Novation Agreement - Greenwich Capital Derivatives, Inc.



 Exhibit 10.2 
  
 ISDA® 
  
 International Swaps and Derivatives Association, Inc. 
  
 NOVATION AGREEMENT 
  
 dated as of February 22,
2005 among: 
  
 GREENWICH CAPITAL DERIVATIVES, INC. (the
“Remaining Party”), 
 NOVASTAR FINANCIAL, INC. (the “Transferor”) 
  
 AND 
  
 NOVASTAR MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2005-1 (the “Transferee”). 
  
 The Transferor and the Remaining Party have entered into one or more Transactions (each an
“Old Transaction”), each evidenced by a Confirmation (an “Old Confirmation”) attached hereto as Exhibit I and subject to a 1992 ISDA Master Agreement dated as of July 3, 2003 (the “Old Agreement”).

  
 The Remaining Party and the Transferee are simultaneously entering into a 1992
ISDA Master Agreement dated as of the date hereof in the form attached hereto as Exhibit II (the “New Agreement”). 
  
 With effect from and including February 22, 2005 (the “Novation Date”) the Transferor wishes to transfer by novation to the Transferee, and the
Transferee wishes to accept the transfer by novation of, all the rights, liabilities, duties and obligations of the Transferor under and in respect of each Old Transaction, with the exception of the Excluded Rights and Obligations referred to below,
with the effect that the Remaining Party and the Transferee enter into a new transaction (each a “New Transaction”) between them having terms identical to those of each Old Transaction, subject to the same exceptions and as more
particularly described below. 
  
 The Remaining Party wishes to accept the
Transferee as its sole counterparty with respect to the New Transactions. 
  
 The
Transferor and the Remaining Party wish to have released and discharged, as a result and to the extent of the transfer described above, their respective obligations under and in respect of the Old Transactions. 
  
 Accordingly, the parties agree as follows: — 
  

	1.	Definitions. 

  
 Terms defined in the ISDA Master Agreement (Multicurrency-Cross Border) as published in 1992 by the International Swaps and Derivatives Association, Inc. (the “1992 ISDA Master Agreement”) are used
herein as so defined, unless otherwise provided herein. For purposes of this Novation Agreement, “Excluded Rights and Obligations” means all obligations of each of the Transferor and the Remaining Party to Transfer (as defined in
the Credit Support Annex to the Old Agreement) Eligible Collateral (as so defined) in respect of the Old Transactions and all related rights of the Remaining Party and the Transferor under the Old Agreement. 
  









  

	2.	Transfer, Release, Discharge and Undertakings. 

  
 Subject to the execution and delivery of the New Agreement by each of the parties thereto to the other, with effect from and including the Novation Date and in
consideration of the mutual representations, warranties and covenants contained in this Novation Agreement and other good and valuable consideration (the receipt and sufficiency of which are hereby acknowledged by each of the parties): 

 

	 	(a)	subject to Section 2(d) of this Novation Agreement, the Remaining Party and the Transferor are each released and discharged from further obligations to each other with respect to
each Old Transaction and their respective rights against each other thereunder are cancelled, provided that such release and discharge shall not affect any rights, liabilities or obligations of the Remaining Party or the Transferor with respect to
payments or other obligations due and payable or due to be performed prior to the Novation Date, and all such payments and obligations shall be paid or performed by the Remaining Party or the Transferor in accordance with the terms of the Old
Transaction; 

  

	 	(b)	in respect of each New Transaction, the Remaining Party and the Transferee each undertake liabilities and obligations towards the other and acquire rights against each other
identical in their terms to each corresponding Old Transaction (and, for the avoidance of doubt, as if the Transferee were the Transferor and with the Remaining Party remaining the Remaining Party, save for the Excluded Rights and Obligations and
any other rights, liabilities or obligations of the Remaining Party or the Transferor with respect to payments or other obligations due and payable or due to be performed prior to the Novation Date); 

  

	 	(c)	each New Transaction shall be governed by, form part of, and be subject to the New Agreement and the relevant Old Confirmation (which, in conjunction and as deemed modified to be
consistent with this Novation Agreement, shall be deemed to be a Confirmation between the Remaining Party and the Transferee), and the offices of the Remaining Party and the Transferee for purposes of each New Transaction shall be their offices at
their addresses for notices provided for in the New Agreement; and 

  

	 	(d)	on the Novation Date, the Remaining Party shall transfer all of the Posted Collateral (as defined in the Credit Support Annex to the Old Agreement) held by it in respect of the Old
Transactions to the account or accounts of the Transferor identified by it by notice given to the Remaining Party as provided in the Old Agreement, and the Transferor shall transfer all Posted Collateral held by it in respect of the Old Transactions
to the account or accounts of the Remaining Party identified by it by notice given to the Transferor as provided in the Old Agreement, in each case together with all Interest Amount and Distributions thereon (as so defined). The Remaining
Party’s or the Transferor’s failure to effect these transfers will continue to constitute Potential Events of Default and may constitute Events of Default under the Old Agreement notwithstanding the transfer by novation contemplated
herein. 

  

	3.	Representations and Warranties. 

  

	 	(a)	On the date of this Novation Agreement: 

  

	 	(i)	Each of the parties makes to each of the other parties those representations and warranties set forth in Section 3(a) of the 1992 ISDA Master Agreement with references in such
Section to “this Agreement” or “any Credit Support Document” being deemed references to this Novation Agreement alone. 

  

	 	(ii)	 The Remaining Party and the Transferor each makes to the other, and the Remaining Party and the Transferee each makes to the other, the representation set forth in
Section 3(b) of the 1992 ISDA Master Agreement, in each case with respect to the Old Agreement or the New 



  

 2 









	 	 
Agreement, as the case may be, and taking into account the parties entering into and performing their obligations under this Novation Agreement.



  

	 	(iii)	Each of the Transferor and the Remaining Party represents and warrants to each other and to the Transferee that: 

  

	 	(A)	it has made no prior transfer (whether by way of security or otherwise) of the Old Agreement or any interest or obligation in or under the Old Agreement or in respect of any Old
Transaction; and 

  

	 	(B)	without prejudice to the obligations of the Remaining Party and the Transferor referred to in Section 2(d) of this Novation Agreement, as of the Novation Date, all obligations of
the Transferor and the Remaining Party under each Old Transaction required to be performed before the Novation Date have been fulfilled. 

  

	 	(iv)	Each party represents to each of the other parties: — 

  

	 	(A)	Non-Reliance. It is acting for its own account, and it has made its own independent decisions to enter into this Novation Agreement and as to whether this Novation Agreement is
appropriate or proper for it based upon its own judgment and upon advice from such advisers as it has deemed necessary. It is not relying on any communication (written or oral) of the other parties as investment advice or as a recommendation to
enter into this Novation Agreement; it being understood that information and explanations related to the terms and conditions of this Novation Agreement shall not be considered investment advice or a recommendation to enter into this Novation
Agreement. No communication (written or oral) received from any of the other parties shall be deemed to be an assurance or guarantee as to the expected results of this Novation Agreement; 

  

	 	(B)	Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts,
the terms, conditions and risks of this Novation Agreement. It is also capable of assuming, and assumes, the risks of this Novation Agreement; and 

  

	 	(C)	Status of Parties. None of the other parties is acting as a fiduciary for or an adviser to it in respect of this Novation Agreement. 

  

	 	(b)	The Transferor makes no representation or warranty and does not assume any responsibility with respect to the legality, validity, effectiveness, adequacy or enforceability of any
New Transaction or the New Agreement or any documents relating thereto and assumes no responsibility for the condition, financial or otherwise, of the Remaining Party, the Transferee or any other person or for the performance and observance by the
Remaining Party, the Transferee or any other person of any of its obligations under any New Transaction or the New Agreement or any document relating thereto and any and all such conditions and warranties, whether express or implied by law or
otherwise, are hereby excluded. 

  

	4.	Counterparts. 

  
 This Novation Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by
facsimile transmission), each of which will be deemed an original. 
  

 3 








  

	5.	Costs and Expenses. 

  
 The parties will each pay their own costs and expenses (including legal fees) incurred in connection with this Novation Agreement and as a result of the
negotiation, preparation and execution of this Novation Agreement. 
  

	6.	Amendments. 

  
 No amendment, modification or waiver in respect of this Novation Agreement will be effective unless in writing (including a writing evidenced by a
facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. 
  

	7.    (a)	Governing Law. 

  
 This Novation Agreement will be governed by and construed in accordance with the laws of the State of New York without reference to the conflict of laws
provisions thereof. 
  

	 	(b)	Jurisdiction.  

  
 The terms of Section 13(b) of the 1992 ISDA Master Agreement shall apply to this Novation Agreement with references in such Section to “this
Agreement” being deemed references to this Novation Agreement alone. 
  

	 	(c)	Not Acting in Individual Capacity. 

  
 JPMorgan Chase Bank, National Association is signing this Novation Agreement solely in its capacity as Trustee under the Pooling and Servicing Agreement
among NovaStar Mortgage Funding Corporation, NovaStar Mortgage, Inc., Wachovia Bank, National Association, and JPMorgan Chase Bank, National Association dated as of February 1, 2005 (the “Pooling and Servicing Agreement”) and not in
its individual capacity, and all persons having any claim against the Trustee by reason of the Transactions contemplated by this Novation Agreement shall look only to the assets of NovaStar Mortgage Supplemental Interest Trust, Series 2005-1
(subject to the availability of funds therefor in accordance with the Flow of Funds as set forth in Article IV of the Pooling and Servicing Agreement) for payment or satisfaction thereof unless due to the Trustee’s own negligent action,
negligent failure to act, or willful misconduct, provided that: 
  

	 	(i)	this Section 7(c) does not limit the effect of paragraph (a) of Section 8.01 of the Pooling and Servicing Agreement, 

  

	 	(ii)	the Trustee shall not be liable for any error of judgment made in good faith by its Responsible Officer (as defined in the Pooling and Servicing Agreement) unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts, and 

  

	 	(iii)	the Trustee shall not be liable with respect to any action it take or omits to take in good faith in accordance with a direction received by it from the Majority Certificateholders
(as defined in the Pooling and Servicing Agreement). 

