8-K/A

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Amendment No. 2 to

Form 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) June 8, 2006

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1

(Issuing Entity with respect to Notes)

NOVASTAR CERTIFICATES FINANCING CORPORATION

(Exact name of depositor and co-registrant as specified in its charter)

Delaware	333-131111-02	48-1194616
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

NOVASTAR MORTGAGE FUNDING CORPORATION

(Exact name of sponsor and registrant as specified in its charter)

Delaware	333-131111	48-1195807
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
8140 Ward Parkway, Suite 300 Kansas City, Missouri		64114
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code (816) 237-7000

No Change

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

NovaStar Mortgage Funding Corporation and NovaStar Certificates Financing Corporation registered issuances of up to $4,145,350,000 principal amount of Asset-Backed Notes on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Act”), by the Registration Statement on Form S-3 (Registration File Nos. 333-131111 and 333-131111-02) (the “Registration Statement”). Pursuant to the Registration Statement, NovaStar Mortgage Funding Trust, Series 2006-MTA1, issued on June 8, 2006, $1,182,600,000 in aggregate principal amount of its Home Equity Loan Asset-Backed Notes, Series 2006-MTA1, Class 1A-1, Class 2A-1A, Class 2A-1B, Class 2A-1-C, Class X, Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7, Class M-8 Notes, Class M-9 (the “Offered Notes”). Also issued, but not offered by NovaStar Mortgage Funding Trust, Series 2006-MTA1 was its Home Equity Loan Asset-Backed Notes, Series 2006-MTA1, Class M-10 Notes (and collectively with the Offered Notes, the “Notes”).

The Notes were issued pursuant to the Indenture, dated as of May 1, 2006 attached hereto as Exhibit 4.1, among NovaStar Mortgage Funding Trust, Series 2006-MTA1, as issuing entity (the “Issuing Entity”), JPMorgan Chase Bank, National Association, as indenture trustee (the “Indenture Trustee”), and J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”). The Notes represent beneficial ownership interests in a pool of mortgage related loans and certain related property. Also issued, but not offered by the Issuing Entity are the class C certificates and the trust certificates (the “Certificates”) evidencing the ownership interest in the Issuing Entity.

Item 9.01 - Financial Statements and Exhibits:

(a)	Financial Statements of Business Acquired: None
(b)	Pro Forma Financial Information: None
(c)	Exhibits:
	1.1	Underwriting Agreement, dated as of June 1, 2006, between NovaStar Mortgage, Inc., NovaStar Certificates Financing Corporation, NovaStar Financial, Inc. and Greenwich Capital Markets, Inc.*
	4.1	Indenture, dated as of May 1, 2006, among the Issuing Entity, the Indenture Trustee, and the Co-Trustee.**
	4.2	Amended and Restated Trust Agreement, dated as of June 8, 2006, among the Depositor and Wilmington Trust Company, as Owner Trustee.**
	4.3	Assignment between the Depositor and the Sponsor.*
	5.1	Opinion of Dewey Ballantine LLP with respect to legality.*

8.1	Opinion of Dewey Ballantine LLP with respect to tax matters.*
10.1	Sale and Servicing Agreement, dated as of May 1, 2006, among the Issuing Entity, the Depositor, the Seller, the Sponsor, the Servicer, the Custodian, the Indenture Trustee and the Co-Trustee.**
23.1	Consents of Dewey Ballantine LLP are included in its opinions filed as Exhibits 5.1 and 8.1 hereto.*

* Filed with initial filing of this 8-K on June 21, 2006.

** Final versions filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: August 7, 2006

NOVASTAR CERTIFICATES FINANCING CORPORATION
By:	/s/ Matt Kaltenrieder
	Matt Kaltenrieder
	Vice President

Exhibit Index

Exhibit No.	Description
Exhibit 1.1	Underwriting Agreement, dated as of June 1, 2006, between NovaStar Mortgage, Inc., NovaStar Certificates Financing Corporation, NovaStar Financial, Inc. and Greenwich Capital Markets, Inc.*
Exhibit 4.1	Indenture, dated as of May 1, 2006, among the Issuing Entity, the Indenture Trustee, and the Co-Trustee.**
Exhibit 4.2	Amended and Restated Trust Agreement, dated as of June 8, 2006, among the Depositor and the Owner Trustee.**
Exhibit 4.3	Assignment between the Depositor and the Sponsor.*
Exhibit 5.1	Opinion of Dewey Ballantine LLP with respect to legality.*
Exhibit 8.1	Opinion of Dewey Ballantine LLP with respect to tax matters.*
Exhibit 10.1	Sale and Servicing Agreement, dated as of May 1, 2006, among the Issuing Entity, the Depositor, the Seller, the Sponsor, the Servicer, the Custodian, the Indenture Trustee and the Co-Trustee.**
Exhibit 23.1	Consents of Dewey Ballantine LLP are included in its opinions filed as Exhibits 5.1 and 8.1 hereto.*

* Filed with initial filing of this 8-K on June 21, 2006.

** Final versions filed herewith.

EX-4.1

EXHIBIT 4.1

EXECUTION VERSION

INDENTURE

dated as of May 1, 2006

by and among

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1,

as Issuing Entity

and

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

as Indenture Trustee

and

J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION

as Co-Trustee

TABLE OF CONTENTS

ARTICLE I DEFINITIONS		2
Section 1.01.	General Definitions.	2
ARTICLE II THE NOTES		2
Section 2.01.	Forms Generally.	2
Section 2.02.	Form of Certificate of Authentication.	2
Section 2.03.	General Provisions with Respect to Principal and Interest Payment.	2
Section 2.04.	Denominations.	3
Section 2.05.	Execution, Authentication, Delivery and Dating.	3
Section 2.06.	Registration, Registration of Transfer and Exchange.	4
Section 2.07.	Mutilated, Destroyed, Lost or Stolen Notes.	5
Section 2.08.	Payments of Principal and Interest.	6
Section 2.09.	Statements.	8
Section 2.10.	Persons Deemed Owner.	10
Section 2.11.	Cancellation.	10
Section 2.12.	Authentication and Delivery of Notes.	10
Section 2.13.	Book-Entry Note.	11
Section 2.14.	Termination of Book Entry System.	12
ARTICLE III COVENANTS, REPRESENTATIONS AND WARRANTIES		13
Section 3.01.	Payment of Notes.	13
Section 3.02.	Maintenance of Office or Agency.	13
Section 3.03.	Money for Note Payments to Be Held in Trust.	13
Section 3.04.	Existence of Issuing Entity	15
Section 3.05.	Protection of Trust Estate	15
Section 3.06.	[Reserved.]	16
Section 3.07.	Performance of Obligations.	16
Section 3.08.	Investment Company Act.	17
Section 3.09.	Negative Covenants.	17
Section 3.10.	Annual Statement as to Compliance.	17
Section 3.11.	Restricted Payments.	18
Section 3.12.	Treatment of Notes as Debt for Tax Purposes.	18
Section 3.13.	Notice of Events of Default.	18
Section 3.14.	Further Instruments and Acts.	19
Section 3.15.	Representation and Warranties of the Issuing Entity.	19
ARTICLE IV SATISFACTION AND DISCHARGE		20
Section 4.01.	Satisfaction and Discharge of Indenture.	20
Section 4.02.	Application of Trust Money.	21
ARTICLE V DEFAULTS AND REMEDIES		22

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Section 5.01.	Event of Default.	22
Section 5.02.	Acceleration of Maturity; Rescission and Annulment.	23
Section 5.03.	Collection of Indebtedness and Suits for Enforcement by Indenture Trustee.	24
Section 5.04.	Remedies.	24
Section 5.05.	Indenture Trustee May File Proofs of Claim.	24
Section 5.06.	Indenture Trustee May Enforce Claims Without Possession of Notes.	25
Section 5.07.	Application of Money Collected.	26
Section 5.08.	Limitation on Suits.	27
Section 5.09.	Unconditional Rights of Noteholders to Receive Principal and Interest.	28
Section 5.10.	Restoration of Rights and Remedies.	28
Section 5.11.	Rights and Remedies Cumulative.	28
Section 5.12.	Delay or Omission Not Waiver.	28
Section 5.13.	Control by Noteholders.	28
Section 5.14.	Waiver of Past Defaults.	29
Section 5.15.	Undertaking for Costs.	29
Section 5.16.	Waiver of Stay or Extension Laws.	30
Section 5.17.	Sale of Trust Estate.	30
Section 5.18.	Action on Notes.	31
Section 5.19.	No Recourse.	31
Section 5.20.	Application of the Trust Indenture Act.	32
ARTICLE VI THE INDENTURE TRUSTEE		32
Section 6.01.	Duties of Indenture Trustee.	32
Section 6.02.	Notice of Default.	34
Section 6.03.	Rights of Indenture Trustee.	34
Section 6.04.	Not Responsible for Recitals, Issuance of Notes or Mortgage Loans.	35
Section 6.05.	May Hold Notes.	36
Section 6.06.	Money Held in Trust.	36
Section 6.07.	Eligibility, Disqualification.	36
Section 6.08.	Indenture Trustee’s Capital and Surplus.	36
Section 6.09.	Resignation and Removal; Appointment of Successor.	36
Section 6.10.	Acceptance of Appointment by Successor Indenture Trustee.	38
Section 6.11.	Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee.	38
Section 6.12.	Preferential Collection of Claims Against Issuing Entity.	38
Section 6.13.	Co-Indenture Trustees and Separate Indenture Trustees.	38
Section 6.14.	Authenticating Agents.	40
Section 6.15.	Servicing Rights Owner to Pay Indenture Trustee’s Fees and Expenses; Indemnification.	41
ARTICLE VII NOTEHOLDERS’ LISTS AND REPORTS		41
Section 7.01.	Note Registrar to Furnish Indenture Trustee Names and Addresses of Noteholders.	41
Section 7.02.	Preservation of Information: Communications to Noteholders. (a)	41

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Section 7.03.	Reports by Indenture Trustee.	42
ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES		43
Section 8.01.	Accounts; Investment; Collection of Moneys.	43
Section 8.02.	Allocation of Realized Losses.	48
Section 8.03.	Withholding Taxes.	48
Section 8.04.	General Provisions Regarding the Payment Account and Mortgage Loans.	49
Section 8.05.	Releases of Deleted Mortgage Loans.	50
Section 8.06.	Reports by Indenture Trustee to Noteholders; Access to Certain Information.	50
Section 8.07.	Release of Trust Estate.	51
Section 8.08.	Amendment to Sale and Servicing Agreement.	51
Section 8.09.	Servicer as Agent.	51
Section 8.10.	Termination of Servicer.	52
ARTICLE IX SUPPLEMENTAL INDENTURES		54
Section 9.01.	Supplemental Indentures Without Consent of Noteholders.	54
Section 9.02.	Supplemental Indentures with Consent of Noteholders.	55
Section 9.03.	Execution of Supplemental Indentures.	56
Section 9.04.	Effect of Supplemental Indentures.	57
Section 9.05.	Conformity With Trust Indenture Act.	57
Section 9.06.	Reference in Notes to Supplemental Indentures.	57
Section 9.07.	Amendments to Governing Documents.	57
ARTICLE X REDEMPTION OF NOTES		58
Section 10.01.	Redemption of Notes.	58
Section 10.02.	Form of Redemption Notice.	58
Section 10.03.	Notes Payable on Optional Redemption.	59
ARTICLE XI MISCELLANEOUS		59
Section 11.01.	Compliance Certificates and Opinions.	59
Section 11.02.	Form of Documents Delivered to Indenture Trustee.	61
Section 11.03.	Acts of Noteholders.	61
Section 11.04.	Notices, etc., to Indenture Trustee and Issuing Entity.	62
Section 11.05.	Notices and Reports to Noteholders; Waiver of Notices.	63
Section 11.06.	Rules by Indenture Trustee.	64
Section 11.07.	Conflict with Trust Indenture Act.	64
Section 11.08.	Effect of Headings and Table of Contents.	64
Section 11.09.	Successors and Assigns.	64
Section 11.10.	Separability.	64
Section 11.11.	Benefits of Indenture.	64
Section 11.12.	Legal Holidays.	64
Section 11.13.	Governing Law.	64

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Section 11.14.	Counterparts.	65
Section 11.15.	Recording of Indenture.	65
Section 11.16.	Issuing Entity Obligation.	65
Section 11.17.	No Petition.	66
Section 11.18.	Inspection.	66

APPENDICES, SCHEDULES AND EXHIBITS

Appendix I	Defined Terms
Schedule 1	Mortgage Loan Schedule
Exhibit A	Form of Note
Exhibit B	Form of Investment Letter
Exhibit C	Form of Class X Note

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CROSS-REFERENCE TABLE

Cross-reference sheet showing the location in the Indenture of the provisions inserted pursuant to Sections 310 through 318(a) inclusive of the Trust Indenture Act of 1939.¹

Trust Indenture Act of 1939		Indenture Section
Section	310
	(a) (1)	6.07
	(a) (2)	6.08
	(a) (3)	6.13
	(a) (4)	Not Applicable
	(a) (5)	6.07
	(b)	6.07
	(c)	Not Applicable
Section	311
	(a)	6.12
	(b)	6.12
	(c)	Not Applicable
Section	312
	(a)	7.01(A), 7.02(a)
	(b)	7.02(b)
	(c)	7.02(c)
Section	313
	(a)	7.03
	(b)	7.03
	(c)	7.03
	(d)	7.03
Section	314
	(a)(1)	7.04
	(a)(2)	7.04
	(a)(3)	7.03, 7.04
	(a)(4)	3.10
	(b)(1)	2.12(b)
	(b)(2)	3.06
	(c)(1)	2.12,4.01, 11.01
	(c)(2)	2.12, 4.01, 11.01
	(c)(3)	4.01
	(d)(1)	11.01
	(d)(2)	11.01
	(d)(3)	11.01
	(e)	11. 01(b)
Section	315
	(a)	6.01(b)(ii), 6.01(c)(i)

¹ ThisCross-ReferenceTable is not part of the Indenture.

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	(b)	6.02
	(c)	6.01(a)
	(d)(1)	6.01(b), 6.01(c)
	(d)(2)	6.01(c)(iii)
	(d)(3)	6.01(c)(iv)
	(e)	5.15
Section	316
	(a)	5.13
	(b)	5.09
	(c)	10.02
Section	317
	(a)(1)	5.03
	(a)(2)	5.05
	(b)	3.03
Section	318
	(a)	11.07

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This INDENTURE, dated as of May 1, 2006 (as amended or supplemented from time to time as permitted hereby, this “Indenture”), is among NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1, a Delaware statutory trust (together with its permitted successors and assigns, the “Issuing Entity”), JPMorgan Chase Bank, National Association, a banking association organized under the laws of the United States, as Indenture Trustee (together with its permitted successors in the trusts hereunder, the “Indenture Trustee”) and J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as co-trustee (the “Co-Trustee”)

Preliminary Statement

The Issuing Entity has duly authorized the execution and delivery of this Indenture to provide for its Asset-Backed Notes, Series 2006-MTA1 (the “Notes”), issuable as provided in this Indenture. All covenants and agreements made by the Issuing Entity herein are for the benefit and security of the Holders of the Notes. The Issuing Entity is entering into this Indenture, and the Indenture Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged.

All things necessary to make this Indenture a valid agreement of the Issuing Entity in accordance with its terms have been done.

Granting Clause

Subject to the terms of this Indenture, the Issuing Entity hereby Grants to the Indenture Trustee at the Closing Date, as Indenture Trustee for the benefit of the Noteholders, all of the Issuing Entity’s right, title and interest in and to: (i) each Mortgage Loan identified on the Mortgage Loan Schedule, including the related Cut-off Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest in any insurance policies in respect of the Mortgage Loans; (iv) its interest in the MI Policies; (v) the rights of the Issuing Entity under the Sale and Servicing Agreement with respect to the Mortgage Loans; (vi) all funds on deposit from time to time in (a) the Collection Account, (b) the Payment Account, (c) the Pre-Funding Account and (d) the Capitalized Interest Account; (viii) all other assets included or to be included in the Trust Fund; and (ix) all proceeds of any of the foregoing (collectively, the “Collateral”).

The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other amounts owing in respect of, the Notes, equally and ratably without prejudice, priority or distinction, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture.

The Indenture Trustee, as Indenture Trustee on behalf of the holders of the Notes, acknowledges the foregoing Grant, accepts the trusts hereunder in good faith and without notice of any adverse claim or liens and agrees to perform its duties required in this Indenture as specifically set forth herein to the end that the interests of the holders of the related Notes may be adequately and effectively protected.

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ARTICLE I

DEFINITIONS

Section 1.01. General Definitions. Except as otherwise specified or as the context may otherwise require, the terms defined in Appendix I have the respective meanings set forth in such Appendix I for all purposes of this Indenture, and the definitions of such terms are applicable to the singular as well as to the plural forms of such terms and to the masculine as well as to the feminine genders of such terms. Whenever reference is made herein to an Event of Default or a Default known to the Indenture Trustee or of which the Indenture Trustee has notice or knowledge, such reference shall be construed to refer only to an Event of Default or Default of which the Indenture Trustee is deemed to have notice or knowledge pursuant to Section 6.01(d). All other terms used herein that are defined in the Trust Indenture Act (as hereinafter defined), either directly or by reference therein, have the meanings assigned to them therein.

ARTICLE II

THE NOTES

Section 2.01. Forms Generally. The Notes shall be substantially in the form set forth as Exhibit A attached hereto. Each Note may have such letters, numbers or other marks of indemnification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange on which the Notes may be listed, or as may, consistently herewith, be determined by the Issuing Entity, as evidenced by its execution thereof. Any portion of the text of any Note may be set forth on the reverse thereof with an appropriate reference on the face of the Note.

The Definitive Notes may be produced in any manner determined by the Issuing Entity, as evidenced by its execution thereof.

Section 2.02. Form of Certificate of Authentication. The form of the Authenticating Agent’s certificate of authentication is as set forth on the signature page of the form of the Note attached hereto as Exhibit A.

Section 2.03. General Provisions with Respect to Principal and Interest Payment. The Notes shall be designated generally as the “NovaStar Mortgage Funding Trust, Series 2006-MTA1, Asset-Backed Notes, Series 2006-MTA1”.

The Notes shall be issued in the form specified in Section 2.01 hereof. The Notes shall be issued in sixteen Classes, the Class 1A-1 Notes, Class 2A-1A Notes, Class 2A-1B Notes, Class 2A-1C Notes, Class M-1 Notes, Class M-2 Notes, Class M-3 Notes, Class M-4 Notes, Class M-5 Notes, Class M-6 Notes, Class M-7 Notes, Class M-8 Notes, Class M-9 Notes and Class M-10 Notes. The aggregate Original Class Note Balance of Notes that may be authenticated and delivered under the Indenture is limited to $518,700,000 of Class 1A-1 Notes, $331,740,000 of Class 2A-1A Notes, $138,225,000 of Class 2A-1B Notes, $82,935,000 of Class

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2A-1C Notes, $40,200,000 of Class M-1 Notes, $19,200,000 of Class M-2 Notes, $11,400,000 of Class M-3 Notes, $9,600,000 of Class M-4 Notes, $6,600,000 of Class M-5 Notes, $6,000,000 of Class M-6 Notes, $6,000,000 of Class M-7 Notes, $6,000,000 of Class M-8 Notes, $6,000,000 of Class M-9 Notes and $6,000,000 of Class M-10 Notes except for the Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Sections 2.06, 2.07, or 9.06 of this Indenture.

Subject to the provisions of Sections 3.01, 5.07, 5.09 and 8.01 of this Indenture, the principal of each Class of Notes shall be payable in installments ending no later than the related Final Stated Maturity Date, unless the unpaid principal of such Notes become due and payable at an earlier date by declaration of acceleration or call for redemption or otherwise.

All payments made with respect to any Note shall be applied first to the interest then due and payable on such Note and then to the principal thereof. All computations of interest accrued on any Note shall be made on the basis of a year of 360 days and the actual number of days elapsed in the related Interest Accrual Period.

Notwithstanding any of the foregoing provisions with respect to payments of principal of and interest on the Notes, if the Notes have become or been declared due and payable following an Event of Default and such acceleration of maturity and its consequences have not been rescinded and annulled, then payments of principal of and interest on the Notes shall be made in accordance with Section 5.07 hereof.

Section 2.04. Denominations. The Notes shall be issuable only as registered Notes in the denominations equal to the Authorized Denominations.

Section 2.05. Execution, Authentication, Delivery and Dating. The Notes shall be executed on behalf of the Issuing Entity by an Authorized Officer of the Owner Trustee, acting at the direction of the Certificateholders. The signature of such Authorized Officer of the Owner Trustee on the Notes may be manual or by facsimile.

Notes bearing the manual or facsimile signature of an individual who was at any time an Authorized Officer of the Owner Trustee shall bind the Issuing Entity, notwithstanding that such individual has ceased to be an Authorized Officer of the Owner Trustee prior to the authentication and delivery of such Notes or was not an Authorized Officer of the Owner Trustee at the date of such Notes.

At any time and from time to time after the execution and delivery of this Indenture, the Issuing Entity may deliver Notes executed on behalf of the Issuing Entity to the Authenticating Agent for authentication, and the Authenticating Agent shall authenticate and deliver such Notes as provided in this Indenture and not otherwise.

Each Note authenticated on the Closing Date shall be dated the Closing Date. All other Notes that are authenticated after the Closing Date for any other purpose hereunder shall be dated the date of their authentication.

No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Note a certificate of authentication substantially in the

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form provided for in Section 2.02 hereof, executed by the Authenticating Agent by the manual signature of one of its Authorized Officers or employees, and such certificate of authentication upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder.

Section 2.06. Registration, Registration of Transfer and Exchange. The Issuing Entity shall cause to be kept a register (the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the Issuing Entity shall provide for the registration of Notes and the registration of transfers of Notes. The Indenture Trustee is hereby initially appointed “Note Registrar” for the purpose of registering Notes and transfers of Notes as herein provided. The Indenture Trustee shall remain the Note Registrar throughout the term hereof. Upon any resignation of the Indenture Trustee, the Servicer, on behalf of the Issuing Entity, shall promptly appoint a successor or, in the absence of such appointment, the Servicer, on behalf of the Issuing Entity, shall assume the duties of Note Registrar.

If a Person other than the Indenture Trustee is appointed by the Issuing Entity as Note Registrar, the Issuing Entity will give the Indenture Trustee prompt written notice of the appointment of such Note Registrar and of the location, and any change in the location, of the Note Register, and the Indenture Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely upon a certificate executed on behalf of the Note Registrar by an Authorized Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and number of such Notes.

Upon surrender for registration of transfer of any Note at the office or agency of the Issuing Entity to be maintained as provided in Section 3.02 hereof, the Owner Trustee on behalf of the Issuing Entity, shall execute, and the Authenticating Agent shall authenticate and deliver, in the name of the designated transferee or transferees; one or more new Notes of any authorized denominations and of a like aggregate initial Class Note Balance.

At the option of the Holder, Notes may be exchanged for other Notes of any authorized denominations, and of a like aggregate Class Note Balance, upon surrender of the Notes to be exchanged at the office or agency of the Issuing Entity to be maintained as provided in Section 3.02 hereof. Whenever any Notes are so surrendered for exchange, the Owner Trustee shall execute, and the Authenticating Agent shall authenticate and deliver, the Notes that the Noteholder making the exchange is entitled to receive.

All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuing Entity, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange.

Every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in the form included in Exhibit A attached hereto, duly executed by the Holder thereof or its attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent’s Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act.

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No service charge shall be made for any registration of transfer or exchange of Notes, but the Note Registrar may require payment of a sum sufficient to cover any tax or other governmental charge as may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.07 or Section 9.06 hereof.

The Note Registrar shall not register the transfer of a Note unless the Note Registrar has received a representation letter from the transferee to the effect that either (i) the transferee is not a Plan and is not, directly or indirectly, acquiring the Note or any interest therein on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with the assets of a Plan or (ii) the transferee is acquiring a Note other than a Class X Note and the acquisition and holding of the Note by the transferee qualifies for exemptive relief under a United States Department of Labor prohibited transaction class exemption (or, if the transferee is a Governmental Plan, will not result in a violation of applicable law). Each Beneficial Owner of a Note which is a Book-Entry Note shall be deemed to make one of the foregoing representations.

No transfer, sale, pledge or other disposition of any Class M-10 Note shall be made unless such disposition is exempt from the registration requirements of the Securities Act of 1933, as amended (the “1933 Act”), and any applicable state securities laws or is made in accordance with the 1933 Act and laws. In the event of any such transfer, except with respect to the initial transfers of any Class M-10 Note by the Issuing Entity to NCFLLC or by the Issuing Entity or NCFLLC to Greenwich Capital Financial Products, Inc., unless (i) such transfer is made in reliance upon Rule 144A under the 1933 Act and an investment letter, in substantially the form attached hereto as Exhibit B, is delivered by the Transferee to the Indenture Trustee) or (ii) a written Opinion of Counsel (which may be in-house counsel) acceptable to and in form and substance reasonably satisfactory to the Indenture Trustee and the Depositor is delivered to them stating that such transfer may be made pursuant to (x) the 1933 Act, or an exemption thereto, describing the applicable provision or exemption and the basis therefore, and (y) the Investment Company Act of 1940, or an exemption thereto, describing the applicable provision or exemption and the basis therefore, which Opinion of Counsel shall not be an expense of the Indenture Trustee or the Depositor. The Holder of a Class M-10 Note desiring to effect such transfer shall protect the Indenture Trustee and the Depositor against any liability that may result if the transfer is not so exempt or is not made in accordance with such federal and state laws.

Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes. If (1) any mutilated Note is surrendered to the Note Registrar or the Note Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (2) there is delivered to the Issuing Entity, the Owner Trustee and the Note Registrar such security or indemnity as may be required by the Issuing Entity, the Owner Trustee and the Note Registrar to save each of the Issuing Entity, the Owner Trustee and the Note Registrar harmless, then, in the absence of notice to the Note Registrar that such Note has been acquired by a bona fide purchaser, the Owner Trustee on behalf of the Issuing Entity, shall execute and upon its delivery of a Trust Request the Authenticating Agent shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Note, a new Note or Notes of the same tenor and aggregate initial principal amount bearing a number not contemporaneously outstanding. If, after the delivery of such new Note, a

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bona fide purchaser of the original Note in lieu of which such new Note was issued presents for payment such original Note, the Issuing Entity, shall be entitled to recover such new Note from the person to whom it was delivered or any person taking therefrom, except a bona fide purchaser, and the Issuing Entity, the Owner Trustee and the Note Registrar shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expenses incurred by the Issuing Entity, the Owner Trustee or the Note Registrar in connection therewith. If any such mutilated, destroyed, lost, or stolen Note shall have become or shall be about to become due and payable, or shall have become subject to redemption in full, instead of issuing a new Note, the Issuing Entity may pay such Note without surrender thereof, except that any mutilated Note shall be surrendered.

Upon the issuance of any new Note under this Section 2.07, the Note Registrar, may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Issuing Entity, the Indenture Trustee or the Note Registrar) connected therewith.

Every new Note issued pursuant to this Section 2.07 in lieu of any destroyed, lost or stolen Note shall constitute an original contractual obligation of the Issuing Entity, whether or not the destroyed, lost or stolen Note shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

Section 2.08. Payments of Principal and Interest. (a) Payments on Notes issued as Book-Entry Notes will be made by or on behalf of the Indenture Trustee to the Clearing Agency or its nominee. Any installment of interest or principal payable on any Definitive Notes that is punctually paid or duly provided for by the Issuing Entity on the applicable Payment Date shall be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business on the Record Date for such Class of Notes and such Payment Date by either (i) wire transfer of immediately available funds to the account of a Noteholder, if such Noteholder has provided the Indenture Trustee with wiring instructions in writing by five (5) Business Days prior to the related Record Date or has provided the Indenture Trustee with such instructions for any previous Payment Date or (ii) check mailed to such Person’s address as it appears in the Note Register on such Record Date, except for the final installment of principal payable with respect to such Note, which shall be payable as provided in subsection (b) of this Section 2.08. A fee may be charged by the Indenture Trustee to a Holder of Definitive Notes for any payment made by wire transfer. Any installment of interest or principal not punctually paid or duly provided for shall be payable as soon as funds are available to the Indenture Trustee for payment thereof, or if Section 5.07 applies, pursuant to Section 5.07.

Payments on Certificates will be made by or on behalf of the Indenture Trustee to or at the direction of the Person in whose name such Certificate is registered by either (i) wire transfer of immediately available funds to the account directed by a Certificateholder, if such Certificateholder (A) is NovaStar Mortgage Inc. or its affiliate and (B) has provided the

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Indenture Trustee with wiring instructions in writing by five (5) Business Days prior to the related payment Date or has provided the Indenture Trustee with such instructions for any previous Payment Date or (ii) check mailed to such Person’s address as it appears in the Certificate Register on such Record Date. A fee may be charged by the Indenture Trustee to a Certificateholder for any payment made by wire transfer. The Indenture Trustee shall be entitled to rely on information provided by the Owner Trustee as Certificate Registrar as to all matters related to the Certificate Registrar and the Certificates.

(b) All reductions in the Class Note Balance of a Note (or one or more Predecessor Notes) effected by payments of installments of principal made on any Payment Date shall be binding upon all Holders of such Note and of any Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Note. The final installment of principal of each Note shall be payable only upon presentation and surrender thereof on or after the Payment Date therefor at the designated office of the Indenture Trustee located within the United States of America pursuant to Section 3.02.

Whenever the Indenture Trustee expects that the entire unpaid Class Note Balance of any Note will become due and payable on the next Payment Date, other than pursuant to a redemption pursuant to Article X, it shall, no later than two (2) Business Days prior to such Payment Date, mail to each Person in whose name a Note to be so retired is registered at the close of business on such otherwise applicable Record Date a notice to the effect that:

(i) the Indenture Trustee expects that funds sufficient to pay such final installment will be available in the Payment Account on such Payment Date; and

(ii) if such funds are available, (a) such final installment will be payable on such Payment Date, but only upon presentation and surrender of such Note at the office or agency of the Note Registrar maintained for such purpose pursuant to Section 3.02 (the address of which shall be set forth in such notice) and (b) no interest shall accrue on such Note after such Payment Date.

Notices in connection with redemptions of Notes shall be mailed to Noteholders in accordance with Section 10.02 hereof.

(c) Subject to the foregoing provisions of this Section 2.08, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to unpaid principal and interest that were carried by such other Note. Any checks mailed pursuant to paragraph (a) of this Section 2.08 and returned undelivered shall be held in accordance with Section 3.03 hereof.

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Section 2.09. Statements. On each Payment Date, based solely on information provided to it by the Servicer in its Determination Date Report, the Indenture Trustee shall prepare and make available to each Noteholder, the Servicer and the Rating Agencies, a statement (the “Indenture Trustee Remittance Report”) as to the payments made on such Payment Date:

(i) the amount of the payment made on such Payment Date to the Holders of each Class of Notes, separately identified, allocable to principal;

(ii) the amount of the payment made on such Payment Date to the Holders of each Class of Notes allocable to interest, separately identified;

(iii) the payments made to the Certificateholders;

(iv) the Pool Balance of the Group I Mortgage Loans and the Group II Mortgage Loans at the Close of Business at the end of the related Due Period;

(v) the number, aggregate principal balance, and weighted average Mortgage Rate of the Mortgage Loans as of the related Determination Date;

(vi) the number and aggregate unpaid principal balance of Mortgage Loans (identified by Group) that (A) were Delinquent (exclusive of Mortgage Loans in bankruptcy or foreclosure and REO Properties) (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days (B) as to which foreclosure proceedings have been commenced and that (i) are not Delinquent, and (ii) are Delinquent (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days, (C) are related to a REO Property and that (i) are not Delinquent and (ii) are Delinquent (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days and (D) are related to a Mortgagor that was subject to a bankruptcy proceeding and that (i) are not Delinquent and (ii) are Delinquent (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days, in each case on a contractual and bankruptcy legal basis;

(vii) the aggregate amount of Principal Prepayments made during the related Prepayment Period;

(viii) the aggregate amount of Realized Losses incurred during the related Prepayment Period and the cumulative amount of Realized Losses;

(ix) the Class Note Balance of each class of the Class A Notes and each class of the Class M Notes, after giving effect to the payments made on such Payment Date;

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(x) the Unpaid Interest Shortfall Amount, if any, with respect to each class of the Class A Notes and each class of the Class M Notes for such Payment Date;

(xi) the aggregate amount of any Prepayment Interest Shortfalls for such Payment Date, to the extent not covered by payments by the Servicer pursuant to Section 5.27 of the Sale and Servicing Agreement;

(xii) the Senior Credit Enhancement Percentage for such Payment Date;

(xiii) the Available Funds Cap Shortfall amount for each class of the Class A Notes and each class of the Class M Notes if any, for such Payment Date;

(xiv) the Required Overcollateralization Amount for such Payment Date;

(xv) the Net Monthly Excess Cashflow for such Payment Date;

(xvi) the aggregate amount of Scheduled Principal Payments made during the related Due Period;

(xvii) the aggregate amount of Principal Prepayments made during the related Due Period in which the related Mortgagor paid the related Mortgage Loan in full;

(xviii) the aggregate amount of Principal Prepayments in part made during the related Prepayment Period;

(xix) the number and the aggregate principal balance of all Liquidated Mortgage Loans for the related Prepayment Period;

(xx) the aggregate amount of Net Liquidation Proceeds received during the related Prepayment Period;

(xxi) the dollar amount of claims made, amounts paid by the MI Insurer in respect of claims made, and premiums due and paid under the MI Policy, solely to the extent provided by the Servicer; and

(xxii) payments of Available Funds Cap Shortfall made to the Noteholders (A) pursuant to Section 5.07 (vi), (vii) and (ix) hereof; (B) pursuant to Section 8.01 (c)(i) and (ii) hereof; and (C) pursuant to Section 8.01 (e)(iii) and (v) hereof.

In the case of information furnished pursuant to subclauses (i) and (ii) above, the amounts shall be expressed in a separate section of the report as a dollar amount for each Class for each $1,000 original dollar amount as of the Closing Date.

The Indenture Trustee may, in the absence of manifest error, conclusively rely upon the Determination Date Report of the Servicer in its preparation of the statement to Noteholders pursuant to this Section 2.09.

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Within a reasonable period of time after the end of each calendar year, the Indenture Trustee shall, upon written request, furnish to each Person who at any time during the calendar year was a Noteholder, if requested in writing by such Person, such information as is reasonably necessary to provide to such Person a statement containing the information set forth in subclauses (i) and (ii) above, aggregated for such calendar year or applicable portion thereof during which such Person was a Noteholder. Such obligation of the Indenture Trustee shall have been previously deemed to have been satisfied to the extent that substantially comparable information shall be made available by the Indenture Trustee to Noteholders.

On each Payment Date, the Indenture Trustee shall make available to the Certificateholders a copy of the reports made available to the Noteholders in respect of such Payment Date with such other information as the Indenture Trustee deems necessary or appropriate.

