<PAGE>

                                                                    EXHIBIT 10.4


                          FOURTH AMENDED AND RESTATED
                               CREDIT AGREEMENT



                                By and Between



                       NEW CENTURY MORTGAGE CORPORATION,



                        U.S. BANK NATIONAL ASSOCIATION,
                                   as Agent


                                      and


                           THE LENDERS PARTY HERETO



                                 MAY 26, 1999
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                           Page
<S>                                                                        <C>
SECTION 1.  DEFINITIONS AND ACCOUNTING TERMS                                 1

1.01  Certain Defined Terms                                                  1
1.02  Accounting Terms                                                      16
1.03  Computation of Time Periods                                           17
1.04  Other Definitional Terms                                              17

SECTION 2.  THE CREDIT FACILITIES                                           17

2.01  The Warehousing Facility and the Swingline Facility                   17
2.02  Interest on the Note; Balances Deficiency Fees;
      Continuations and Conversions                                         23
2.03  Payments and Computations                                             26
2.04  Setoff                                                                26
2.05  Increased Capital Requirements                                        27
2.06  Provisions Relating to Eurodollar Advances and Balance
      Funded Rate Advances                                                  27

SECTION 3.  REPRESENTATIONS AND WARRANTIES                                  29

3.01  Formation; Powers; Good Standing; Subsidiaries; Agency Status         30
3.02  Authorization; No Conflict; Governmental Consents; Binding Effect     30
3.03  Financial Condition                                                   31
3.04  Title to Property; Liens                                              32
3.05  Litigation; Adverse Facts                                             32
3.06  Other Agreements; Performance                                         33
3.07  Use of Proceeds                                                       33
3.08  Taxes                                                                 33
3.09  ERISA                                                                 33
3.10  Governmental Regulation                                               34
3.11  Indebtedness                                                          34
3.12  No Material Adverse Event                                             34
3.13  Licenses and Permits                                                  34
3.14  Guarantees                                                            34
3.15  Accuracy and Completeness of Information                              34
3.16  Year 2000.                                                            35

SECTION 4.  COVENANTS OF THE COMPANY                                        35

4.01  Financial Statements and Other Reports                                35
4.02  Corporate Existence                                                   39
4.03  Compliance with Laws, Taxes, etc                                      39
4.04  ERISA                                                                 40
4.05  Assets and Insurance                                                  40
4.06  Inspection, Visitation, etc                                           41
</TABLE>

                                      68
<PAGE>

<TABLE>
<S>                                                                        <C>
4.07  Further Assurances                                                   41
4.08  Indebtedness                                                         41
4.13  Restricted Payments                                                  46
4.14  Net Worth                                                            46
4.15  Minimum Liquidity                                                    46
4.16  Leverage Ratio.                                                      47
4.17  Subsidiaries                                                         47
4.18  Affiliate Transactions                                               47
4.19  Escrow Imbalances                                                    47
4.20  Inconsistent Agreements                                              47
4.21  Closing Procedures                                                   48
4.22  Underwriting                                                         48
4.23  Independence of Covenants                                            48
4.24  Year 2000 Remediation                                                48

SECTION 5.  CONDITIONS PRECEDENT                                           49

5.01  Conditions Precedent to Effectiveness                                49
5.02  Conditions Precedent to all Loans                                    51

SECTION 6.  EVENTS OF DEFAULT; REMEDIES                                    52

6.01  Events of Default                                                    52
6.02  Remedies                                                             54

SECTION 7.  THE AGENT                                                      54

7.01  Appointment and Authorization                                        55
7.02  Note Holders                                                         55
7.03  Consultation With Counsel                                            55
7.04  Documents                                                            55
7.05  Agent and Affiliates                                                 55
7.06  Action by Agent                                                      56
7.07  Credit Analysis                                                      56
7.08  Notices of Event of Default, etc.                                    56
7.09  Indemnification                                                      57
7.10  Payments                                                             57
7.11  Sharing of Payments                                                  58
7.12  Successor Agent                                                      58
7.13  Inspection                                                           59

SECTION 8.  MISCELLANEOUS                                                  59

8.01  Waiver                                                               59
8.02  Notices                                                              59
8.03  Expenses; Indemnification                                            60
</TABLE>

                                      69
<PAGE>

<TABLE>
<S>                                                                        <C>
8.04  Confidentiality                                                       60
8.05  Releases, Amendments, Waivers, Consents and Exercise of Remedies      61
8.06  Binding Effect; Assignments and Participations; Transferees;
      New Lenders;    Commitment Increases                                  61
8.07  Governing Law and Construction                                        63
8.08  Consent to Jurisdiction                                               63
8.09  Waiver of Jury Trial                                                  64
8.10  Survival of Agreement                                                 64
8.11  Captions                                                              64
8.12  Entire Agreement                                                      64
8.13  Counterparts                                                          64
8.14  Company Acknowledgments                                               65
8.15  Exiting Lenders                                                       65
8.16  Amendments, Waivers and Modification Fees                             65
</TABLE>

                                      70
<PAGE>

                 FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
                 --------------------------------------------


          FOURTH AMENDED and RESTATED CREDIT AGREEMENT dated as of May 26, 1999
by and between NEW CENTURY MORTGAGE CORPORATION, a California corporation (the
"Company"), the lenders from time to time party hereto (each a "Lender" and
collectively, the "Lenders"), and U.S. BANK NATIONAL ASSOCIATION, as agent for
the Lenders (in such capacity, together with any successor agents appointed
hereunder, the "Agent").

          WHEREAS, the Company, the lenders party thereto, including certain of
the Lenders,  and the Agent are parties to that certain Third Amended and
Restated Credit Agreement dated as of May 29, 1998 (as amended, the "Existing
Credit Agreement") pursuant to which the Lenders provided the Company with a
revolving mortgage warehousing credit facility and USBNA provided the Company
with a swingline facility and working capital credit facility; and

          WHEREAS, the Company has requested that the Lenders and the Agent
amend certain provisions of and restate the Existing Credit Agreement, and that
certain of the Lenders party to the Existing Credit Agreement cease to be
parties to the Agreement;

          Accordingly, the parties hereto hereby agree as follows:

          SECTION 1.  DEFINITIONS AND ACCOUNTING TERMS.
                      --------------------------------

          1.01 Certain Defined Terms.  As used herein, the terms defined in the
               ---------------------
introductory paragraphs hereof shall have the meanings given them therein and
the following terms shall have the following respective meanings (such terms to
be equally applicable to both the singular and plural forms of the terms
defined):

          "Adjusted Eurodollar Rate:"  on any date of determination, the rate
           ------------------------
     (rounded upward, if necessary, to the next higher one hundredth of one
     percent) determined by dividing the Eurodollar Rate for such date by 1.00
     minus the Eurodollar Reserve Percentage.

          "Adjusted Leverage Ratio":  on any date of determination, the ratio of
           -----------------------
     (a) Total Liabilities to (b) Adjusted Tangible Net Worth.

          "Adjusted Tangible Net Worth":  on any date of determination, the
           ---------------------------
     Tangible Net Worth of NCFC minus 25% of the amount by which the book value
                                -----
     of Junior Securitization Interests included in calculating Tangible Net
     Worth exceeds Indebtedness of the type described in Section 4.08(d).

          "Advance":  (a) a Reference Rate Advance, (b) a Balance Funded Rate
           -------
     Advance, or (c) a Eurodollar Advance.

                                      -1-
<PAGE>

          "Affiliate":  with respect to any Person, any other Person directly or
           ---------
     indirectly controlling, controlled by, or under common control with, such
     Person, whether through the ownership of voting securities, by contract or
     otherwise.

          "Agreement":  this Fourth Amended and Restated Credit Agreement, as
           ---------
     amended, supplemented, restated or otherwise modified and in effect from
     time to time.

          "Applicable Margin":  with respect to:
           -----------------

               (a)  Reference Rate Advances, 0%; and

               (b)  Eurodollar Advances, 1.25%.

          "Balance Calculation Period":  each calendar quarter after the
           --------------------------
     Effective Date to and including the later of the date on which the Notes
     shall be paid in full or the Termination Date, except that the first
     Balance Calculation Period shall commence on the Effective Date and the
     last Balance Calculation Period shall end on the later of the date on which
     the Notes shall have been paid in full or the Termination Date.

          "Balance Funded Rate Advance":  an outstanding Loan that bears
           ---------------------------
     interest as provided in Section 2.02(a)(i).

          "Balances Deficiency":  as defined in Section 2.02(a)(i).
           -------------------

          "Balances Deficiency Fee":  as defined in Section 2.02(a)(i).
           -----------------------

          "Balances Surplus":  as defined in Section 2.02(a)(i).
           ----------------

          "Borrowing Base":  as of a date of determination, an amount equal to
           --------------
     100% of the Warehousing Collateral Value of the Collateral, as determined
     by the Agent from its records.

          "Borrowing Date":  the Business Day specified by the Company in a
           --------------
     Confirmation of Borrowing/Paydown/Conversion as the date on which it
     requests the Lenders to make Warehousing Loans or USBNA to make a Swingline
     Loan.

          "Business Day":  any day of the year other than a Saturday, Sunday or
           ------------
other day on which commercial banks in Minneapolis, Minnesota are   required or
authorized to close.

          "Cash":  all cash and cash equivalents, as shown on a consolidated
           ----
     balance sheet of the Company prepared in accordance with GAAP, including,
     without limitation, all deposit accounts of the Company with any Lender or
     any other financial institution.

                                      -2-
<PAGE>

          "Change of Control":  the occurrence, after the Signing Date, of any
           -----------------
     of the following circumstances:  (a) NCFC not owning, directly or
     indirectly, all of the issued and outstanding capital stock of the Company;
     or (b) any Person, or two or more Persons acting in concert, other than the
     Management Shareholders, acquiring beneficial ownership (within the meaning
     of Rule 13d-3 of the Securities and Exchange Commission under the
     Securities Exchange Act of 1934, as amended), directly or indirectly, of
     securities of NCFC (or other securities convertible into such securities)
     representing 35% or more of the combined voting power of all securities of
     NCFC entitled to vote in the election of directors; (c) any Person, or two
     or more Persons acting in concert, other than the Management Shareholders,
     acquiring by contract or otherwise, or entering into a contract or
     arrangement which upon consummation will result in its or their acquisition
     of, control over securities of NCFC (or other securities convertible into
     such securities) representing 35% or more of the combined voting power of
     all securities of NCFC entitled to vote in the election of directors; or
     (d) Robert Cole ceasing to be Chairman and Chief Executive Officer of NCFC.

          "Code":  the Internal Revenue Code of 1986, together with all
           ----
     amendments from time to time thereto.

          "Collateral":  the "Collateral" as defined in the Pledge and Security
           ----------
     Agreement, and the "Collateral" as defined in the Servicing Security
     Agreement.

          "Collateral Account":  account number 1731-0097-1378 of the Company
           ------------------
     with Agent.

          "Commitment":  as to any Lender, the obligation of such Lender to make
           ----------
     Loans pursuant to Section 2.01(a).

          "Commitment Amount":  as to any Lender, the amount set opposite such
           -----------------
     Lender's name as its "Commitment" in Schedule 1.01(b), as the same may be
     (i) reduced pursuant to Section 2.01(g), (ii) changed as the result of an
     assignment pursuant to Section 8.06(a) or (iii) increased pursuant to
     Section 8.06(b).

          "Company Securitization Transaction": an issuance of Mortgage-backed
           ----------------------------------
     Securities by the Company or an Affiliate of SBRC on behalf of the Company,
     through a trust or other entity created by the Company, SBRC or such
     Affiliate, which Mortgage-backed Securities are either secured (in whole or
     in part) by Mortgage Loans originated or acquired by the Company or
     evidence the entire beneficial ownership interest therein, and in
     connection with which one or more Junior Securitization Interests are
     issued to the Company or an Affiliate of the Company.

          "Compliance/Borrowing Base Certificate":  a certificate in the form of
           -------------------------------------
     Exhibit A.

          "Confirmation of Borrowing/Paydown/Conversion":  a confirmation in the
           --------------------------------------------
     form of Exhibit B.

                                      -3-
<PAGE>

          "Daily Leverage Ratio":  as of any date of determination, the ratio of
           --------------------
     (a) Total Liabilities of NCFC and its Subsidiaries on such date to (b)
     Tangible Net Worth of NCFC and its Subsidiaries as of the last day of the
     most recently completed month.

          "Effective Date":  the date on or after the Signing Date on which all
           --------------
     of the conditions precedent set forth in Section 5.01 shall have been
     satisfied or waived in writing by the Lenders.

          "Eligible Servicing Portfolio":  on any date of determination, the
           ----------------------------
     aggregate unpaid principal balance of all Mortgage Loans owned by Persons
     other than the Company that are serviced by the Company pursuant to
     Eligible Servicing Rights, excluding Servicing Rights that are subject to
     an executed and delivered agreement to sell the same.

          "Eligible Servicing Rights":  all rights of the Company held for its
           -------------------------
     own account (and not as nominee or subservicer), whether pursuant to a
     Servicing Contract or otherwise, to service Mortgage Loans or Mortgage Loan
     pools, other than rights to service Mortgage Loans:

                    (a)  pursuant to Recourse Servicing Contracts;

                    (b)  with respect to which any payment is more than 59 days
          past due; or

                    (c)  with respect to which any obligor is the subject of a
          bankruptcy, debt arrangement or other proceeding under any insolvency
          law.

          "ERISA":  the Employee Retirement Income Security Act of 1974,
           -----
     together with all amendments from time to time thereto.

          "ERISA Affiliate":  any trade or business (whether or not
           ---------------
     incorporated) that is a member of a group that is treated as a single
     employer under Section 414 of the Code of which the Company is a member.

          "Eurodollar Advance":  an outstanding Warehousing Loan that bears
           ------------------
     interest as provided in Section 2.02(a)(iii).

          "Eurodollar Rate":  on any date of determination, the average offered
           ---------------
     rate for deposits in United States dollars having a maturity of thirty days
     (rounded upward, if necessary, to the nearest 1/16 of 1%) for delivery of
     such deposits on the second Eurodollar Business Day after such date of
     determination, which appears on the Reuters Screen LIBO page as of 11:00
     a.m., London time (or such other time as of which such rate appears), on
     such date of determination, or the rate for such deposits determined by the
     Agent at such time based on such other published service of general
     application as shall be selected by the Agent for such purpose; provided,
     that in lieu of determining the rate in the foregoing manner, the Agent may
     determine the rate based on rates at which

                                      -4-
<PAGE>

     thirty day United States dollar deposits are offered to the entity which is
     the Agent in the interbank Eurodollar market at such time for delivery in
     Immediately Available Funds on the second Eurodollar Business Day after
     such date of determination in an amount approximately equal to the Advance
     as made by the entity which is the Agent to which such rate is to apply
     (rounded upward, if necessary, to the nearest 1/16 of 1%). "Reuters Screen
     LIBO page" means the display designated as page "LIBO" on the Reuters
     Monitor Money Rate Screen (or such other page as may replace the LIBO page
     on such service for the purpose of displaying London interbank offered
     rates of major banks for United States dollar deposits).

          "Eurodollar Reserve Percentage":  on any date of determination, that
           -----------------------------
     percentage (expressed as a decimal) which is in effect on such day, as
     prescribed by the Board of Governors of the Federal Reserve System (or any
     successor) for determining the maximum reserve requirement for a member
     bank of the Federal Reserve System, with deposits comparable in amount to
     those held by USBNA, in respect of "Eurocurrency Liabilities" (or in
     respect of any other category of liabilities which includes deposits by
     reference to which the interest rate on Eurodollar Rate Advances is
     determined or any category of extensions of credit or other assets which
     includes loans by a non-United States office of a Bank to United States
     residents).

          "Event of Default":  as defined in Section 6.01.
           ----------------

          "Existing Lenders":  means USBNA, Guaranty Federal Bank, F.S.B.,
           ----------------
     Residential Funding Corporation, Bank One, Texas, N.A. and Comerica Bank.

          "Existing Warehousing Loans":  as of the Effective Date, the
           --------------------------
     outstanding "Warehousing Loans" (as such term is defined in the Existing
     Credit Agreement) made by the Lenders under the Existing Credit Agreement.

          "Exiting Lenders":  Fleet Bank, National Association, NationsBank of
           ---------------
     Texas, N.A., The First National Bank of Chicago, First Union National Bank
     and the Bank of New York.

          "Fair Market Value":  as defined in Exhibit E.
           -----------------

          "Federal Funds Effective Rate":  for any date of determination, the
           ----------------------------
     weighted average of the quotations for such date for overnight federal
     funds transactions received by the Agent from three (3) federal funds
     brokers of recognized standing selected by the Agent; provided, that in
     lieu of determining the rate in the foregoing manner, the Agent may
     substitute the per annum rate for such transactions displayed on the
     Telerate screen, page 120, at 10:00 A.M. (Minneapolis time) on such date
     or, if such date is not a Business Day, the most recent Business Day, or
     the equivalent rate determined by the Agent at such time based on such
     other published service of general application as shall be selected by the
     Agent for such purpose.

          "FHLMC":  the Federal Home Loan Mortgage Corporation and any successor
           -----
     thereto.

                                      -5-
<PAGE>

          "Fixed Rate":  as defined in Section 2.02(a)(i).
           ----------

          "Floating Rate Advance":  a Reference Rate Advance or a Eurodollar
           ---------------------
     Advance.

          "FNMA":  the Federal National Mortgage Association and any successor
           ----
     thereto.

          "GAAP":  generally accepted accounting principles in the United States
           ----
     set forth in the opinions and pronouncements of the Accounting Principles
     Board of the American Institute of Certified Public Accountants and
     statements and pronouncements of the Financial Accounting Standards Board
     or in such other statements by such other entity as may be approved by a
     significant segment of the accounting profession, which are applicable to
     the circumstances as of the date of determination.

          "GNMA":  the Government National Mortgage Association and any
           ----
     successor thereto.

          "Guarantee":  any obligation, contingent or otherwise, of any Person
           ---------
     guaranteeing or having the economic effect of guaranteeing any Indebtedness
     of any other Person (the "primary obligor") in any manner, whether directly
     or otherwise, (a) to purchase or pay (or advance or supply funds for the
     purchase or payment of) such Indebtedness or to purchase (or to advance or
     supply funds for the purchase of) any direct or indirect security therefor,
     (b) to purchase property, securities, or services for the purpose of
     assuring the owner of such Indebtedness of the payment of such
     Indebtedness, (c) to maintain working capital, equity capital, or other
     financial statement condition of the primary obligor so as to enable the
     primary obligor to pay such Indebtedness or otherwise to protect the owner
     thereof against loss in respect thereof, or (d) entered into for the
     purpose of assuring in any manner the owner of such Indebtedness of the
     payment of such Indebtedness or to protect such owner against loss in
     respect thereof; provided, that the term "Guarantee" shall not include
                      --------
     endorsements for collection or deposit, in each case in the ordinary course
     of business.

          "Guaranty":  the Guaranty dated as of May 29, 1998 executed and
           --------
     delivered in connection with the Existing Credit Agreement, as the same may
     have been and may hereafter be amended, supplemented, reaffirmed or
     restated from time to time.

          "Hedging Arrangements":  any agreements or other arrangements
           --------------------
     (including, without limitation, interest rate swap agreements, interest
     rate cap agreements and forward sale agreements) entered into to protect
     the Company against changes in interest rates or in the value of any assets
     of the Company.

          "Immediately Available Funds":  funds with good value on the day and
           ---------------------------
     in the city in which payment is received.

          "Indebtedness":  with respect to any Person at any time, without
           ------------
     duplication, all obligations of such Person which, in accordance with GAAP,
     consistently applied, should

                                      -6-
<PAGE>

     be classified as liabilities on an unconsolidated balance sheet of such
     Person, but in any event shall include: (a) all obligations of such Person
     for borrowed money, (b) all obligations of such Person evidenced by bonds,
     debentures, notes or other similar instruments, (c) all obligations of such
     Person upon which interest charges are customarily paid or accrued, (d) all
     obligations of such Person under conditional sale or other title retention
     agreements relating to property purchased by such Person, (e) all
     obligations of such Person issued or assumed as the deferred purchase price
     of property or services, but excluding accrued expenses and trade payables
     incurred and paid in the ordinary course of business, (f) all obligations
     of others secured by any Lien on property owned or acquired by such Person,
     whether or not the obligations secured thereby have been assumed, (g) all
     capitalized lease obligations of such Person, (h) all obligations of such
     Person in respect of interest rate protection agreements, (i) all
     obligations of any partnership or joint venture as to which such Person is
     or may become personally liable, and (j) all Guarantees by such Person of
     Indebtedness of others.

          "Investment":  as applied to any Person, any direct or indirect
           ----------
     purchase or other acquisition by that Person of, or a beneficial interest
     in, stock or other securities of any other Person, or any direct or
     indirect loan, advance (other than advances to employees for moving and
     travel expenses, drawing accounts and similar expenditures in the ordinary
     course of business) or capital contribution by that Person to any other
     Person, including all Indebtedness and accounts receivable from that other
     Person which are not current assets or did not arise from sales to that
     other Person in the ordinary course of business.

          "Investor":  any financially responsible Person in the business of
           --------
     purchasing Mortgage Loans designated by the Company and approved by the
     Agent (which approval shall not be unreasonably withheld) with respect to
     Mortgage Loans of a particular type; provided, that the Agent or the
     Required Lenders may at any time, by written notice to the Company, reject
     any Investor designated by the Company or designate any Investor as no
     longer acceptable.  Upon receipt of such written notice, the Person(s)
     named in such notice to the Company shall no longer be considered Investors
     hereunder.

          "Junior Securitization Interests":  a Mortgage-backed Security created
           -------------------------------
     in a Company Securitization Transaction that represents a subordinated
     right to receive principal or interest payments on the underlying Mortgage
     Loans (whether or not such subordination arises only under particular
     circumstances).

          "Leverage Ratio":  on any date of determination, the ratio of (a)
           --------------
     Total Liabilities to (b) Tangible Net Worth.

          "Lien'':  any security interest, mortgage, pledge, lien, charge,
           ----
encumbrance, title retention agreement or analogous instrument, in, of, or   on
any of the assets or properties, now owned or hereafter acquired, of any
Person, whether arising by agreement or operation of law.

                                      -7-
<PAGE>

          "Loan Documents":  this Agreement, the Notes, the Pledge and Security
           --------------
     Agreement, the Servicing Security Agreement, the Guaranty, the NCCC
     Guaranty and all other agreements, instruments, certificates and other
     documents executed and delivered pursuant hereto or thereto or in
     connection herewith or therewith, as the same may be supplemented, amended
     or otherwise modified from time to time after the Signing Date.

          "Loans":  Warehousing Loans and Swingline Loans.
           -----

          "Management Shareholders":  Robert K. Cole, Brad A. Morrice,    Edward
           -----------------------
F. Gotschall and Steven Holder.

          "Material Adverse Event":  any occurrence of whatsoever nature
           ----------------------
     (including, without limitation, any adverse determination in any
     litigation, arbitration or governmental investigation or proceeding) which
     materially adversely affects the present or reasonably foreseeable
     prospective financial condition or operations of NCFC or the Company or
     materially impairs the ability of NCFC or the Company to perform its
     respective obligations under the Loan Documents.

          "Mortgage":  a mortgage or deed of trust on real property which has
           --------
     been improved by a completed single family (i.e., one to four family units)
                                                 ----
     dwelling unit (i.e., a detached house, townhouse or condominium).
                    ----

          "Mortgage-backed Security":  a security (including, without
           ------------------------
     limitation, a participation certificate) that is an interest in a pool of
     Mortgage Loans or is secured by such an interest.

          "Mortgage Banker's Financial Reporting Form": Form Number 1002-1055 of
           ------------------------------------------
     the FNMA Seller's Guide.

          "Mortgage Loan":  a Mortgage Note and the related Mortgage.
           -------------

          "Mortgage Note":  a promissory note which has a term not exceeding 30
           -------------
     years evidencing a loan or advance which is secured by a Mortgage.

          "Multiemployer Plan":  a multiemployer plan, as such term is defined
           ------------------
     in Section 4001 (a) (3) of ERISA, which is maintained (on the Closing Date,
     within the five years preceding the Closing Date, or at any time after the
     Closing Date) for employees of the Company or any ERISA Affiliate.

          "NCCC":  means NC Capital Corporation, a California corporation.
           ----

          "NCCC Guaranty":  means the guaranty dated as of December 11, 1998
           -------------
          executed and delivered in connection with the Fourth Amendment to the
          Existing Credit Agreement, as the same may have been and may hereafter
          be amended, supplemented, reaffirmed or restated from time to time.

                                      -8-
<PAGE>

          "NCFC":  New Century Financial Corporation, a Delaware corporation.
           ----

          "Net Worth":  as to any Person, as of any date of determination, the
           ---------
     net worth of such Person as of such date, determined in accordance with
     GAAP.

          "Note":  as defined in Section 2.01(e).
           ----

          "Obligations":  all obligations of each of the Company and NCFC to the
           -----------
     Agent or any Lender now or hereafter existing under any Loan Document,
     whether for principal, interest, fees, expenses, indemnification or
     otherwise.

          "PBGC":  the Pension Benefit Guaranty Corporation created by Section
           ----
     4002(a) of ERISA or any governmental body succeeding to the functions
     thereof.

          "Person":  any natural person, corporation, partnership, joint
           ------
     venture, firm, association, limited liability company, trust,
     unincorporated organization, government or governmental agency or political
     subdivision or any other entity, whether acting in an individual, fiduciary
     or other capacity.

          "Plan":  each employee benefit plan (whether in existence on the
           ----
     Closing Date or thereafter instituted), as such term is defined in Section
     3 of ERISA, maintained for the benefit of employees, officers or directors
     of the Company or of any ERISA Affiliate, other than a Multiemployer Plan.

          "Pledge and Security Agreement":  the Pledge and Security Agreement
           -----------------------------
     dated as of May 29, 1998 executed and delivered in connection with the
     Existing Credit Agreement, as the same may have been and may hereafter be
     amended, supplemented, reaffirmed or restated from time to time.

          "Prohibited Transaction":  as defined in Section 4975 of the Code and
           ----------------------
     Section 406 of ERISA.

          "Pro Rata Share":  with respect to each Lender, in each case expressed
           --------------
     as a percentage:

                    (a)  as such term pertains to such Lender's obligation to
          make Warehousing Loans, including its obligation to refinance any
          outstanding Swingline Loans, the fraction which the amount of its
          Commitment Amount is to the aggregate amount of all the Commitment
          Amounts,

                    (b)  as such term pertains to such Lender's right to receive
          payment of interest on and Balances Deficiency Fees with respect to
          its outstanding Warehousing Loans, the fraction which the outstanding
          amount of interest and Balances Deficiency Fees payable to it on or
          with respect to the outstanding principal balance of such Lender's
          Warehousing Loans is to the aggregate outstanding amount of interest
          and Balances Deficiency Fees payable

                                      -9-
<PAGE>

          on or with respect to the aggregate unpaid principal balance of all
          Warehousing Loans,

                    (c)  as such term pertains to such Lender's right to receive
          payment of principal of its outstanding Warehousing Loans, the
          fraction which the amount of the unpaid principal balance of its
          Warehousing Loans is to the aggregate unpaid principal balance of all
          outstanding Warehousing Loans,

                    (d)  as such term pertains to such Lender's right to receive
          facility fees under Section 2.01(h), the fraction which such Lender's
          Commitment Amount is to the sum of all Commitment Amounts, and

                    (e)  as such term pertains to such Lender's obligations
          under Section 7.09, and for all other purposes, the fraction which the
          sum of such Lender's Commitment Amount, or, if its Commitment has
          terminated, the unpaid principal balance of its Warehousing Loans, is
          to the sum of the Commitment Amounts of all of the Lenders or, if the
          Commitments have terminated, the unpaid principal balance of all of
          the Warehousing Loans.

          "Quarterly Average Leverage Ratio":  for each three-month period
           --------------------------------
     ending on March 31, June 30, September 30 or December 31 of any year during
     the term of this Agreement, the ratio of (a) the average daily amount of
     Total Liabilities of NCFC and it Subsidiaries outstanding during such
     three-month period to (b) the average of the Tangible Net Worth of NCFC and
     its Subsidiaries at the end of each month during such three-month period.

          "Recourse Servicing Contract":  a Servicing Contract under which the
           ---------------------------
     Company is obligated to repurchase or indemnify the holder of any Mortgage
     Loans as a result of defaults on such Mortgage Loans at any time during the
     term of such Mortgage Loans (other than those Servicing Contracts that are
     customarily recognized in the trade as non-recourse but that may contain
     repurchase or indemnification obligations related to breaches of usual and
     customary representations and warranties made by the Company in connection
     with the sale and servicing of the Mortgage Loans serviced thereunder and
     usual and customary provisions for the advance of principal and interest on
     Mortgage-backed Securities by the Company).

          "Reference Rate":  at the time of any determination thereof, the rate
           --------------
     per annum which is most recently publicly announced by USBNA as its
     "reference rate", which may be a rate at, above or below which USBNA lends
     to other Persons.

          "Reference Rate Advance":  an outstanding Loan that bears interest as
           ----------------------
     provided in Section 2.02(a)(ii).

          "Regulation D":  Regulation D (or any substitute regulations) of the
           ------------
     Board of Governors of the Federal Reserve System (or any successor
     thereto), together with all amendments from time to time thereto.

                                     -10-
<PAGE>

          "Regulatory Change":  any change after the Signing Date in United
           -----------------
     States federal, state or foreign laws or regulations or the adoption or
     making after such date of any interpretations, directives or requests
     applying to a class of banks including any Lender under any United States
     federal, state or foreign laws or regulations (whether or not having the
     force of law) by any court or governmental or monetary authority charged
     with the interpretation or administration thereof.

          "REO":  real property acquired by the Company as a result of the
           ---
     foreclosure of a Mortgage Loan.

          "REO Sub":  New Century REO Corp., a California corporation.
           -------

          "Reportable Event":  a reportable event as defined in Section 4043 of
           ----------------
     ERISA and the regulations issued under such Section, with respect to a
     Plan, excluding, however, such events as to which the PBGC by regulation
     has waived the requirement of Section 4043(a) of ERISA that it be notified
     within 30 days of the occurrence of such event, provided, that a failure to
     meet the minimum funding standard of Section 412 of the Code and of Section
     302 of ERISA shall be a Reportable Event regardless of the issuance of any
     waiver in accordance with Section 412(d) of the Code.

          "Required Lenders":  at any time of determination, Lenders whose Pro
           ----------------
     Rata Shares (as defined under clause (e) of the definition of such term)
     aggregate at least 66.67%; provided, that if there is more than one Lender,
     the "Required Lenders" shall not consist of fewer than two Lenders.

          "Reserve-Adjusted Balances":  for any Balance Calculation Period, an
           -------------------------
     amount obtained by multiplying (a) the average net daily collected non-
     interest-bearing balances of the Company on deposit with any Lender during
     such Balance Calculation Period over and above the balances required to
     compensate such Lender for services provided by such Lender for said
     Balance Calculation Period, reductions in the interest payable on
     Indebtedness (other than the Loans) outstanding to such Lender and
     assessments payable with respect to such balances by such Lender to the
     Federal Deposit Insurance Corporation (or any successor thereto) for such
     Corporation's insuring of time deposits in United States dollars maintained
     at such Lender for such Balance Calculation Period by (b) a percentage
     equal to 100%, minus the average daily Reserve Percentage in effect for
     said Balance Calculation Period.  For purposes of the foregoing, "Reserve
                                                                       -------
     Percentage" shall mean, on any date of determination, the percentage as
     ----------
     prescribed by Regulation D for determining the highest maximum reserve
     requirement (including, without limitation, any marginal, emergency,
     supplemental, special or other reserve) that the applicable Lender
     determines it is required to maintain on such date in respect of deposits
     of the type maintained with such Lender in the applicable Balance
     Calculation Period.

          "Residual Finance Subsidiaries":  means (a) NC Residual Corporation, a
           -----------------------------
     Delaware corporation, as long as it is a wholly-owned Subsidiary of the
     Company and does not amend its Certificate of Incorporation as in effect on
     March 20, 1998, and (b)

                                     -11-
<PAGE>

     any other wholly-owned Subsidiary of the Company or NCCC that, pursuant to
     its Articles or Certificate of Incorporation, has a purpose limited to the
     ownership of Junior Securitization Interests, the establishment of one or
     more securitization trusts, issuing securities backed by such Junior
     Securitization Interests, otherwise financing such Junior Securitization
     Interests, and lawful activities incidental to and necessary and convenient
     to the foregoing.

          "Restricted Payments":  with respect to any Person, collectively, all
           -------------------
     dividends or other distributions of any nature (cash, securities, assets or
     otherwise), and all payments, by virtue of redemption or otherwise, on any
     class of equity securities (including, without limitation, warrants,
     options or rights therefor) issued by such Person, whether such securities
     are now or may hereafter be authorized or outstanding and any distribution
     in respect of any of the foregoing, whether directly or indirectly.

          "Risk Rating":  as defined in Exhibit E.
           -----------

          "Salomon REO Agreement":  a Loan and Security Agreement dated as of
           ---------------------
     November 18, 1998 by and between the Company and Liquidation Properties,
     Inc., a Secured Promissory Note dated as of November 18, 1998 payable to
     Liquidation Properties, Inc. (the "Secured Promissory Note") and a letter
     agreement dated as of November 18, 1998 by and between the Company and
     Liquidation Properties, Inc., as the same may be amended, supplemented,
     restated or otherwise modified in accordance with this Agreement and in
     effect from time to time.

          "SBRC":  Salomon Brothers Realty Corp., a Delaware corporation.
           ----

          "Servicing Contract":  a contract or agreement purchased by the
           ------------------
     Company or entered into by the Company for its own account (and not as
     nominee or subservicer), whether now existing or hereafter purchased or
     entered into, pursuant to which the Company services Mortgage Loans or
     Mortgage Loan pools for others.

