After Jarl Agnar has finished talking to Ulgar, Svegard and Brother Thorlogh, he turns to you and asks you to go and warn Borvald and Jarl Valfred. He says that the town is locked up due to bandit activity, but Jarl Valfred's housecarl should let you in. Asking him "Would Yngvarr really attack Borvaldur?" after Agnar finishes speaking will give you more information on the background to the current events. Now, make your way to Borvald. If you have bought the horse from Gabrial, you may wish to leave it somewhere safe rather than taking it to Borvald.
When you reach the gates to Borvald, they are shut and Goran is standing outside them. Say to him "I have news from Agnar that must be delivered to Jarl Valfred immediately" and he will open the gates and tell you to follow him. Goran leads you to Jarl Valfred's Manor; enter, and speak to the Jarl.
When you tell Valfred that Yngvarr was looking for something, and searched Bailun Priory and wanted to search Amber Creek, he says that he thinks he knows what Yngvarr was looking for, but he hopes not. Goran then enters and says that the city is under siege and that the bandits have breached the gate. Valfred says that you must be gotten out of the city so that you can report to Agnar. Exit the manor, and there are bandits attacking.
"Borvald is under siege. I must go with Goran and Jarl Valfred and escape the city to inform Agnar of what is happening."
There is a group of bandits skirmishing with some guards and citizens. Valfred and Goran join in the battle. They cannot die, but the other friendlies can. Once this group is defeated, the pair will go another way. Follow them, and you will encounter another, smaller group of bandits. Once these are dispatched, Valfred and Goran go into the square before saying that there are too many bandits, and head towards the Borvald Catacombs. Follow them in, and Goran will say that there are two many of the bandits and he will remain behind and keep them off. Once the door just inside the catacombs is shut, it will close and cannot be opened again.
"Goran has decided to stay behind in order to buy me and Jarl Valfred more time to get out of the city."
Follow Valfred through the catacombs, in which there are a number of bandits, as well as various urns containing treasure. The Jarl will open a hidden door with a handle, and you will come across a bandit who says that Yngvarr has found the Heart of the Gods and will destroy everyone. Valfred says that this is very bad. Just before the exit from the catacombs is a cavern full of barrels of oil, and Valfred wonders if they are going to blow up the city.
Valfred exits the catacombs - once exited, the catacombs cannot be re-entered - and you are at the top of a waterfall above the lake. When you approach him, he tells you that you must jump off the waterfall into the water below, as it is the only way you will be safe. He will stay behind and guard your back.
Jump off the waterfall, then make your way back to Amber Creek. Find Jarl Agnar, and tell him that Borvald has been destroyed. He will also tell you some information about the Heart of the Gods, and how it transformed the southern part of Falskaar into the habitable land it is now, before the heart was hidden away somewhere requiring five keys to get it, of Strength, Wealth, Leadership, Shelter and Wisdom, and that one of the keys must have been in Borvald.
The Jarl then tells you to take a seat in the main room of Borvaldur Manor around the table, as he will summon the others to tell them what is going on. Ulgar, Svegard and Thorlogh enter and take a seat, as does Agnar. Once you are also seated, the Jarl will start the meeting.
When it comes to the keys, Agnar calls Jalma over and takes her necklace. On it is the Key of Leadership. The Key of Wealth was apparently in Staalgarde, so Yngvarr likely already has it. The Key of Shelter was in Borvald, so Yngvarr will have that one too.
Brother Thorlogh says he believes he knows where the other two keys are; that of Wisdom is in Kalrun Monastery and that of Strength in Hjorgunnar Manor, Ulgar and Svegard's ancestral home. Agnar says that they should split into two groups, with Ulgar and Svegard going after the Key of Strength and Agnar and Thorlogh retrieving the Key of Wisdom. Once he concludes, this ends the meeting. Stand up and go to speak with Agnar. He tells you that you must choose which party to go with.
When Agnar is asked "What's the difference?" he says that the party going to the manor will likely face Draugr, so this should favour those who use melee weapons and bows, whilst those visiting Kalrun Monastery will face necromancers, so this will favour those who use magic, although he also says that it may not make any difference. If asked why you can't help with both keys, Agnar states that there isn't enough time. Telling him that you get it finishes this quest and starts the next.
"We know the location of two more keys, and must now retrieve both of them, before Yngvarr can."
The next quest is Strength and Wisdom, which has two different forks to it, only one of which can be done.