  
 The foregoing may not be construed to give to Majority Certificateholders any rights under this Novation Agreement. 
  

 4 








 IN WITNESS WHEREOF the parties have executed this Novation Agreement on the respective dates specified below with effect
from and including the Novation Date. 
  

													
	 GREENWICH CAPITAL DERIVATIVES, INC.
	 	 	 	 NOVASTAR FINANCIAL, INC.

	 By: Greenwich Capital Markets, Inc., its agent
	 	 	 	 
					
	By:	 	 /s/    Thomas A. Newman
	 	 	 	By:	 	 /s/    David L. Farris

	 	 	 Name:
	 	 Thomas A. Newman
	 	 	 	 	 	 Name: David L. Farris

	 	 	 Title:
	 	 Managing Director
	 	 	 	 	 	 Title: Vice President

	 	 	 Date:
	 	 	 	 	 	 	 	 Date:
	 	 
					
	 NOVASTAR MORTGAGE
 SUPPLEMENTAL INTEREST TRUST,
 SERIES 2005-1
	 	 	 	 	 	 	 	 
					
	 By: JPMorgan Chase Bank, National Association,
 as Trustee under the Pooling and Servicing
 Agreement, acting not in its individual capacity,
 but solely in its capacity as Trustee to NovaStar
 Mortgage Supplemental Interest Trust, Series 2005-1
	 	 	 	 	 	 	 	 
						
	 By:
	 	 /s/    Michael A. Smith
	 	 	 	 	 	 	 	 
	 	 	 Name:
	 	 Michael A. Smith
	 	 	 	 	 	 	 	 
	 	 	 Title:
	 	 Vice President
	 	 	 	 	 	 	 	 
	 	 	 Date:
	 	 	 	 	 	 	 	 	 	 

  

 5 








  
 Exhibit I 

 
 [Old Confirmations attached behind this page] 
  

 6 








  
 

 
  
 24 November 2004

  
 NovaStar Financial, Inc. 
 Kansas City 
 Attn: Derivatives Confirmation

  
 THIS CONFIRMATION AMENDS AND RESTATES IN ITS ENTIRETY THE ORIGINAL
CONFIRMATION FOR THIS TRANSACTION. 
  
 Our Reference:
S102204012 
 Re: USD 75,000,000.00 Swap 
  
 The purpose of this document is to set forth the terms and conditions of the Transaction entered into between Greenwich Capital Derivatives, Inc., acting through its
agent, Greenwich Capital Markets, Inc. and yourselves on the Trade Date specified below (the 
 ‘Transaction’). This document constitutes a
‘Confirmation’ as referred to in the Agreement specified below. 
  
 The
definitions and provisions contained in the 2000 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between those definitions and
provisions and this Confirmation, this Confirmation will govern. 
  
 This
Confirmation supplements, forms part of, and is subject to, the 1992 ISDA Master Agreement dated as of 03 July 2003 as amended and supplemented from time to time (the ‘Agreement’), between yourselves and Greenwich Capital Derivatives, Inc.
All provisions contained in the Agreement govern this Confirmation except as expressly modified below. 
  
 1. The terms of the particular Transaction to which this Confirmation relates are as follows: 
  

			
		
	Notional Amount:	  	USD 75,000,000.00
		
	Trade Date:	  	22 October 2004
		
	Effective Date:	  	25 October 2004
		
	Termination Date:	  	25 October 2006, subject to adjustment in accordance with the Modified Following Business Day Convention
		
	Fixed Amounts:	  	 
		
	 Fixed Rate Payer:
	  	NovaStar Financial, Inc.
		
	 Fixed Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 25 November 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Fixed Rate:
	  	2.85625%

  

 1 









			
		
	 Fixed Rate Day Count Fraction:
	  	30/360
		
	 No Adjustment for Period End Dates:
	  	Applicable
		
	 Business Days:
	  	New York
		
	Floating Amounts:	  	 
		
	 Floating Rate Payer:
	  	Greenwich Capital Derivatives, Inc.
		
	 Floating Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 26 November 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Floating Rate for initial Calculation Period:
	  	1.93250% (exclusive of Spread where applicable)
		
	 Floating Rate Option:
	  	USD-LIBOR-BBA
		
	 Designated Maturity:
	  	1 month
		
	 Spread:
	  	None
		
	 Floating Rate Day Count Fraction:
	  	Actual/360
		
	 Reset Dates:
	  	The first day of each Calculation Period
		
	 Compounding:
	  	Not Applicable
		
	 Business Days:
	  	New York
		
	Calculation Agent:	  	Greenwich Capital Markets, Inc. (as agent for Greenwich Capital Derivatives, Inc., Greenwich) or, if different, as stated in the Agreement
		
	2. Other Provisions:	  	 
		
	Independent Amount:	  	The Independent Amount (as defined in Paragraph 13 of the Credit Support Annex) with respect to NovaStar Financial, Inc. under this Transaction shall be USD 375,000. In the event of any
adjustment to the terms of the Transaction, Greenwich Capital Derivatives, Inc. shall have the right to re-calculate the Independent Amount in its sole discretion.
		
	Account Details:	  	 
		
	Payments to Greenwich Capital Derivatives, Inc.	  	 J.P. Morgan Chase Bank, New York
 ABA#
021000021
 Beneficiary: Greenwich Capital Derivatives, Inc.
 Account #: 066-9-05206


  

 2 









			
	Payments to NovaStar Financial, Inc.	  	Please provide your settlement instructions
		
	Offices:	  	 
		
	 The Office of Greenwich Capital Derivatives, Inc. for the
 Transaction is:
	  	Greenwich   
		
	The Office of NovaStar Financial, Inc. for the Transaction is:	  	Kansas City

  
 Representations and Warranties:

  
 To induce the other to enter into the Transaction, each party represents
and warrants to the other that (i) it is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended and it has entered into this Transaction in conjunction with its line of business (including
financial intermediation services) or the financing of business, (ii) it is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it
based upon its own judgement and upon advice from such advisers as it has deemed necessary, (iii) it is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction
(it being understood that information and explanation related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction), (iv) no communication (written or oral)
received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction, (v) it is capable of assessing the merits of and understanding (on its own behalf or through independent professional
advice), and understand and accepts, the terms, conditions and risks of this Transaction, and it is capable of assuming, and assumes, the risks of this Transaction, and (vi) the other party is not acting as a fiduciary for or an adviser to it in
respect of this Transaction. 
  
 This Transaction has been entered into by
Greenwich Capital Markets, Inc., as agent for Greenwich Capital Derivatives, Inc., Greenwich. Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Greenwich Capital Derivatives, Inc., Greenwich
under this Transaction. 
  
 This Confirmation is in final form and supersedes all
previous Confirmations and communications in respect of this Transaction. No hard copy will follow. Please confirm that the foregoing correctly sets forth the terms of our agreement by signing this Confirmation and returning it via fax to the
attention of Customer Service/Confirmations, fax number (203) 618-2580. 
  
 In the
event that you disagree with any part of this Confirmation, please telephone the sender on (203) 618-2525, so that the discrepancy may be quickly resolved. Please note that our telephone conversations with you may be recorded. Alternatively you may
contact us via fax on (203) 618-2580. 
  
 We are pleased to have completed this
Transaction and look forward to dealing with you again in the near future. 
  

									
	 Yours Sincerely,
	 	 	 	 Confirmed as of the date first written:

			
	Greenwich Capital Markets, Inc.	 	 	 	NovaStar Financial, Inc.
	As Agent stated above	 	 	 	 
					
	By:	 	 /s/ William Gougherty
	 	 	 	By:	 	 /s/ David L. Farris

	 Name:
	 	 William Gougherty
	 	 	 	 Name:
	 	 David L. Farris

	 Title:
	 	 Vice President
	 	 	 	 Title:
	 	 V.P.


  

 3 









			
	Our Deal Reference:	  	Counterparty Deal Reference:
	 S102204012
	  	148

  

			
	 Contact information for
 Greenwich Capital
Derivatives, Inc.:
	  	 
		
	 Customer Service / Confirmations:
	  	(203) 618-2525
		
	 Please fax all confirmations to:
	  	(203) 618-2580
		
	 Settlements:
	  	(203) 618-2572
		
	 Please fax payment / reset notices to:
	  	(203) 618-2579
		
	 Our e-mail address:
	  	gcmderivatives@gcm.com

  
 

 
  

 4 








 

 
  
 24 November 2004

  
 NovaStar Financial, Inc. 
 Kansas City 
 Attn: Derivatives Confirmation

  
 THIS CONFIRMATION AMENDS AND RESTATES IN ITS ENTIRETY THE ORIGINAL
CONFIRMATION FOR THIS TRANSACTION. 
  
 Our Reference:
S102204010 
 Re: USD 25,000,000.00 Swap 
  
 The purpose
of this document is to set forth the terms and conditions of the Transaction entered into between Greenwich Capital Derivatives, Inc., acting through its agent, Greenwich Capital Markets, Inc. and yourselves on the Trade Date specified below (the
‘Transaction’). This document constitutes a ‘Confirmation’ as referred to in the Agreement
specified below. 
  
