (B) 90% of the unpaid principal balance of
                     the Problem Mortgage Loan, minus an additional 10% of the
                     unpaid principal balance of such Problem Mortgage Loan for
                     each of the fourth, fifth and sixth delinquent payments and
                     (C) 65% of the Broker Price Opinion obtained by SBRC, at
                     the expense of NCCC, regarding the real property subject to
                     the Mortgage Loan if such Mortgage Loan is delinquent more
                     than six payments; and

               (iv)  if a Mortgage Loan is a Problem Loan based on clause (z)
                     above, then the "Purchase Price" shall be equal to (A) 95%
                     of the unpaid principal balance of the Problem Mortgage
                     Loan as of the date of purchase if such Mortgage Loan has
                     been more than thirty days delinquent but less than sixty
                     days delinquent on two occasions in the prior twelve
                     months; (B) 90% of the unpaid principal balance of the
                     Problem Mortgage Loan as of the date of purchase if such
                     Mortgage Loan has been sixty days delinquent on one
                     occasion in the prior twelve months and (C) 85% of the
                     unpaid principal balance of the Problem Mortgage Loan, if
                     such Mortgage Loan does not meet the requirements set forth
                     in (A) or (B) above.

     With respect to any Mortgage Loan that is a Problem Mortgage Loan based on
clause (x) or clause (y) above, in the event that SBRC determines in its sole
discretion that such Problem Mortgage Loan has ceased to be a Problem Mortgage
Loan, such Mortgage Loan shall be treated as a Standard Mortgage Loan or a Non-
Standard Mortgage Loan, as the case may be, as of the first day of the month
following such determination.

          (c)  Non-Standard Mortgage Loans.  A "Non-Standard Mortgage Loan" is
               ---------------------------
defined as any Mortgage Loan (x) with an unpaid principal balance in excess of
$1,000,000; or (y) that has a loan-to-value ratio in excess of 85.00% (up to a
maximum of 95.00%); provided, however, at its option, SBRC may deem a Mortgage
Loan with an unpaid principal balance of no more than $1,500,000 to be a [3]
Standard Mortgage Loan. In addition, if (i) Mortgage Loans with a loan-to-value
ratio greater than 80% (but not more than 85%) have an aggregate unpaid
-----
principal balance in excess of $120 million and (ii) Mortgage Loans with unpaid
principal balances greater than $500,000 and less than or equal to $1,500,000
have an aggregate unpaid principal balance in excess of $42 million, such excess
amounts shall be deemed "Non-Standard Mortgage Loans". No Mortgage Loan shall be
subject to the terms of the Aggregation Line if: (i) the unpaid principal
balance of such Mortgage Loan exceeds $1,500,000 or (ii) such Mortgage Loan has
a loan-to-value ratio greater than 95%. Non-Standard Mortgage Loans shall be
subject to the following qualifications with respect to the Aggregation Line:

               (i)   the maximum Aggregation Line with respect to Non-Standard
                     Mortgage Loans shall equal $100,000,000 (of which no more
                     than
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                       Page 10.

                     $30,000,000 shall have unpaid principal balances greater
                     than $1,000,000 (including any Problem Loans with unpaid
                     principal balances greater than $500,000) and no more than
                     $50,000,000 shall be Mortgage Loans with a loan-to-value
                     ratio in excess of 85.00% (up to a maximum of 95.00%)), as
                     of any trade date on which there was formal notification of
                     a trade by a confirmation letter or trade ticket; and

               (ii)  with respect to the Mortgage Loans, the Purchase Price for
                     the first sixty days shall be the market value of such
                     Mortgage Loans as determined by SBRC acting in good faith,
                     and thereafter, the Purchase Price shall decrease by 10% of
                     such market value and by an additional 10% thereof for each
                     succeeding month.