          "Servicing Rights":  any and all rights of the Company held for its
           ----------------
     own account (and not as nominee or subservicer), whether pursuant to a
     Servicing Contract or otherwise, to service Mortgage Loans or Mortgage Loan
     pools, including, without limitation, (i) all rights to collect payments
     due and enforce the rights of the mortgagee under any Mortgage Loans, (ii)
     all rights to receive compensation and termination fees under any Servicing
     Contract and (iii) all rights to receive the proceeds from any sale or
     other transfer of the Company's interest in any Servicing Contract.

          "Servicing Security Agreement":  the Servicing Security Agreement
           ----------------------------
     dated as of May 28, 1998 executed and delivered in connection with the
     Existing Credit Agreement, as the same may have been and may hereafter be
     amended, supplemented, reaffirmed or restated from time to time.

          "Signing Date":  the Business Day on which counterparts of this
           ------------
     Agreement, duly executed by the Company and the Lenders, have been
     delivered to the Agent.

                                     -12-
<PAGE>

          "Stock Repurchase Program":  the stock repurchase program approved by
           ------------------------
     NCFC's Board of Directors on February 18, 1999 pursuant to which NCFC may
     spend up to $10,000,000 to repurchase shares of NCFC common stock on the
     open market or in negotiated transactions.

          "Subsidiary":  as to any Person, any corporation or other entity of
           ----------
     which securities or other ownership interests having ordinary voting power
     to elect a majority of the board of directors or other Persons performing
     similar functions are at the time owned directly or indirectly by such
     Person.

          "Swingline Commitment":  the discretionary revolving credit facility
           --------------------
     provided by USBNA to the Borrower described in Section 2.01(b).

          "Swingline Loan":  a loan made by USBNA to the Borrower pursuant to
           --------------
     Section 2.01(b).

          "Take-Out Commitment": as defined in Exhibit E.
           -------------------

          "Tangible Net Worth":  as of any date of determination, the
           ------------------
     consolidated Net Worth of the Company or NCFC, as applicable, and its
     respective Subsidiaries, less the consolidated book value of all assets of
                              ----
     the Company or NCFC, as applicable, and its respective Subsidiaries (to the
     extent reflected as an asset in the balance sheet of the Company or NCFC,
     as applicable, or any such Subsidiary at such date) which are treated as
     intangibles under GAAP, including, without limitation, such items as
     deferred financing expenses, net leasehold improvements, good will,
     trademarks, trade names, service marks, copyrights, patents, licenses and
     unamortized debt discount and expense; provided, that Junior Securitization
                                            --------
     Interests shall not be treated as intangibles for purposes of this
     definition.

          "Termination Date": the earliest of (a) May 24, 2000, (b) the date on
           ----------------
     which the Commitments are terminated or reduced to zero pursuant to Section
     2.01(g), or (c) the date on which the Commitments are terminated pursuant
     to Section 6.02.

          "Total Liabilities":  at any time of determination, the amount, on a
           -----------------
     consolidated basis, of the liabilities of the Company or NCFC, as
     applicable, and its respective Subsidiaries, determined in accordance with
     GAAP.

          "Transferees":  as defined in Section 8.06.
           -----------

          "Transferred Interest":  as defined in Section 8.06.
           --------------------

          "Underwriting Guidelines":  the Company's underwriting guidelines as
           -----------------------
     in effect on the Signing Date, a copy of which is attached hereto as
     Schedule 1.01 (a), as the same may be modified from time to time in
     accordance with this Agreement.

                                     -13-
<PAGE>

          "Unmatured Event of Default":  any event which with the lapse of time,
           --------------------------
     with notice to the Company or with both would constitute an Event of
     Default.

          "USBNA":  U.S. Bank National Association, in its individual capacity.
           -----

          "Warehousing Collateral Value":  on the date of any determination,
           ----------------------------
     with respect to the Collateral or any portion thereof, as determined by the
     Agent in accordance with the provisions of Exhibit E.

          "Warehousing Loan":  a loan made by the Lenders to the Company
           ----------------
     pursuant to Section 2.01(a).

          1.02 Accounting Terms.  Except as provided to the contrary herein, all
               ----------------
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP.  To the extent
any change in GAAP affects any computation or determination required to be made
pursuant to this Agreement, such computation or determination shall be made as
if such change in GAAP had not occurred unless the Company and the Lenders agree
in writing on an adjustment to such computation or determination to account for
such change in GAAP.

          1.03 Computation of Time Periods.  In this Agreement, in the
               ---------------------------
computation of a period of time from a specified date to a later specified date,
unless otherwise stated the word "from" means "from and including" and the word
"to" or "until" each means "to but excluding".

          1.04 Other Definitional Terms.  The words "hereof", "herein" and
               ------------------------
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and section, schedule, exhibit and like references are to this
Agreement unless otherwise specified.  Unless the context in which used herein
otherwise clearly requires, "or" has the inclusive meaning represented by the
phrase "and/or".

          SECTION 2.  THE CREDIT FACILITIES.
                      ---------------------

          2.01 The Warehousing Facility and the Swingline Facility.
               ---------------------------------------------------

               (a)  Warehousing Credit Commitment.    Upon the terms and subject
                    -----------------------------
     to the conditions of this Agreement, during the period beginning on the
     Effective Date and ending on the Termination Date, each Lender agrees,
     severally but not jointly, to lend (and after repayment, to relend) to the
     Company, at such times and in such amounts as the Company shall request, up
     to an aggregate principal amount at any time outstanding equal to such
     Lender's Commitment Amount, subject to the following limitations:

               (i)  the aggregate principal amount of Warehousing Loans and
          Swingline Loans at any time outstanding shall not exceed the sum of
          the Commitment Amounts of all the Lenders; and

                                     -14-
<PAGE>

               (ii) the aggregate principal amount of Warehousing Loans and
          Swingline Loans at any time outstanding shall not exceed the Borrowing
          Base, as determined by the Agent from its records.

     No Lender shall be obligated to make Warehousing Loans if, after giving
     effect thereto, either of the foregoing limitations would be exceeded.  The
     failure of any one or more of the Lenders to make a Warehousing Loan in
     accordance with its Commitment shall not relieve the other Lenders of their
     several obligations hereunder, but no Lender shall be liable with respect
     to the obligation of any other Lender hereunder or be obligated in any
     event to make Warehousing Loans which, together with its Pro Rata Share of
     outstanding Swingline Loans, would exceed its Commitment Amount.

               (b)  Discretionary Swingline Commitment.  Upon the terms and
                    ----------------------------------
     subject to the conditions of this Agreement, until the Termination Date,
     USBNA, in its sole discretion, may lend to the Company loans (each such
     loan, a "Swingline Loan") at such times and in such amounts as the Company
     shall request, up to an aggregate principal amount at any time outstanding
     equal to the amount by which USBNA's Commitment Amount exceeds the
     principal amount outstanding under USBNA's Note; provided, that USBNA will
     not make a Swingline Loan if (i) after giving effect thereto, either of the
     limitations set forth in Section 2.01(a) would be exceeded or (ii) USBNA
     has received written notice from the Company or any Lender that one or more
     of the conditions precedent set forth in Section 5 for the making of a
     Warehousing Loan have not been satisfied.

               (c)  Manner of Borrowing.  The Company shall give the Agent
                    -------------------
     telephonic notice of each request for Warehousing Loans not later than 1:00
     P.M. (Minneapolis time) on the requested Borrowing Date, and each request
     for Swingline Loans not later than 3:30 p.m. (Minneapolis time) on the
     requested Borrowing Date.  On the Effective Date, the Company shall be
     deemed to have requested Warehousing Loans in an amount equal to the
     outstanding principal balance of all Existing Warehousing Loans, and such
     Warehousing Loans shall be used to refund such Existing Warehousing Loans.
     Each request for Warehousing Loans or Swingline Loans shall specify the
     aggregate amount of Warehousing Loans or Swingline Loans, as the case may
     be,  requested and whether such Loans to be made by each Lender are to be
     funded as Eurodollar Advances, Balance Funded Rate Advances or Reference
     Rate Advances; provided, that any portion of a Loan not so designated shall
     be funded as a Eurodollar Advance.  The Company shall, not later than the
     following Business Day, confirm any such request by delivering to the Agent
     a duly completed and executed Confirmation of Borrowing/Paydown/Conversion.
     The Agent shall notify each Lender by not later than 2:00 P.M. (Minneapolis
     time) on the date it receives such request of each request for Warehousing
     Loans received from the Company, of such Lender's Pro Rata Share of the
     Warehousing Loans requested and whether such Lender's Warehousing Loans are
     to be funded as Reference Rate Advances, Eurodollar Advances or Balance
     Funded Rate Advances.  Each Lender shall deposit into the Collateral
     Account in Immediately Available Funds by not later than 3:00 P.M.
     (Minneapolis time) on the Borrowing Date the total amount of the
     Warehousing Loans to be made by such Lender.  On the

                                     -15-
<PAGE>

     Borrowing Date of requested Swingline Loans, USBNA may deposit into the
     Collateral Account in Immediately Available Funds by not later than 4:00
     p.m. (Minneapolis time) on the requested Borrowing Date the amount of the
     requested Swingline Loans. Unless the Agent shall have received notice from
     a Lender prior to 3:00 P.M. (Minneapolis time) on any Borrowing Date that
     such Lender will not make available to the Agent the Warehousing Loans to
     be made by such Lender on such date, the Agent may assume that such Lender
     has made such Warehousing Loan available to the Agent on such date and the
     Agent in its sole discretion may, in reliance upon such assumption, make
     available to the Company on such date a corresponding amount on behalf of
     such Lender. If a Lender shall not have timely given such a notice, and to
     the extent such Lender shall not have so made available to the Agent the
     Warehousing Loans to be made by such Lender on such date and the Agent
     shall have so made available to the Company a corresponding amount on
     behalf of such Lender, such Lender shall, on demand, pay to the Agent such
     corresponding amount together with interest thereon, at the Federal Funds
     Effective Rate, for each day from the date such amount shall have been so
     made available by the Agent to the Company until the date such amount shall
     have been repaid to the Agent. If such Lender does not pay such
     corresponding amount promptly upon the Agent's demand therefor, the Agent
     shall promptly notify the Company and the Company shall immediately repay
     such corresponding amount to the Agent together with accrued interest
     thereon at the applicable rate or rates provided in Section 2.04. Each
     request for Warehousing Loans or Swingline Loans shall be deemed to be a
     representation by the Company that (i) no Event of Default or Unmatured
     Event of Default has occurred or will exist upon the making of the
     requested Warehousing Loans and (ii) the representations and warranties
     contained in Section 3 hereof, in Section 5 of the Pledge and Security
     Agreement, in Section 4 of the Servicing Security Agreement, and in Section
     15 of the Guaranty are true and correct with the same force and effect as
     if made on and as of the date of such request.

               (d)  Refinancing of Swingline Loans.
                    ------------------------------

                    (i)  Permitted Refinancings of Swingline Loans.  USBNA, at
                         -----------------------------------------
          any time in its sole and absolute discretion, may, upon notice given
          to each other Lender by not later than 2:00 P.M. (Minneapolis time) on
          any Business Day, request that each Lender (including USBNA) make a
          Warehousing Loan in an amount equal to its Pro Rata Share of a portion
          of the aggregate unpaid principal amount of any outstanding Swingline
          Loans for the purpose of refinancing such Swingline Loans.  Such
          Warehousing Loans shall be made as Eurodollar Advances, unless the
          Company specifies otherwise.

                    (ii) Mandatory Refinancings of Swingline Loans.  Not later
                         -----------------------------------------
          than 2:00 P.M. (Minneapolis time) at least on a weekly basis, USBNA
          will notify each other Lender of the aggregate amount of Swingline
          Loans which are then outstanding and the amount of Warehousing Loans
          required to be made by each Lender (including USBNA) to refinance such
          outstanding Swingline Loans (which shall be in the amount of each
          Lender's Pro Rata Share of such outstanding Swingline Loans).  Such
          Warehousing Loans shall be made as Eurodollar Advances, unless the
          Company specifies otherwise.

                                     -16-
<PAGE>

                    (iii)  Lenders' Obligation to Fund Refinancings of Swingline
                           -----------------------------------------------------
          Loans.  Upon the giving of notice by USBNA under Section 2.01(d)(i) or
          -----
          2.01(d)(ii), each Lender (including USBNA) shall make a Warehousing
          Loan in an amount equal to its Pro Rata Share of the aggregate
          principal amount of Swingline Loans to be refinanced, and provide
          proceeds of such Warehousing Loans, in Immediately Available Funds, by
          not later than 3:00 P.M. (Minneapolis time) on the date such notice
          was received; provided, however, that a Lender shall not be obligated
          to make any such Warehousing Loan unless (A) USBNA believed in good
          faith that all conditions to making the subject Swingline Loan were
          satisfied at the time such Swingline Loan was made, or (B) if the
          conditions to such Swingline Loan were not satisfied, such Lender had
          actual knowledge, by receipt of the statements furnished to it
          pursuant to Section 4.01 or otherwise, that any such condition had not
          been satisfied and failed to notify USBNA in a writing received by
          USBNA prior to the time it made such Swingline Loan that USBNA was not
          authorized to make a Swingline Loan until such condition had been
          satisfied, or USBNA was obligated to give notice of the occurrence of
          an Event of Default or an Unmatured Event of Default to the Lenders
          pursuant to Section 7.08 and failed to do so, or (C) any conditions to
          the making of such Swingline Loan that were not satisfied had been
          waived in writing by the Majority Lenders prior to or at the time such
          Swingline Loan was made.  The proceeds of Warehousing Loans made
          pursuant to the preceding sentence shall be paid to USBNA (and not to
          the Company) and applied to the payment of principal of the
          outstanding Swingline Loans, and the Company authorizes the Agent to
          charge the Collateral Account or any other account (other than escrow
          or custodial accounts) maintained by the Company with the Agent (up to
          the amount available therein) in order to immediately pay USBNA the
          principal amount of such Swingline Loans to the extent Warehousing
          Loans made by the Lenders are not sufficient to repay in full the
          principal of the outstanding Swingline Loans requested or required to
          be refinanced.  Upon the making of a Warehousing Loan by a Lender
          pursuant to this Section 2.01(d)(iii), the amount so funded shall
          become due under such Lender's Note and the outstanding principal
          amount of the Swingline Loans shall be correspondingly reduced.  If
          any portion of any Warehousing Loan made by the Lenders pursuant to
          this Section 2.01(d)(iii) should be recovered by or on behalf of the
          Company from USBNA in bankruptcy or otherwise, the loss of the amount
          so recovered shall be ratably shared among all the Lenders in the
          manner contemplated by Section 7.11.  Each Lender's obligation to make
          Warehousing Loans referred to in this Section 2.01(d) shall, subject
          to the proviso to the first sentence of this Section 2.01(d)(iii), be
          absolute and unconditional and shall not be affected by any
          circumstance, including, without limitation, (1) any setoff,
          counterclaim, recoupment, defense or other right which such Lender may
          have against USBNA, the Company or anyone else for any reason
          whatsoever; (2) the occurrence or continuance of a Default or an Event
          of Default; (3) any adverse change in the condition (financial or
          otherwise) of the Company or the Guarantor; (4) any breach of this
          Agreement by the Company, the Agent or any Lender; or (5) any other
          circumstance, happening or event whatsoever, whether or not

                                     -17-
<PAGE>

          similar to any of the foregoing; provided, that in no event shall a
          Lender be obligated to make a Warehousing Loan if, after giving effect
          thereto, the outstanding principal balance of such Lender's Note would
          exceed its Commitment Amount.

               (e)  Notes.  Warehousing Loans made by each Lender shall be
                    -----
     evidenced by the Company's promissory note in the form of Exhibit F (each,
     together with any promissory note subsequently executed and delivered by
     the Company to evidence any Lender's Loans, a "Note"), which shall be made
     payable to the order of such Lender in an amount equal to such Lender's
     Commitment Amount, shall be dated the Effective Date and shall mature on
     the Termination Date. USBNA's Note shall also evidence the Swingline Loans
     made by it hereunder. The aggregate amount of the Warehousing Loans made by
     a Lender and, in the case of USBNA, Swingline Loans, less all repayments of
     principal thereof shall be the principal amount owing and unpaid on such
     Lender's Note. The principal amount of each Loan made by a Lender and all
     principal payments and prepayments thereof may be noted by such Lender on a
     schedule attached to its Note and shall be entered by such Lender on its
     ledgers and computer records. The failure of any Lender to make such
     notations or entries shall not affect the principal amount owing and unpaid
     on its Note. The entries made by a Lender on its ledgers and computer
     records and any notations made by a Lender on any such schedule annexed to
     its Note shall be presumed to be accurate until the contrary is
     established.

               (f)  Payment and Prepayment of Warehousing Loans and Swingline
                    ---------------------------------------------------------
     Loans.  The Company shall pay the principal of the Warehousing Loans and
     -----
     Swingline Loans as follows:

                    (i)   Mandatory Payments. The entire unpaid principal
                          ------------------
          balance of each Lender's Note shall be due and payable on the
          Termination Date.

                    (ii)  Mandatory Prepayments.  If, at any time, the aggregate
                          ---------------------
          principal amount of all Loans outstanding exceeds the Borrowing Base,
          the Company shall immediately either (A) pledge additional Mortgage
          Loans with a Warehousing Collateral Value not less than the amount of
          such excess to the Agent for the benefit of the Lenders pursuant to
          the Pledge and Security Agreement, or (B) make principal prepayments
          of the Notes in an aggregate amount equal to the amount of such
          excess, which amount shall be paid to the Agent and distributed (y)
          first, to USBNA as a prepayment on the outstanding principal balance
          of any Swingline Loans and (z) after repayment in full of any
          Swingline Loans, to the Lenders ratably on the basis of each Lender's
          Pro Rata Share.  In addition, all Swingline Loans shall also be
          prepayable on demand therefor by USBNA.

                    (iii) Optional Prepayments.  The Company shall have the
                          --------------------
          right to prepay, without penalty, the outstanding principal balance of
          the Notes in whole or in part at any time and from time to time, each
          such principal prepayment to be paid to the Agent and distributed (A)
          first, to USBNA as a

                                     -18-
<PAGE>

          prepayment on the outstanding principal balance of any Swingline Loans
          and (B) after repayment in full of any Swingline Loans, to the Lenders
          ratably on the basis of each Lender's Pro Rata Share.

                    (iv) Confirmation.  The Company shall promptly send the
                         ------------
          Agent a Confirmation of Borrowing/Paydown/Conversion confirming any
          payment or prepayment of principal made on the Notes.

               (g)  Termination and Reduction of the Commitments.
                    --------------------------------------------

                    (i)  The Company may, at any time, upon not less than thirty
          days' prior written notice to the Agent, a copy of which shall be
          promptly provided by the Agent to each Lender, reduce the aggregate
          Commitment Amounts, with any such reduction in a minimum amount of
          $10,000,000, or, if more, in an integral multiple of $5,000,000 in
          excess thereof; provided, that the Company may not reduce the
          aggregate Commitment Amounts below the aggregate principal amount of
          outstanding Loans.  The Company may, upon not less than thirty days'
          prior written notice to the Agent, a copy of which shall be promptly
          provided by the Agent to each Lender, terminate the Commitments in
          their entirety.  Upon termination of the Commitments pursuant to this
          Section, the Company shall pay to the Agent the aggregate amount of
          all outstanding Loans, all accrued and unpaid interest thereon, any
          unpaid fees accrued to the date of such termination and all other
          unpaid obligations of the Company to the Lenders in respect of their
          Commitments hereunder.

                    (ii) Notwithstanding the foregoing, any termination of the
          Commitments pursuant to Section 6.02 shall supersede any notice of
          termination or reduction under this Section 2.01(g).  Once the
          Commitments have been terminated or reduced, they may not be
          reinstated.

               (h)  Facility Fees.  The Company shall pay each Lender a facility
                    -------------
     fee on the average daily amount of such Lender's Commitment Amount, whether
     used or unused, payable monthly in arrears on the fifth Business Day of
     each month in an amount equal to one-quarter of one percent (0.25%) per
     annum.

               (i)  Use of Proceeds.  Except as otherwise provided in Section
                    ---------------
     2.01(d) with respect to refinancing Swingline Loans, the proceeds of the
     Swingline Loans and the Warehousing Loans shall be used to make, originate
     or acquire Mortgage Loans, to finance Mortgage Loans previously made,
     originated or acquired or, in the case of Warehousing Loans made on the
     Effective Date, to repay in full the Existing Warehousing Loans.

               (j)  Commitment Fees.  The Company shall pay to each Bank on the
                    ---------------
     Effective Date in consideration of its Commitment a commitment fee in an
     amount equal to the amount set forth on Schedule 2.01(j) as such Bank's
     "Effective Date Fee."

                                     -19-
<PAGE>

          2.02 Interest on the Note; Balances Deficiency Fees; Continuations and
               -----------------------------------------------------------------
Conversions.
-----------

               (a)  Interest Rates; Balances Deficiency Fees.  The Company will
                    ----------------------------------------
     pay each Lender monthly in arrears on the third Business Day of each month
     interest on the unpaid principal balance of each Advance of such Lender
     from time to time outstanding as follows:

                    (i)    with respect to Balance Funded Rate Advances, at the
          per annum rate of 1.25% (the "Fixed Rate"); provided, that if for any
          Balance Calculation Period the average daily Reserve-Adjusted Balances
          maintained by the Company with any Lender are less than an amount
          equal to the average daily aggregate unpaid principal balance of the
          Balance Funded Rate Advances owed to such Lender during such Balance
          Calculation Period (such deficiency being herein referred to as the
          "Balances Deficiency"), the Company will pay such Lender a fee (the
          "Balances Deficiency Fee") for said Balance Calculation Period on the
          Balances Deficiency at a per annum rate equal to 1.25% below the
          average daily Reference Rate in effect during said Balance Calculation
          Period; and provided further, that if the weighted average Reserve-
          Adjusted Balances maintained by the Company with any Lender for any
          Balance Calculation Period exceeds the weighted average daily
          aggregate unpaid principal balance of the Balance Funded Rate Advances
          owed to such Lender during such Balance Calculation Period (such
          excess being defined herein as the "Balances Surplus"), then such
          Balances Surplus, or, if the Company and such Lender shall so agree,
          the charges reduction benefit for such Balances Surplus (as determined
          by such Lender), may be carried forward and applied to succeeding
          Balance Calculation Periods (but not to any Balance Calculation Period
          occurring in any subsequent calendar year);

                    (ii)   with respect to Reference Rate Advances, the
          Reference Rate plus the Applicable Margin, as adjusted automatically
          on and as of the effective date of any change in the Reference Rate;

                    (iii)  with respect to Eurodollar Advances, the Adjusted
          Eurodollar Rate plus the Applicable Margin, as adjusted automatically
          on and as of the effective date of any change in the Adjusted
          Eurodollar Rate; and

                    (iv)   with respect to any Obligations not paid when due (i)
          consisting of Balance Funded Rate Advances, a rate per annum equal to
          the Fixed Rate plus 2.0%, and (ii) consisting of other Obligations, a
          rate per annum equal to the Reference Rate plus the Applicable Margin
          plus 2.0% for the period from the date such Obligations were due until
          the same are pai d.

               (b)  Payment of Interest and Fees.  The Agent shall use its best
                    ----------------------------
     efforts to provide the Company with a statement for interest on the Notes,
     the facility fees with respect to the Commitments and the collateral
     handling fees with respect to Mortgage

                                     -20-
<PAGE>

     Loans pledged under the Pledge and Security Agreement, in each case accrued
     through the last day of each calendar month, on or before the fifth
     Business Day of the next succeeding calendar month, but shall have no
     liability to the Company for its failure to do so. Interest on the Notes,
     facility fees and collateral handling fees accrued through the last day of
     each calendar month shall be due and payable on the second Business Day
     after the date the Company receives such statement from the Agent;
     provided, that interest payable at the rates provided for in Section 2.02
     (a)(iv) shall be payable on demand. Any Balances Deficiency Fee payable
     hereunder shall be due and payable quarterly after each Balance Calculation
     Period within two Business Days after receipt by the Company from any
     Lender of a statement therefor (a copy of which shall be provided to the
     Agent) containing the calculations made to determine such Balances
     Deficiency Fee, which statement shall be conclusive absent manifest error.

               (c)  Designation and Conversions of Outstanding Advances. Subject
                    ---------------------------------------------------
     to the terms and conditions of this Agreement, the Company shall designate,
     on any Borrowing Date, all or portions of the Warehousing Loans or
     Swingline Loans to be made on such Borrowing Date as one or more Eurodollar
     Advances, Balance Funded Rate Advances or Reference Rate Advances.  Any
     portion of an outstanding Loan not designated as a Reference Rate Advance
     or a Balance Funded Rate Advance shall be funded as a Eurodollar Advance.
     Thereafter, subject to the terms and conditions of this Agreement, the
     Company shall have the option to convert all or any portion of any
     outstanding Advance consisting of Warehousing Loans or Swingline Loans into
     Advances of another type (i.e., Eurodollar Advances, Balance Funded Rate
     Advances or Reference Rate Advances); provided, however, that (i) no
     Advance may be requested as or converted into a Eurodollar Advance or,
     without the written consent of the Lender to which it is owed (a copy of
     which shall be provided to the Agent), a Balance Funded Rate Advance if an
     Event of Default or Unmatured Event of Default has occurred and is
     continuing on the proposed date of conversion, and (ii) no Advance owed to
     any Lender may be requested as or converted into a Balance Funded Rate
     Advance without the prior consent of such Lender, which shall be confirmed
     to the Agent in writing by such Lender, if the Reserve-Adjusted Balances
     maintained by the Company at such Lender are less than the aggregate amount
     of Balance Funded Rate Advances owed to such Lender, after giving effect to
     such conversion.  The Company shall provide the Agent with telephonic
     notice of each proposed conversion not later than 1:00 P.M. (Minneapolis
     time) on the date of any conversion, which notice shall set forth the
     proposed date therefor.  Each such notice shall specify (A) the amount to
     be converted, and (B) the date for the conversion.  Any notice given by the
     Company under this Section 2.02(c) shall be irrevocable.  The Company shall
     promptly confirm any such proposed conversion by delivering to the Agent a
     duly completed and executed Confirmation of  Borrowing/Paydown/ Conversion.
     The Agent shall notify each Lender affected by such proposed conversion by
     not later than 2:00 P.M. (Minneapolis time) on the date it receives such
     notice of the Advances of such Lender being converted and the types of
     Advances into which such Advances are being converted.

                                     -21-
<PAGE>

          (d)  Agent's Fees.  The Company shall pay to the Agent collateral
               ------------
     handling fees in accordance with the terms of a letter dated May 26, 1999
     as the same may be amended, supplemented, restated or replaced from time to
     time.

          2.03 Payments and Computations.
               -------------------------

               (a)  Payments.  All payments and prepayments by the Company of
                    --------
     principal of and interest on each Note and all fees, expenses and other
     obligations under this Agreement shall be made in Immediately Available
     Funds to the Agent not later than 2:00 p.m. (Minneapolis time) on the dates
     called for under this Agreement, at the main office of the Agent in
     Minneapolis.  Funds received after such hour shall be deemed to have been
     received by the Agent on the next Business Day.  The Company irrevocably
     authorizes the Agent to charge the Collateral Account or any other account
     of the Company (other than escrow or custodial accounts) maintained with
     the Agent in an amount equal to any such payment or permitted prepayment of
     principal, interest, fees, expenses and other Obligations then due and
     payable by the Company to the Lenders or the Agent under this Agreement and
     the other Loan Documents, as the case may be.

               (b)  Computations.  Balances Deficiency Fees, facility fees and
                    ------------
     interest on each Note shall be computed on the basis of actual days elapsed
     and a year of 360 days.

          2.04 Setoff.  Whenever an Event of Default shall have occurred and be
               ------
continuing, the Company hereby irrevocably authorizes each Lender to set off the
Obligations owed to such Lender against all deposits and credits of the Company
with, and any and all claims of the Company against, such Lender, excluding
deposits of the Company with such Lender which the Company holds in escrow or in
trust for the benefit of third parties, whether or not the Obligations owed to
such Lender, or any part thereof, shall be then due.  No Lender shall, except as
otherwise set forth in the Loan Documents, have any right to set off the
Obligations owed to such Lender against any such deposits or credits except
during the continuance of an Event of Default.

          2.05 Increased Capital Requirements.  In the event that, as a result
               ------------------------------
of any Regulatory Change, compliance by any Lender with any applicable law or
governmental rule, requirement, regulation, guideline or order (whether or not
having the force of law) regarding capital adequacy has the effect of reducing
the rate of return on such Lender's capital as a consequence of such Lender's
Commitment or amounts outstanding under such Lender's Note to a level below that
which such Lender would have achieved but for such compliance (taking into
consideration such Lender's policies with respect to capital adequacy), then
from time to time the Company shall pay to such Lender, within thirty days after
written demand by such Lender, such additional amount or amounts as will
compensate such Lender for such reduction; provided, that the Company shall not
be obligated to pay any such additional amount (i) unless such Lender shall
first have notified the Company in writing that it intends to seek such
compensation pursuant to this Section, or (ii) to the extent such additional
amount is attributable to the period ending 91 days prior to the date of the
first such notice with respect to such Regulatory Change (the "Excluded
Period"), except to the extent any amount is attributable to the Excluded Period

                                     -22-
<PAGE>

as a result of the retroactive application of the applicable Regulatory Change.
A certificate, which shall be conclusive except for manifest error, as to the
amount of any such reduction (including calculations in reasonable detail
showing how such Lender computed such reduction and a statement that such Lender
has not allocated to its Commitment or amounts outstanding under its Note a
proportionately greater amount of such reduction than is attributable to each of
its other commitments to lend or to each of its other outstanding credit
extensions that are affected similarly by such compliance by such Lender,
whether or not such Lender allocates any portion of such reduction to such other
commitments or credit extensions) shall be furnished promptly by such Lender to
the Company.

          2.06 Provisions Relating to Eurodollar Advances and Balance Funded
               -------------------------------------------------------------
Rate Advances.
-------------

               (a)  Interest Rate Not Ascertainable, Etc.  If, on the date for
                    ------------------------------------
     determining the Adjusted Eurodollar Rate in respect of any Eurodollar
     Advance, any Lender determines (which determination shall be conclusive and
     binding, absent error) that the Adjusted Eurodollar Rate will not
     adequately and fairly reflect the cost to such Lender of funding such
     Eurodollar Advance, then such Lender shall notify the Agent, and the Agent
     shall notify the Company, of such determination, whereupon the obligation
     of such Lender to make, or to convert any Advances to, Eurodollar Advances
     shall be suspended until such Lender notifies the Agent, and the Agent
     notifies the Company, that the circumstances giving rise to such suspension
     no longer exist.  Outstanding Eurodollar Advances owed to such Lender shall
     thereupon automatically be converted to Reference Rate Advances.

               (b)  Increased Cost.  If, after the date hereof, any Regulatory
                    --------------
     Change or compliance with any request or directive (whether or not having
     the force of law) of any governmental authority, central bank or comparable
     agency:

                         (i)  shall subject any Lender to any tax, duty or other
          charge with respect to Eurodollar Advances or Balance Funded Rate
          Advances, its Note, or its obligation to make Eurodollar Advances or
          Balance Funded Rate Advances, or shall change the basis of taxation of
          payment to such Lender of the principal of or interest on Eurodollar
          Advances or Balance Funded Rate Advances or any other amounts due
          under this Agreement in respect of Eurodollar Advances or Balance
          Funded Rate Advances or its obligation to make Eurodollar Advances or
          Balance Funded Rate Advances (except for changes in the rate of tax on
          the overall net income of such Lender imposed by the laws of the
          United States or any jurisdiction in which such Lender's principal
          office is located); or

                         (ii) shall impose, modify or deem applicable any
          reserve, special deposit, capital requirement or similar requirement
          (including, without limitation, any such requirement imposed by the
          Board of Governors of the Federal Reserve System, but excluding any
          such requirement to the extent included in calculating the Adjusted
          Eurodollar Rate) against assets of, deposits with or for the account
          of, or credit extended by, any Lender or shall impose on

                                     -23-
<PAGE>

          any Lender or on the interbank Eurodollar market any other condition
          affecting Eurodollar Advances or Balance Funded Rate Advances, such
          Lender's Note, or its obligation to make Eurodollar Advances or
          Balance Funded Rate Advances;

     and the result of any of the foregoing is to increase the cost to such
     Lender of making or maintaining any Eurodollar Advance or Balance Funded
     Rate Advance, or to reduce the amount of any sum received or receivable by
     such Lender under this Agreement or under its Note, then, within 30 days
     after written demand by such Lender, the Company shall pay to such Lender
     such additional amount or amounts as will compensate such Lender for such
     increased cost or reduction; provided, that the Company shall not be
     obligated to pay any such additional amount (i) unless such Lender shall
     first have notified the Company in writing that it intends to seek such
     compensation pursuant to this Section, or (ii) to the extent such
     additional amount is attributable to the period ending 91 days prior to the
     date of the first such notice with respect to such Regulatory Change (the
     "Excluded Period"), except to the extent any amount is attributable to the
     Excluded Period as a result of the retroactive application of the
     applicable Regulatory Change.  A certificate of any Lender claiming
     compensation under this Section 2.06(b), setting forth the additional
     amount or amounts to be paid to it hereunder and stating in reasonable
     detail the basis for the charge and the method of computation, shall be
     conclusive in the absence of manifest error.  In determining such amount,
     such Lender may use any reasonable averaging and attribution methods.
     Failure on the part of any Lender to demand compensation for any increased
     costs or reduction in amounts received or receivable with respect to any
     period shall not constitute a waiver of such Lender's rights to demand
     compensation for any increased costs or reduction in amounts received or
     receivable in any subsequent period.