 The definitions and provisions contained in the 2000 ISDA
Definitions, as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will
govern. 
  
 This Confirmation supplements, forms part of, and is subject to, the
1992 ISDA Master Agreement dated as of 03 July 2003 as amended and supplemented from time to time (the ‘Agreement’), between yourselves and Greenwich Capital Derivatives, Inc., All provisions contained in the Agreement govern this Confirmation except as expressly modified below. 
  
 1. The terms of the particular Transaction to which this Confirmation relates are as follows: 
  

			
	Notional Amount:	  	USD 25,000,000.00
		
	Trade Date:	  	22 October 2004
		
	Effective Date:	  	25 October 2004
		
	Termination Date:	  	25 October 2007, subject to adjustment in accordance with the Modified Following Business Day Convention

  
 Fixed Amounts:

  

			
	 Fixed Rate Payer:
	  	NovaStar Financial, Inc.
		
	 Fixed Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 25 November 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Fixed Rate:
	  	3.1775%

  

 1 









			
	 Fixed Rate Day Count Fraction:
	  	30/360
		
	 No Adjustment for Period End Dates:
	  	Applicable
		
	 Business Days:
	  	New York

  
 Floating Amounts:

  

			
	 Floating Rate Payer:
	  	Greenwich Capital Derivatives, Inc.
		
	 Floating Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 26 November 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Floating Rate for Initial Calculation Period:
	  	1.93250% (exclusive of Spread where applicable)
		
	 Floating Rate Option:
	  	USD-LIBOR-BBA
		
	 Designated Maturity:
	  	1 month
		
	 Spread:
	  	None
		
	 Floating Rate Day Count Fraction:
	  	Actual/360
		
	 Reset Dates:
	  	The first day of each Calculation Period
		
	 Compounding:
	  	Not Applicable
		
	 Business Days:
	  	New York
		
	 Calculation Agent:
	  	Greenwich Capital Markets, Inc. (as agent for Greenwich Capital Derivatives, Inc., Greenwich) or, if different, as stated in the Agreement

  
 2. Other Provisions:

  

			
	 Independent Amount:
	  	The Independent Amount (as defined in Paragraph 13 of the Credit Support Annex) with respect to NovaStar Financial, Inc. under this Transaction shall be USD 125,000. In the event of any
adjustment to the terms of the Transaction, Greenwich Capital Derivatives, Inc. shall have the right to re-calculate the Independent Amount in its sole discretion.

  
 Account Details: 
  

			
	 Payments to Greenwich Capital Derivatives, Inc.
	  	 J.P. Morgan Chase Bank, New York
 ABA#
021000021
 Beneficiary: Greenwich Capital Derivatives, Inc.
 Account #: 066-9-05206


  

 2 









			
	 Payments to NovaStar Financial, Inc.
	 	Please provide your settlement instructions
		
	Offices:	 	 
		
	 The Office of Greenwich Capital Derivatives, Inc. for the
 Transaction is:
	 	Greenwich
		
	 The Office of NovaStar Financial, Inc. for the Transaction is:
	 	Kansas City

  
 Representations and Warranties:

  
 To induce the other to enter into the Transaction, each party represents
and warrants to the other that (i) it is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended and it has entered into this Transaction in conjunction with its line of business (including
financial intermediation services) or the financing of business, (ii) it is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it
based upon its own judgement and upon advice from such advisers as it has deemed necessary, (iii) it is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction
(it being understood that information and explanation related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction), (iv) no communication (written or oral)
received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction, (v) it is capable of assessing the merits of and understanding (on its own behalf or through independent professional
advice), and understand and accepts, the terms, conditions and risks of this Transaction, and it is capable of assuming, and assumes, the risks of this Transaction, and (vi) the other party is not acting as a fiduciary for or an adviser to it in
respect of this Transaction. 
  
 This Transaction has been entered into by
Greenwich Capital Markets, Inc., as agent for Greenwich Capital Derivatives, Inc., Greenwich. Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Greenwich Capital Derivatives, Inc., Greenwich
under this Transaction. 
  
 This Confirmation is in final form and supersedes all
previous Confirmations and communications in respect of this Transaction. No hard copy will follow. Please confirm that the foregoing correctly sets forth the terms of our agreement by signing this Confirmation and returning it via fax to the
attention of Customer Service/Confirmations, fax number (203) 618-2580. 
  
 In the
event that you disagree with any part of this Confirmation, please telephone the sender on (203) 618-2525, so that the discrepancy may be quickly resolved. Please note that our telephone conversations with you may be recorded. Alternatively you may
contact us via fax on (203) 618-2580. 
  
 We are pleased to have completed this
Transaction and look forward to dealing with you again in the near future. 
  

									
	 Yours Sincerely,
	 	 	 	 Confirmed as of the date first written:

			
	 Greenwich Capital Markets, Inc.
 As
Agent stated above
	 	 	 	NovaStar Financial, Inc.
					
	By:	 	 /s/ William Gougherty
	 	 	 	By:	 	 /s/ David L. Farris

	 Name:
	 	 William Gougherty
	 	 	 	 Name:
	 	 David L. Farris

	 Title:
	 	 Vice President
	 	 	 	 Title:
	 	 V. P.


  

 3 









									
	 Our Deal Reference:
	 	 	 	 Counterparty Deal Reference:

			
	 S102204010
	 	 	 	 149


  

			
	Contact Information for Greenwich Capital Derivatives, Inc.:	 	 
		
	Customer Service / Confirmations:	 	(203) 618-2525
		
	Please fax all confirmations to:	 	(203) 618-2580
		
	Settlements:	 	(203) 618-2572
		
	Please fax payment / reset notices to:	 	(203) 618-2579
		
	Our e-mail address:	 	gcmderivatives@gcm.com

  
 

 
  

 4 








 

 
  
 04 November 2004

  
 NovaStar financial, Inc. 
 Kansas City 
 Attn: Derivatives Confirmation

  
 Our Reference: S110304018 
 Re: USD 75,000,000.00 Swap 
  
 The purpose of this document is to set forth the terms and conditions of the Transaction entered into between Greenwich Capital Derivatives, Inc., acting through its
agent, Greenwich Capital Markets, Inc. and yourselves on the Trade Date specified below (the “Transaction”). This document constitutes a ‘Confirmation’ as referred to in the Agreement specified below. 
  
 The definitions and provisions contained in the 2000 ISDA Definitions, as published by the
International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation, in the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. 
  
 This Confirmation supplements, forms part of, and is subject to, the 1982 ISDA Master
Agreement dated as of 27 June 2003 as amended and supplemented from time to time (the ‘Agreement’), between yourselves and Greenwich Capital Derivatives, Inc., All provisions contained in the Agreement govern this Confirmation except as
expressly modified below. 
  
 1. The terms of the particular Transaction to which
this Confirmation relates are as follows: 
  

			
		
	 Notional Amount:
	  	USD 75,000,000.00
		
	 Trade Date:
	  	03 November 2004
		
	 Effective Date:
	  	26 November 2004
		
	 Termination Date:
	  	25 November 2006, subject to adjustment in accordance with the Modified Following Business Day Convention
		
	Fixed Amounts:	  	 
		
	 Fixed Rate Payer:
	  	NovaStar Financial, Inc.
		
	 Fixed Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 25 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Fixed Rate:
	  	2.9875%
		
	 Fixed Rate Day Count Fraction:
	  	30/360
		
	 No Adjustment for Period End Dates:
	  	Applicable
		
	 Business Days:
	  	New York

  

 1 









			
	Floating Amounts:	  	 
		
	 Floating Rate Payer:
	  	Greenwich Capital Derivatives, Inc.
		
	 Floating Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 27 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Floating Rate for initial Calculation Period:
	  	To be determined
		
	 Floating Rate Option:
	  	USD-LIBOR-BBA
		
	 Designated Maturity:
	  	1 month
		
	 Spread:
	  	None
		
	 Floating Rate Day Count Fraction:
	  	Actual/360
		
	 Reset Dates:
	  	The first day of each Calculation Period
		
	 Compounding:
	  	Not Applicable
		
	 Business Days:
	  	New York
		
	 Calculation Agent:
	  	Greenwich Capital Markets, Inc. (as agent for Greenwich Capital Derivatives, Inc., Greenwich) or, if different, as stated in the Agreement
		
	2. Other Provisions:	  	 
		
	 Independent Amount:
	  	The Independent Amount (as defined in Paragraph 13 of the Credit Support Annex) with respect to NovaStar Financial, Inc. under this Transaction shall be USD 375,000. In the event of any
adjustment to the terms of the Transaction, Greenwich Capital Derivatives, Inc. shall have the right to re-calculate the Independent Amount in its sole discretion.
		
	Account Details:	  	 
		
	 Payments to Greenwich Capital Derivatives, Inc.
	  	 J.P. Morgan Chase Bank, New York
 ABA#
021000021
 Beneficiary: Greenwich Capital Derivatives, Inc.
 Account #: 066-9-05206

		
	 Payments to NovaStar Financial, Inc.
	  	Please provide your settlement Instructions

  

			
	Offices:	  	 
		
	 The Office of Greenwich Capital Derivatives, Inc. for the Transaction is:
	  	Greenwich
		
	 The Office of NovaStar Financial, Inc. for the Transaction is:
	  	Kansas City

  
 Representations and Warranties:

  
 To induce the other to enter into the Transaction, each party represents
and warrants to the other that (i) it is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended and it has entered into this Transaction in conjunction with its line of business (including
financial intermediation services) or the financing of business, (ii) it is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to 

  

 2 








 
whether this Transaction is appropriate or proper for it based upon its own judgement and upon advice from such advisors as it has deemed necessary, (iii) it
is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction (it being understood that information and explanation related to the terms and conditions of this
Transaction shall not be considered investment advice or a recommendation to enter into this Transaction), (iv) no communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected
results of this Transaction, (v) it is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understand and accepts, the terms, conditions and risks of this Transaction, and it is
capable of assuming, and assumes, the risks of this Transaction, and (vi) the other party is not acting as a fiduciary for or an adviser to it in respect of this Transaction. 
  
