<PAGE>
 
                                                                    EXHIBIT 10.5
                                                                    ------------

                         SALOMON BROTHERS REALTY CORP.
                           Seven World Trade Center
                           New York, New York 10048



                                                   March 31, 1998


New Century Mortgage Corporation
18400 Von Karman, Suite 1000
Irvine, California 92612

Attention: Mr. Brad Morrice
           President & General Counsel

Ladies and Gentlemen:

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

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

           (a) In General.  New Century hereby agrees to securitize Mortgage
               ----------                                                   
Loans with an unpaid principal balance, as of the date of securitization, of not
less than $1,000,000,000 between April 1, 1998 and March 31, 1999 securitized
through a program of securitizations (the "Securitizations") of AAA and Aaa-
rated mortgage-backed securities (the "Securities") either (i) using SBMSI or
(ii) pursuant to a shelf registration filing of New Century in connection with
passthrough transfers with respect to which Salomon or one of its affiliates is
the sole underwriter.

           (b) Servicing of the Mortgage Loans.  Unless otherwise agreed to
               -------------------------------                             
between Salomon and New Century, New Century shall service the Mortgage Loans
itself or subservice the Mortgage Loans through Comerica or such other sub-
servicer which Salomon has accepted in writing, as the sub-servicer (the "Sub-
Servicer"); provided that, Salomon shall have the right to perform due diligence
on any entity appointed as servicer or sub-servicer of the Mortgage Loans
(including Comerica) and may require New Century to select another servicer or
subservicer to the extent that Salomon 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
1997-NC5 dated as of November 1, 1997 among U.S.
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                           Page 2.


Bank National Association, SBMSI and New Century.  New Century or the Sub-
Servicer shall remit payments of principal and interest to Salomon 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)
on the Mortgage Loans.  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 .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 Salomon.  Any Sub-Servicer (including Comerica) shall
execute a letter agreement recognizing Salomon's interest in the Mortgage Loans
in the form of Exhibit A.

          (c)    Conditions Precedent to Mortgage Loan Purchases.  Salomon's
                 -----------------------------------------------            
obligation to purchase any Mortgage Loans which it accepts for its Aggregation
Line (as defined in Section 3(a)) shall be subject to each of the following
conditions:

               (i)  there shall have been delivered to Salomon a Trust Receipt
                    issued by First Bank National Association ("First Bank")
                    with a mortgage loan schedule attached thereto and an
                    exception report which is acceptable to Salomon in its sole
                    discretion;

              (ii)  Salomon 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 Salomon; and

             (iii)  New Century shall have provided to Salomon such other
                    documents which are then required to have been delivered
                    under the Purchase and Sale Agreement (as defined in Section
                    3(a)) or which are reasonably requested by Salomon, which
                    other documents may include UCC financing statements, a
                    favorable opinion or opinions of counsel with respect to
                    matters which are reasonably requested by Salomon, and/or an
                    officer's or secretary's certificate.
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                           Page 3.


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

          (a) In General.  As noted above, New Century shall meet its commitment
              ----------                                                        
to Salomon with respect to not less than $1,000,000,000 in Mortgage Loans
between April 1, 1998 and March 31, 1999 by using a shelf registration statement
of SBMSI or New Century pursuant to transactions in which SBI or an affiliate of
SBI shall act as the sole underwriter.  Sales of whole Mortgage Loans by New
Century to Salomon shall not be counted toward the $1,000,000,000 commitment.
New Century will pay to SBI 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 %); provided
however, the Underwriting Fee Percentage shall be one-fourth of one percent
(0.25 %) if a Securitization is fully wrapped by a bond insurer.  If in any six-
month period commencing with the period from April 1, 1998 through September 30,
1998, and thereafter on a semiannual basis, New Century fails to pay SBI a
cumulative Underwriting Fee of at least $1,875,000, New Century shall pay to SBI
on the last business day of such period an amount equal to (i) $1,875,000 less
(ii) the cumulative Underwriting Fee for such period; provided, however, that
any Underwriting Fees paid by New Century in any quarter in excess of $1,875,000
shall be carried forward and applied toward New Century's Underwriting Fee
commitment hereunder; provided, further, that the minimum semiannual
Underwriting Fee commitment shall not apply in any such period in which New
Century utilizes SBI as the exclusive underwriter for all securitizations
completed by New Century during such period.  In addition, if on March 31, 1999,
New Century has not paid to SBI a cumulative Underwriting Fee of at least
$3,750,000, New Century shall pay to SBI on the last business day of such period
an amount equal to (i) $3,750,000 less (ii) the cumulative Underwriting Fee.