Within a reasonable period of time after the end of each calendar year, the Indenture Trustee shall deliver to each Person who at any time during the calendar year was a Certificateholder, if requested in writing by such Person, such information as is reasonably necessary to provide to such Person a statement containing the information provided pursuant to the previous paragraph aggregated for such calendar year or applicable portion thereof during which such Person was a Certificateholder. Such obligation of the Indenture Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall have been previously made available to Certificateholders by the Indenture Trustee.

Section 2.10. Persons Deemed Owner. Prior to due presentment for registration of transfer of any Note, any agent on behalf of the Issuing Entity including but not limited to the Indenture Trustee, may treat the Person in whose name any Note is registered as the owner of such Note (a) on the applicable Record Date for the purpose of receiving payments of the principal of and interest on such Note and (b) on any other date for all other purposes whatsoever, and none of the Issuing Entity, the Indenture Trustee or any other agent of the Issuing Entity, shall be affected by notice to the contrary.

Section 2.11. Cancellation. All Notes surrendered for payment, registration of transfer, exchange or redemption shall, if surrendered to any Person other than the Note Registrar, be delivered to the Note Registrar and shall be promptly canceled by it. The Owner Trustee, on behalf of the Issuing Entity, shall deliver to the Note Registrar for cancellation any Note previously authenticated and delivered hereunder which the Owner Trustee, on behalf of the Issuing Entity may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly canceled by the Note Registrar. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 2.11, except as expressly permitted by this Indenture. All canceled Notes held by the Note Registrar shall be held by the Note Registrar in accordance with its standard retention policy.

Section 2.12. Authentication and Delivery of Notes. The initial Notes shall be executed by an Authorized Officer of the Owner Trustee, on behalf of the Issuing Entity; and delivered to the Authenticating Agent for authentication, and thereupon the same shall be authenticated and delivered by the Authenticating Agent on the Closing Date, upon receipt by the Authenticating Agent of all of the following:

(a) A Trust Request authorizing the execution, authentication and delivery of the Notes and specifying the Class Note Balance and the Percentage Interest of such Notes to be authenticated and delivered.

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(b) An Officer’s Certificate of the Issuing Entity complying with the requirements of Section 11.01 and stating that:

(i) the Issuing Entity is not in Default under this Indenture and the issuance of the Notes will not result in any breach of any of the terms, conditions or provisions of, or constitute a default under, the Issuing Entity’s Certificate of Trust or any indenture, mortgage, deed of trust or other agreement or instrument to which the Issuing Entity is a party or by which it is bound, or any order of any court or administrative agency entered in any proceeding to which the Issuing Entity is a party or by which it may be bound or to which it may be subject, and that all conditions precedent provided in this Indenture relating to the authentication and delivery of the Notes have been complied with;

(ii) the Issuing Entity is the owner of each Mortgage Loan, free and clear of any lien, security interest or charge, has not assigned any interest or participation in any such Mortgage Loan (or, if any such interest or participation has been assigned, it has been released), and has the right to Grant each such Mortgage Loan to the Indenture Trustee;

(iii) the information set forth in the Mortgage Loan Schedule attached as Schedule 1 to this Indenture is correct;

(iv) the Issuing Entity has Granted to the Indenture Trustee all of its right, title and interest in each Mortgage Loan; and

(v) as of the Closing Date, no lien in favor of the United States described in Section 6321 of the Code, or lien in favor of the Pension Benefit Guaranty Corporation described in Section 4068(a) of the ERISA, has been filed as described in subsections 6323(f) and 6323(g) of the Code upon any property belonging to the Issuing Entity.

(c) An executed counterpart of the Sale and Servicing Agreement.

(d) An executed counterpart of the Trust Agreement.

(e) A copy of a letter from each of the Rating Agencies that it has assigned the ratings to each Class of the Notes as set forth in the Prospectus Supplement.

(f) Evidence of the establishment of the Accounts.

Section 2.13. Book-Entry Note. The Notes will be issued initially as one or more certificates in the name of Cede & Co., as nominee for the Clearing Agency maintaining book-entry records with respect to ownership and transfer of such Notes, and registration of the Notes may not be transferred by the Note Registrar except upon the termination of the book-entry system as described in Section 2.14. In such case, the Note Registrar shall deal with the Clearing Agency as representative of the Beneficial Owners of such Notes for purposes of exercising the

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rights of Noteholders hereunder. Each payment of principal of and interest on a Book-Entry Note shall be paid to the Clearing Agency, which shall credit the amount of such payments to the accounts of its Clearing Agency Participants in accordance with its normal procedures. Each Clearing Agency Participant shall be responsible for disbursing such payments to the Beneficial Owners of the Book-Entry Notes that it represents and to each indirect participating brokerage firm (a “brokerage firm” or “indirect participating firm”) for which it acts as agent. Each brokerage firm shall be responsible for disbursing funds to the Beneficial Owners of the Book-Entry Notes that it represents. All such credits and disbursements are to be made by the Clearing Agency and the Clearing Agency Participants in accordance with the provisions of the Notes. None of the Indenture Trustee, the Note Registrar, if any, or the Issuing Entity shall have any responsibility therefor except as otherwise provided by applicable law. Requests and directions from, and votes of, such representatives shall not be deemed to be inconsistent if they are made with respect to different Beneficial Owners.

Section 2.14. Termination of Book Entry System. (a) The book-entry system through the Clearing Agency with respect to the Book-Entry Notes may be terminated upon the happening of any of the following:

(i) The Clearing Agency advises the Indenture Trustee that the Clearing Agency is no longer willing or able to discharge properly its responsibilities as nominee and depository with respect to the Notes and a qualified successor Clearing Agency satisfactory to the Servicer is not located; or

(ii) After the occurrence of an Event of Default (at which time the Indenture Trustee shall promptly notify the Clearing Agency of such Event of Default and instruct the Clearing Agency to forward such notice to the Beneficial Owners), the Beneficial Owners representing in the aggregate more than 50% of the Class Note Balance of the Book-Entry Notes advise the Indenture Trustee in writing, through the related Clearing Agency Participants and the Clearing Agency, that the continuation of a book-entry system through the Clearing Agency to the exclusion of any Definitive Notes being issued to any person other than the Clearing Agency or its nominee is no longer in the best interests of the Beneficial Owners.

(b) Upon the occurrence of any event described in subsection (a) of this Section 2.14, the Indenture Trustee shall instruct the Clearing Agency to notify all Beneficial Owners, of the occurrence of such event and of the availability of Definitive Notes to Beneficial Owners requesting the same, in an aggregate outstanding Class Note Balance representing the interest of each, making such adjustments and allowances as it may find necessary or appropriate as to accrued interest and previous calls for redemption. Definitive Notes shall be issued only upon surrender to the Indenture Trustee of the global Note by the Clearing Agency, accompanied by registration instructions for the Definitive Notes. Neither the Issuing Entity nor the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon issuance of the Definitive Notes, all references herein to obligations imposed upon or to be performed by the Clearing Agency shall cease to be applicable and the provisions relating to Definitive Notes shall be applicable.

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ARTICLE III

COVENANTS, REPRESENTATIONS AND WARRANTIES

Section 3.01. Payment of Notes. The Issuing Entity will pay or cause to be duly and punctually paid the principal of, and interest on, the Notes in accordance with the terms of the Notes and this Indenture. The Notes shall be non-recourse obligations of the Issuing Entity and shall be limited in right of payment to amounts available from the Trust Estate as provided in this Indenture and the Issuing Entity shall not otherwise be liable for payments on the Notes. No person shall be personally liable for any amounts payable under the Notes. If any other provision of this Indenture conflicts or is deemed to conflict with the provisions of this Section 3.01, the provisions of this Section 3.01 shall control.

Section 3.02. Maintenance of Office or Agency. The Indenture Trustee will always maintain an office at a location in the United States of America where Notes may be surrendered for registration of transfer or exchange, which as of the Closing Date shall be located at 2001 Bryan Street, 9th Floor, Dallas, Texas, 75201, Attention: Worldwide Securities Services/Structured Finance Services - NovaStar 2006-MTA1. Notices and demands to or upon the Issuing Entity in respect of the Notes and this Indenture may be delivered at the Corporate Trust Office of the Indenture Trustee.

Section 3.03. Money for Note Payments to Be Held in Trust. All payments of amounts due and payable with respect to any Notes that are to be made from amounts withdrawn from the Payment Account pursuant to Sections 5.07 or 8.01 hereof shall be made on behalf of the Issuing Entity by the Indenture Trustee, and no amounts so withdrawn from the Payment Account for payments on the Notes shall be paid over to the Issuing Entity under any circumstances except as provided in this Section 3.03 or in Sections 5.07 or 8.01 hereof.

With respect to Definitive Notes, if the Issuing Entity shall have a Note Registrar that is not also the Indenture Trustee, such Note Registrar shall furnish, no later than the fifth (5th) calendar day after each Record Date, a list, in such form as such Indenture Trustee may reasonably require, of the names and addresses of the Holders of Notes and of the number of Individual Notes held by each such Holder.

Whenever the Issuing Entity shall have a Paying Agent other than the Indenture Trustee, the Servicer, on behalf of the Issuing Entity, will, on or before the Business Day next preceding each Payment Date, direct the Indenture Trustee to distribute from the Payment Account to such Paying Agent on such Payment Date an aggregate sum sufficient to pay the amounts then becoming due (to the extent funds are then available for such purpose in the Payment Account), such sum to be held in trust for the benefit of the Persons entitled thereto. Any moneys deposited with a Paying Agent in excess of an amount sufficient to pay the amounts then becoming due on the Notes with respect to which such deposit was made shall, upon Trust Order, be paid over by such Paying Agent to the Indenture Trustee for application in accordance with Article VIII hereof.

Any Paying Agent, other than the Indenture Trustee, may be appointed by Trust Order and at the expense of the Issuing Entity. The Issuing Entity shall not appoint any Paying Agent

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(other than the Indenture Trustee) that is not, at the time of such appointment, a depository institution or trust company whose obligations would be Eligible Investments pursuant to clause (iii) of the definition of the term “Eligible Investments”. The Servicer, on behalf of the Issuing Entity, will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee and the Owner Trustee, on behalf of the Issuing Entity, an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section 3.03, that such Paying Agent will:

(a) allocate all sums received for payment to the Holders of Notes on each Payment Date among such Holders in the proportion specified in the applicable Indenture Trustee’s Remittance Report, in each case to the extent permitted by applicable law;

(b) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

(c) if such Paying Agent is not the Indenture Trustee, immediately resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of the Notes if at any time the Paying Agent ceases to meet the standards set forth above required to be met by a Paying Agent at the time of its appointment;

(d) if such Paying Agent is not the Indenture Trustee, give the Indenture Trustee notice of any Default by the Issuing Entity (or any other obligor upon the Notes) in the making of any payment required to be made with respect to any Notes for which it is acting as Paying Agent;

(e) if such Paying Agent is not the Indenture Trustee, at any time during the continuance of any Default by the Issuing Entity (or any other obligor upon the Notes), upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent; and

(f) comply with all requirements of the Code, and all regulations thereunder, with respect to withholding from any payments made by it on any Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith; provided, however, that with respect to withholding and reporting requirements applicable to original issue discount (if any) on any of the Notes, the Servicer, on behalf of the Issuing Entity, has provided the calculations pertaining thereto to the Indenture Trustee and the Paying Agent.

The Issuing Entity may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or any other purpose, by Trust Order direct any Paying Agent, if other than the Indenture Trustee, to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee in the same trusts as such sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money.

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Any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed for two and one-half years after such amount has become due and payable to the Holder of such Note (or if earlier, three months before the date on which such amount would escheat to a governmental entity under applicable law) shall be discharged from such trust and paid to the Issuing Entity; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuing Entity for payment thereof (but only to the extent of the amounts so paid to the Issuing Entity), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease. The Indenture Trustee may, but shall have no obligation to (and shall have no liability for failing to), adopt and employ, at the expense of the Issuing Entity, any reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Holders whose Notes have been called but have not been surrendered for redemption or whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or an), Paying Agent, at the last address of record for each such Holder).

Section 3.04. Existence of Issuing Entity. (a) Subject to paragraphs (b) and (c) of this Section 3.04, the Issuing Entity will keep in full effect its existence, rights and franchises as a statutory trust under the laws of the State of Delaware or under the laws of any other state of the United States of America, and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes and the other Basic Documents.

(b) Subject to Section 3.09(g) hereof, any entity into which the Issuing Entity may be merged or with which it may be consolidated, or any entity resulting from any merger or consolidation to which the Issuing Entity shall be a party, shall be the successor issuing entity under this Indenture without the execution or filing of any paper, instrument or further act to be done on the part of the parties hereto, anything in any agreement relating to such merger or consolidation, by which any such Issuing Entity may seek to retain certain powers, rights and privileges therefore obtaining for any period of time following such merger or consolidation to the contrary notwithstanding (other than Section 3.09(g)).

(c) Upon any consolidation or merger of or other succession to the Issuing Entity in accordance with this Section 3.04, the Person formed by or surviving such consolidation or merger (if other than the Issuing Entity) may exercise every right and power of, and shall have all of the obligations of, the Issuing Entity under this Indenture with the same effect as if such Person had been named as the issuing entity herein.

Section 3.05. Protection of Trust Estate. (a) The Issuing Entity will, from time to time, execute and deliver all such supplements and amendments hereto and all such financing statements, continuation statements, instruments of further assurance and other instruments, and will take such other action as may be necessary or advisable to:

(i) Grant more effectively all or any portion of the Trust Estate as made by this Indenture;

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(ii) maintain or preserve the lien of this Indenture or carry out more effectively the purposes hereof;

(iii) perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture;

(iv) enforce any of the Mortgage Loans or the Sale and Servicing Agreement; or

(v) preserve and defend title to the Trust Estate and the rights of the Indenture Trustee, and the Noteholders in the Mortgage Loans and the other property held as part of the Trust Estate against the claims of all Persons and parties.

(b) The Indenture Trustee shall not remove any portion of the Trust Estate that consists of money or is evidenced by an instrument, certificate or other writing from the jurisdiction in which it was held at the Closing Date or cause or permit ownership or the pledge of any portion of the Trust Estate that consists of book-entry securities to be recorded on the books of a Person located in a different jurisdiction from the jurisdiction in which such ownership or pledge was recorded at such time unless the Indenture Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property will continue to be maintained after giving effect to such action or actions.

Section 3.06. [Reserved.]

Section 3.07. Performance of Obligations. (a) The Issuing Entity shall punctually perform and observe all of its obligations under this Indenture and the other Basic Documents.

(b) The Issuing Entity shall not take any action and will use its Best Efforts not to permit any action to be taken by others that would release any Person from any of such Person’s covenants or obligations under any of the Mortgage Files or under any instrument included in the Trust Estate, or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any of the documents or instruments contained in the Mortgage Files, except as expressly permitted in this Indenture, the other Basic Documents or such document included in the Mortgage File or other instrument or unless such action will not adversely affect the interests of the Noteholders.

(c) If the Servicer or the Owner Trustee, on behalf of the Issuing Entity, shall have actual knowledge of the occurrence of a Servicing Default, the Servicer or the Owner Trustee, as applicable, shall promptly notify the Indenture Trustee and the Rating Agencies thereof, and, in the case of the Servicer, shall specify in such notice the action, if any, the Servicer is taking with respect to such default.

(d) Upon any termination of the Servicer’s rights and powers pursuant to the Sale and Servicing Agreement, the Indenture Trustee shall promptly notify the Rating Agencies. As soon as any successor Servicer is appointed, the Indenture Trustee shall notify the Rating Agencies, specifying in such notice the name and address of such successor Servicer.

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Section 3.08. Investment Company Act. The Issuing Entity shall at all times conduct its operations so as not to be subject to, or shall comply with, the requirements of the Investment Company Act of 1940, as amended (or any successor statute), and the rules and regulations thereunder.

Section 3.09. Negative Covenants. The Issuing Entity shall not:

(a) sell, transfer, exchange or otherwise dispose of any portion of the Trust Estate, except as expressly permitted by this Indenture and the other Basic Documents;

(b) claim any credit on, or make any deduction from, the principal of, or interest on, any of the Notes (other than amounts properly withheld from such payments under the Code) or assert any claim against any present or former Noteholder by reason of the payment of any taxes levied or assessed upon any portion of the Trust Estate;

(c) engage in any business or activity other than as permitted by the Trust Agreement or other than in connection with, or relating to, the issuance of the Notes pursuant to this Indenture, or amend the Trust Agreement, as in effect on the Closing Date, other than in accordance with Section 12.01 of the Trust Agreement;

(d) incur, issue, assume or otherwise become liable for any indebtedness other than the Notes;

(e) incur, assume, guaranty or agree to indemnify any Person with respect to any indebtedness of any Person, except for such indebtedness as may be incurred by the Issuing Entity in connection with the issuance of the Notes pursuant to this Indenture;

(f) subject to Article X of the Trust Agreement, dissolve or liquidate in whole or in part (until the Notes are paid in full);

(g) (i) permit the validity or effectiveness of this Indenture or any Grant to be impaired, or permit the lien of this Indenture to be impaired, amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations under this Indenture, except as may be expressly permitted hereby, (ii) permit any lien, charge, security interest, mortgage or other encumbrance (other than the lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the Trust Estate or any pall thereof or any interest therein or the proceeds thereof; or (iii) permit the lien of this Indenture not to constitute a valid perfected first priority (other than with respect to any such tax, mechanics’ or other lien) security interest in the Trust Estate; or

(h) take any other action that should reasonably be expected to, or fail to take any action if such failure should reasonably be expected to, cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes.

Section 3.10. Annual Statement as to Compliance. On or before March 15, 2007, and each March 15 thereafter, the Servicer, on behalf of the Issuing Entity, shall deliver to the Indenture Trustee and the Sponsor a written statement, signed by an Authorized Officer of the Servicer, on behalf of the Issuing Entity, stating that:

(i) a review of the fulfillment by the Issuing Entity during such year of its obligations under this Indenture has been made under such Authorized Officer’s supervision; and

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(ii) to the best of such Authorized Officer’s knowledge, based on such review, the Issuing Entity has complied with all conditions and covenants under this Indenture throughout such year, or, if there has been a Default in the fulfillment of any such covenant or condition, specifying each such Default known to such Authorized Officer and the nature and status thereof.

Section 3.11. Restricted Payments. The Issuing Entity shall not, directly or indirectly, (i) pay any dividend or make any payment (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuing Entity or otherwise with respect to any ownership or equity interest or security in or of the Issuing Entity or to the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for any such purpose; provided, however, that the Issuing Entity may make, or cause to be made, payments to the Servicer, the Indenture Trustee, the Owner Trustee, the Noteholders and the Certificateholders as contemplated by, and to the extent funds are available for such purpose under this Indenture and the other Basic Documents and the Issuing Entity will not, directly or indirectly, make or cause to be made payments to or payments from the Payment Account except in accordance with this Indenture.

Section 3.12. Treatment of Notes as Debt for Tax Purposes. For purposes of federal, state and local income, single business and franchise taxes, the Issuing Entity will treat the Class A and Class M Notes, other than such Notes held by the Depositor or its owner, as indebtedness, and hereby instructs the Indenture Trustee, Paying Agent and the Servicer, on behalf of the Issuing Entity to treat the Class A and Class M Notes, other than such Notes held by the Depositor or its owner, as indebtedness for all applicable tax reporting purposes. For purposes of federal, state and local income, single business and franchise taxes, the Issuing Entity will treat the Class X Notes as “stripped coupons” within the meaning of section 1286 of the Code, and hereby instructs the Indenture Trustee, Paying Agent and the Servicer, on behalf of the Issuing Entity to treat the Class X Notes as “stripped coupons” for all applicable tax reporting purposes. Notwithstanding anything herein to the contrary, payments of Available Funds Cap Shortfalls made pursuant to Section 8.01(c)(i) and (ii) hereof will be treated by the Issuing Entity, the Indenture Trustee, the Paying Agent and the Servicer as having been made pursuant to a “notional principal contract” within the meaning of Treasury regulation section 1.446-3 written by the holders of the Class X Notes in favor of holders of the Class A and Class M Notes for all applicable tax reporting purposes.

Section 3.13. Notice of Events of Default. The Servicer, on behalf of the Issuing Entity, shall give the Indenture Trustee, the Rating Agencies and the Sponsor prompt written notice of each Event of Default hereunder of which it has knowledge, each default on the part of the Servicer of its obligations under the Sale and Servicing Agreement and each default on the part of the Sponsor of its obligations under the Sale and Servicing Agreement.

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Section 3.14. Further Instruments and Acts. Upon written request of the Indenture Trustee, the Owner Trustee, on behalf of the Issuing Entity, will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture.

Section 3.15. Representation and Warranties of the Issuing Entity.

(a) The Issuing Entity represents and warrants to the Indenture Trustee, the Depositor, the Sponsor and the Servicer that the Issuing Entity is duly authorized under applicable law and the Trust Agreement to create and issue the Notes, to execute and deliver this Indenture, the Sale and Servicing Agreement, the other documents referred to herein to which it is a party and all instruments included in the Collateral which it has executed and delivered, and that all Issuing Entity action and governmental consents, authorizations and approvals necessary or required therefor have been duly and effectively taken or obtained. The Notes, when issued, will be, and this Indenture and such other documents are, valid and legally binding obligations of the Issuing Entity enforceable in accordance with their terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights in general and by general principles of equity, regardless of whether such enforceability shall be considered in a proceeding in equity or in law.

(b) The Issuing Entity represents and warrants that, immediately prior to its Grant of the Collateral provided for herein, it had good title to, and was the sole owner of, the Mortgage Loans, free and clear of any pledge, lien, encumbrance or security interest.

(c) The Issuing Entity represents and warrants that the Indenture Trustee has a valid and enforceable first priority security interest in the Mortgage Loans, subject only to exceptions permitted hereby.

(d) The Issuing Entity represents and warrants it is not required to be registered as an “investment company” under the 1940 Act.

(e) This Indenture creates a valid and continuing security interest (as defined in the applicable UCC) in the Mortgage Loans in favor of the Indenture Trustee, which security interest is prior to all other Liens, and is enforceable as such as against creditors of and purchasers from the Issuing Entity.

(f) Other than the security interest granted to the Indenture Trustee pursuant to this Indenture, the Issuing Entity has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Mortgage Loans. The Issuing Entity has not authorized the filing of and is not aware of any financing statements against the Issuing Entity that includes a description of collateral covering the Mortgage Loans other than any financing statement relating to the security interest granted to the Indenture Trustee hereunder or that has been terminated. The Issuing Entity is not aware of any judgment or tax lien filings against the Issuing Entity.

(g) The Issuing Entity owns and has good and marketable title to the Mortgage Loans free and clear of any Lien, claim or encumbrance of any Person.

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(h) The Issuing Entity has caused or will have caused, within ten days, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdiction under applicable law in order to perfect the security interest in the Mortgage Loans granted to the Indenture Trustee hereunder. The Custodian on behalf of the Issuing Entity has in its possession all original copies of the mortgage notes that constitute or evidence the Mortgage Loans. The mortgage notes that constitute or evidence the Mortgage Loans do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Indenture Trustee. All financing statements filed or to be filed against the Issuing Entity in favor of the Indenture Trustee (or any subsequent assignee, without limitation) in connection herewith describing the Mortgage Loans contain a statement to the following effect: “A purchase of or security interest in, any collateral described in this financing statement will violate the rights of the Indenture Trustee.”

(i) The mortgage notes evidencing the Mortgage Loans constitute instruments.

(j) The Issuing Entity shall, to the extent consistent with this Indenture, take such additional reasonable actions as may be necessary to ensure that, if this Indenture were deemed to create a security interest in the Mortgage Loans and the other assets of the Collateral, such security interest would be a perfected security interest of first priority under applicable law and will be maintained as such throughout the life of this Indenture.

The foregoing representations and warranties may not be waived and shall survive the issuance of the Notes.

ARTICLE IV

SATISFACTION AND DISCHARGE

Section 4.01. Satisfaction and Discharge of Indenture. Whenever the following conditions shall have been satisfied:

(a) either;

(i) all Notes theretofore authenticated and delivered (other than (x) Notes that have been destroyed, lost or stolen and that have been replaced or paid as provided in Section 2.07 hereof, and (y) Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Issuing Entity, as provided in Section 3.03 hereof) have been delivered to the Note Registrar for cancellation; or

(ii) all Notes not theretofore delivered to the Note Registrar for cancellation, (a) have become due and payable, or (b) will become due and payable at the Final Stated Maturity Date within one (1) year, or (c) are to be called for redemption pursuant to Section 10.01 hereof within one (1) year under irrevocable arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name, and at the expense, of the Sponsor,

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and the Sponsor, in the case of clause ii(c), or Servicer, in the case of clauses (ii)(a) or (ii)(b) above, has irrevocably deposited or caused to be deposited with the Indenture Trustee, in trust for such purpose, an amount sufficient to pay and discharge the entire unpaid Class Note Balance of such Notes not theretofore delivered to the Indenture Trustee for cancellation, for principal and interest to the Final Stated Maturity Date or to the applicable Redemption Date, as the case may be, and in the case of Notes that were not paid at the Final Stated Maturity Date of their entire unpaid Class Note Balance, for all overdue principal and all interest payable on such Notes to the next succeeding Payment Date therefor;

(b) the Servicer, on behalf of the Issuing Entity, has paid or caused to be paid all other sums payable hereunder by the Issuing Entity;

(c) the Servicer, on behalf of the Issuing Entity, has delivered to the Indenture Trustee an Officer’s Certificate and an Opinion of Counsel and, if the Servicer determines that TIA Section 314(c)(3) requires it, a certificate from a firm of certified public accountants, each stating that all conditions precedent herein providing for the satisfaction and discharge of this Indenture have been complied with,

then, upon a Trust Request, this Indenture and the lien, rights and interests created hereby and thereby shall cease to be of further effect, and the Indenture Trustee and each co-trustee and separate trustee, if any, then acting as such hereunder shall, at the expense of the Issuing Entity, execute and deliver all such instruments as may be necessary to acknowledge the satisfaction and discharge of this Indenture and shall pay, or assign or transfer and deliver, to the Issuing Entity or upon Trust Order all cash, securities and other property held by it as part of the Trust Estate remaining after satisfaction of the conditions set forth in paragraphs (a) and (b) above.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Indenture Trustee and any Paying Agent to the Issuing Entity and the Holders of Notes under Section 3.03 hereof, the obligations of the Indenture Trustee to the Holders of Notes under Section 4.02 hereof and the provisions of Section 2.07 hereof with respect to lost, stolen, destroyed or mutilated Notes, registration of transfers of Notes and rights to receive payments of principal of and interest on the Notes, and the obligations of the Servicer to the Indenture Trustee under Section 7.06 of the Sale and Servicing Agreement shall survive.

Section 4.02. Application of Trust Money. All money deposited with the Indenture Trustee pursuant to Sections 3.03 and 4.01 hereof shall be held in trust and applied by it, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Persons entitled thereto, of the principal and interest for whose payment such money has been deposited with the Indenture Trustee.

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ARTICLE V

DEFAULTS AND REMEDIES

Section 5.01. Event of Default. “Event of Default”, wherever used herein, means, with respect to Notes issued hereunder, any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a) if the Issuing Entity shall fail to distribute or cause to be paid to the Indenture Trustee, for the benefit of the holders of the Notes, (x) on any Payment Date, any Interest Payment Amount due and payable on such Payment Date and such failure continues for three Business Days or (y) on the applicable Final Stated Maturity Date for each class of Notes, any remaining Available Funds Cap Shortfall and any remaining Allocated Loss Interest for such Class, as applicable;

(b) if the Issuing Entity shall fail to distribute or cause to be paid to the Indenture Trustee, for the benefit of the holders of the Notes, (x) on any Payment Date (other than the Final Stated Maturity Date), an amount equal to the related Principal Distribution Amount due on the Notes on such Payment Date, to the extent that, after application in the order specified in Section 8.01 hereof, sufficient funds are on deposit in the Collection Account and such failure continues for three Business Days or (y) on the Final Stated Maturity Date for any Class of Notes, the aggregate Class Note Balance of the related Class of Notes;

(c) if the Issuing Entity shall breach or default in the due observance of any one or more of the covenants hereof and such breach or default continues unremedied for a period of 30 Business Days;

(d) if the Issuing Entity shall consent to the appointment of a custodian, receiver, trustee or liquidator (or other similar official) of itself, or of a substantial part of its property, or shall admit in writing, its inability to pay its debts generally as they come due, or a court of competent jurisdiction shall determine that the Issuing Entity is generally not paying its debts as they come due, or the Issuing Entity shall make a general assignment for the benefit of creditors;

(e) if the Issuing Entity shall file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegation of a petition filed against the Issuing Entity in any, such proceeding, or the Issuing Entity shall, by voluntary petition, answer or consent, seek relief under the provisions of any now existing or future bankruptcy or other similar law providing for the reorganization or winding-up of debtors, or providing for an agreement, composition, extension or adjustment with its creditors;

(f) if an order, judgment or decree shall be entered in any proceeding by any court of competent jurisdiction appointing, without the consent (express or legally implied) of the Issuing Entity, a custodian, receiver, trustee or liquidator (or other similar official) of the

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Issuing Entity or any substantial part of its property, or sequestering any substantial part of its respective property, and any such order, judgment or decree or appointment or sequestration shall remain in force undismissed, unstayed or unvacated for a period of ninety (90) days after the date of entry thereof; or

(g) if a petition against the Issuing Entity in a proceeding under applicable bankruptcy laws or other insolvency laws, as now or hereafter in effect, shall be filed and shall not be stayed, withdrawn or dismissed within ninety (90) days thereafter, or if, under the provisions of any law providing for reorganization or winding-up of debtors which may apply to the Issuing Entity, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Issuing Entity or any substantial part of its property, and such jurisdiction, custody or control shall remain in force unrelinquished, unstayed or unterminated for a period of ninety (90) days.

Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an Event of Default occurs and is continuing, then and in every such case, the Indenture Trustee may, and at the direction of Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes, shall, declare all the Notes to be immediately due and payable by a notice in writing to the Issuing Entity (and to the Indenture Trustee if given by Noteholders), and upon any such declaration such Notes, in an amount equal to the entire unpaid Class Note Balance of such Notes, together with accrued and unpaid interest thereon to the date of such acceleration, shall become immediately due and payable.

At any time after such a declaration of acceleration of maturity of the Notes has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter provided in this Article V, the Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes, by written notice to the Issuing Entity and the Indenture Trustee, may rescind and annul such declaration and its consequences if:

(a) the Issuing Entity has paid or deposited with the Indenture Trustee a sum sufficient to pay:

(i) all payments of principal of, and interest on, all Outstanding Notes and all other amounts that would then be due hereunder or upon such Notes if the Event of Default giving rise to such acceleration had not occurred; and

(ii) all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements, indemnities and advances of the Indenture Trustee, its agents (including but not limited to the Custodian) and counsel; and

(b) all Events of Default, other than the nonpayment of the principal of Notes that have become due solely by such acceleration, have been cured or waived as provided in Section 5.14 hereof.

No such rescission shall affect any subsequent Default or impair any right consequent thereon.

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Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee. Subject to the provisions of Section 3.01 hereof and the following sentence, if an Event of Default occurs and is continuing, the Indenture Trustee may, and shall at the written direction of the Holders of Notes representing at least 50% of the Class Note Balance of the Outstanding Notes, proceed to protect and enforce its rights and the rights of the Noteholders by any Proceedings the Indenture Trustee deems appropriate to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or enforce any other proper remedy. Any Proceedings brought by the Indenture Trustee; on behalf of the Noteholders, or any Noteholder against the Issuing Entity shall be limited to the preservation, enforcement and foreclosure of the liens; assignments, rights and security interests under the Indenture and no attachment, execution or other unit or process shall be sought, issued or levied upon any assets, properties or funds of the Issuing Entity, other than the Trust Estate relative to the Notes in respect of which such Event of Default has occurred. If there is a foreclosure of any such liens, assignments, rights and security interests under this Indenture, by private power of sale or otherwise, no judgment for any deficiency upon the indebtedness represented by the Notes may be sought or obtained by the Indenture Trustee or any Noteholder against the Issuing Entity. The Indenture Trustee shall be entitled to recover the costs and expenses expended by it pursuant to this Article V including reasonable compensation, expenses, or disbursements incurred of the Indenture Trustee, its agents and counsel from the Trust Estate.

Section 5.04. Remedies. If an Event of Default shall have occurred and be continuing and the Notes been declared due and payable and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee (subject to Section 5.17 hereof, to the extent applicable) shall, for the benefit of the Noteholders, do one or more of the following:

(a) institute Proceedings for the collection of all amounts then payable on the Notes, or under this Indenture, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuing Entity moneys adjudged due, subject in all cases to the provisions of Sections 3.01 and 5.03 hereof;

(b) in accordance with Section 5.17 hereof, sell the Trust Estate or any portion thereof or rights or interest therein, at one or more public or private Sales called and conducted in any manner permitted by law;

(c) institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Trust Estate;

(d) exercise any remedies of a secured party under the Uniform Commercial Code and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee or the Holders of the Notes hereunder; and

(e) refrain from selling the Trust Estate and apply all funds on deposit in each of the Accounts pursuant to Section 5.07 hereof.

Section 5.05. Indenture Trustee May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, composition

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or other judicial Proceeding relative to the Issuing Entity or any other obligor upon any of the Notes or the property of the Issuing Entity or of such other obligor or their creditors, the Indenture Trustee irrespective of whether the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand on the Issuing Entity for the payment of any overdue principal or interest shall be entitled and empowered, by intervention in such Proceeding or otherwise to:

(a) file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Notes and file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel), the Noteholders allowed in such Proceeding, and

(b) collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any receiver, assignee, trustee, liquidator, or sequestrator (or other similar official) in any such Proceeding is hereby authorized by each Noteholder to make such payments to the Indenture Trustee and, in the event that the Indenture Trustee shall consent to the making of such payments directly to the Noteholders, to pay to the Indenture Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel.

Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting any of the Notes or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such Proceeding.

Section 5.06. Indenture Trustee May Enforce Claims Without Possession of Notes. All rights of action and claims under this Indenture or any of the Notes may be prosecuted and enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any Proceeding relating thereto, and any such Proceeding instituted by the Indenture Trustee, at the written direction of the Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered after payment of amounts required to be paid pursuant to paragraph (i) of Section 5.07 hereof.