          (d)  Mark-to-Market.  If with respect to any Standard Mortgage Loan,
               --------------
any Non-Standard Mortgage Loan or any Problem Mortgage Loan, SBRC at any time
determines, in its sole discretion, that there exists a Collateral Value
Deficiency (as defined below) and SBRC notifies NCCC in writing of such
Collateral Value Deficiency, NCCC shall, no later than one (1) Business Day
after receipt of such notice, pay to SBRC 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 3(a)
hereof over (b) the Market Value of such Mortgage Loan. "Market Value" shall
mean, as of any date in respect of any Standard Mortgage Loan, any Non-Standard
Mortgage Loan or any Problem Mortgage Loan, the value of such Mortgage Loan as
determined by SBRC in its sole discretion. SBRC shall have the right to mark-to-
market any Mortgage Loan on a daily basis.

          (e)  Mortgage Loan Schedule. No Mortgage Loan shall be included in the
               ----------------------
Aggregation Line unless NCCC shall have delivered to SBRC at least 72 hours
prior to such inclusion, a magnetic tape, in a format acceptable to SBRC,
consisting of the loan characteristics agreed upon by SBRC and NCCC with respect
to each Mortgage Loan.

          (f)  Marketing of Mortgage Loans.  SBRC may (subject to NCCC's consent
               ---------------------------
unless a Termination Event has occurred) market the Problem Mortgage Loans and
Non-Standard Mortgage Loans on NCCC's behalf for a purchase price acceptable to
NCCC and shall provide NCCC with a copy of a trade ticket or letter of intent
with respect to any commitment to sell such Mortgage Loans. NCCC must advise
SBRC within sixty days after inclusion of each Mortgage Loan in the Aggregation
Line of the course of action it intends to take with respect to such Mortgage
Loan (i.e., securitization, whole loan sale, etc.).

          (g)  Hedging.  NCCC will have the option to establish one or more
               -------
securities or commodities accounts at Salomon Smith Barney and to enter into
transactions in such accounts (and
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                       Page 11.

only in such accounts) that are intended to hedge the interest rate risk on
Mortgage Loans included in the Aggregation Line.

          4.  (a) Financing of CE Bonds and Equity Certificates.  SBRC or an
                  ---------------------------------------------
affiliate shall provide a financing facility for the CE bonds (the "CE Bonds")
created by any NCCC securitizations on which Salomon Smith Barney has acted as
the sole underwriter pursuant to this Letter Agreement. Such facility shall
provide for financing at a rate equal to 75% of the present value of the CE
Bonds, as determined by SBRC. The CE Bonds shall be financed by SBRC or an
affiliate at a financing fee equal to One Month LIBOR plus 1.50% and will be
subject to standard provisions of the PSA global master repurchase agreement.
SBRC or an affiliate shall provide a financing facility for the Equity
Certificates created by any ECF Securitization on which Salomon Smith Barney has
acted as the sole underwriter. Such facility shall provide for financing by SBRC
or its affiliate at a financing fee equal to One Month LIBOR plus 2.50% and will
be subject to standard provisions of the PSA global master repurchase agreement.

          (b)  Financing of Trigger Buybacks.  SBRC shall purchase under the
               -----------------------------
Aggregation Line mortgage loans which are repurchased by New Century and sold or
contributed to NCCC based upon trigger buybacks in effect pursuant to the
pooling and servicing agreements for SBMSVII 1997-NC1, 1997-NC2, 1997-NC3, 1998-
NC5 and New Century Home Equity Loan Trust Series 1997-NC5. The maximum
aggregate outstanding Purchase Price will be $10,000,000. Such mortgage loans
will be deemed Problem Mortgage Loans in the Aggregation Line and will be
financed by SBRC in the same manner as Problem Mortgage Loans financed pursuant
to Section 3(b)(iii) above based on the degree of delinquency.