               (c)    Illegality.  If, after the date of this Agreement, the
                      ----------
     adoption of, or any change in, any applicable law, rule or regulation, or
     any change in the interpretation or administration thereof by any
     governmental authority, central bank or comparable agency charged with the
     interpretation or administration thereof, or compliance by any Lender with
     any request or directive (whether or not having the force of law) of any
     such authority, central bank or comparable agency shall make it unlawful or
     impossible for such Lender to make, maintain or fund Eurodollar Advances or
     Balance Funded Rate Advances, such Lender shall notify the Company and the
     Agent, whereupon the obligation of such Lender to make or convert Advances
     into Eurodollar Advances or Balance Funded Rate Advances, shall be
     suspended until such Lender notifies the Company and the Agent that the
     circumstances giving rise to such suspension no longer exist.  If any
     Lender determines that it may not lawfully continue to maintain any
     Eurodollar Advances or Balance Funded Rate Advances, all of the affected
     Advances shall be automatically converted to Reference Rate Advances as of
     the date of such Lender's notice.

          SECTION 3.  REPRESENTATIONS AND WARRANTIES.  In order to induce the
                      ------------------------------
Lenders to enter into this Agreement and to make and maintain the Loans
hereunder, the Company makes the following representations and warranties to the
Lenders effective on and as of the Signing Date, the Effective Date and each
Borrowing Date:

                                     -24-
<PAGE>

          3.01 Formation; Powers; Good Standing; Subsidiaries; Agency Status.
               -------------------------------------------------------------

               (a)  Formation and Powers.  NCFC is a corporation duly
                    --------------------
     organized, validly existing and in good standing under the laws of the
     State of Delaware, the Company is a corporation duly organized, validly
     existing and in good standing under the laws of the State of California,
     NCCC is a corporation duly organized, validly existing and in good standing
     under the laws of the State of California, and each of NCFC, the Company
     and NCCC has all requisite corporate power and authority to own and operate
     its properties, to carry on its business as now conducted and proposed to
     be conducted, to enter into and perform each Loan Document to which it is
     or will be a party and to carry out the transactions contemplated thereby.

               (b)  Good Standing.  Each of NCFC, the Company and NCCC is in
                    -------------
     good standing wherever necessary to carry on its business and operations,
     except in jurisdictions in which the failure to be in good standing would
     not preclude it from enforcing its rights with respect to any material
     asset or expose it to any material liability.

               (c)  Subsidiaries, Joint Ventures and Partnerships.  As of the
                    ---------------------------------------------
     Signing Date, neither NCFC nor the Company has any Subsidiaries other than
     those listed on Schedule 3.01.  Neither NCFC, the Company nor any of their
     Subsidiaries is a member of any joint venture or partnership other than a
     strategic alliance with Persons in which the Company has made Investments
     of the types permitted pursuant to Sections 4.10(i) and 4.10(j).

          3.02 Authorization; No Conflict; Governmental Consents; Binding
               ----------------------------------------------------------
Effect.

               (a)  Authorization of Borrowing.  The execution, delivery and
                    --------------------------
     performance by each of NCFC, the Company and NCCC of each Loan Document to
     which it is or will become a party, the carrying out of the transactions
     contemplated thereby, and the issuance, delivery and payment of the Notes
     have been duly authorized by all necessary corporate action by each of
     them.

               (b)  No Conflict. The execution, delivery and performance by each
                    -----------
     of NCFC, the Company and NCCC of each Loan Document to which it is or will
     be a party, the carrying out of the transactions contemplated thereby, and
     the issuance, delivery and payment of the Notes does not and will not (i)
     violate any provision of law applicable to it, its articles or certificate
     of incorporation or bylaws or any order, judgment or decree of any court or
     other agency of government binding on it, (ii) conflict with, result in a
     breach of or constitute (with due notice or lapse of time or both) a
     default under any of its contractual obligations, (iii) result in or
     require the creation or imposition of any Lien, charge or encumbrance of
     any nature whatsoever upon any of its properties or assets except the Liens
     granted to the Agent for the benefit of the Lenders under the Pledge and
     Security Agreement or (iv) require any approval of shareholders or any
     approval or consent of any Person under any of its contractual obligations
     other than approvals or consents which have been obtained.

                                     -25-
<PAGE>

               (c)  Governmental Consents.  The execution, delivery and
                    ---------------------
     performance by each of NCFC, the Company and NCCC of, and the validity and
     enforceability of, each Loan Document to which it is or will be a party,
     the carrying out of the transactions contemplated thereby, and the
     issuance, delivery and payment of the Notes by the Company do not and will
     not require any registration with, consent or approval of, or notice to, or
     other action of, with or by, any Federal, state or other governmental
     authority or regulatory body or other Person except those that have been
     obtained.  Any registration with, consent or approval of or other action by
     any federal, state or other governmental authority or regulatory body or
     other Person which has been obtained and has been disclosed in writing to
     the Lenders shall remain in effect and shall not be modified except as may
     be approved in writing by the Agent, which approval shall not be
     unreasonably withheld.

               (d)  Binding Obligations.  Each of the Loan Documents to which it
                    -------------------
     is a party is, and each of the Loan Documents to which it will be a party
     will be, the legally valid and binding obligations of each of NCFC , the
     Company and NCCC, and each of the Loan Documents has been or will be duly
     executed, and is or will be enforceable against it in accordance with its
     terms, except as enforcement may be limited by bankruptcy, insolvency,
     reorganization, moratorium or similar laws or equitable principles relating
     to or limiting creditors' rights generally.

          3.03 Financial Condition.  NCFC has heretofore delivered to the
               -------------------
Lenders its audited consolidated balance sheet as at December 31, 1998, its
unaudited consolidated balance sheet as at March 31, 1999 and the related
statements of income, shareholders' equity and cash flow for the periods then
ended.  The Company has heretofore delivered to the Lenders its audited
consolidated balance sheet as at December 31, 1998, its unaudited consolidated
balance sheet as at March 31, 1999, and the related statements of income,
shareholder's equity and cash flow for the periods then ended.  Such financial
statements have been prepared in accordance with GAAP and fairly present the
consolidated financial condition of NCFC and the Company as of the dates
indicated and the results of their operations and cash flow for the periods
indicated.  As of the Signing Date, neither NCFC nor the Company has any
material contingent obligation, contingent liability or liability for taxes,
long-term lease or unusual forward or long-term commitment, which is not
reflected in the foregoing financial statements or in the notes thereto.

          3.04 Title to Property; Liens.  NCFC and the Company each has good,
               ------------------------
sufficient and legal title to all the properties and assets reflected in the
balance sheets dated as at March 31, 1999 referred to in Section 3.03 and all
assets held by NCFC and the Company on the Signing Date but acquired subsequent
to the date of such balance sheet, except for assets disposed of in the ordinary
course of business.  All such properties and assets are free and clear of Liens,
except as permitted hereunder.  The grants of security interests pursuant to the
Pledge and Security Agreement and the Servicing Security Agreement create valid
security interests in the property subject thereto and the Liens on the
Collateral created by the Pledge and Security Agreement and the Servicing
Security Agreement will be first priority Liens thereon, free and clear of any
other Liens except as permitted hereunder.

                                     -26-
<PAGE>

          3.05 Litigation; Adverse Facts.  Except as set forth in Schedule 3.05,
               -------------------------
there is no action, suit, proceeding or arbitration at law or in equity or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
pending or, to the knowledge of NCFC, the Company or any of their Subsidiaries,
threatened against or affecting NCFC, the Company or NCCC or any of their
respective properties that would, if decided in a manner adverse to it, result
in any material adverse change in its business, operations, properties, assets
or condition (financial or otherwise) or would materially adversely affect its
ability to perform its obligations under each Loan Document to which it is or
will be a party, and there is no basis known to it for any action, suit or
proceeding which would have such an effect.  None of NCFC, the Company  or NCCC
is (i) in violation of any applicable law if such violation materially adversely
affects or may materially adversely affect its business, operations, properties,
assets or condition (financial or otherwise) or (ii) subject to or in violation
of any final judgment, writ, injunction, decree, rule or regulation of any court
or federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, which could have
a material adverse effect on its business, operations, properties, assets or
condition (financial or otherwise).  There is no action, suit, proceeding or
investigation pending or, to the knowledge of NCFC, the Company or NCCC,
threatened against or affecting NCFC, the Company or NCCC, which questions the
validity or the enforceability of any Loan Document.

          3.06 Other Agreements; Performance.
               -----------------------------

               (a)  Agreements.  None of  NCFC, the Company or NCCC is a party
                    ----------
     to or subject to any contractual obligation or charter or other internal
     restriction materially adversely affecting its business, properties,
     assets, operations or condition (financial or otherwise).

               (b)  Performance.  None of NCFC, the Company  or NCCC is in
                    -----------
     default in the performance, observance or fulfillment of any of the
     obligations, covenants or conditions contained in any of its material
     contractual obligations, and no condition exists which, with the giving of
     notice or the lapse of time or both, would constitute such a default,
     except where the consequences, direct or indirect, of such default or
     defaults, if any, would not have a material adverse effect on its business,
     properties, assets, operations or condition (financial or otherwise).  To
     the best knowledge of NCFC, the Company and NCCC, the other parties to any
     of the contractual obligations of NCFC, the Company or NCCC are not in
     default thereunder, except where the consequences, direct or indirect, of
     such default or defaults, if any, would not have a material adverse effect
     on its business, properties, assets, operations or condition (financial or
     otherwise).

          3.07 Use of Proceeds.  All proceeds of the Loans will be used only in
               ---------------
accordance with Section 2.01(i).  No part of the proceeds of the Loans will be
used by the Company to purchase or carry any margin stock (as such term is
defined in Regulation U of the Board of Governors of the Federal Reserve System
(or any successor thereto)) or to extend credit to any other Person for the
purpose of purchasing or carrying any margin stock.

                                     -27-
<PAGE>

          3.08  Taxes.  Each of NCFC and the Company has filed all tax returns
                -----
required to be filed by it, and has paid all taxes and assessments payable by it
which have become due, other than those not yet delinquent and except for those
contested in good faith by appropriate proceedings for which adequate reserves
in conformity with GAAP have been provided.  No material tax Liens have been
filed and, to their knowledge, no material claims or assessments are being
asserted or will be asserted with respect to any such taxes or other charges.

          3.09  ERISA.  Each Plan is in substantial compliance with all
                -----
applicable requirements of ERISA and the Code and with all material applicable
rulings and regulations issued under the provisions of ERISA and the Code
setting forth those requirements.  No Reportable Event has occurred and is
continuing with respect to any Plan.  All of the minimum funding standards
applicable to such Plans have been satisfied and there exists no event or
condition which would reasonably be expected to result in the institution of
proceedings to terminate any Plan under Section 4042 of ERISA.  With respect to
each Plan subject to Title IV of ERISA, as of the most recent valuation date for
such Plan, the present value (determined on the basis of reasonable assumptions
employed by the independent actuary for such Plan and previously furnished in
writing to the Lenders) of such Plan's projected benefit obligations did not
exceed the fair market value of such Plan's assets.  Neither the Company nor any
ERISA Affiliate is required to make contributions to any Multiemployer Plan.

          3.10  Governmental Regulation.  None of NCFC, the Company nor any of
                -----------------------
their Subsidiaries is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, the
Investment Company Act of 1940 or any federal or state statute or regulation
limiting its ability to incur Indebtedness for money borrowed.

          3.11  Indebtedness.  As of the Signing Date, none of NCFC, the Company
                ------------
nor any of their Subsidiaries has any Indebtedness outstanding except the
Indebtedness permitted pursuant to Section 4.08.

          3.12  No Material Adverse Event.  Since December 31, 1998, neither the
                -------------------------
business, operations, condition (financial or otherwise), properties nor assets
of NCFC or the Company or their Subsidiaries have been affected in any material
adverse way as the result of any Material Adverse Event, including, without
limitation, fire, explosion, accident, act of God, strike, lockout, flood,
drought, storm, earthquake, or combination of workmen or other labor
disturbance, riot, activity of armed forces or of the public enemy, embargo or
nationalization, condemnation, requisition or taking of property, or
cancellation or modification of contracts, by any domestic or foreign government
or any instrumentality or agency thereof.

          3.13  Licenses and Permits.  Each of NCFC, the Company and their
                --------------------
Subsidiaries has all federal, state and local licenses and permits required to
be maintained in connection with and material to the current operation of its
businesses, and all such licenses and permits are valid and fully effective.

                                     -28-
<PAGE>

          3.14 Guarantees.  As of the Signing Date, none of NCFC, the Company
               ----------
nor any of their Subsidiaries has made, or is liable in respect of, any
Guarantee, other than the Guaranty and Guarantees permitted pursuant to Section
4.11.

          3.15 Accuracy and Completeness of Information.  No representation or
               ----------------------------------------
warranty of NCFC, the Company or any of their Subsidiaries contained in this
Agreement or the other Loan Documents, no representation or warranty contained
in any other document, certificate or written statement furnished to the Agent
or any Lender by NCFC, the Company or any of their Subsidiaries for use in
connection with the transactions contemplated by the Loan Documents and no
representation or warranty contained in any other document, certificate or
written statement furnished to the Agent or any Lender by or on behalf of any
other Person for use in connection with the transactions contemplated by the
Loan Documents, contains any untrue statement of a material fact or omits to
state a material fact (known to it in the case of any document not furnished by
it) necessary in order to make the statements contained herein or therein not
materially misleading.  There is no fact known to NCFC or the Company (other
than matters of a general economic nature) which materially adversely affects
the business, operations, property, assets or condition (financial or otherwise)
of NCFC, the Company or their Subsidiaries which has not been disclosed herein
or in such other documents, certificates and statements furnished to the Agent
or any Lender for use in connection with the transactions contemplated hereby.

          3.16 Year 2000.  NCFC and the Company have, and have caused their
               ---------
Subsidiaries to, review and assess its business operations and computer systems
with respect to the "year 2000 problem" (that is, that computer applications and
equipment may not be able properly to perform date-sensitive functions before,
during and after January 1, 2000) and, based on those reviews and inquiries, the
Company has no reason to believe that the year 2000 problem will result in a
material adverse change in the business, condition (financial or otherwise),
operations or prospects of NCFC, the Company and their Subsidiaries, or the
Company's ability to repay the Lenders.

          SECTION 4.  COVENANTS OF THE COMPANY. So long as the Commitments are
                      ------------------------
in effect and thereafter so long as any Obligation shall remain unpaid, the
Company covenants that, unless the Lenders shall otherwise consent in writing,
it will perform all the covenants set forth in this Section 4.

          4.01 Financial Statements and Other Reports.  NCFC and the Company
               --------------------------------------
will each maintain, and cause its Subsidiaries to maintain, a system of
accounting established and administered in accordance with sound business
practices such as to permit the preparation of financial statements in
accordance with GAAP and furnish or cause to be furnished to each Lender:

               (a)  as soon as available and in any event within 30 days after
     the end of each calendar month, a copy of the unaudited financial
     statements of NCFC (on a consolidated and a consolidating basis) and the
     Company as at the end of such month, consisting of at least a balance sheet
     and the related statements of income, shareholders' equity and cash flow of
     NCFC and the Company for such month and from the beginning

                                     -29-
<PAGE>

     of the then current fiscal year of NCFC and the Company to the end of such
     month, setting forth in each case in comparative form the figures for the
     corresponding date or period of the previous fiscal year, all in reasonable
     detail, and certified by the chief financial officer of NCFC as being
     complete and correct in all material respects and fairly presenting NCFC's
     and the Company's financial condition and results of operations, subject to
     changes resulting from normal year-end adjustments;

               (b)  as soon as available and in any event within 90 days after
     the end of each fiscal year, financial statements of NCFC (on a
     consolidated and a consolidating basis) and the Company, consisting of at
     least a balance sheet as at the end of such fiscal year and the related
     statement of income, shareholders' equity and cash flow for such fiscal
     year of NCFC and the Company, setting forth in each case in comparative
     form the corresponding figures as of the end of and for the previous fiscal
     year, all in reasonable detail, accompanied by a report thereon of the
     accounting firm of KPMG Peat Marwick or other independent certified public
     accountants selected by NCFC and reasonably satisfactory to the Agent,
     which report shall be unqualified and shall state that such financial
     statements present fairly the financial condition of NCFC and the Company
     as at the date indicated and the results of their operations for the
     periods indicated in conformity with GAAP applied on a basis consistent
     with prior fiscal years (except as otherwise required by GAAP and stated
     therein) and that the examination of such accountants in connection with
     such consolidated financial statements has been made in accordance with
     generally accepted auditing standards, accompanied by a letter from such
     accounting firm addressed to the Lenders acknowledging that the Lenders are
     extending credit in reliance on such statements and authorizing such
     reliance, and also by any management letters to the Company or its board of
     directors furnished by such accounting firm in connection with its audit of
     the Company's consolidated financial statements;

               (c)  with the financial statements furnished pursuant to Section
     4.01(a) for each calendar month:

                    (i)   a certificate signed by the chief financial officer of
          the Company and a certificate signed by the chief financial officer of
          NCFC, each stating that to the best of the respective chief financial
          officer's knowledge, after due inquiry, there exists no Event of
          Default or Unmatured Event of Default, or, if such Event of Default or
          Unmatured Event of Default exists, stating the nature thereof, the
          period of existence thereof, and what action the Company or NCFC
          proposes to take with respect thereto;

                    (ii)  a properly completed Compliance/Borrowing Base
          Certificate as of the end of such month;

                    (iii) a servicing/delinquency report showing with respect
          to the Eligible Servicing Portfolio:  the number of Mortgage  Notes
          (including Mortgage Notes backing Mortgage-backed Securities) included
<PAGE>

          therein, the total outstanding principal amount thereof, Investor
          type, weighted average coupon, delinquency status and foreclosure
          experience; and Financial Printing GroupFinancial Printing
          Grouptherein, the total outstanding principal amount thereof, Investor
          type, weighted average coupon, delinquency status and foreclosure
          experience; and

                              (iv) such additional information concerning the
          Eligible Servicing Portfolio and such selective detail by segments and
          categories thereof as may from time to time be reasonably requested by
          any Lender.

               (d)  within five days after the end of each (i) semi-monthly
     period (for the purposes of this paragraph (d)), with respect to the Agent,
     and (ii) month, with respect to all the Lenders, an inventory/pipeline
     position report showing with respect to each Take-Out Commitment:  the
     type, Investor type, expiration date, price, interest rate and/or required
     yield, the original amount or aggregate amount thereof and the portions
     thereof that have been utilized and the portions thereof that remain
     available, future contracts, hedged positions, repurchase agreements and
     profit and loss, indicating the number of Mortgage Notes owned by the
     Company, the aggregate principal balance thereof and the warehouse and
     pipeline balances (for purposes of this clause (d), "inventory" means
     Mortgage Notes owned by the Company which have been fully funded or with
     respect to which the Company has paid the full purchase price and
     "pipeline" means the Mortgage Notes (or applications for Mortgages) as to
     which the Company has made either firm or floating price quotes to purchase
     or fund but which have not been purchased or funded by the Company),
     together with copies of any new Take-Out Commitments issued to or entered
     into by the Company during such week or month, as the case may be;

               (e)  within five Business Days after any officer of the Company
     has knowledge of their occurrence, notice of each of the following events:

                    (i)    the commencement of any action, suit, proceeding or
          arbitration against NCFC or any Subsidiary of NCFC, or any material
          development in any action, suit, proceeding or arbitration pending or
          threatened against NCFC or any such Subsidiary, (A) in which the
          aggregate uninsured amount claimed is more than $250,000, (B) which
          would, if decided in a manner adverse to NCFC or such Subsidiary,
          constitute a Material Adverse Event or (C) which relates to this
          Agreement or any document executed pursuant hereto or any transaction
          financed or to be financed in whole or in part directly or indirectly
          with the proceeds of the Loans made pursuant hereto;

                    (ii)   any Event of Default or Unmatured Event of Default
          and what actions, if any, the Company is taking or contemplates taking
          in regard thereto;

                    (iii)  any notice from any Investor that it intends to put
          the Company on probation or that it will cease purchasing Mortgage
          Loans from the Company or that it will cease permitting the Company to
          service Mortgage Notes owned, sold or guaranteed by it;

                                     -31-
<PAGE>

                         (iv) the occurrence of any default (however
          denominated) under, the termination of, or the receipt by the Company
          of a notice of non-renewal of, any credit, gestation repurchase or
          other financing facility of the Company or NCFC (A) with SBRC or any
          similar counterparty reasonably satisfactory to the Agent or (B) under
          which there is Indebtedness or other obligations in an amount in
          excess of $100,000 outstanding; and

               (v)  notice of any other Material Adverse Event, including
          any material adverse development which occurs in any litigation,
          arbitration or governmental investigation or proceeding previously
          disclosed by the Company to the Lenders;

               (f)  within ten Business Days following each issuance of
     Mortgage-backed Securities by the Company, a copy of the due diligence
     report prepared in connection with such issuance by KPMG Peat Marwick or
     other independent certified public accountants selected by the Company and
     reasonably satisfactory to the Agent;

               (g)  prior to the end of each fiscal year, final annual budgets,
     forecasts and pro-forma cash flow projections developed by NCFC and the
     Company for its next succeeding fiscal year;

               (h)  as soon as available and in any event within 30 days after
     the end of each fiscal quarter of the Company, (i)  management reports
     containing such information with respect to each Junior Securitization
     Interest owned by the Company or an Affiliate of the Company, and the
     related Company Securitization Transaction, as the Agent may request,
     including, without limitation, information concerning reserve account
     balances, cash receipts, prepayment and credit loss experience, REO
     inventory status and loss projections, and relevant gain on sale
     assumptions, and (ii) a review report on the quarterly financial statements
     of NCFC from KPMG LLP or other independent certified public accountants
     selected by NCFC and reasonably satisfactory to the Agent, in accordance
     with Statement of Auditing Standards No. 71;

               (i)  as soon as available, copies of all financial statements,
     reports and returns sent to NCFC's stockholders and copies of all regular,
     periodic, or special reports which the Company or NCFC is or may be
     required to file with any governmental department, bureau, commission or
     agency;

               (j)  simultaneously with any request to the Agent to approve a
     new Investor, notice of the identity of such Investor, and promptly upon
     the request of any Lender, additional information concerning any such
     proposed Investor; and

               (k)  from time to time, such other information regarding the
     business, operations, affairs and financial condition of NCFC or the
     Company as any Lender may reasonably request.

                                     -32-
<PAGE>

          4.02 Corporate Existence.  The Company, NCFC and NCCC will each (a)
               -------------------
maintain its corporate existence in good standing under the laws of the
jurisdiction of its incorporation and (b) its right to carry on its business and
operations in each jurisdiction in which the character of the properties owned
or leased by it or the business conducted by it makes such qualification
necessary and the failure to be in good standing would preclude the Company,
NCFC or NCCC from enforcing its rights with respect to any material assets or
expose the Company, NCFC or NCCC to any material liability.

          4.03 Compliance with Laws, Taxes, etc.  The Company, NCFC and NCCC
               --------------------------------
will each comply in all material respects with all applicable laws, rules,
regulations and orders (including without limitation Regulations T, U and X of
the Board of Governors of the Federal Reserve System), the failure to be in
compliance with which would have a materially adverse effect on the financial
condition of the Company, NCFC or NCCC such compliance to include, without
limitation, paying before the same become delinquent all taxes, assessments and
governmental charges imposed upon it or upon its property except to the extent
contested in good faith by appropriate proceedings and for which any reserves
required by GAAP have been established.  In the event the Company, NCFC or NCCC
fails to satisfy its obligations under this Section 4.03 as to taxes,
assessments and governmental charges, the Lenders may but are not obligated to
satisfy such obligations in whole or in part and any payments made and expenses
incurred in doing so shall constitute Obligations, shall bear interest at the
rate set forth in Section 2.02(a)(iv) from the date incurred and shall be paid
or reimbursed by the Company on demand.

          4.04 ERISA.  The Company and NCFC will each maintain, and cause each
               -----
ERISA Affiliate to maintain, each Plan in compliance with all material
applicable requirements of ERISA and of the Code and with all applicable rulings
and regulations issued under the provisions of ERISA and of the Code and will
not and not permit any of the ERISA Affiliates to (a) engage in any transaction
in connection with which the Company or any of the ERISA Affiliates would be
subject to either a civil penalty assessed pursuant to Section 502(i) of ERISA
or a tax imposed by Section 4975 of the Code, in each case in an amount
exceeding $10,000, or (b) fail to make full payment when due of all amounts
which, under the provisions of any Plan, the Company, NCFC or any ERISA
Affiliate is required to pay as contributions thereto, or permit to exist any
accumulated funding deficiency (as such term is defined in Section 302 of ERISA
and Section 412 of the Code), whether or not waived with respect to any Plan in
an aggregate amount exceeding $10,000.  The Company and NCFC will not permit,
and will not allow any ERISA Affiliate to permit, any event to occur or
condition to exist which would permit any Plan to terminate under any
circumstances which would cause the Lien provided for in Section 4068 of ERISA
to attach to any assets of the Company, NCFC or any Subsidiary of the Company;
and the Company and NCFC will not permit, as of the most recent valuation date
for any Plan subject to Title IV of ERISA, the present value (determined on the
basis of reasonable assumptions employed by the independent actuary for such
Plan and previously furnished in writing to the Lenders) of such Plan's
projected benefit obligations to exceed the fair market value of such Plan's
assets.  The Company and NCFC will not, and will not permit any ERISA Affiliate
to, become a party to any Multiemployer Plan.

          4.05 Assets and Insurance.  The Company, NCFC and NCCC will each
               --------------------
maintain in full force and effect (a) an adequate errors and omissions insurance
policy, (b) such

                                     -33-
<PAGE>

other insurance coverage by financially sound and respectable insurers, on all
properties of a character usually insured by organizations engaged in the same
or similar business (including, without limitation, all real property covered by
Mortgages to the extent normally required by prudent mortgagees) against loss or
damage of a kind customarily insured against by such organizations, (c) adequate
public liability insurance against tort claims which may be asserted against the
Company, NCFC or NCCC and (d) a mortgage bankers blanket bond insurance policy
in at least the amount customarily maintained by organizations engaged in the
same or similar business and under similar circumstances as the Company, NCFC or
NCCC.

          4.06 Inspection, Visitation, etc.  The Company and NCFC will each
               ---------------------------
permit, and will cause its Subsidiaries to permit, any Person designated by any
Lender in writing, at such Lender's expense, to visit and inspect any of the
properties, corporate books and financial records of NCFC, the Company or such
Subsidiaries and discuss its affairs and finances with the principal officers of
NCFC, the Company or such Subsidiaries and their independent public accountants,
all at such times as any such Lender shall reasonably request.

          4.07 Further Assurances. The Company, NCFC and NCCC will each take all
               ------------------
such further actions and execute all such further documents and instruments as
the Agent may at any time reasonably determine in its sole discretion to be
necessary or advisable to further carry out and consummate the transactions
contemplated by the Loan Documents and to perfect or protect the Liens granted
to the Agent for the benefit of the Lenders under any Loan Document.

          4.08  Indebtedness.  The Company and NCFC will not, and will not
                ------------
permit  any of their Subsidiaries to, directly or indirectly, create, incur,
assume, guarantee, or otherwise become or remain directly or indirectly liable
with respect to, any Indebtedness, except:

               (a)  the Obligations;

               (b)  current liabilities not more than 90 days overdue, unless
     contested in good faith by appropriate proceedings and any reserves
     required by GAAP have been established, incurred by NCFC, the Company or
     NCCC in the ordinary course of business otherwise than for money borrowed;

               (c)  Indebtedness incurred to finance the purchase of equipment
     and secured solely by Liens on such equipment, in an aggregate amount not
     to exceed $10,000,000;

               (d)  Indebtedness incurred to finance Junior Securitization
     Interests which Indebtedness is secured only by such Junior Securitization
     Interests, provided, such Indebtedness does not exceed 65% of the value of
                --------
     such Junior Securitization Interests determined in accordance with GAAP;

               (e)  intercompany Indebtedness of NCFC to the Company or NCCC in
     an aggregate amount not to exceed $1,000,000;

               (f)  intercompany Indebtedness of the Company or NCCC to NCFC
     incurred in the ordinary course of business;

                                     -34-
<PAGE>

               (g)  obligations under gestation repurchase agreements or similar
     arrangements of the type described in Section 4.09(f);

               (h)  obligations in respect of letters of credit issued by USBNA
     for the account of the Company or NCFC with an aggregate face amount not to
     exceed $1,250,000;

               (i)  Indebtedness incurred by the Company in connection with the
     Salomon REO Agreement in an aggregate amount not to exceed $3,000,000; and

               (j)  intercompany Indebtedness between the Company and NCCC
     incurred in the ordinary course of business.

          4.09 Liens.  The Company and NCFC will not, and will not permit any of
               -----
their Subsidiaries to, directly or indirectly, create, incur, assume or permit
to exist any Lien with respect to any property now owned or hereafter acquired
by NCFC, the Company or NCCC, or any income or profits therefrom, except:

               (a)  the security interests granted to the Agent for the benefit
     of the Lenders, FBS Business Finance Corp. (with respect to obligations
     described in Section 4.08(c)) and USBNA (with respect to obligations
     described in Section 4.08(g)) under the Loan Documents;

               (b)  Liens in connection with deposits or pledges to secure
     payment of workers' compensation, unemployment insurance, old age pensions
     or other social security obligations, in the ordinary course of business of
     NCFC or the Company;

               (c)  Liens for taxes, fees, assessments and governmental charges
     not delinquent or which are being contested in good faith by appropriate
     proceedings and for which appropriate reserves have been established in
     accordance with GAAP;

               (d)  encumbrances consisting of zoning regulations, easements,
     rights of way, survey exceptions and other similar restrictions on the use
     of real property and minor irregularities in title thereto which do not
     materially impair their use in the operation of its business;

               (e)  Liens on equipment arising under any capitalized lease
     obligation or other purchase money Liens on equipment acquired after the
     Signing Date to secure Indebtedness permitted pursuant to Section 4.08(c);

               (f)  Liens incurred in connection with gestation repurchase
     agreements or similar arrangements under which NCFC or its Subsidiaries are
     required to repurchase Mortgage-backed Securities or Mortgage Loans from
     any Lender or other counterparty reasonably satisfactory to the Agent;
     provided, that such gestation repurchase agreements

                                     -35-
<PAGE>

     are entered into in the ordinary course of business in contemplation of the
     subsequent non-recourse sale of such Mortgage-backed Securities or Mortgage
     Loans;

               (g)  Liens on Junior Securitization Interests which secure
     Indebtedness permitted by Section 4.08(d);

               (h)  Liens arising under Hedging Arrangements; and

               (i)  a pledge of the stock of REO Sub to SBRC pursuant to the
     Salomon REO Agreement.

          4.10 Investments.  The Company and NCFC will not, and will not permit
               -----------
any of their Subsidiaries to, directly or indirectly, make or own any
Investment, except Investments in:

               (a)  Marketable direct obligations issued or unconditionally
     guaranteed by the United States Government or issued by any agency thereof
     and backed by the full faith and credit of the United States, in each case
     maturing within one year from the date of acquisition thereof.

               (b)  Marketable direct obligations issued by any state of the
     United States of America or any political subdivision of any such state or
     any public instrumentality thereof maturing within one year from the date
     of acquisition thereof and, at the time of acquisition, having the highest
     rating obtainable from either Standard & Poor's Ratings Group, a division
     of McGraw Hill, Inc., or Moody's Investors Service, Inc.

               (c)  Commercial paper maturing no more than one year from the
     date of creation thereof and, at the time of acquisition, having the
     highest rating obtainable from either Standard & Poor's Ratings Group, a
     division of McGraw Hill, Inc., or Moody's Investors Service, Inc.

               (d)  In the case of the Company, Mortgage Loans originated or
     acquired by the Company in the ordinary course of the Company's business,
     in the case of NCCC, Mortgage Loans acquired from the Company in the
     ordinary course of business, and in the case of NCFC, other consumer debt
     obligations originated or acquired by NCFC in the ordinary course of NCFC's
     business.

               (e)  Certificates of deposits or bankers acceptances issued by
     any of the Lenders or any other commercial bank organized under the laws of
     the United States or any State thereof and having a combined capital and
     surplus of at least $500,000,000, or by United States offices of foreign
     banks having the highest rating obtainable from a nationally recognized
     rating agency, in each case maturing within one year from the date of
     acquisition thereof.

               (f)  Investments in mutual funds that invest substantially all of
     their assets in Investments of the types described in subsections (a), (b),
     (c) and (e) of this Section 4.10.

                                     -36-
<PAGE>

               (g)  The capital stock of any Subsidiary (subject to the
     limitations set forth in Sections 4.12 and 4.17).

               (h)  In the case of the Company and NCCC, loans to NCFC in an
     aggregate amount not to exceed $1,000,000.

               (i)  Direct equity investments made by the Company, to the extent
     no Event of Default or Unmatured Event of Default has occurred and is
     continuing, or would occur as a result thereof, in or loans to Persons in
     the mortgage origination business, in an aggregate amount not to exceed
     $2,500,000.

               (j)  Investments made or to be made by the Company, in an amount
     not to exceed $1,250,000 in the aggregate, and a guaranty made by NCFC,
     pursuant to a Strategic Alliance Agreement by and among the Company,
     Qualified Financial Services, Inc., a Colorado corporation, Qualified
     Financial Services, Inc., a California corporation, Simon Mundy, an
     individual, and David V.V. Thais, an individual.

               (k)  Investments arising under Hedging Arrangements.

               (l)  In the case of NCFC, loans to the Company and NCCC.

               (m)  Intercompany Indebtedness between the Company and NCCC
     incurred in the ordinary course of business.