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Section 5.07. Application of Money Collected. If the Notes have been declared due and payable following an Event of Default and such declaration and its consequences have not been rescinded and annulled, any money collected by the Indenture Trustee with respect to each Class of Notes pursuant to this Article V or otherwise and any other monies that may then be held or thereafter received by the Indenture Trustee as security for such Class of Notes shall be applied in the following order, at the date or dates fixed by the Indenture Trustee and, in case of the payment of the entire amount due on account of principal of, and interest on, such Class of Notes, upon presentation and surrender thereof:

(i) first, to the Indenture Trustee, any unpaid Indenture Trustee Fees then due and any amounts in respect of indemnification then due under Section 7.06 of the Sale and Servicing Agreement to the extent not already paid by the Servicing Rights Owner or the Servicer pursuant to Section 7.06 of the Sale and Servicing Agreement, in an amount not to exceed $100,000 in any calendar year, and any Owner Trustee Fees then due to the extent not already paid pursuant to Section 9.01 of the Trust Agreement and to the Owner Trustee, any amounts in respect of indemnification then due under Section 9.02 of the Trust Agreement to the extent not already paid pursuant to Section 9.02 of the Trust Agreement, in an amount not to exceed $50,000 in any calendar year and to the Custodian’s Fees then due to the extent not already paid pursuant to the Sale and Servicing Agreement and any amounts in respect of indemnification then due the Custodian to the extent not already paid pursuant to the Sale and Servicing Agreement in an amount not to exceed $50,000 in any calendar year;

(ii) second, (a) from money collected with respect to both Groups of Mortgage Loans, any Accrued Note Interest to the Class X Notes, (b) from money collected with respect to the Group I Mortgage Loans, any Accrued Note Interest to the Class 1A-1 Notes, and (c) from money collected on the Group II Mortgage Loans, any Accrued Note Interest pro rata to the Class 2A Notes provided, that if after making such payments Accrued Note Interest is owed on the Class A Notes, then any remaining amount of money relating to the other group of mortgage loans after making payments on the related class of Class A Notes will be available to pay Accrued Note Interest to the other classes of Class A Notes;

(iii) third, concurrently, (a) from remaining money collected with respect to the Group I Mortgage Loans, to the Class 1A-1 Notes as a payment of principal in reduction of the related Class Note Balance until it has been reduced to zero; and from money collected with respect to the Group II Mortgage Loans, first to the Class 2A-1A Notes, then pro rata, to the Class 2A-1B Notes and the Class 2A-1C Notes until their respective Class Note Balances (or, if less, their respective Adjusted Note Balances) have been reduced to zero provided, that if after making such payments principal is owed on the Class A Notes, then any remaining amount of money relating to the other group of Mortgage Loans after making payments on the related classes of Class A Notes will be available to pay principal to the other classes of Class A Notes;

(iv) fourth, any Accrued Note Interest to the classes of Class M Notes, sequentially, in ascending numerical order;

(v) fifth, first, sequentially to the Class 2A-1B and Class 2A-1C Notes, and second, sequentially in ascending order, to the classes of Class M Notes, in each case to the extent of any remaining Class Note Balance;

(vi) sixth, concurrently, any Available Funds Cap Shortfall to the classes of Class A Notes, pro rata, based on Class Note Balance;

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(vii) seventh, any Available Funds Cap Shortfall (other than Available Funds Cap Shortfalls relating to Allocated Realized Losses) to the classes of Class M Notes, sequentially, in ascending numerical order;

(viii) eighth, any Allocated Loss Interest, first, sequentially to the Class 2A-1B and Class 2A-1C Notes, in that order, and, second sequentially in ascending numerical order, to the classes of Class M Notes;

(ix) ninth, any Available Funds Cap Shortfall relating to Allocated Realized Losses, first, sequentially to the Class 2A-1B and Class 2A-1C Notes, in that order, and second, sequentially in ascending numerical order, to the classes of Class M Notes;

(x) tenth, any amounts due to the Indenture Trustee or the Custodian to the extent not paid pursuant to Section 5.07(i) hereof and any amounts due to the Owner Trustee under Article IX of the Trust Agreement or the other Basic Documents to the extent not already paid pursuant to Section 5.07(i) or Section 9.02 of the Trust Agreement;

(xi) eleventh, to the Servicer, the amount of any reimbursement of indemnification owed to it by the Issuing Entity pursuant to Section 7.03 of the Sale and Servicing Agreement; and

(xii) twelfth, any remainder to the Certificates.

All payments in paragraph (i) above, shall be made from money collected with respect to the Group I Mortgage Loans and the Group II Mortgage Loans, pro rata based on the aggregate amount of money collected with respect to such Group and available to make the related payment.

Section 5.08. Limitation on Suits. No Holder of a Note shall have any right to institute any Proceedings, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

(a) such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default;

(b) the Holders of Notes representing not less than 25% of the Class Note Balance of the Outstanding Notes shall have made written request to the Indenture Trustee to institute Proceedings in respect of such Event of Default in its own name as Indenture Trustee hereunder;

(c) such Holder or Holders have offered to the Indenture Trustee indemnity satisfactory to it in full against the costs, expenses and liabilities to be incurred in compliance with such request;

(d) the Indenture Trustee, for sixty (60) days after its receipt of such notice, request and offer of indemnity, has failed to institute any such Proceeding;

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(e) no direction inconsistent with such written request has been given to the Indenture Trustee during such sixty (60) day period by the Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes; and

(f) In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes, each representing less than 50% of the Class Note Balance of the Outstanding Notes, the Indenture Trustee shall take the action prescribed by the group representing a greater percentage of the Class Note Balance of the Outstanding Notes.

Section 5.09. Unconditional Rights of Noteholders to Receive Principal and Interest. Subject to the provisions in this Indenture (including Sections 3.01 and 5.03 hereof) limiting the right to recover amounts due on a Note to recovery from amounts in the portion of the Trust Estate relating to such Note, the Holder of any Note shall have the right, to the extent permitted by applicable law, which right is absolute and unconditional, to receive payment of each installment of interest on such Note on the respective Payment Date for such installments of interest, to receive payment of each installment of principal of such Note when due (or, in the case of any Note called for redemption, on the date fixed for such redemption) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder.

Section 5.10. Restoration of Rights and Remedies. If the Indenture Trustee or any Noteholder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined to be adverse to the Indenture Trustee or to such Noteholder, then and in every such case the Indenture Trustee and the Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders shall continue as though no such Proceeding had been instituted.

Section 5.11. Rights and Remedies Cumulative. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of a, right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

Section 5.12. Delay or Omission Not Waiver. No delay or omission of the Indenture Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be.

Section 5.13. Control by Noteholders. The Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes on the applicable Record Date shall

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have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee or exercising any trust or power conferred on the Indenture Trustee; provided that:

(a) such written direction shall not be in conflict with any rule of law or with this Indenture;

(b) any direction to the Indenture Trustee to undertake a Sale of the Trust Estate shall be by the Holders of Notes representing the percentage of the Class Note Balance of the Outstanding Notes specified in Section 5.17(b)(i) hereof, unless Section 5.17(b)(ii) hereof is applicable; and

(c) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction; provided, however, that, subject to Section 6.01 hereof, the Indenture Trustee need not take any action that it determines might involve it in liability or be unjustly prejudicial to the Noteholders not consenting.

Section 5.14. Waiver of Past Defaults. The Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes on the applicable Record Date may on behalf of the Holders of all the Notes, waive any past Default hereunder and its consequences, except a Default:

(a) in the payment of principal or any installment of interest on any Note; or

(b) in respect of a covenant or provision hereof that under Section 9.02 hereof cannot be modified or amended without the consent of the Holder of each Outstanding Note affected.

Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon.

Section 5.15. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.15 shall not apply to any suit instituted by the Indenture Trustee to any suit instituted by any Noteholder, or Class of Noteholders, holding in the aggregate Notes representing more than 10% of the Class Note Balance of the Outstanding Notes, or to any suit instituted by any Noteholder for the enforcement of the payment of any Interest Payment Amount or Base Principal Distribution Amount on any Note on or after the related Payment Date or for the enforcement of the payment of principal of any Note on or after the Final Stated Maturity Date (or, in the case of any Note called for redemption, on or after the applicable Redemption Date).

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Section 5.16. Waiver of Stay or Extension Laws. The Issuing Entity covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension of law wherever enacted, now or at any time hereafter in force, that may affect the covenants in, or the performance of, this Indenture; and the Issuing Entity (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

Section 5.17. Sale of Trust Estate. (a) The power to effect any sale (a “Sale”) of any portion of the Trust Estate pursuant to Section 5.04 hereof shall not be exhausted by any one or more Sales as to any portion of the Trust Estate remaining unsold, but shall continue unimpaired until the entire Trust Estate shall have been sold or all amounts payable on the Notes and under this Indenture with respect thereto shall have been paid. The Indenture Trustee may, from time to time postpone any public Sale by public announcement made at the time and place of such Sale.

(b) To the extent permitted by law, the Indenture Trustee shall not in any private Sale sell or otherwise dispose of the Trust Estate, or any portion thereof, unless:

(i) the Holders of Notes representing more than 50% of the Class Note Balance of the Notes of the Class or Classes then Outstanding consents to or directs the Indenture Trustee in writing to make such Sale; or

(ii) the proceeds of such Sale would be not less than the entire amount that would be payable to the Holders of the Notes, in full payment thereof in accordance with Section 5.07 hereof, on the Payment Date next succeeding the date of such Sale.

(c) Unless the Holders of all Outstanding Notes have otherwise consented or directed the Indenture Trustee, at any public Sale of all or any portion of the Trust Estate at which a minimum bid equal to or greater than the amount described in paragraph (b)(ii) of this Section 5.17 has not been established by the Indenture Trustee and no Person bids an amount equal to or greater than such amount, the Indenture Trustee, acting in its capacity as Indenture Trustee (i) on behalf of the Noteholders, shall prevent such Sale in order to preserve the Trust Estate on behalf of the Noteholders.

(d) In connection with a Sale of all or any portion of the Trust Estate:

(i) any Holder or Holders of Notes may bid for and purchase the property offered for Sale, and upon compliance with the terms of sale may hold, retain and possess and dispose of such property, without further accountability, and may, in paying the purchase money therefor, deliver any Outstanding Notes or claims for interest thereon in lieu of cash up to the amount that shall, upon payment of the net proceeds of such Sale, be payable thereon, and such Notes, in case the amounts so payable thereon shall be less than the amount due thereon, shall be returned to the Holders thereof after being appropriately stamped to show such partial payment;

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(ii) the Indenture Trustee may bid for and acquire the property offered for Sale in connection with any public Sale thereof, and, in lieu of paying cash therefor, may make settlement for the purchase price by crediting the gross Sale price against the sum of (a) the amount that would be payable to the Holders of the Notes as a result of such Sale in accordance with Section 5.07 hereof on the Payment Date next succeeding the date of such Sale and (b) the expenses of the Sale and of any Proceedings in connection therewith which are reimbursable to it, without being required to produce the Notes in order to complete any such Sale or in order for the net Sale price to be credited against such Notes, and any property so acquired by the Indenture Trustee shall be held and dealt with by it in accordance with the provisions of this Indenture;

(iii) the Indenture Trustee shall execute and deliver an appropriate instrument of conveyance transferring its interest in any portion of the Trust Estate in connection with a Sale thereof;

(iv) the Indenture Trustee is hereby irrevocably appointed the agent and attorney in-fact of the Issuing Entity to transfer and convey its interest in any portion of the Trust Estate in connection with a Sale thereof, and to take all action necessary to effect such Sale; and

(v) no purchaser or transferee at such a Sale shall be bound to ascertain the Indenture Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys.

(e) The Indenture Trustee shall have the right to rely on the opinion of an independent investment bank, obtained at other than its own expense for the purposes of making the determination in Section 5.17(b) above.

(f) The Indenture Trustee shall have the right to utilize an agent, at other than its own expense, for purposes of conducting a sale hereunder.

Section 5.18. Action on Notes. The Indenture Trustee’s right to seek and recover judgment under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Holders of Notes shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuing Entity or by the levy of any execution under such judgment upon any portion of the Trust Estate. Any money or property collected by the Indenture Trustee shall be applied in accordance with Section 5.07 hereof.

Section 5.19. No Recourse. The Trust Estate Granted to the Indenture Trustee as security for the Notes serves as security only for the Notes. The Noteholders shall have no recourse against the Owner Trustee, the Indenture Trustee, the Note Registrar, the Authenticating Agent, the Depositor, the Sponsor, the Servicer or any of their respective Affiliates, or to the assets of any of the foregoing entities.

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Section 5.20. Application of the Trust Indenture Act. Pursuant to Section 316(a) of the TIA, all provisions automatically provided for in Section 316(a) are hereby expressly excluded.

ARTICLE VI

THE INDENTURE TRUSTEE

Section 6.01. Duties of Indenture Trustee. (a) If an Event of Default has occurred and is continuing of which a Responsible Officer of the Indenture Trustee has actual knowledge, the Indenture Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

(b) Except during the continuance of an Event of Default of which a Responsible Officer of the Indenture Trustee has actual knowledge:

(i) the Indenture Trustee need perform only those duties that are expressly set forth in this Indenture and no others and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and

(ii) in the absence of bad faith on its part, the Indenture Trustee may request and conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, opinions, resolutions, statements, reports, instruments or other documents furnished to the Indenture Trustee and conforming, on their faces, to the requirements of this Indenture. The Indenture Trustee shall, however, examine such certificates and opinions to determine whether they conform on their face to the requirements of this Indenture.

(c) The Indenture Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:

(i) The duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Indenture, no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee and, in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates, opinions or other documents (including, but not limited to, any reports or statements furnished by the Servicer) reasonably believed by the Indenture Trustee to be genuine and to have been furnished by the proper party to the Indenture Trustee and which on their face, do not contradict the requirements of this Indenture;

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(ii) this paragraph (c) does not limit the effect of paragraph (a) of this Section 6.01;

(iii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts;

(iv) the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction of the Noteholders (including directions pursuant to Sections 5.13 or 5.17 hereof) or exercising any trust or power or remedy conferred upon the Indenture Trustee under this Indenture; and

(v) The Indenture Trustee shall not be charged with knowledge of any failure by the Servicer to comply with any of its obligations under the Sale and Servicing Agreement or any breach of representations or warranties under the Sale and Servicing Agreement or any Event of Default under the Sale and Servicing Agreement unless a Responsible Officer of the Indenture Trustee obtains actual knowledge of such failure or breach or the Indenture Trustee receives written notice of such failure or breach from the Servicer.

(d) [Reserved.]

(e) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it under this Indenture or the other Basic Documents.

(f) Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to the provisions of this Section 6.01 and to the provisions of the TIA (except where expressly excluded).

(g) Notwithstanding any extinguishment of all right, title and interest of the Issuing Entity in and to the Trust Estate following an Event of Default and a consequent declaration of acceleration of the maturity of the Notes, whether such extinguishment occurs through a Sale of the Trust Estate to another Person, the acquisition of the Trust Estate by the Indenture Trustee or otherwise, the rights, powers and duties of the Indenture Trustee with respect to the Trust Estate (or the proceeds thereof), the Noteholders and the rights of Noteholders shall continue to be governed by the terms of this Indenture.

(h) Subject to the other provisions of this Indenture and without limiting the generality of this Section 6.01, the Indenture Trustee shall have no duty (a) to see to any recording, filing, or depositing of this Indenture or any agreement referred to herein or any financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording, filing or depositing or to any rerecording, refiling or redepositing of any thereof, (b) to see to any insurance, (c) to see to the payment or discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Trust Estate from funds available in

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the Payment Account, (d) to confirm or verify the contents of any reports or certificates of the Servicer delivered to the Indenture Trustee pursuant to this Indenture believed by the Indenture trustee to be genuine and to have been signed or presented by the proper party or parties or (e) to make payments on or otherwise maintain the MI Policies.

Section 6.02. Notice of Default. Immediately after the occurrence of any Default known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall provide written notice to the Sponsor of each such Default and, within ninety (90) days after the occurrence of any Default known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall transmit by mail to all Holders of Notes notice of each such Default, unless such Default shall have been cured or waived; provided, however, that in no event shall the Indenture Trustee provide notice, or fail to provide notice of a Default of which a Responsible Officer of the Indenture Trustee has actual knowledge in a manner contrary to the requirements of the Trust Indenture Act. Concurrently with the mailing of any such notice to the Holders of the Notes, the Indenture Trustee shall transmit by mail a copy of such notice to the Rating Agencies.

Section 6.03. Rights of Indenture Trustee. (a) Except as otherwise provided in Section 6.01 hereof, the Indenture Trustee may rely on, and be protected in acting or refraining to act upon any document believed by it to be genuine and to have been signed or presented by the proper Person. The Indenture Trustee need not investigate any fact or matter stated in any such document.

(b) Before the Indenture Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel reasonably satisfactory in form and substance to the Indenture Trustee. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on any such Officer’s Certificate or Opinion of Counsel.

(c) The Indenture Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care.

(d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers.

(e) The Indenture Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Noteholders, pursuant to the provisions of this Indenture, unless such Noteholders shall have offered to the Indenture Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby; nothing contained herein shall, however, relieve the Indenture Trustee of the obligation, upon the occurrence of an Event of Default of which a Responsible Officer of the Indenture Trustee shall have actual knowledge (which has not been cured), to exercise such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

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(f) The Indenture Trustee shall not be bound to make any investigation into the facts of the matters stated in any resolution, certificate, statement, instrument, opinion, report notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by the Noteholders and provided further that payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in tile making of such investigation is, in the opinion of the Indenture Trustee, reasonably assured to the Indenture Trustee by the security afforded to it by the terms of this Indenture or such other security or indemnity as the Indenture Trustee may reasonably require as a condition to taking any such action.

(g) The right of the Indenture Trustee to perform any discretionary act enumerated in this Indenture shall not be construed as a duty, and the Indenture Trustee shall not be answerable for anything other than its negligence or willful misconduct in the performance of such act.

(h) The Indenture Trustee may consult with counsel and may rely on, and be protected in acting or refraining to act upon resulting advice or Opinions of Counsel. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on any such advice or Opinions of Counsel.

(i) The Indenture Trustee shall not be required to give any bond or surety in respect of the execution of the Issuing Entity created hereby or the powers granted hereunder.

Section 6.04. Not Responsible for Recitals, Issuance of Notes or Mortgage Loans. The recitals contained herein and in the Notes, except, with respect to the Indenture Trustee, the certificates of authentication on the Notes, shall be taken as the statements of the Issuing Entity, and the Owner Trustee, the Indenture Trustee and the Authenticating Agent assume no responsibility for their correctness. The Owner Trustee and the Indenture Trustee make no representations with respect to the Trust Estate or as to the validity or sufficiency of this Indenture or of the Notes. Neither the Indenture Trustee nor the Owner Trustee shall be accountable for the use or application by the Issuing Entity of the Notes or the proceeds thereof or any money paid to the Issuing Entity or upon a Trust Order pursuant to the provisions hereof.

The Indenture Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Mortgage or any Mortgage Loan, or the recordability, sufficiency, perfection and priority of any mortgage or the maintenance of any such perfection and priority or for or with respect to the sufficiency of the Trust Estate or its ability to generate the payments to be paid to Noteholders under this Indenture, including, without limitation: the existence, condition and ownership of any Mortgaged Property; the existence and enforceability of any hazard insurance or primary mortgage insurance thereon; the validity of the assignment of any Mortgage Loan to the Indenture Trustee or of any intervening assignment; the completeness of any Mortgage Loan; the performance or enforcement of any Mortgage Loan; the compliance by the Depositor, the Sponsor, Issuing Entity or Servicer with any warranty or representation made under this Indenture, the Sale and Servicing Agreement or in any related document or the accuracy of any such warranty or representation; any investment of monies by or at the direction of the Sponsor or the Servicer or any loss resulting therefrom; the acts or omissions of any of the Sponsor, the Servicer or any Mortgagor; any action of the

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Servicer taken in the name of the Indenture Trustee; the failure of the Servicer to act or perform any duties acquired of it as agent of the Indenture Trustee hereunder; or any action by the Indenture Trustee taken at the instruction of the Servicer. The Indenture Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or otherwise to perfect or maintain the perfection of any security interest or lien granted to it hereunder.

Section 6.05. May Hold Notes. The Indenture Trustee, any Agent, or any other agent of the Issuing Entity, in its individual or any other capacity, may become the owner or pledgee of Notes and, subject to Sections 6.07, 6.09 and 6.12 hereof, may otherwise deal with the Issuing Entity or any Affiliate of the Issuing Entity with the same rights it would have if it were not Indenture Trustee, Agent or such other agent.

Section 6.06. Money Held in Trust. Money held by the Indenture Trustee in trust hereunder need not be segregated from other funds except to the extent required by this Indenture or by law. The Indenture Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed with the Issuing Entity and except to the extent of income or other gain on investments that are obligations of the Indenture Trustee, in its commercial capacity, and income or other gain actually received by the Indenture Trustee on investments, which are obligations of others.

Section 6.07. Eligibility, Disqualification. Irrespective of whether this Indenture is qualified under the TIA, this Indenture shall always have an indenture trustee who satisfies the requirements of TIA Sections 310(a)(1) and 310(a)(5). The Indenture Trustee shall always have a combined capital and surplus as stated in Section 6.08 hereof. The Indenture Trustee shall be subject to TIA Section 310(b).

Section 6.08. Indenture Trustee’s Capital and Surplus. The Indenture Trustee shall at all times (a)(i) have a combined capital and surplus of at least $50,000,000, and it or its parent shall have a long-term debt rating of Baa3 or better by Moody’s, BBB or better by Standard & Poor’s and BBB or F-2 or better by Fitch and shall also have a short term rating of A-1 or better by Standard & Poor’s; provided, however, that the Indenture Trustee’s separate capital and surplus shall at all times be at least the amount required by TIA Section 310(a)(2). If the Indenture Trustee publishes annual reports of condition of the type described in TIA Section 310(a)(1), its combined capital and surplus for purposes of this Section 6.08 shall be as set forth in the latest such report. The Indenture Trustee shall at all times be a corporation or association organized or doing business under the laws of a state or of the United States; authorized to exercise corporate powers and subject to supervision or examination by federal or state authority. If at any time the Indenture Trustee shall cease to be eligible in accordance with the provisions of this Section 6.08 and TIA Section 310(a)(2), it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI.

Section 6.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Indenture Trustee and no appointment of a successor Indenture Trustee pursuant to this Article VI shall become effective until the acceptance of appointment by the successor Indenture Trustee under Section 6.10 hereof.

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(b) The Indenture Trustee may resign at any time by giving written notice thereof to the Issuing Entity and each Rating Agency. If an instrument of acceptance by a successor Indenture Trustee shall not have been delivered to the Indenture Trustee within thirty (30) days after the giving of such notice of resignation, the resigning Indenture Trustee may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.

(c) The Indenture Trustee may be removed at any time by Act of the Holders representing more than 50% of the Class Note Balance of the Outstanding Notes, by written notice delivered to the Indenture Trustee and to the Issuing Entity.

(d) If at any time:

(i) the Indenture Trustee shall have a conflicting interest prohibited by Section 6.07 hereof and shall fail to resign or eliminate such conflicting interest in accordance with Section 6.07 hereof after written request therefor by the Issuing Entity or by any Noteholder; or

(ii) the Indenture Trustee shall cease to be eligible under Section 6.08 hereof or shall become incapable of acting or shall be adjudged bankrupt or insolvent, or a receiver of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation;

then, in any such case, (x) the Owner Trustee, on behalf of the Issuing Entity, by a Trust Order, may remove the Indenture Trustee, and the Owner Trustee, on behalf of the Issuing Entity, by a Trust Order, shall join with the Indenture Trustee in the execution, delivery and performance of all instruments and agreements necessary or proper to appoint a successor Indenture Trustee to vest in such successor Indenture Trustee any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Indenture; provided, however, if the Owner Trustee, on behalf of the Issuing Entity, does not join in such appointment within thirty (30) days after the receipt by it of a request to do so, (either by reason of resignation or removal) or in case an Event of Default has occurred and is continuing, the Indenture Trustee may petition a court of competent jurisdiction to make such appointment, or (y) subject to Section 5.15 hereof, and, in the case of a conflicting interest as described in clause (i) above, unless the Indenture Trustee’s duty to resign has been stayed as provided in TIA Section 310(b), any Noteholder who has been a bona fide Holder of a Note for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.

(e) If the Indenture Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the Indenture Trustee for any cause, the Servicer, on behalf of the Issuing Entity, by a Trust Order, shall promptly, appoint a successor Indenture Trustee reasonably acceptable to the Sponsor.

(f) The Servicer, on behalf of the Issuing Entity, shall give notice of each resignation and each removal of the Indenture Trustee and each appointment of a successor Indenture Trustee to the Holders of Notes. Each notice shall include the name of the successor Indenture Trustee and the address of its Corporate Trust Office.

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Section 6.10. Acceptance of Appointment by Successor Indenture Trustee. Every successor Indenture Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuing Entity and the retiring Indenture Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Indenture Trustee shall become effective and such successor Indenture Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Indenture Trustee. Notwithstanding the foregoing, upon a Trust Request of the Owner Trustee, on behalf of the Issuing Entity, or the successor Indenture Trustee, such retiring Indenture Trustee shall, upon payment of its charges and any fees, expenses or other amounts owing the Indenture trustee, execute and deliver an instrument transferring to such successor Indenture Trustee all the rights, powers and trusts of the retiring Indenture Trustee, and shall duly assign, transfer and deliver to such successor Indenture Trustee all property and money held by such retiring Indenture Trustee hereunder. Upon a written request of any such successor Indenture Trustee, the Owner Trustee, on behalf of the Issuing Entity, shall execute and deliver any and all instruments for more fully and certainly vesting in and confirming to such successor Indenture Trustee all such rights, powers and trusts.

No successor Indenture Trustee shall accept its appointment unless at the time of such acceptance such successor Indenture Trustee shall be qualified and eligible under this Article VI.

Section 6.11. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation or banking association into which the Indenture Trustee may be merged or converted or with which it may be consolidated, or any corporation or banking association resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation or banking association succeeding to all or substantially all of the corporate trust business of the Indenture Trustee, shall be the successor of the Indenture Trustee hereunder, provided, that such corporation or banking association shall be otherwise qualified and eligible under this Article VI, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes have been authenticated, but not delivered, by the Indenture Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Indenture Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Indenture Trustee had authenticated such Notes.

Section 6.12. Preferential Collection of Claims Against Issuing Entity. The Indenture Trustee (and any co-trustee or separate trustee) shall be subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b), and an Indenture Trustee (and any co-trustee or separate trustee) who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated.

Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees. At any time or times, for the purpose of meeting the legal requirements of the TIA or of any jurisdiction in which any of the Trust Estate may at the time be located, the Indenture Trustee shall have power and shall execute and deliver all instruments necessary to appoint one or more Persons approved

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by the Indenture Trustee either to act as co-trustee, jointly with the Indenture Trustee, of all or any part of the Trust Estate, or to act as separate trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable, subject to the other provisions of this Section 6.13. All fees and expenses of any co-trustee or separate trustee shall be payable by the Issuing Entity. The Indenture Trustee hereby appoints J.P. Morgan Trust Company, National Association as Co-Trustee hereunder solely for the purpose of holding the MI Policies. The Servicer shall retain physical possession of such MI Policies as agent to the Co-Trustee.

Should any written instrument from the Issuing Entity be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right or power, any and all such instruments shall, on written request, be executed, acknowledged and delivered by the Owner Trustee, on behalf of the Issuing Entity.

Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms:

(a) The Notes shall be authenticated and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of securities, cash and other personal property held by, or required to be deposited or pledged with, the Indenture Trustee hereunder, shall be exercised, solely by the Indenture Trustee.

(b) As required by TIA Section 310(a)(3), the rights, powers, duties and obligations hereby conferred or imposed upon the Indenture Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Indenture Trustee or by the Indenture Trustee and such co-trustee or separate trustee jointly, as shall be provided in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee.

(c) The Indenture Trustee at any time may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section 6.13. A successor to any co-trustee or separate trustee so resigned or removed may be appointed in the manner provided in this Section 6.13.

(d) The Indenture Trustee shall not be liable by reason of any act or omission of a co-trustee or separate trustee appointed by the Indenture Trustee with due care. No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Indenture Trustee, or any other such trustee hereunder.

(e) Any Act of Noteholders delivered to the Indenture Trustee shall be deemed to have been delivered to each such co-trustee and separate trustee.

(f) Any co-trustee or separate trustee appointed hereunder shall be afforded the same rights, protections and immunities as the Indenture Trustee.

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Section 6.14. Authenticating Agents. The Owner Trustee, acting at the direction of the Certificateholders, shall appoint an Authenticating Agent with power to act on the Issuing Entity’s behalf, subject to the direction of the Certificateholders, in the authentication and delivery of the Notes designated for such authentication and, containing provisions therein for such authentication (unless the Owner Trustee, acting at the direction of the Certificateholders, has made other arrangements, satisfactory to the Indenture Trustee and such Authenticating Agent, for notation on the Notes of the authority of an Authenticating Agent appointed after the initial authentication and delivery of such Notes) in connection with transfers and exchanges under Section 2.06 hereof, as fully to all intents and purposes as though the Authenticating Agent had been expressly authorized by Section 2.06 hereof to authenticate and deliver Notes. For all purposes of this Indenture (other than in connection with the authentication and delivery of Notes pursuant to Sections 2.05 and 2.12 hereof in connection with their initial issuance), the authentication and delivery of Notes by the Authenticating Agent pursuant to this Section 6.14 shall be deemed to be the authentication and delivery of Notes “by the Indenture Trustee.” Such Authenticating Agent shall at all times be a Person that both meets the requirements of Section 6.07 hereof for the Indenture Trustee hereunder and has an office for presentation of Notes in the United States of America. The Indenture Trustee, shall initially be the Authenticating Agent and shall be the Note Registrar as provided in Section 2.06 hereof. The office from which the Indenture Trustee shall perform its duties as Note Registrar and Authenticating Agent shall be its Corporate Trust Office. Any Authenticating Agent appointed pursuant to the terms of this Section 6.14 or pursuant to the terms of any supplemental indenture shall deliver to the Indenture Trustee as a condition precedent to the effectiveness of such appointment an instrument accepting the trusts, duties and responsibilities of Authenticating Agent and of Note Registrar or co-Note Registrar and indemnifying the Indenture Trustee for and holding the Indenture Trustee harmless against, any loss, liability or expense (including reasonable attorneys’ fees) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance, administration of the Issuing Entity or exercise of authority by such Authenticating Agent, Note Registrar or co-Note Registrar.

Any corporation or banking association into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation or banking association resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any corporation or banking association succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of the Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this Section 6.14, without the execution or filing of any further act on the part of the parties hereto or the Authenticating Agent or such successor corporation or banking association.

Any Authenticating Agent may at any time resign by giving written notice of resignation to the Issuing Entity. The Owner Trustee, acting at the direction of the Certificateholders, may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Indenture Trustee. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.14, the Owner Trustee, acting at the direction of the Certificateholders, shall promptly appoint a successor Authenticating Agent, shall give written notice of such appointment to the Indenture Trustee, and shall mail notice of such appointment to all Holders of Notes.

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The Indenture Trustee agrees, subject to Section 6.01(e) hereof to pay to any Authenticating Agent from time to time reasonable compensation for its services and the Indenture Trustee shall be entitled to be reimbursed for such payments pursuant to Section 6.16 hereof. The provisions of Sections 2.09, 6.04 and 6.05 hereof shall be applicable to any Authenticating Agent.

Section 6.15. Servicing Rights Owner to Pay Indenture Trustee’s Fees and Expenses; Indemnification.

The Indenture Trustee shall have the right to payment from the Servicing Rights Owner of all amounts as set forth in Section 7.06 of the Sale and Servicing Agreement.

ARTICLE VII

NOTEHOLDERS’ LISTS AND REPORTS

Section 7.01. Note Registrar to Furnish Indenture Trustee Names and Addresses of Noteholders. (a) The Note Registrar shall furnish or cause to be furnished to the Indenture Trustee (i) semiannually, not less than forty-five (45) days nor more than sixty (60) days after the Payment Date occurring closest to six (6) months after the Closing Date and each Payment Date occurring at six (6) month intervals thereafter, all information in the possession or control of the Note Registrar, in such form as the Indenture Trustee may reasonably require, as to names and addresses of the Noteholders, and (ii) at such other times, as the Indenture Trustee may request in writing, within thirty (30) days after receipt by the Note Registrar of any such request, a list of similar form and content as of a date not more than ten (10) days prior to the time such list is furnished; provided, however, that so long as the Indenture Trustee is the Note Registrar, no such list shall be required to be furnished.

(b) In addition to furnishing to the Indenture Trustee the Noteholder lists, if any, required under paragraph (a) of this Section 7.01, the Note Registrar shall also furnish all Noteholder lists, if any, required under Section 3.03 hereof at the times required by such Section 3.03.

Section 7.02. Preservation of Information: Communications to Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders of Notes contained in the most recent list, if any, furnished to the Indenture Trustee as provided in Section 7.01 hereof and the names and addresses of the Holders of Notes received by the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any list furnished to it as provided in Section 7.01 hereof upon receipt of a new list so furnished.

(b) Noteholders may communicate pursuant to TIA Section 312(b) with other Noteholders with respect to their rights under this Indenture or under the Notes. To the extent that the Notes are Book Entry, upon the request of such Noteholders, the Indenture Trustee will obtain for such Noteholders at such Noteholders’ expense, the names and addresses of the Clearing Agency Participants needed to allow such Noteholders to communicate.

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(c) The Issuing Entity, the Indenture Trustee and the Note Registrar shall have the protection of TIA Section 312(c).

Section 7.03. Reports by Indenture Trustee.

(a) Within sixty (60) days after December 31 of each year (the “reporting date”), commencing December 31, 2006, (i) the Indenture Trustee shall, if required by TIA Section 313(a), mail to all Noteholders described in TIA Section 313(c) a brief report dated as of such reporting date that complies with TIA Section 313(a); (ii) the Indenture Trustee shall, to the extent not set forth in the Indenture Trustee’s Remittance Report pursuant to Section 2.09 hereof, and, the Indenture Trustee shall also mail to Holders of Notes described in TIA Section 313(c) any reports required by TIA Section 313(b)(1). For purposes of the information required to be included in any such reports pursuant to TIA Sections 313(a)(2), 313(b)(1) (if applicable), or 313(b)(2), the principal amount of indenture securities outstanding on the date as of which such information is provided shall be the Class Note Balance of the then Outstanding Notes covered by the report.

A copy of each report at the time of its mailing to Noteholders will be filed by the Indenture Trustee with the Commission and each stock exchange, if any, on which the Notes are listed. The Issuing Entity will notify the Indenture Trustee if and when the Notes are listed on any stock exchange.

(b) If required under Regulation AB, the Indenture Trustee will:

(i) deliver to the Depositor and the Servicer, a report, of the preceding calendar year, on its assessment of compliance with the minimum servicing criteria during the preceding calendar year, including disclosure of any material instance of non-compliance identified by the Indenture Trustee, as required by Rule 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB under the Securities Act. The applicable items with respect to this assessment of compliance are set forth on Exhibit H to the Sale and Servicing Agreement.

(ii) cause a firm of registered public accountants that is qualified and independent within the meaning of Rule 2-01 of Regulation S-X under the Securities Act to deliver to the Depositor and the Servicer an attestation report that satisfies the requirements of Rule 13a-18 or Rule 15d-18 under the Exchange Act, as applicable, on the assessment of compliance with servicing criteria with respect to the prior calendar year. Such attestation report will be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act. The firm may render other services to the Indenture Trustee, but the firm must be qualified and independent within the meaning of Rule 2-01 of Regulation S-X under the Securities Act.