 This Transaction has been entered into by Greenwich Capital Markets, Inc., as agent for Greenwich Capital Derivatives, Inc., Greenwich.
Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Greenwich Capital Derivatives, Inc., Greenwich under this Transaction. 
  
 This Confirmation is in final form and supersedes all previous Confirmations and communications in respect of this Transaction. No hard copy
will follow. Please confirm that the foregoing correctly sets forth the terms of our agreement by signing this Confirmation and returning it via fax to the attention of Customer Service/Confirmations, fax number (203) 618-2580. 
  
 In the event that you disagree with any part of this Confirmation, please telephone the
sender on (203) 618-2525, so that the discrepancy may be quickly resolved. Please note that our telephone conversations with you may be recorded. Alternatively you may contact us via fax on (203) 818-2580. 
  
 We are pleased to have completed this Transaction and took forward to dealing with you again
in the near future. 
  

									
	 Yours Sincerely,
	 	 	 	 Confirmed as of the date first written:

			
	 Greenwich Capital Markets, Inc.
 As
Agent stated above
	 	 	 	NovaStar Financial, Inc.
					
	By:	 	 /s/ William Gougherty
	 	 	 	By:	 	 /s/ David L. Farris

	 Name:
	 	 William Gougherty
	 	 	 	 Name:
	 	 David L. Farris

	 Title:
	 	 Vice President
	 	 	 	 Title:
	 	 V.P.

			
	Our Deal Reference:	 	 	 	 Counterparty Deal Reference:

	S110304018	 	 	 	150

  
 Contact Information for

 Greenwich Capital Derivatives, Inc. 
  

			
	Customer Service / Confirmations:	  	(203) 618-2525
		
	Please fax all confirmations to:	  	(203) 618-2580
		
	Settlements:	  	(203) 618-2572
		
	Please fax payment/reset notices to:	  	(203) 618-2379
		
	Our e-mail address:	  	gcmderivatives@gcm.com

  
 

 
  

 3 








 

 
  
 04 November 2004 
  
 NovaStar Financial, Inc. 
 Kansas City 

Attn: Derivatives Confirmation 
  
 Our Reference: S110304020 
 Re: USD
25,000,000.00 Swap 
  
 The purpose of this document is to set forth the terms and
conditions of the Transaction entered into between Greenwich Capital Derivatives, Inc., acting through its agent, Greenwich Capital Markets, Inc. and yourselves on the Trade Date specified below (the ‘Transaction’). This document
constitutes a ‘Confirmation’ as referred to in the Agreement specified below. 
  
 The definitions and provisions contained in the 2000 ISDA Definitions, as published by the International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between those
definitions and provisions and this Confirmation, this Confirmation will govern. 
  
 This Confirmation supplements, forms part of, and is subject to, the 1992 ISDA Master Agreement dated as of 27 June 2003 as amended and supplemented from time to time (the ‘Agreement’), between yourselves and Greenwich Capital
Derivatives, Inc. All provisions contained in the Agreement govern this Confirmation except as expressly modified below. 
  
 1. The terms of the particular Transaction to which this Confirmation relates are as follows: 
  

			
	Notional Amount:	  	USD 25,000,000.00
		
	Trade Date:	  	03 November 2004
		
	Effective Date:	  	26 November 2004
		
	Termination Date:	  	25 November 2007, subject to adjustment in accordance with the Modified Following Business Day Convention

  
 Fixed Amounts:

  

			
	 Fixed Rate Payer:
	  	NovaStar Financial, Inc.
		
	 Fixed Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 25 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Fixed Rate:
	  	3.2725%
		
	 Fixed Rate Day Count Fraction:
	  	30/360
		
	 No Adjustment for Period End Dates:
	  	Applicable
		
	 Business Days:
	  	New York

  

 1 








 Floating Amounts: 
  

			
	 Floating Rate Payer:
	  	Greenwich Capital Derivatives, Inc.
		
	 Floating Rate Payer Payment Dales:
	  	The 25th of each month, commencing on 27 December 2004 to and including the Termination Date, subject to adjustment In accordance with the Modified Following Business Day
Convention
		
	 Floating Raw for initial Calculation Period:
	  	To be determined
		
	 Floating Rate Option:
	  	USD–LIBOR–BBA
		
	 Designated Maturity:
	  	1 month
		
	 Spread:
	  	None
		
	 Floating Rate Day Count Fraction;
	  	Actual/360
		
	 Reset Dates:
	  	The first day of each Calculation Period
		
	 Compounding:
	  	Not Applicable
		
	 Business Days:
	  	New York
		
	Calculation Agent:	  	Greenwich Capital Markets, Inc. (as agent for Greenwich Capital Derivatives, Inc., Greenwich) or, if different, as stated in the Agreement
		
	2. Other Provisions:	  	 
		
	Independent Amount:	  	The Independent Amount (as defined in Paragraph 13 of the Credit Support Annex) with respect to NovaStar Financial, Inc. under this Transaction shall be USD 125_000. In the event of any
adjustment to the terms of the Transaction, Greenwich Capital Derivatives, Inc. shall have the right to re-calculate the Independent Amount in its sole discretion.
		
	Account Details:	  	 
		
	Payments to Greenwich Capital Derivatives, Inc.	  	 J.P. Morgan Chase Bank, New York
 ABA#
021000021
 Beneficiary: Greenwich Capital Derivatives, Inc.
 Account #: 066-9-05208

		
	Payments to NovaStar Financial, Inc.	  	Please provide your settlement instructions

  

			
	Offices:	  	 
		
	 The Office of Greenwich Capital Derivatives, Inc. for the Transaction is:
	  	Greenwich
		
	 The Office of NovaStar Financial, Inc. for the Transaction is:
	  	Kansas City

  
 Representations and Warranties:

  
 To induce the other to enter into the Transaction, each party represents
and warrants to the other that (i) it is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended and it has entered into this Transaction in conjunction with its line of business (including
financial intermediation services) or the financing of business, (II) It is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to 

  

 2 








 
whether this Transaction is appropriate or proper for it based upon ire own judgement and upon advice from such advisers as it has deemed necessary, (iii) it
is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction (it being understood that information and explanation related to the terms and conditions of this
Transaction shall not be considered investment advice or a recommendation to enter into this Transaction), (iv) no communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected
results of this Transaction, (v) it is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understand and accepts, the terms, conditions and risks or this Transaction, and it is
capable of assuming, and assumes, the risks of this Transaction, and (vi) the other party is not acting as a fiduciary for or an adviser to it in respect or this Transaction. 
  
 This Transaction has been entered into by Greenwich Capital Markets, Inc., as agent for Greenwich Capital Derivatives, Inc., Greenwich.
Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Greenwich Capital Derivatives, Inc., Greenwich under this Transaction. 
  
 This Confirmation is in final form and supersedes all previous Confirmations and communications in respect of this Transaction. No hard copy
will follow. Please confirm that the foregoing correctly sets forth the terms of our agreement by signing this Confirmation and returning it via fax to the attention of Customer Service/Confirmations, fax number (203) 618-2580. 
  
 In the event that you disagree with any part of this Confirmation, please telephone the
sender on (203) 618-2525. so that the discrepancy may be quickly resolved. Please note that our telephone conversations with you may be recorded. Alternatively you may contact us via fax on (203) 618-2580. 
  
 We are pleased to have completed this Transaction and look forward to dealing with you again
in the near future. 
  

									
	 Yours Sincerely,
	 	 	 	 Confirmed as of the date first written:

	 Greenwich Capital Markets, Inc.
	 	 	 	NovaStar Financial, Inc.
	As Agent Stated above	 	 	 	 
					
	By:	 	 /s/ William Gougherty
	 	 	 	By:	 	 /s/ David L. Farris

	 Name: William Gougherty
	 	 	 	 Name: David L. Farris

	 Title: Vice President
	 	 	 	 Title: V.P.

	Our Deal Reference:	 	 	 	Counterparty Deal Reference:
	S110304020	 	 	 	 151


  

			
	 Contact Information for
 Greenwich Capital Derivatives, Inc.:
	 	 
	Customer Service / Confirmations:	 	 (203) 618-2525

	Please fax all confirmations to:	 	 (203) 618-2580

	Settlements:	 	 (203) 618-2572

	Please fax payment/ reset notices to:	 	 (203) 618-2578

	Our e-mail address;	 	 gcmderivatives@gcm.com


  
 

 
  

 3 








  
 

 
  
 16 November 2004

  
 NovaStar Financial, Inc. 
 Kansas City 
 Attn: Derivatives Confirmation

  
 Our Reference: D6625024 
 Re: USD 75,000,000.00 Swap 
  
 The purpose of this document is to set forth the terms and conditions of the Transaction entered into between Greenwich Capital Derivatives, Inc., acting through its
agent, Greenwich Capital Markets, Inc. and yourselves on the Trade Date specified below (the ‘Transaction’). This document constitutes a ‘Confirmation’ as referred to in the Agreement specified below. 
  