          4.11 Guarantees.   The Company and NCFC will not, and will not permit
               ----------
any of their Subsidiaries to, directly or indirectly, create or become or be
liable with respect to any Guarantee, other than:

               (a)  the Guaranty and the NCCC Guaranty;

               (b)   Guarantees by NCFC of Indebtedness of the Company secured
     by liens described in Section 4.09(e), in an amount not to exceed
     $7,500,000;

               (c)   Guarantees by NCFC of  the Company's obligations under (i)
     gestation repurchase agreements or similar arrangements of the type
     described in Section 4.09(f), or (ii) the Strategic Alliance Agreement
     described in Section 4.10(j); and

               (d)  Guarantees by the Company of the obligations of NCCC or
     Residual Finance Subsidiaries in respect of Indebtedness permitted by
     Sections 4.08 (d) and (g).

          4.12 Restriction on Fundamental Changes.  The Company and NCFC will
               ----------------------------------
not, and will not permit any of their Subsidiaries to, engage in any business
activities or operations substantially different from or unrelated to those in
which the Company and NCFC were engaged on the Signing Date, enter into any
transaction of merger or consolidation, or liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution), or convey, sell, lease, transfer

                                     -37-
<PAGE>

or otherwise dispose of, in one transaction or a series of transactions, any of
its assets, whether now owned or hereafter acquired, or acquire by purchase or
otherwise all or substantially all the business or property of, or stock or
other evidence of beneficial ownership of, any Person, except:

               (a)  the Company or NCFC may sell or otherwise dispose of
     property in the ordinary course of business, provided such sales do not
     include all or substantially all of the assets of NCFC or the Company;

               (b)  NCFC and its Subsidiaries other than the Company may engage
     in any business involving the origination, acquisition, servicing or sale
     of consumer Indebtedness;

               (c)  The Company may transfer REO with a book value not to exceed
     $6,000,000 at any time to REO Sub, provided that the Agent's security
     interest, if any, for the benefit of the Lenders in the related Mortgage
     Loan has been released in accordance with the Pledge and Security Agreement
     and no Eligible Servicing Receivables (as defined in Exhibit E) relating
     thereto are included in the Borrowing Base; and

               (d)  The Company may transfer to NCCC (i) Mortgage Loans,
     provided that such Mortgage Loans are subject to the security interest
     created under the Pledge and Security Agreement prior to such transfer, but
     will be released from such security interest, and the Warehousing Loans
     will be repaid with the proceeds of Indebtedness incurred by NCCC of the
     type described in Section 4.08(g), simultaneously with such transfer, (ii)
     Junior Securitization Interests, and (iii) fixed assets used in the
     operation of NCCC.

          4.13 Restricted Payments.  The Company and NCFC will not make any
               -------------------
Restricted Payments, other than (a) dividends paid by NCFC on its Series 1998A
Convertible Preferred Stock in an amount not to exceed $1,500,000 per annum, (b)
dividends paid by the Company to NCFC to enable NCFC to pay such dividends in an
amount not to exceed $1,500,000 per annum, and (c) repurchases by NCFC of shares
of its common stock pursuant to the Stock Repurchase Program, in each case
provided that, both before and after giving effect to such dividend payments or
repurchases, the Borrower and NCFC are in compliance with the covenants set
forth in Section 4 of this Agreement and no Event of Default or Unmatured Event
of Default has occurred and is continuing.

          4.14 Net Worth.  The Company will at all times maintain Tangible Net
               ---------
Worth of not less than (a) the greater of (i) $40,000,000 or (ii) eighty-five
percent (85%) of the Tangible Net Worth at the end of its most recently
completed fiscal year (or, in the case of the Tangible Net Worth at the end of
any fiscal year, its prior fiscal year) plus (b) ninety percent (90%) of capital
                                        ----
contributions made during such fiscal year plus (c) fifty percent (50%) of
                                           ----
positive year-to-date net income.  NCFC will at all times maintain Tangible Net
Worth of not less than (a) the greater of (i) $55,000,000 or (ii) eighty-five
percent (85%) of the Tangible Net Worth at the end of its most recently
completed fiscal year (or, in the case of the Tangible Net Worth at the end of

                                     -38-
<PAGE>

any fiscal year, its prior fiscal year) plus (b) ninety percent (90%) of capital
                                        ----
contributions made during such fiscal year plus (c) fifty percent (50%) of
                                           ----
positive year-to-date net income.

          4.15 Minimum Liquidity. The Company will not permit the sum of (a)
               -----------------
Cash plus (b) the lesser of the Borrowing Base and the sum of the Commitment
     ----
Amounts minus, in either case, the outstanding principal balance of all Loans,
        -----
as of (i)  the end of each month and (ii)  the date of any payment made under
the Stock Repurchase Program (after giving effect to such payment), to be less
than $10,000,000.

          4.16 Leverage Ratio.  The Company will not permit the Leverage Ratio
               --------------
of the Company to be greater than 8.0 to 1.0 as of the last day of each fiscal
quarter of the Company.  NCFC will not permit (i) the Quarterly Average Leverage
Ratio for any period of measurement to be greater than 10.0 to 1.0, (ii) the
Daily Leverage Ratio on any date to be greater than 15.0 to 1.0, or (iii) the
Adjusted Leverage Ratio as of the last day of each fiscal quarter to be greater
than 12.0 to 1.0.

          4.17 Subsidiaries.  (a) The Company will not create or acquire any
               ------------
Subsidiaries other than (i) the Subsidiaries listed on Schedule 3.01 hereto, and
(ii) Residual Finance Subsidiaries , and (b) NCFC will not create or acquire any
Subsidiaries other than (i) the Company, (ii) the Subsidiaries listed on
Schedule 3.01 hereto, (iii) Residual Finance Subsidiaries, and (iv) Subsidiaries
engaged solely in any business involving the origination, acquisition, servicing
and sale of consumer obligations.

          4.18 Affiliate Transactions.  The Company and NCFC will not, and will
               ----------------------
not permit any of their Subsidiaries to, enter into any transaction with an
Affiliate of the Company or NCFC, except:

               (a)  transactions in the ordinary course of business on terms no
     less favorable to the Company or NCFC than those that would be obtained in
     an arm's-length transaction;

               (b)  Indebtedness described in Sections 4.08(e) and 4.08(j);

               (c)  guaranties of Indebtedness described in Section 4.11;

               (d)  transfers of assets by the Company to NCCC and REO Sub as
     described in Sections 4.12(c) and 4.12(d); and

               (e)  transfers by the Company and NCCC of Junior Securitization
     Interests to Residual Finance Subsidiaries.

          4.19 Escrow Imbalances.  The Company will, no later than five (5)
               -----------------
Business Days after learning (from any source) of any material imbalance in any
escrow account, fully and completely correct and eliminate such imbalance.

                                     -39-
<PAGE>

          4.20 Inconsistent Agreements.  The Company and NCFC will not, and will
               -----------------------
not permit any of their Subsidiaries to, directly or indirectly, enter into any
agreement containing any provision which would be violated or breached by any
extension of credit to the Company hereunder or by the performance by the
Company or NCFC of their respective obligations hereunder or under any other
Loan Document.

          4.21 Closing Procedures.  The Company will provide closing
               ------------------
instructions to each Closing Agent (as defined in the Pledge and Security
Agreement) which (a) require, in connection with Mortgage Loans tablefunded by
the Company, that (i) the Mortgage Note evidencing each such Mortgage Loan shall
be endorsed to the Company, (ii) the assignment of the applicable Mortgage to
the Company shall be recorded simultaneously with but separate from the related
Mortgage and (iii) the Mortgage Note evidencing each such Mortgage Loan and
other related loan documents shall be delivered to the Company promptly upon the
closing of such Mortgage Loan, and (b) in the case of Mortgage Loans funded by a
wire transfer of funds from the Wet Funding Wire Clearing Account (as defined in
the Pledge and Security Agreement) in accordance with Section 4.01(b)(ii) of the
Pledge and Security Agreement, contain a statement substantially in the form set
forth in Exhibit H.  The Company shall review for accuracy and completeness each
Mortgage Note, Mortgage, assignment and other document evidencing or securing
each Mortgage Loan originated or purchased by the Company.

          4.22 Underwriting.  All Mortgage Loans pledged to the Agent, for the
               ------------
benefit of Lenders, pursuant to the Pledge and Security Agreement will conform
with, and will be assigned a Risk Rating in accordance with, the Underwriting
Guidelines.  The Company shall not make any material change in the Underwriting
Guidelines and shall review the Underwriting Guidelines periodically to confirm
that they are being complied with in all material respects and are adequate to
meet the Company's business objectives.

          4.23 Independence of Covenants.  All covenants hereunder shall be
               -------------------------
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or be otherwise within the limitations of, another covenant shall
not avoid the occurrence of an Event of Default or Unmatured Event of Default if
such action is taken or condition exists.

          4.24 Year 2000 Remediation.  The Company and NCFC agree to take, and
               ---------------------
to cause each of their Subsidiaries to take, all actions reasonably necessary to
ensure that the representation set forth in Section 3.16 remains true, and the
Company and NCFC agree to notify the Agent promptly if, at any time during the
term of this Agreement, the Company or NCFC becomes aware of facts or
circumstances such that the representation set forth in Section 3.16 has become
or may become untrue or this Section has been or may be breached.  The Company
and NCFC will promptly deliver to the Agent such information relating to the
representation in Section 3.16 and the agreement set forth in this Section as
the Agent requests from time to time, including, without limitation, any
information pertaining to the review and assessment set forth in Section 3.16.

          SECTION 5.  CONDITIONS PRECEDENT.
                      --------------------

                                     -40-
<PAGE>

          5.01 Conditions Precedent to Effectiveness.  The several obligations
               -------------------------------------
of the Lenders to make the initial Warehousing Loans and the effectiveness of
this Agreement are subject to the satisfaction on or before the Effective Date
of each and every of the following conditions:

               (a)  The following documents, certificates and opinion, each in
     form and substance satisfactory to the Lenders and their counsel, shall
     have been delivered to the Agent:

                    (i)    the Notes, duly executed by the Company;

                    (ii)   a reaffirmation of the Pledge and Security Agreement,
          substantially in the form of Exhibit C hereto, duly executed by the
          Company;

                    (iii)  a reaffirmation of the Servicing Security Agreement,
          substantially in the form of Exhibit D hereto, duly executed by the
          Company;

                    (iv)   a reaffirmation of the Guaranty, substantially in the
          form of Exhibit G hereto, duly executed by NCFC;

                    (v)    a reaffirmation of the NCCC Guaranty, substantially
          in the form of Exhibit G-1 hereto, duly executed by NCCC;

                    (vi)   completed responses to requests for information or
          other evidence satisfactory to the Agent that the financing statements
          and other instruments delivered to the Agent pursuant to the Existing
          Credit Agreement have been filed in all appropriate filing offices and
          that such filed financing statements perfect a first priority security
          interest in favor of the Agent for the benefit of the Lenders in the
          property described therein;

                    (vii)  copies of the resolutions of the Boards of Directors
          of the Company and NCFC, certified by the respective Secretary or
          Assistant Secretary of each of them, authorizing the execution,
          delivery and performance of each Loan Document to which it is or will
          be a party and the other matters contemplated hereby;

                    (viii) a certificate signed by the Secretary or an Assistant
          Secretary of each of the Company and NCFC certifying (A) as to the
          names, incumbency and true signatures of the respective persons
          authorized to execute and deliver each Loan Document to which it is or
          will be a party and any other instrument or agreement hereunder and
          under any other Loan Documents and (B) that the Agent and the Lenders
          may conclusively rely on such certificate until the Agent shall have
          received a further certification of its Secretary or an Assistant
          Secretary canceling or amending such certificate and submitting the

                                     -41-
<PAGE>

          names, incumbency and signatures of the officers named in such further
          certificate;

                    (ix)    copies of the Articles or Certificate of
          Incorporation of each of the Company and NCFC with all amendments
          thereto, certified by the appropriate governmental official of the
          jurisdiction of their respective incorporation;

                    (x)     certificates of good standing for each of the
          Company and NCFC in the jurisdiction of its incorporation and
          certificates of good standing for the Company in each of the
          jurisdictions in which the Company is required to be qualified to do
          business, certified by the appropriate governmental officials as of a
          date not more than forty-five days prior to the Closing Date;

                    (xi)    a certificate of the Secretary or an Assistant
          Secretary of each of the Company and NCFC certifying to true and
          correct copies of its respective bylaws, as amended to the Effective
          Date;

                    (xii)   the favorable written opinions of Stergios
          Theologides, counsel to the Company and NCFC, addressed to the
          Lenders, as to the matters and effect set forth in Exhibit I;

                    (xiii)  a certificate of the Secretary or Assistant
          Secretary of the Company in the form set forth as Exhibit J;

                    (xiv)   financing statements and other instruments required
          by the Agent to create and perfect the security interests granted
          under the Pledge and Security Agreement and Servicing Security
          Agreement; and

                    (xv)    an Acknowledgment of Exiting Lender, substantially
          in the form of Exhibit K hereto, duly executed by each Exiting Lender.

               (b)  The fees required to be paid pursuant to Section 2.01(j)
                    shall have been paid.

               (c)  The requirements of Section 5.02 shall have been satisfied.

          5.02 Conditions Precedent to all Loans.  The obligation of each Lender
               ---------------------------------
to make each Loan (including the initial Loan) is subject to the satisfaction of
each and every of the following additional conditions:

               (a)  the Agent shall have received a timely and properly
     completed notice under Section 2.01(c);

               (b)  there shall not have been any Regulatory Change after the
     Signing Date which would render the transactions contemplated hereby
     unlawful or which would

                                     -42-
<PAGE>

     impose a cost on or increase the cost to such Lender for making or
     maintaining its Loans or which would reduce any amount payable to such
     Lender under this Agreement or its Note or Notes;

               (c)  no Event of Default or Unmatured Event of Default shall
     have occurred and be continuing or will exist upon making the requested
Loan;

               (d)  all the representations and warranties set forth in Section
     3 of this Agreement, in Section 5 of the Pledge and Security Agreement, in
     Section 4 of the Servicing Security Agreement, in Section 15 of the
     Guaranty and in Section 15 of the NCCC Guaranty shall be true and correct
     in all material respects as though made on and as of the applicable
     Borrowing Date;

               (e)  no material adverse change in, or development likely to have
     a material adverse effect on, the business, operations, prospects, assets
     or condition (financial or otherwise) of NCFC or the Company shall have
     occurred and no occurrence or event which is likely to have a material
     adverse effect on the rights and remedies of the Lenders or the ability of
     NCFC or the Company to perform their respective obligations to the Lenders
     shall have occurred; and

               (f)  the requested Loan is permitted under Section 2.01.

          SECTION 6.  EVENTS OF DEFAULT; REMEDIES.
                      ---------------------------

          6.01 Events of Default.  The occurrence of any one or more of the
               -----------------
following events shall constitute an Event of Default:

               (a)  The Company shall fail to make when due, whether by
     acceleration of maturity or otherwise, any payment of principal of any
     Note, or shall fail to pay within five days after the same becomes due,
     whether by acceleration of maturity or otherwise, any payment of interest
     on any Note or any fee or other amount required to be paid to the Agent or
     any Lender pursuant to this Agreement or any other Loan Document; or

               (b)  Any representation or warranty made or deemed made by the
     Company in this Agreement or by the Company, NCFC or NCCC in any other Loan
     Documents or in any certificate, statement, report or document furnished to
     the Agent or the Lenders pursuant to or in connection with any Loan
     Document shall be untrue or misleading in any material respect on the date
     as of which the facts set forth are stated or certified or deemed stated or
     certified; or

               (c)  The Company shall fail to comply with any agreement,
     covenant, condition, provision or term contained in the Pledge and Security
     Agreement, in the Servicing Security Agreement or in Section 4.02(a), 4.08,
     4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.15, 4.16, 4.17, 4.20, 4.21 or 4.22,
     or shall fail to comply with any agreement, covenant, condition, provision
     or term contained in Section 4.02(b) or 4.04 and such

                                     -43-
<PAGE>

     failure shall not be remedied within 10 calendar days after an executive
     officer of the Company shall have become aware of such failure to comply;
     or

               (d)  The Company, NCFC or NCCC shall fail to comply with any
     other agreement, covenant, condition, provision or term contained in this
     Agreement or any other Loan Document then in effect (other than those
     hereinabove set forth in this Section 6.01) and such failure to comply is
     not remedied within 30 calendar days after the earliest of (i) the date the
     Agent has given the Company written notice of the occurrence thereof, (ii)
     the date the Company gives notice of such failure to the Agent or (iii) the
     date the Company should have given such notice of such failure to the Agent
     pursuant to Section 4.01(e)(ii); or

               (e)  Any creditor or representative of any creditor of the
     Company, NCFC or NCCC shall become entitled to declare any Indebtedness in
     the amount of $250,000 or more owing on any bond, debenture, note or other
     evidence of Indebtedness for borrowed money to be due and payable prior to
     its expressed maturity, whether or not such Indebtedness is actually
     declared to be immediately due and payable, or any such Indebtedness
     becomes due and payable prior to its expressed maturity by reason of any
     default by the Company, NCFC or NCCC in the performance or observance of
     any obligation or condition and such default shall not have been
     effectively waived or shall not have been cured within any grace period
     allowed therefor or any such Indebtedness shall have become due by its
     terms and shall not have been promptly paid or extended; or

               (f)  The Company, NCFC or NCCC shall become insolvent or shall
     generally not or admit in writing its inability to pay its debts as they
     mature or shall apply for, shall consent to, or shall acquiesce in the
     appointment of a custodian, trustee or receiver of the Company, NCFC or
     NCCC or for a substantial part of the property thereof or, in the absence
     of such application, consent or acquiescence, a custodian, trustee or
     receiver shall be appointed for the Company, NCFC or NCCC or for a
     substantial part of the property thereof and shall not be discharged within
     60 days, or the Company, NCFC or NCCC shall make an assignment for the
     benefit of creditors; or

               (g)  Any bankruptcy, reorganization, debt arrangement or other
     proceeding under any bankruptcy or insolvency law shall be instituted by or
     against the Company, NCFC or NCCC, and, if instituted against the Company,
     NCFC or NCCC, shall have been consented to or acquiesced in by the Company,
     NCFC or NCCC, or shall remain undismissed for 60 days, or an order for
     relief shall have been entered against the Company, NCFC or NCCC; or

               (h)  Any dissolution or liquidation proceeding shall be
     instituted by or against the Company, NCFC or NCCC and, if instituted
     against the Company, NCFC or NCCC, shall be consented to or acquiesced in
     by the Company, NCFC or NCCC or such Subsidiary or shall remain for 60 days
     undismissed; or

               (i)  A judgment or judgments for the payment of money in excess
     of the sum of $250,000 in the aggregate shall be rendered against the
     Company, NCFC or

                                     -44-
<PAGE>

     NCCC and either (i) the judgment creditor executes on such judgment or (ii)
     such judgment remains unpaid or undischarged for more than 60 days from the
     date of entry thereof or such longer period during which execution of such
     judgment shall be stayed during an appeal from such judgment.

               (j)  Any execution or attachment shall be issued whereby any
     substantial part of the property of the Company, NCFC or NCCC shall be
     taken or attempted to be taken and the same shall not have been vacated or
     stayed within 30 days after the issuance thereof; or

               (k)  The Pledge and Security Agreement, the Servicing Security
     Agreement, the Guaranty or the NCCC Guaranty shall, at any time, cease to
     be in full force and effect or shall be judicially declared null and void,
     or the validity or enforceability thereof shall be contested by the
     Company, NCFC or NCCC, or the Agent for the benefit of the Lenders shall
     cease to have a valid and perfected security interest having the priority
     contemplated under the Pledge and Security Agreement or the Servicing
     Security Agreement in any part of the Collateral described therein, other
     than by action or inaction of the Agent, unless the Company shall, within
     two Business Days after the earlier of the date it receives notice thereof
     from the Agent or the date an officer of the Company has knowledge thereof,
     repay the outstanding Loans in an amount sufficient to reduce the aggregate
     outstanding principal balance of the Loans to the aggregate Warehousing
     Collateral Value of the Collateral; or

               (l)  A Change of Control shall occur.

          6.02 Remedies.  If (a) any Event of Default described in Section
               --------
6.01(f), (g) or (h) shall occur, the Commitments shall automatically terminate
and the Obligations shall automatically become immediately due and payable, and
thereafter the Required Lenders may direct the Agent to attempt to enforce its
rights under any one or more of the Loan Documents; or (b) any other Event of
Default shall occur and be continuing, then, the Required Lenders may do any or
all of the following:  (i) declare the Commitments terminated, whereupon the
Commitments shall be terminated, (ii) declare the Obligations to be forthwith
due and payable, whereupon the Obligations shall immediately become due and
payable, in each case without presentment, demand, protest or other notice of
any kind, all of which are hereby expressly waived, anything in this Agreement
or in any other Loan Document to the contrary notwithstanding, and (iii) direct
the Agent to attempt to enforce its rights under any one or more of the Loan
Documents.

          SECTION 7.  THE AGENT
                      ---------

          7.01 Appointment and Authorization.  Each Lender appoints and
               -----------------------------
authorizes the Agent to take such actions as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to  the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto.  Neither the Agent nor any of its directors,
officers or employees shall be liable for any action taken or omitted to be
taken by it or them under or in connection with this Agreement or the other Loan
Documents,

                                     -45-
<PAGE>

WHETHER OR NOT AMOUNTING TO SIMPLE NEGLIGENCE, except for its or their own gross
negligence or willful misconduct; provided, however, that the Agent shall be
protected in acting or refraining from acting upon the instruction of the
requisite Lenders under Section 8.05; and provided, further, that the Agent
shall not be required to take any action that exposes it to personal liability
or is contrary to any Loan Document, other agreement or applicable law. The
Agent shall act as an independent contractor in performing its obligations as
the Agent hereunder and under the other Loan Documents and nothing herein
contained shall be deemed to create a fiduciary relationship among or between
the Agent, the Company or the Lenders.

          7.02 Note Holders.  The Agent may treat the payee of any Note as the
               ------------
holder thereof until written notice of transfer shall have been filed with it
signed by such payee.

          7.03 Consultation With Counsel.  The Agent may consult with legal
               -------------------------
counsel selected by it and shall not be liable for any action taken or suffered
in good faith by it in accordance with the advice of such counsel.

          7.04 Documents.  The Agent shall not be under a duty to examine into
               ----------
or pass upon the validity, effectiveness, genuineness or value of the Notes, the
other Loan Documents or any other instrument or document furnished pursuant
thereto or thereunder.  The Agent makes no representation or warranty to any
Lender, nor shall the Agent be responsible for any representations, warranties
or statements made in connection with this Agreement or any other Loan Document.
The Agent shall be entitled to assume that this Agreement and the other Loan
Documents are valid, effective and genuine and what they purport to be.  The
Agent (i) shall execute and deliver the Pledge and Security Agreement, whereupon
each provision thereof which is contemplated to be binding upon the Lenders
shall be binding upon the Lenders and each of them; and (ii) shall not waive,
amend or otherwise modify any provision of the Pledge and Security Agreement
without the written consent of the Lenders required pursuant to Section 8.05.

          7.05 Agent and Affiliates.  With respect to its Commitments and the
               --------------------
Loans made by it in its capacity as a Lender, the entity that is the Agent shall
have the same rights and powers under this Agreement and the other Loan
Documents as any other Lender and may exercise the same as though it were not
the Agent, and the entity that is the Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
the Company or any Subsidiary as if it were not the Agent.

          7.06 Action by Agent.  The Agent shall be entitled to use its
               ---------------
discretion with respect to exercising or refraining from exercising any rights
which may be vested in it by, or with respect to taking or refraining from
taking any action or actions which it may be able to take under or in respect
of, this Agreement and the other Loan Documents.  The Agent shall incur no
liability under or in respect of this Agreement or any of the other Loan
Documents by acting upon any notice, consent, certificate, warranty or other
paper or instrument believed by it to be genuine or authentic or to be signed by
the proper party or parties, or with respect to anything which it may do or
refrain from doing in the reasonable exercise of its judgment, or which may seem
to it to be necessary or desirable in the premises.  The Agent may employ agents
and attorneys-in-fact in carrying out its responsibilities under the Loan
Documents, and shall not be responsible for the negligence or misconduct of any
such agents or attorneys-in-fact as long as the Agent was not

                                     -46-
<PAGE>

grossly negligent in selecting or directing such agents or attorneys-in-fact,
EVEN IF SUCH SELECTION AMOUNTED TO SIMPLE NEGLIGENCE.

          7.07  Credit Analysis.  Each Lender has made, and shall continue to
                ---------------
make, its own independent investigation or evaluation of the operations,
business, property and condition, financial and otherwise, of the Company in
connection with its Commitments and Loans and has made its own appraisal of the
creditworthiness of the Company.  Except as explicitly provided herein, the
Agent has no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect to such
operations, business, property, condition or creditworthiness, whether such
information comes into its possession on or before the first Event of Default or
at any time thereafter.

          7.08  Notices of Event of Default, etc.  In the event that any Lender
                ---------------------------------
shall have acquired actual knowledge of any Event of Default or Unmatured Event
of Default, other than as a result of its receipt of financial statements
delivered to it pursuant to Section 4.01, such Lender shall promptly give notice
thereof to the Agent.  The Agent shall, promptly upon receipt of any such notice
provide a copy thereof to the other Lenders.  Upon receipt from any Lender of a
request that the Agent give notice to the Company of the occurrence of an Event
of Default or Unmatured Event of Default under Section 6, the Agent shall
promptly forward such request to the other Lenders and will take such action and
assert such rights under this Agreement and the other Loan Documents as the
requisite Lenders under Section 8.05 shall direct in writing.

          7.09  Indemnification.  Each Lender agrees to indemnify the Agent (to
                ----------------
the extent not reimbursed by the Company), ratably according to its Pro Rata
Share (determined under clause (e) of the definition thereof), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of this Agreement or the other Loan Documents
or any action taken or omitted by the Agent under this Agreement or the other
Loan Documents, WHETHER OR NOT THE AGENT'S SIMPLE NEGLIGENCE CAUSES THE SAME IN
WHOLE OR IN PART; provided that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the Agent's gross
negligence or willful misconduct.  Without limitation of the foregoing, each
Lender agrees to reimburse the Agent promptly upon demand for its Pro Rata Share
(determined under clause (l) of the definition thereof) of any out-of-pocket
expenses (including counsel fees) incurred by the Agent in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiations, legal proceedings or otherwise) of,
or legal advice in respect of rights or responsibilities under, this Agreement
and the other Loan Documents, to the extent that the Agent is not reimbursed for
such expenses by the Company, WHETHER OR NOT SUCH OUT-OF-POCKET EXPENSES
RESULTED, IN WHOLE OR IN PART, FROM THE AGENT'S SIMPLE NEGLIGENCE; provided,
that no Lender shall be liable for any portion of any such expenses resulting
from the Agent's gross negligence or willful misconduct.

          7.10  Payments.  All payments of principal of the Notes and all other
                ---------
funds received by the Agent in respect of any payments made by the Company
pursuant to this

                                     -47-
<PAGE>

Agreement, the Notes or the other Loan Documents, other than payments under
Sections 2.05 and 2.06, and subject to the effect of Section 7.11, shall be
distributed forthwith by the Agent (in like currency and funds) to the Lenders
on the date received or deemed received pursuant to Section 2.03(a), in
accordance with Sections 2.02(b) in the case of payments of interest and
Balances Deficiency Fees, and ratably according to each Lender's Pro Rata Share
in the case of any other payment received by the Agent. If the Agent does not
make any such distribution (or provide Federal Reserve Bank reference numbers
for the wire transfer of the amount thereof) on the date any such payment is
received or deemed received pursuant to Section 2.03(a), the Agent will pay
interest to each Lender entitled to receive a portion of such distribution on
the amount distributable to it at the Federal Funds Effective Rate from such
date until the date such distribution is made, such interest to be payable with
such distribution. Notwithstanding any of the foregoing or any other provision
of this Agreement, upon and after the occurrence of an Event of Default or
Unmatured Event of Default, (a) all proceeds received by the Agent from the sale
or other disposition of the Collateral shall be applied in accordance with
Section 17 of the Pledge and Security Agreement or Section ___ of the Servicing
Security Agreement, as applicable, and (b) all payments made by the Guarantor to
the Agent under the Guaranty shall be applied in the same order of priority as
is set forth in Section 17 of the Pledge and Security Agreement.

          7.11 Sharing of Payments.  Other than as provided in Section 7.10, if
               -------------------
any Lender shall receive and retain any payment during the continuance of an
Event of Default or Unmatured Event of Default, whether by setoff, application
of deposit balance or security, or otherwise, in respect of the Obligations in
excess of such Lender's Pro Rata Share of all payments of the Obligations, then
such Lender shall purchase from the other Lenders for cash and at face value and
without recourse, such participation in the Obligations held by them as shall be
necessary to cause such excess payment to be shared ratably as aforesaid with
each of them; provided, that if such excess payment or part thereof is
thereafter recovered from such purchasing Lender, the related purchases from the
other Lenders shall be rescinded ratably and the purchase price restored as to
the portion of such excess payment so recovered, but without interest.  Each
Lender agrees to exercise any and all rights of setoff, counterclaim or bankers'
lien first fully against the Obligations, and only then to any other
indebtedness of the Company to such Lender.

          7.12 Successor Agent.  The Agent may resign at any time by giving ten
               ---------------
days written notice thereof to the Lenders and the Company.  The Required
Lenders may remove the Agent at any time with or without cause by notifying the
Agent and the Company in writing.  In addition, the Lenders with an aggregate
Pro Rata Share (determined under clause (a) of the definition thereof) of 66
2/3% may at any time, if such Lenders determine, in the reasonable exercise of
their judgment, that the Agent is not handling the Collateral in accordance with
accepted industry practices, appoint a custodian to perform the Agent's
responsibilities under the Pledge and Security Agreement and, with respect to
the Collateral and the determination of the Borrowing Base, hereunder.  Upon any
such resignation or removal, the Required Lenders or, in the case of a removal
pursuant to the preceding sentence, the removing Lenders shall have the right to
appoint a successor Agent, which successor Agent shall (unless an Event of
Default has then occurred and is continuing) be reasonably acceptable to the
Company.  Upon any determination by the Lenders under the second preceding
sentence to appoint a custodian, the Lenders making such determination shall
have the right to appoint a custodian, which custodian shall (unless an Event of
Default has then occurred and is continuing) be reasonably acceptable to the
Company.  If no successor Agent shall have been so appointed and shall have
accepted such

                                     -48-
<PAGE>

appointment within 30 days after the retiring Agent's giving of notice of its
resignation or the removal of the Agent, then the retiring Agent may, on behalf
of the Lenders, appoint an Agent or custodian which shall be a Lender or a
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$100,000,000 and which shall be reasonably acceptable to the Company (unless an
Event of Default has occurred and is continuing). Any such resignation or
removal shall be effective upon the appointment of a successor Agent. Upon the
acceptance of any appointment as the Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations, under this Agreement
and the other Loan Documents. After any retiring Agent's resignation or removal
hereunder as the Agent, the provisions of this Section 7 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was acting
as the Agent under this Agreement and any other Loan Document.

          7.13  Inspection. The Lenders and their agents, accountants, attorneys
                ----------
and auditors will be permitted during normal business hours at any time and from
time to time upon reasonable notice to examine (to the extent permitted by
applicable law) the files, documents, records and other papers in the possession
or under the control of the Agent relating to any or all Collateral and to make
copies thereof.  Any such examination will be at the cost and expense of the
Lender conducting such examination.

          7.14  Notice of New Investors.  The Agent shall use reasonable efforts
                -----------------------
to provide prompt notice to each Lender (which notice may be telephonic) of its
approval of any new Investor after May 26, 1999; provided, however, that the
                                                 --------  -------
Agent shall have no liability to any Lender or other Person for its failure to
provide the notice described in this Section 7.14.

          SECTION 8.  MISCELLANEOUS.
                      -------------

          8.01  Waiver.  No failure on the part of the Agent or the Lenders to
                ------
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, power or privilege under this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege.  The remedies provided herein and in the other Loan
Documents are cumulative and not exclusive of any remedies provided by law.

          8.02  Notices.  Except as otherwise specifically provided for herein,
                -------
all notices and other communications provided for herein shall be in writing
(including teletransmission communication) and, unless otherwise required herein
or by law, shall be teletransmitted, mailed or delivered to the intended
recipient at the "Address for Notices" specified below its name on the signature
pages hereof; or, as to any party, at such other address as shall be designated
by such party in a notice to the other parties in accordance with this Section
8.02.  All notices and other communications hereunder shall be effective when
transmitted by telex or telecopier, delivered or, in the case of a mailed notice
or notice sent by overnight courier, upon receipt thereof as conclusively
evidenced by the signed receipt therefor, in each case given or addressed as
aforesaid

                                     -49-
<PAGE>

except that notices to the Agent under the provisions of Section 2 shall not be
effective until received by the Agent.

          8.03 Expenses; Indemnification.  The Company agrees to pay on demand:
               -------------------------
(a) the reasonable fees and expenses of Dorsey & Whitney LLP, special counsel to
the Agent in connection with the negotiation, preparation, approval, execution
and delivery of the Loan Documents, (b) the reasonable fees and expenses of
counsel for the Agent in connection with any amendment, modification or waiver
of any of the terms of any Loan Document and (c) all reasonable costs and
expenses of the Agent and each Lender (including reasonable counsel's fees) in
connection with the enforcement (whether through negotiations, legal proceedings
or otherwise) of this Agreement, the Notes and the other Loan Documents.  The
Company hereby agrees to indemnify the Lenders and their directors, officers,
agents and employees from and hold each of them harmless against any and all
losses, liabilities, claims, damages or expenses incurred by any of them arising
out of or by reason of any investigation, litigation or other proceedings
related to any use made or proposed to be made by the Company of the proceeds of
the Loans or the operation of the Company's business, including, without
limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation, litigation or other proceedings, WHETHER
OR NOT SUCH OUT-OF-POCKET EXPENSES RESULTED, IN WHOLE OR IN PART, FROM THE
AGENT'S OR ANY LENDER'S SIMPLE NEGLIGENCE (but excluding, for all purposes under
this Section 8.03, any such losses, liabilities, claims, damages or expenses
incurred by reason of the gross negligence or willful misconduct of the Person
to be indemnified).