(iii) The reports referred to in this Section 7.03(b) will be delivered on or before March 15 of each year in which a Form 10-K is required to be filed, beginning March 15, 2007.

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(c) The Indenture Trustee will furnish to the Depositor and the Servicer, in writing, the necessary disclosure, if any, describing the legal proceedings required to be disclosed under Item 1117 of Regulation AB with respect to the Indenture Trustee, for inclusion in reports, so long as such reports are required to be filed, pursuant to the Exchange Act.

ARTICLE VIII

ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES

Section 8.01. Accounts; Investment; Collection of Moneys. (a) The Issuing Entity hereby directs the Indenture Trustee to establish, on or before the Closing Date, an Eligible Account that shall be the “Payment Account” for the Notes. The Indenture Trustee shall promptly upon receipt, deposit in the Payment Account and retain therein the Interest Remittance Amount and the Principal Remittance Amount remitted on each Servicer Remittance Date to the Indenture Trustee by the Servicer and any other funds from any deposits to be made by the Servicer pursuant to the Sale and Servicing Agreement.

All amounts that are deposited from time to time in the Payment Account are subject to withdrawal by the Indenture Trustee for the purposes set forth in Section 8.01 hereof. All funds withdrawn from the Payment Account pursuant to this Section 8.01 for the purpose of making payments to the Holders of Notes shall be applied in accordance with this Section 8.01 and Section 3.03 hereof.

(b) On each Payment Date, the Indenture Trustee will apply the Available Funds to pay the Custodian Fees, the Owner Trustee Fees and the Indenture Trustee Fees for such Payment Date. On each Payment Date, funds will be applied in the following order of priority:

(i) Concurrently,

(x) from the Distributable Interest Amount related to both Groups of Mortgage Loans to the Class X Notes, their Accrued Note Interest, and any Unpaid Accrued Note Interest from prior Payment Dates, provided that any such amount will be paid in the priority described in paragraph (c) below;

(y) from the Distributable Interest Amount related to the Group I Mortgage Loans, to the Class 1A-1 Notes, its Accrued Note Interest, and any unpaid Accrued Note Interest from prior Payment Dates; and

(z) from the Distributable Interest Amount related to the Group II Mortgage Loans, concurrently to the Class 2A-1A, Class 2A-1B and Class 2A-1C Notes, their Accrued Note Interest and any unpaid Accrued Note Interest from prior Payment Dates allocated pro rata based on their entitlement to those amounts,

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provided, that if the Distributable Interest Amount for either Group of Mortgage Loans is insufficient to make the related payments set forth in clause (y) or (z) above, as applicable, any Distributable Interest Amount relating to the other group of Mortgage Loans remaining after making the related payments set forth in clause (y) or (z) above, as applicable, will be available to cover that shortfall; and

(ii) from any remaining Distributable Interest Amount, to the Class M Notes, sequentially, in ascending numerical order, the Accrued Note Interest for each such class.

(c) On each Payment Date, following all other payments on that Payment Date, any amounts which the Class X Noteholders would otherwise have received will be applied in the following order of priority:

(i) to the classes of Class A Notes and Class M Notes, pro rata based on their respective Class Note Balances in the case of the Class 1A-1 and Class 2A-1A Notes or the Adjusted Class Note Balances in the case of each other class of Class A or Class M Notes, any remaining Available Funds Cap Shortfalls (other than Available Funds Cap Shortfalls relating to the Allocated Realized Losses);

(ii) concurrently to the Class 2A-1B, Class 2A-1C Notes and Class M Notes, pro rata based on their respective Class Note Balances, any remaining Available Funds Cap Shortfalls relating to Allocated Realized Losses; and

(iii) the remaining amount to the Class X Notes.

(d) The Principal Distribution Amount will be paid from the amount on deposit in the Payment Account (after making the payments set forth in paragraph (b) and (c) above) on each Payment Date as follows:

A. On each Payment Date (a) prior to the Crossover Date or (b) with respect to which a Trigger Event is in effect, the Principal Distribution Amount will be applied in the following order of priority;

(i) first, concurrently, with equal priority of payment,

(a) payable from the Group I Principal Distribution Amount, to the Class 1A-1 Notes, until its Class Note Balance has been reduced to zero; and

(b) payable from the Group II Principal Distribution Amount, concurrently to the Class 2A-1A, Class 2A-1B and Class 2A-1C Notes, pro rata, based on outstanding Class Note Balances (or, if less, outstanding Adjusted Class Note Balances), until their respective Class Note Balances have been reduced to zero;

(ii) second,

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(a) if the Class Note Balance of the Class 1A-1 Notes have been reduced to zero, then concurrently to the Class 2A-1A, Class 2A-1B, Class 2A-1C Notes, pro rata, based on outstanding Class Note Balances (or, if less, outstanding Adjusted Class Note Balances), the amount of any remaining Group I Principal Distribution Amount until the Class Note Balances of the Class 2A Notes have been reduced to zero;

(b) if the Class Note Balances (or, if less, outstanding Adjusted Class Note Balances) of the Class 2A Notes have been reduced to zero, then to the Class 1A-1 Notes, the amount of any remaining Group II Principal Distribution Amount until the Class Note Balance of the Class 1A-1 Notes has been reduced to zero; and

(ii) to the Class M Notes, sequentially, in ascending numerical order, until their respective Adjusted Class Note Balances have been reduced to zero.

B. On each Payment Date (a) on or after the Crossover Date and (b) with respect to which a Trigger Event is not in effect, the Principal Distribution Amount will be applied in the following order of priority in each case to the extent remaining:

(i) first, concurrently, with equal priority of payment:

(a) to the Class 1A-1 Notes, the lesser of the Group I Principal Distribution Amount and the Group I Senior Principal Distribution Amount, until its Class Note Balance has been reduced to zero; and

(b) concurrently, to the Class 2A-1A, Class 2A-1B and Class 2A-1C Notes, pro rata, based on outstanding Class Note Balances (or, if less, outstanding Adjusted Class Note Balances), the lesser of the Group II Principal Distribution Amount and the Group II Senior Principal Distribution Amount, until their respective Class Note Balances (or, if less, their respective Adjusted Class Note Balances) have been reduced to zero;

(ii) second,

(a) if the Group I Principal Distribution Amount was insufficient to pay the Group I Senior Principal Distribution Amount, then payable from the remaining Group II Principal Distribution Amount, to the Class 1A-1 Notes, the unpaid portion of the Group I Senior Principal Distribution Amount;

(b) if the Group II Principal Distribution Amount was insufficient to pay the Group II Senior Principal Distribution Amount, then payable from the remaining Group I Principal Distribution Amount, concurrently to the Class 2A-1A, Class 2A-1B and Class 2A-1C Notes, pro rata, based on outstanding Class Note Balances (or, if less, outstanding Adjusted Class Note Balances), the unpaid portion of the Group II Senior Principal Distribution Amount;

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(iii) to the Class M-1 Notes, the Class M-1 Principal Distribution Amount, until their Adjusted Class Note Balance has been reduced to zero,

(iv) to the Class M-2 Notes, the Class M-2 Principal Distribution Amount, until their Adjusted Class Note Balance has been reduced to zero,

(v) to the Class M-3 Notes, the Class M-3 Principal Distribution Amount, until their Adjusted Class Note Balance has been reduced to zero,

(vi) to the Class M-4 Notes, the Class M-4 Principal Distribution Amount, until their Adjusted Class Note Balance has been reduced to zero,

(vii) to the Class M-5 Notes, the Class M-5 Principal Distribution Amount, until their Adjusted Class Note Balance has been reduced to zero,

(viii) to the Class M-6 Notes, the Class M-6 Principal Distribution Amount, until their Adjusted Class Note Balance has been reduced to zero,

(ix) to the Class M-7 Notes, the Class M-7 Principal Distribution Amount, until their Adjusted Class Note Balance has been reduced to zero,

(x) to the Class M-8 Notes, the Class M-8 Principal Distribution Amount until their Adjusted Class Note Balance has been reduced to zero,

(xi) to the Class M-9 Notes, the Class M-9 Principal Distribution Amount until their Adjusted Class Note Balance has been reduced to zero, and

(xii) to the Class M-10 Notes, the Class M-10 Principal Distribution Amount until their Adjusted Class Note Balance has been reduced to zero.

(e) For any Payment Date, any Net Monthly Excess Cashflow to the extent not applied as part of the Extra Principal Distribution Amount will be paid as follows:

(i) first, sequentially to the Class 2A-1B and Class 2A-1C Notes in that order, and second, sequentially to the classes of Class M Notes, sequentially in ascending numerical order any Allocated Realized Losses for each such class;

(ii) first, sequentially to the Class 2A-1B and Class 2A-1C Notes, in that order, and, second, to the classes of Class M Notes, sequentially in numerical order any unpaid Interest Shortfall Amounts;

(iii) to the classes of Class A Notes and Class M Notes, pro rata based on their respective Class Note Balances in the case of the Class 1A-1 and Class 2A-1A Notes or the Adjusted Class Note Balances in the case of each other class of the Class A or the Class M Notes, any Available Funds Cap Shortfalls (other than Available Funds Cap

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Shortfalls relating to Allocated Realized Losses) together, with any shortfalls allocated to such classes of Notes pursuant to clause (i) of the Definition of “Accrued Note Interest”;

(iv) first, sequentially to the Class 2A-1B and Class 2A-1C Notes, and, second, to the classes of Class M Notes sequentially in numerical order, any interest on Allocated Loss Interest;

(v) first, sequentially to the Class 2A-1B and Class 2A-1C Notes, and, second, to the classes of Class M Notes sequentially in numerical order, any Available Funds Cap Shortfalls relating to Allocated Realized Losses;

(vi) any Net Negative Amortization for the current Payment Date, pro rata to each class of Class A or Class M Notes based on the amount of Net Negative Amortization allocated to such class of Notes on such Payment Date; and

(vii) to the Servicer, the amount of any reimbursement of indemnification owed to it by the Issuing Entity pursuant to Section 7.03 of the Sale and Servicing Agreement;

(viii) to the trust certificates, any remaining amounts.

(f) The aggregate, cumulative amount of principal payments made to the holders of any Class of Notes shall not exceed the sum of (i) the Original Class Note Balance of the related Class and (ii) any amount of Negative Amortization allocated to such class.

(g) [Reserved.]

(h) So long as no Default or Event of Default shall have occurred and be continuing, amounts held in the Accounts, other than the Payment Account, shall at the written direction of the Servicer be invested in Eligible Investments, which Eligible Investments shall mature no later than the Business Day preceding the immediately following Payment Date; provided, however, that the Indenture Trustee shall have no obligation to invest funds deposited into the Accounts later than 12:00 p.m. (New York time) on the day of receipt. Absent written direction, all such amounts shall be held uninvested. Amounts in the Payment Account shall be invested in Eligible Investments at the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by the Indenture Trustee uninvested.

All income or other gains, if any, from investment of moneys deposited in the Collection Account and the Payment Account shall be for the benefit of the Servicer, and on or after each Payment Date, any such amounts may be released from such Accounts and paid to the Servicer, as part of its compensation hereunder. Any loss resulting from such investment of moneys deposited in the Collection Account or the Payment Account, respectively, shall be reimbursed immediately as incurred to the related Account by the Servicer. Subject to Section 6.01 hereof and the preceding sentence, the Servicer shall not in any way be held liable by reason of any insufficiency in the Accounts.

The Indenture Trustee shall not in any way be held liable by reason of any insufficiency in any Account held by the Indenture Trustee resulting from any investment loss on any Eligible Investment included therein (except in its capacity as obligor solely to the extent that the Indenture Trustee is the obligor and has defaulted thereon).

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In order to comply with its duties under the U.S.A. Patriot Act of 2001, the Indenture Trustee may obtain and verify certain information and documentation from the other party to this Indenture including, but not limited to, such party’s name, address, and other identifying information.

(i) Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall hold all such money and property received by it as part of the Trust Estate and shall apply it as provided in this Indenture.

Section 8.02. Allocation of Realized Losses.

(a) All Realized Losses on the Mortgage Loans will be allocated on each Payment Date, sequentially as follows: first to Net Monthly Excess CashFlow and second in reduction of the Overcollateralization Amount. Following the reduction of the Overcollateralization Amount to zero, all allocable Realized Losses will be allocated in reverse sequential order, first to the Class M-10 Notes, second to the Class M-9 Notes, third to the Class M-8 Notes, fourth to the Class M-7 Notes, fifth to the Class M-6 Notes, sixth to the Class M-5 Notes, seventh to the Class M-4 Notes, eighth to the Class M-3 Notes, ninth to the Class M-2 Notes, tenth to the Class M-1 Notes and eleventh, in the case of the Group II Mortgage Loans; sequentially to the Class 2A-1C and Class 2A-1B Notes, in that order for so long as such Notes are outstanding. Although losses will be allocated to such classes of Notes, the Class Note Balances thereof will not be written down. However, the interest that accrues on the portion of the Class Note Balance equal to the related Allocated Loss Amount will be deferred and will only be paid to the extent funds are available therefor in the priority described herein. Realized Losses will not be allocated to the Class 1A-1, Class 2A-1A or Class X Notes.

(b) Subsequent Recoveries will count as additional Liquidation Proceeds and be paid on the related Payment Date pursuant to Section 8.01(d) hereof.

Section 8.03. Withholding Taxes. In the event that any withholding tax is imposed under federal, state, or local law on the Issuing Entity’s payment (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to such Certificateholder in accordance with this Section 6.02. The Indenture Trustee, on behalf of the Owner Trustee, is hereby authorized and directed to retain in the Payment Account from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax that is legally owed by the Issuing Entity (but such authorization shall not prevent the Indenture Trustee from contesting any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The Depositor will provide the Indenture Trustee with a statement indicating the amount of any such withholding tax. The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to such Certificateholder at the time it is withheld by the

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Indenture Trustee and remitted by the Indenture Trustee to the appropriate taxing authority from the Payment Account. If there is a possibility that withholding tax is payable with respect to a distribution (such as a distribution to a Certificateholder who is a Non-U.S. Person), the Indenture Trustee may in its sole discretion withhold such amounts in accordance with this paragraph. In the event that a Certificateholder wishes to apply for a refund of any such withholding tax, the Owner Trustee and the Indenture Trustee shall reasonably cooperate with such Certificateholder in making such claim so long as such Certificateholder agrees in writing to reimburse the Owner Trustee for any out-of-pocket expenses incurred.

Section 8.04. General Provisions Regarding the Payment Account and Mortgage Loans. (a) The Payment Account shall relate solely to the Notes, Eligible Investments and other property securing the Notes. Funds and other property in the Payment Account shall not be commingled with any other moneys or property of the Issuing Entity or any Affiliate thereof. Notwithstanding the foregoing, the Indenture Trustee may hold any funds or other property received or held by it as part of a Payment Account in collective accounts maintained by it in the normal course of its business and containing funds or property held by it for other Persons (which may include the Issuing Entity or an Affiliate); provided, that such accounts are under the sole control of the Indenture Trustee and the Indenture Trustee maintains adequate records indicating the ownership of all such funds or property and the portions thereof held for credit to the Payment Account.

(b) If any amounts are needed for payment from the Payment Account and sufficient uninvested funds are not available therein to make such payment, the Indenture Trustee shall cause to be sold or otherwise converted to cash, to the extent available, a sufficient amount of the investments in the Payment Account.

(c) The Indenture Trustee shall, at all times while any Notes are Outstanding, maintain in its possession, or in the possession of an agent whose actions with respect to such items are under the sole control of the Indenture Trustee, all certificates or other instruments, if any, evidencing any investment of funds in the Payment Account. The Indenture Trustee shall relinquish possession of such items, or direct its agent to do so, only for purposes of collecting the final payment receivable on such investment or certificate or, in connection with the sale of any investment held in the Payment Account, against delivery of the amount receivable in connection with any sale.

(d) The Servicer shall not direct the Indenture Trustee to invest any part of the Trust Estate in Eligible Investments that constitute uncertificated securities (as defined in Section 8-102 of the Uniform Commercial Code, as enacted in the relevant jurisdiction) unless it has delivered an Opinion of Counsel addressed to the Indenture Trustee and reasonably satisfactory in form and substance to the Indenture Trustee setting forth, with respect to each type of security for which authority to invest is being sought, the procedures that must be followed to maintain the lien and security interest created by this Indenture with respect to the Trust Estate.

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(e) With respect to any portion of the Trust Estate invested in Eligible Investments, the Indenture Trustee acknowledges and agrees that:

(i) any Eligible Investment that is held in a deposit account shall be held solely in an Eligible Account; and each such Eligible Account shall be subject to the sole and exclusive dominion, custody and control of the Indenture Trustee; and, without limitation on the foregoing, the Indenture Trustee shall have sole signature authority with respect thereto;

(ii) any Eligible Investment that constitutes Physical Property shall be delivered to the Indenture Trustee in accordance with paragraph (a) and/or (b) of the definition of “Delivery,” as applicable, and shall be held, pending maturity or disposition, solely by the Indenture Trustee or a securities intermediary (as such term is defined in Section 8-102(a)(14) of the Uniform Commercial Code) acting solely for the Indenture Trustee; and

(iii) any Eligible Investment that is a book-entry security held through the Federal Reserve System pursuant to federal book-entry regulations shall be delivered in accordance with paragraph (c) of the definition of “Delivery” and shall be maintained by the Indenture Trustee, pending maturity or disposition, through continued book-entry registration of such Eligible Investment as described in such paragraph.

Section 8.05. Releases of Deleted Mortgage Loans. Upon notice or discovery by a Responsible Officer of the Indenture Trustee that any of the representations or warranties of the Sponsor set forth in Section 4.01 of the Sale and Servicing Agreement was materially incorrect or otherwise misleading with respect to any Mortgage Loan as of the time made, the Indenture Trustee shall direct the Sponsor to either cure, repurchase or substitute for such Mortgage Loan as provided in Section 4.02 of the Sale and Servicing Agreement. Upon any purchase of or substitution for a Deleted Mortgage Loan by the Sponsor in accordance with Section 2.06 or Section 4.02 of the Sale and Servicing Agreement, the Custodian shall deliver the Mortgage File relating to such Deleted Mortgage Loan to the Sponsor, and the Issuing Entity and the Indenture Trustee and the Custodian shall execute such instruments of transfer as are necessary to convey title to such Deleted Mortgage Loan to the Sponsor from the lien of this Indenture. Nothing in this Section 8.05 should be construed to obligate the Indenture Trustee to actively monitor the correctness or accuracy of the representations and warranties of the Sponsor.

Section 8.06. Reports by Indenture Trustee to Noteholders; Access to Certain Information. On each Payment Date, the Indenture Trustee, shall make available the written reports required by the first paragraph of Section 2.09 to Noteholders of record as of the related Record Date (including the Clearing Agency, if any). The Indenture Trustee will make available the Indenture Trustee’s Remittance Report (and, at its option, any additional files containing the same information in an alternative format) to any interested person via the Indenture Trustee’s internet website. The Indenture Trustee’s internet website shall initially be located at https://www.jpmorgan.com/sfr and assistance in using the website can be obtained by calling the Indenture Trustee’s investor relations desk at 1-877-722-1095. The Indenture Trustee shall have the right to alter the manner in which it provides its Indenture Trustee’s Remittance Reports to Noteholders upon notice to Noteholders in the manner in which such Indenture Trustee’s Remittance Reports are then being provided.

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The Indenture Trustee shall make available at its Corporate Trust Office, during normal business hours, for review by any Noteholder or designees of the Issuing Entity, originals or copies of the following items: (a) the Indenture and any amendments thereto, (b) all Indenture Trustee’s Remittance Reports and other reports delivered since the Closing Date pursuant to Section 2.09 hereof, (c) any Officers’ Certificates delivered to the Indenture Trustee since the Closing Date as described in the Indenture and (d) any Accountants’ reports delivered to the Indenture Trustee since the Closing Date as required under the Sale and Servicing Agreement. Copies of any and all of the foregoing items will be available from the Indenture Trustee upon written request to the Indenture Trustee’s Corporate Trust Office; however, the Indenture Trustee will be permitted to require payment of a sum sufficient to cover the reasonable costs and expenses of providing such copies and shall not be required to provide such copies without reasonable assurances that such sum will be paid.

Section 8.07. Release of Trust Estate. The Indenture Trustee or the Custodian shall, at such time as there are no Notes Outstanding, as confirmed to the Indenture Trustee in writing, shall release all of the Trust Estate to the Issuing Entity (other than any cash held for the payment of the Notes pursuant to Section 3.03 or 4.02 hereof and amounts due to the Indenture Trustee hereunder).

Section 8.08. Amendment to Sale and Servicing Agreement. The Indenture Trustee may, without the consent of any Holder, enter into or consent to any amendment or supplement to the Sale and Servicing Agreement for the purpose of increasing the obligations or duties of any party other than the Indenture Trustee or the Holders of the Notes. The Indenture Trustee shall not enter into or consent to any such supplement or amendment unless the Indenture Trustee receives (i) an Opinion of Counsel that the position of the Holders would not be materially adversely affected or written confirmation of satisfaction of the Rating Agency Condition has been delivered to it and (ii) an Opinion of Counsel experienced in federal income tax matters that such amendment or supplement will not prevent the Notes from being characterized as debt for United States federal income tax purposes and will not cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes. The Indenture Trustee may in its discretion decline to enter into any such supplement or amendment if its own rights, duties or immunities would be adversely affected. Prior to entering into any supplement or amendment an Opinion of Counsel, accompanied by copies of any instruments involved, shall be delivered to the Indenture Trustee (upon which it may conclusively rely) to the effect that such amendment or supplement is permitted and authorized by this Indenture and/or the Sale and Servicing Agreement, setting forth the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with.

Section 8.09. Servicer as Agent. In order to facilitate the servicing of the Mortgage Loans by the Servicer of such Mortgage Loans, the Servicer of the Mortgage Loans has been appointed by the Issuing Entity to retain, in accordance with the provisions of the Sale and Servicing Agreement and this Indenture, all Servicer Remittance Amounts on such Mortgage Loans prior to their deposit into the Payment Account on or prior to the related Servicer Remittance Date.

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Section 8.10. Termination of Servicer. In the event of the occurrence of a Servicing Default specified in Section 8.01 of the Sale and Servicing Agreement, the Indenture Trustee may, and, upon the request of the Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes, shall (or as otherwise provided in the Sale and Servicing Agreement), terminate the Servicer as provided in Section 7.01 of the Sale and Servicing Agreement, subject to the rights of the Servicing Rights Pledgee. If the Indenture Trustee terminates the Servicer, the Indenture Trustee as successor servicer shall, pursuant to Section 8.02 of the Sale and Servicing Agreement, assume the duties of the Servicer or the Indenture Trustee shall appoint or petition a court and appoint a successor servicer acceptable to the Rating Agencies and meeting the requirements set forth in the Sale and Servicing Agreement.

Section 8.11. Pre-Funding Account.

(a) No later than the Closing Date, the Indenture Trustee, at the direction of the Servicer, shall establish and maintain, a segregated trust account that is an Eligible Account, which shall be titled “Pre-Funding Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 2006-MTA1, Home Equity Loan Asset-Backed Certificates, Series 2006-MTA1” (the “Pre-Funding Account”). The Indenture Trustee shall, promptly upon receipt, deposit in the Pre-Funding Account and retain therein the Original Pre-Funded Amount remitted on the Closing Date to the Indenture Trustee by the Depositor. Funds deposited in the Pre-Funding Account shall be held in trust by the Indenture Trustee for the Noteholders for the uses and purposes set forth herein.

(b) The Indenture Trustee will invest funds deposited in the Pre-Funding Account as directed by the Servicer in writing in Eligible Investments with a maturity date (i) no later than the Business Day immediately preceding the date on which such funds are required to be withdrawn from such account pursuant to the Sale and Servicing Agreement, if a Person other than the Indenture Trustee or an Affiliate manages or advises such investment, and (ii) no later than the date on which such funds are required to be withdrawn from such account pursuant to this Agreement, if the Indenture Trustee or an Affiliate manages or advises such investment. If the Indenture Trustee does not receive such written investment instructions it shall retain such funds uninvested. All income and gain realized from investment of funds deposited in the Pre-Funding Account shall be withdrawn and deposited in the Capitalized Interest Account. The Indenture Trustee shall not be liable for investment losses on investments selected by the Servicer pursuant to this Section 8.11(b).

(c) Amounts on deposit in the Pre-Funding Account shall be withdrawn by the Indenture Trustee as follows:

(i) On any Subsequent Transfer Date, the Indenture Trustee shall withdraw from the Pre-Funding Account an amount equal to 100% of the Principal Balances of the Subsequent Mortgage Loans transferred and assigned to the Indenture Trustee for deposit in the Mortgage Pool on such Subsequent Transfer Date and pay such amount to or upon the order of the Depositor upon satisfaction of the conditions set forth in Section 2.08 with respect to such transfer and assignment if such Subsequent Mortgage Loan is designated for inclusion in Group I, such amount shall reduce (but not below zero) the remaining Original

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Pre-Funded Amount allocated to Group I and if such Subsequent Mortgage Loan is designated for inclusion in Group II, such amount shall reduce (but not below zero) the remaining Original Pre-Funded Amount allocated to Group II;

(ii) If the amount on deposit in the Pre-Funding Account has not been reduced to zero on the day of the termination of the Pre-Funding Period, the Indenture Trustee shall deposit into the Payment Account on such day any amounts remaining in the Pre-Funding Account relating to Group I for inclusion in the Group I Principal Remittance Amount and relating to Group II for inclusion in the Group II Principal Remittance Amount for distribution in accordance with the terms hereof;

(iii) To withdraw any amount not required to be deposited in the Pre-Funding Account or deposited therein in error;

(iv) To clear and terminate the Pre-Funding Account upon the earlier to occur of (A) the Payment Date immediately following the end of the Pre-Funding Period but not later than September 6, 2006 and (B) the termination of this Agreement, with any amounts remaining on deposit therein being paid to the Holders of the Notes then entitled to distributions in respect of principal; and

(v) To withdraw investment income for deposit in the Capitalized Interest Account.

Section 8.12. Capitalized Interest Account

(a) No later than the Closing Date, the Indenture Trustee, at the direction of the Servicer, shall establish and maintain, a segregated trust account that is an Eligible Account, which shall be titled “Capitalized Interest Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust 2006-MTA1, Home Equity Loan Asset-Backed Certificates, Series 2006-MTA1” (the “Capitalized Interest Account”). The Indenture Trustee shall, promptly upon receipt, deposit in the Capitalized Interest Account and retain therein (i) the Interest Coverage Amount (which amount is $1,000,000) remitted on the Closing Date to the Indenture Trustee by the Depositor and (ii) income and gain realized from investments in the Pre-Funding Account. Funds deposited in the Capitalized Interest Account shall be held in trust by the Indenture Trustee, for the Noteholders for the uses and purposes set forth herein.

(b) All income and gain realized from investment of funds deposited in the Capitalized Interest Account shall be for the sole and exclusive benefit of the Depositor and shall be remitted by the Indenture Trustee to the Depositor no later than the following Payment Date following receipt of such income and gain by the Indenture Trustee. The Depositor shall deposit in the Capitalized Interest Account the amount of any net loss incurred in respect of any such Permitted Investment immediately upon realization of such loss.

(c) On each Payment Date during the Pre-Funding Period, if any, and on the Payment Date immediately following the termination of the Pre-Funding Period, the Indenture Trustee shall withdraw from the Capitalized Interest Account, to the extent funds are available

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therefore, and deposit in the Payment Account an amount, as provided in the related Determination Date Report, equal to the lesser of (i) the amount remaining in the Capitalized Interest Account for such Payment Date and (ii) the amount of any unpaid Monthly Interest Distributable Amount for the Class A Certificates and the Mezzanine Certificates, to the extent not paid pursuant to Section 4.01(a)(i).

(d) Upon the earliest of (i) the Payment Date immediately following the end of the Pre-Funding Period, (ii) the reduction of the Certificate Principal Balances of the Certificates to zero or (iii) the termination of this Agreement in accordance with Section 11.01, any amount remaining on deposit in the Capitalized Interest Account after distributions pursuant to paragraph (c) above shall be withdrawn by the Indenture Trustee and remitted to the Depositor or its designee, solely upon the Depositor’s written direction.

(e) Amounts in the Capitalized Interest Account shall only be invested at the prior written direction of the Depositor. If no such prior written investment direction has been provided by the Depositor to the Indenture Trustee, the Indenture Trustee shall hold such amounts uninvested.

ARTICLE IX

SUPPLEMENTAL INDENTURES

Section 9.01. Supplemental Indentures Without Consent of Noteholders. Without the consent of the Holders of any Notes, the Issuing Entity and the Indenture Trustee, at any time and from time to time, may enter into one or more indenture supplemental hereto, in form satisfactory to the Indenture Trustee, for any of the following purposes:

(a) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject to the lien of this Indenture additional property;

(b) to add to the conditions, limitations and restrictions on the authorized amount, terms and purposes of the issuance, authentication and delivery of any Notes, as herein set forth, additional conditions, limitations and restrictions thereafter to be observed;

(c) to evidence the succession of another Person to the Issuing Entity to the extent permitted herein, and the assumption by any such successor of the covenants of the Issuing Entity herein and in the Notes contained;

(d) to add to the covenants of the Issuing Entity, for the benefit of the Holders of all Notes, or to surrender any right or power herein conferred upon the Issuing Entity;

(e) to cure any ambiguity, to correct or supplement any provision herein that may be defective or inconsistent with any other provision herein, or to amend any other provisions with respect to matters or questions arising under this Indenture, which shall not be inconsistent with the provisions of this Indenture;

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(f) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the TIA or under any similar federal statute hereafter enacted, and to add to this Indenture such other provisions as may be expressly required by the TIA;

provided that such action shall not adversely affect in any material respect the interests of the Holders of the Notes or the Certificateholders and will not prevent the Notes from being characterized as debt for United States federal income tax purposes or cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes; provided, that the amendment shall be deemed not to adversely affect in any material respect the interests of the Holders of the Notes and will not prevent the Notes from being characterized as debt for United States federal income tax purposes or cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes if the Person requesting the amendment obtains either (i) an Opinion of Counsel delivered to, but not at the expense of, the Indenture Trustee, to such effect or (ii) written confirmation of the satisfaction of the Rating Agency Condition.

Section 9.02. Supplemental Indentures with Consent of Noteholders. With the consent of Holders of Notes representing not less than a majority of the Class Note Balance of all Outstanding Notes of the Classes affected thereby by Act of said Holders delivered to the Issuing Entity and the Indenture Trustee, the Issuing Entity and the Indenture Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Notes under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby:

(a) change any Payment Date or the Final Stated Maturity Date of the Notes or, with respect to the Notes, reduce the Class Note Balance thereof or the Interest Rate thereon, change the earliest date on which any Note may be redeemed at the option of the Sponsor, change payment where, or the coin or currency in which, any Note or any interest thereon is payable, or impair the right to institute suit for the enforcement of the payment of any installment of interest due on any Note on or after the Final Stated Maturity Date thereof or for the enforcement of the payment of the entire remaining unpaid principal amount of any Note on or after the Final Stated Maturity Date (or, in the case of redemption, on or after the applicable Redemption Date);

(b) reduce the percentage of the Class Note Balance of the Outstanding Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with provisions of this Indenture or Defaults hereunder and their consequences provided for in this Indenture;

(c) modify any of the provisions of this Section 9.02 or Sections 5.13 or 5.17(b) hereof, except to increase any percentage specified therein or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby;

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(d) modify or alter the provisions of the proviso to the definition of the term “Outstanding;”

(e) permit the creation of any lien other than the lien of this Indenture with respect to any part of the Trust Estate or terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security afforded by the lien of this Indenture; or

(f) modify any of the provisions of this Indenture in such manner as to affect the calculation of the Interest Payment Amount or Principal Distribution Amount for any Payment Date (including the calculation of any of the individual components of such amounts) or to affect rights of the Holders of the Notes to the benefits of any provisions for the redemption of Notes contained herein.

The Indenture Trustee may in its discretion determine whether or not any Notes would be affected by any supplemental indenture and any such determination shall be conclusive upon the Holders of all Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Indenture Trustee shall not be liable for any such determination made in good faith.

It shall not be necessary for any Act of Noteholders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

Promptly after the execution by the Issuing Entity and the Indenture Trustee of any supplemental indenture pursuant to this Section 9.02 or Section 9.01, the Indenture Trustee shall mail to the Holders of the Notes to which such supplemental indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

Section 9.03. Execution of Supplemental Indentures. In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and shall be fully protected in relying upon, (i) an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and such supplemental indenture does not adversely affect the interests of the Noteholders in any material respect; (ii) an Opinion of Counsel experienced in federal income tax matters stating that the execution of such supplemental indenture will not prevent the Notes from being characterized as debt for United States federal income tax purposes or cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes; or (iii) written confirmation of satisfaction of the Rating Agency Condition. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee’s own rights, duties or immunities under this Indenture or otherwise. The Servicer, on behalf of the Issuing Entity, shall cause executed copies of any supplemental indentures to be delivered to the Rating Agencies.

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Section 9.04. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture under this Article IX, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes to which such supplemental indenture relates that have theretofore been or thereafter are authenticated and delivered hereunder shall be bound thereby.

Section 9.05. Conformity With Trust Indenture Act. Every supplemental indenture executed pursuant to this Article IX shall conform to the requirements of the TIA as then in effect so long as this Indenture shall then be qualified under the TIA.

Section 9.06. Reference in Notes to Supplemental Indentures. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Owner Trustee, acting at the direction of the Certificateholders, shall so determine, new Notes so modified as to conform, in the opinion of the Indenture Trustee and the Owner Trustee, acting at the direction of the Certificateholders, to any such supplemental indenture may be prepared by the Servicer and executed by the Owner Trustee, acting at the direction of the Certificateholders, on behalf of the Issuing Entity, and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes.

Section 9.07. Amendments to Governing Documents. The Indenture Trustee shall, upon a Trust Request, consent to any proposed amendment to the Issuing Entity’s governing documents, or an amendment to or waiver of any provision of any other document relating to the Issuing Entity’s governing documents, such consent to be given without the necessity of obtaining the consent of the Holders of any Notes upon receipt by the Indenture Trustee of:

(a) an Officer’s Certificate, to which such proposed amendment or waiver shall be attached, stating that such attached copy is a true copy of the proposed amendment or waiver and that all conditions precedent to such consent specified in this Section 9.07 have been satisfied; and

(b) written confirmation of the satisfaction of the Rating Agency Condition with respect to such proposed amendment.

Notwithstanding the foregoing, the Indenture Trustee may decline to consent to a proposed waiver or amendment that adversely affects its own rights, duties or immunities under this Indenture or otherwise.

Nothing in this Section 9.07 shall be construed to require that any Person obtain the consent of the Indenture Trustee to any amendment or waiver or any provision of any document where the making of such amendment or the giving of such waiver without obtaining the consent of the Indenture Trustee is not prohibited by this Indenture or by the terms of the document that is the subject of the proposed amendment or waiver.