 The definitions and provisions contained in the 2000 ISDA Definitions, as published by the
International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. 
  
 This Confirmation supplements, forms part of, and is subject to, the 1992 ISDA Master
Agreement dated as of 03 July 2003 as amended and supplemented from time to time (the ‘Agreement’),
between yourselves and Greenwich Capital Derivatives, Inc. All provisions contained in the Agreement govern this Confirmation except as expressly modified below. 
  
 1. The terms of the particular Transaction to which this Confirmation relates are as follows: 
  

			
	 Notional Amount:
	  	USD 75,000,000.00
		
	 Trade Date:
	  	12 November 2004
		
	 Effective Date:
	  	26 November 2004
		
	 Termination Date:
	  	25 November 2006, subject to adjustment in accordance with the Modified Following Business Day Convention
		
	Fixed Amounts:	  	 
		
	 Fixed Rate Payer:
	  	NovaStar Financial, Inc.
		
	 Fixed Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 25 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Fixed Rate:
	  	3.2075%
		
	 Fixed Rate Day Count Fraction:
	  	30/360
		
	 No Adjustment for Period End Dates:
	  	 
	 	  	Applicable

  

 1 









			
		
	 Business Days:
	  	New York
		
	Floating Amounts:	  	 
		
	 Floating Rate Payer:
	  	Greenwich Capital Derivatives, Inc.
		
	 Floating Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 27 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Floating Rate for initial Calculation Period:
	  	To be determined
		
	 Floating Rate Option:
	  	USD-LIBOR-BBA
		
	 Designated Maturity:
	  	1 month
		
	 Spread:
	  	None
		
	 Floating Rate Day Count Fraction:
	  	Actual/360
		
	 Reset Dates:
	  	The first day of each Calculation Period
		
	 Compounding:
	  	Not Applicable
		
	 Business Days:
	  	New York
		
	 Calculation Agent:
	  	 Greenwich Capital Markets, Inc. (as agent for Greenwich Capital Derivatives, Inc.,
 Greenwich) or, if different, as stated in the Agreement

		
	2. Other Provisions:	  	 
		
	 Independent Amount:
	  	The Independent Amount (as defined in Paragraph 13 of the Credit Support Annex) with respect to NovaStar Financial, Inc. under this Transaction shall be USD 375,000. In the event of any
adjustment to the terms of the Transaction, Greenwich Capital Derivatives, Inc. shall have the right to re-calculate the Independent Amount in its sole discretion.
		
	Account Details:	  	 
		
	 Payments to Greenwich Capital Derivatives, Inc.
	  	 J.P. Morgan Chase Bank, New York
 ABA#
021000021
 Beneficiary: Greenwich Capital Derivatives, Inc.
 Account #: 066-9-05206

		
	 Payments to NovaStar Financial, Inc.
	  	Please provide your settlement instructions

  

 2 









			
	Offices:	  	 
		
	 The Office of Greenwich Capital Derivatives, Inc. for the Transaction is:
	  	Greenwich
		
	 The Office of NovaStar Financial, Inc. for the Transaction is:
	  	Kansas City

  
 Representations and Warranties:

  
 To induce the other to enter into the Transaction, each party represents
and warrants to the other that (i) it is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended and it has entered into this Transaction in conjunction with its line of business (Including
financial intermediation services) or the financing of business, (ii) it is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it
based upon its own judgement and upon advice from such advisers as it has deemed necessary, (iii) it is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction
(it being understood that information and explanation related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction), (iv) no communication (written or oral)
received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction, (v) it is capable of assessing the merits of and understanding (on its own behalf or through independent professional
advice), and understand and accepts, the terms, conditions and risks of this Transaction, and it is capable of assuming, and assumes, the risks of this Transaction, and (vi) the other party is not acting as a fiduciary for or an adviser to it in
respect of this Transaction. 
  
 This Transaction has been entered into by
Greenwich Capital Markets, Inc., as agent for Greenwich Capital Derivatives, Inc., Greenwich. Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Greenwich Capital Derivatives, Inc., Greenwich
under this Transaction. 
  
 This Confirmation is in final form and supersedes all
previous Confirmations and communications in respect of this Transaction. No hard copy will follow. Please confirm that the foregoing correctly sets forth the terms of our agreement by signing this Confirmation and returning it via fax to the
attention of Customer Service/Confirmations, fax number (203) 618-2580. 
  
 In the
event that you disagree with any part of this Confirmation, please telephone the sender on (203) 618-2525, so that the discrepancy may be quickly resolved. Please note that our telephone conversations with you may be recorded. Alternatively you may
contact us via fax on (203) 618-2580. 
  
 We are pleased to have completed this
Transaction and look forward to dealing with you again in the near future. 
  

									
	 Yours Sincerely,
	 	 	 	 Confirmed as of the date first written:

			
	 Greenwich Capital Markets, Inc.
 As
Agent stated above
	 	 	 	NovaStar Financial, Inc.
					
	By:	 	 /s/ William Gougherty
	 	 	 	By:	 	 /s/ David L. Farris

	Name:	 	 William Gougherty
	 	 	 	Name:	 	 David L. Farris

	Title:	 	 Vice President
	 	 	 	 Title:
	 	 V.P.


  

 3 









							
		
	Our Deal Reference:	 	Counterparty Deal Reference:
		
	D6625024	 	 154


  

					
	 Contact Information for
 Greenwich Capital
Derivatives, Inc.:
	 	 	  	 
		
	Customer Service / Confirmations:	 	(203) 618-2525
		
	Please fax all confirmations to:	 	(203) 618-2580
		
	Settlements:	 	(203) 618-2572
		
	Please fax payment / reset notices to:	 	(203) 618-2579
		
	Our e-mail address:	 	gcmderivatives@gcm.com

  
 

 
  

 4 








 

 
  

			
	 	  	16 November 2004
	 NovaStar Financial, Inc.
 Kansas
City
 Attn: Derivatives Confirmation
	  	 

  
 Our Reference: D6625036

 Re: USD 25,000,000.00 Swap 
  
 The purpose of this document is to set forth the terms and conditions of the Transaction entered into between Greenwich Capital Derivatives, Inc., acting through its
agent, Greenwich Capital Markets, Inc. and yourselves on the Trade Date specified below (the ‘Transaction’). This document constitutes a ‘Confirmation’ as referred to in the Agreement specified below. 
  
 The definitions and provisions contained in the 2000 ISDA Definitions, as published by the
International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. 
  
 This Confirmation supplements, forms part of, and is subject to, the 1992 ISDA Master
Agreement dated as of 03 July 2003 as amended and supplemented from time to time (the ‘Agreement’), between yourselves and Greenwich Capital Derivatives, Inc., All provisions contained in the Agreement govern this Confirmation except as
expressly modified below. 
  
 1. The terms of the particular
Transaction to which this Confirmation relates are as follows: 
  

			
	 Notional Amount:
	  	USD 25,000,000.00
		
	 Trade Date:
	  	12 November 2004
		
	 Effective Date:
	  	26 November 2004
		
	 Termination Date:
	  	25 November 2007, subject to adjustment in accordance with the Modified Following Business Day Convention
		
	Fixed Amounts:	  	 
		
	 Fixed Rate Payer:
	  	NovaStar Financial, Inc.
		
	 Fixed Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 25 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Fixed Rate:
	  	3.47875%
		
	 Fixed Rate Day Count Fraction:
	  	30/360
		
	 No Adjustment for Period End Dates:
	  	 
		
	 	  	Applicable

  

 1 









			
		
	 Business Days:
	  	New York
		
	Floating Amounts:	  	 
		
	 Floating Rate Payer:
	  	Greenwich Capital Derivatives, Inc.
		
	 Floating Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 27 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Floating Rate for initial Calculation Period:
	  	To be determined
		
	 Floating Rate Option:
	  	USD-LIBOR-BBA
		
	 Designated Maturity:
	  	1 month
		
	 Spread:
	  	None
		
	 Floating Rate Day Count Fraction:
	  	Actual/360
		
	 Reset Dates:
	  	The first day of each Calculation Period
		
	 Compounding:
	  	Not Applicable
		
	 Business Days:
	  	Now York
		
	 Calculation Agent:
	  	Greenwich Capital Markets, Inc. (as agent for Greenwich Capital) Derivatives, Inc., Greenwich) or, if different, as stated in the Agreement
		
	2. Other Provisions:	  	 
		
	 Independent Amount:
	  	The Independent Amount (as defined in Paragraph 13 of the Credit Support Annex) with respect to NovaStar Financial, Inc. under this Transaction shall be USD 125,000. In the event of any
adjustment to the terms of the Transaction, Greenwich Capital Derivatives, Inc. shall have the right to re-calculate the Independent Amount in its sole discretion.
		
	Account Details:	  	 
		
	 Payments to Greenwich Capital Derivatives, Inc.
	  	 J.P. Morgan Chase Bank, New York
 ABA#
021000021
 Beneficiary: Greenwich Capital Derivatives, Inc.
 Account #: 066-9-05206

		
	 Payments to NovaStar Financial, Inc.
	  	Please provide your settlement instructions

  

 2 









			
	Offices:	  	 
		
	The Office of Greenwich Capital Derivatives, Inc. for the Transaction is:	  	Greenwich
		
	The Office of NovaStar Financial, Inc. for the Transaction is:	  	Kansas City

  
 Representations and Warranties:

  
 To induce the other to enter into the Transaction, each party represents
and warrants to the other that (i) It is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended and it has entered into this Transaction in conjunction with its line of business (including
financial intermediation services) or the financing of business, (ii) It is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it
based upon its own Judgement and upon advice from such advisers as it has deemed necessary, (iii) it is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction
(it being understood that information and explanation related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction), (iv) no communication (written or oral)
received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction, (v) It is capable of assessing the merits of and understanding (on its own behalf or through independent professional
advice), and understand and accepts, the terms, conditions and risks of this Transaction, and it is capable of assuming, and assumes, the risks of this Transaction, and (vi) the other party is not acting as a fiduciary for or an adviser to it in
respect of this Transaction. 
  