          8.04 Confidentiality.  The Agent and each Lender shall use reasonable
               ---------------
efforts to assure that information about the Company, NCFC and their respective
operations, affairs and financial condition, not generally disclosed to the
public or to trade and other creditors, which is furnished to the Agent or such
Lender, as the case may be, pursuant to the provisions hereof is used only for
the purposes of this Agreement and any other relationship between the Lenders
and the Company and NCFC and shall not be divulged to any Person other than the
Agent, the Lenders, their respective Affiliates and their respective officers,
directors, employees and agents, except: (a) to their attorneys and accountants,
(b) in connection with the enforcement of the rights of the Agent and the
Lenders hereunder and under the other Loan Documents or otherwise in connection
with applicable litigation, (c) in connection with assignments and
participations and the solicitation of prospective assignees and participants
referred to in the immediately preceding Section, and (d) as may otherwise be
required or requested by any regulatory authority having jurisdiction over the
Agent or any Lender or by any applicable law, rule, regulation or judicial
process, the opinion of the applicable Lender's counsel concerning the making of
such disclosure to be binding on the parties hereto.  Neither the Agent nor any
Lender shall incur any liability to the Company or NCFC by reason of any
disclosure permitted by this Section 8.04.

          8.05 Releases, Amendments, Waivers, Consents and Exercise of Remedies.
               ----------------------------------------------------------------
Except as otherwise provided in this Section 8.05, any provision of this
Agreement or any other Loan Document may be amended or modified only by an
instrument or instruments in writing signed by the Required Lenders and the
Company.  Any amendment, waiver or consent reducing any principal of, or the
amount of or rate of interest on or fees with respect to the Loans or the
Commitments, postponing any date fixed for the payment of any principal of,
interest on or fees

                                     -50-
<PAGE>

with respect to the Loans or Commitments, extending the Termination Date,
releasing or subordinating any of the Collateral (except as provided in the
Pledge and Security Agreement or the Servicing Security Agreement, as
applicable), releasing the Guaranty, amending the definition of "Pro Rata
Share," "Required Lenders," "Borrowing Base" or "Warehousing Collateral Value,"
or amending Section 2.01, this Section 8.05 or any other provision hereof
specifically requiring the consent or approval or satisfaction of all of the
Lenders, may only be made by an instrument or instruments in writing signed by
all of the Lenders and the Company. In addition to the foregoing requirements,
(A) no amendment, waiver or consent shall, unless in writing and signed by the
Agent in addition to the requisite Lenders indicated above to take such action,
affect the rights or duties of the Agent under this Agreement or any Loan
Document, and (B) no amendment may increase any Lender's Commitment unless it is
in writing and signed by such Lender. No waiver of any provision of this
Agreement or any other Loan Document or consent to any departure by the Company
therefrom shall in any event be effective unless the same shall be in writing
and signed or consented to in writing by the requisite Lenders indicated above
and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given.

          8.06 Binding Effect; Assignments and Participations; Transferees; New
               ----------------------------------------------------------------
Lenders; Commitment Increases. (a) This Agreement shall be binding upon and
-----------------------------
inure to the benefit of the parties hereto and their respective successors and
assigns, except that the Company may not assign its rights or obligations
hereunder, under the Notes or under any other Loan Document without the prior
written consent of all of the Lenders. Each Lender may (i) grant participations
in any portion of its Note and its Commitment; and (ii) with the prior written
consent of the Agent (except in the case of an assignment by any Lender to an
Affiliate of such Lender or to another Lender), which consent shall not be
unreasonably withheld, sell, assign, transfer or otherwise dispose of any
portion of its Commitment (with a proportionate share of its outstanding Loans)
or, if its Commitment has terminated, its outstanding Loans (each such grant of
a participation or interest so sold, assigned, transferred or disposed of being
herein called a "Transferred Interest") to (y) banks chartered under the laws of
the United States or any State thereof or (z) insurance companies, other lenders
or mutual funds ("Transferees"). Upon any assignment and delegation as
contemplated in clause (ii) of the preceding sentence, (A) the Agent shall
revise Schedule 1.01(b) to reflect such assignment and delegation and distribute
such revised Schedule 1.01(b) to the Company and the Lenders, (B) the Company
shall, at the request of either the assignor or assignee Lenders, execute and
deliver new Notes to the assignor Lender (if it retains a Commitment following
such assignment) and the assignee Lender, in the principal amount of their
respective Commitments, and (C) the assignor Lender shall pay to the Agent an
assignment fee in the amount of $2,500. In addition, each Lender may pledge any
portion of its Note for security purposes to any Federal Reserve Bank. If a
Lender makes any assignment to a Transferee, then such Transferee, to the extent
of such assignment (unless otherwise provided therein), shall become a "Lender"
hereunder and shall have all the rights and obligations of the Lenders
hereunder, and the transferring Lender shall be released from its duties and
obligations under this Agreement to the extent of such assignment. Without in
any way limiting the rights of Transferees hereunder, the Company agrees that
each Transferee shall be entitled to the benefits of Sections 2.05 and 2.06 to
the extent of its Transferred Interest as if it were a "Lender" holding a
Commitment in an amount equal to such Transferred Interest, and that each
Transferee may exercise any and all rights of banker's lien, setoff and
counterclaim available pursuant to law with respect to its Transferred Interest
as fully as if such Transferee were a direct lender to the Company.
Notwithstanding the

                                     -51-
<PAGE>

sale by a Lender of any participation hereunder, (i) no participant shall be
deemed to be or have the rights and obligations of a Lender hereunder except as
provided in the preceding sentence and (ii) no Lender shall, in connection with
selling any such participation, condition such Lender's rights in connection
with consenting to amendments or granting waivers concerning any matter under
any Loan Document upon obtaining the consent of such participant other than on
matters relating to (A) any reduction in the amount of any principal of, or the
amount of or rate of interest on, any Note or Loan in which such participation
is sold, (B) any postponement of the date fixed for any payment of principal of
or interest on any Note or Loan, or the termination of any Commitment, in which
such participation is sold, or (C) the release or subordination of any material
portion of any collateral other than pursuant to the terms of any Loan Document.

          (b)  From time to time, the Company may agree, with the prior
written consent of the Agent, to (i) permit a Lender to increase its Commitment
Amount, or (ii) add a bank chartered under the laws of the United States or any
State thereof, an insurance company, another lender or a mutual fund (a "New
Bank") as a "Lender" under this Agreement with a Commitment, for the purpose of
increasing the aggregate amount of the Commitments; provided that upon giving
                                                    --------
effect to any such new Commitment, the Commitment Amount of the New Bank shall
not be less than $10,000,000; and provided, further, that the aggregate
                                  --------  -------
Commitment Amounts, after giving effect to any such increase, shall not exceed
$400,000,000. The Company and each Lender increasing its Commitment Amount or
New Bank shall agree on the date as of which the increased Commitment Amount or
the New Bank's Commitment Amount shall become effective, and each New Bank shall
execute and deliver an instrument in the form prescribed by the Agent to
evidence its agreement to be bound by this Agreement and the other Loan
Documents. Upon the effective date of an increase in any Lender's Commitment
Amount or inclusion of a New Bank as a lender under this Agreement, the Agent
shall deliver to the Company and each of the Lenders a revised Schedule 1.01(b)
reflecting the revised aggregate Commitment Amounts and the Company shall
execute and deliver to the Lender increasing its Commitment Amount or the New
Bank a Note.

          8.07 Governing Law and Construction. THE VALIDITY, CONSTRUCTION AND
               ------------------------------
ENFORCEABILITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA, WITHOUT GIVING EFFECT TO
CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE
UNITED STATES APPLICABLE TO NATIONAL BANKS. Whenever possible, each provision of
this Agreement and the other Loan Documents and any other statement, instrument
or transaction contemplated hereby or thereby or relating hereto or thereto
shall be interpreted in such manner as to be effective and valid under such
applicable law, but, if any provision of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto shall be held to be prohibited or
invalid under such applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement, the other Loan
Documents or any other statement, instrument or transaction contemplated hereby
or thereby or relating hereto or thereto.

          8.08 Consent to Jurisdiction. AT THE OPTION OF THE AGENT, THIS
               -----------------------
AGREEMENT AND THE OTHER LOAN DOCUMENTS MAY BE ENFORCED IN ANY

                                     -52-
<PAGE>

FEDERAL COURT OR MINNESOTA STATE COURT SITTING IN HENNEPIN COUNTY, MINNESOTA;
AND THE COMPANY CONSENTS TO THE JURISDICTION AND VENUE OF ANY SUCH COURT AND
WAIVES ANY ARGUMENT THAT VENUE IN SUCH FORUMS IS NOT CONVENIENT. IN THE EVENT
THE COMPANY COMMENCES ANY ACTION IN ANOTHER JURISDICTION OR VENUE UNDER ANY TORT
OR CONTRACT THEORY ARISING DIRECTLY OR INDIRECTLY FROM THE RELATIONSHIP CREATED
BY THIS AGREEMENT, THE AGENT AT ITS OPTION SHALL BE ENTITLED TO HAVE THE CASE
TRANSFERRED TO ONE OF THE JURISDICTIONS AND VENUES ABOVE-DESCRIBED, OR IF SUCH
TRANSFER CANNOT BE ACCOMPLISHED UNDER APPLICABLE LAW, TO HAVE SUCH CASE
DISMISSED WITHOUT PREJUDICE.

          8.09  Waiver of Jury Trial.  THE COMPANY, THE AGENT AND EACH LENDER
                --------------------
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.


          8.10  Survival of Agreement. All representations, warranties,
                ---------------------
covenants and agreement made by the Company or NCFC herein or in the other Loan
Documents and in the certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be deemed to have been relied upon by the Lenders and shall survive the making
of the Loans by the Lenders and the execution and delivery to the Agent by the
Company and NCFC of the Loan Documents, regardless of any investigation made by
or on behalf of the Lenders, and shall continue in full force and effect as long
as any Obligation is outstanding and unpaid and so long as the Commitments have
not been terminated; provided, however, that the obligations of the Company
under Sections 2.05, 2.06 and 8.03 shall survive payment in full of the
Obligations and the termination of the Commitments.

          8.11  Captions.  The captions or headings herein and any table of
                --------
contents hereto are for convenience only and in no way define, limit or describe
the scope or intent of any provision of this Agreement.

          8.12  Entire Agreement. This Agreement and the other Loan Documents
                ----------------
embody the entire agreement and understanding between the Company, the Agent and
the Lenders with respect to the subject matter hereof and thereof. This
Agreement supersedes all prior agreements and understandings relating to the
subject matter hereof. Nothing contained in this Agreement or in any other Loan
Document, expressed or implied, is intended to confer upon any Persons other
than the parties hereto any rights, remedies, obligations or liabilities
hereunder or thereunder.

          8.13  Counterparts.  This Agreement may be executed in any number of
                ------------
counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.

          8.14  Company Acknowledgments. The Company hereby acknowledges that
                -----------------------
(a) it has been advised by counsel in the negotiation, execution and delivery of
this Agreement and the

                                     -53-
<PAGE>

other Loan Documents, (b) neither the Agent nor any Lender has any fiduciary
relationship to the Company, the relationship being solely that of debtor and
creditor, (c) no joint venture exists between the Company, the Agent or any
Lender, and (d) neither the Agent nor any Lender undertakes any responsibility
to the Company to review or inform the Company of any matter in connection with
any phase of the business or operations of the Company and the Company shall
rely entirely upon its own judgment with respect to its business, and any
review, inspection or supervision of, or information supplied to, the Company by
the Lenders is for the protection of the Lenders and neither the Company nor any
third party is entitled to rely thereon.

          8.15  Exiting Lenders. On the Effective Date, the aggregate unpaid
                ---------------
principal amount of the Existing Warehousing Loans were made by each Exiting
Lender under the Existing Credit Agreement and related Note issued to such
Exiting Lender thereunder together with all interest, facility fees provided for
by Section 2.01(h) hereto and other amounts, if any, payable to such Exiting
Lender thereunder as of the Effective Date (as to any Exiting Lender, its
"Payoff Amount"), shall be repaid in full from the proceeds of Warehousing Loans
made by the Lenders, and the commitments of the Exiting Lenders under the
Existing Credit Agreement shall terminate. The Company shall give the Agent
notice pursuant to Section 2.01(b) with respect to such Existing Warehousing
Loans. The Agent shall distribute to each Exiting Lender by not later than 3:00
P.M. (Minneapolis time) on the Effective Date out of the proceeds of the
Warehousing Loans made for such purpose, the amount required to pay such Exiting
Lender's Payoff Amount in full, whereupon: (a) such Exiting Lender shall no
longer be a party to the Existing Credit Agreement (except to the extent
provided in Section 8.10 thereof with respect to the survival of certain
provisions, which shall remain in effect as to the Exiting Lenders); and (b)
such Exiting Lenders shall not be deemed to be a "Lender" for any purpose
hereunder.

          8.16  Amendments, Waivers and Modification Fees. The Company agrees to
                -----------------------------------------
pay to the Agent for the account of each Lender which provides its written
consent to an amendment, waiver or other modification of the Loan Documents on
or before the date such amendment, waiver or other modification becomes
effective as a result of the written approval thereof by the requisite number of
Lenders required by the Loan Documents, a processing fee of $1,500, said fee to
be payable promptly following such effective date; provided, however, that such
fee shall not apply to the first two such amendments, waivers or other
modifications hereunder during any continuous one year period (calculated from
the date of this Agreement).

        -54-
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.


                              NEW CENTURY MORTGAGE CORPORATION

                              By: /s/ Edward F. Gotschall
                                 --------------------------------
                              Its: CFO
                                  -------------------------------

                              Address for Notices:
                              -------------------

                              18400 Von Karman
                              Suite 1000
                              Irvine, California 92612
                              Attention: Brad A. Morrice
                              Telephone Number:  (949) 224-5757
                              Telecopier Number: (949) 440-7033

                              U.S. BANK NATIONAL ASSOCIATION

                              By: /s/ David Peterson
                                 --------------------------------
                              Its: Senior Vice President
                                  -------------------------------

                              Address for Notices:
                              -------------------

                              Mortgage Banking Services Division
                              Mail Station MPFP 0508
                              601 Second Avenue South
                              Minneapolis, Minnesota 55402
                              Attention:  Edwin D. Jenkins
                              Telephone Number:  (612) 973-0588
                              Telecopier Number: (612) 973-0826

                                     -55-
<PAGE>

                              GUARANTY FEDERAL BANK, F.S.B.


                              By: /s/ W. James Meintjes
                                 ------------------------------
                              Its: Vice President
                                  -----------------------------

                              Address for Notices:
                              -------------------

                              8333 Douglas Ave.
                              Dallas, Texas 75225
                              Attention: W. James Meintjes
                              Telephone Number:  (214) 360-2845
                              Telecopier Number: (214) 360-1660

                              COMERICA BANK

                              By: /s/ David R. Chirchill
                                 -----------------------------------
                              Its: Assistant Vice President
                                  ----------------------------------

                              Address for Notices:
                              -------------------

                              55 Almaden Blvd.
                              San Jose, California 95113
                              Attention:  David Chirchill
                              Telephone Number:  (408) 278-8288
                              Telecopier Number: (408) 278-8289

                              RESIDENTIAL FUNDING CORPORATION


                              By: /s/ illegible
                                 -----------------------------------
                              Its: Director
                                  ----------------------------------

                              Address for Notices:
                              -------------------

                              10 Universal City Plaza
                              Suite 2100
                              Universal City, CA 91608
                              Attention: Wendy Joseph
                              Telephone Number:  (818) 753-4430
                              Telecopier Number: (818) 985-7344

                                      S-1
<PAGE>

                              BANK ONE, TEXAS, N.A.

                              By: /s/ Gregory  illegible
                                 ---------------------------------------
                              Its: Assistant Vice President
                                  --------------------------------------

                              Address for Notices:
                              -------------------

                              1717 Main Street, 4th Floor
                              Dallas, TX 75201
                              Attention: Mark Freeman
                              Telephone Number:  (214) 290-2780
                              Telecopier Number: (214) 290-2054


                              BANK UNITED

                              By: /s/ Michelle Perrin
                                 ---------------------------------------
                              Its: VP - MBF
                                  --------------------------------------


                              Address for Notices:
                              -------------------

                              10352 Cowan Heights Drive
                              Santa Ana, CA 92705
                              Attention: Michelle Perrin
                              Telephone Number:  (714) 544-5118
                              Telecopier Number: (714) 544-5695
<PAGE>

                              UNION BANK OF CALIFORNIA, N.A.

                              By: /s/ Robin Courtney
                                 -------------------------------------
                              Its: Senior Vice President
                                  ------------------------------------


                              Address for Notices:
                              -------------------

                              350 California Street, 6th Floor
                              San Francisco, CA 94104
                              Attention: Robin Courtney
                              Telephone Number:  (415) 705-7565
                              Telecopier Number: (415) 705-5093
<PAGE>

EXHIBITS

A    Form of Compliance/Borrowing Base Certificate

B    Form of Confirmation of Borrowing/Paydown/Conversion

C    Reaffirmation of Pledge and Security Agreement

D    Reaffirmation of Servicing Security Agreement

E    Formula for Determining Warehousing Collateral Value

F    Form of Note

G    Reaffirmation of Guaranty

G-1  Reaffirmation of NCC Guaranty

H    Closing Agent Instructions

I    Matters to be Covered by Opinion of Counsel to the Company and NCFC at
     closing

J    Operational Certificate

K    Acknowledgment of Exiting Lender
<PAGE>

SCHEDULES

1.01(a)   Underwriting Guidelines

1.01(b)   Commitment Amounts

2.01(j)   Effective Date Fees

3.01      Subsidiaries

3.05      Litigation

4.09      Existing Liens
<PAGE>

                                                                    EXHIBIT A TO
                                                              FOURTH AMENDED AND
                                                       RESTATED CREDIT AGREEMENT

                                    FORM OF
                     COMPLIANCE/BORROWING BASE CERTIFICATE


U.S. Bank National Association            Bank One, Texas, N.A.
601 Second Avenue South                   1717 Main Street, 4th Floor
Minneapolis, Minnesota 55402              Dallas, Texas 75214
Attention:  Mortgage Banking Services     Attention:
            Division

Guaranty Federal Bank, F.S.B.             Residential Funding Corporation
8333 Douglas Avenue                       10 Universal City Plaza, Suite 2100
Dallas, Texas  75225 Universal City,
CA 91608
Attention:________________________        Attention:________________________

Comerica Bank                             Bank United
55 Almaden Blvd.                          10352 Cowan Heights Drive
San Jose, California 95113                Santa Ana, CA 92705
Attention:________________________        Attention:

Union Bank of California, N.A.
350 California Street, 11th Floor
San Francisco, CA 94104
Attention:________________________
Ladies and Gentlemen:


          We submit this certificate to you in accordance with the terms of
Section 4.01(c)(ii) of the Fourth Amended and Restated Credit Agreement dated as
of May 26, 1999 (as the same may be amended, supplemented or restated from time
to time, the "Credit Agreement") between New Century Mortgage Corporation, the
lenders party thereto (the "Lenders") and U.S. Bank National Association, as
Agent for the Lenders (in such capacity, the "Agent").  Each capitalized term
used herein and not defined herein has the same meaning ascribed to such term in
the Credit Agreement or in Exhibit E thereto.

          The undersigned hereby certifies the following as of the close of
business on __________________, 199_:

1.   The Borrowing Base was calculated as follows:
     --------------------------------------------

     Warehousing Collateral Value
     ----------------------------

                                      A-1
<PAGE>

     (a)  Eligible Mortgage Loans                  $______________

          "C" Mortgages                            $______________
          "C-" Mortgages                           $______________
          Mortgages with an Original Principal
          Balance in Excess of $207,000
          ("Jumbo Mortgages")                      $______________

                                      A-2
<PAGE>

Less:
----

     (b)  Pledged Mortgage Loans with No Collateral Value        $______________
            180 days or more since origination or
              acquisition                                        $______________
            90 days or more in warehouse                         $______________

          Promissory Note and/or Collateral Documents
            not returned or purchased by an Investor
            (45 days)                                            $______________

          Collateral Document not returned (21 days)             $______________
          In default (one full reporting period)                 $______________
          Requested documents not delivered
            (5 Business Days)                                    $______________
          Promissory Note and/or Collateral Documents
            not delivered (wet funding loans;
            7 Business Days)                                     $______________

          Wet funding loans in excess of sublimit                $______________

          Wet funding loans not closed                           $______________

                                      A-3
<PAGE>

          Jumbo Mortgages in excess
          of applicable sublimit                                 $_____________
          Second Mortgages in excess
          of applicable sublimit                                 $_____________

          High LTV (100%+) Second Mortgages
          in excess of applicable sublimit                       $_____________

          Not marketable                                         $_____________

          Agent does not have perfected, first priority          $_____________
          security interest

          Other ineligible                                       $_____________

     (c)  Total ((a) - (b))                                      $_____________
          Less 2.5%                                              $_____________$

     Plus:
     ----

     (d)  Eligible Servicing Receivables:                        $

          Pool P&I Payment Receivables                           $

          T&I Receivables                                        $

          Foreclosure Advance Receivables                        $

     Less:
     ----

     (e)  Eligible Servicing Receivables with No
          Collateral Value:                                      $

          Unpaid beyond permitted period                         $

          Disputed                                               $

          Servicing Agreement Default/Termination                $

          Agent does not have perfected, first
          priority security interest                             $

     (f)  Total ((d) - (e))                                      $

                                      A-4
<PAGE>

          80% of Total                                        $____________$

     (g)  Other Assets                                                     $

     TOTAL WAREHOUSING BORROWING BASE                                      $

2.   Leverage Ratio Requirements of Section 4.16:
     --------------------------------------------

     Company Leverage Ratio

          (i)  Maximum ratio permitted by Section 4.16 as     8 to 1
               of the last day of any fiscal quarter:

          (ii) The ratio of Total Liabilities to Tangible Net
               Worth at such date:

               Total Liabilities at such date:                $
                         to
                         --
               Tangible Net Worth at such date                $______ = ___ to 1

     NCFC Quarterly Average Leverage Ratio

          (i)  Maximum ratio permitted by Section 4.16 on
               last day of each fiscal quarter:               10.0 to 1.0

          (ii) The ratio of Total Liabilities (average daily
               amount outstanding during the fiscal
               quarter) to Tangible Net Worth (average
               Tangible Net Worth at end of each month
               during the quarter)
               Tangible Net Worth at the end of each
               month during the quarter)

               Total Liabilities (average daily amount
               outstanding during the quarter)                $

               Tangible Net Worth (average of
               Tangible Net Worth at the end of each
               month during the quarter                       $______ = ___ to 1

     NCFC Daily Leverage Ratio

          (i)  Maximum ratio permitted by Section 4.16
               on any day:                                            15 to 1

                                      A-5
<PAGE>

          (ii) The ratio of Total Liabilities (highest
               day during month) to Tangible
               Net Worth:

               Total Liabilities (highest day during month)  $

               Tangible Net Worth at the end of
               preceding month                               $______ = ___ to  1

     NCFC Adjusted Leverage Ratio

          (i)  Maximum ratio permitted by Section 4.16
               on the last day of each fiscal quarter        8 to 1

          (ii) The ratio of Total Liabilities to Adjusted
               Tangible Net Worth:
               Total Liabilities at such date                $

               Adjusted Tangible Net Worth
               at such date                                  $______ = ___ to  1

3.   Net Worth Requirements of Section 4.14:
     ---------------------------------------

     (a)  Minimum Tangible Net Worth of the Company
          required by Section 4.14

          (i)   Greater of $40,000,000; or

          (ii)  85 % of Tangible Net Worth
                Worth at Prior Fiscal Year End               $

                plus
                ----

                90% of capital contributions made
                during such Fiscal Year                      $

                plus
                ----

                                      A-6
<PAGE>

                50% of year-to-date net income              $_________
                Total                                       $

     (b)  Tangible Net Worth at the end of the most
          recently concluded fiscal month:

          (i)   Net Worth of the Company at
                such date:                                  $_________

                less
                ----
          (ii)  Intangible assets at such date
                consisting of:
                Goodwill:                                   $_________
                Other Intangibles:                          $_________

          Total                                             $

     (c)  Minimum Tangible Net Worth of NCFC
          required by Section 4.14

          (i)   Greater of $55,000,000; or

          (ii)  85 % of Tangible Net Worth
                Worth at Prior Fiscal Year End              $_________

                plus
                ----

                90% of capital contributions made
                during such Fiscal Year                     $_________

               plus
               ----

                50% of year-to-date net income              $_________

               Total                                        $

     (d)  Tangible Net Worth at the end of the most
          recently concluded fiscal month:
          (i)   Net Worth of NCFC at
                such date:                                  $_________
                less
                ----
          (ii)  Intangible assets at such date

                                      A-7
<PAGE>

               consisting of:
               Goodwill:                               $_________
               Other Intangibles:                      $_________

          Total                                        $

4.   Minimum Liquidity under Section 4.15:
     ------------------------------------

     (a)  Minimum Cash plus Available
          Borrowings as of the most
          recently concluded fiscal month:             $10,000,000

     (b)  Cash on hand as of such date:                $_________
          Available Borrowings as of such date:        $_________

          Total                                        $

5.   (a)  The undersigned is the duly elected chief financial officer of the
          Company;

     (b)  The undersigned has reviewed the terms of the Credit Agreement and has
          made, or has caused to be made under the supervision of the
          undersigned, a detailed review of the transactions and conditions of
          the Company during the accounting period covered by this Certificate;
          and

     (c)  These examinations did not disclose, and the undersigned has no
          knowledge, whether arising out of such examinations or otherwise, of
          the existence of any condition or event that constitutes an Event of
          Default or an Unmatured Event of Default during or at the end of the
          accounting period covered by this Certificate, except as described in
          a separate attachment to this Certificate, the exceptions listing, in
          detail, the nature of the condition or event, the period during which
          it has existed and the action that the Company has taken, is taking,
          or proposes to take with respect to each such condition or event.

6.   Attached hereto is a schedule of the "Pledged Mortgage Loans" (as defined
     in the Pledge and Security Agreement) that have no Warehousing Collateral
     Value at the date hereof.

Dated: _______, 199___             NEW CENTURY MORTGAGE CORPORATION


                                   By

                                   Its

                                      A-8
<PAGE>

                                                                    EXHIBIT B TO
                                                              FOURTH AMENDED AND
                                                       RESTATED CREDIT AGREEMENT


                            FORM OF CONFIRMATION OF
                         BORROWING/PAYDOWN/CONVERSION
                         ----------------------------



                            [On Company Letterhead]


                                    [Date]


U.S. Bank National Association,
  as Agent
601 Second Avenue South
Minneapolis, Minnesota  55402
Attention:  Mortgage Banking Services Division

     Re:  Confirmation of Borrowing/Paydown/Conversion

Ladies and Gentlemen:

          Reference is made to the Fourth Amended and Restated Credit Agreement
dated as of May 26, 1999 (as said Agreement may be amended, supplemented or
restated from time to time, the "Credit Agreement"), between New Century
Mortgage Corporation (the "Company"), the Lenders party thereto and U.S. Bank
National Association ("USBNA") as Agent for the Lenders (in such capacity, the
"Agent").  Each capitalized term used herein shall have the  meaning ascribed to
such term in the Credit Agreement.

          The Company and the undersigned hereby confirm and certify to the
Agent as follows:

          1.   The undersigned is authorized to submit this Confirmation of
Borrowing/Paydown/Conversion on behalf of the Company.

          2.   On ______________________________ , 19__, the Company (a)
requested the Lenders to make Warehousing Loans in the aggregate principal
amount of $_______________________, (b) requested USBNA to make a Swingline Loan
in the aggregate principal amount of $_______________________, (c) made
principal payments on outstanding Warehousing Loans in the aggregate

                                      B-1
<PAGE>

amount of $______________________, or (d) converted outstanding Advances to
outstanding Advances of another type,/1// as follows:


                                      Warehousing Credit
                                      ------------------

                               Reference Rate  Eurodollar Rate  Fixed Rate
                               -------------------------------------------

Advance                          _____________      ____________    ___________
Payment                          _____________      ____________    ___________
Net Amount Outstanding
                                 =============      ============    ===========
Interest Rate                    _____________%     ____________%   ___________%


          3.   In connection with any requested Warehousing Loans or Swingline
Loans, please disburse $_____________________ as follows [include wire
instructions]:

          4.   In connection with any requested Warehousing Loans or Swingline
Loans:  (a) no Event of Default or Unmatured Event of Default has occurred or
will exist upon the making of any such Warehousing Loans or Swingline Loans; (b)
the representations and warranties contained in Section 3 of the Credit
Agreement, in Section 5 of the Pledge and Security Agreement, in Section 4 of
the Servicing Security Agreement, in Section 15 of the Guaranty and in Section
15 of the NCCC Guaranty are true and correct in all material respects with the
same force and effect as if made on and as of the date hereof; and (c) after
giving effect to the Warehousing Loans or Swingline Loans requested herein, the
sum of the outstanding principal balance under the Notes shall not exceed the
Borrowing Base.


                              Very truly yours,

                              NEW CENTURY MORTGAGE CORPORATION

                              By

                              Its

____________________

/1//   For purposes of this Certificate, Advances being converted shall be
       described as principal payments, and the new Advances into which such
       Advances are being converted shall be described as new Advances.

                                      B-2
<PAGE>

                                                                    EXHIBIT C TO
                                                              FOURTH AMENDED AND
                                                       RESTATED CREDIT AGREEMENT


                       NEW CENTURY MORTGAGE CORPORATION
                REAFFIRMATION OF PLEDGE AND SECURITY AGREEMENT


     Reference is made to that certain Pledge and Security Agreement (the
"Pledge and Security Agreement") dated as of May 29, 1998, made and given by the
undersigned to secure the Obligations, Lease Obligations and Letter of Credit
Obligations (as defined in the Prior Credit Agreement and Pledge and Security
Agreement) of New Century Mortgage Corporation (the "Company") or New Century
Financial Corporation ("NCFC") in connection with that certain Third Amended and
Restated Credit Agreement dated as of May 29, 1998 by and among the Company, the
lenders which are parties thereto (the "Lenders") and U.S. Bank National
Association, a national banking association, as agent for the Lenders (in such
capacity, the "Agent") (the "Prior Credit Agreement").

     The undersigned hereby (a) agrees that the obligations of the undersigned
under the Fourth Amended and Restated Credit Agreement dated as of May 26, 1999
(the "New Credit Agreement") constitute "Obligations" within the meaning of the
Pledge and Security Agreement and (b) agrees and reaffirms that the collateral
pledged pursuant to the Pledge and Security Agreement ("Pledged Collateral")
secures, among other things, the undersigned's obligations and duties under the
New Credit Agreement, as the same may be amended from time to time, and the
obligations of the undersigned under the Pledge and Security Agreement.  The
undersigned further reaffirms that all of the terms, covenants and conditions of
the Pledge and Security Agreement remain in full force and effect.


Dated: May 26, 1999                NEW CENTURY MORTGAGE CORPORATION


                                   By:_________________________
                                   Its:________________________
<PAGE>

                                                                    EXHIBIT D TO
                                                                CREDIT AGREEMENT


                       NEW CENTURY MORTGAGE CORPORATION
                 REAFFIRMATION OF SERVICING SECURITY AGREEMENT


     Reference is made to that certain Servicing Security Agreement (the
"Servicing Security Agreement") dated as of May 29, 1998, made and given by the
undersigned to secure the Obligations, Lease Obligations and Letter of Credit
Obligations (as defined in the Prior Credit Agreement and Servicing Security
Agreement) of New Century Mortgage Corporation (the "Company") or New Century
Financial Corporation ("NCFC") in connection with that certain Third Amended and
Restated Credit Agreement dated as of May 29, 1998 by and among the Company, the
lenders which are parties thereto (the "Lenders") and U.S. Bank National
Association, a national banking association, as agent for the Lenders (in such
capacity, the "Agent") (the "Prior Credit Agreement").

     The undersigned hereby (a) agrees that the obligations of the undersigned
under the Fourth Amended and Restated Credit Agreement dated as of May 26, 1999
(the "New Credit Agreement") constitute "Obligations" within the meaning of the
Servicing Security Agreement and (b) agrees and reaffirms that the collateral
pledged pursuant to the Servicing Security Agreement ("Pledged Collateral")
secures, among other things, the undersigned's obligations and duties under the
New Credit Agreement, as the same may be amended from time to time, and the
obligations of the undersigned under the Servicing Security Agreement.  The
undersigned further reaffirms that all of the terms, covenants and conditions of
the Servicing Security Agreement remain in full force and effect.