          (c)  Financing of REO Properties.  In the event there is a foreclosure
               ---------------------------
sale for any Problem Mortgage Loan, simultaneously with the occurrence of such
foreclosure, NCCC will repurchase such Mortgage Loan from SBRC on such date and
title of the REO Property to be taken in the name of New Century R.E.O. Corp.
Liquidation Proceeds, Inc. ("LPI"), SBRC's affiliate, will provide financing for
such REO Property pursuant to the letter agreement, dated November 18, 1998,
between New Century and LPI, the loan and security agreement, dated November 18,
1998, between the New Century and LPI, the related Secured Promissory Note,
dated November 18, 1998 by New Century to LPI and the REO Subsidiary Pledge
Agreement, dated as of November 18, 1998, made by New Century, in favor of LPI
(collectively, the "REO Financing Facility").

          5.   Termination.
               -----------

          (a)  NCCC shall have the right to terminate its obligations hereunder
upon (i) any material default by SBRC of its obligations under this Letter
Agreement which is not cured within 30 days following written notice of such
default to SBRC by NCCC or (ii) the payment by NCCC to SBRC of a termination fee
equal to 0.25% times the unfulfilled volume commitment hereunder.

          (b)  SBRC shall have the right to terminate this Letter Agreement upon
the occurrence of any of the following events (each, a "Termination Event"):
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                       Page 12.

               (i)   the judgment by SBRC in good faith that a material adverse
                     change has occurred with respect to the business,
                     properties, assets or condition (financial or otherwise) of
                     NCCC;

               (ii)  SBRC shall reasonably request, specifying the reasons for
                     such request, information, and/or written responses to such
                     requests, regarding the financial well-being of NCCC 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 NCCC shall have occurred
                     without the consent of SBRC, other than in connection with
                     and as a result of the issuance and sale by NCCC of
                     registered, publicly offered common stock; or (B) SBRC
                     determines in its sole discretion that any material adverse
                     change has occurred in the management of NCCC;

               (iv)  There is (A) a material breach by NCCC of any
                     representation and warranty contained in the Purchase and
                     Sale Agreement, other than a representation or warranty
                     relating to particular Mortgage Loans, and SBRC 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 NCCC or (B) a failure
                     by NCCC to make any payment payable by it under the
                     Purchase and Sale Agreement or (C) any other failure by
                     NCCC to observe and perform in any material respect its
                     material covenants, agreements and obligations with SBRC,
                     including without limitation those contained in the
                     Purchase and Sale Agreement, and SBRC 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 NCCC;

               (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 SBRC, impracticable to continue
                     the commitment; or

               (vi)  NCCC fails to provide written notification to SBRC of any
                     material change in its loan origination, acquisition or
                     appraisal guidelines or practices, or NCCC, without the
                     prior consent of SBRC (which shall not be unreasonably
                     withheld), amends in any material respect its loan
                     origination, acquisition or appraisal guidelines or
                     practices; or
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                       Page 13.

               (vii) NCCC's 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 3(e) hereof;

provided, that SBRC shall have the right to dispose of any collateral held by
SBRC pursuant to this Letter Agreement. In connection with a Termination Event
under this Paragraph 5, SBRC shall have the right to transfer servicing as
provided in Section 1(b).

     (c)  Subject to the provisions of Paragraph 3 of this Letter Agreement,
this Letter Agreement shall terminate upon the earlier of (i) satisfaction of
the $750,000,000 commitment and (ii) March 31, 2000; provided that the CE "repo"
and equity certificate "repo" facility provided for in Section 4(a) and the REO
Financing Facility provided for in Section 4(c) shall continue under its terms;
provided, further, that SBRC may, in its sole discretion, extend the terms of
this Letter Agreement until such time that NCCC has been able to fulfill its
commitment without payment of a termination fee.

          Notwithstanding any other provision of this Section 5, any grace or
notice period provided herein in respect of a notice to be given or action to be
taken by SBRC may be shortened or eliminated by SBRC 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 or other Securities 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.