 This Transaction has been entered into by
Greenwich Capital Market, Inc., as agent for Greenwich
Capital Derivatives, Inc., Greenwich, Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Greenwich Capital Derivatives, Inc., Greenwich under this Transaction. 
  
 This Confirmation is in final form and supersedes all previous Confirmations and
communications in respect of this Transaction. No hard copy will follow. Please confirm that the foregoing correctly sets forth the terms of our agreement by signing this Confirmation and returning it via fax to the attention of Customer
Service/Confirmations, fax number (203) 618-2580. 
  
 In the event that you
disagree with any part of this Confirmation, please telephone the sender on (203) 618-2525, so that the discrepancy may be quickly resolved. Please note that our telephone conversations with you may be recorded. Alternatively you may contact us via
fax on (203) 618-2580. 
  
 We are pleased to have completed this Transaction and
look forward to dealing with you again in the near future. 
  

									
	 Yours Sincerely,
	 	 	 	 Confirmed as of the date first written:

			
	 Greenwich Capital Markets, Inc.
 As
Agent stated above
	 	 	 	NovaStar Financial, Inc.
					
	By:	 	 /s/ William Gougherty
	 	 	 	By:	 	 /s/ David L. Farris

	Name:	 	 William Gougherty
	 	 	 	Name:	 	 David L. Farris

	Title:	 	 Vice President
	 	 	 	 Title:
	 	 V.P.


  

 3 









					
			
	Our Deal Reference:	 	 	  	Counterparty Deal Reference:
			
	D6625036	 	 	  	 155

			
	 Contact Information for
 Greenwich Capital
Derivatives, Inc.:
	 	 	  	 
		
	Customer Service / Confirmations:	 	(203) 618-2525
		
	Please fax all confirmations to:	 	(203) 618-2580
		
	Settlements:	 	(203) 618-2572
		
	Please fax payment / reset notices to:	 	(203) 618-2579
		
	Our e-mail address:	 	gcmderivatives@gcm.com

  
 

 
  

 4 








  
 

 
  
 01 December 2004

  
 NovaStar Financial, Inc. 
 Kansas City 
 Attn: Derivatives Confirmation

  
 THIS CONFIRMATION AMENDS AND RESTATES IN ITS ENTIRETY THE ORIGINAL
CONFIRMATION FOR THIS TRANSACTION. 
  
 Our Reference: D6627678

 Re: USD 75,000,000.00 Swap 
  
 The purpose of this document is to set forth the terms and conditions of the Transaction entered into between Greenwich Capital Derivatives, Inc., acting through its
agent, Greenwich Capital Markets, Inc. and yourselves on the Trade Date specified below (the ‘Transaction’). This document constitutes a ‘Confirmation’ as referred to in the Agreement specified below. 
  
 The definitions and provisions contained in the 2000 ISDA Definitions, as published by the
international Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. 
  
 This Confirmation supplements, forms part of, and is subject to, the 1992 ISDA Master
Agreement dated as of 03 July 2003 as amended and supplemented from time to time (the ‘Agreement’),
between yourselves and Greenwich Capital Derivatives, Inc. All provision contained in the Agreement govern this Confirmation except as expressly modified below, 
  

1. The terms of the particular Transaction to which this Confirmation relates are as follows: 
  

			
	Notional Amount:	  	USD 75,000,000.00
		
	Trade Date:	  	17 November 2004
		
	Effective Date:	  	26 November 2004
		
	Termination Date:	  	25 November 2005, subject to adjustment in accordance with the Modified Following Business Day Convention
		
	Fixed Amounts:	  	 
		
	 Fixed Rate Payer:
	  	NovaStar Financial, Inc.
		
	 Fixed Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 25 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Fixed Rate:
	  	3.2726%

  

 1 









			
	 Fixed Rate Day Count Fraction:
	  	30/3_0
		
	 No Adjustment for Period End Dates:
	  	Applicable
		
	 Business Days:
	  	New York
		
	Floating Amounts:	  	 
		
	 Floating Rate Payer:
	  	Greenwich Capital Derivatives, Inc.
		
	 Floating Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 27 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Floating Rate for initial Calculation Period:
	  	2.18063% (exclusive of Spread where applicable)
		
	 Floating Rate Option:
	  	USD-LIBOR-BBA
		
	 Designated Maturity:
	  	1 month
		
	 Spread:
	  	None
		
	 Floating Rate Day Count Fraction:
	  	Actual/360
		
	 Reset Dates:
	  	The first day of each Calculation Period
		
	 Compounding;
	  	Not Applicable
		
	 Business Days:
	  	New York
		
	Calculation Agent	  	Greenwich Capital Markets, Inc. (as agent for Greenwich Capital Derivatives, Inc,, Greenwich) or, if (different, as stated in the Agreement
		
	2. Other Provisions:	  	 
		
	Independent Amount:	  	The Independent Amount (as defined in Paragraph 13 of the Credit Support Annex) with respect to NovaStar Financial, Inc. under this Transaction shall be USD 375,000. In the event of any
adjustment to the terms of the Transaction, Greenwich Capital Derivatives, Inc. shall have the right to re-calculate the Independent Amount in its sole discretion.
		
	Account Details:	  	 
		
	Payments to Greenwich Capital Derivatives, Inc.	  	 J.P. Morgan Chase Bank, New York
 ABA# 021
000021
 Beneficiary: Greenwich Capital Derivatives. Inc.
 Account
#: 066-9-05206


  

 2 









			
	Payments to NovaStar Financial, Inc.	  	Please provide your settlement Instructions
		
	Offices:	  	 
		
	The Office of Greenwich Capital Derivatives, Inc. for the Transaction is:	  	Greenwich
		
	 The Office of NovaStar Financial, Inc. for the Transaction is:
	  	Kansas City

  
 Representations and Warranties:

  
 To induce the other to enter into the Transaction, each party represents
and warrants to the other that (i) It is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended and it has entered into this Transaction in conjunction with its line of business (including
financial intermediation services) or the financing of business, (ii) it is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it
based upon its own judgement and upon advice from such advisers as it has deemed necessary, (iii) it is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction
(It being understood that information and explanation related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction), (iv) no communication (written or oral)
received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction, (v) It is capable of assessing the merits of and understanding (on its own behalf or through independent professional
advice), and understand and accepts, the terms, conditions and risks of this Transaction, and it is capable of assuming, and assumes, the risks of this Transaction, and (vi) the other party is not acting as a fiduciary for or an advisor to it in
respect of this Transaction. 
  
 This Transaction has been entered into by
Greenwich Capital Markets, Inc., as agent for Greenwich Capital Derivatives, Inc., Greenwich, Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Greenwich Capital Derivatives, Inc., Greenwich
under this Transaction. 
  
 This Confirmation is in final form and supersedes all
previous Confirmations and communications in respect of this Transaction. No hard copy will follow. Please confirm that the foregoing correctly sets forth the terms of our agreement by signing this Confirmation and returning it via fax to the
attention of Customer Service/Confirmations, fax number (203) 618-2580. 
  
 In the
event that you disagree with any part of this Confirmation, please telephone the sender on (203) 618-2525, so that the discrepancy may be quickly resolved. Please note that our telephone conversations with you may be recorded. Alternatively you may
contact us via fax on (203) 618-2580. 
  
 We are pleased to have completed this
Transaction and look toward to dealing with you again in the near future. 
  

									
	Yours Sincerely,	 	 	 	Confirmed as of the date first written:
			
	 Greenwich Capital Markets, Inc.
 As Agent stated above
	 	 	 	NovaStar Financial, Inc.
					
	By:	 	 /s/ William Gougherty
	 	 	 	By:	 	 /s/ David L Farris

	 Name:
	 	 William Gougherty
	 	 	 	 Name:
	 	 David L Farris

	 Title:
	 	 Vice President
	 	 	 	 Title:
	 	 V.P.


  

 3 









					
		
	 Our Deal Reference:
	 	 Counterparty Deal Reference:

			
	 D6627678
	 	 	 	 157


  
 Contact Information for

 Greenwich Capital Derivatives, Inc.: 
  

			
	 Customer Service / Confirmations:
	  	(203) 618-2525
		
	 Please fax all confirmations to:
	  	(208) 618-2580
		
	 Settlements:
	  	(203) 618-2572
		
	 Please fax payment / reset notices to:
	  	(203) 618-2579
		
	 Our e-mail address:
	  	gcmderivatives@gcm.com

  
 

 
  

 4 









			
	

	 	 
		
	 	 	01 December 2004

  
 NovaStar Financial, Inc.

 Kansas City 
 Attn: Derivatives
Confirmation 
  
 THIS CONFIRMATION AMENDS AND RESTATES IN ITS ENTIRETY
THE ORIGINAL CONFIRMATION FOR THIS TRANSACTION. 
  
 Our
Reference: D__27679 
 Re: USD 25,000,000.00 Swap 
  
 The purpose of this document is to set forth the terms and conditions of the Transaction entered into between Greenwich Capital Derivatives, Inc., acting through its
agent, Greenwich Capital Markets, Inc. and yourselves on the Trade Date specified below (the ‘Transaction’). This document constitutes a ‘Confirmation’ as referred to in the Agreement specified below. 
  