Dated: May 26, 1999           NEW CENTURY MORTGAGE CORPORATION


                              By:_________________________
                              Its:________________________
<PAGE>

                                                                    EXHIBIT E TO
                                                              FOURTH AMENDED AND
                                                       RESTATED CREDIT AGREEMENT

                            FORMULA FOR DETERMINING
                         WAREHOUSING COLLATERAL VALUE
                         ----------------------------


               "Warehousing Collateral Value": at the time of any determination
                ----------------------------
as it pertains to the following described types or kinds of assets which
constitute Warehousing Collateral:

               (1)  A Mortgage Loan the entire interest in which is owned by the
Company and which is an Eligible Mortgage Loan covering a completed residential
property, provided that such Mortgage Loan has been pre-approved for purchase
          --------
under a Take-Out Commitment and the aggregate available amount of such Take-Out
Commitment is not less than the aggregate outstanding principal amount of
Mortgage Loans pre-approved for delivery thereunder, and provided that at the
time such Mortgage Loan was pledged under the Pledge and Security Agreement not
more than 180 days had elapsed from the date such Mortgage Loan was closed: the
least of: (i) the purchase price under the Take-Out Commitment to which such
Mortgage Loan has been assigned or, if such Mortgage Loan has not been so
assigned, the weighted average purchase price for Mortgage Loans under Take-Out
Commitments under which such Mortgage Loan has been pre-approved for delivery,
less three percent (3%) of the original principal balance, (ii) the unpaid
----
principal amount of such Mortgage Loan, or (iii) at the election of the Agent,
the Fair Market Value of such Mortgage Loan, less three percent (3%) of the
                                             ----
original principal balance.

               (2)  All Eligible Servicing Receivables owned by the Company:
eighty percent (80%) of the sum of the amount of all Eligible Servicing
Receivables.

               (3)  Such other assets of the Company as the Company shall offer
to the Required Lenders and as the Required Lenders shall accept in their sole
discretion as Warehousing Collateral: the amount of Warehousing Collateral Value
which the Required Lenders in their sole discretion assign thereto.

Notwithstanding the foregoing:

               (i)  the maximum aggregate Warehousing Collateral Value of all
Mortgage Loans which have been closed and funded under Agreements to Pledge, and
with respect to which the Agent has not received the instruments and documents
described in paragraph 2 of the related Collateral Identification Letters, shall
be not more than (a) during each Month-End Period, forty percent (40%) of the
aggregate Commitment Amounts and (b) at all other times, twenty-five percent
(25%) of the aggregate Commitment Amounts;

                                      E-1
<PAGE>

               (ii)      the maximum aggregate Warehousing Collateral Value of
Mortgage Loans with original principal balances in excess of $240,000 shall not
exceed thirty-five percent (35%) of the aggregate Commitment Amounts;

               (iii)     the maximum aggregate Warehousing Collateral Value of
Mortgage Loans with original principal balances of $500,000 or greater but less
than $750,000 shall not exceed twenty percent (20%) of the aggregate Commitment
Amounts;

               (iv)      the maximum aggregate Warehousing Collateral Value of
Mortgage Loans with original principal balances of $750,000 or greater shall not
exceed ten percent (10%) of the aggregate Commitment Amounts;

               (v)       the maximum aggregate Warehousing Collateral Value of a
single Mortgage Loan shall not exceed $1,000,000;

               (vi)      the maximum aggregate Warehousing Collateral Value of
all Mortgage Loans with a Risk Rating of C- or C shall not exceed thirty-five
percent (35%) of the aggregate Commitment Amounts;

               (vii)     the maximum aggregate Warehousing Collateral Value of
all Mortgage Loans with a Risk Rating of C- shall not exceed fifteen percent
(15%) of the aggregate Commitment Amounts;

               (viii)    the maximum aggregate Warehousing Collateral Value of
all Mortgage Loans secured by Second Mortgages shall not exceed ten percent
(10%) of the aggregate Commitment Amounts;

               (ix)      the maximum aggregate Warehousing Collateral Value of
all Mortgage Loans secured by Second Mortgages which have a Loan-to-Value Ratio
of greater than 100% shall not exceed five percent (5%) of the aggregate
Commitment Amounts;

               (x)       the maximum aggregate Warehousing Collateral Value of
all Eligible Servicing Receivables shall not exceed five percent (5%) of the
aggregate Commitment Amounts; and

               (xi)      the portion of the Warehousing Collateral Value of all
Eligible Servicing Receivables consisting of Foreclosure Advance Receivables
shall not exceed two and one-half percent (2.5%) of the aggregate Commitment
Amounts.

               A Mortgage Loan, or Mortgage-backed Security issued in
consideration of a Mortgage Loan, will be considered as having no Warehousing
Collateral Value if, as to any such Mortgage Loan, any of the following events
occur:

               (a)       more than 90 days elapse from the date on which the
Mortgage Note and other documents relating to such Mortgage Loan were delivered
to the Agent in accordance with Sections 4.01 and 4.02 of the Pledge and
Security Agreement;

                                      E-2
<PAGE>

               (b)  21 or more days elapse from the date a document relating to
such Mortgage Loan was delivered to the Company for correction in accordance
with Section 10.01 of the Pledge and Security Agreement and such document has
not been returned to the Agent;

               (c)  45 or more days elapse from the date such Mortgage Loan was
delivered to an Investor pursuant to Section 10.02 of the Pledge and Security
Agreement for examination and purchase under a Take-Out Commitment and such
Mortgage Loan has not been returned to the Agent;

               (d)  more than one payment on such Mortgage Loan is delinquent,
as reported on any Compliance/Borrowing Base Certificate delivered to each
Lender pursuant to Section 4.01(c)(ii) of the Credit Agreement, such Mortgage
Loan has been rescinded, canceled or avoided, or such Mortgage Loan is subject
to any rights of rescission, cancellation or avoidance or to any counterclaims,
offsets or defenses, whether by operation of law or otherwise;

               (e)  the Company fails to deliver any document relating to such
Mortgage Loan within five Business Days after being requested to do so by the
Agent pursuant to Section 4.03 of the Pledge and Security Agreement;

               (f)  such Mortgage Loan was listed on a Loan Detail Listing
delivered to the Agent with an Agreement to Pledge and a Collateral
Identification Letter, and such Mortgage Loan shall not have closed on or before
the close of business on the Business Day on which such Loan Detail Listing was
delivered;

               (g)  such Mortgage Loan was closed and funded with the proceeds
of a Warehousing Loan under an Agreement to Pledge and the Company fails to
deliver to the Agent, with respect to such Mortgage Loan, within seven Business
Days after the date of such Agreement to Pledge, the documents referred to in
Section 4.02 of the Pledge and Security Agreement;

               (h)  the Agent, for the benefit of the Lenders, does not have a
perfected, first priority security interest in such Mortgage Loan;

               (i)  the Agent notifies the Company that in its reasonable
opinion such Mortgage Loan is not marketable and will not be given Warehousing
Collateral Value;

               (j)  such Mortgage Loan has a Risk Rating lower than C-; or

               (k)  such Mortgage Loan was closed and funded more than one
hundred eighty (180) days prior to the date the Mortgage Note and other
documents relating to such Mortgage Loan were delivered to the Agent in
accordance with Section 4.02 of the Pledge and Security Agreement.

               An Eligible Servicing Receivable shall cease to have Warehousing
Collateral Value if:

                                      E-3
<PAGE>

               (i)    such receivable is not paid (A) in the case of a Pool P&I
Payment Receivable, on or before the first Business Day of the first P&I Cleanup
Period beginning after the date the related Pool P&I Payment was made, (B) in
the case of a T&I Receivable, one hundred eighty (180) days after the date of
the related T&I Payment, and (C) in the case of a Foreclosure Advance
Receivable, two hundred seventy (270) days after the date foreclosure or
bankruptcy proceedings with respect to the related Mortgage Loan commenced;

               (ii)   such receivable is disputed by any Person, or the Company
obtains knowledge of any grounds for any such dispute;

               (iii)  the Servicing Contract under which such receivable arose
terminates, or any party under such Servicing Contract asserts a right to
terminate such Servicing Contract, for any reason;

               (iv)   the Company fails to comply with any of the requirements
of the Credit Agreement or the Servicing Security Agreement with respect
thereto; or

               (v)    the Agent, for the benefit of the Lenders, does not have a
perfected, first priority security interest in such receivable or the related
Servicing Contract.

               As used in the foregoing definition of Warehousing Collateral
Value and all defined terms used therein and in the following defined terms, all
terms defined in the Credit Agreement are used as therein defined and, in
addition, the following terms shall have the following respective meanings:

               "Agreement to Pledge": as defined in the Pledge and Security
                -------------------
Agreement.

               "Appraised Value": with respect to an interest in real estate,
                ---------------
the then current fair market value thereof as of a recent date, as determined in
accordance with accepted methods of appraising by a qualified appraiser who is a
member of the American Institute of Real Estate Appraisers or other group of
professional appraisers.

               "Approved Second Mortgage Investor":  an Investor that has been
                ---------------------------------
approved in writing by Agent for the purchase of Mortgage Loans secured by
Second Mortgages.

               "Collateral Identification Letter": as defined in the Pledge and
                --------------------------------
Security Agreement.

               "Eligible Mortgage Loan": a closed-end Mortgage Loan secured by a
                ----------------------
First Mortgage or a Second Mortgage on improved real estate in an original
principal amount not in excess of (a) in the case of Mortgage Loans secured by
First Mortgages, 80% of the Appraised Value of such real estate, and (b) in the
case of Mortgage Loans secured by Second Mortgages, 80% of the Appraised Value
of such real estate minus the amount of the Mortgage Loan secured by the First
Mortgage thereon, unless either (i) the amount of such Mortgage Loan in excess
of the maximum set forth above is insured, or is subject to a commitment to be
insured, by an insurer approved by the Agent, or (ii) such Mortgage Loan (A) has
a Loan-to-Value Ratio of not

                                      E-4
<PAGE>

more than 100%, in the case of a Mortgage Loan secured by a First Mortgage, or
125% in the case of a Mortgage Loan secured by a Second Mortgage, (B) in the
case of Mortgage Loans secured by a First Mortgage, satisfies the underwriting
guidelines or other applicable standards of the Investor referenced in clause
(C) below for a Risk Rating of at least "C-", or in the case of Mortgage Loans
secured by a Second Mortgage, is underwritten in accordance with the applicable
Underwriting Guidelines, (C) in the case of a Mortgage Loan secured by a Second
Mortgage, has been pre-approved by an Approved Second Mortgage Investor for
purchase under a Take-Out Commitment, (D) in the case of a Mortgage Loan secured
by a Second Mortgage, is originated or acquired pursuant to a program offered by
such Approved Second Mortgage Investor and (E) has an original principal amount
of not more than $1,000,000.

               "Eligible Servicing Receivable":  a Pool P&I Payment Receivable,
                -----------------------------
T&I Receivable or Foreclosure Advance Receivable with respect to which each of
the following statements shall be accurate and complete (and the Company, by
including any such receivable in any computation of the Borrowing Base, shall be
deemed to so represent and warrant to the Agent and the Lenders):

                    (a)  The Servicing Contract under which such receivable
arose is in full force and effect and is free of any default of the Company and
there does not exist any fact or circumstance that would entitle the investor
thereunder to terminate said Servicing Contract;

                    (b)  No Person has a Lien or other interest or claim on any
right, title or interest of the Company under the Servicing Contract under which
such receivable arose or on any right of the Company to payment thereunder;

                    (c)  Such receivable arose in connection with a servicing
advance made by or a servicing fee owed to the Company, whether on account of
principal or interest, property taxes or property insurance or otherwise,
consistent with all terms and conditions of the related Servicing Contract and
is free of any counterclaim, right of appeal or defense to payment; and

                    (d)  The pledge by the Company of its right to payment of
such receivable does not violate any requirement of law or contractual
obligation, or require the giving of notice to or obtaining the consent of any
Person, including, without limitation, the investor party to the related
Servicing Contract.

               "Fair Market Value": at any date with respect to any Mortgage
                -----------------
Loan, the bid price quoted in writing to the Agent as of the computation date by
two nationally recognized dealers selected by the Agent who at the time are
making a market in similar Mortgage Loans, multiplied, in any case, by the
outstanding principal amount thereof.

               "First Mortgage": a Mortgage which is subject to no prior or
                --------------
superior mortgage liens.

               "Foreclosure Advance":  a recoverable advance made by the Company
                -------------------
for T&I Payments or the costs of repair or enforcement in connection with the
foreclosure or other

                                      E-5
<PAGE>

enforcement of a Mortgage Loan which is part of a pool of Mortgage Loans backing
a Mortgage-backed Security being serviced by the Company under a Servicing
Contract.

               "Foreclosure Advance Receivable":  on a date of determination, a
                ------------------------------
valid, readily enforceable claim of the Company to retain amounts received or to
be received from an obligor, or out of the foreclosure proceeds, under a
Mortgage Loan serviced by the Company to reimburse the Company for a Foreclosure
Advance.

               "Loan Detail Listing": as defined in the Pledge and Security
                -------------------
Agreement.

               "Loan-to-Value Ratio":  with respect to a Mortgage Loan secured
                -------------------
by a Mortgage on improved real estate, the ratio (expressed as a percentage)
which (a) the sum of the original principal amount of such Mortgage Loan plus
the original principal amount of the Mortgage Loan that is secured by prior
Mortgages on such real estate, if any, bears to (b) the Appraised Value of such
real estate.

               "Month-End Period": the period beginning on the third to the last
                ----------------
Business Day of each month and ending on the fifth Business Day of the following
month.

               "P&I Cleanup Period":  a period beginning on or after the 15th
                ------------------
day of one month and ending on or before the 14th day of the following month
during which no Pool P&I Payment Receivables shall be included in the
calculation of Eligible Servicing Receivables.

               "Pool P&I Payment":  a recoverable payment of delinquent
                ----------------
principal or interest on a Mortgage Loan (other than a Mortgage Loan which is in
bankruptcy or in the process of foreclosure) which is part of a pool of Mortgage
Loans backing a Mortgage-backed Security and which payment the Company is
obligated to fund under a Servicing Contract.

               "Pool P&I Payment Receivable":  on a date of determination, a
                ---------------------------
valid, readily enforceable claim of the Company to retain amounts received or to
be received from an obligor under a Mortgage Loan serviced by the Company that
is currently due from such obligor to reimburse the Company for a Pool P&I
Payment.

               "Risk Rating": the risk rating of a Mortgage Loan, determined
                -----------
using the Underwriting Guidelines or other applicable standards of the Investor
to which such Mortgage Loan is to be sold by the Company under a Take-Out
Commitment previously issued to the Company by such Investor, provided such
underwriting guidelines or other applicable standards comply with industry
standards in the sole judgment of the Agent.

               "Second Mortgage": a Mortgage which is subject to one prior or
                ---------------
superior Mortgage.

               "T&I Payment":  a recoverable payment of real estate taxes or
                -----------
insurance premiums in respect of a Mortgage Loan (other than a Mortgage Loan
that is in bankruptcy or in the process of foreclosure) which is serviced by the
Company and which the Company is obligated to fund under a Servicing Contract.

                                      E-6
<PAGE>

               "T&I Receivable":  on any date of determination, a valid, readily
                --------------
enforceable claim against any obligor on any Mortgage Loan and the accounts of
such obligor for repayment of any T&I Payment made by the Company that is
currently due from such obligor to reimburse the Company for a T&I Payment.

               "Take-Out Commitment": a current, written commitment issued to
                -------------------
the Company by an Investor to purchase Mortgage Loans, at a definite price or
yield, within a specified time period.

                                      E-7
<PAGE>

                                                                    EXHIBIT F TO
                                                              FOURTH AMENDED AND
                                                       RESTATED CREDIT AGREEMENT

                            FORM OF PROMISSORY NOTE
                            -----------------------
                              (Warehousing Note)


          May 26, 1999

  $___________      Minneapolis, Minnesota


          FOR VALUE RECEIVED, NEW CENTURY MORTGAGE CORPORATION, a California
corporation, hereby promises to pay to the order of ___________________ (the
"Lender") at the main office of the Agent in Minneapolis, Minnesota, in lawful
money of the United States of America in Immediately Available Funds (as such
term and each other capitalized term used herein are defined in the Credit
Agreement hereinafter referred to), the principal sum of ___ MILLION AND NO/100
DOLLARS ($_______) or the aggregate unpaid principal amount of all Warehousing
Loans made by the Lender pursuant to the Credit Agreement described below,
whichever is less, and to pay interest in like funds from the date hereof on the
unpaid balance thereof at the rates per annum and at such times as are specified
in the Credit Agreement.  Interest (computed on the basis of actual days elapsed
and a year of 360 days) shall be payable at said office at the times specified
in the Credit Agreement.

          Principal hereof shall be payable in the amounts and at the times set
forth in the Credit Agreement.

          This note is one of the Warehousing Notes referred to in the Fourth
Amended and Restated Credit Agreement dated as of May 26, 1999, between the
undersigned, the Lender, the other lenders party thereto and U.S. Bank National
Association, as Agent (as the same may be amended, modified or restated from
time to time, the "Credit Agreement").  Unless otherwise defined herein,
capitalized terms used herein shall have the meanings given to such terms in the
Credit Agreement.  This note is subject to certain mandatory and voluntary
prepayments and its maturity is subject to acceleration, in each case upon the
terms provided in the Credit Agreement.

          The undersigned hereby waives diligence, presentment, demand, protest,
and notice (except such notice as is required under the Loan Documents) of any
kind whatsoever.  The nonexercise by the Lender of any of its rights hereunder
or under the other Loan Documents in any particular instance shall not
constitute a waiver thereof in any subsequent instance.


                                       1
<PAGE>

          This note is entitled to the benefit of the Guaranty, the NCCC
Guaranty, the Pledge and Security Agreement, the Servicing Security Agreement
and the other Loan Documents.

          THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE
OF MINNESOTA, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THEREOF BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.  In the event of
default hereunder, the undersigned agrees to pay all costs and expenses of
collection, including but not limited to reasonable attorneys' fees.

          [Notwithstanding the foregoing paragraphs and all other provisions of
this note and the Credit Agreement, none of the terms and provisions of this
note or the Credit Agreement shall ever be construed to create a contract to pay
to the Lender, for the use, forbearance or detention of money, interest in
excess of the maximum amount of interest permitted to be charged by the Lender
to the undersigned under applicable state or federal law from time to time in
effect, and the undersigned shall never be required to pay interest in excess of
such maximum amount.  If, for any reason, interest is paid hereon in excess of
such maximum amount (whether as a result of the payment of this note prior to
its maturity or otherwise), then promptly upon any determination that such
excess has been paid the Lender will, at its option, either refund such excess
to the undersigned or apply such excess to the principal owing hereunder.  All
interest paid shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full period of the Company's
credit relationship with the Lender until payment in full of the principal
(including the period of any renewal or extension) so that the interest for such
full period shall not exceed the maximum rate of interest permitted by
applicable law.]


                         NEW CENTURY MORTGAGE CORPORATION


                         By:___________________________________
                         Its:__________________________________

                                       2
<PAGE>

                                                                    EXHIBIT G TO
                                                              FOURTH AMENDED AND
                                                       RESTATED CREDIT AGREEMENT


                       NEW CENTURY FINANCIAL CORPORATION
                           REAFFIRMATION OF GUARANTY


     Reference is made to that certain Guaranty (the "Guaranty") dated as of May
29, 1998, made and given by the undersigned to secure the Guarantied Obligations
(as defined in the Guaranty) of New Century Mortgage Corporation (the "Company")
to the Lenders in connection with that certain Third Amended and Restated Credit
Agreement dated as of May 29, 1998 by and among the Company, the lenders which
are parties thereto (the "Lenders") and U.S. Bank National Association, a
national banking association, as agent for the Lenders ( in such capacity, the
"Agent") (the "Prior Credit Agreement").

     The undersigned hereby (a) consents to the terms of that certain Fourth
Amended and Restated Credit Agreement dated as of May 26, 1999 (the "New Credit
Agreement") and to the execution and delivery of the New Credit Agreement by the
Company; and (b) agrees that the obligations of the Company under the New Credit
Agreement, as the same may be amended from time to time, constitute "Guarantied
Obligations" within the meaning of the Guaranty.  The undersigned further agrees
and reaffirms that such Guarantied Obligations are guaranteed by the undersigned
in accordance with the terms and conditions of the Guaranty, and that all of the
terms, covenants and conditions of the Guaranty remain in full force and effect.


Dated: May 26, 1999                NEW CENTURY FINANCIAL
                                   CORPORATION


                                   By:___________________________
                                   Its:__________________________
<PAGE>

                                                                  EXHIBIT G-1 TO
                                                              FOURTH AMENDED AND
                                                       RESTATED CREDIT AGREEMENT


                            NC CAPITAL CORPORATION
                           REAFFIRMATION OF GUARANTY


     Reference is made to that certain Guaranty (the "Guaranty") dated as of
December 11, 1998, made and given by the undersigned to secure the Guarantied
Obligations (as defined in the Guaranty) of New Century Mortgage Corporation
(the "Company") to the Lenders in connection with that certain Third Amended and
Restated Credit Agreement dated as of May 29, 1998 by and among the Company, the
lenders which are parties thereto (the "Lenders") and U.S. Bank National
Association, a national banking association, as agent for the Lenders ( in such
capacity, the "Agent") (the "Prior Credit Agreement").

     The undersigned hereby (a) consents to the terms of that certain Fourth
Amended and Restated Credit Agreement dated as of May 26, 1999 (the "New Credit
Agreement") and to the execution and delivery of the New Credit Agreement by the
Company; and (b) agrees that the obligations of the Company under the New Credit
Agreement, as the same may be amended from time to time, constitute "Guarantied
Obligations" within the meaning of the Guaranty. The undersigned further agrees
and reaffirms that such Guarantied Obligations are guaranteed by the undersigned
in accordance with the terms and conditions of the Guaranty, and that all of the
terms, covenants and conditions of the Guaranty remain in full force and effect.


Dated: May 26, 1999                NC CAPITAL CORPORATION



                                   By:____________________________
                                   Its:___________________________
<PAGE>

                                                                    EXHIBIT H TO
                                                              FOURTH AMENDED AND
                                                       RESTATED CREDIT AGREEMENT


               Statement to be Included in Closing Instructions
               ------------------------------------------------
                    to Closing Agents for Wet Funded Loans
                    --------------------------------------


          "You are hereby notified that U.S. Bank National Association, as agent
for certain lenders and a certain lessor (in such capacity, the "Agent"), has a
security interest in the deed of trust or mortgage note, the deed of trust or
mortgage and all other supporting documents for the above-referenced loan.
Unless the Agent otherwise instructs you, (i) if the mortgage loan is not funded
within one (1) business day after your receipt of funds from the Agent, said
funds are to be returned by you to: U.S. Bank National Association, Minneapolis,
Minnesota, ABA No. 0910-0002-2 for credit to our Collateral Account No. 1731-
0097-1378, and (ii) all loan documents are to be returned to us by the second
business day after settlement."

                                      H-1
<PAGE>

                                                                    EXHIBIT I TO
                                                              FOURTH AMENDED AND
                                                       RESTATED CREDIT AGREEMENT

                                 MATTERS TO BE
                       COVERED BY THE OPINION OF COUNSEL
                            TO THE COMPANY AND NCFC


     The opinions of Stergios Theologides, counsel to NCFC, the Company and
NCCC, which are called for by Section 5.01(a)(xi) of the Credit Agreement, shall
be satisfactory in form and substance to the Agent and shall cover the matters
set forth below, subject to such assumptions, exceptions and qualifications as
may be acceptable to the Agent and counsel to the Agent:

     1.   Each of NCFC, the Company and NCCC (collectively, the "Transaction
Parties" and each, individually, a "Transaction Party") has been duly
incorporated, is a validly existing corporation and is in good standing under
the laws of its respective jurisdiction of incorporation, and has the requisite
corporate power to own its respective properties and to conduct its respective
businesses as currently conducted by it.  The Company is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
in which the character of the business conducted by it or the location of the
properties owned or leased by it make such qualification necessary, except in
jurisdictions in which failure to be in good standing will not preclude it from
enforcing its rights with respect to any material asset or expose it to any
material liability.

     2.   The execution, delivery and performance by each Transaction Party of
each Loan Document to which it is a party and the consummation of the
transactions contemplated thereby are within the corporate powers of such
Transaction Party, have been duly authorized by all necessary corporate action
and do not, and the consummation of the transactions contemplated thereby and
compliance by each Transaction Party with the applicable provisions thereof will
not, conflict with, constitute a default under or violate (a) any of the terms,
conditions or provisions of its Articles or Certificate of Incorporation or
bylaws, (b) any of the terms, conditions or provisions of any document,
agreement or other instrument which is known to me to which it is a party or by
which it is bound, (c) any judgment, writ, injunction, decree, order or ruling
of any court or governmental authority binding on it and known to me, or (d) any
statute, rule or regulation of any governmental authority binding on it.

     3.   Each Loan Document to which any Transaction Party is a party has been
duly executed and delivered by such Transaction Party and is the legal, valid
and binding obligation of such Transaction Party enforceable against such
Transaction Party

                                      I-1
<PAGE>

in accordance with its terms, subject to limitations as to enforceability which
might result from general equitable principles or bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws affecting
creditors' rights generally.

     4.   No consent, approval, waiver, license or authorization or other action
by or filing with any governmental authority is required in connection with the
execution, delivery and performance by any Transaction Party of any Loan
Document to which it is a party, the validity or enforceability of any Loan
Document or the consummation of the transactions contemplated thereby except for
those which have already been obtained and are in full force and effect.

     5.   The Pledge and Security Agreement creates a valid security interest in
the Collateral described in Section 2 thereof, which security interest will,
after giving effect to the reaffirmation thereof executed and delivered in
connection with the Credit Agreement, secure the Obligations.  The financing
statements filed under the Pledge and Security Agreement are in appropriate form
for filing with the offices identified thereon.  Such financing statements
perfect the security interest granted to the Agent, for the benefit of the
Lenders, pursuant to the Pledge and Security Agreement to the extent such
security interest may be perfected by filing financing statements under the
Uniform Commercial Code.

     6.   There has been created under the Pledge and Security Agreement a valid
security interest in the Pledged Mortgage Loans (as defined therein).  Assuming
delivery to, and the continued possession by, the Agent of the Mortgage Notes
relating to the Pledged Mortgage Loans, said security interests shall be
perfected.  The laws of certain jurisdictions may require the recordation of an
assignment of each Mortgage in order to perfect a security interest in the
Mortgage (as opposed to the Mortgage Note secured thereby).  If the Agent does
not record its assignment of the Mortgages in such jurisdictions, I express no
opinion as to the Agent's perfected security interest in such Mortgages (as
opposed to the Mortgage Notes secured thereby).

     7.   The Servicing Security Agreement creates a valid security interest in
the Collateral described in Section 2 thereof, which security interest will,
after giving effect to the reaffirmation thereof executed and delivered in
connection with the Credit Agreement, secure the Obligations.  The financing
statements filed under the Servicing Security Agreement are in appropriate form
for filing with the offices identified thereon.  Such financing statements
perfect the security interest granted to the Agent, for the benefit of the
Lenders, pursuant to the Servicing Security Agreement to the extent such
security interest may be perfected by filing financing statements under the
Uniform Commercial Code.

     8.   To the best knowledge of such counsel, there are no actions, suits or
proceedings pending or threatened against or affecting any Transaction Party or
any of

                                      I-2
<PAGE>

its properties before any court or arbitrator, or any governmental department,
board, agency or other instrumentality which (i) challenge the legality,
validity or enforceability of any Loan Document, or (ii) if determined adversely
to such Transaction Party, would have a material adverse effect on the business,
operations, property or condition (financial or otherwise) of any Transaction
Party or on the ability of any Transaction Party to perform its obligations
under the Loan Documents.

                                      I-3
<PAGE>

                                                                    EXHIBIT J TO
                                                              FOURTH AMENDED AND
                                                       RESTATED CREDIT AGREEMENT


                        FORM OF CERTIFICATE CONCERNING
                        BORROWER'S AUTHORIZED EMPLOYEES



     I, _______________________, am the duly elected Secretary of New Century
Mortgage Corporation (the "Corporation"), a California corporation, and do
hereby certify that the following officers and employees of said corporation are
authorized to take the following action on behalf of said corporation:

                PERSONNEL AUTHORIZED TO SIGN (a) INSTRUMENTS OR
           (b) COLLATERAL CERTIFICATES, REPORTS AND DIRECTIONS AS TO
                   SHIPMENT OF COLLATERAL TO INVESTORS UNDER
              CREDIT AGREEMENT AND PLEDGE AND SECURITY AGREEMENT

                                                                 Telephone
                                                                 Number
                                                                 (Area Code
Name                Title               Signature                and Number)
----------------------------------------------------------------------------

                                      J-1
<PAGE>

                PERSONNEL AUTHORIZED TO TELEPHONE INSTRUCTIONS
                      TO AGENT UNDER CREDIT AGREEMENT AND
                         PLEDGE AND SECURITY AGREEMENT


                                                                 Telephone
                                                                 Number
                                                                 (Area Code
Name                Title               Signature                and Number)
----------------------------------------------------------------------------


                PERSONNEL AUTHORIZED TO AMEND SCHEDULES ANNEXED
                  TO ANY OF THE ITEMS SET FORTH IN (b) ABOVE


                                                                 Telephone
                                                                 Number
                                                                 (Area Code
Name                Title               Signature                and Number)
----------------------------------------------------------------------------

                                      J-2
<PAGE>

SEND ADVICES AND  MAIL TO:

ATTN:


          IN WITNESS WHEREOF I have hereunder set my hand and the seal of the
Corporation this ________ day of __________________________, 199_.


                    Title:

                                      J-3
<PAGE>



                       ACKNOWLEDGMENT BY EXITING LENDER

     Subject to its receipt of payment in full in cash of its Payoff Amount on
the Effective Date, the undersigned (the "Exiting Lender"), hereby acknowledges
and consents to the Fourth Amended and Restated Credit Agreement dated as of May
26, 1999, by and between New Century Mortgage Corporation, a California
corporation (the "Company"), the lenders from time to time a party thereto (the
"Lenders"), and U.S. Bank National Association, as agent for the Lenders (in
such capacity, the "Agent") and agrees that upon the Exiting Lender's receipt of
payment in full of its Payoff Amount in accordance with Section 8.15 of said
Fourth Amended and Restated Credit Agreement, it will, as soon thereafter is
administratively feasible (not to exceed 30 days), return to the Company the
Note issued by the Company to the Exiting Lender pursuant to the Existing
Credit Agreement marked "paid" or language to similar effect. Capitalized terms
used and not otherwise defined herein shall have the meanings ascribed thereto
in said Fourth Amended and Restated Credit Agreement.



                              EXITING LENDER


                              Fleet Bank N.A.


                              By:_____________________________

                              Its:____________________________
<PAGE>

                               SCHEDULE 1.01(a)

                           UNDERWRITING GUIDELINES
                           -----------------------

                                  See Attached
<PAGE>

UNDERWRITING/ 1st LIENS
Policies - Underwriting Philosophy
Page 1 of 4 (03/03/99) Latest Revised Items in Bold Blue

Overview Sound Practices/ Individual Review

New Century Mortgage Corporation provides loans to finance the purchase or
refinance of real property secured by one to four family dwelling units. The
company's lending philosophy is to originate loans based on sound underwriting
practices, risk classifications practices and adherence to underwriting
guidelines. Each loan will be reviewed on an individual basis, taking into
consideration the applicant's credit history and ability to repay, the loan
amount and the loan to value ratio. Because New Century lends to applicants with
limited credit histories and impaired credit records, the ability to evaluate
the overall qualifications and background of each borrower to determine if there
are compensating factors which may offset specific areas of weakness is
required.

Compliance

New Century Mortgage Corporation complies fully with all Federal. and State
regulations that apply to mortgage lending. New Century encourages all potential
loan applicants to apply for a loan and no member of its organization
discourages any applicant from applying. New Century does not discriminate in
its lending practices and offers loans to all qualified applicants, regardless
of their race, color, national origin, religion, age, sex, marital status,
familial status, sexual orientation, handicap status, receipt of public
assistance or good faith exercising of rights under the Consumer Credit
Protection Act. Service New Century has pledged to provide loan originators and
borrowers with competitive prices, a variety of loan programs and service which
is prompt, courteous and responsive to the unique characteristics of every loan.
New Century strives to emphasize service, treating people with respect and
acting with integrity and common sense in all of our lending and other business
activities.

5 Major Guideline Areas

New Century's underwriting guidelines provide a framework for the evaluation of
loans being considered for approval. Guidelines are provided in the following 5
major areas, which are discussed in more detail in the following pages:

 . General Product Descriptions
 . Capacity (Employment/Income Requirements)
 . Credit Requirements
 . Collateral Requirements
 . Purchase Money Transactions

                                  Page 1 of 3
<PAGE>

General Product Descriptions

Basic First Lien Guidelines and Exceptions
The "General Product Descriptions" section covers the product guidelines for
first mortgage loans offered by New Century Mortgage, and includes topics such
as:

 . Acceptable applicants
 . Maximum loans to one borrower
 . Loan To Value ratios
 . Debt to Income ratios
 . Loan programs
 . Underwriting exceptions

Capacity (Employment/Income Requirements)

Definition

The Borrower's ability to repay his/her loan. The customers past, present and
expected stable future income combined with his repayment experience and his
debt to income ratio are all considered when evaluating the borrowers
"capacity".

Stability of Income

The "Employment/Income Requirements" section takes into consideration both the
borrowers current income as well as the stability of that income over the past
24 months.

Special Considerations

New Century will give consideration to those cases when due to special
circumstances there have been temporary breaks, or sharp increases in the
borrowers income. When these can be documented to be caused by reasonable or
positive factors they can be considered on a case by case basis.

Credit

Definition The Borrower's willingness to repay his/her loan. The Borrower's
willingness to repay, though a subjective determination, can be judged by
evaluating his/her past use and repayment of credit obligations.

Evaluating Past Use and Repayment

A majority of New Century's determination is based on the customer's payment
record over the 12-month period prior to the application date. However, caution
is used in reviewing any applicant whose credit history is characterized by
notices of default, forecloses, bankruptcy, judgments, liens, charge-off's or
other types of serious derogatory items. In evaluating the applicant's credit
problems, a key factor is whether the credit problems are a result of an
isolated problem, poor financial planning, or a

                                  Page 2 of 3
<PAGE>

general lack of regard for credit obligations. See "Credit Requirements" section
for details.