     In addition to those fees described above, in the event SBI sells on behalf
of New Century a CE Bond (as defined below), SBI shall receive a fee equal to
2.0 % of the proceeds of the CE Bond, and, if SBI sells on behalf of New Century
a NIMS bond, SBI shall receive a fee equal to 2.0% of the stated principal
balance of such bond.

          (b) Expenses.  New Century 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 Salomon affiliate in lieu thereof if such affiliate's shelf
registration is utilized), auditors' fees, due diligence expenses (other than
SBI's), costs of preparing and printing any offering documents and trustee fees,
etc.  SBI shall be responsible for the fees and disbursements of its own legal
counsel and any due diligence expenses incurred by SBI.  It is understood and
agreed that New Century may require that the parties incurring or charging such
costs and
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                           Page 4.


expenses agree in advance that they are payable or reimbursable by New Century
only to a specified reasonable extent or cap.

          (c) Information.  New Century will furnish SBI with all financial and
              -----------                                                      
other information concerning New Century as SBI 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 in that connection will provide SBI with reasonable access during
normal business hours to New Century's officers, directors, employees,
accountants, and other representatives.  New Century acknowledges and confirms
that SBI (i) will rely on such information in the performance of the services
contemplated by this letter without independently investigating or verifying any
of it and (ii) assumes no responsibility for the accuracy or completeness of
such information.

          (d) Offering Documents.  In connection with each Securitization, New
              ------------------                                              
Century will be solely responsible 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, New Century to any actual or
prospective purchaser of the Securities except to the extent such contents of
the Offering Document are provided by SBI in writing 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 SBI
(but as to which SBI is not taking responsibility in the Offering Document)
shall have been verified by New Century's independent public accountants.  New
Century shall represent and warrant 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 SBI for use
specifically in such Offering Document.  New Century shall authorize SBI 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, New Century will
promptly notify SBI of such event and SBI will suspend solicitations of
prospective purchasers of the Securities until such time as New Century shall
prepare (and New Century agrees that, if it shall have notified SBI 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 agrees to indemnify and hold
              ---------------                                           
harmless SBI and each person who controls Salomon within the meaning of either
the Securities Act of 1933, as
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                           Page 5.


amended (the "Act") or the Securities Exchange Act of 1934, as amended (the
"Exchange Act") 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 New Century shall not be liable to SBI or any person who controls
-------                                                                       
SBI 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 New Century by SBI specifically for inclusion
in the Offering Document.  This indemnity agreement will be in addition to any
liability which New Century may otherwise have.

          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 SBI
within the meaning of either the Act or the Exchange Act shall have the same
rights to contribution as SBI. 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 New Century under this Section 2(e), notify New Century, but the
omission to so notify New Century shall not relieve 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 SBI in
connection with the transactions contemplated hereby (including, without
limitation, any computer models, cash flow analyses, and any documentation
prepared by counsel for SBI) shall be proprietary to SBI.  Except as otherwise
required by law, neither New Century, any New Century affiliate, nor any person
acting on behalf of any of them (including, without limitation, counsel and the
independent accountants to New Century) shall disseminate, distribute, or
otherwise make available such data
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                          Page 6.


or documentation without SBI's prior written consent (other than New Century
making such data available to any 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 SBI pursuant to
         ----------                                                        
Sections 1 and 2 of this Letter Agreement, Salomon shall make available to New
Century an aggregation line (the "Aggregation Line") pursuant to which Salomon
shall simultaneously purchase from, and sign a forward commitment to resell to,
New Century Mortgage Loans 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 between New Century and Salomon, which shall
be substantially similar in form to the Mortgage Loan Purchase and Sale
Agreement dated November 4, 1996 between New Century and Salomon but shall
provide for servicing of the Mortgage Loans by New Century and require that,
upon a Termination Event (as defined in Section 5) principal and interest
collections be held in a segregated bank account acceptable to Salomon pending
remittance to Salomon.  Under the Purchase and Sale Agreement, New Century 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 New Century 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 Salomon.  In the event that New Century 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 New Century satisfies its obligations to
Salomon pursuant to Section 1(a) of this Letter Agreement.