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ARTICLE X

REDEMPTION OF NOTES

Section 10.01. Redemption of Notes. (a) The Depositor may, at its sole cost and expense, terminate this Indenture and all the Notes then Outstanding may be redeemed in whole, but not in part, on any Redemption Date on and after the related Clean-Up Call Date at the related Termination Price.

(b) Any such purchase or redemption shall be accomplished by deposit by the Sponsor into the Payment Account of the related Termination Price on the Servicer Remittance Date preceding the Redemption Date. The amounts on deposit therein shall be paid by the Indenture Trustee on such Redemption Date in accordance with the priority set forth in Section 8.01 hereof.

(c) [Reserved].

(d) Upon the redemption of the Notes, the Mortgage Loans in the Trust Estate shall be released and delivered to the Depositor.

(e) Upon receipt of the written notice from the Sponsor of its election to redeem the Notes pursuant to Section 10.01 (a) hereof (which shall be provided to the Indenture Trustee at least twenty-five (25) days prior to the Redemption Date and shall state that the Sponsor has determined that the conditions to redemption at the option of the Sponsor have been satisfied and setting forth information as may be required to accomplish such redemption), the Indenture Trustee shall prepare and deliver to the Issuing Entity, the Sponsor and the Servicer, no later than the related Redemption Date, an Indenture Trustee’s Remittance Report.

Section 10.02. Form of Redemption Notice. Notice of redemption shall be given by the Indenture Trustee in the name of and at the expense of the Issuing Entity by first class mail, postage prepaid, mailed not less than ten days prior to the Redemption Date to each Holder of Notes to be redeemed, such Holders being determined as of the Record Date for such Payment Date.

All notices of redemption shall state:

(a) the Redemption Date;

(b) the price at which the Notes of the related Class or Classes will be redeemed; and

(c) the fact of payment in full on such Notes, the place where such Notes are to be surrendered for final payment (which shall be the office or agency of the Issuing Entity to be maintained as provided in Section 3.02 hereof), and that no interest shall accrue on such Note for any period after the date fixed for redemption.

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Failure to give notice of redemption, or any defect therein, to any Holder of any Note selected for redemption shall not impair or affect the validity of the redemption of any other Note.

Section 10.03. Notes Payable on Optional Redemption. Notice of redemption having been given as provided in Section 10.02 hereof, the Notes to be redeemed shall, on the applicable Redemption Date, become due and payable and (unless the Issuing Entity shall default in such payment) no interest shall accrue on such Notes for any period after such Redemption Date; provided, however, that if such payment is not made on the Redemption Date, the Class Note Balance shall, until paid, bear interest from the Redemption Date at the applicable Interest Rate.

ARTICLE XI

MISCELLANEOUS

Section 11.01. Compliance Certificates and Opinions. (a) Upon any application or request by any Person to the Indenture Trustee to take any action under any provision of this Indenture, such Person shall furnish to the Indenture Trustee an Officer’s Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel, if requested by the Indenture Trustee, stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

(b) Every certificate, opinion or letter with respect to compliance with a condition or covenant provided for in this Indenture, including one furnished pursuant to specific requirements of this Indenture relating to a particular application or request (other than certificates provided pursuant to TIA Section 314(a)(4)) shall include and shall be deemed to include (regardless of whether specifically stated therein) the following:

(i) a statement that each individual signing such certificate, opinion or letter has read such covenant or condition and the definitions herein relating thereto;

(ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate, opinion or letter are based;

(iii) a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(iv) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

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(c) (i) Other than with respect to the release of any Liquidated Mortgage Loans, Mortgage Loans that are purchased pursuant to Section 4.02 or Section 5.15 of the Sale and Servicing Agreement, or in connection with the Optional Redemption contemplated by Article X hereof, prior to the deposit of any Collateral or other property or securities with the Indenture Trustee that is to be made the basis for the release of any Collateral or other property or securities subject to the lien of this Indenture, the Issuing Entity shall, in addition to any obligation imposed in Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuing Entity of the Collateral or other property or securities to be so deposited.

(ii) Whenever the Issuing Entity is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuing Entity shall also deliver to the Indenture Trustee a certificate of a firm of independent public accountants as to the same matters, if the fair value to the Issuing Entity of the property to be so deposited and of all other such property (other than Liquidated Mortgage Loans, Mortgage Loans that are sold pursuant to Section 4.02 or Section 5.15 of the Sale and Servicing Agreement, or Mortgage Loans to be sold in connection with the Optional Redemption contemplated by Article X hereof) made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuing Entity, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is 10% or more of the aggregate outstanding Class Note Balances of the Notes, but such a certificate need not be furnished with respect to any property so deposited, if the fair value thereof to the Issuing Entity as set forth in the related Officer’s Certificate is less than $25,000 or less than 1% percent of the aggregate outstanding Class Note Balances of the Notes.

(iii) Other than with respect to the release of any Liquidated Mortgage Loans, Mortgage Loans that are purchased pursuant to Section 4.02 or Section 5.15 of the Sale and Servicing Agreement, or in connection with the Optional Redemption contemplated by Article X hereof, whenever any property or securities are to be released from the lien of this Indenture, the Issuing Entity shall also furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof.

(iv) Whenever the Issuing Entity is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (iii) above, the Issuing Entity shall also furnish to the Indenture Trustee an a certificate of a firm of independent public accountants as to the same matters if the fair value of the property or securities and of all other property or securities (other than Liquidated Mortgage Loans, Mortgage Loans that are sold pursuant to Section 4.02 or Section 5.15 of the Sale and Servicing Agreement, or Mortgage Loans to be sold in connection with the Optional Redemption contemplated by Article X hereof) released from the lien of this Indenture since the commencement of the then current calendar year, as set forth in the certificates required by clause (iii) above and this clause (iv), equals 10% or more of the aggregate outstanding Class Note Balances of the Notes, but such certificate need not be furnished in the case of any release

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of property or securities if the fair value thereof as set forth in the related Officer’s Certificate is less than $25,000 or less than 1 percent of the then aggregate outstanding Class Note Balances of the Notes.

Section 11.02. Form of Documents Delivered to Indenture Trustee. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of the Issuing Entity may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any Opinion of Counsel may be based on the written opinion of other counsel, in which event such Opinion of Counsel shall be accompanied by a copy of such other counsel’s opinion and shall include a statement to the effect that such counsel believes that such counsel and the Indenture Trustee may reasonably rely upon the opinion of such other counsel.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

Wherever in this Indenture, in connection with any application or certificate or report to the indenture Trustee, it is provided that the Issuing Entity shall deliver any document as a condition of the reporting of such application, or as evidence of the Issuing Entity’s compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuing Entity to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee’s right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in Section 6.01(b)(ii) hereof.

Whenever in this Indenture it is provided that the absence of the occurrence and continuation of a Default or Event of Default is a condition precedent to the taking of any action by the Indenture Trustee at the request or direction of the Issuing Entity, then, notwithstanding that the satisfaction of such condition is a condition precedent to the Issuing Entity’s right to make such request or direction, the Indenture Trustee shall be protected in acting in accordance with such request or direction if it does not have knowledge of the occurrence and continuation of such Default or Event of Default as provided in Section 6.01 (d) hereof.

Section 11.03. Acts of Noteholders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of substantially

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similar tenor signed by such Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuing Entity. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.01 hereof) conclusive in favor of the Indenture Trustee and the Issuing Entity, if made in the manner provided in this Section 11.03.

(b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Whenever such execution is by an officer of a corporation or a member of a partnership on behalf of such corporation or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority.

(c) The ownership of Notes shall be proved by the Note Register.

(d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuing Entity in reliance thereon; whether or not notation of such action is made upon such Notes.

Section 11.04. Notices, etc., to Indenture Trustee and Issuing Entity. Any request, demands authorization, direction, notice, consent, waiver or Act of Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with:

(a) the Indenture Trustee by any Noteholder, the Co-Trustee or by the Issuing Entity shall be made in writing and given, furnished or filed and received by the Indenture Trustee at its Corporate Trust Office; or

(b) the Issuing Entity by the Indenture Trustee, the Co-Trustee or by any Noteholder shall be sufficient for every purpose hereunder (except as provided in Section 5.01 (c) and (d)) hereof if in writing and mailed, first-class postage prepaid, to the Issuing Entity addressed to it at NovaStar Mortgage Funding Trust, Series 2006-MTA1, c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, facsimile number: (302) 636-4140 (with copies to NovaStar Certificates Financing Corporation, 8140 Ward Parkway, Suite 300, Kansas City, MO 64114, Attn: Matt Kaltenrieder, facsimile number: (816) 237-7515), or at any other address previously furnished in writing to the Indenture Trustee by the Issuing Entity.

(c) the Co-Trustee by the Indenture Trustee, the Issuing Entity or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class

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postage prepaid, to the Co-Trustee addressed to it at J.P. Morgan Trust Company, National Association, ITS - Global Debt, 560 Mission Street, 13th Floor, San Francisco, CA 94105, Attn: James Myers, V.P. (NovaStar Mortgage Funding Trust, Series 2006-MTA1).

(d) the Sponsor by the Indenture Trustee, the Co-Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage paid, to NovaStar Mortgage Inc., 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114, Attention: Matt Kaltenrieder or at any other address previously furnished in writing to the Indenture Trustee by the Sponsor; or

(e) the Servicer by the Indenture Trustee, the Co-Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage paid, to NovaStar Mortgage Inc., 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114, Attention: Matt Kaltenrieder or at any other address previously furnished in writing to the Indenture Trustee by the Servicer; or

(f) the Depositor by the Indenture Trustee, the Co-Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage paid, to NovaStar Certificates Financing Corporation, 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114, Attention: Matt Kaltenrieder or at any other address previously furnished in writing to the Indenture Trustee by the Depositor; or

Notices required to be given to the Rating Agencies by the Issuing Entity or the Indenture Trustee shall be in writing, personally delivered or mailed first-class postage pre-paid, to (i Moody’s Investors Service Inc., 99 Church Street, New York, New York 10007, Attention: Shachar Gonen, (ii) Standard & Poor’s, 26 Broadway, New York, New York 10004-1064, Attention: Julia Clements and (iii) Fitch Ratings, One State Street Plaza, 30th Floor, New York, New York 10004, Attention: Michele Patterson, Tel: (212) 908-0779; or as to each of the foregoing, at such other address as shall be designed by written notice to the other parties.

Section 11.05. Notices and Reports to Noteholders; Waiver of Notices. Where this Indenture provides for notice to Noteholders of any event or the mailing of any report to Noteholders, such notice or report shall be sufficiently given (unless otherwise herein expressly provided) if mailed, first-class postage prepaid, to each Noteholder affected by such event or to whole such report is required to be mailed, at the address of such Noteholder as it appears on the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice or the mailing of such report. In any case where a notice or report to Noteholders is mailed in the manner provided above, neither the failure to mail such notice or report, nor any defect in any notice or report so mailed, to any particular Noteholder shall affect the sufficiency of such notice or report with respect to other Noteholders, and any notice or report that is mailed in the manner herein provided shall be conclusively presumed to have been duly given or provided.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

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In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice.

Section 11.06. Rules by Indenture Trustee. The Indenture Trustee may (but is not obligated to) make reasonable rules for any meeting of Noteholders.

Section 11.07. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the TIA, such required provision shall control.

Section 11.08. Effect of Headings and Table of Contents. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

Section 11.09. Successors and Assigns. All covenants and agreements in this Indenture by the Issuing Entity shall bind its successors and assigns, whether so expressed or not.

Section 11.10. Separability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 11.11. Benefits of Indenture. Nothing in this Indenture or in the Notes, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any separate trustee or co-trustee appointed under Section 6.14 hereof and the Noteholders, any benefit or any legal or equitable right, remedy or claim under this Indenture.

Section 11.12. Legal Holidays. In any case where the date of any Payment Date, Redemption Date or any other date on which principal of or interest on any Note is proposed to be paid shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the next succeeding Business Day, with the same force and effect as if made on the nominal date of any such Payment Date, Redemption Date or other date for the payment of principal of or interest on any Note and no interest shall accrue for the period from and after any such nominal date, provided such payment is made in full on such next succeeding Business Day.

Section 11.13. Governing Law. IN VIEW OF THE FACT THAT NOTEHOLDERS ARE EXPECTED TO RESIDE IN MANY STATES AND OUTSIDE THE UNITED STATES AND THE DESIRE TO ESTABLISH WITH CERTAINTY THAT THIS INDENTURE WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAW OF A STATE HAVING A WELL-DEVELOPED BODY OF COMMERCIAL AND FINANCIAL LAW RELEVANT TO TRANSACTIONS OF THE TYPE CONTEMPLATED HEREIN, THIS INDENTURE AND EACH NOTE SHALL BE CONSTRUED IN

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ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 11.14. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

Section 11.15. Recording of Indenture. This Indenture is subject to recording in any appropriate public recording offices, such recording to be effected by the Servicer, on behalf of the Issuing Entity, and at its expense in compliance with any Opinion of Counsel delivered pursuant to Sections 2.12 (c) or 3.06 hereof.

Section 11.16. Issuing Entity Obligation. (a) No recourse, may be taken, directly or indirectly, with respect to the obligations of the Issuing Entity, the Owner Trustee or the Indenture Trustee on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (i) the Indenture Trustee (except as expressly stated herein regarding performance of its own obligations) Owner Trustee in its individual capacity, (ii) any manner of a beneficial interest in the Issuing Entity or (iii) any partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuing Entity, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Indenture Trustee and the Owner Trustee have no such obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. For all purposes of this Indenture, in the performance of any duties or obligations of the Issuing Entity hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of the Trust Agreement.

(b) It is expressly understood and agreed by the parties hereto that (i) this Indenture is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Owner Trustee of the Issuing Entity, in the exercise of the powers and authority conferred and vested in it under the Trust Agreement, (ii) each of the representations, undertakings and agreements herein made on the part of the Issuing Entity is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Issuing Entity, (iii) nothing herein contained shall be construed as creating any liability on Wilmington Trust Company, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto and (iv) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Issuing Entity or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuing Entity under this Indenture or any other related documents.

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Section 11.17. No Petition. The Indenture Trustee, by entering into this Indenture, and each Noteholder and Beneficial Owner, by accepting a Note, hereby covenant and agree that they will not at any time institute against the Depositor or the Issuing Entity, or join in any institution against the Depositor or the Issuing Entity of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the Basic Documents. In addition, the Indenture Trustee will, if directed in writing by the Majority Noteholders and indemnity is provided as set forth herein, on behalf of the Holders of the Notes, (a) file a written objection to any motion or the Sponsor with the Depositor or other proceeding seeking the substantive consolidation of the Sponsor with the Issuing Entity, (b) file an appropriate memorandum of points and authorities or other brief in support of such objection, or (c) endeavor to establish at the hearing on such objection that the substantive consolidation of such entities would be materially prejudicial to the Noteholders.

This Section 11.17 will survive for one year and one day following the termination of this Indenture.

Section 11.18. Inspection. The Issuing Entity agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee, during the Issuing Entity’s normal business hours, to examine all of books of account, records, reports and other papers of the Issuing Entity, to make copies and extracts therefrom, to cause such books to be audited by Independent Accountants selected by the Indenture Trustee, and to discuss its affairs, finances and accounts with its officers, employees and Independent Accountants (and by this provision the Issuing Entity hereby authorizes its Accountants to discuss with such representatives such affairs, finances and accounts), all at such reasonable times and as often as may be reasonably requested. Any expense incident to the exercise by the Indenture Trustee of any right under this Section 11.18 shall be borne by the Issuing Entity.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the Issuing Entity and the Indenture Trustee have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, all as of the day and year first above written.

NOVASTAR MORTGAGE FUNDING
TRUST, SERIES 2006-MTA1
By:	WILMINGTON TRUST COMPANY,
	not in its individual capacity, but solely as Owner Trustee under the Trust Agreement
	By:	/s/ Rachel L. Simpson
	Name:	Rachel L. Simpson
	Title:	Sr. Financial Services Officer
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
By:	/s/ Andrew M. Cooper
Name:	Andrew M. Cooper
Title:	Assistant Vice President
J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION,
as Co-Trustee
By:	/s/ Mark W. McDermott
Name:	Mark W. McDermott
Title:	Vice President

[Signature page to Indenture]

APPENDIX I

DEFINED TERMS

“Accepted Servicing Practices”: The Servicer’s normal servicing practices, to the extent consistent with the mortgage servicing practices of prudent mortgage lending institutions which service, for their own account, mortgage loans of the same type as the Mortgage Loans in the jurisdictions in which the related Mortgaged Properties are located.

“Account”: Any of the Collection Account, the Pre-Funding Account, the Capitalized Interest Account or the Payment Account.

“Accountant”: A Person engaged in the practice of accounting who (except when the Indenture provides that an Accountant must be Independent) may be employed by or affiliated with the Issuing Entity or an Affiliate of the Issuing Entity.

“Accrual Period”: With respect to the Class A and Class M Notes and for each Payment Date, the period commencing on the preceding Payment Date (or in the case of the first Accrual Period, commencing on the Closing Date) and ending on the day preceding the applicable Payment Date. Interest will accrue on the Class A and Class M Notes on the basis of a 360-day year and the actual number of days elapsed in the Accrual Period. The Accrual Period for the Class X Notes for each Payment Date is the prior calendar month. Interest will accrue on the Class X Notes on the basis of a 360-day year comprised of 12 months of 30 days each.

“Accrued Note Interest”: As to any Payment Date and each class of Notes, the amount of interest accrued during the related Interest Accrual Period on the related Class Note Balance (or, in the case of the Class X Notes, the Class X Notional Balance) immediately prior to such Payment Date at the related Note Rate, as reduced by (i) any Net Prepayment Interest Shortfalls and any shortfalls resulting from the application of the Servicemembers Civil Relief Act (or any similar state statutes) and (ii) any Net Negative Amortization allocated to such class (other than Class X Notes) on such Payment Date, provided, however, that in the case of any Class 2A-1B Note, any Class 2A-1C Note or any Class M Note, such amount shall be reduced by the amount described in clause (a) in the definition of Allocated Loss Interest allocated to such class.

“Act”: With respect to any Noteholder, as defined in Section 11.03 of the Indenture.

“Adjusted Class Note Balance”: For any class of Notes and any Payment Date, the Class Note Balance of that class minus any Allocated Realized Loss for such class, in each case, immediately prior to that Payment Date.

“Adjustment Date”: With respect to each Mortgage Loan, each Due Date, on which the Mortgage Rate of such Mortgage Loan changes pursuant to the related Mortgage Note.

“Administrative Fee”: With respect to each Payment Date, the sum of the MI Premium, the Servicing Fee, the Custodian Fee and the Indenture Trustee Fee with respect to such Payment Date.

“Affiliate”: With respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with such specified Person. For the purposes of this definition, “control” when used with respect to any specified Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agent”: Any Note Registrar or Authenticating Agent.

“Allocated Loss Interest”: Means for any Class of Notes other than the Class 1A-1 Notes, the Class 2A-1A Notes and the Class X Notes and any Payment Date, the sum of (a) the aggregate amount of interest accrued at the applicable Note Rate during the related Accrual Period on the related Allocated Realized Loss, (b) any amounts described in clause (a) for such class for prior Payment Dates that remain unpaid, and (c) interest accrued for the Accrual Period related to such Payment Date on the amount in clause (b) at the Note Rate applicable to such class.

“Allocated Realized Loss”: With respect to any class of Notes, the portion of the Applied Realized Loss previously allocated to that class of Notes.

“Applicable Margins”: The margins for each Class of Notes is set forth below:

	Margins
Class	(1)		(2)
1A-1	0.205	%	0.410	%
2A-1A	0.190	%	0.380	%
2A-1B	0.240	%	0.480	%
2A-1C	0.270	%	0.540	%
M-1	0.360	%	0.540	%
M-2	0.380	%	0.570	%
M-3	0.400	%	0.600	%
M-4	0.500	%	0.750	%
M-5	0.550	%	0.825	%
M-6	0.600	%	0.900	%
M-7	0.650	%	0.975	%
M-8	1.300	%	1.950	%
M-9	1.750	%	2.625	%
M-10	1.750	%	2.625	%

(1) For the Interest Accrual Period for each Payment Date on or prior to the first possible Clean Up Call Date.

(2) For each other Interest Accrual Period.

“Applied Realized Loss”: With respect to any Payment Date, the excess of the Realized Losses for the related Collection Period over the sum of Net Monthly Excess Cashflow and the Overcollateralization Amount.

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“Appraised Value”: As to any Mortgaged Property, the appraised value of the Mortgaged Property based upon the appraisal made in connection with the origination of the Mortgage Loan and, in the case of a Mortgaged Property that was purchased with the proceeds of the Mortgage Loan or within twelve months preceding the origination of the Mortgage Loan, the sales price of the Mortgaged Property, if such sales price is less than such appraised value.

“Assignment of Mortgage”: With respect to each Mortgage Loan, an assignment of the Mortgage, notice of transfer or equivalent instrument sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect of record the conveyance of the Mortgage to the Indenture Trustee, for the benefit of the Noteholders.

“Authenticating Agent”: The Person, if any, appointed as Authenticating Agent by the Owner Trustee on behalf of the Issuing Entity, acting at the direction of the Certificateholders, pursuant to Section 6.14 of the Indenture, until any successor Authenticating Agent for the Notes is named, and thereafter “Authenticating Agent” shall mean such successor. The initial Authenticating Agent shall be the Indenture Trustee. Any Authenticating Agent other than the Indenture Trustee shall sign an instrument under which it agrees to be bound by all of the terms of this Indenture applicable to the Authenticating Agent.

“Authorized Denominations”: Each Class of Notes is issuable only in the minimum Percentage Interest corresponding to a minimum denomination of $25,000 and integral multiples of $1,000 in excess thereof; provided, however, that one Note of each Class is issuable in a denomination equal to any such multiple plus an additional amount such that the aggregate denomination of all Notes of such Class shall be equal to the Original Class Note Balance of such Class, and further provided that the underwriter will only sell offered notes to initial investors in minimum total investment amounts of $100,000.

“Authorized Officer”: With respect to (i) the Indenture Trustee, any Responsible Officer, (ii) the Owner Trustee, the president, any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer, any financial services officer or any other officer of the Owner Trustee customarily performing functions similar to those performed by the above officers and (iii) any other Person, the chairman, chief operating officer, president or any vice president of such Person.

“Available Funds”: As for any Payment Date, the sum of the following amounts: (i) the Servicer Remittance Amount, (ii) the proceeds from repurchases of Mortgage Loans, (iii) any unused amounts released from the Pre-Funding Account at the end of the Pre-Funding Period and any amounts released from Capitalized Interest Account during the Pre-Funding Period, or at the end of the Pre-Funding Period, as applicable, and (iv) all proceeds received with respect to any optional termination pursuant to Section 10.01 of the Indenture.

“Available Funds Cap Rate”: With respect to the Class A and Class M Notes, the percentage equivalent of (i) the product of (a) the excess of (x) the weighted average of the Net Mortgage Rates for the Mortgage Loans, adjusted for the related Accrual Period over (y) the Class X Note Rate then in effect and (b) the aggregate Principal Balance of the Mortgage Loans as of the first day of the month prior to such Payment Date (except with respect to the first Payment Date, after giving effect to scheduled payments due during the related Due Period, to

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the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) divided by (ii) the aggregate Class Note Balance of the Notes immediately prior to such Payment Date.

“Available Funds Cap Shortfall”: With respect to any Payment Date and any class of Class A and Class M Notes or Allocated Realized Loss Amount, the sum of (i) the excess of (a) the amount of interest that would have accrued on such class or Allocated Realized Loss Amount based on the related Formula Rate over (b) the amount of interest accrued on such class or Allocated Realized Loss Amount based on the related Available Funds Cap Rate and (ii) the unpaid portion of any Available Funds Cap Shortfall from the prior Payment Date together with accrued interest on such unpaid portion at the related Formula Rate.

“Balloon Mortgage Loan”: A Mortgage Loan that provides for the payment of the unamortized Principal Balance of such Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is greater than the preceding Monthly Payment.

“Balloon Payment”: A payment of the unamortized Principal Balance of a Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is greater than the preceding Monthly Payment.

“Bankruptcy Code”: The Bankruptcy Reform Act of 1978 (Title 11 of the United States Code), as amended.

“Basic Documents”: The Indenture, the Trust Agreement and, the Sale and Servicing Agreement.

“Basic Principal Distribution Amount”: The sum of (i) the Group I Basic Principal Distribution Amount and (ii) the Group II Basic Principal Distribution Amount.

“Beneficial Owner”: With respect to a Book-Entry Note, the Person who is the beneficial owner of such Note as reflected on the books of the Clearing Agency for the Notes or on the books of a Person maintaining an account with such Clearing Agency (as either a Direct Participant or an Indirect Participant, in accordance with the rules of such Clearing Agency).

“Best Efforts”: Efforts determined to be in good faith and reasonably diligent by the Person performing such efforts, specifically the Issuing Entity or the Servicer or any other agent of the Issuing Entity, as the case may be, in its reasonable discretion. Such efforts do not require the Issuing Entity or the Servicer or any other agent of the Issuing Entity, as the case may be, to enter into any litigation, arbitration or other legal or quasi-legal proceeding, nor do they require the Issuing Entity or the Servicer or any other agent of the Issuing Entity, as the case may be, to advance or expend fees or sums of money in addition to those specifically set forth in the Indenture and the Sale and Servicing Agreement.

“Book-Entry Notes”: Any Notes registered in the name of the Clearing Agency or its nominee, ownership of which is reflected on the books of the Clearing Agency or on the books of a person maintaining an account with such Clearing Agency (as either a Direct Participant or an Indirect Participant in accordance with the rules of such Clearing Agency).

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“Business Day”: Any day other than (i) a Saturday or Sunday or (ii) a day that is either a legal holiday or a day on which banking institutions in the State of New York, the State of Missouri or in the city in which the corporate trust office of the Indenture Trustee, Owner Trustee or Custodian are located, or the state in which the Indenture Trustee’s office from which payments will be made to Noteholders, are authorized or obligated by law, regulation or executive order to be closed.

“Cap Contract Obligations”: The obligations of the Class X Notes to make payments of Available Funds Cap Shortfalls pursuant to Section 8.01(c)(i) and (ii) of the Indenture.

“Cap Contract Rights”: The rights of the Class A and Class M Notes to receive Available Funds Cap Shortfalls pursuant to Section 8.01(c)(i) and (ii) of the Indenture.

“Capitalized Interest Account”: The account established and maintained pursuant to Section 8.12, as defined herein, and which must be an Eligible Account.

“CERCLA”: The Comprehensive Environmental Response, Compensation and Liability Act of 1980.

“Certificateholder” or “Holder”: A Person in whose name a Trust Certificate and Class C Certificate is registered.

“Certificates”: Each Trust Certificate and Class C Certificate issued pursuant to the Trust Agreement.

“Class A Notes”: The Class 1A-1 Notes and Class 2A Notes.

“Class 2A Notes”: The Class 2A-1A Notes, Class 2A-1B Notes and Class 2A-1C Notes.

“Class A Principal Distribution Amount”: With respect to any Payment Date, an amount equal to the excess of (x) the Class Note Balance (or, if less, the Adjusted Class Note Balance) of the Class A Notes immediately prior to that Payment Date over (y) the lesser of (A) the product of (i) for each Payment Date prior to June 2012, 73.250% and thereafter 78.600% and (ii) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extend received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

“Class C Certificate”: A certificate entitling the Certificateholder to (i) receive payments from Net Monthly Excess Cashflow, (ii) receive all collected Prepayment Charges, (iii) the Overcollateralization Amount and representing a. beneficial interest of the Certificateholder in the Issuing Entity substantially in the form of Exhibit E to the Trust Agreement.

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“Class M Notes”: The Class M-1 Notes, Class M-2 Notes, Class M-3 Notes, Class M-4 Notes, Class M-5 Notes, Class M-6 Notes, Class M-7 Notes, Class M-8 Notes, Class M-9 Notes and Class M-10 Notes.

“Class M-1 Principal Distribution Amount”: With respect to any payment date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance (or, if less, the Adjusted Class Note Balance) of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such payment date) and (B) the aggregate Adjusted Class Note Balance of the Class M-1 Notes immediately prior to such payment date, over (y) the lesser of: (A) the product of (i) for each payment date prior to June 2012, 81.625% and thereafter 85.300% and (ii) the aggregate principal balance of the mortgage loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate principal balance of the mortgage loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

“Class M-2 Principal Distribution Amount”: With respect to any payment date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance (or, if less, the Adjusted Class Note Balance) of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such payment date), (B) the Adjusted Class Note Balance of the Class M-1 Notes (after taking into account the payment of Class M-1 Principal Distribution Amount on such payment date) and (C) the Adjusted Class Note Balance of the Class M-2 Notes immediately prior to such payment date, over (y) the lesser of: (A) the product of (i) for each payment date prior to June 2012, 85.625% and thereafter 88.500% and (ii) the aggregate principal balance of the mortgage loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate principal balance of the mortgage loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

“Class M-3 Principal Distribution Amount”: With respect to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance (or, if less, the Adjusted Class Note Balance) of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date), and (D) the Adjusted Class Note Balance of the Class M-3 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product

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of (i) for each Payment Date prior to June 2012, 88.000% and thereafter 90.400% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

“Class M-4 Principal Distribution Amount”: With respect to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance (or, if less, the Adjusted Class Note Balance) of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date), (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), and (E) the Adjusted Class Note Balance of the Class M-4 Notes or to such Payment Date, over (y) the lesser of: (A) the product of (i) for each Payment Date prior to June 2012, 90.000% and thereafter 92.000% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

“Class M-5 Principal Distribution Amount”: With respect to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance (or, if less, the Adjusted Class Note Balance) of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), (E) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Payment Date), and (F) the Adjusted Class Note Balance of the Class M-5 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) for each Payment Date prior to June 2012, 91.375% and thereafter 93.100% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if

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any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

“Class M-6 Principal Distribution Amount”: With respect to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance (or, if less, the Adjusted Class Note Balance) of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), (E) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Payment Date), (F) the Adjusted Class Note Balance of the Class M-5 Notes (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Payment Date), and (G) the Adjusted Class Note Balance of the Class M-6 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) for each Payment Date prior to June 2012, 92.625% and thereafter 94.100% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

“Class M-7 Principal Distribution Amount”: With respect to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance (or, if less, the Adjusted Class Note Balance) of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), (E) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Payment Date), (F) the Adjusted Class Note Balance of the Class M-5 Notes (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Payment Date), (G) the Adjusted Class Note Balance of the Class M-6 Notes (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Payment Date) and (H) the Adjusted Class Note Balance of the Class M-7 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) for each Payment Date prior to June 2012, 93.875% and thereafter 95.100%, and (ii) the aggregate Principal Balance of the Mortgage Loans on the

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last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

“Class M-8 Principal Distribution Amount”: With respect to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance (or, if less, the Adjusted class Note Balance) of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), (E) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Payment Date), (F) the Adjusted Class Note Balance of the Class M-5 Notes (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Payment Date), (G) the Adjusted Class Note Balance of the Class M-6 Notes (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Payment Date), (H) the Adjusted Class Note Balance of the Class M-7 Notes (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Payment Date) and (I) the Adjusted Class Note Balance of the Class M-8 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) for each Payment Date prior to June 2012, 95.125% and thereafter 96.100% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

“Class M-9 Principal Distribution Amount”: With respect to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance (or, if less, the Adjusted class Note Balance) of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), (E) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on such

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Payment Date), (F) the Adjusted Class Note Balance of the Class M-5 Notes (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Payment Date), (G) the Adjusted Class Note Balance of the Class M-6 Notes (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Payment Date), (H) the Adjusted Class Note Balance of the Class M-7 Notes (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Payment Date), (I) the Adjusted Class Note Balance of the Class M-8 Notes (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Payment Date), and (I) the Adjusted Class Note Balance of the Class M-9 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) for each Payment Date prior to June 2012, 96.375% and thereafter 97.100% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

“Class M-10 Principal Distribution Amount”: With respect to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance (or, if less, the Adjusted Class Note Balance) of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes (after taking into account the payment of the Class M-1 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-2 Notes (after taking into account the payment of the Class M-2 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), (E) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Payment Date), (F) the Adjusted Class Note Balance of the Class M-5 Notes (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Payment Date), (G) the Adjusted Class Note Balance of the Class M-6 Notes (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Payment Date), (H) the Adjusted Class Note Balance of the Class M-7 Notes (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Payment Date), (I) the Adjusted Class Note Balance of the Class M-8 Notes (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Payment Date), (J) the Adjusted Class Note Balance of the Class M-9 Notes (after taking into account the payment of the Class M-9 Principal Distribution Amount on such Payment Date) and (K) the Adjusted Class Note Balance of the Class M-10 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) for each Payment Date prior to June 2012, 97.625% and thereafter 98.100% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $6,000,000.

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“Class Note Balance”: As of any date of determination, the Original Class Note Balance of any class of Notes, minus the sum of all amounts applied in reduction of such amount on all prior Payment Dates and plus all Net Negative Amortization allocated to such class (other than such amounts paid pursuant to Section 8.01 (e)(vi) of the Indenture) on all prior payment dates.

“Class X Note Rate” Will be equal to 1.10%, with respect to the 1st through 12th payment dates; 0.90%, with respect to the 13th through 18th payment dates; 0.80%, with respect to the 19th through 24th payment dates; and 0.70%, with respect to the 25th and all subsequent payment dates.

“Class X Notional Balance” $1,061,223,414.92.

“Clean-Up Call Date”: Any Payment Date when the outstanding Principal Balance of the Mortgage Loans is less than or equal to 10% of the sum of (i) the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date and (ii) the Original Pre-funded Amount.

“Clearing Agency”: An organization registered as a “clearing agency” pursuant to Section 17A of the Securities Exchange Act of 1934, as amended, and the regulations of the Commission thereunder and shall initially be The Depository Trust Company of New York, the nominee for which is Cede & Co.

“Clearing Agency Participants”: The entities for whom the Clearing Agency will maintain book-entry records of ownership and transfer of Book-Entry Notes, which may include securities brokers and dealers, banks and trust companies and clearing corporations and certain other organizations.

“Closing Date”: June 8, 2006.

“Code”: The Internal Revenue Code of 1986 as it may be amended from time to time.

“Collection Account”: The Eligible Account established and maintained by the Servicer pursuant to Section 5.06(d) of the Sale and Servicing Agreement.

“Collection Period”: With respect to each Payment Date, the calendar month preceding the related Payment Date.

“Commission”: The United States Securities and Exchange Commission.

“Compensating Interest”: An amount equal to the lesser of (a) the aggregate of the Prepayment Interest Shortfalls for the related Payment Date resulting from principal prepayments in full during the related Prepayment Period and (b) the aggregate Servicing Fee with respect to the related Due Period.

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“Corporate Trust Office”: With respect to (y) the Indenture Trustee, the principal office of the Indenture Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of the execution of the Basic Documents is located at: (i) solely for purposes of the transfer, exchange or surrender of Notes, 2001 Bryan Street, 10th Floor, Dallas, Texas 75201, Attention: Worldwide Securities Services/Structured Finance Services -NovaStar Mortgage Funding Trust, Series 2006-MTA1 and (ii) for all other purposes, 4 New York Plaza, 6th Floor, New York, New York 10004-2477, Attention: Worldwide Securities Services/Structured Finance Services - NovaStar Mortgage Funding Trust, Series 2006-MTA1 where it conducts its trust administration services; and (z) the Owner Trustee, the office of the Owner Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of the Basic Documents is located at Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001, facsimile number: (302) 636-4140, Attention: Corporate Trust Administration.