 The definitions and provisions contained in the 2000 ISDA Definitions, as published by the
International Swaps and Derivatives Association, Inc., are Incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. 
  
 This Confirmation supplements, forms part of, and is subject to, the 1992 ISDA Master
Agreement dated as of 03 July 2003 as amended and supplemented from time to time (the ‘Agreement’), between yourselves and Greenwich Capital Derivatives, Inc., All provisions contained in the Agreement govern this Confirmation except as
expressly modified below. 
  
 1. The terms of the particular Transaction to
which this Confirmation relates are as follows: 
  

			
	Notional Amount:	 	USD 25,000,000.00
		
	Trade Date:	 	17 November 2004
		
	Effective Date:	 	26 November 2004
		
	Termination Date:	 	25 November 2007, subject to adjustment in accordance with the Modified Following Business Day Convention
		
	Fixed Amounts:	 	 
		
	 Fixed Rate Payer:
	 	NovaStar Financial, Inc.
		
	 Fixed Rate Payer Payment Dates:
	 	The 25th of each month, commencing on 25 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Fixed Rate:
	 	3.5225%

  

 1 









			
	 Fixed Rate Day Count Fraction:
	 	30/360
		
	 No Adjustment for Period End Dates:
	 	Applicable
		
	 Business Days:
	 	New York
		
	Floating Amounts:	 	 
		
	 Floating Rate Payer:
	 	Greenwich Capital Derivatives, Inc.
		
	 Floating Rate Payer Payment Dates:
	 	The 25th of each month, commencing on 27 December 2004 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Floating Rate for Initial Calculation Period:
	 	2.18063% (exclusive of Spread where applicable)
		
	 Floating Rate Option:
	 	USD-LIBOR-BBA
		
	 Designated Maturity:
	 	1 month
		
	 Spread:
	 	None
		
	 Floating Rate Day Count Fraction:
	 	Actual/360
		
	 Reset Dates:
	 	The first day of each Calculation Period
		
	 Compounding:
	 	Not Applicable
		
	 Business Days:
	 	New York
		
	Calculation Agent:	 	Greenwich Capital Markets, Inc. (as agent for Greenwich Capital Derivatives, Inc., Greenwich) or, if different, as stated in the Agreement
		
	2. Other Provisions:	 	 
		
	Independent Amount:	 	The Independent Amount (as defined in Paragraph 13 of the Credit Support Annex) with respect to NovaStar Financial, Inc. under this Transaction shall be USD 125,000. In the event of any
adjustment to the terms of the Transaction, Greenwich Capital Derivatives, Inc. shall have the right to re-calculate the Independent Amount in its sole discretion.
		
	Account Details:	 	 
		
	Payments to Greenwich Capital Derivatives, Inc.	 	 J.P. Morgan Chase Bank, New York
 ABA#
021000021
 Beneficiary: Greenwich Capital Derivatives, Inc.
 Account #: 066-9-05206


  

 2 









			
	 Payments to NovaStar Financial, Inc.
	  	Please provide your settlement instructions
		
	Offices:	  	 
		
	The Office of Greenwich Capital Derivatives, Inc. for the Transaction is;	  	Greenwich
		
	 The Office of NovaStar Financial, Inc. for the Transaction is:
	  	Kansas City

  
 Representations and Warranties:

  
 To induce the other to enter into the Transaction, each party represents
and warrants to the other that (i) it is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended and it has entered into this Transaction in conjunction with its line of business (including
financial intermediation services) or the financing of business, (ii) it is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it
based upon its own judgement and upon advice from such advisers as it has deemed necessary, (iii) it is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction
(it being understood that information and explanation related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction), (iv) no communication (written or oral)
received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction, (v) it is capable of assessing the merits of and understanding (on its own behalf or through independent professional
advice), and understand and accepts, the terms, conditions and risks of this Transaction, and it is capable of assuming, and assumes, the risks of this Transaction, and (vi) the other party is not acting as a fiduciary for or an adviser to it in
respect of this Transaction. 
  
 This Transaction has been entered into by
Greenwich capital Markets, Inc., as agent for Greenwich Capital Derivatives, Inc., Greenwich. Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Greenwich Capital Derivatives, Inc., Greenwich
under this Transaction. 
  
 This Confirmation is in final form and supersedes all
previous Confirmations and communications in respect of this Transaction. No hard copy will follow. Please confirm that the foregoing correctly sets forth the terms of our agreement by signing this Confirmation and returning it via fax to the
attention of Customer Service/Confirmations, fax number (203) 618-2580. 
  
 In the
event that you disagree with any part of this Confirmation, please telephone the sender on (203) 618-2525, so that the discrepancy may be quickly resolved. Please note that our telephone conversations with you may be recorded. Alternatively you may
contact us via fax on (203) 618-2580. 
  
 We are pleased to have completed this
Transaction and look forward to dealing with you again in the near future. 
  

									
	 Yours Sincerely,
	 	 	 	Confirmed as of the date first written;
			
	 Greenwich Capital Markets, Inc.
 As
Agent stated above
	 	 	 	NovaStar Financial, Inc.
					
	By:	 	 /s/ William Gougherty
	 	 	 	By:	 	 /s/    David C. Farris

	 Name:
	 	 William Gougherty
	 	 	 	 	 	 David C. Farris


  

 3 








 

 
  
 07 December 2004

  
 NovaStar Financial, Inc. 
 Kansas City 
 Attn: Derivatives Confirmation

  
 Our Reference: D5838413 
 Re: USD 25,000,000.00 Swap 
  
 The purpose of this document is to set forth the terms and conditions of the Transaction entered into between Greenwich Capital Derivatives, Inc., acting through its
agent, Greenwich Capital Markets, Inc. and yourselves on the Trade Date specified below (the ‘Transaction’). This document constitutes a ‘Confirmation’ as referred to in the Agreement specified below. 
  
 The definitions and provisions contained in the 2000 ISDA Definitions, as published by the
International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. 
  
 This Confirmation supplements, forms part of, and is subject to, the 1892 ISDA Master
Agreement dated as of 03 July 2003 as amended and supplemented from time to time (the ‘Agreement’), between yourselves and Greenwich Capital Derivatives, Inc.. All provisions contained in the Agreement govern this Confirmation except as
expressly modified below. 
  
 1. The terms of the particular Transaction to
which this Confirmation relates are as follows: 
  

			
	 Notional Amount:
	 	USD 25,000,000.00
		
	 Trade Date:
	 	03 December 2004
		
	 Effective Date:
	 	27 December 2004
		
	 Termination Date:
	 	25 December 2007, subject to adjustment in accordance with the Modified Following Business Day Convention
		
	Fixed Amounts:	 	 
		
	 Fixed Rate Payer;
	 	NovaStar Financial, Inc.
		
	 Fixed Rate Payer Payment Dates:
	 	The 25th of each month, commencing on 25 January 2005 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Fixed Rate:
	 	3.61%
		
	 Fixed Rate Day Count Fraction:
	 	30/360
		
	 No Adjustment for Period End Dates:
	 	 
		
	 	 	Applicable

  

 1 









			
		
	 Business Days:
	  	New York
		
	Floating Amounts:	  	 
		
	 Floating Rate Payer:
	  	Greenwich Capital Derivatives, Inc.
		
	 Floating Rate Payer Payment Dates:
	  	The 25th of each month, commencing on 25 January 2005 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Floating Rate for Initial Calculation Period:
	  	To be determined
		
	 Floating Rate Option:
	  	USD-LIBOR-BBA
		
	 Designated Maturity:
	  	1 month
		
	 Spread:
	  	None
		
	 Floating Rate Day Count Fraction:
	  	Actual/360
		
	 Reset Dates:
	  	The first day of each Calculation Period
		
	 Compounding:
	  	Not Applicable
		
	 Business Days:
	  	New York
		
	 Calculation Agent
	  	Greenwich Capital Markets, Inc. (as agent for Greenwich Capital Derivatives, Inc., Greenwich) or, If different, as stated in the Agreement
		
	2. Other Provisions:	  	 
		
	 Independent Amount:
	  	The Independent Amount (as defined in Paragraph 13 of the Credit Support Annex) with respect to NovaStar Financial, Inc. under this Transaction shall be USD 125,000. In the event of any
adjustment to the terms of the Transaction, Greenwich Capital Derivatives, Inc. shall have the right to re-calculate the Independent Amount in its sole discretion.
		
	 Account Details:
	  	 
		
	 Payments to Greenwich Capital Derivatives, Inc.
	  	 J.P. Morgan Chase Bank, New York
 ABA#
021000021
 Beneficiary: Greenwich Capital Derivatives, Inc.
 Account #: 066-9-05206

		
	 Payments to NovaStar Financial, Inc.
	  	Please provide your settlement instructions

  

 2 









			
	Offices:	  	 
		
	 The Office of Greenwich Capital Derivatives, Inc. for the Transaction is:
	  	Greenwich
		
	The Office of NovaStar Financial, Inc. for the Transaction is:	  	Kansas City

  
 Representations and Warranties:

  
 To induce the other to enter into the Transaction, each party represents
and warrants to the other that (i) It is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended and it has entered into this Transaction in conjunction with its line of business (including
financial intermediation services) or the financing of business, (ii) It is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it
based upon its own judgement and upon advice from such advisers as it has deemed necessary, (iii) it is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction
(it being understood that information and explanation related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction), (iv) no communication (written or oral)
received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction, (v) It is capable of assessing the merits of and understanding (on its own behalf or through independent professional
advice), and understand and accepts, the terms, conditions and risks of this Transaction, and it is capable of assuming, and assumes, the risks of this Transaction, and (vi) the other party is not acting as a fiduciary for or an adviser to it in
respect of this Transaction. 
  