          The Purchase Price with respect to each Mortgage Loan which conforms
to the Underwriting Standards of New Century which were most recently reviewed
and approved by Salomon 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 the market value of such Mortgage
Loan, as determined by Salomon acting in good faith.  The Purchase Price for
each Non-Standard Mortgage Loan shall be equal to the lesser of (i) the market
value of such Mortgage Loan as determined by Salomon acting in good faith or
(ii) the amount determined in accordance with the provisions of Section
3(c)(iii) of this Letter Agreement.  Unless Salomon provides notice to New
Century and First Bank pursuant to this section, the Purchase Price for each
Standard Mortgage Loan shall be equal to at least 103 % of the unpaid principal
balance of such Standard Mortgage Loan, and the Purchase Price for each other
Mortgage Loan shall be equal to at least the minimum percentage of the unpaid
principal balance of such Mortgage Loan that is specified in the financing
agreements between New Century and First Bank.  In order for Salomon to
determine when notice is required to be delivered to First Bank pursuant
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                        Page 7.


to this section, New Century shall forward to Salomon copies of the financing
agreements between New Century and First Bank.

          The repurchase price shall reflect the agreed upon return to Salomon
for providing the Aggregation Line (the "Aggregation Cost").  With respect to
any Mortgage Loan which is a Standard Mortgage Loan, the Aggregation Cost shall
equal One Month LIBOR plus 1.25 %. With respect to any Problem Mortgage Loan or
Non-Standard Mortgage Loan, or in the event that New Century sells any Mortgage
Loan which is subject to the Aggregation Line to a party other than Salomon, the
Aggregation Cost shall equal One Month LIBOR plus 2.00 %; provided, however,
with respect to any second lien Mortgage Loans with a combined loan-to-value
ratio greater than 95 % (to a maximum of 125 %) the Aggregation Cost shall equal
One Month LIBOR plus 2.50%.  In the event that a Mortgage Loan is sold to a
party other than Salomon, 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 Salomon.  New
Century shall retain principal and interest on any Mortgage Loans subject to the
Aggregation Line.

          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 $600 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.

          New Century 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 two weeks prior written notice by New Century to
Salomon.

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

          (b)  Problem Mortgage Loans.   Salomon, in its sole discretion, may
               ----------------------                                        
determine that a Mortgage Loan is (x) of insufficient quality to be financed or
purchased, (y) missing documentation or other information and such problem is
not cured by New Century in sixty days or (z) a loan which is delinquent at the
time of financing by Salomon, which becomes delinquent during such financing by
Salomon or was more than thirty days delinquent on one or more occasions in the
prior twelve months (each such Mortgage Loan, a "Problem Mortgage Loan").
Problem Mortgage Loans shall be subject to the following qualifications with
respect to the Aggregation Line:
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                           Page 8.


            (i)  the maximum Aggregation Line with respect to Problem Mortgage
                 Loans shall equal $42 million as of any trade date on which
                 there was formal notification of a trade by a confirmation
                 letter or trade ticket; and

           (ii)  the Purchase Price shall be equal to (A) for the first sixty-
                 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 20 % of the unpaid principal balance of
                 such Problem Mortgage Loan for each additional month after the
                 initial sixty-day period.

In the event that Salomon determines in its sole discretion that any Problem
Mortgage Loan has ceased to be a Problem Mortgage Loan, such Mortgage Loan shall
be treated as a Standard 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.  "Non-Standard Mortgage Loans" are
              ---------------------------                                    
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, Salomon may deem a
Mortgage Loan with an unpaid principal balance of no more than $1,500,000 to be
a Standard 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 the unpaid principal balance of
such Mortgage Loan exceeds $1,500,000 or if such Mortgage Loan has a loan-to-
value ratio greater than 95 % if it is a first lien or a combined loan-to-value
ratio greater than 125% if it is a second lien.  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 $78 million (of which no more than
                 $30 million 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 $42 million
                 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;
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                           Page 9.