“Co-Trustee”: J.P.Morgan Trust Company, National Association, a national banking association organized under the laws of the United States or its successor-in-interest or any successor Co-Trustee.

“Crossover Date”: The earlier of (A) the Payment Date after which the aggregate Class Note Balance of the Class A Notes has been reduced to zero and (B) the later to occur of:

(x) the Payment Date occurring in June 2009, and

(y) the first Payment Date on which the Senior Credit Enhancement Percentage (calculated for this purpose after giving effect to payments or other recoveries on the Mortgage Loans during the related Due Period, but before giving effect to payments on any of the notes on such Payment Date) is greater than or equal to (i) prior to the Payment Date in June 2012, 26.750% and (ii) on or after the Payment Date in June 2012, 21.400%.

“Curtailment”: With respect to a Mortgage Loan, any payment of principal received in advance of its Monthly Payment and which is not accompanied by an amount as to interest representing scheduled interest due on any date or dates in any month or months subsequent to the month of prepayment.

“Custodian”: U.S. Bank National Association, a national banking association, and any successor thereto.

“Custodian Fee”: An initial set up fee of $1.50 per mortgage loan and with respect to each Payment Date, the product of (i) $0.20 and (ii) the number of Mortgage Loans.

“Custodian Fee Rate”: The percentage equivalent expressed as a fraction, the numerator of which is (i) the product of (a) the Custodian Fee and (b) 12 and the denominator of which is (ii) the aggregate Principal Balance of the Mortgage Loans as of the beginning of the Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period).

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“Custodian’s Mortgage File”: The documents delivered to the Custodian, pursuant to Section 2.05 of the Sale and Servicing Agreement.

“Cut-Off Date”: For any Mortgage Loan, the Initial Cut-Off Date or Subsequent Cut-Off Date, as applicable.

“Cut-Off Date Principal Balance”: As to any Mortgage Loan, the unpaid Principal Balance of such Mortgage Loan as of the Cut-Off Date as specified in the amortization schedule at the time relating thereto (before any adjustment to such amortization schedule by reason of any moratorium or similar waiver or grace period) and after giving effect to any previous Curtailments and Liquidation Proceeds allocable to principal (other than with respect to any Liquidated Mortgage Loan), irrespective of any delinquency in payment by the related Mortgagor.

“Debt Service Reduction”: With respect to any Mortgage Loan, a reduction in the scheduled Monthly Payment on the related Mortgage Loan by a court of competent jurisdiction in a proceeding under the Bankruptcy Code, except such a reduction constituting a Deficient Valuation or any reduction that results in a permanent forgiveness of principal.

“Default”: Any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default.

“Deficient Valuation”: With respect to any Mortgage Loan, a valuation of the related Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding Principal Balance of the Mortgage Loan, or that results in a permanent forgiveness of principal, which valuation in either case results from a proceeding initiated under the Bankruptcy Code.

“Definitive Notes”: Notes other than Book-Entry Notes.

“Deleted Mortgage Loan”: A Mortgage Loan replaced or to be replaced by one or more Qualified Substitute Mortgage Loans.

“Delinquency Advance”: The aggregate of the advances required to be made by the Servicer on any Servicer Remittance Date pursuant to Section 5.25 of the Sale and Servicing Agreement, the amount of any such advances being equal to the sum of:

(i) with respect to each Mortgage Loan, other than an REO Property, that was Delinquent as of the close of business on the last day of the Due Period preceding the related Servicer Remittance Date, the aggregate amount of Monthly Payments (with interest thereon calculated at the Mortgage Interest Rate (or at such lower rate as may be in effect for such Mortgage Loan pursuant to application of the Relief Act, any Deficient Valuation and/or any Debt Service Reduction), net of the related Servicing Fee) due during the related Due Period, and

(ii) with respect to each REO Property which was acquired during or prior to the related Collection Period and as to which an REO Disposition did not occur during the related Collection Period, an amount equal to the excess, if any, of (i) interest on the Principal Balance of the related Mortgage Loan at the Mortgage Interest Rate (or at such lower rate as may be in

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effect for such Mortgage Loan pursuant to application of the Relief Act, any Deficient Valuation and/or any Debt Service Reduction) for such Mortgage Loan net of the related Servicing Fee, for the most recently ended Due Period over (ii) the Net REO Proceeds transferred to the Payment Account for such Payment Date;

provided, however, that in each such case such advance has not been determined by the Servicer to be a Nonrecoverable Advance. For purposes of the preceding sentence, the Monthly Payment on each Balloon Mortgage Loan with a delinquent Balloon Payment is equal to the assumed monthly payment that would have been due on the related Due Date based on the original principal amortization schedule for such Balloon Mortgage Loan.

“60-Day Delinquency Percentage”: As of the last day of any Due Period, the percentage equivalent of a fraction, (i) the numerator of which equals the aggregate Principal Balance of the Mortgage Loans that are 60 or more days contractually delinquent, in bankruptcy, in foreclosure or converted to REO Properties, and (ii) the denominator of which is the Pool Balance as of the last day of such Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period).

“90-Day Delinquency Percentage”: As of the last day of any Due Period, the percentage equivalent of a fraction, (i) the numerator of which equals the aggregate Principal Balance of the Mortgage Loans that are 90 or more days contractually delinquent, in bankruptcy, in foreclosure or converted to REO Properties and (ii) the denominator of which is the Pool Balance as of the last day of such Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period).

“Delinquent”: A Mortgage Loan is “delinquent” if any payment due thereon is not made by the close of business on the day such payment is scheduled to be due. A Mortgage Loan is “30 days delinquent” if such payment has not been received by the close of business on the corresponding day of the month immediately succeeding the month in which such payment was due, or, if there is no such corresponding day (e.g., as when a 30-day month follows a 31-day month in which a payment was due on the 31st day of such month) then on the last day of such immediately succeeding month. Similarly for “60 days delinquent,” “90 days delinquent” and so on.

“Delivery”: When used with respect to Eligible Investments means:

(a) with respect to bankers’ acceptances, commercial paper, negotiable certificates of deposit and other obligations that constitute “instruments” within the meaning of Section 9-102(a)(47) of the Uniform Commercial Code and are susceptible of physical delivery (except with respect to Eligible Investments consisting of certificated securities (as defined in Section 8-102(a)(4) of the Uniform Commercial Code)), physical delivery to the Custodian endorsed to the Indenture Trustee or endorsed in blank;

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(b) with respect to a certificated security (as defined in Section 8-102(a)(4) of the Uniform Commercial Code) (i) delivery of such certificated security, not containing any evidence of a right or interest inconsistent with the Indenture Trustee’s interest therein, endorsed to, or registered in the name of, the Indenture Trustee or endorsed in blank to a securities intermediary (as defined in Section 8-102(a)(14) of the Uniform Commercial Code) and the making by such securities intermediary of appropriate entries in its records identifying such certificated securities as credited to the securities account (as defined in Section 8-501(a) of the Uniform Commercial Code) of the Indenture Trustee, or (ii) by delivery thereof to a “clearing corporation” (as defined in Section 8-102(5) of the Uniform Commercial Code) and the making by such clearing corporation of appropriate entries in its records crediting the securities account of a securities intermediary by the amount of such certificated security and the making by such securities intermediary of appropriate entries in its records identifying such certificated securities as credited to the securities account of the Indenture Trustee (all Eligible Investments described in subsections (a) and (b), and “Physical Property”); and, in any event, any such Physical Property in registered form shall be registered in the name of the Indenture Trustee or its nominee; and such additional or alternative procedures as may hereafter become appropriate to effect the complete transfer of ownership of any such Eligible Investments to the Indenture Trustee or its nominee, consistent with then applicable law or regulations or the interpretation thereof; and

(c) with respect to any security issued by the U.S. Treasury, Fannie Mae or Freddie Mac that is a book-entry security held through the Federal Reserve System pursuant to federal book-entry regulations, the following procedures, all in accordance with applicable law, including applicable federal regulations and Articles 8 and 9 of the Uniform Commercial Code: the making by a Federal Reserve Bank of an appropriate entry crediting such Eligible Investment to an account of a securities intermediary that is also a “participant” pursuant to applicable federal regulations; the making by such securities intermediary of appropriate entries in its records crediting such book-entry security held through the Federal Reserve System pursuant to federal book-entry regulations and Articles 8 and 9 of the Uniform Commercial Code to the securities account of the Indenture Trustee; and such additional or alternative procedures as may hereafter become appropriate to effect complete transfer of ownership of any such Eligible Investments to the Indenture Trustee or its nominee, consistent with then applicable law or regulations or the interpretation thereof.

“Depositor”: NovaStar Certificates Financing Corporation, a Delaware corporation.

“Determination Date”: With respect to any Payment Date, the 15th day of the calendar month in which such Payment Date occurs or, if such 15th day is not a Business Day, the Business Day immediately preceding such 15th day.

“Determination Date Report”: The monthly report prepared by the Servicer and delivered to the parties specified in Section 5.24 of the Sale and Servicing Agreement.

“Distributable Interest Amount”: With respect to any Payment Date and Loan Group, the Interest Remittance Amount for such Payment Date and Loan Group plus the lesser of (i) Negative Amortization with respect to the related Loan Group during the related Due Period and (ii) the voluntary principal prepayments with respect to the related Prepayment Period and Loan Group, plus related amounts transferred from the Capitalized Interest Account, if any.

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“Distributable Principal Amount”: With respect to any Payment Date and Loan Group, the Principal Remittance Amount for such Payment Date and Loan Group minus the lesser of (i) Negative Amortization with respect to the related Loan Group during the related Due Period and (ii) the voluntary principal prepayments with respect to the related Prepayment Period and Loan Group.

“Direct Participant”: Any broker-dealer, bank or other financial institution for which the Clearing Agency holds Notes from time to time as a securities depositary.

“Due Date”: With respect to any Mortgage Loan and any Monthly Payment, the date on which such Monthly Payment is due from the related Mortgagor.

“Due Period”: With respect to any Payment Date, the period commencing on the second day of the month preceding the month in which such Payment Date occurs and ending on the first day of the month in which such Payment Date occurs.

“Eligible Account”: An account that is either: (A) a segregated account or accounts maintained with an institution whose deposits are insured by the FDIC, the unsecured and uncollateralized long-term debt obligations of which institution shall be rated “AA” or higher by Standard & Poor’s, “Aa2” or higher by Moody’s and “AA” or higher by Fitch and in the highest short-term rating category by each of the Rating Agencies, and which is (i) a federal savings and loan association duly organized, validly existing and in good standing under the federal banking laws, (ii) an institution duly organized, validly existing and in good standing under the applicable banking laws of any state, (iii) a national banking association duly organized, validly existing and in good standing under the federal banking laws, or (iv) a principal subsidiary of a bank holding company or (B) a segregated trust account or accounts maintained with the trust department of a federal or state chartered depository institution acceptable to each Rating Agency, having capital and surplus of not less than $100,000,000, acting in its fiduciary capacity.

“Eligible Investments”: One or more of the following:

(i) direct obligations of, and obligations fully guaranteed by, the United States of America, any of the Federal Home Mortgage Corporation, the Federal National Mortgage Association, the Federal Home Loan Banks or any agency or instrumentality of the United States of America the obligations of which are backed by the full faith and credit of the United States of America;

(ii) (A) demand and time deposits in, Certificates of deposit of, banker’s acceptances issued by or federal funds sold by any depository institution or trust company (including the Trustee or its agents acting in their respective commercial capacities) incorporated under the laws of the United States of America or any State thereof and subject to supervision and examination by federal and/or state authorities, so long as at the time of such investment or contractual commitment providing for such investment, such depository institution or trust company has a short-term unsecured debt rating in the highest available rating category

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of each of the Rating Agencies and provided that each such investment has an original maturity of no more than 365 days, and (B) any other demand or time deposit or deposit which is fully insured by the Federal Deposit Insurance Corporation;

(iii) repurchase obligations with a term not to exceed 30 days with respect to any security described in clause (i) above and entered into with a depository institution or trust company (acting as a principal) rated “A-1+” or higher by S&P, “A2” or higher by Moody’s and “F-1+” or higher by Fitch; provided, however, that collateral transferred pursuant to such repurchase obligation must (A) be valued daily at current market price plus accrued interest, (B) pursuant to such valuation, equal, at all times, 105% of the cash transferred in exchange for such collateral and (C) be delivered in such a manner as to accomplish perfection of a security interest in the collateral by possession of certificated securities;

(iv) securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States of America or any State thereof which has a long-term unsecured debt rating in the highest available rating category of each of the Rating Agencies at the time of such investment;

(v) commercial paper having an original maturity of less than 365 days and issued by an institution having a short-term unsecured debt rating in the highest available rating category of each of the Rating Agencies at the time of such investment;

(vi) a guaranteed investment contract approved by each of the Rating Agencies and issued by an insurance company or other corporation having a long-term unsecured debt rating in the highest available rating category of each of the Rating Agencies at the time of such investment; and

(vii) any demand, money market fund, common trust fund or time deposit or obligation, or interest-bearing or other security or investment, (A) rated in the highest rating category by each Rating Agency (if rated by such Rating Agency) or (B) that would not adversely affect the then current rating by either Rating Agency of any of the Notes. Such investments in this subsection (vii) may include money market mutual funds or common trust funds, including, without limitation, the J.P. Morgan Prime Money Market Fund or any other fund for which JPMorgan Chase Bank, National Association, the Indenture Trustee or an affiliate thereof serves as an investment advisor, administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (i) JPMorgan Chase Bank, National Association or an affiliate thereof charges and collects fees and expenses from such funds for services rendered, (ii) JPMorgan Chase Bank, National Association or an affiliate thereof charges and collects fees and expenses for services rendered pursuant to the Agreement and the Indenture, and (iii) services performed for such funds and pursuant to the Agreement and the Indenture may converge at any time. The Indenture Trustee specifically authorizes JPMorgan Chase Bank, National Association or an affiliate thereof to charge and collect from the Trust Estate such fees as are collected from all investors in such funds for services rendered to such funds (but not to exceed investment earnings thereon),

provided, however, that each such instrument shall be acquired in an arm’s-length transaction and no such instrument shall be an Eligible Investment if it represents, either (1) the

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right to receive only interest payments with respect to the underlying debt instrument or (2) the right to receive both principal and interest payments derived from obligations underlying such instrument and the principal and interest payments with respect to such instrument provide a yield to maturity greater than 120% of the yield to maturity at par of such underlying obligations; provided, further, however, that each such instrument acquired shall not be acquired at a price in excess of par. The Indenture Trustee may purchase from or sell to itself or an affiliate, as principal or agent, the Eligible Investments listed above.

“ERISA”: The Employee Retirement Income Security Act of 1974, as amended.

“Event of Default”: As defined in Section 5.01 of the Indenture.

“Exchange Act”: Means the Securities Exchange Act of 1934, as amended.

“Extra Principal Distribution Amount”: As to any Payment Date, the lesser of (i) the Net Monthly Excess Cashflow and (ii) the Overcollateralization Deficiency for such Payment Date.

“Fannie Mae”: Fannie Mae, formerly known as, The Federal National Mortgage Association, and any successor thereto.

“FDIC”: The Federal Deposit Insurance Corporation, and any successor thereto.

“Final Certification”: A certification as to the completeness of each Custodian’s Mortgage File prepared by the Custodian, and provided by the Custodian within one hundred eighty (180) days of the Closing Date pursuant to Section 2.06(b) of the Sale and Servicing Agreement.

“Final Stated Maturity Date”: The Payment Date occurring in September 2046.

“Fitch”: Fitch Ratings, or its successors in interest.

“Foreclosure Profits”: As to any Servicer Remittance Date, the excess, if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan that became a Liquidated Mortgage Loan during the Collection Period immediately preceding such Servicer Remittance Date over (ii) the sum of the unpaid Principal Balance of each such Liquidated Mortgage Loan plus accrued and unpaid interest at the applicable Mortgage Interest Rate on the unpaid Principal Balance thereof from the Due Date on which interest was last paid by the Mortgagor (or, in the case of a Liquidated Mortgage Loan that had been an REO Property, from the Due Date on which interest was last deemed to have been paid pursuant to Section 5.13 of the Sale and Servicing Agreement) to the next succeeding Due Date following the date such Mortgage Loan became a Liquidated Mortgage Loan, plus any amounts required by applicable law to be paid to the related Mortgagors.

“Formula Rate”: With respect to each class of Notes (other than the Class X Notes) the annual rate equal to the lesser of (i) LIBOR plus the Applicable Margin for that class of Notes and (ii) 10.50%.

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“Freddie Mac”: Freddie Mac, formerly known as The Federal Home Loan Mortgage Corporation, and any successor thereto.

“Free Writing Prospectus”: The Free Writing Prospectus dated June 1, 2006 relating to the Notes filed with the Commission pursuant to Rule 433.

“GAAP”: Generally accepted accounting principles, consistently applied.

“Governmental Plan”: A governmental plan within the meaning of Section 3(32) of ERISA.

“Grant”: To assign, transfer, mortgage, pledge, create and grant a security interest in, deposit, set-over and confirm. A Grant of a Mortgage Loan and the related Mortgage Files, a Eligible Investment, the Sale and Servicing Agreement, or any other instrument shall include all rights, powers and options (but none of the obligations) of the Granting party thereunder, including, without limitation, the immediate and continuing right to claim for, collect, receive and give receipts for principal and interest payments thereunder, Loan Repurchase Prices and all other moneys payable thereunder and all proceeds thereof, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the Granting party or otherwise, and generally to do and receive anything that the Granting party is or may be entitled to do or receive thereunder or with respect thereto.

“Group”: With respect to the Mortgage Loans, either Loan Group I or Loan Group II, as the context requires.

“Group I Allocation Percentage”: With respect to any Payment Date, the percentage equivalent of a fraction, the numerator of which is (i) the Group I Principal Remittance Amount for such Payment Date and the denominator of which is (ii) the Principal Remittance Amount for such Payment Date.

“Group I Basic Principal Distribution Amount”: With respect to any Payment Date, the excess of (i) the Distributable Principal Amount for Group I for such Payment Date over (ii) the Overcollateralization Release Amount, if any, for such Payment Date multiplied by the Group I Allocation Percentage.

“Group I Mortgage Loans”: The Mortgage Loans allocated to Group I which primarily support the Class 1A-1 Notes.

“Group I Principal Distribution Amount”: As to any Payment Date, the sum of the (i) Group I Basic Principal Distribution Amount for such Payment Date and (ii) the Extra Principal Distribution Amount for such Payment Date multiplied by the Group I Allocation Percentage.

“Group I Principal Remittance Amount”: For any Payment Date is that portion of the Principal Remittance Amount that was collected or advanced on the Group I Mortgage Loans plus, on the Payment Date immediately following the Pre-Funding Period, any related portion of unused Pre-Funding Account moneys.

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“Group I Senior Principal Distribution Amount”: The lesser of (a) the Class A Principal Distribution Amount times the Group I Allocation Percentage and (b) the note principal balance of the Class 1A-1 Notes.

“Group II Allocation Percentage”: With respect to any Payment Date, the percentage equivalent of a fraction, the numerator of which is (i) the Group II Principal Remittance Amount for such Payment Date and the denominator of which is (ii) the Principal Remittance Amount for such Payment Date.

“Group II Basic Principal Distribution Amount”: With respect to any Payment Date, the excess of (i) the Distributable Principal Amount for Group II for such Payment Date over (ii) the Overcollateralization Release Amount, if any, for such Payment Date multiplied by the Group II Allocation Percentage.

“Group II Mortgage Loans”: The Mortgage Loans allocated to Group II which primarily support the Class 2A Notes.

“Group II Principal Distribution Amount”: With respect to any Payment Date, the sum of (i) the Group II Basic Principal Distribution Amount for such Payment Date and (ii) the Extra Principal Distribution Amount for such Payment Date multiplied by the Group II Allocation Percentage.

“Group II Principal Remittance Amount”: For any Payment Date, that portion of the Principal Remittance Amount that was collected or advanced on the Group II Mortgage Loans plus, on the Payment Date immediately following the Pre-Funding Period, any related portion of unused Pre-Funding Account moneys.

“Group II Senior Principal Distribution Amount”: The lesser of (a) the Class A Principal Distribution Amount times the Group II Allocation Percentage and (b) the aggregate note principal balance of the Class 2A-1A, Class 2A-1B and Class 2A-1C Notes.

“Highest Lawful Rate”: As defined in Section 11.19 of the Indenture.

“Indenture”: The Indenture, dated as of May 1, 2006, by and among the Issuing Entity, the Indenture Trustee and the Co-Trustee, relating to the issuance of the Notes.

“Indenture Trustee”: JPMorgan Chase Bank, National Association, a national banking association organized under the laws of the United States, or its successor-in-interest, or any successor Indenture Trustee appointed as provided for in Section 6.09 of the Indenture.

“Indenture Trustee Fee”: As to any Payment Date, the product of (i) the Indenture Trustee Fee Rate divided by 12 and (ii) the sum of the Principal Balance of the Mortgage Loans as of the first day of the related Due Period plus the Pre-Funding Amount as of such date as well as any due and unpaid fees.

“Indenture Trustee Fee Rate”: 0.0035% per annum.

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“Indenture Trustee’s Remittance Report”: The statement prepared pursuant to Section 2.09 of the Indenture.

“Independent”: When used with respect to any specified Person, means such a Person who (i) is in fact independent of the Issuing Entity and any other obligor upon the Notes, (ii) does not have any direct financial interest or any material indirect financial interest in the Issuing Entity or in any such other obligor or in an Affiliate of the Issuing Entity or such other obligor, and (iii) is not connected with the Issuing Entity or any such other obligor as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar functions. Whenever it is herein provided that any Independent Person’s opinion or certificate shall be furnished to the Indenture Trustee, such Person shall be appointed by a Trust Order and such opinion or certificate shall state that the signer has read this definition and that the signer is Independent within the meaning hereof.

“Indirect Participant”: Any financial institution for whom any Direct Participant holds an interest in a Note.

“Individual Note”: A Note of an original principal balance of $25,000; a Note of an original principal balance in excess of $25,000 shall be deemed to be a number of Individual Notes equal to the quotient obtained by dividing such original principal balance amount by $25,000.

“Initial Certification”: A certification as to the completeness of each Custodian’s Mortgage File prepared by the Custodian, and provided by the Custodian within sixty (60) days of the Closing Date pursuant to Section 2.06(a) of the Sale and Servicing Agreement.

“Initial Cut-Off Date”: The close of business on May 1, 2006.

“Initial Mortgage Loans”: The Mortgage Loans sold to the Issuing Entity on the Closing Date.

“Insurance Proceeds”: Proceeds paid by any insurer pursuant to any insurance policy covering a Mortgage Loan to the extent such proceeds are not applied to the restoration of the related Mortgaged Property or released to the related Mortgagor in accordance with the express requirements of law or in accordance with Accepted Servicing Practices.

“Interest Determination Date”: With respect to any Interest Accrual Period for the LIBOR Notes, the second London Business Day prior to the immediately preceding Payment Date; provided, however, that with respect to the June 2006 Payment Date, the Interest Determination Date shall be June 6, 2006.

“Interest Payment Amount”: For any Payment Date and Class of Notes, an amount equal to the Accrued Note Interest for such Class of Notes on such Payment Date, plus the Unpaid Interest Shortfall Amount for such Class of Notes as of such Payment Date.

“Interest Remittance Amount”: With respect to any Payment Date and Group, the Available Funds on such Payment Date attributable to interest received or advanced on the related Group of Mortgage Loans less the Servicing Fees, the Owner Trustee Fees, the Custodian Fees and the Indenture Trustee Fees for such Payment Date, to the extent related to such Group.

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“Issuing Entity”: NovaStar Mortgage Funding Trust, Series-2006-MTA1, a Delaware statutory trust.

“Lender Letter”: The lender letter #LL03-00 dated April 11, 2000 for Fannie Mae Sellers.

“Letter Agreement”: The Letter of Representations to the Clearing Agency from the Indenture Trustee and the Issuing Entity dated June 8, 2006.

“LIBOR”: With respect to any Accrual Period, the rate determined by the Indenture Trustee on the related Interest Determination Date which equals the posted rate for U.S. dollar deposits for one month which appears on Telerate Page 3750, as of 11:00 a.m. (London time) on such Interest Determination Date. If no such posted rate appears, LIBOR will be determined on the basis of the offered quotation of the Reference Banks for U.S. dollar deposits for one month to prime banks in the London interbank market as of 11:00 a.m. London time, on such date. If fewer than two Reference Banks provide such offered quotations on that date, LIBOR will be calculated as the offered rate which one or more leading banks in The City of New York selected by the Indenture Trustee (after consultation with the Servicer) are quoting as of 11:00 a.m., New York City time, on such date to leading European banks for U.S. dollar deposits for one month; provided, however, that if such banks are not quoting as described above, LIBOR will be equal to the value calculated for the immediately preceding Accrual Period.

In the event that LIBOR must be calculated on the basis of offered rates as set forth above, LIBOR shall be calculated as the arithmetic mean (rounded, if necessary, to the nearest 1/100th of a percent (0.0001), with upwards rounding of amounts equal to or in excess of 5/1,000th of a percent (0.00005)) of all such quotations.

“LIBOR Notes”: The Class A Notes and the Class M Notes.

“Liquidated Loan Loss”: As to any Liquidated Mortgage Loan, the excess, if any, of (x) the unpaid Principal Balance of such Liquidated Mortgage Loan plus accrued and unpaid interest on such unpaid Principal Balance from the Due Date to which interest was last paid by the Mortgagor over (y) Net Liquidation Proceeds.

“Liquidated Mortgage Loan”: A Mortgage Loan with respect to which the related Mortgaged Property has been acquired, liquidated or foreclosed and with respect to which the Servicer determines that all Liquidation Proceeds which it expects to recover have been recovered and for which the Servicer has so designated on its Determination Date Report.

“Liquidation Expenses”: As to any Liquidated Mortgage Loan, all expenses incurred by the Servicer in connection with the liquidation of such Mortgage Loan, including, without duplication any unreimbursed Servicing Advances.

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“Liquidation Proceeds”: The amount received by the Servicer in connection with (i) the taking of all or a part of a Mortgaged Property by exercise of the power of eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage Loan through a sale, foreclosure sale, REO Disposition or otherwise or (iii) the liquidation of any other security for such Mortgage Loan.

“Loan Group”: Any of Loan Group I or Loan Group II.

“Loan Group I”: The Mortgage Loans identified in the Mortgage Loan Schedule for Group I.

“Loan Group II”: The Mortgage Loans identified in the Mortgage Loan Schedule for Group II.

“Loan-to-Value Ratio” or “LTV”: With respect to any Mortgage Loan as of its date of origination, the ratio on such date borne by the original Principal Balance of the Mortgage Loan to the Appraised Value of the related Mortgaged Property.

“London Business Day”: A day on which banking institutions in the City of London, England, are not required or authorized to be closed.

“Majority Noteholders”: With respect to the Notes, the Holder or Holders of Notes evidencing Note Balances in excess of 51% of the aggregate Class Note Balance.

“MERS”: Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.

“MERS System”: The system of recording transfers of Mortgages electronically maintained by MERS.

“MI Insurance Agreement”: A private mortgage insurance agreement issued by the MI Insurer pursuant to which MI Policies are issued on individual Mortgage Loans.

“MI Insurance Proceeds”: Proceeds paid by the MI Insurer pursuant to an MI Policy.

“MI Insurer”: Mortgage Guaranty Insurance Corporation, a Wisconsin private mortgage insurance company and their successors and assigns.

“MI Insurer Insolvency Event”: (A) The determination by the applicable regulatory or supervisory agency having jurisdiction over the MI Insurer that such MI Insurer is insolvent or unable to pay its obligations as they mature, (B) following the failure of the MI Insurer to pay under the related MI Policy, the determination by the Servicer that such MI Insurer is insolvent or unable to pay its obligations as they become due, (C) the long-term rating on the claims paying ability of the MI Insurer shall be lowered by Moody’s below A-2, if such MI Insurer is then rated by Moody’s, or shall be lowered by S&P below AA, if such MI Insurer is then rated by S&P.

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“MI Policy”: A private mortgage insurance policy underwritten by the MI Insurer with respect to an individual Mortgage Loan, issued pursuant to the MI Insurance Agreement.

“MI Premium”: The primary mortgage insurance premium for each MI Policy, payable annually to an MI Insurer, as specified in the MI Insurance Agreement, and with respect to each monthly premium payment, 1/12 of the annual premium.

“MIN”: The Mortgage Identification Number for Mortgage Loans registered with MERS on the MERS System.

“MOM Loan”: A Mortgage Loan for which MERS is acting as the mortgagee of such Mortgage Loan, solely as nominee for the originator of such Mortgage Loan and its successors and assigns, at the origination thereof.

“Monthly Payment”: As to any Mortgage Loan (including any REO Property) and any Due Date, the payment of principal and interest due thereon as specified for such Due Date in the related amortization schedule at the time applicable thereto (after adjustment for any Curtailments and Deficient Valuations occurring prior to such Due Date but before any adjustment to such amortization schedule by reason of any bankruptcy, other than Deficient Valuations, or similar proceeding or any moratorium or similar waiver or grace period).

“Moody’s”: Moody’s Investors Service, Inc., a corporation organized and existing under Delaware law, or any successor thereto and if such corporation no longer for any reason performs the services of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized rating agency.

“Mortgage”: The mortgage, deed of trust or other instrument creating a first lien on the Mortgaged Property.

“Mortgage File”: The mortgage documents listed in Section 2.05 of the Sale and Servicing Agreement pertaining to a particular Mortgage Loan and any additional documents required to be added to the Mortgage File pursuant to the Sale and Servicing Agreement.

“Mortgage Interest Rate”: As to any Mortgage Loan, the per annum rate at which interest accrues on the unpaid Principal Balance thereof.

“Mortgage Loan Schedule”: With respect to any date, the schedule of Mortgage Loans subject to this Agreement on such date. The schedule of Mortgage Loans as of the Cut-off Date is the schedule set forth in Schedule I hereto, which schedule sets forth as to each Mortgage Loan:

(i) the loan number;

(ii) the city, state and zip code of the Mortgaged Property;

(iii) the Mortgage Rate at origination;

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(iv) with respect to a Mortgage Loan, the Maximum Rate and the Minimum Rate;

(v) the maturity date;

(vi) the original Principal Balance;

(vii) the first due date;

(viii) the type of Mortgaged Property;

(ix) the Monthly Payment in effect as of the Cut-off Date;

(x) the Principal Balance as of the Cut-off Date;

(xi) with respect to an Mortgage Loan, the Index, the Gross Margin; the Lifetime Rate Cap and the Periodic Rate Cap;

(xii) with respect to an Mortgage Loan, the first Adjustment Date and next Adjustment Date, if any;

(xiii) with respect to an Mortgage Loan, the Adjustment Date frequency and Payment Date frequency;

(xiv) the occupancy status;

(xv) the purpose of the Mortgage Loan;

(xvi) the Appraised Value of the Mortgaged Property;

(xvii) the original term to maturity;

(xviii) the paid-through date of the Mortgage Loan;

(xix) the Loan-to-Value Ratio;

(xx) whether the Mortgage Loan is an Mortgage Loan or a Fixed Rate Mortgage Loan;

(xxi) whether or not the Mortgage Loan was underwritten pursuant to a limited documentation program;

(xxii) whether the Mortgage Loan is covered by an MI Policy;

(xxiii) if the Mortgage Loan is registered with MERS on the MERS System, the MIN; and

(xxiv) whether the Mortgage Loan is in Group I or Group II.

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The Mortgage Loan Schedule shall set forth the total of the amounts described under (x) above for all of the Mortgage Loans and each Loan Group.

“Mortgage Loans”: The Mortgage Loans (together with any Qualified Substitute Mortgage Loans substituted therefor in accordance with the Basic Documents, as from time to time are held as a part of the Issuing Entity), so being identified in the Mortgage Loan Schedule on the Closing Date. When used in respect of any Payment Date, the term Mortgage Loans shall mean all Mortgage Loans (including those in respect of which the Indenture Trustee has acquired the related Mortgaged Property) which have not been repaid in full prior to the related Due Period, did not become Liquidated Mortgage Loans prior to such related Due Period or were not repurchased or replaced by the Sponsor prior to such related Due Period.

“Mortgage Note”: The original, executed note or other evidence of any indebtedness of a Mortgagor under a Mortgage Loan.

“Mortgaged Property”: The underlying property or properties securing a Mortgage Loan, consisting of a fee simple or leasehold interest in one or more parcels of land.

“Mortgagor”: The obligor on a Mortgage Note.

“NCFC”: NovaStar Certificates Financing Corporation, a Delaware corporation, and its successors and assigns.

“NCFLLC”: NovaStar Certificates Financing LLC, a Delaware limited liability company, and its successors and assigns.

“Negative Amortization”: With respect to any Mortgage Loan, the amount by which unpaid interest on such Mortgage Loan is added to the Principal Balance of such Mortgage Loan.

“Net Foreclosure Profits”: As to any Servicer Remittance Date, the excess, if any, of (i) the aggregate Foreclosure Profits with respect to such Servicer Remittance Date over (ii) Liquidated Loan Losses with respect to such Servicer Remittance Date.

“Net Liquidation Proceeds”: As to any Liquidated Mortgage Loan, Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed Delinquency Advances and Servicing Advances made by the Servicer with respect to such Liquidated Mortgage Loan. For all purposes of the Basic Documents, Net Liquidation Proceeds shall be allocated first to accrued and unpaid interest on the related Mortgage Loan and then to the unpaid Principal Balance thereof.

“Net Monthly Excess Cashflow” With respect to any Payment Date, the sum of (i) the amount of Available Funds in respect of interest remaining after making all payments described in Section 8.01(b) of the Indenture and (ii) the Overcollateralization Release Amount.

“Net Negative Amortization”: Means for any Payment Date and any group of Mortgage Loans the excess, if any, of (a) the aggregate Negative Amortization with respect to such Loan Group during the related Due Period over (b) voluntary Principal Prepayments for the related Prepayment Period and Loan Group.

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“Net Prepayment Interest Shortfalls”: For any Payment Date and either Loan Group, the amount by which the aggregate Prepayment Interest Shortfalls for that Loan Group exceeds the sum of (x) the Compensating Interest for that Loan Group and (y) the excess, if any, of the Compensating Interest for the other Loan Group over the Prepayment Interest Shortfalls for such other Loan Group.

“Net REO Proceeds”: As to any REO Disposition, REO Proceeds net of any related expenses of the Servicer.

“NFI”: NovaStar Financial, Inc., a Maryland corporation, and its successors and assigns.