Collateral

Definition

The property used to secure the transaction. Collateral is a major factor in
determining whether a loan will be approved, as outlined in the "Collateral
Requirements" section. New Century uses the appraisal as the major determiner of
the value and acceptability of the collateral.

Underwriting Evaluation

It is also the responsibility of underwriters and management to evaluate whether
the property:

 . Conforms to the area
 . Shows pride of ownership
 . Has comparable design and appeal to a majority of the properties in the
subject area
 . Is located in an area with sufficient sale activity to establish an accurate
fair market value.

When any of these factors are in question, New Century may:

 . Consider an independent appraisal review
 . Require an additional appraisal
 . Consider a reduction in the Loan To Value Ratio
 . Consider the property unacceptable to New Century as collateral

Purchase Money Transactions

Definition Loans where proceeds are used to purchase property.

The "Purchase Money Transactions" section gives general requirements for this
type of loan, covers special agreements, verifications required, and gives
guidelines for sales concessions.

                                  Page 3 of 3
<PAGE>

UNDERWRITING / 1/st/ LIENS
Policies-General Product Descriptions
Page 1 of 10 (03/03/99) Latest Revised Items in Bold Blue

Introduction To General Product Descriptions First Liens Guidelines

The following section covers the basic product guidelines for the loans made by
New Century Mortgage Corporation. These descriptions are for first lien position
loans only. The debt-to-income ratios, loan amounts, loan-to-value ratios and
combined loan-to-value ratios are reviewed as well as information on currently
available loan programs and exceptions to New Century's guidelines.

Application Requirements

NCMC requires that a Uniform Residential Loan Application (Fannie Mae 1003) be
completed on all loans submitted. Any alterations to the 1003 must be initialed
by the borrowers and at no time will white out be permitted. The borrower or
interviewer must provide New Century with all of the borrowers financial data,
including but not limited to all outstanding obligations and real estate owned
by the borrower.

The name of the interviewers employer must be NCMC, the originating Broker, or
the Correspondent. If the name identified as the interviewers employer is not a
party to the transaction, NCMC requires a corrected 1003 to be obtained. At
submission all applications must be signed and dated by the interviewer, and
prior to funding all applications must be signed and dated by both the
interviewer and the borrower(s).

Acceptable Applicants

New Century will approve loans for individuals only. Corporations, partnerships,
trusts, DBA's etc. are not eligible. New Century will accept applications for
either individual or joint credit. All individuals whose income is to be used to
qualify for the loan must be on title and have a financial interest in the
property being used for collateral. If the property is owner-occupied only the
income of those borrowers residing in the property will be used to qualify for
the loans. (CN)

All borrowers who are used to qualify for a loan should have a vested interest
in the property. Any borrower who has been added to title within 6 months of the
application may be required to prove their interest. Other than a spouse, no
borrower should be added to title at the time of loan closing to qualify for the
transaction.

                                  Page 1 of 6
<PAGE>

Borrower Identification

All applicants must provide proper identification when signing any loan
documents. A current U.S. driver's license or current U.S. passport with picture
is acceptable. If a driver's license or passport is not available, any two of
the following items are acceptable:

 . Birth Certificate
 . Voter's registration card
 . Social Security card
 . Military Identification card

If an applicant is not a United States citizen he/she should possess a green
card verifying permanent residency. If the borrower does not posses a green
card, the loan will require a level 1 approval and the LTV should be limited to
60%.

Resident  Aliens

NCMC will extend credit to resident aliens, who have lawfully established
permanent residence in the United States, under the same terms that are extended
to U.S. citizens. If a borrower is a permanent resident alien, NCM requires a
copy (front and back) of the borrower(s) Alien Registration Card (green card).
If the borrower does not posses a green card, the loan will require a level 1
approval and the LTV should be limited to 60%. New Century will not extend
credit to non-resident aliens and applicants without a social security number.

Minimum/Maximum Loan Amounts

Maximum Loans to One Borrower

New Century will consider more than one loan to a borrower. Individuals who
obtain several loans within a 12-month period should show a history and/or
ability to manage multiple properties. The determination to make these loans
will be made as a subjective judgment by New Century's under-writers and/or
management. New Century normally limits the loans it makes to one borrower to
either 3 loans or $500,000 in combined loan amounts whichever occurs first. On a
case-by- case basis with Level 1 approval exceptions may be made to these limits
with compensating factors. (CN)

Minimum Loan Amount

The minimum loan amount allowed by New Century Wholesale for its first mortgage
program is $25,000. The minimum loan amount allowed by New Century Retail is
$10,000 except in those states that have legislated a higher minimum.

Maximum Loan Amounts

New Century Identifies its maximum Loan Amounts based on the borrowers credit
grade and the LTV as described below.

                                  Page 2 of 6
<PAGE>

Cash Out

Requirements

New Century considers any transaction with cash out exceeding 3% a Cash Out
transaction. For C and C-borrowers a satisfactory letter of explanation will be
required on cash out transactions in excess of $10,000. Cash out on Home Savers
will not exceed 3%, excluding consolidation of any debt.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                    Full Documenation
------------------------------------------------------------------------------------------------------------------------
       Credit                                                         LTV
                       -------------------------------------------------------------------------------------------------
       Grade             90%                      80%                      75%                      70%
------------------------------------------------------------------------------------------------------------------------
<S>                     <C>                      <C>                      <C>                      <C>
 A+                     $350K                    $400K                    $500K                    $600K
------------------------------------------------------------------------------------------------------------------------
 A-                     $300K                    $400K                    $500K                    $600K
------------------------------------------------------------------------------------------------------------------------
 B                      N/A                      $350K                    $400K                    $500K
------------------------------------------------------------------------------------------------------------------------
 C                      N/A                      N/A                      $350K                    $400K
------------------------------------------------------------------------------------------------------------------------
 C-                     N/A                      N/A                      $250K                    $300K
------------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                       Stated Income
------------------------------------------------------------------------------------------------------------------------
       Credit                                                           LTV
                   ------------------------------------------------------------------------------------------------------
        Grade           85%                      80%                      75%                      70%           65%
-------------------------------------------------------------------------------------------------------------------------
<S>                     <C>                      <C>                      <C>                      <C>           <C>
 A+                     $300K                    $350K                    $400K                    $450K         $500K
---------------------------------------------------------------------------------------------------------------------------
 A-                     N/A                      $300K                    $350K                    $400K         $450K
---------------------------------------------------------------------------------------------------------------------------
 B                      N/A                      N/A                      $300K                    $350K         $400K
---------------------------------------------------------------------------------------------------------------------------
 C                      N/A                      N/A                      N/A                      $250K         $300K
---------------------------------------------------------------------------------------------------------------------------
 C-                     N/A                      N/A                      N/A                      N/A           N/A
---------------------------------------------------------------------------------------------------------------------------
</TABLE>


Loan To Value (LTV) Ratios

Maximum LTV Ratio's
New Century Identifies its maximum LTV ratios based on the income documentation
type, the borrower's credit grade and deductions for certain property types as
described below.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Documentation/         A+          A-      B          C         C-         MOP       HOME SAVER
Property Type
--------------------------------------------------------------------------------------------------------------------
<S>                    <C>        <C>      <C>        <C>       <C>        <C>       <C>
Full Doc               90%        90%      80%        75%       70%        75%          65%
--------------------------------------------------------------------------------------------------------------------
Stated Income          85%        80%      75%        70%       55%        N/A          N/A
--------------------------------------------------------------------------------------------------------------------
Rural Properties       75%        75%      70%        65%       60%        N/A          N/A
--------------------------------------------------------------------------------------------------------------------
</TABLE>

New Century will consider subordinate loans which exceed 100% CLTV when the
2/nd/ /Subordinate loan is to a city, municipality, SBA, and IRS or state tax
liens with an

                                  Page 3 of 6
<PAGE>

approved payment plan. In these cases the loan must have an AA rating.
These loans will be considered only on a case by case basis and require a Level
1 signature.

(CN) * 24 Months Bank Statements cannot be used as full documentation on
Manufacture/Mobile Homes, 90% LTV loans, Mortgage Only, Home Saver or C-
Programs.


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                        Combined LTV
-----------------------------------------------------------------------------------------------------------
Loan Type               A          A-         B        C        C-      MOP      Home Saver
-----------------------------------------------------------------------------------------------------------
<S>                    <C>        <C>         <C>      <C>     <C>      <C>      <C>
Purchase               100%        95%        95%      90%     80%      N/A         N/A
-----------------------------------------------------------------------------------------------------------
Refinance              100%       100%        95%      90%     85%      90%         80%
-----------------------------------------------------------------------------------------------------------
</TABLE>


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
                                     Deductions to LTV and CLTV
-----------------------------------------------------------------------------------------------------------
Property Type           A          A-        B          C         C-      MOP         Home Saver
-----------------------------------------------------------------------------------------------------------
<S>                     <C>        <C>       <C>       <C>       <C>      <C>         <C>
Non Owner-Occupied      -5%        -10%      -5%       -5%       -5%       -5%          -5%
-----------------------------------------------------------------------------------------------------------
Condo/Attached PUD      -5%         -5%      -5%       -5%       -5%       -5%          -5%
-----------------------------------------------------------------------------------------------------------
2-4 Units               -5%         -5%      -5%       -5%       -5%       -5%          -5%
-----------------------------------------------------------------------------------------------------------
Manufactured/Mobile    -10%        -10%     -10%      -10%       N/A       N/A           N/A
-----------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
                                         Deductions to LTV and CLTV
------------------------------------------------------------------------------------------------------------
Property Type                  A         A-        B        C         C-      MOP        Home Saver
------------------------------------------------------------------------------------------------------------
<S>                           <C>       <C>       <C>      <C>        <C>     <C>        <C>
Non Owner-Occupied            -5%       -10%      -5%      -5%        -5%     -5%          -5%
------------------------------------------------------------------------------------------------------------
Condo/Attached PUD            -5%        -5%      -5%      -5%        -5%     -5%          -5%
------------------------------------------------------------------------------------------------------------
2-4 Units                     -5%        -5%      -5%      -5%        -5%     -5%          -5%
------------------------------------------------------------------------------------------------------------
Manufactured/Mobile          -10%       -10%     -10%     -10%         N/A     N/A          N/A
------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                            Debt to Income (DTI) Ratio
-------------------------------------------------------------------------------------------------------------
Allowable DTI        A+          a-         B          C         C-         MOP        Home Saver
Ratio
               ----------------------------------------------------------------------------------------------
<S>            <C>               <C>        <C>       <C>        <C>        <C>        <C>
                    45%          50%        555       59%        59%         55%          59%
-------------------------------------------------------------------------------------------------------------
</TABLE>

Available Terms

 . Fully Amortized Fixed (10, 15, 20, 25, 30 year terms)
 . 5 Year Fixed / 25 Year Variable

                                  Page 4 of 6
<PAGE>

 . 3 Year Fixed / 27 Year Variable
 . 2 Year Fixed / 28 Year Variable
 . 6 Month Variable

(CN) All 2, 3 and 5 Year fixed revert to a 6 month variable
after the fixed period.

Variable Rate Product Parameters:

Index-All Variable rate loans are tied to the LIBOR Index

Change Period-The Rate and Payments will be subject to change every 6 months
from origination or after the fixed rate period ends.

Maximum Rate-Maximum rate is based on our current rate sheet and changes will
be based on 1.5% Per Change and 7% Lifetime.

Minimum Rate-Start Rate

Loan terms-10, 15, 20, 25, 30 years


Underwriting Exceptions

Primary Factors

New Century has anticipated that managers and second signers, from time to time,
will make exceptions to our Underwriting Guidelines based on their experience
and compensating factors that are documented in the file. These exceptions will
include but not necessarily be limited to LTV, Loan Amount and Debt Ratio. When
considering an exception, the grantor will place primary emphasis on the
following factors:

 . Stability in the subject property
 . Stability in this employment or field
 . Stability of income
 . Debt to income ratios 5% or more below limits
 . Loan amounts below program limits
 . Historical good or excellent credit history
 . Significant reductions in the borrower's outgo

These exceptions will be documented on the appropriate form, describing the
exception and compensating factors, and be signed by an authorized approval
level based on the following table:

                                  Page 5 of 6
<PAGE>

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Level                      LTV             Debt Ratio             Loan Amount          Product Guidelines
-----------------------------------------------------------------------------------------------------------
<S>                        <C>             <C>                    <C>                  <C>
 2                           5%*               5%                   Program + 10%**        Limited
-----------------------------------------------------------------------------------------------------------
 1                          10%*              10%                   Program + 20%**        General
-----------------------------------------------------------------------------------------------------------
 Corporate Credit           Any               Any                   Any                      All
 Committee
-----------------------------------------------------------------------------------------------------------
</TABLE>

*  Maximum 90% LTV
** Maximum $500,000 Loan Amount


Underwriting Exceptions (continued)

Authorizing Exceptions

Exceptions to policy will be limited to Level 2, Level 1 and Corporate Credit
Committee members. Level 2 signers will be authorized to make such limited
exceptions to the Product Guidelines as they deem appropriate.

Level 1 signers may make exceptions to most Product Guidelines subject to the
following limitations:

 . No exceptions stated Home Savers
 . No exceptions to 95% Program
 . No exceptions to maximum number of loans to one borrower

Corporate Credit Committee members may make changes to product guidelines which
are consistent with New Century Underwriting Philosophy.

                                  Page 6 of 6
<PAGE>

UNDERWRITING/ 1 /st/LIENS
Policies - Capacity (Employment/Income Requirements)
Page 1 of 17 (01/29/99) Latest Revised Items in Bold Blue

Overview Capacity of Applicant

NCMC requires that, as a condition of granting a loan, applicants exhibit:

1. Stability in Employment and in the income used to qualify for the loan.
2. Sufficient monthly income to make their monthly financial obligations and
meet their basic living expenses
3. A Debt to Income Ratio that conforms with New Century's guidelines.
4. All sources of Income used to qualify are expected to continue for a minimum
of 3 years.

Income Documentation Programs

NCMC offers two types of income documentation programs:

1 - Full Documentation (Full Doc)
 . all Salaried Applicants
 . Calculating Salaried Income
 . Self Employed Applicants
 . Calculating Self-Employed Income
 . Allowable Other Income
 . Calculating Allowable Other Income

2 - Stated Income

Full Documentation-Salaried Applicants Definition of Salaried Applicants
Salaried applicants are defined as those applicants for whom a majority of
income is derived from a consistent hourly, weekly or monthly wage that is
consistently received over a 12 month period.

Establishing Stability

New Century will obtain a minimum of two years of employment history for each
borrower. To evaluate stability of the borrower's employment and income, New
Century
will:

 . Identify any employment gaps, review the reason for and lengths of any gaps in
employment.
 . Look favorably on stability in an applicant's current job or stability in the
same line of work.
 . Give favorable consideration to borrowers who change jobs for advancement
within the same line of work and maintain or improve their income

                                 Page 1 of 11
<PAGE>

 . Ensure overtime, commission and bonus income is consistent, does not
constitute more than 40% of the applicants income and is considered based on the
calculation methods described later in this document
 . In cases where a borrower has an employment history of less than two years and
was previously in school or in the military, obtain a copy of his or her
diploma, transcript, or discharge papers as a compensating factor.

Full Documentation-Salaried Applicants (continued)

Verification of Employment

The underwriter or Account Manager/Retail Coordinator will perform a "verbal
audit" and maintain written evidence of telephone contact with the employer by
completing the following steps:

 . Identify the name of the employer
 . Identify the name and title of the individual contacted at the employer's
office
 . Confirm that our borrower is currently employed
 . Confirm the borrowers position
 . Confirm the borrowers salary
 . Indicate the date of the contact
 . Identify the name of the associate who made the contact

When Income or Employment is in Question

In cases where the borrower's income or employment history is in question, New
Century will require whatever documentation necessary to verify consistency or
lack of such. This may be done by obtaining:

 . Written verifications of employment
 . Past years tax returns
 . Additional employment background

Full Documentation-Salaried Applicants (continued)

Salary The Borrower must provide a recent paycheck stub (within 30 days of
closing) with YTD earnings and
 . Most recent year W-2 or
 . Most recent year 1040 complete with all schedules or
 . Written Verification of Employment from employer (CN)

(CN)Unacceptable Pay Stubs: Pay stubs are not acceptable documentation of salary
if they are missing:

 . YTD earnings
 . Borrower name

                                 Page 2 of 11
<PAGE>

 . Borrower's social security number
 . Employer's name

If any of the above are missing or they are handwritten, the following
additional documents will be required:

Missing         Additional Doc Required
YTD earnings    4 consecutive paystubs showing 2-week, bi-monthly or
                monthly income

Name, SSN,      VOE from employee showing Employer Name all
                required information

or hand-written
paystub

Overtime Overtime can be considered if it is consistent over a minimum 6-month
period. This can be established from:

 . Recent pay stub with YTD overtime earning broken out,
 . Verification of employment or
 . Prior year W-2 combined with YTD pay stub

Commissions Commissions can be considered if they are consistent over a 12-month
period. This can be established from:

 . Recent pay stub with YTD commission earnings broken out and
 . Verification of employment or
 . Prior year W-2 combined with YTD pay stub

Bonuses Bonuses can be considered if they are consistent over a 24 month period.
This can be established from:

 . Recent pay stub with YTD overtime earning broken out and
 . Verification of employment or
 . Prior 2 years' W-2's combined with YTD pay stub

Calculating Salaried Income Standard Conversion Formula
1. Determine the base salary.
2. Multiply the salary period by appropriate Salary Multiplier* to convert to
monthly income.

(CN) *Salary Multipliers- To convert:
 . Hourly Wage,
Step 1: Multiply by 40 or consistent weekly hours.
Step 2: Multiply by 4.3

                                 Page 3 of 11
<PAGE>

 . Weekly Wage, multiply by 4.3
 . Bi-Weekly Wage,
Step 1: Multiply by 26
Step 2: Divide by 12
 . Annual Salary, divide by 12

Calculating Salaried Income

Conversion For Inconsistent Wage Periods
In cases where the applicant's hours worked or work periods are not consistent,
average their income over a minimum 12-month period.

(C/N) If the applicant is a teacher you will need to determine if the individual
is paid for ten months or twelve months each year.

To convert income figures to a monthly average, use the following methods based
on how the applicant is paid:

 . Paid for 12 months per year - Divide the annual salary by 12 to arrive at
their monthly gross income
 . Paid for 10 months per year, take the monthly base pay, multiply by 10, and
then divide by 12. This will result in the monthly salary
 . Seasonal, Contract, or Temporary income can be
accepted subject to the following:
 . The average of 2 years income per W-2's or
 . The average of 2 years tax returns
 . Both seasonal/contract/temporary income and unemployment compensation can be
used if consistent from year to year
 . Overtime, Commissions and Bonuses must have a history of at least 24 months
 . If using 1040's to qualify the borrowers you must deduct the 2106 expenses on
schedule A from their income

In calculating seasonal, contract or temporary employment, underwriters should
evaluate any signs of poor credit due to interruptions in income and/or lack of
reserves.

Calculating Salaried Income (continued)

Overtime If the current year to date Pay stub covers a period greater than 6
months, simply calculate the total salary and overtime income by dividing the
YTD Figure by the
appropriate number of months. No further calculations are required. If the Pay
Stub covers a period of less than 6 months:

 . A Verification of employment verifying actual overtime must be obtained for a
period greater than 6 months or

                                 Page 4 of 11
<PAGE>

 . The applicant's current YTD income may be averaged with his prior year W-2 to
establish his salary and overtime income.

Commissions To calculate Commission, divide the total commission income for the
current year and the past year and divide by the appropriate # of months.

Example:

Total Income for period: Year to Date Pay stub: $36,125 + 1997 W-2 of $48,123 =
$84,248
Number of Months in Period: Pay stubs as of 10/9 and
prior year W-2 would equal 21.29 months. $84,248 / 21.29 month = $3,957.16
Monthly Income

Bonus Income Bonus Income must be calculated over a minimum of two years. To
calculate, divide the total income for the period of 24 months and the current
year to date.

Example:

Total Income for period: Year to Date Pay stub: $36,125 + 1997 W-2 of $48,123 +
1996 W2 of $44,125 =$128,373
Number of Months in Period: Pay stubs as of 10/9 and prior year W-2 would equal
33.29 months.
$128,373 / 33.29 month = $3,856.20 Monthly Income
(CN) If either Bonus, Commission, or Overtime income
represent more than 40% of the borrower's total income,
they will be considered similar to Self-Employed borrowers
and tax returns will be required.

Ownership of Corporation

There are cases when a salaried employee owns a large or majority interest in
the company that issues his pay stubs and W-2's.

(CN) If you determine the borrower's ownership of the company is 50% or greater,
you must obtain the documentation described in the "Full Documentation - Self -
Employed"
section below, which will include:
 . 2 Years of the following, with all schedules:
 . 1040's
 . 1065's
 . 1120's
 . K-1's
or
 . 24 months Personal Bank Statements (see 24 Months Bank Statements )

Definition of Self-Employed Applicant

                                 Page 5 of 11
<PAGE>

These borrowers receive all or a portion of their income from Self Employment.
These businesses are normally a sole proprietorship where all or a majority of
the profits made by the business are reported on schedule C of the 1040's and
are taxed at the same rate as personal income. Self Employed individuals are
those who:

 . Own 50% or more of the stock in the corporation for which they work
 . Own 50% or more interest in a Sub-Chapter S Corporation for which they work
 . Receive 40% or more of their income from commissions or bonus
 . Work as an independent contractor and receive their income from a 1099
 . Receive their income from Partnerships which they own 50% or more

Establishing Stability

The borrower must be self-employed (or-commissioned or an independent
contractor) and in the same business for at least the last 2 years.

Verification of Employment and Income

Verification of employment and income are made through a review of the
borrower's past two years' tax returns and applicable schedules. In addition,
the underwriter may check for 411 listings for the employment, request a
business license or other applicable certification.

24 Months' Bank Statements

In the event signed federal income tax returns or other required evidence of
income is unavailable, New Century will accept 24 consecutive months of personal
Bank Statements in lieu of the borrower's prior 2 years' 1040's. If 24 months of
consecutive Bank Statements are not available, NCMC will accept a minimum of 18
months. The statements will be considered to cover a 24 month period and the
calculations will also be based on 24 months. Large and unusual deposits need to
be excluded from totals unless a reasonable explanation is provided. Consecutive
months Bank Statements on one personal account are required. Business statements
are generally not sufficient as sole-source of income documentation but may
validate business existence. In evaluating the use of Bank Statements, it should
be determined that the borrower is the only individual on the account and that
deposits are not transferred from another account. In addition, negative factors
such as NSF fees should be reviewed. On a case by case basis, Business Bank
Statements may be considered if approved by a Level 1 signer or Corporate Credit
Committee.

Calculating Self-Employed Income

Sole Proprietor The following formula is used to calculate income:
2 years net profit from schedule C's + allowable adjustments (see Adjustments To
Income in this section)
divide by 24 months
=average monthly income

                                 Page 6 of 11
<PAGE>

Partnerships Both general and limited partnerships use the IRS form 1065 and
schedule K- 1 for filing federal income tax returns. The partnership return
income is carried over to the individual tax return, the "partner's share of
income, credits, deductions, etc."

Use the following formula to determine income:
2 years income/loss (reference schedule K-1) from 1040's + partners share of
approved add backs (see partnership returns)

divide by 24 months
= average monthly income

S Corporations "S" corporations are generally small corporations that are taxed
in the same manner as partnerships. They pass gains and losses through to their
shareholders, who are then taxed at the tax rates for individuals. Depreciation,
depletion and ordinary income or loss can be proportionately added back to the
applicant's income. Monthly income can be derived from the past two years'
1040's and the past 2 years' corporate returns. Consider whether income is
transferred by W-S's or 1099 income. Consider corporate income and/or loss.

Adjustments to Income

(CN)
It is acceptable in determining an individuals qualifying income to add back to
adjusted gross income non-cash items such as depreciation, depletion, or
amortization. Documented loss carry over from previous tax years, and non-
recurring losses such as casualty losses may be added back to adjusted gross
income. Non-recurring gains must be subtracted from gross income. Following are
adjustments that can be added back to the adjusted gross income:

 . Depreciation & Amortization on property (only amounts allowed or deducted)
 . IRA/Keogh contributions
 . Non taxable pension income
 . Tax-exempt interest income
 . Self-employed health insurance deductions
 . 1/2 of self-employed tax
 . Early withdrawal penalty
 . Non-cash losses
 .. Alimony (only if shown as a debt)

Rental Consistent Rental Income from other properties that the borrower owns is
allowed subject to the following:

 .Use 90% of rents up to 4 properties and 75% of rents if borrower owns more
than 4 properties. Deduct PITI.

                                 Page 7 of 11
<PAGE>

 . Room rents will be allowed. However, the income must be reported on the prior
two years' tax returns.
Alimony Alimony will be allowed if:
 . Copy of complete divorce decree is supplied
 . Payments have three years or more remaining
 . Copy of the prior year's 1040 is supplied to verify receipt

Child Support .Must be in effect with minimum of 3 years remaining
 . Copy of complete divorce decree is required
 . Underwriter may require proof of receipt at their discretion

Social Security Benefits/Retirement  Benefits

Any one of the following:
 . Award Statements
 . Check Copies
 . Bank Statements specifying source

Foster Care Foster care payments can be allowed if we obtain
 . Letter from granting agency
 . 12 months' Check Copies or
 . 12 months' Bank Statements with specific deposits

Calculating Allowable Other Income Schedule B-Interest and Dividend
Income

Average the most recent two years and year-to-date interest and dividend income
statements (where available). Verify that dividend and interest income is
ongoing. If any investment will be liquidated in order to complete the current
transaction, the income from that investment should not be used.

Schedule D-Capital Gains and Losses

 . Combine the most recent two years income from capital gains or losses.
 . Divide this amount by 24 months, and the result is additional monthly income.
 . Make certain that assets will continue to provide the same type of income in
future years.
 . Do not average capital gains if income is from a different source each year or
cannot be determined to be consistent.

Schedule E -Rental Income

Average the most recent two years income from schedule E, by subtracting the
expenses from the gross income (this method will not require you to add back
depreciation). Determine if all rental properties appear on the tax return. If
the net figure is a positive number, it will be shown as monthly income. If the
figure is a negative number, it will be deducted from income. In the event that
an applicant has owned a

                                 Page 8 of 11
<PAGE>

rental property for a short period of time and thus has not yet filed a schedule
E, rental income may be established by multiplying the actual rents form the
rental agreement by 90% if less than 4 units are owned and 75% if 4 or more
units are owned, then subtracting PITI. If the net figure is a positive number,
it will be shown as monthly income, if the figure is a negative, it will be
shown as a deduction to income. If the borrower owns 3 or less rental units,
rental agreements may be used in lieu of tax returns using the 90% rule if
rental income appears normal and stable.

Calculating Allowable Other Income (continued)

1099 -Miscellaneous Income
 . 1099 forms are used to report payments of other income such as dividends,
interest, and retirement distributions.
 . Most payments to sole proprietors or individuals made in the course of a trade
or business will be reported on a 1099 form.
 . If a borrower receives 1099 income you must obtain the prior two years' 1040's
and verify the amount based on how the income is filed.

Non-Taxable Income

Verified nontaxable income will be allowed when it is determined that such
income will continue and remain untaxed for the foreseeable future. Examples of
nontaxable income include, but are not limited to:

 . Certain military allowances
 . Certain retirement income
 . Disability payments
 . Workers compensation benefits
 . Child support payments
 . Certain types of public assistance payments.

It is New Century's policy that an applicant with non-taxable income can be
evaluated in the same manner as a borrower who has taxable gross income. The
Underwriter may adjust or "gross up" the applicant(s) actual income by
multiplying the "non-taxable" income by 125% and idientifying this on an
exception form.

Stated Income Documentation

Overview In certain circumstances, borrowers who would otherwise qualify for a
loan are unable to fully document their income. Subject to certain conditions,
New Century will accept the borrower's occupation and income as "stated" on
their application. New Century will compare the borrower's occupation and income
as stated on the 1003, to similar applicants in their area. They will also
consider the borrower's repayment habits and assets to evaluate the
reasonableness of the income stated. If they appear to be reasonable, the income
will be accepted.

                                 Page 9 of 11
<PAGE>

New Century does not allow stated documentation on Section 32 loans or on any
loan for the purpose of purchasing a non-owner occupied property. This applies
to both the Wholesale and Retail divisions.

Documentation Requirements

Subject to the underwriter's discretion, the borrower may be allowed to "state"
his/her self-employment or salaried income. Stated income is not allowed on the
following income sources:

 . Retirement Income/Social Security/Pension/Disability
 . Room rents
 . Annuity
 . Note Income

The borrower must provide verification if these sources of income are used to
qualify for the loan. The Underwriter or Account Manager/Retail Coordinator is
to make an appropriate verification to establish the existence of the borrower's
business or employment. For the self employed borrower this may include one or
more of the following:

 . Determining if the business is listed in the phone directory
 . Verifying the existence of a business license
 . Verifying trade associations
 .Obtaining business promotional material

Stated Income Documentation (continued)

Documentation Requirements

(continued)

If it is not possible to complete verbal verification due to the borrower
working out of his or her residence, and the lack of a business license, a
written Letter Of Explanation (LOE) is required. For the salaried borrower the
underwriter or Account Manager/Retail Coordinator will perform a "verbal audit"
and maintain written evidence of telephone contact with the employer by
completing the following steps:

 . Identify the name of the employer
 . Identify the name and title of the individual contacted at the employer's
office
 . Confirm that our borrower is currently employed
 . Confirm the borrowers position
 . Indicate the date of the contact
 . Identify the name of the associate who made the contact.

If it is not possible to complete a verbal verification, then the borrower must
qualify under the full documentation program or a level 1 approval must be
obtained.

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                                   Overview

Determining    The borrower's willingness to repay is judged by evaluating
Willingness    his/her past use and repayment of credit obligations. New Century
to Repay       will establish a "Credit Grade" by comparing the customer's prior
               credit or lack of credit to the established guidelines on our
               "Underwriting Matrix". In addition to the matrix and these
                -------------------
               guidelines the underwriter will use their common sense in
               evaluating the borrower's credit background and weigh that
               against any explanations that are available and compensating
               factors. New Century's lending philosophy calls for our
               underwriters and management to avoid making automatic judgments
               and to evaluate the overall qualifications and background of each
               borrower.

Credit         New Century has established 3 general credit categories
Categories     described as:

               1. Established Credit - A borrower whose credit history includes
                  5 or more pieces of credit which have been open or paid over a
                  period of at least 2 years will be considered to have
                  established credit. A minimum of 1 of the credit accounts
                  should be a mortgage or large installment account.

               2. Minimal Credit - This borrower's credit history is either
                  limited by the length of their established credit, the number
                  of accounts with a 2 year seasoning (less than 5) or limited
                  to smaller accounts. This borrower could be considered a "B"
                  credit grade.

               3. No Credit - a borrower who has not established any repayment
                  record on a credit type account for 6 months or more will
                  considered a C credit grade.

               In all of these cases the underwriter will consider the
               borrower's background and compare the credit background with the
               loans being applied for.

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                             Overview (continued)

Importance of  The borrower's history of repayment on their mortgage obligations
Mortgage       will be a primary consideration in evaluating their acceptable
Credit History credit background. A history of paying mortgage loans with no
               delinquencies is a compensating factor that can be used to offset
               other weaknesses. A borrower who has consistently exhibited a
               record of delinquency and problems on their mortgage obligations
               should be reviewed closely for other indications of weakness and
               lack of ability.

                               Mortgage Credit

Mortgage       A minimum of 12 months payment history, except as noted below,
Verification   must be obtained on all mortgages. Current balance, current
               status and payment amount must also be verified. Changes,
               whiteouts, and strikeouts on the original documentation are not
               acceptable. Any altered verification requires new documentation.

               The following are acceptable methods of verifying payment
               history:

                   .  A credit report dated within 30 days of funding will be
                      the primary source of verifying repayment of mortgages.
                      The credit report should include the status by month for a
                      minimum of 12 months.

                   .  Written verification of mortgage, including rating, from
                      an institutional lender.

                   .  A letter from the institutional mortgage holder stating
                      the current balance and the last 12 month payment history.

                   .  VOMs and correspondence from private, individual lenders,
                      as is the case for seller carried paper, must be verified
                      with canceled checks.

                                                                 Continued . . .

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                          Mortgage Credit (continued)

Mortgage       In cases where mortgage delinquency has occurred, the underwriter
Verification   will compare the delinquency to the "Underwriting Matrix" to
(continued)                                        ---------------------
               determine the appropriate "Credit Grade".

               New Century requires written verification for mortgage history up
               to the prior month's payment. Additionally, verbal or written
               verification of the current month's payment is required if the
               loan is funded after the 15th of the month. The verification
               must be well documented in the form of a certification to the
               file including the following information:

                   .  Date verified
                   .  Updated information as verified
                   .  Name, title and telephone number of the contact at the
                      mortgage company
                   .  Name of person verifying the information

               If the borrower has been in the property less than 12 months, New
               Century Mortgage may consult prior mortgages or rent payment
               history.

Rolling Late's A consecutive 30-day late on a mortgage payment is considered
               1x30 if:

                   .  The mortgage is no more than 30 days late as of the
                      underwriting date
                   .  The credit report, mortgage verification or canceled
                      checks reflect one missed payment and the remaining
                      consecutive payments have been paid as agreed. (CN)

                                                                 Continued . . .

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                          Mortgage Credit (continued)

Subordinated   New Century will allow subordinate liens provided they meet the
Liens          conditions indicated below. In all instances, the combined loan-
               to-value and debt-to-income ratios cannot exceed the maximums
               indicated in the General Product Description section and/or the
                                ---------------------------
               Underwriting Matrix.
               -------------------

               New Century Mortgage will consider all liens
               when determining the debt-to-income ratio. All liens should be
               reviewed to determine any terms or conditions which may adversely
               affect the borrowers' ability to pay their obligations. In
               addition, all loans should have regular monthly payments. If the
               repayment schedule is not monthly, it must be converted to a
               monthly payment for budgeting purposes.