 This Transaction has been entered into by
Greenwich Capital Markets, Inc., as agent for Greenwich Capital Derivatives, Inc., Greenwich. Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Greenwich Capital Derivatives, Inc., Greenwich
under this Transaction. 
  
 This Confirmation is in final form and supersedes all
previous Confirmations and communications in respect of this Transaction. No hard copy will follow. Please confirm that the foregoing correctly sets forth the terms of our agreement by signing this Confirmation and returning it via fax to the
attention of Customer Service/Confirmations, fax number (203) 618-2580. 
  
 In the
event that you disagree with any part of this Confirmation, please telephone the sender on (203) 618-2525, so that the discrepancy may be quickly resolved. Please note that our telephone conversations with you may be recorded. Alternatively you may
contact us via fax on (203) 618-2580. 
  
 We are pleased to have completed this
Transaction and look forward to dealing with you again in the near future. 
  

									
	 Yours Sincerely,
	 	 	 	 Confirmed as of the date first written:

			
	 Greenwich Capital Markets, Inc.
 As Agent stated above
	 	 	 	 NovaStar Financial, Inc.

					
	 By:
	 	 /s/ William Gougherty
	 	 	 	 By:
	 	 /s/ David L. Farris

	 Name:
	 	 William Gougherty
	 	 	 	 Name:
	 	 David L. Farris

	 Title:
	 	 Vice President
	 	 	 	 Title:
	 	 V.P.


  

 3 









					
			
	 Our Deal Reference:
	 	 	 	 Counterparty Deal Reference:

			
	 D6638413
	 	 	 	 162


  
 Contact Information for

 Greenwich Capital Derivatives, Inc.: 
  

			
		
	 Customer Service / Confirmations:
	  	(203) 618-2525
		
	 Please fax all confirmations to:
	  	(203) 618-2580
		
	 Settlements:
	  	(203) 618-2572
		
	 Please fax payment / reset notices to:
	  	(203) 618-2579
		
	 Our e-mail address:
	  	gcmderivatives@gcm.com

  
 

 
  

 4 








 

 
  
 07 December, 2004

  
 NovaStar Financial, Inc. 
 Kansas City 
 Attn: Derivatives Confirmation

  
 Our Reference: D8838458 
 Re: USD 75,000,000.00 Swap 
  
 The purpose of this document is to set forth the terms and conditions of the Transaction entered into between Greenwich Capital Derivatives, Inc., acting through its
agent, Greenwich Capital Markets, Inc. and yourselves on the Trade Date specified below (the ‘Transaction’). This document constitutes a ‘Confirmation’ as referred to in the Agreement specified below. 
  
 The definitions and provisions contained in the 2000 ISDA Definitions, as published by the
International Swaps and Derivatives Association, Inc., are incorporated into this Confirmation. In the event of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. 
  
 This Confirmation supplements, forms part of, and is subject to, the 1992 ISDA Master
Agreement dated as of 03 July 2003 as amended and supplemented from time to time (the ‘Agreement’), between yourselves and Greenwich Capital Derivatives, Inc.. All provisions contained in the Agreement govern this Confirmation except as
expressly modified below. 
  
 1. The terms of the particular Transaction to which
this Confirmation relates are as follows: 
  

			
		
	 Notional Amount:
	  	USD 75,000,000.00
		
	 Trade Date:
	  	03 December 2004
		
	 Effective Date:
	  	27 December 2004
		
	 Termination Date:
	  	25 December 2006, subject to adjustment in accordance with the Modified Following Business Day Convention
		
	 Fixed Amounts:
	  	 
		
	 Fixed Rate Payer:
	  	NovaStar Financial, Inc.
		
	 Fixed Rate Payer Payment Dates:
	  	 The 25th of each month, commencing on 25 January 2005 to and including the Termination Date, subject to adjustment in accordance with the Modified
Following Business Day
 Convention

		
	 Fixed Rate:
	  	3.355%
		
	 Fixed Rate Day Count Fraction:
	  	30/360
		
	 No Adjustment for Period End Dates:
	  	 
		
	 	  	Applicable

  

 1 









			
		
	 Business Days:
	 	New York
		
	Floating Amounts:	 	 
		
	 Floating Rate Payer:
	 	Greenwich Capital Derivatives, Inc.
		
	 Floating Rate Payer Payment Dates:
	 	The 25th or each month, commencing on 25 January 2005 to and including the Termination Date, subject to adjustment in accordance with the Modified Following Business Day
Convention
		
	 Floating Rate for Initial Calculation Period:
	 	To be determined
		
	 Floating Rate Option:
	 	USD-LIBOR-BBA
		
	 Designated Maturity:
	 	1 month
		
	 Spread:
	 	None
		
	 Floating Rate Day Count Fraction:
	 	Actual/360
		
	 Reset Dates:
	 	The first day of each Calculation Period
		
	 Compounding:
	 	Not Applicable
		
	 Business Days:
	 	New York
		
	Calculation Agent:	 	Greenwich Capital Markets, Inc. (as agent for Greenwich Capital Derivatives, Inc., Greenwich) or, if different, as stated in the Agreement
		
	2. Other Provisions:	 	 
		
	Independent Amount:	 	The Independent Amount (as defined in Paragraph 13 of the Credit Support Annex) with respect to NovaStar Financial, Inc. under this Transaction shall be USD 375,000. In the event of any
adjustment to the terms of the Transaction, Greenwich Capital Derivatives, Inc. shall have the right to re-calculate the Independent Amount in its sole discretion.
		
	Account Details:	 	 
		
	Payments to Greenwich Capital Derivatives, Inc.	 	 J.P. Morgan Chase Bank, New York
 ABA#
021000021
 Beneficiary: Greenwich Capital Derivatives, Inc.

	 	 	Account #: 066-9-05206
		
	Payments to NovaStar Financial, Inc.	 	Please provide your settlement instructions

  

 2 









			
	Offices:	 	 
		
	The Office of Greenwich Capital Derivatives, Inc. for the Transaction is:	 	Greenwich
		
	The Office of NovaStar Financial, Inc. for the Transaction is:	 	Kansas City

  
 Representations and warranties:

  
 To induce the other to enter into the Transaction, each party represents
and warrants to the other that (i) it is an “eligible contract participant” as such term is defined in the Commodity Exchange Act, as amended and it has entered into this Transaction in conjunction with line its one of business (including
financial intermediation services) or the financing of business, (ii) it is acting for its own account, and it has made its own independent decisions to enter into this Transaction and as to whether this Transaction is appropriate or proper for it
based upon its own judgement and upon advice from such advisers as it has deemed necessary, (iii) it is not relying on any communication (written or oral) of the other party as investment advice or as a recommendation to enter into this Transaction
(it being understood that information and explanation related to the terms and conditions of this Transaction shall not be considered investment advice or a recommendation to enter into this Transaction), (iv) no communication (written or oral)
received from the other party shall be deemed to be an assurance or guarantee as to the expected results of this Transaction, (v) it is capable of assessing the merits of and understanding (on its own behalf or through independent professional
advice), and understand and accepts, the terms, conditions and risks of this Transaction, and it is capable of assuming, and assumes, the risks of this Transaction, and (vi) the other party is not acting as a fiduciary for or an adviser to it in
respect of this Transaction. 
  
 This Transaction has been entered into by
Greenwich Capital Markets, Inc., as agent for Greenwich Capital Derivatives, Inc., Greenwich. Greenwich Capital Markets, Inc. has not guaranteed and is not otherwise responsible for the obligations of Greenwich Capital Derivatives, Inc., Greenwich
under this Transaction. 
  
 This Confirmation is in final form and supersedes all
previous Confirmations and communications in respect of this Transaction. No hard copy will follow. Please confirm that the foregoing correctly sets forth the terms of our agreement by signing this Confirmation and returning it via fax to the
attention of Customer Service/Confirmations, fax number (203) 618-2580. 
  
 In the
event that you disagree with any part of this Confirmation, please telephone the sender on (203) 618-2525, so that the discrepancy may be quickly resolved. Please note that our telephone conversations with you may be recorded. Alternatively you may
contact us via fax on (203) 618-2580. 
  
 We are pleased to have completed this
Transaction and look forward to dealing with you again in the near future. 
  

									
	 Yours Sincerely,
	 	 	 	 Confirmed as of the date first written:

			
	 Greenwich Capital Markets, Inc.
 As Agent stated above
	 	 	 	 NovaStar Financial, Inc.

					
	By:	 	 /s/ William Gougherty
	 	 	 	By:	 	 /s/ David L. Farris

	 Name: William Gougherty
	 	 	 	 Name: David L. Farris

	 Title: Vice President
	 	 	 	Title: V.P.

  

 3 









			
		
	Our Deal Reference:	  	Counterparty Deal Reference:
		
	D6638458	  	161

  
 Contact Information for

 Greenwich Capital Derivatives, Inc.: 
  

			
	 Customer Service / Confirmations:
	  	(203) 618-2525
		
	 Please fax all confirmations to:
	  	(203) 618-2580
		
	 Settlements:
	  	(203) 618-2572
		
	 Please tax payment / reset notices to:
	  	(203) 618-2579
		
	 Our e-mail address:
	  	gcmderivatives@gcm.com

  
 

 
  

 4 








  
 Exhibit II 

 
 [Form of New Agreement attached behind this page] 
  

 7