“Nonrecoverable Advances”: With respect to any Mortgage Loan, (a) any Delinquency Advance or Servicing Advance previously made and not reimbursed pursuant to Section 5.07 of the Sale and Servicing Agreement, or (b) a Delinquency Advance proposed to be made in respect of a Mortgage Loan or REO Property either of which, in the good faith business judgment of the Servicer, as evidenced by an Officer’s Certificate delivered to the Indenture Trustee no later than the Business Day following such determination, would not ultimately be recoverable pursuant to Section 5.07 of the Sale and Servicing Agreement.

“Note”: Any Class A Note, Class M Note or Class X Note executed by the Owner Trustee on behalf of the Issuing Entity and authenticated by the Indenture Trustee.

“Noteholder” or “Holder”: Each Person in whose name a Note is registered in the Note Register, except that, solely for the purposes of giving any consent, waiver, request or demand pursuant to the Indenture, any Note registered in the name of the Servicer or the Sponsor, or any Affiliate of any of them, shall be deemed not to be outstanding and the undivided Percentage Interest evidenced thereby shall not be taken into account in determining whether the requisite percentage of Notes necessary to effect any such consent, waiver, request or demand has been obtained. For purposes of any consent, waiver, request or demand of Noteholders pursuant to the Indenture, upon the Indenture Trustee’s request, the Servicer and the Sponsor shall provide to the Indenture Trustee a notice identifying any of their respective Affiliates that is a Noteholder as of the date(s) specified by the Indenture Trustee in such request.

“Note Rate”: For each Class of Notes (other than the Class X Notes), the rate equal to the lesser of (i) the related Formula Rate and (ii) the Available Funds Cap Rate.

“Note Register”: As defined in Section 2.06 of the Indenture.

“Note Registrar”: As defined in Section 2.06 of the Indenture.

“Officer’s Certificate”: A certificate signed by the chairman of the board, the president or a vice president and the treasurer, the secretary or one of the assistant treasurers or assistant secretaries of the Sponsor, the Servicer, or, with respect to the Issuing Entity, a certificate signed by the Servicer pursuant to Section 12.15 of the Trust Agreement or a Responsible Officer of the Owner Trustee, at the direction of the Certificateholders as required by any Basic Document.

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“Opinion of Counsel”: A written opinion of counsel, who may, without limitation, be counsel for the Sponsor, the Servicer, the Indenture Trustee, the Owner Trustee, a Noteholder or a Noteholder’s prospective transferee (including except as otherwise provided herein, in-house counsel) reasonably acceptable to each addressee of such opinion and experienced in matters relating to the subject of such opinion.

“Original Class Note Balance”: As of the Closing Date and as to each Class of Notes, as follows.

Class	Original Class Note Balance
1A-1	$	518,700,000
2A-1A	$	331,740,000
2A-1B	$	138,225,000
2A-1C	$	82,935,000
M-1	$	40,200,000
M-2	$	19,200,000
M-3	$	11,400,000
M-4	$	9,600,000
M-5	$	6,600,000
M-6	$	6,000,000
M-7	$	6,000,000
M-8	$	6,000,000
M-9	$	6,000,000
M-10	$	6,000,000

“Original Pre-Funded Amount”: The amount deposited by the Company in the Pre-Funding Account on the Closing Date, which amount is $138,776,585.08, $90,813,688.21, related to the Group I Mortgage Loans and $47,962,896.87 related to the Group II Mortgage Loans.

“Outstanding”: As of the date of determination, all Notes theretofore authenticated and delivered under the Indenture except:

(i) Definitive Notes theretofore canceled by the Note Registrar or delivered to the Note Registrar for cancellation;

(ii) Notes or portions thereof for whose payment or redemption money in the necessary amount has been theretofore deposited with the Indenture Trustee in trust for the Holders of such Notes; provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision therefor, satisfactory to the Indenture Trustee, has been made;

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(iii) Notes in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Notes are held by a bona fide purchaser (as defined by the Uniform Commercial Code of the applicable jurisdiction); and

(iv) Notes alleged to have been destroyed, lost or stolen that have been paid as provided for in Section 2.07 of the Indenture;

provided, however, that in determining whether the Holders of the requisite percentage of the Class Note Balance of the Outstanding Notes have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Issuing Entity, any other obligor upon the Notes or any Affiliate of the Issuing Entity, the Servicer or the Sponsor or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes that a Responsible Officer of the Indenture Trustee has actual knowledge to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Issuing Entity, any other obligor upon the Notes or any Affiliate of the Issuing Entity, the Servicer or the Sponsor or such other obligor.

“Overcollateralization Amount”: As to any Payment Date, the amount, if any, by which (x) the Pool Balance as of the end of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) plus any outstanding Pre-Funding Amount exceeds (y) the aggregate Adjusted Class Note Balance or Class Note Balance, as applicable, of the Notes, after giving effect to payments on such Payment Date.

“Overcollateralization Deficiency”: As to any Payment Date, the amount, if any, by which (x) the Required Overcollateralization Amount for such Payment Date exceeds (y) the Overcollateralization Amount for such Payment Date, calculated for this purpose after giving effect to the reduction on such Payment Date of the Adjusted Class Note Balances of the Notes resulting from the payment of the Principal Remittance Amount on such Payment Date.

“Overcollateralization Release Amount”: With respect to any Payment Date, the lesser of (x) the Principal Remittance Amount for such Payment Date and (y) the excess, if any, of (i) the Overcollateralization Amount for such Payment Date (assuming that 100% of the Principal Remittance Amount is applied as a principal payment on such Payment Date) over (ii) the Required Overcollateralization Amount for such Payment Date.

“Owner-Occupied Mortgaged Property”: A Residential Dwelling as to which (a) the related Mortgagor represented an intent to occupy as such Mortgagor’s primary residence at the origination of the Mortgage Loan, and (b) the Sponsor has no actual knowledge that such Residential Dwelling is not so occupied.

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“Ownership Interest”: As to any Note, any ownership or security interest in such Note, including any interest in such Note as the Holder thereof and any other interest therein, whether direct or indirect, legal or beneficial, as owner or as pledgee.

“Owner Trustee”: Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity, but solely as owner trustee under the Trust Agreement, and any successor owner trustee thereunder.

“Owner Trustee Fee”: As defined in Section 9.01 of the Trust Agreement.

“Payahead”: Any payment made by a Mortgagor during a Due Period which is intended by the Mortgagor to be an early payment of one or more scheduled monthly payments due with respect to subsequent Due Periods, and not as a Curtailment to be applied in full as a reduction in the Principal Balance of the related Mortgage Loan.

“Paying Agent”: The Indenture Trustee or any other depository institution or trust company that is authorized by the Issuing Entity pursuant to Section 3.03 of the Indenture to pay the principal of, or interest on, any Notes on behalf of the Issuing Entity, which agent, if not the Indenture Trustee, shall have signed an instrument agreeing to be bound by the terms of the Indenture applicable to such Paying Agent.

“Payment Account”: The segregated trust account, which shall be an Eligible Account, established and maintained pursuant to Section 8.01(a) of the Indenture and entitled “JPMorgan Chase Bank, National Association, as Indenture Trustee for NovaStar Mortgage Funding Trust, Series 2006-MTA1 Asset-Backed Notes, Series 2006-MTA1, Payment Account,” on behalf of the Noteholders.

“Payment Date”: The 25th day of any month or if such 25th day is not a Business Day, the first Business Day immediately following, commencing in June 2006.

“Percentage Interest”: With respect to a Note of any Class, the portion of such Class evidenced by such Note, expressed as a percentage rounded to four decimal places, equal to a fraction the numerator of which is the denomination represented by original Principal Balance of such Note and the denominator of which is the Original Class Note Balance of such Class. With respect to the Certificates, the portion of the Certificates evidenced thereby as stated on the face of such Certificate.

“Person”: Any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, national banking association, unincorporated organization or government or any agency or political subdivision thereof.

“Physical Property”: As defined in clause (b) of the definition of “Delivery.”

“Plan”: Either (i) an employee benefit plan (within the meaning of Section 3(3) of ERISA) that is subject to Title I of ERISA, (ii) a plan (within the meaning of Section 4975(e)(1) of the Code) that is subject to Section 4975 of the Code or (iii) a Governmental Plan that is subject to any federal, state or local law that is, to a material extent, similar to Title I of ERISA or Section 4975 of the Code.

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“Pool Balance”: For any date and with respect to the Mortgage Loans or a Group of Mortgage Loans, the aggregate Principal Balance of the related Mortgage Loans as of such date.

“Predecessor Notes”: With respect to any particular Note, every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 2.07 of the Indenture in lieu of a lost, destroyed or stolen Note shall be deemed to evidence the same debt as the lost, destroyed or stolen Note.

“Pre-Funded Amount”: With respect to any date of determination, the amount on deposit in the Pre-Funding Account.

“Pre-Funding Account”: The account established and maintained pursuant to Section 8.11(a) of the Indenture and which must be an Eligible Account.

“Pre-Funding Period”: The period beginning on the Closing Date and ending on the earlier to occur of (a) the date upon which the amount on deposit in the Pre-Funding Account is less than $10,000 and (b) September 6, 2006

“Prepayment Charge”: With respect to any Mortgage Loan, the charges or premiums, if any, due in connection with a full or partial Principal Prepayment of such Mortgage Loan in accordance with the terms thereof.

“Prepayment Interest Shortfall”: With respect to any Payment Date, for each Mortgage Loan that was the subject of a Principal Prepayment in full during the portion of the related Prepayment Period in the prior calendar month, an amount equal to the excess, if any, of (a) 30 days’ interest on the Principal Balance of such Mortgage Loan at a per annum rate equal to (i) the Mortgage Interest Rate (or at such lower rate as may be in effect for such Mortgage Loan pursuant to application of the Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus (ii) the Servicing Fee Rate, over (b) the amount of interest actually remitted by the related Mortgagor in connection with such Principal Prepayment in full.

“Prepayment Period”: With respect to any Payment Date and Principal Prepayments in full, the period commencing on the 16^th day of the month preceding the month in which such Payment Date occurs (or, in the case of the first Payment Date, the day following the Initial Cut-Off Date) and ending on the 15^th day of the month in which such Payment Date occurs.

“Principal Balance”: As to any Mortgage Loan and any date of determination, the outstanding Principal Balance of such Mortgage Loan as of such date of determination.

“Principal Distribution Amount”: As to any Payment Date, the sum of (i) the Basic Principal Distribution Amount and (ii) the Extra Principal Distribution Amount.

“Principal Prepayment”: Any payment of principal made by the Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due Date and which is not accompanied by an amount of interest representing the full amount of scheduled interest due on any Due Date in any month or months subsequent to the month of prepayment.

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“Principal Remittance Amount”: For any Payment Date, an amount equal to that portion of the Servicer Remittance Amount for the related Servicer Remittance Date which relates to principal, together with:

(i) the principal portion of the proceeds received by the Indenture Trustee upon the exercise by the Depositor of its option to call the Notes;

(ii) the principal portion of the proceeds received by the Indenture Trustee on any termination of the Issuing Entity;

(iii) the principal portion of the repurchase price for any repurchased Mortgage Loans;

(iv) the principal portion of Substitution Adjustments received in connection with the substitution of a Mortgage Loan as of such Payment Date; and

(v) the Subsequent Recoveries received.

“Proceeding”: Any suit in equity, action at law or other judicial or administrative proceeding.

“Prospectus”: The Prospectus Supplement together with the Base Prospectus attached thereto with respect to the Notes.

“Prospectus Supplement”: The Prospectus Supplement dated June 5, 2006 relating to the Notes filed with the Commission in connection with the Registration Statement heretofore filed or to be filed with the Commission pursuant to Rule 424(b)(5).

“Qualified Appraiser”: An appraiser, duly appointed by the Sponsor, who had no interest, direct or indirect, in the Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan, and such appraiser and the appraisal made by such appraiser both satisfy the requirements of Title XI of the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the regulations promulgated thereunder, all as in effect on the date the Mortgage Loan was originated.

“Qualified REIT Subsidiary”: Has the meaning set forth in Section 856(i) of the Code. Qualified REIT Subsidiary shall also include any entity that is wholly-owned by a Qualified REIT Subsidiary and is disregarded as an entity separate from its owner under Treasury Regulation Section 301.7701-3.

“Qualified Substitute Mortgage Loan”: Any Mortgage Loan substituted for a Deleted Mortgage Loan which has a scheduled Principal Balance, after application of all payments received on or prior to the date of substitution not substantially less and not more than the scheduled Principal Balance of the Deleted Mortgage Loan as of such date, and each of which, among other things,

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• relates to a detached one- to four-family residence and has the same or a better lien priority as the Deleted Mortgage Loan and has the same occupancy status as the Deleted Mortgage Loan or is an owner-occupied mortgaged property,

• matures no later than, and not more than one year earlier than, the Deleted Mortgage Loan,

• has a loan-to-value ratio or LTV at the time of such substitution no higher than the LTV of the Deleted Mortgage Loan,

• has a mortgage interest rate greater than or equal to the interest rate of the Deleted Mortgage Loan, and if the Deleted Mortgage Loan is an adjustable Mortgage Loan, have a gross margin no lower than and not more than 1% per annum higher than the gross margin of the Deleted Mortgage Loan,

• not be more than 30 days delinquent,

• have a lien priority equal to or superior to the lien priority of the Deleted Mortgage Loan, and

• complies, as of the date of substitution, with each representation and warranty set forth in the sale and servicing agreement.

“Rating Agency”: Each of S&P, Moody’s and Fitch.

“Rating Agency Condition”: With respect to any action to which a Rating Agency Condition applies, each Rating Agency shall have been given ten (10) days (or such shorter period as is acceptable to each Rating Agency) prior notice thereof and each of the Rating Agencies shall have notified the Indenture Trustee, the Servicer, the Sponsor, the Depositor and the Issuing Entity in writing that such action will not result in a reduction, qualification or withdrawal of the then current rating of the Notes that it maintains.

“Realized Loss”: The amount determined by the Servicer, in accordance with its standard procedure, in connection with any Mortgage Loan equal to:

(i) with respect to any Mortgage Loan which has been liquidated, the excess of the Principal Balance of that Mortgage Loan plus interest thereon at a rate equal to the applicable Mortgage Interest Rate less the Servicing Fee Rate from the Due Date as to which interest was last paid or advanced up to the Due Date next succeeding such liquidation over Net Liquidation Proceeds, if any, received in connection with such liquidation,

(ii) with respect to any Mortgage Loan which has become the subject of a Deficient Valuation, the excess of the Principal Balance of the Mortgage Loan over the Principal Amount as reduced in connection with the proceedings resulting in the Deficient Valuation or

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(iii) with respect to any Mortgage Loan which has become the subject of a Debt Service Reduction, the present value of all monthly Debt Service Reductions on such Mortgage Loan, assuming that the Mortgagor pays each scheduled monthly payment on the applicable due date and that no Principal Prepayments are received with respect to such Mortgage Loan, discounted monthly at the applicable mortgage rate.

“Record Date”: With respect to the Notes, the last Business Day immediately preceding the related Payment Date so long as the Notes are in book-entry form and for Notes in definitive form, the last Business Day of the month immediately preceding the month in which the Payment Date occurs.

“Redemption Date”: The Payment Date, if any, on which the Notes are redeemed, in each case, pursuant to Article X of the Indenture, which date may occur on or after the Clean-Up Call Date.

“Reference Banks”: Citibank, Barclay’s Bank PLC, The Bank of Tokyo-Mitsubishi and National Westminster Bank PLC; provided, that if any of the foregoing banks are not suitable to serve as a Reference Bank, then any leading banks selected by the Indenture Trustee (after consultation with the Servicer) which are engaged in transactions in Eurodollar deposits in the international Eurocurrency market (i) with an established place of business in London, (ii) not controlling, under the control of or under common control with the Servicer or the Indenture Trustee or any affiliate thereof and (iii) whose quotations appear on the Telerate Page 3750 on the relevant Interest Determination Date.

“Regulation AB”: Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, as such may be amended from time to time, and subject to such clarification and interpretation as have been provided by the Commission in the adopting release (Asset-Backed Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff of the Commission, or as may be provided by the Commission or its staff from time to time.

“Relevant Servicing Criteria”: The Servicing Criteria applicable to the various parties, as set forth on Exhibit H to the Sale and Servicing Agreement. For clarification purposes, multiple parties can have responsibility for the same Relevant Servicing Criteria. With respect to a Servicing Function Participant engaged by the Servicer and the Indenture Trustee, the term “Relevant Servicing Criteria” may refer to a portion of the Relevant Servicing Criteria applicable to such parties.

“Relief Act”: The Servicemembers Civil Relief Act, as amended.

“Relief Act Interest Shortfall”: With respect to any Payment Date and a Mortgage Loan, an amount equal to the excess, if any, of (a) one month’s interest on the outstanding Principal Balance of a Mortgage Loan at the related Mortgage Interest Rate over (b) the amount of interest due on such Mortgage Loan because of the application of the Servicemembers Civil Relief Act or any similar state law.

“REIT”: A real estate investment trust within the meaning of section 856(a) of the Code that satisfies the requirements of section 857(a). REIT shall also include any entity that is wholly-owned by a REIT and is disregarded as an entity separate from its owner under Treasury Regulation Section 301.7701-3.

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“REO Disposition”: As to any REO Property, a determination by the Servicer that it has received substantially all Insurance Proceeds, Liquidation Proceeds, REO Proceeds and other payments and recoveries (including proceeds of a final sale) which the Servicer expects to be finally recoverable from the sale or other disposition of the REO Property.

“REO Proceeds”: Proceeds, net of expenses, received in respect of any REO Property (including, without limitation, proceeds from the rental of the related Mortgaged Property), which proceeds are required to be deposited into the Collection Account within two days of receipt by the Servicer.

“REO Property”: A Mortgaged Property acquired by the Servicer in the name of the Indenture Trustee on behalf of the Noteholders through foreclosure or deed-in-lieu of foreclosure.

“Request for Release”: A request for release in substantially the form attached as Exhibit F of the Sale and Servicing Agreement.

“Required Overcollateralization Amount”: With respect to any Payment Date:

(i) prior to the Crossover Date, 0.950% of the sum of (i) the aggregate Principal Balance of the Initial Mortgage Loans as of the related cut-off date and (ii) the Pre-Funding Amount as of the Closing Date.

(ii) on or after the Crossover Date if no Trigger Event has occurred and is continuing, the greater of:

(a) 0.500% of the sum of (x) the aggregate Principal Balance of the Initial Mortgage Loans as of the related Cut-off Date and (y) the Pre-Funding Amount as of the Closing Date;

(b) prior to the Payment Date in June 2012, 2.375% of the current Principal Balance of the Mortgage Loans; and on or after the Payment Date in June 2012, 1.900% of the Principal Balance of the Mortgage Loans.

On any Payment Date on which a Trigger Event is in effect, the Required Overcollateralization Amount will be equal to the Required Overcollateralization Amount as of the preceding Payment Date.

“Repurchase Event”: With respect to any Mortgage Loan, either (i) a discovery that, as of the Closing Date the related Mortgage was not a valid lien on the related Mortgaged Property subject only to (A) the lien of real property taxes and assessments not yet due and payable, (B) covenants, conditions, and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage and such other permissible title exceptions as are permitted, (C) other matters to which like properties are commonly subject which do not materially adversely affect the value, use, enjoyment or marketability of the related

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Mortgaged Property and (D) in the case of a second-lien Mortgage, the first-lien or (ii) with respect to any Mortgage Loan as to which the Seller delivers an affidavit certifying that the original Mortgage Note has been lost or destroyed, a subsequent default on such Mortgage Loan if the enforcement thereof or of the related Mortgage is materially and adversely affected by the absence of such original Mortgage Note.

“Repurchase Price”: With respect to any Mortgage Loan (i) required to be repurchased on any date by the Sponsor pursuant to the Sale and Servicing Agreement or (ii) permitted to be purchased by the Servicer pursuant to 5.19 of the Sale and Servicing Agreement, an amount equal to the sum, without duplication, of (i) 100% of the Principal Balance thereof (without reduction for any amounts charged off) and (ii) unpaid accrued interest at the Mortgage Interest Rate on the outstanding Principal Balance thereof from the Due Date to which interest was last paid by the Mortgagor (or with respect to which an Advance was last made by the Servicer) to the first day of the month following the month of purchase plus (iii) the amount of any unreimbursed Servicing Advances or unreimbursed Advances made with respect to such Mortgage Loan plus (iv) any other amounts owed to the Servicer or the Subservicer pursuant to Section 5.07 of the Sale and Servicing Agreement and not included in clause (iii) of this definition plus (v) any costs and damages incurred by the Issuing Entity in connection with any violation by any Mortgage Loan of any predatory or abusive lending law or breach of representations and warranties regarding licensing or any predatory or abusive lending law.

“Residential Dwelling”: A one- to four-family dwelling, a unit in a planned unit development, a unit in a condominium development or a townhouse.

“Responsible Officer”: When used with respect to the Indenture Trustee or the Owner Trustee, any officer assigned to the Corporate Trust Office (or any successor thereto), including any Vice President, Second or Assistant Vice President, Senior Trust Officer, Trust Officer, Assistant Trust Officer, any Assistant Secretary, associate, any trust officer or any other officer of the Indenture Trustee or the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers and to whom, with respect to a particular matter, such matter is referred because of such officer’s knowledge of and familiarity with the particular subject, in each case having direct responsibility for the administration of the Indenture or the Trust Agreement, as applicable. When used with respect to the Sponsor or the Servicer, the chief executive officer, the president or any vice president, assistant vice president, or any secretary or assistant secretary.

“Rolling 60-Day Delinquency Percentage”: For any Payment Date, the average of the 60-Day Delinquency Percentages for the Mortgage Loans as of the last day of each of the three (or 1 and 2 in the case of the first two Distribution Dates, as applicable) most recently ended Due Periods.

“Rolling 90-Day Delinquency Percentage”: For any Payment Date, the average of the 90-Day Delinquency Percentages for the Mortgage Loans as of the last day of each of the three (or 1 and 2 in the case of the first two Distribution Dates, as applicable) most recently ended Due Periods.

“Sale”: The meaning specified in Section 5.17 of the Indenture.

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“Sale and Servicing Agreement”: The Sale and Servicing Agreement, dated as of May 1, 2006, among the Issuing Entity, the Servicer, the Seller, the Sponsor, the Depositor, the Indenture Trustee, the Co-Trustee and the Custodian, providing for, among other things, the sale of the Mortgage Loans from the Sponsor to the Depositor and from the Depositor to the Issuing Entity and the servicing of the Mortgage Loans.

“Securities Act”: Means the Securities Act of 1933, as amended.

“Seller”: NovaStar Financial Inc., a Maryland corporation, and its successors and assigns.

“Senior Credit Enhancement Percentage”: For any Payment Date is equal to (i) the sum of (a) the aggregate Adjusted Class Note Balance of the Class M Notes and (b) the Overcollateralization Amount divided by (ii) the aggregate Principal Balance of the Mortgage Loans, calculated prior to taking into account payments of principal on the Mortgage Loans and prior to taking into account payments on the Notes on such Payment Date.

“Servicer”: NovaStar Mortgage Inc., a Virginia corporation, and its successors and assigns.

“Servicer Remittance Amount”: For a Servicer Remittance Date is equal to the sum, without duplication, of:

• all scheduled collections of principal of and interest on the Mortgage Loans collected by the Servicer during the related Due Period,

• all partial prepayments of principal and other amounts collected on account of principal, including Net REO Proceeds, Net Liquidation Proceeds, Insurance Proceeds and Subsequent Recoveries, if any, collected by the Servicer during the previous calendar month, other than Payaheads,

• all principal prepayments in full, including Prepayment Charges, collected by the Servicer during the related Prepayment Period,

• all Delinquency Advances made, and Compensating Interest paid, by the Servicer with respect to payments due to be received on the Mortgage Loans during the related Due Period, and

• any other amounts required to be placed in the Collection Account by the Servicer pursuant to the Sale and Servicing Agreement,

but excluding the following:

(a) amounts received on a Mortgage Loan, other than timely scheduled payments of principal and interest, and including late payments, Liquidation Proceeds, and Insurance Proceeds, to the extent the Servicer has previously made an unreimbursed Delinquency Advance or a Servicing Advance with regard to such Mortgage Loan;

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(b) for such Servicer Remittance Date, the aggregate servicing fees;

(c) all net income from Eligible Investments that is held in the Collection Account for the account of the Servicer;

(d) all amounts actually recovered by the Servicer in respect of late fees, assumption fees and similar fees;

(e) Net Foreclosure Profits;

(f) all amounts previously advanced by the Servicer as Delinquency Advances or Servicing Advances that are determined in good faith by the Servicer to be unrecoverable from the proceeds of the particular Mortgage Loan to which they relate;

(g) certain other amounts which are reimbursable to the Servicer, as provided in the Sale and Servicing Agreement; and

(h) MI Premium.

The amounts described above may be withdrawn by the Servicer from the Collection Account on or prior to each Servicer Remittance Date.

“Servicer Remittance Date”: With respect to any Payment Date, the third Business Day preceding the Payment Date.

“Servicer Reporting Date”: As defined in Section 5.24 of the Sale and Servicing Agreement.

“Service(s)(ing)”: In accordance with Regulation AB, the act of servicing and administering the Mortgage Loans or any other assets of the Issuing Entity by an entity that meets the definition of “Servicer” set forth in Item 1101 of Regulation AB and is subject to the disclosure requirements set forth in 1108 of Regulation AB. For clarification purposes, any uncapitalized occurrence of this term shall have the meaning commonly understood by participants in the residential mortgage-backed securitization market.

“Servicing Advances”: All reasonable and customary “out-of-pocket” costs and expenses incurred in the performance by the Servicer of its servicing obligations, including, but not limited to, the cost of (a) the preservation, restoration and protection of the Mortgaged Property, including, without limitation, real estate taxes, (b) any enforcement, collection and judicial proceedings, including foreclosures and liquidations, (c) the management and liquidation of the REO Property, including reasonable fees paid to any independent contractor in connection therewith, (d) compliance with the obligations under Sections 5.04 and 5.06 of the Sale and Servicing Agreement, all of which reasonable and customary out-of-pocket costs and expenses are reimbursable to the Servicer to the extent provided in Sections 5.07 and 5.06 of the Sale and Servicing Agreement and (e) expenses incurred in connection with any Mortgage Loan being registered on the MERS System.

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“Servicing Criteria”: The criteria set forth in paragraph (d) of Item 1122 of Regulation AB, as such may be amended from time to time.

“Servicing Compensation”: The Servicing Fee and other amounts to which the Servicer is entitled pursuant to Section 5.15 of the Sale and Servicing Agreement.

“Servicing Event of Default”: As defined in Section 7.01 of the Sale and Servicing Agreement.

“Servicing Fee”: With respect to the Mortgage Loans and any Payment Date, the product of (i) the Servicing Fee Rate divided by 12 and (ii) the Pool Balance as of the first day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period).

“Servicing Fee Rate”: With respect to any Mortgage Loan, 0.375% per annum.

“Servicing Function Participant”: Any sub-servicer, subcontractor or any other Person, other than the Servicer and the Indenture Trustee, that is performing activities addressed by the Servicing Criteria, unless such Person’s activities relate only to 5% or less of the Mortgage Loans.

“Servicing Officer”: Any officer of the Servicer involved in, or responsible for, the administration and servicing of the Mortgage Loans whose name and specimen signature appear on a list of servicing officers furnished to the Indenture Trustee by the Servicer, as such list may from time to time be amended.

“Servicing Rights Owner”: NovaStar Mortgage, Inc., or its transferee or assign, in its capacity as owner of the servicing rights with respect to the Mortgage Loans.

Servicing Rights Pledgee: The entity designated by the Servicing Rights Owner pursuant to Section 5.28.

“Servicing Transfer Costs”: Reasonable and necessary costs and expenses incurred, by or on behalf of the Indenture Trustee or successor Servicer in connection with the transfer of servicing in the event of termination of the Servicer as servicer hereunder and the resulting transfer to the successor Servicer.

“Sponsor”: NovaStar Mortgage Inc., a Virginia corporation.

“Standard & Poor’s” or “S&P”: Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or any successor thereto and if such corporation no longer for any reason performs the services of a securities rating agency, “S&P” shall be deemed to refer to any other nationally recognized statistical rating organization.

“Stated Principal Balance”: As to any Mortgage Loan and Payment Date, the unpaid Principal Balance of such Mortgage Loan as of the Due Date in the related Due Period as specified in the amortization schedule at the time relating thereto (before any adjustment to such

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amortization schedule by reason of any moratorium or similar waiver or grace period) after giving effect to (i) any previous Principal Prepayments in full received during the related Prepayment Period, (ii) any previous Curtailments and Liquidation Proceeds allocable to principal received during the prior calendar month (other than with respect to any Liquidated Mortgage Loan) and (iii) the payment of principal due on the Due Date in the related Due Period and irrespective of any delinquency in payment by the related Mortgagor.

“Statutory Trust Statute”: Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code § 3801 et seq., as the same may be amended from time to time.

“Subsequent Cut-Off Date”: As to any Subsequent Mortgage Loan, the later of the first day of the month of the transfer to the issuing entity and the date of origination of such Mortgage Loan.

“Subsequent Mortgage Loan”: A Mortgage Loan sold by the Depositor to the Issuing Entity pursuant to Section 2.09 of the Sale and Servicing Agreement such Mortgage Loan being identified on the Mortgage Loan Schedule attached to a Subsequent Transfer Instrument.

“Subsequent Recovery”: With respect to any Mortgage Loan that had previously been the subject of a Realized Loss, any amounts (net of reimbursable expenses) subsequently received in connection with such Mortgage Loan.

“Subsequent Transfer Date”: With respect to each Subsequent Transfer Instrument, the date on which the related Subsequent Mortgage Loans are sold to the Issuing Entity.

“Subsequent Transfer Instrument”: Each Subsequent Transfer Instrument, dated as of a Subsequent Transfer Date, executed by the Trustee and the Company substantially in the form attached hereto as Exhibit D, by which Subsequent Mortgage Loans are transferred to the Issuing Entity.

“Subservicer”: Any Person with which the Servicer has entered into a Subservicing Agreement and which meets the qualifications of a Subservicer pursuant to Section 5.02 of the Sale and Servicing Agreement.

“Subservicing Account”: An account established by a Subservicer which meets the requirements set forth in Section 5.06(d) of the Sale and Servicing Agreement and is otherwise acceptable to the Servicer.

“Subservicing Agreement”: The written contract between the Servicer and a Subservicer relating to servicing and administration of certain Mortgage Loans as provided in Section 5.02 of the Sale and Servicing Agreement.

“Subservicing Fee”: With respect to each Mortgage Loan and any Payment Date, the portion of the Servicing Fee paid to a Subservicer.

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“Substitution Adjustment”: As to any date on which a substitution occurs pursuant to Sections 2.06 or 4.01 of the Sale and Servicing Agreement, the amount (if any) by which the aggregate Principal Balances (after application of Principal Payments received on or before the date of substitution) of any Qualified Substitute Mortgage Loans as of the date of substitution, are less than the aggregate Stated Principal Balance of the related Deleted Mortgage Loans (after application of the scheduled principal portion of the Monthly Payments due in the month of substitution) together with 30-days’ interest thereon at the Mortgage Interest Rate, plus any costs and damages incurred by the Issuing Entity in connection with any violation by such Mortgage Loan of any predatory or abusive lending law.

“Telerate Page 3750”: The display page currently so designated on the Moneyline Telerate Service (or such other page as may replace that page on that service for the purpose of displaying comparable rates or prices).

“Termination Event”: As defined in the Swap Agreement.

“Termination Price”: The greater of (A) the sum of (i) 100% of the aggregate Class Note Balance of the Notes, (ii) the aggregate amount of accrued and unpaid interest on such Notes through the related Due Period (including with respect to any related Available Funds Cap Shortfall amount and Allocated Loss Interest), (iii) any Indenture Trustee’s fees and unpaid amounts due to the Indenture Trustee pursuant to Section 7.06 of the Sale and Servicing Agreement, (iv) any Owner Trustee Fees or Expenses that have not been paid by the Sponsor, (v) any unreimbursed Delinquency Advances and Servicing Advances due and owing to the Servicer, (vi) any costs and damages incurred by the Issuing Entity in connection with any violation by such Mortgage Loan of any predatory or abusive lending law and (vii) any Custodian Fees and expenses and (B) the fair market value of the Mortgage Loans.

“Trigger Event”: A Trigger Event is in effect on any Payment Date on or after the Crossover Date, if either (i) the Rolling 60 Day Delinquency Percentage exceeds the Product of the Senior Credit Enhancement Percentage and (a) prior to June 2012, 26.25% and (b) on or after June 2012, 32.75%, or (ii) cumulative realized losses as a percentage of the sum of (a) the aggregate Principal Balance of the Mortgage Loans as of the Initial Cut-off Date and (b) the Original Pre-Funded Amount are greater than the applicable amount set forth below:

Payment Date Occurring In:	Percentage
June 2008 - May 2009	0.20% for the month plus an additional 1/12th of 0.30% for each month thereafter.
June 2009 - May 2010	0.50% for the first month plus an additional 1/12th of 0.40% for each month thereafter.
June 2010 - May 2011	0.90% for the first month plus an additional 1/12th of 0.40% for each month thereafter.
June 1011 - May 2012	1.30% for the first month plus an additional 1/12th of 0.50% for each month thereafter.
June 2012 - May 2013	1.80% for the first month plus an additional 1/12th of 0.20% for each month thereafter.
June 2013 and thereafter	2.00%

A-41

“Trust Agreement”: The Trust Agreement, dated as of May 22, 2006, as amended and restated as of June 8, 2006, between the Sponsor, the Depositor and the Owner Trustee, relating to the establishment of the Issuing Entity.

“Trust Certificate”: A certificate evidencing the beneficial interest of the Trust Certificateholder in the Issuing Entity substantially in the form of Exhibit A to the Trust Agreement.

“Trust Estate”: All money, instruments and other property subject or intended to be subject to the lien of the Indenture, for the benefit of the Noteholders, as of any particular time, including, without limitation, all property and interests, including all proceeds thereof, granted to the Indenture Trustee, for the benefit of the Noteholders, pursuant to the Granting Clauses of the Indenture.

“Trust Indenture Act” or “TIA”: The Trust Indenture Act of 1939, as it may be amended from time to time.

“Trust Order” and “Trust Request”: A written order or request of the Issuing Entity signed on behalf of the Issuing Entity by Servicer pursuant to Section 12.15 of the Trust Agreement or an Authorized Officer of the Owner Trustee, at the direction of the Certificateholders and delivered to the Indenture Trustee or the Authenticating Agent, as applicable.

“Underwriter”: Greenwich Capital Markets, Inc. and their successors and assigns.

“Underwriting Guidelines”: The underwriting guidelines set forth in the Prospectus Supplement under the heading “Description of the Mortgage Pool—Underwriting Standards for Mortgage Loans”.

“United States Person” or “U.S. Person”: A citizen or resident of the United States, a corporation, partnership or other entity treated as a corporation or partnership for federal income tax purposes (other than a partnership that is not treated as a U.S. Person pursuant to any applicable Treasury regulations) created or organized in, or under the laws of, the United States, any state thereof or the District of Columbia, or an estate the income of which from sources without the United States is includible in gross income for United States federal income tax purposes regardless of its connection with the conduct of a trade or business within the United States, or a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have authority to control all substantial decisions of the Issuing Entity.