               The subordinate lien must be:

               .  Clearly in subordinate position behind the subject loan
               .  Fully documented including repayment terms.
               .  Recorded concurrently or after the subject loan.
               .  Due no sooner than 3 years from closing unless fully
                  amortized.


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                                Consumer Credit

Overview       A majority of New Century's determination in evaluating consumer
               credit is based on the customer's payment record over the 12-
               month period prior to the application date. However, caution is
               used in reviewing any applicant whose credit history is
               characterized by notices of default, forecloses, bankruptcy,
               judgments, liens, charge-off's or other types of serious
               derogatory items. In evaluating the applicant's credit problems,
               a key factor is whether the credit problems are a result of an
               isolated problem, poor financial planning, or a general lack of
               regard for credit obligations. For certain credit grades, NCMC
               will accept a "Credit Score" in lieu of an individual evaluation
               of Revolving and Installment Debt.

               These are:
                   .  A+    640 or greater
                   .  A-    620 or greater
                   .  B     600 or greater

               The underwriter must still review mortgage credit, defaults,
               bankruptcies and foreclosures to determine final credit grade.

Installment    The repayment of larger installment accounts in an "as agreed"
Debt           manner is a positive factor when evaluating a borrower's credit
               background. The presence of severe delinquency in the repayment
               of major installment accounts or the lack of any history of such
               should be considered weaknesses in assessing the borrower's
               credit background.

                                                                 Continued . . .

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                          Consumer Credit (continued)

Installment    The monthly payment for installment debt used in calculating the
Debt           debt-to-income ratio should be:
(continued)
                   .  The monthly payment amount indicated on the credit report
                      or

                   .  The high credit divided by the loan term, if the monthly
                      payment is not included on the credit report:

                         .  Debts listed on the application, but not appearing
                            on the credit report, must be included, unless proof
                            of payment is shown.

                         .  Debts with 10 or less monthly payments remaining do
                            not need to be included.

Revolving      Revolving credit and other obligations, especially when less that
Credit/Other   $1,000, although considered are not given the same weight as the
Reported       borrower mortgage and/or other major installment accounts. In
Obligations    addition, the presence of only small revolving and/or installment
               debt as the borrower's only credit background may not be
               sufficient to establish their ability to repay a larger mortgage
               account.

               Three percent of the outstanding balance should be used as the
               payment amount when calculating the debt ratio, when the payment
               amount is not available from a current statement or the credit
               report.


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                          Other Types Of Obligations

Co-Signed      New Century will not include payments on co-signed loans if
Obligations    verification can be obtained to show that payments are and have
               been made by a responsible third party. A primary method of
               establishing the co-borrower relationship is by acquiring a copy
               of the Note, Installment Agreement or a copy of the payment
               coupon, which must establish that the payor is someone other than
               our borrower.

               In addition, proof that the primary borrower (on the Co-Signed
               account) is making the payments is also required to be in the
               loan file. This can be documented with a copy of 3 months
               canceled checks (front and back) or 3 months bank statements.

               The primary borrower may not be 2 X 30 days late in the last 12
               months, or the monthly payment amount and balance of the debt
               will be included in the Debt To Income Ratio calculations for New
               Century's borrower.

               If the obligation reports a delinquent history, New Century
               reviews this as a delinquency of the borrower and the monthly
               debt payment is included in the Debt To Income Ratio
               calculations. The payment amount of the obligation is not held
               against the borrower on the New Century Mortgage loan as long as
               the above required documentation has been provided.

               If the obligation does not interfere with the borrower's ability
               to qualify for New Century Mortgage guidelines, then there is no
               need to provide the above documentation. The debt will be
               included in the DTI Ratio with other obligations.

                                                                 Continued . . .

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                    Other Types Of Obligations (continued)

Deferred       If a borrower has obligations that are deferred, such as a
Obligations    student loan, the obligation may not need to be included in the
               DTI Ratio. Proof that the borrower is enrolled in school and/or
               evidence from the finance office to verify that the loan is
               deferred until a certain date (date must be specified), may be
                                              ----------------------
               all that is required. Many student loans report to the credit
               bureau stating the date to which the obligation is deferred.

               If the debt is not to be included in the DTI Ratio, there must be
               a write-up in the loan file that the 1 st payment will not be due
               for at least 12 months from the closing date of the loan. This
               information can be obtained from the lending institution, the
               credit report, or from the finance office at the school where the
               borrower is enrolled, or based on verification of enrollment and
               on an underwriter's write-up.

Child          New Century Mortgage Corporation considers child support/alimony
Support/       payments as an installment debt. If the debt is due to continue
Alimony        for more than 6 months, it will be included in the DTI Ratio. Any
Obligations    past due child support/alimony must be paid current, or in full
               if required by the administering agency, by the closing date of
               the loan. Any deviation from policy requires prior Level 1
               approval.


                                                                 Continued . . .

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                    Other Types Of Obligations (continued)

Delinquent     Current delinquencies and recent and prior charge off's,
and Charged-   judgments and collection accounts from credit obligations should
Off Accounts   be reviewed closely by the underwriter. New Century requires that
               its underwriters and management use common sense in determining
               whether accounts should:

                   .  Be brought current at or prior to funding
                   .  Be paid off through loan proceeds
                   .  Effect the borrower credit grade

               New Century, at its discretion, may not consider an individual
               account, even if it is within the past 12 months, to effect the
               borrower's credit grade if it is not representative of the
               borrower's overall credit background.

               Charged off accounts (less than one year old) or exceeding $5,000
               cumulative within the past 24 months, should be:

                   .  Verified as paid or
                   .  Paid off from loan proceeds.

               Collections and charge offs less than $500 and medical
               collections may not be considered if the underwriter considers
               them as not representative of the borrower's overall credit
               and/or caused by a dispute. The original date of occurrence is
               used in the credit decision.

               Any time large amounts are to be disbursed in cash to the
               borrower, prior obligations should be paid if they were reported
               within the past 36 months.

               Homeowners Association (HOA) dues more than 90 days past due are
               counted as a major derogatory item.


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                    Other Types Of Obligations (continued)

Bankruptcy     Century Mortgage generally requires that a Bankruptcy be
               discharged or dismissed before a mortgage loan can be made, as
               described below. (Dismissal willl be treated as discharge.)

--------------------------------------------------------------------------------
Credit           Chapter 7                          Chapter 13
Grade
--------------------------------------------------------------------------------
A+       greater than or equal to           greater than or equal to
         3 years from discharge date        2 years from discharge date
                                            with "as agreed" rating from
                                            trustee
--------------------------------------------------------------------------------
A-       greater than or equal to           greater than or equal to
         2 years from discharge date        2 years from filing date
                                            with rating from trustee, must
                                            be discharged
--------------------------------------------------------------------------------
B        greater than or equal to           greater than or equal to
         2 years from discharge date        2 years from filing date
                                            with rating from trustee, may
                                            be discharged at funding*
--------------------------------------------------------------------------------
MOP      greater than or equal to           greater than or equal to
         2 years from discharge date        2 years from filing date
                                            with rating trustee, may be
                                            discharged at funding
--------------------------------------------------------------------------------
C        greater than or equal to           greater than or equal to
         12 months from discharge date      12 months from filing date,
                                            may be discharged at funding
--------------------------------------------------------------------------------
C-       less than 12 months allowed        less than 12 months allowed from
         from discharge date                filing date, may be discharged
                                            at funding*
--------------------------------------------------------------------------------
HS       less than 12 months allowed        less than 12 months allowed from
         from discharge date                discharge date
--------------------------------------------------------------------------------

*New Century will only consider loans with an open Chapter 13 on a case by
case basis, and will require a level 1 or level 2 approval.

NCMC also requires that under an open Chapter 13 Bankruptcy, a written demand
from the Chapter 13 Trustee and the written approval from the Bankruptcy court
be obtained before a mortgage loan can be made.


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                          Debt to Income (DTI) Ratios

Definition     New Century considers the borrower's "total monthly payments"
               divided by their "gross monthly income" to establish the "Debt to
               Income" Ratio (DTI) as a means of determining the borrower's
               credit grade and to evaluate their ability to repay.

Disposable     New Century will also evaluate the borrower's "Disposable
Income         Income". This is determined by subtracting the borrower's "Total
               Monthly Payments" from their "Gross Income". The following guide
               is to be used as a tool for underwriters to consider whether a
               borrower has sufficient disposable income to cover their other
               living expenses and to provide minimal reserves.


                       Family Size            Disposable Income
               -----------------------------------------------------------------
                            1                         400
                            2                         600
                            3                         800
                            4                       1,000
                            5                       1,200
                            6                       1,400
                            7                       1,600

               Although this table is used as a guide, New Century may use
               discretion when reviewing borrowers with disposable income below
               these levels.

                                                                 Continued . . .

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                    Debt to Income (DTI) Ratios (continued)

Maximum DTI    Grade                               Maximum DTI
By Grade       -----------------------------------------------------------------
               A+                                      45%
               A- (45% for LTV's greater than 85%)     50%
               Mortgage Only Program (M.O.P.)          55%
               B                                       55%
               C                                       59%
               C-                                      59%
               HomeSaver                               59%


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                                   Overview

Importance of  Due to the nature of Sub Prime lending, the condition and
Collateral     accurate value of our collateral is an essential part of making
Condition      the proper credit judgment. The following guidelines are provided
and Valuation  to assist all NCMC associates in determining the acceptability
               and the value of the collateral:

                   . Acceptable Property Types
                     -------------------------

                   . Mobile Manufactured Homes
                     -------------------------

                   . Property/Collateral Requirements
                     --------------------------------

                   . Appraisal/Collateral Valuation
                     ------------------------------

                   . Insurance Requirements
                     ----------------------


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                           Acceptable Property Types

Single Family  A majority of New Century's business is to provide loans for the
Residence      purchase or refinance of Single Family Residences. A primary
(SFR)          determining factor in evaluating the acceptability of the
               property is its conformity to the area and the ability to
               establish an accurate "Market Value".

               New Century will lend on properties with up to 10 acres. In cases
               with over 5 acres the appraiser must give value to all acres,
               however New Century will deduct a pro-rata value for the average
               over 5 and base the LTV on this lower value. Properties with
               acreage must be considered residential, have no business or
               farming use and be conforming to the residential properties in
               the immediate area.

New            NCMC lends on both new Tract construction and Custom Homes.
Construction
               Both new tract construction and custom homes must have a
               certificate of occupancy. Also, if the appraisal was made
               "subject to", it must have a 442 with photos showing the property
               is complete and "as is".

Detached       NCMC treats these property types as SFR's. No LTV deductions
PUD's and      required.
Row Houses

Multiple       NCMC lends on a maximum of four units. Units require a minimum 5%
Units (2-4)    LTV reduction on all programs for all credit grades (see
               "Underwriting Matrix"). The maximum LTV available for owner-
                -------------------
               occupied units is 85%.


                                                                 Continued . . .

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                     Acceptable Property Types (continued)

Condominium/   NCMC lends on condominiums/townhomes with the following
Townhomes      restrictions:

               . The condo project must have at least four units.
               . No mixed use condo's that have retail \ commercial on the
                 bottom floor.
               . No Condo Hotels (Condotels), timeshares or co-ops.
               . No studio condos
               . No Apartment Conversions if the conversion has occurred within
                 the last three years, and\or if subject has less than 500
                 square feet.
               . Resort area Condominium projects are considered on a case by
                 case basis only. The owner occupancy requirement of 50% still
                 needs to be met.
               . High Rise Condo's are allowed if common for the area and all
                 comparables are similar. (Example: same number of floors; if
                 subject is a lower floor unit, the comps are not superior for
                 higher floor units.)

               All condominiums require a Home Owners Association (HOA) letter
               completed by the Property Management company or the Association
               President. The completed certificate must verify that:

               . The project is NOT involved in any type of litigation.
               . The project is 50% owner occupied. Second Homes are counted in
                 the owner occupancy total.
               . No more than 50% of the association homeowners are delinquent
                 in their monthly HOA dues.

               (Exception: New construction Condo projects. The HOA letter must
               verify all of the above information and also verify that 50% of
               the units in the Project are sold.)

               Condo's and Attached PUD's require a 5% LTV reduction on all
               programs for all credit grades. The maximum LTV available for
               Condo's / Townhomes is 85%.

                                                                 Continued . . .

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                     Acceptable Property Types (continued)

Attached       NCMC lends on Attached PUD's following the same guidelines as
Planned Unit   Condominiums. An HOA letter is still required and LTV reductions
Development    are the same.

Log            NCMC lends on log homes on a case by case. Log homes must have
Homes          the same amenities as a Single Family Residence: smooth plaster
               type interior walls, separate bedrooms, separate baths, kitchens,
               etc. Log Homes must be common for the area, and similar Log Homes
               must be used as comparables. The maximum LTV available in
               program / credit grade, must be reduced by 5%.

Unique         NCMC recognizes that there are properties that may not have a
Properties     broad appeal and/or market. These properties will be considered
               on a case by case basis as long as they are not properties that
               are listed in this section under "Unacceptable Properties". In
                                                 -----------------------
               addition to design and appeal considerations, all properties
               where comparable sales are available within 10 miles are to be
               considered unique.

Rural          NCMC may lend on Rural properties. Rural properties follow the
Properties     same LTV restrictions as UNIQUE PROPERTIES listed above. They
               must show good pride of ownership, conform to their area and
               their value must be established to the acceptance of NCMC.

Inherited      NCMC may lend to borrowers who have inherited property. If the
Properties     borrower has been on title over six months the transaction will
               be treated as a refinance transaction with no restrictions.
               However, if the borrower has not been on title for at least six
               months, the transaction must follow the same LTV restrictions as
               do Unique and Rural properties.

                                                                 Continued . . .

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                     Acceptable Property Types (continued)

Maximum LTV    Maximum LTV's for unique and rural properties are:
for Unique and
Rural          . A+ to A-   = 75%
               . B          = 70%
               . C          = 65%
               . C-         = 60%

               NO MOP OR HOME SAVER PROGRAMS ALLOWED

                           Mobile/Manufactured Homes

Overview       Mobile, manufactured homes are those homes that were
               substantially completed offsite and delivered to the site as one
               unit or in sections. The offsite work would in most cases include
               framing and insulation, drywall or wall covering, appliances and
               flooring. In most cases these properties would be identified as
               such by the appraiser, however, New Century may require
               additional clarification based on the property photos or if the
               borrower states that the home does not meet this definition.

               New Century limits the Loan To Value ratios and terms on mobile
               homes based on the information in this section and provided on
               the "Mobile/Manufactured Home Guidelines Checklist".
                    ---------------------------------------------

Mobile Home    New Century requires that a Mobile/Manufactured Home Guidelines
Checklist                                  -----------------------------------
               Checklist be completed on each loan where a mobile/manufactured
               ---------
               home is to be used as collateral. This form will assist the
               underwriter in establishing the acceptable terms and Loan To
               Value ratio.

                                                                 Continued . . .

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                     Mobile/Manufactured Homes (continued)

Mobile Home    . The mobile home and property must be legally classified and
Requirements     taxed as real property.
               . All foundations must have footings that are anchored to a
                 permanent foundation.
               . Home must have been built after June 15, 1976.
               . Maximum site value is 10 acres with reviewed value on 5 acres
                 value only.
               . 10% LTV reduction from program guidelines is required (all
                 exceptions require Level 1 approval.
               . 5% additional reduction for rural properties is required.
               . Loans on homes built prior to 15 years ago should have a
                 maximum term of 15 years.
               . All title policies must include an "ALTA Form 7" endorsement,
                 (insures improvements as "real property").


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                       Property/Collateral Requirements

Minimum        . Minimum Collateral Value is $30,000.00.
Collateral     . Minimum Square Footage is 800. All comps should be similar in
Requirements     size, bedroom and bath count. (Exception: Less than 800 square
                 feet if common for area with Level 1 or 2 approval).
               . Property condition must be rated as Average or better.
               . NCMC requires that the property is serviced with public
                 electricity.
               . NCMC requires that the property has a water source. If the
                 water source is not a public water company, it must be verified
                 that the source used is common for the area.
               . NCMC does not require a well or a septic certification unless
                 the appraisal or purchase contract indicates a problem.

                                                                 Continued . . .

               Copy of termite report and clearance (if applicable) will only be
               required if it is asked for in either the Purchase Contract,
               Escrow Instructions, or if the Appraiser or Appraisal Reviewer
               mentions any issues that raise concern.

                                                                 Continued . . .

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                 Property/Collateral Requirements (continued)

Unacceptable   . Vacant Properties. Vacant properties are only acceptable if our
Collateral/      transaction is a purchase, Construction to Perm, or a current
Property         remodel with verification in file.
               . Properties that are rated in FAIR or AVERAGE - (Minus)
                 condition on the appraisal.
               . Properties that appear to be in FAIR or AVERAGE -(Minus)
                 condition upon review of appraisal photos.
               . Adult care facilities, Elderly Care Homes, Group Homes.
               . Studio Condo's . A condo must have a separate bedroom with four
                 permanent walls.
               . Geometric Domes.
               . Properties that do not conform to the area / market.
               . Commercial and commercial store front properties.
               . Properties near a hazardous waste site.
               . Any properties used as a "working farm".

               *****ANY EXCEPTIONS MADE TO PROPERTIES LISTED IN
               THIS SECTION REQUIRE A LEVEL ONE APPROVAL *****


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                        Appraisal/Collateral Valuation

Determining    Determining an accurate "Market Value" for properties used as
Market Value   collateral for NCMC loans is a critical factor. To ensure NCMC
               obtains the most accurate estimated value for the collateral, the
               following guidelines have been implemented.

               . NCMC will base the LTV on the estimated market value provided
                 by a licensed appraisal on an acceptable appraisal for each
                 property type.
               . The current appraised value will be used to determine the LTV
                 when a borrower has owned the property for six months or more.
               . If borrowers purchased/acquired the property within the past 6
                 months, the original purchase/acquisition price must be used as
                 the basis of the LTV. A copy of the final HUD-1 should be
                 obtained to verify the original purchase price.

                 (Exception: If the borrower can provide a list of upgrades made
                 to the property, along with receipts and/or canceled checks to
                 verify the dollar amount of these improvements, then the LTV
                 can be based on the original purchase price plus the cost of
                 improvements or the appraised value.)

Properties     The value of properties that have been purchased or acquired
Owned Less     within the previous 6 months will be limited to the original
Than 6 Months  purchase price. In addition, NCMC will review properties where
               the Appraisal Value has increased over 25% in the past 24
               months.

Acceptable     . Form 1004 - Used for a Single Family Residence, Attached and
Appraisal        Detached PUD's. Last revision date of 6/93.
Forms          . Form 1073 - Used for a Condominium. Last revision date of
                 10/94.
               . Form 1025 - Used for Small Income Property (2-4 Units). Last
                 revision date of 10/94.

               Appraisals received for lending purposes at New Century must be
               on one of the above 3 forms. No other format (Drive by's, FHA
               appraisals) are acceptable at this time.


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                  Appraisal/Collateral Valuation (continued)

Expiration     Appraisals are good for 90 days from the appraisal date. After 90
Dates On       days NCMC requires a Recert of Value. NCMC does not require new
Appraisals     comps, nor a grid with the Recert. After six months, a complete
               new appraisal is required.

Appraisal      See the Retail Appraisal Policy or Wholesale Appraisal Policy for
Review                 -----------------------    --------------------------
Requirements   details.

Loan Amounts   NCMC requires that two appraisals, from two independent
of $500,000    appraisers, be included in each loan file with a loan amount of
               $500,000 or greater. If the values differ, NCMC will base the LTV
               on the lower of the two values. One field review should be
               ordered and should confirm at minimum the lower value.

Key Factors    The property address should be compared to the 1003's, and Prelim
In Reviewing   to validate appraisal is on NCMC subject property.
An Appraisal
               Verify if Owner Occupied, Tenant, or Vacant. Underwriter needs to
               question if applicant indicates Owner Occupied and Appraiser
               indicates Tenant on the appraisal. Vacant properties are only
               acceptable if our transaction is a purchase, construction to
               Perm, or a current remodel with verification in file.

               Verify if property is Fee Simple, or Leasehold. If Leasehold,
               NCMC requires a copy of the original lease to be obtained and
               approved by NCMC legal department prior to docs. NCMC will also
               require the original Lessor to sign a NCMC Leasehold agreement.

               The appraisal report submitted for a loan must be ordered by a
               New Century employee, Broker, or Correspondent. Verify the name
               identified as the client as NCMC, the Broker, or the
               Correspondent Broker. If the name identified is not one of the
               foregoing, then NCMC requires a new appraisal.

               The appraisal cannot be typed in our borrowers name.


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                            Insurance Requirements

SFR's,         Coverage must be in an amount at least equal to the replacement
Detached PUD's value of improvements on the property or the loan amount,
and Units      whichever is less.

               If your loan program is a second/junior lien, coverage must be in
               an amount at least equal to the new loan amount plus the amount
               of all senior liens against the subject property.

               Policies must contain deductibles on any peril of NOT MORE THAN:
                   . $100.00 for a loan of $50,000.00 or less
                   . $250.00 for loans between $50,001.00 and $100,000.00
                   . $500.00 for loans in excess of $100,000.00 and
                   . $1,000.00 for loans of $1,000,000.00 or more.

               Policy shall provide at least "Broad Form" coverage on properties
               of one to four units.

Condos and     The Master Policy must contain a minimum of $1,000,000 coverage
Attached PUD's for "Directors & Officers" liability. A copy of the Master
               Policy, or a certificate showing proof of coverage for both the
               Homeowners Association and the Condominium unit owner, must be
               provided prior to funding. A $1000.00 deductible is acceptable
               for condominiums and attached PUD's. Homeowners policies must
               provide coverage equal to "H02" form.

Flood          NCMC requires flood insurance if the collateral is determined to
Insurance      be in a FEMA special flood hazard area. If the property is in
               excess of $250,000, NCMC requires Excess Flood Coverage. A
               borrower's obligation to purchase flood insurance may not be
               waived.


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Page 1 of 7 (5/19/99) Latest Revised Items in Bold Blue

Overview


General New Century Mortgage Corporation provides loans to finance the purchase
of real property secured by one to four family dwelling units. Loans will be
granted to individuals only, for owner occupied and non-owner occupied
properties. Each loan will be reviewed on an individual basis, while taking into
consideration the applicant's credit history and ability to repay, the loan
amount and the loan to value ratio.

Purchase Money Checklist

New Century requires that a "Purchase Money Checklist" be completed for each
purchase money transaction prior to loan documents being drawn. The Checklist
assists the underwriter in evaluating the purchase transactions and obtaining
the required documentation and the correct type of appraisal review. The
checklist must be signed or counter signed by an approved individual.

Recent Sales of Subject Property

Because of New Century's need to determine a fair market value for the
properties used as collateral, the appraisal must include, in the appropriate
areas, information on any sale of the subject property within the last 12
months, whether it is "of record" or not. In addition, we may require
information to determine if any previous sellers and/or borrowers transferred
property below or above a fair market value.

Condition of Property

Properties must be in average or better condition. Any repairs must be minor and
should be completed prior to closing. At the underwriter's discretion repairs
may be waived when the amount is less than $1000 and the LTV is 5% below the
maximum allowed for the risk grade.

General Requirements

 .Seller must be the vested owner.
 .Equity exchange properties will be allowed, provided that both properties are
evaluated and appraised.
 .New developments with "subject to plans and specs" require an "as is " value
of 442 before funding.
 .Vacant properties are allowed, provided the borrower/tenant intends to
occupy.
 .Subordinating 2nd mortgages must have a minimum term of 3 years with a minimum
of interest only payments with executed document.
 . All purchase money loans will require a termite report and clearance if asked
  for in either the Purchase Contract, Escrow Instructions, or if the Appraiser
  or Appraisal Reviewer mention issues that raise concern.

                                  Page 1 of 7
<PAGE>

 .  Non-occupant co-signer income is not to be considered
 .All transactions must be deemed to be "Arms Length" and the buyer and seller
may not be the same or have similar financial interests.

Title Requirements

New Century requires that all purchase money transactions include a verification
of the date the seller acquired the property. If that date is within the past 12
months, a complete 12 month chain of title is required.

This condition:
 ..Must be reviewed and signed off by an Underwriter or Manager, and
 ..May not be waived by any individual.

It is the responsibility of the person reviewing the chain of title or other
documentation to ensure that the seller has been on title for at least 12
months.

New Century also requires a statement on all title documents indicating any
other pending sales or agreements other than those between the vested owner and
our borrower. In any case where there has been a transfer within the past 12
months, New Century requires the following:

A. Non-Owner Occupied - Investment/2/nd/ Home -Corporate Credit Officer
signature must be obtained prior to documents or final approval. B. Owner
Occupied - Level One or Risk Manager Signature required prior to documents or
final approval.

Agreements Agreement of Sale/Contract of Sale/ Purchase Agreements

New Century requires an Agreement of Sale which includes the sales price, amount
of down payment, commitment and closing dates, sales concessions seller
contributions, mortgage contingency, signatures of buyer, parties to the sale
transaction, i.e. .Corporation, partnership or Private individuals, plus any
additional addenda.

This is required on all purchase money transactions, including land contracts
and lease with option to purchase.

Land Contracts

These agreements between an owner and our borrower for the sale of a property at
a specific price and with specific repayment terms will be accepted as a bona
fide purchase based on the following conditions:
 .The Land Contract has been recorded
 .Canceled checks to verify the original deposit or down payment if any (if less
than 12 months ago)

                                  Page 2 of 7
<PAGE>

 .Canceled checks to verify payments according to the terms of the agreement for
the past 12 months
 .No indication that the agreement is a "Non-Arm's Length" transaction
If the contract has not been recorded, New Century will require 12 months
seasoning and the items listed above to consider the loan as a refinance
transaction.

Lease Option

This agreement between an Owner and a prospective Buyer allows the prospective
Buyer to lease a property for a specific term with an option to purchase at a
specific price. In most cases, New Century will consider this to be a "Purchase
Money Loan" at the time of submission and will limit the appraisal value to the
purchase price.

In some cases when the "prospective Buyer" has developed enough equity in the
property, New Century may consider it a refinance. This will be allowed in the
following cases:

 .When the lease option has been in place for over 12 months and a down payment
can be verified of at least 2.5% of the purchase price
 .When the lease option has been in place for over 24 months

In both of these cases the original down payment, if any, and all monthly
payments must be verified by canceled checks. If these are not available, the
transaction will be considered a "Purchase" at the time of submission to New
Century.

Funds To Close/Cash Reserves

Calculating Funds To Close
The formula below is used to calculate the funds required to close:

Sale price

+ Prepaid charges
+ Closing costs
- Loan Amount
= Seller contribution
---------------------
Funds needed for closing

Verification of Funds
New Century does not require seasoning for the down payment on owner occupied
A+, A- and B grades (however, the source of all of the down payment must be
verified). Owner Occupied C and C- grade and all Non-Owner Occupied/Investment
transactions require proof of and 60 days seasoning of the down payment.

Funds should be verified through a Verification of Deposit or the most recent
two month's bank statement, or as described below.

                                  Page 3 of 7
<PAGE>

In any case where the down payment source is not identified, New Century
requires the following:

A. Non-Owner Occupied - Investment/2/nd/ Home - Corporate Credit Officer
signature must be obtained prior to documents or final approval.
B. Owner Occupied - Level One or Risk Manager Signature required prior to
documents or final approval.

For Owner Occupied A+. A- and B grades, if LTV is 70% or less and the amount
needed to close is disclosed on the 1003, no additional verification is
required.

New Century requires the source of the down payment to be shown on the 1003
(application) prior to documents being drawn.

This condition:
 ..Must be signed off by an Underwriter or a Manager.
 .Sixty-days seasoning of these funds may be requested, unless otherwise
required, at the discretion of the Underwriter or Manager.

-------------------------------------------------------------------------------
Source                  Method of Verification
-------------------------------------------------------------------------------
Bridge Loans            The borrower must have the ability to carry the
                        payment on the new home, that payment (s) on the
                        current home up for sale, and the payment on the
                        bridge loan. If the bridge loan repayment schedule is
                        not monthly, it must be converted to a monthly
                        interest-only payment at the contractual interest
                        rate. If a contractual interest rate is not
                        available, use current market rates for qualification
                        purposes. Verification documentation includes:

                        . Copy of the loan commitment including all terms.
                        . Copy of the listing agreement.
-------------------------------------------------------------------------------
Funds Borrowed          This includes funds borrowed against certificates of
Against Assets          deposit, marketable securities, insurance policies,
                        401K plans, etc. The terms of the loan must be
                        verified in writing and the debt for repayment of the
                        loan must be included in the debt-to-income ratio.
-------------------------------------------------------------------------------
Gift Funds              Gift funds are acceptable as long as the relationship
                        of the donor to our borrower is a direct relative. No
                        repayment is required. Documentation required
                        includes:

                        .A gift letter from the donor plus
                        .A bank statement from the donor showing the gift
                        funds on deposit prior to their presentation to the
                        borrower(s)
                        .A deposit receipt showing the funds on deposit.
                        .Amount of gift
-------------------------------------------------------------------------------

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------------------------------------------------------------------------------
Source                  Method of Verification
------------------------------------------------------------------------------
IRA/Keogh/401k          Because funds from these sources are subject to
                        withdrawal penalties and income tax, only the "net"
                        withdrawal may be counted. Verification documentation
                        includes:

                        .Most recent statement
                        .Copy of the disbursement check
                        .Deposit receipt showing deposit of funds into the
                        borrower's account
------------------------------------------------------------------------------
Liquid Assets           Liquid assets include, but are not limited to:

                        .Bank Deposits - FNMA Verification of Deposit (Form
                        #1006) or two most current bank statement. Any recent
                        large deposits should be satisfactorily explained.
                        .Marketable Securities - Broker statement showing the
                        availability or sale of the securities.
                        .Cash Value of Life Insurance - The cash value must
                        be verified by a statement or letter from the
                        insurance company.
------------------------------------------------------------------------------
Relocation Package      Copy of commitment letter describing the details of
                        the relocation package.

                        .Deposit receipt showing deposit of funds into the
                        borrower's account, if not funding directly.
------------------------------------------------------------------------------
Source                  Method of Verification
------------------------------------------------------------------------------
Sale of Real Estate     .HUD-I form.
                        .If a sale is pending, a copy of the Purchase/ Sales
                        Contract is required.
------------------------------------------------------------------------------
Sale of Personal        .Contract of Sale with a deposit receipt or statement
Property                showing the funds on deposit in the borrower's
                        account. Bill of Sale, or other legally binding
                        agreement, to include date, amount and buyer's and
                        seller's signatures. In addition, a deposit receipt
                        or statement showing deposit of funds to the
                        borrower's account.
------------------------------------------------------------------------------
Trust Funds             .If remitted by the trust, trust documents.
                        .If trust documents are not available, a letter from
                        an attorney will suffice.
------------------------------------------------------------------------------

Miscellaneous Requirements

Rental of Existing Home

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<PAGE>

In cases where the existing home will be retained and rented, either a rental
agreement must be provided.

Owner Occupancy
A signed Owner Occupancy Agreement form or statement confirming the borrower
will occupy the property should be in the loan file if the property will be
owner occupied.

Rent Back Rent back to previous owners is acceptable for a maximum of 90 days
from date of closing.

Reserves Not required.

Earnest Money and Deposits on Sales Contracts
Earnest money and deposits on sales contracts are considered part of the down
payment and should be verified by one of the following:

 .Canceled check
 .Escrow instructions or Escrow Receipt

Sales Concessions

General Sales concessions from a seller are allowable up to 90% LTV, and
cannot exceed six percent (6%) of the purchase price and can only be used to
pay for non-recurring closing costs.(e.g. Loan fees, escrow fees, etc.). All
sale concessions must be clearly documented in the loan file.

The seller may never supply the buyer with any portion of the down payment.
However, if the buyer is a licensed real estate agent/broker, he can act as
his own agent. The buyer acting as his own agent would be entitled to 3% of
the 6% commission and can be allowed to have the commission earned credited
toward the down payment. Under no other circumstances may a seller supply a
buyer with any portion of the down payment.

The example below demonstrates how to calculate the maximum loan amount when
the sales concession exceeds the 6% allowable. This example assumes an
adjustable rate mortgage with an 80% CLTV.

Example

STEP 1 - Determine any excess sales concession. Itemize all of the borrower's
closing costs paid by seller:


Sales Price:                           $100,000
Appraised Value:                       $101,000
Loan Amount:                           $ 80,000
3 points paid by seller:               $  2,400

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<PAGE>

Costs paid by seller:                  $  4,700
Total contributions:                   $  7,100
Allowable contributions: -             $  6,000
------------------------------------------------
Excess sales concessions:              $  1,100

STEP 2 - Subtract the total excess sales concessions from the lesser of the
sales price or appraised value to determine the maximum allowable property
value:

Lesser of sales price or appraised value:    $100,000
Excess sales concession: -                   $  1,100
-----------------------------------------------------
Maximum allowable property value:            $ 98,900

STEP 3 - Multiply the maximum property value by the LTV (%) for the program to
arrive at the maximum acceptable loan amount:

Maximum Property Value:    $  98,900
Program LTV:               X .80
Maximum Loan Amount        $ 79, 120

The borrower would have to come up with an additional down payment of $880:

Original loan amount requested:     $  80,000
New reduced loan amount:             -$79,120
                                    ---------
Additional down payment:            $     880

Crib Note: Any sales concessions that are a credit to the borrower for items
other than non-recurring closing cost must be deducted from the property
value/Purchase Price.

Subordinate Financing
See CLTV Maximums in the "Underwriting Matrix".

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