           (ii)  the maximum Aggregation Line with respect to second lien
                 Mortgage Loans shall equal $25 million for second lien Mortgage
                 Loans with a combined loan-to-value ratio in excess of 95.00%
                 (up to a maximum of 125.00%), as of any trade date on which
                 there was formal notification of a trade by a confirmation
                 letter or trade ticket, and Mortgage Loans provided for in this
                 clause (ii) shall not be applied to the $42 million limit in
                 the preceding clause (i); and

          (iii)  with respect to first lien Mortgage Loans, the Purchase Price
                 for the first sixty days shall be the market value of such
                 Mortgage Loans as determined by Salomon acting in good faith,
                 and thereafter, the Purchase Price shall decrease by 20 % of
                 such market value and by an additional 20 % thereof for each
                 succeeding month (to zero at the fifth such reduction); and
                 with respect to second lien Mortgage Loans, the Purchase Price
                 for the first sixty days shall be the market value of such
                 Mortgage Loan as determined by Salomon acting in good faith,
                 and thereafter, the maximum Purchase Price shall decrease by 20
                 % of such market value and by an additional 20 % thereof for
                 each succeeding month (to zero at the fifth such reduction).

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

          (e) Marketing of Mortgage Loans.  Salomon may market the Problem
              ---------------------------                                 
Mortgage Loans and Non-Standard Mortgage Loans on New Century's behalf for a
purchase price acceptable to New Century and shall provide New Century with a
copy of a trade ticket or letter of intent with respect to any commitment to
sell such Mortgage Loans.  New Century must advise Salomon 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.).

          (f) Hedging.  New Century agrees to establish one or more securities
              -------                                                         
or commodities accounts at SBI and to enter into transactions in such accounts
(and only in such accounts) that are intended to hedge the interest rate risk on
the fixed-rate Mortgage Loans included in the Aggregation Line.

          4.  (a)  Financing of CE Bonds.  Salomon or an affiliate shall
                   ---------------------                                
provide a financing facility for the CE bonds (the "CE Bonds") created by the
asset-backed structure on any New Century securitizations which SBI 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
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                          Page 10.


of the CE Bonds, as determined by Salomon.  The CE Bonds shall be financed by
Salomon 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 master repurchase
agreement.  In addition, if New Century terminates its relationship with
Greenwich Capital Financial Products, Inc. ("Greenwich"), Salomon or an
affiliate shall provide such facility with respect to the CE bonds created by
New Century's fixed rate transactions with Greenwich.  Such terms shall be
acceptable to Salomon.  In connection therewith, Salomon agrees to reduce by
one-eighth (0.125 %) of one percent the interest rate on the fixed rate loans
included in the Aggregation Line over the term of this Aggregation Line to the
extent necessary to refund the "termination fee" New Century has agreed to pay
to Greenwich (and to the extent any amounts remain after the termination of the
line, Salomon shall pay such shortfall).  Such fee shall be calculated based
upon an assumed underwriting fee of 0.25 % on an assumed deal with an unpaid
principal balance of $100,000,000.

          (b) Financing of Trigger Buybacks.  Salomon shall purchase under the
              -----------------------------                                   
Aggregation Line mortgage loans which are repurchased by New Century based upon
trigger buybacks in effect pursuant to the pooling and servicing agreements for
SBMSVII 1997-NC 1, 1997-NC2, 1997-NC3 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 Salomon in the same manner as Problem
Mortgage Loans.  The pricing for these purposes will be at the market value as
determined by Salomon acting in good faith.

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

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

          (b) Salomon shall have the right to terminate this Letter Agreement
  upon the occurrence of any of the following events (each, a "Termination
  Event"):
            (i)  the judgment by Salomon in good faith that a material adverse
                 change has occurred with respect to the business, properties,
                 assets or condition (financial or otherwise) of New Century;

           (ii)  Salomon shall reasonably request, specifying the reasons for
                 such request, information, and/or written responses to such
                 requests, regarding the financial well-being of New Century and
                 such information and/or responses shall not have been provided
                 within three business days of such request;
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                          Page 11.