          6.   General Provisions.
               ------------------

          (a)  Salomon Smith Barney's Discretion.  It is understood that Salomon
               ---------------------------------
Smith Barney shall have absolute discretion in determining whether to accept or
reject any proposed offer or proposal to securitize any Mortgage Loan.
Notwithstanding the foregoing, however, subject to NCCC's representations,
warranties and covenants as set forth herein and in any related agreements, all
Standard Mortgage Loans, Non-Standard Mortgage Loans and Problem Mortgage Loans
originated by New Century in accordance with the underwriting standards of New
Century which were most recently approved by SBRC shall be eligible for
financing under the Aggregation Line in accordance with the terms hereof. It is
further understood that SBRC shall have absolute discretion in determining
whether any Mortgage Loan is a Standard Mortgage Loan, Non-Standard Mortgage
Loan or Problem Mortgage Loan and SBRC 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, NCCC shall have obtained two
appraisals).
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                       Page 14.

          (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).

          (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.  NCCC and SBRC 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 December 11, 1998 among New Century, NCCC, Salomon Smith
Barney and SBRC (including those sections related to indemnification), such
letter agreement is hereby terminated.

          (i)  Expenses. In addition to those expenses set forth in Section 2(a)
               --------
above, NCCC shall pay subject to prenegotiated caps, all costs and expenses
related to any amendment of this Letter Agreement.
<PAGE>

          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,

                                             SALOMON BROTHERS REALTY CORP.

                                             By: /s/ Matthew R. Bollo
                                                ----------------------------
                                             Name:
                                             Title: Authorized Agent

                                             SALOMON SMITH BARNEY INC.

                                             By: /s/ Matthew R. Bollo
                                                ----------------------------
                                             Name:
                                             Title: Vice President

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

NEW CENTURY MORTGAGE CORPORATION

By: /s/ Brad A. Morrice
   -----------------------------
Name:
Title: CEO

NC CAPITAL CORPORATION

By: /s/ John Kontoulis
   -----------------------------
Name:
Title: Senior Vice President
<PAGE>

                                   EXHIBIT A

                           FORM OF RECOGNITION LETTER


Salomon Brothers Realty Corp.
390 Greenwich Street
4th Floor
New York, NY 10013

Attention:  Mr. Matthew Bollo
            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 ("New Century") that NC Capital Corporation
("NCCC") from time to time enters into transactions with you ("SBRC") in which
SBRC purchases mortgage loans (including the related servicing rights) serviced
by Sub-Servicer for New Century pursuant to the captioned Agreement, and NCCC
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"). New Century has requested that
Sub-Servicer provide this letter agreement to SBRC in order to, and Sub-Servicer
hereby agrees to, acknowledge that SBRC owns the servicing rights and, upon a
written notice to Sub-Servicer from SBRC that NCCC failed to repurchase a
Mortgage Loan on the related repurchase date or if NCCC 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 "Salomon Loans") for SBRC, that Sub-Servicer will no longer be sub-
servicer with respect to the Salomon Loans, unless the term of sub-servicing is
extended by SBRC in its sole discretion. NCCC and New Century 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 SBRC with
respect to the Salomon Loans. Any fee payable to the Sub-Servicer shall be paid
by New Century without any right of reimbursement by SBRC.
<PAGE>

NC Capital Corporation
New Century Mortgage Corporation
September 1, 1999                                                        Page 2.

                                             Yours sincerely,

                                             SALOMON BROTHERS REALTY CORP.

                                             By:____________________________
                                             Name:
                                             Title:

                                             NC CAPITAL CORPORATION

                                             By:____________________________
                                             Name:
                                             Title:

                                             NEW CENTURY MORTGAGE CORPORATION

                                             By:____________________________
                                             Name:
                                             Title:

                                             [SUB-SERVICER]

                                             By:____________________________
                                             Name:
                                             Title:
<PAGE>

                                   EXHIBIT B

                           FORM OF LIMITED GUARANTY