          (iii)  Either (A) a change in control of New Century shall have
                 occurred other than in connection with and as a result of the
                 issuance and sale by New Century of registered, publicly
                 offered common stock; or (B) Salomon determines in its sole
                 discretion that any material adverse change has occurred in the
                 management of New Century;

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

            (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 Salomon, impracticable to continue the commitment;
                 or

           (vi)  New Century to provide written notification to Salomon of any
                 change in its loan origination, acquisition or appraisal
                 guidelines or practices, or New Century, without the prior
                 consent of Salomon (which shall not be unreasonably withheld),
                 amends in any material respect its loan origination,
                 acquisition or appraisal guidelines or practices;

provided, that Salomon shall have the right to dispose of any collateral held by
Salomon pursuant to this Letter Agreement.  In connection with a Termination
Event under this Paragraph 5, Salomon shall have the right to transfer servicing
to another servicer (which such servicer shall not be Option One Mortgage
Corporation, Long Beach Mortgage Company or Ameriquest Mortgage Company) without
payment of any fee to New Century; provided, however, Salomon shall pay all
costs associated with such servicing transfer.  New Century will cooperate in
good faith to effect such servicing transfer.
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                          Page 12.

     (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 $1,000,000,000 commitment and (ii) March 31, 1999; provided that the CE
"repo" facility provided for in Section 4 shall continue under its terms;
provided, further, that Salomon may, in its sole discretion, extend the terms of
this Letter Agreement until such time that New Century 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 Salomon may be shortened or eliminated by Salomon 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)  SBI's Discretion.  It is understood that SBI 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 New Century'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 Salomon shall be eligible for financing under the
Aggregation Line in accordance with the terms hereof.  It is further understood
that Salomon shall have absolute discretion in determining whether any Mortgage
Loan is a Standard Mortgage Loan, Non-Standard Mortgage Loan or Problem Mortgage
Loan and Salomon 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, New Century 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).

          (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.
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                          Page 13.


          (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. New Century and Salomon 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 August 27, 1997 between New Century and Salomon
(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, New Century 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/ Vincent J. Varca
                                     --------------------
                              Name:  Vincent J. Varca
                                     --------------------
                              Title: Authorized Agent
                                     --------------------


                              SALOMON BROTHERS INC.


                              By:    /s/ Bruce M. Rose
                                     -----------------
                              Name:  Bruce M. Rose
                                     -----------------
                              Title: Managing Director
                                     -----------------



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

By:     /s/ Brad A. Morrice
        -------------------
Name:   Brad A. Morrice
        -------------------
Title:  CEO
        -------------------
<PAGE>
 
                                   EXHIBIT A

                           FORM OF RECOGNITION LETTER



Salomon Brothers Realty Corp.
Seven World Trade Center
New York, NY 10048

Attention:  Mr. Vincent Varca
            Facsimile No. (212) 783-3895


Re:  [Name and Date of] Servicing Agreement ("Agreement") between
     [Name of Sub-Servicer] and New Century Mortgage Corporation


Gentlemen:

    The undersigned, __________ ("Sub-Servicer"), having an address at
__________________, _________ Attention: __________, has been informed by New
Century Mortgage Corporation ("New Century") that New Century from time to time
enters into transactions with you ("SBRC") in which SBRC purchases mortgage
loans serviced by SubServicer for New Century pursuant to the captioned
Agreement, and New Century agrees to repurchase such mortgage loans 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 shall have the right, upon a written notice to
Sub-Servicer of a default by New Century under the Purchase and Sale Agreement
and written notice to Sub-Servicer from First Bank National Association
("Custodian") that Custodian holds specified mortgage loans (the "Salomon
Loans") for SBRC, to succeed immediately to New Century's rights under the
Agreement.  New Century hereby agrees to indemnify Sub-Servicer for any loss,
liability, damage, judgement, cost or expense in any way related to the exercise
of such right by SBRC with respect to the Salomon Loans.

                              Yours sincerely,

                              [SUB-SERVICER]


                              By: __________________
                              Name: ________________
                              Title: _______________
<PAGE>
 
New Century Mortgage Corporation
March 31, 1998                                                          Page 16.


                              NEW CENTURY MORTGAGE
                               CORPORATION


                              By: __________________
                              Name: ________________
                              Title: _______________


Acknowledged and agreed:

SALOMON BROTHERS REALTY CORP.


By: _________________________
Name: _______________________
Title: ______________________