A-42

“Unpaid Interest Shortfall Amount”: For any Payment Date and Class of Notes, the sum of (a) the amount, if any, by which (x) the Interest Payment Amount with respect to such Class as of the immediately preceding Payment Date exceeded (y) the amount of interest actually paid to the holders of such Class of Notes on such immediately preceding Payment Date and (b) interest for the actual number of days in the Interest Accrual Period, on the amount described in clause (a), calculated at an interest rate equal to the Note Rate applicable to the related Interest Accrual Period.

A-43

SCHEDULE 1

MORTGAGE LOAN SCHEDULE

EXHIBIT A

FORM OF NOTE

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1

CLASS [                    ] NOTE

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUING ENTITY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

[THIS NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS NOTE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF THE INDENTURE.]

THE NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUING ENTITY, AND IS LIMITED IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUING ENTITY IS NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.

THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

THE CLASS M NOTES ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A NOTES, AND EACH CLASS OF CLASS M NOTES IS SUBORDINATED IN RIGHT OF PAYMENT TO THE OTHER CLASSES OF CLASS M NOTES THAT HAVE A NUMERICAL DESIGNATION THAT IS LESS THAN SUCH CLASS, AS SET FORTH MORE FULLY IN THE INDENTURE AND THE SALE AND SERVICING AGREEMENT.

Note No.:   A-[            / M- ________                   Class A-                    ] CUSIP No.:       Percentage Interest: 100%

EX A-1

Class M-                     Original Class Note Balance: $
Date of Indenture:	First Payment Date:
As of                     , 2006	, 2006

EX A-2

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1

ASSET-BACKED NOTES, SERIES 2006-MTA1,

CLASS A-            /CLASS M-            

NovaStar Mortgage Funding Trust, Series 2006-MTA1, a statutory trust organized and existing under the laws of the State of Delaware (herein referred to as the “Issuing Entity”), for value received, hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of $             (             Thousand Dollars) payable on each Payment Date in an amount equal to the result obtained by multiplying (x) the Percentage Interest of this Note set forth on the cover page hereof, by (y) the aggregate amount, if any, payable from the Payment Account in respect of principal on the Class A-[            ]/Class M-[            ] Notes, pursuant to the Indenture, dated as of May 1, 2006, between the Issuing Entity, JPMorgan Chase Bank, National Association, a banking association organized under the laws of the United States, as Indenture Trustee (the “Indenture Trustee”) and J.P. Morgan Trust Company, National Association, as Co-Trustee (the “Co-Trustee”); provided, however, that the entire unpaid Class Note Balance of this Note shall be due and payable on the earlier of (i) the Payment Date occurring in August 2046 (the “Final Stated Maturity Date”), (ii) the Redemption Date, if any, applicable to this Notes pursuant to Article X of the Indenture or (iii) the date on which an Event of Default shall have occurred and be continuing, if the Notes have been declared to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. Capitalized terms used but not defined herein are defined in Appendix I to the Indenture.

Pursuant to the terms of the Indenture, payments will be made on the 25th day of each month or, if such day is not a Business Day, on the Business Day immediately following such 25th day (each a “Payment Date”), commencing on the first Payment Date specified on the cover page hereof, to the Person in whose name this Note is registered at the close of business on the applicable Record Date, in an amount equal to the product of (a) the Percentage Interest evidenced by this Note and (b) the sum of the amounts to be paid on the Class A and Class M Notes with respect to such Payment Date, all as more specifically set forth in the Indenture.

Notwithstanding the foregoing, in the case of Definitive Notes, upon written request at least five (5) days prior to the related Record Date with appropriate instructions by the Holder of this Note (holding an aggregate initial Class Note Balance of at least $1,000,000), any payment of principal or interest, other than the final installment of principal or interest, shall be made by wire transfer to an account in the United States of America designated by such Holder reasonably satisfactory to the Indenture Trustee.

On each Payment Date, Noteholders will be entitled to receive the payment described in Article VIII of the Indenture, relating to such Payment Date.

The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuing Entity with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this Note.

EX A-3

This Note is one of a duly authorized issue of Notes of the Issuing Entity, designated as the “NovaStar Mortgage Funding Trust, Series 2006-MTA1, Asset-Backed Notes, Series 2006-MTA1, Class A-            ]/Class M-[            ],” issued under the Indenture, to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuing Entity, the Indenture Trustee and the Holders of the Notes. Also issued under the Indenture are the “NovaStar Mortgage Funding Trust, Series 2006-MTA1, Asset-Backed Notes, Series 2006-MTA1, Class A-[            ]]/Class M-[            ]].” To the extent that any provision of this Note contradicts or is inconsistent with the provisions of the Indenture, the provisions of the Indenture shall control and supersede such contradictory or inconsistent provision herein. The Notes are subject to all terms of the Indenture.

The Class A-[            ]/Class M-[            ]Notes are and will be equally and ratably secured by the Mortgage Loans in Loan Group [I][II], the other collateral related thereto pledged as security therefor as provided in the Indenture, and, to the extent provided in the Indenture, by the Mortgage Loans in Loan Group [I][II].

As described above, the entire unpaid Class Note Balance of this Note shall be due and payable on the earlier of the Final Stated Maturity Date and any Redemption Date, pursuant to Article X of the Indenture. Notwithstanding the foregoing, the entire unpaid Class Note Balance of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing if the Indenture Trustee, or the Holders of the Notes representing more than 50% of the Class Note Balance of the Outstanding Notes of both Groups, shall have declared the Notes to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. All Principal Payments on the Notes shall be made pro rata to the Noteholders entitled thereto.

The Issuing Entity shall not be liable upon the indebtedness evidenced by the Notes except to the extent of amounts available from the Trust Estate which constitutes security for the payment of the Notes. The assets included in the Trust Estate will be sole source of payments on the Notes, and each Holder hereof, by its acceptance of this Note, agrees that (i) such Note will be limited in right of payment to amounts available from the Trust Estate as provided in the Indenture and (ii) such Holder shall have no recourse to the Issuing Entity, the Owner Trustee, the Indenture Trustee, the Sponsor, the Depositor, the Servicer, or any of their respective affiliates, or to the assets of any of the foregoing entities, except the assets of the Issuing Entity pledged to secure the Notes pursuant to the Indenture.

Payments of interest on this Note due and payable on each Payment Date, together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by wire transfer in immediately available funds to the account designated by such nominee, or if no instructions for wire transfers have been provided to the Indenture Trustee as provided in the Indenture, then by check mailed to the Person whose name appears as the Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Payment Date shall be

EX A-4

binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuing Entity, will notify the Person who was the Holder hereof as of the Record Date preceding such Payment Date by notice mailed or transmitted by facsimile prior to such Payment Date, and the amount then due and payable shall be payable only upon presentation and surrender of this Note at the Indenture Trustee’s designated office or at the office of the Indenture Trustee’s agent designated for such purposes.

As provided in the Indenture, all Classes of Notes may be redeemed in whole, but not in part, at the option of the Sponsor on any Payment Date on and after the date on which the outstanding Principal Balance of the Mortgage Loans is less than or equal to 10% of the aggregate Principal Balance of the Mortgage Loans, in each case after giving effect to distributions on that Payment Date.

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuing Entity pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent’s Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange.

In the case of a transfer of a Class A-[            ]/Class M-[            ] Note, the Note Registrar shall not register the transfer of this Note unless the Note Registrar has received a representation letter from the transferee to the effect that [either (i)] the transferee is not a Plan and is not, directly or indirectly, acquiring this Note or any interest herein on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with the assets of a Plan [or (ii) the acquisition and holding of this Note by the transferee qualifies for exemptive relief under a United States Department of Labor prohibited transaction class exemption (or, if the transferee is a Governmental Plan, will not result in a violation of applicable law)]. Each Beneficial Owner, by acceptance of a beneficial interest herein, shall be deemed to make [one of] the foregoing representation[s].

Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the case of a Beneficial Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuing Entity, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other

EX A-5

writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuing Entity or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuing Entity, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.

Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the case of a Beneficial Owner, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder or Beneficial Owner will not at any time institute against the Issuing Entity, or join in any institution against the Issuing Entity of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes; the Indenture, the Trust Agreement and the Sale and Servicing Agreement (the “Basic Documents”).

Except with respect to certain payments of Available Funds Cap Shortfalls as described in the Indenture, the Issuing Entity has entered into the Indenture and this Note is issued with the intention that, for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each Beneficial Owner by acceptance of a beneficial interest in a Note), agrees to treat the Notes for federal, state and local income, single business and franchise tax purposes as indebtedness.

Prior to the due presentment for registration of transfer of this Note, the Issuing Entity, the Indenture Trustee and any agent of the Issuing Entity or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuing Entity, the Indenture Trustee or any such agent shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuing Entity and the rights of the Holders of the Notes under the Indenture at any time by the Issuing Entity with the consent of the Holders of Notes representing a majority of the Class Note Balance of the Outstanding Notes affected thereby. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Class Note Balance of Outstanding Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuing Entity with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the amendment thereof, in certain limited circumstances, or the waiver of certain terms and conditions set forth in the Indenture, without the consent of Holders of the Notes issued thereunder.

EX A-6

The term “Issuing Entity” as used in this Note includes any successor to the Issuing Entity under the Indenture.

Initially, each Class of Notes will be represented by one Note registered in the name of Cede & Co. as nominees of the Clearing Agency. The Notes will be delivered in denominations as provided in the Indenture and subject to certain limitations therein set forth. The Notes are exchangeable for a like aggregate initial Class Note Balance of Notes of different authorized denominations, as requested by the Holder surrendering the same.

THIS NOTE AND THE INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuing Entity, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed.

Unless the certificate of authentication hereon has been executed by the Authenticating Agent whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to herein, or be valid or obligatory for any purpose.

EX A-7

IN WITNESS WHEREOF, the Issuing Entity has caused this Instrument to be signed, manually or in facsimile, by its Authorized Officer, as of the date set forth below.

Dated: June 8, 2006

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1
By:	WILMINGTON TRUST COMPANY,
	not in its individual capacity but solely as Owner Trustee under the Trust Agreement
By:
	Authorized Signatory

EX A-8

CERTIFICATE OF AUTHENTICATION

This is one of the Notes designated above and referred to in the within-mentioned Indenture.

Dated: June 8, 2006

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as Authenticating Agent
By:
	Authorized Signatory

EX A-1

ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee:

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:

______________________________________________________________________________________    

(name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints                         , attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.

Dated:	*/
Signature Guaranteed:
	*/

*/ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

EX A-2

EXHIBIT B

Form of Investment Letter

NovaStar Mortgage, Inc.

8140 Ward Parkway, Suite 300

Kansas City, Missouri 64114

Attention: Chris Miller, Senior Vice President

JPMorgan Chase Bank, National Association

4 New York Plaza, 6^th Floor

New York, New York 10004

Attn: Worldwide Securities Services/Structured Finance Services—NovaStar Series 2006-MTA1

Ladies and Gentlemen:

The undersigned (the “Transferee”) has agreed to purchase from             (the “Transferor”) the following notes:

Class	Number
—
—
—
—
—

I. The Transferee is (check one):

— (i) An insurance company, as defined in Section 2(13) of the Securities Act of 1933, as amended (the “Securities Act”), (ii) an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), (iii) a business development company as defined in Section 2(a)(48) of the Securities Act, (iv) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended, (v) a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, (vi) a business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940, as amended, (vii) an organization described in Section 501(c)(3) of the Internal Revenue Code, corporation (other than a bank as defined in Section 3(a)(2) of the Securities Act or a savings and loan association or other institution referenced in Section 3(a)(2) of the Securities Act or a foreign bank or savings and loan association or equivalent institution), partnership, or Massachusetts or similar business trust; or (viii) an investment advisor registered under the Investment Advisors Act of 1940, as amended, which, for each of (i) through (viii), owns and invests on a discretionary basis at least $100 million in securities other than securities of issuers affiliated with the Transferee, securities issued or guaranteed by the United States or a person controlled or supervised by and acting as an instrumentality of the government of the United States pursuant to authority granted by the Congress of the United States, bank deposit notes and certificates of deposit, loan participations, repurchase agreements, securities owned but subject to a repurchase agreement, and currency, interest rate and commodity swaps (collectively, “Excluded Securities”);

EX B-1

— a dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that in the aggregate owns and invests on a discretionary basis at least $10 million of securities other than Excluded Securities and securities constituting the whole or part of an unsold allotment to, or subscription by, Transferee as a participant in a public offering;

— an investment company registered under the Investment Company Act that is part of a family of investment companies (as defined in Rule 144A of the Securities and Exchange Commission) which own in the aggregate at least $100 million in securities other than Excluded Securities and securities of issuers that are part of such family of investment companies;

— an entity, all of the equity owners of which are entities described in this Paragraph A(I);

— a bank as defined in Section 3(a)(2) of the Securities Act, any savings and loan association or other institution as referenced in Section 3(a)(5)(A) of the Securities Act, or any foreign bank or savings and loan association or equivalent institution that in the aggregate owns and invests on a discretionary basis at least $100 million in securities other than Excluded Securities and has an audited net worth of at least $25 million as demonstrated in its latest annual financial statements, as of a date not more than 16 months preceding the date of transfer of the Certificates to the Transferee in the case of a U.S. Bank or savings and loan association, and not more than 18 months preceding such date in the case of a foreign bank or savings association or equivalent institution.

II. The Transferee is acquiring such Notes solely for its own account, for the account of one or more others, all of which are “Qualified Institutional Buyers” within the meaning of Rule 144A, or in its capacity as a dealer registered pursuant to Section 15 of the

EX B-2

Exchange Act acting in a riskless principal transaction on behalf of a “Qualified Institutional Buyer”. The Transferee is not acquiring such Note with a view to or for the resale, distribution, subdivision or fractionalization thereof which would require registration of the Note under the Securities Act.

III. The Transferee represents that either (i) it is not (A) an employee benefit plan (as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) that is subject to the provisions of Title I of ERISA, (B) a plan (as defined in section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the “Code”)) that is subject to Section 4975 of the Code, or (C) a governmental plan (as defined in Section 3(32) of ERISA) that is subject to any federal, state or local law that is, to a material extent, similar to Title I of ERISA or Section 4975 of the Code (each, a “Plan”), and is not, directly or indirectly, acquiring the Notes on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with the assets of a Plan or (ii) the Transferee is acquiring Notes other than Class X Notes and its acquisition and holding of the Notes qualifies for exemptive relief under a United States Department of Labor prohibited transaction class exemption (or, if the Transferee is a Governmental Plan, will not result in a violation of applicable law).

Very truly yours,

By:

Title:

EX B-3

EXHIBIT C

FORM OF NOTE

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1

CLASS X NOTE

UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUING ENTITY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

THE NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUING ENTITY, AND IS LIMITED IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE TRUST ESTATE AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUING ENTITY IS NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE.

THIS NOTE IS AN INTEREST ONLY NOTE. THE HOLDER OF THIS NOTE SHALL NOT BE ENTITLED TO ANY DISTRIBUTIONS OF PRINCIPAL WITH RESPECT TO THE MORTGAGE LOANS.

SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS NOTE REPRESENTS ONE OR MORE “STRIPPED COUPONS” AS THAT TERM IS DEFINED IN SECTION 1286 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”).

DISTRIBUTIONS ON THIS NOTE WILL BE MADE TO THE OWNER HEREOF FOLLOWING THE PRIOR FUNDING OF AMOUNTS OWED WITH RESPECT TO CERTAIN CAP AGREEMENTS SUPPORTING THE FUNDING OF SUPPLEMENTAL INTEREST PAYMENTS TO CERTAIN OTHER CLASSES OF NOTES.

Note No.: X	CUSIP No.:
Class X Initial Class Notional Balance:                                              $	Percentage Interest:                     100%
Date of Indenture:	First Payment Date:
As of                     , 2006	, 2006

C-1

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1

ASSET-BACKED NOTES, SERIES 2006-MTA1,

CLASS X

The registered owner named above is the registered owner of a fractional interest in (i) certain interest payable on each Mortgage Loan identified on the Mortgage Loan Schedule attached as Schedule 1 to the Indenture dated as of May 1, 2006 (the “Indenture”) by and among NovaStar Mortgage Funding Trust, Series 2006-MTA1 (the “Issuing Entity”), JPMorgan Chase Bank, National Association (the “Indenture Trustee”) and J.P. Morgan Trust Company, National Association (the “Co-Trustee”), accruing thereon on and after the Cut-off Date and all collections in respect of interest due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Issuing Entity’s interest in any insurance policies in respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Issuing Entity under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment includes all interest due to the Issuing Entity or the Servicer after the Cut-off Date with respect to the Mortgage Loans. Capitalized terms used but not defined herein are defined in Appendix I to the Indenture.

Pursuant to the terms of the Indenture, payments will be made on the 25th day of each month or, if such day is not a Business Day, on the Business Day immediately following such 25th day (each a “Payment Date”), commencing on the first Payment Date specified on the cover page hereof, to the Person in whose name this Note is registered at the close of business on the applicable Record Date, in an amount equal to the product of (a) the Percentage Interest evidenced by this Note and (b) the sum of the amounts to be paid on the Class X Notes with respect to such Payment Date, all as more specifically set forth in the Indenture.

Notwithstanding the foregoing, in the case of Definitive Notes, upon written request at least five (5) days prior to the related Record Date with appropriate instructions by the Holder of this Note (holding an aggregate initial Class Notional Balance of at least $1,000,000), any payment of interest, other than the final installment of interest, shall be made by wire transfer to an account in the United States of America designated by such Holder reasonably satisfactory to the Indenture Trustee.

On each Payment Date, Noteholders will be entitled to receive the payment described in Article VIII of the Indenture, relating to such Payment Date.

The interest on this Note is payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

The Issuing Entity shall not be liable upon the indebtedness evidenced by the Notes except to the extent of amounts available from the Trust Estate. The assets included in the Trust Estate will be sole source of payments on the Notes, and each Holder hereof, by its acceptance of this Note, agrees that (i) such Note will be limited in right of payment to amounts available from the Trust Estate and (ii) such Holder shall have no recourse to the Issuing Entity, the Owner Trustee, the Indenture Trustee, the Sponsor, the Depositor, the Servicer, or any of their respective affiliates, or to the assets of any of the foregoing entities, except the assets of the Issuing Entity.

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Payments of interest on this Note due and payable on each Payment Date, shall be made by wire transfer in immediately available funds to the account designated by such nominee, or if no instructions for wire transfers have been provided to the Indenture Trustee as provided in the Indenture, then by check mailed to the Person whose name appears as the Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each Record Date. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment.

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuing Entity pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent’s Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange.

In the case of a transfer of a Class X Note, the Note Registrar shall not register the transfer of this Note unless the Note Registrar has received a representation letter from the transferee to the effect that the transferee is not a Plan and is not, directly or indirectly, acquiring this Note or any interest herein on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with the assets of a Plan. Each Beneficial Owner, by acceptance of a beneficial interest herein, shall be deemed to make the foregoing representation.

Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the case of a Beneficial Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuing Entity, the Owner Trustee or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuing Entity or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuing Entity, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.

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Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the case of a Beneficial Owner, a beneficial interest in a Note, covenants and agrees by accepting the benefits of the Indenture that such Noteholder or Beneficial Owner will not at any time institute against the Issuing Entity, or join in any institution against the Issuing Entity of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes; the Indenture, the Trust Agreement and the Sale and Servicing Agreement (the “Basic Documents”).

Prior to the due presentment for registration of transfer of this Note, the Issuing Entity, the Indenture Trustee and any agent of the Issuing Entity or the Indenture Trustee may treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuing Entity, the Indenture Trustee or any such agent shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuing Entity and the rights of the Holders of the Notes under the Indenture at any time by the Issuing Entity with the consent of the Holders of Notes representing a majority of the Class Note Balance of the Outstanding Notes affected thereby. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Class Note Balance of Outstanding Notes, on behalf of the Holders of all the Notes, to waive compliance by the Issuing Entity with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes) shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits the amendment thereof, in certain limited circumstances, or the waiver of certain terms and conditions set forth in the Indenture, without the consent of Holders of the Notes issued thereunder.

The term “Issuing Entity” as used in this Note includes any successor to the Issuing Entity under the Indenture.

Initially, each Class of Notes will be represented by one Note registered in the name of Cede & Co. as nominees of the Clearing Agency. The Notes will be delivered in denominations as provided in the Indenture and subject to certain limitations therein set forth. The Notes are exchangeable for a like aggregate initial Class Note Balance of Notes of different authorized denominations, as requested by the Holder surrendering the same.

THIS NOTE AND THE INDENTURE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

C-4

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuing Entity, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed.

Unless the certificate of authentication hereon has been executed by the Authenticating Agent whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to herein, or be valid or obligatory for any purpose.

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IN WITNESS WHEREOF, the Issuing Entity has caused this Instrument to be signed, manually or in facsimile, by its Authorized Officer, as of the date set forth below.

Dated: June 8, 2006

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1
By:	WILMINGTON TRUST COMPANY,
	not in its individual capacity but solely as Owner Trustee under the Trust Agreement
By:
	Authorized Signatory

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CERTIFICATE OF AUTHENTICATION

This is one of the Notes designated above and referred to in the within-mentioned Indenture.

Dated: June 8, 2006

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as Authenticating Agent
By:
	Authorized Signatory

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ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee:

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto:

______________________________________________________________________________________________________________    

(name and address of assignee)

the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints                     , attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.

Dated:	*/
Signature Guaranteed:
	*/

*/ NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

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EX-4.2

EXHIBIT 4.2

EXECUTION VERSION

AMENDED AND RESTATED TRUST AGREEMENT

dated as of June 8, 2006

by and among

NOVASTAR CERTIFICATES FINANCING CORPORATION

as Depositor,

and

WILMINGTON TRUST COMPANY,

as Owner Trustee

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1

Asset-Backed Notes, Series 2006-MTA1

TABLE OF CONTENTS

ARTICLE I

DEFINITIONS

Section 1.01.	Capitalized Terms	1
Section 1.02.	Other Definitional Provisions.	4
ARTICLE II ORGANIZATION
Section 2.01.	Name	5
Section 2.02.	Office	5
Section 2.03.	Purposes and Powers	5
Section 2.04.	Appointment of Owner Trustee	6
Section 2.05.	Initial Capital Contribution of Owner Trust Estate	6
Section 2.06.	Declaration of Trust	6
Section 2.07.	Liability of the Certificateholders	7
Section 2.08.	Title to Trust Property.	7
Section 2.09.	Situs of Issuing Entity	7
Section 2.10.	Federal Income Tax Treatment of the Issuing Entity	7
Section 2.11.	Covenants of the Certificateholders	7
Section 2.12.	Representations and Warranties of the Depositor	8
Section 2.13.	Covenants of the Depositor	9
ARTICLE III [Reserved]
ARTICLE IV CERTIFICATES AND TRANSFER OF INTERESTS
Section 4.01.	Initial Ownership	10
Section 4.02.	The Certificates	10
Section 4.03.	Execution, Authentication and Delivery of Certificates	10
Section 4.04.	Registration of Transfer and Exchange of Certificates	10
Section 4.05.	Mutilated, Destroyed, Lost or Stolen Certificates	11
Section 4.06.	Persons Deemed Owners	12
Section 4.07.	Access to List of Certificateholders’ Names and Addresses	12
Section 4.08.	Maintenance of Office or Agency	12
Section 4.09.	Restrictions on Transfers of Certificates	12
ARTICLE V ACTIONS BY OWNER TRUSTEE
Section 5.01.	Prior Notice to the Certificateholders with Respect to Certain Matters	15
Section 5.02.	Action by Certificateholders with Respect to Bankruptcy	16

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Section 5.03.	Restrictions on Certificateholders’ Power	17
Section 5.04.	Majority Control	17
ARTICLE VI
TAX PROVISIONS; CERTAIN DUTIES
Section 6.01.	Federal Income Tax Provisions.	17
Section 6.02.	Withholding Taxes	17
Section 6.03.	Accounting and Reports to the Certificateholders, the Internal Revenue Service and Others	18
ARTICLE VII
AUTHORITY AND DUTIES OF OWNER TRUSTEE
Section 7.01.	General Authority	18
Section 7.02.	General Duties.	19
Section 7.03.	Action upon Instruction.	20
Section 7.04.	No Duties Except as Specified in this Agreement, the Basic Documents or any Instructions.	21
Section 7.05.	No Action Except under Specified Documents or Instructions	21
Section 7.06.	Restrictions	22
ARTICLE VIII
CONCERNING THE OWNER TRUSTEE
Section 8.01.	Acceptance of Trusts and Duties	22
Section 8.02.	Furnishing of Documents	23
Section 8.03.	Representations and Warranties of the Owner Trustee	24
Section 8.04.	Reliance; Advice of Counsel.	24
Section 8.05.	Not Acting in Individual Capacity	25
Section 8.06.	Owner Trustee Not Liable for the Certificates or Mortgage Loans	25
Section 8.07.	Owner Trustee May Own Notes	25
Section 8.08.	Licenses	26
Section 8.09.	Legal Proceedings	26
ARTICLE IX
COMPENSATION OF OWNER TRUSTEE
Section 9.01.	Owner Trustee’s Fees and Expenses	26
Section 9.02.	Indemnification	26
Section 9.03.	Payments to the Owner Trustee	27
ARTICLE X
TERMINATION OF TRUST AGREEMENT
Section 10.01.	Termination of Trust Agreement.	27

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ARTICLE XI
SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
Section 11.01.	Eligibility Requirements for Owner Trustee	28
Section 11.02.	Resignation or Removal of Owner Trustee	29
Section 11.03.	Successor Owner Trustee	29
Section 11.04.	Merger or Consolidation of Owner Trustee	30
Section 11.05.	Appointment of Co-Trustee or Separate Trustee.	30
ARTICLE XII
MISCELLANEOUS
Section 12.01.	Supplements and Amendments	31
Section 12.02.	No Legal Title to Owner Trust Estate in Certificateholders	32
Section 12.03.	Limitations on Rights of Others	33
Section 12.04.	Notices.	33
Section 12.05.	Severability	33
Section 12.06.	Separate Counterparts	33
Section 12.07.	Successors and Assigns	33
Section 12.08.	No Petition	34
Section 12.09.	No Recourse	34
Section 12.10.	Headings	34
Section 12.11.	GOVERNING LAW	34
Section 12.12.	[Intentionally Omitted.]	34
Section 12.13.	Third-Party Beneficiaries	34
Section 12.14.	[Intentionally Omitted.]	34
Section 12.15.	Servicer	34

EXHIBITS

Exhibit A   Form of Trust Certificate

Exhibit B   Form of Certificate of Trust

Exhibit C   Form of Investment Letter

Exhibit D   Form of Transferor Certificate

Exhibit E   Form of Class C Certificate

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This AMENDED AND RESTATED TRUST AGREEMENT, dated as of June 8, 2006, is between NOVASTAR CERTIFICATES FINANCING CORPORATION, a Delaware corporation, as depositor (the “Depositor”) and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as owner trustee (the “Owner Trustee”).

NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Capitalized Terms. For all purposes of this Agreement, the following terms shall have the meanings set forth below:

“Agreement” shall mean this Trust Agreement, as may be amended and supplemented from time to time.

“Authorized Officer” shall have the meaning assigned thereto in Appendix I to the Indenture.

“Basic Documents” shall mean this Agreement, the Sale and Servicing Agreement and the Indenture.

“Business Day” shall mean any day other than (i) a Saturday or Sunday or (ii) a day that is either a legal holiday or a day on which banking institutions in the State of New York, the State of Delaware, the State of Missouri, or the state in which the Indenture Trustee’s office from which payments will be made to the Certificateholder, are authorized or obligated by law, regulation or executive order to be closed.

“Certificate” shall mean each Trust Certificate and each Class C Certificate.

“Certificateholder” shall mean each Person in whose name a Trust Certificate and a Class C Certificate is registered.

“Certificate of Trust” shall mean the Certificate of Trust, in the form of Exhibit B, to be filed for the Issuing Entity pursuant to Section 3810(a) of the Statutory Trust Statute.

“Certificate Register” and “Certificate Registrar” shall mean the register mentioned and the registrar appointed pursuant to Section 4.04.

“Class C Certificate”: A certificate which represents (i) the Certificateholder’s entitlement to receive payments from Excess Cashflow, (ii) the Overcollateralization Amount and (iii) a beneficial interest of the Certificateholder in the Issuing Entity and which is substantially in the form of Exhibit E to the Trust Agreement.

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“Class Note Balance” shall have the meaning assigned to such term in the Indenture.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and, where appropriate in context, Treasury Regulations promulgated thereunder.

“Corporate Trust Office” shall mean, with respect to the Owner Trustee, an office of the Owner Trustee which for purposes of the Agreement is located at Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001, facsimile number: (302) 636-4140, Attention: Corporate Trust Administration; or at such other address as the Owner Trustee may designate by notice to the Certificateholders and the Depositor, or an office of any successor Owner Trustee (the address of which the successor Owner Trustee will notify the Certificateholders and the Depositor).

“Depositor” shall mean NovaStar Certificates Financing Corporation, a Delaware corporation.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

“Expenses” shall have the meaning assigned to such term in Section 9.02.

“Group I Mortgage Loans” shall mean a pool of adjustable-rate mortgage loans, as identified in the related Mortgage Loan Schedule.

“Group II Mortgage Loans” shall mean a pool of adjustable-rate mortgage loans, as identified in the related Mortgage Loan Schedule.

“Indenture” shall mean the Indenture, dated as of May 1, 2006, by and between the Issuing Entity and the Indenture Trustee.

“Indenture Trustee” means JPMorgan Chase Bank, National Association, as Indenture Trustee under the Indenture.

“Investment Letter” shall have the meaning assigned to such term in Section 4.04.

“Issuing Entity” shall mean the NovaStar Mortgage Funding Trust, Series 2006-MTA1, the Delaware statutory trust created pursuant to this Agreement.

“Loan Group” shall mean either Loan Group I or Loan Group II.

“Loan Group I” shall mean the Group I Mortgage Loans.

“Loan Group II” shall mean the Group II Mortgage Loans.

“Mortgage Loans” shall mean the Group I Mortgage Loans and the Group II Mortgage Loans.

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“Non-U.S. Person” shall mean an individual, corporation, partnership or other person other than a United States Person.

“Noteholder” shall have the meaning assigned to such terms in the Indenture.

“Notes” shall mean the Class 1A-1 Notes, Class 2A-1A Notes, Class 2A-1B Notes, Class 2A-1C Notes, Class M-1 Notes, Class M-2 Notes, Class M-3 Notes, Class M-4 Notes, Class M-5 Notes, Class M-6 Notes, Class M-7 Notes, Class M-8 Notes, Class M-9 Notes, Class M-10 Notes and Class X Notes.

“Outstanding” shall have the meaning assigned to such term in the Indenture.

“Ownership Interest” means, with respect to any Certificate, any ownership or security interest in such Certificate, including any interest in such Certificate as the Certificateholder thereof and any other interest therein, whether direct or indirect, legal or beneficial, as owner or as pledgee.

“Owner Trust Estate” shall mean the Trust Estate, including the contribution of $1 referred to in Section 2.05 hereof.

“Owner Trustee” shall mean Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity but solely as owner trustee under this Agreement, and any successor owner trustee hereunder.

“Owner Trustee Information” shall mean the information in (a) the Free Writing Prospectus contained in the first two paragraphs under the heading “The Owner Trustee” and (b) the Prospectus Supplement or any amendment or supplement thereto contained in the first two paragraphs under the heading “The Owner Trustee.”

“Payment Date” shall mean the 25^th day of each month or, if such 25^th day is not a Business Day, the next succeeding Business Day, commencing June 25, 2006.

“Percentage Interest” shall mean with respect to any Certificate, the percentage portion of the Certificates evidenced thereby as stated on the face of such Certificate.

“Plan” shall mean (i) an employee benefit plan (within the meaning of Section 3(3) of ERISA) that is subject to Title I of ERISA, (ii) a plan (within the meaning of Section 4975(e)(1) of the Code) that is subject to Section 4975 of the Code or (iii) a governmental plan (within the meaning of Section 3(32) of ERISA) that is subject to any federal, state or local law that is, to a material extent, similar to Title I of ERISA or Section 4975 of the Code.

“Prospective Holder” shall have the meaning set forth in Section 4.09(a).

“Rating Agency Condition” means, with respect to any action to which a Rating Agency Condition applies, that each Rating Agency shall have been given ten (10) days (or such shorter period as is acceptable to each Rating Agency) prior notice thereof and that each of the Rating Agencies shall have notified the Indenture Trustee, the Depositor, the Sponsor, the Servicer, the Owner Trustee and the Issuing Entity in writing that such action will not result in a reduction or withdrawal of the then current rating of the Notes that it maintains.

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“Record Date” shall mean, with respect to the Certificates and any Payment Date, the last Business Day of the month preceding the month in which the related Payment Date occurs.

“Sale and Servicing Agreement” shall mean the Sale and Servicing Agreement, dated as of May 1, 2006, among the Sponsor, the Issuing Entity, the Depositor, the Indenture Trustee, and the Servicer.

“Secretary of State” shall mean the Secretary of State of the State of Delaware.

“Servicer” shall mean NovaStar Mortgage Inc., a Virginia corporation, or any successor servicer appointed pursuant to the Sale and Servicing Agreement.

“Sponsor” shall mean NovaStar Mortgage Inc., a Virginia corporation.

“Statutory Trust Statute” shall mean Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code § 3801 et seq., as the same may be amended from time to time.

“Transfer” means any direct or indirect transfer, sale, pledge, hypothecation or other form of assignment of any Ownership Interest in a Certificate.

“Treasury Regulations” shall mean regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.

“Trust Certificate” shall mean a certificate evidencing the beneficial interest of the Certificateholder in the Issuing Entity, substantially in the form attached hereto as Exhibit A.

“Underwriter” shall mean Greenwich Capital Markets, Inc.

Section 1.02. Other Definitional Provisions.

(a) Capitalized terms used herein and not otherwise defined herein have the meanings assigned to them in Appendix I to the Indenture and the Sale and Servicing Agreement.

(b) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

(c) As used in this Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in any such certificate or other document to the extent not defined, shall have the respective

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meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control.

(d) The words “hereof,” “herein,” “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section and Exhibit references contained in this Agreement are references to Sections and Exhibits in or to this Agreement unless otherwise specified; and the term “including” shall mean “including without limitation.”

(e) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms.

(f) Any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; references to a Person are also to its permitted successors and assigns.

ARTICLE II

ORGANIZATION

Section 2.01. Name. The Issuing Entity governed hereby shall be known as “NovaStar Mortgage Funding Trust, Series 2006-MTA1,” in which name the Owner Trustee may conduct the business of the Issuing Entity, make and execute contracts and other instruments on behalf of the Issuing Entity and sue and be sued on behalf of the Issuing Entity.

Section 2.02. Office. The office of the Issuing Entity shall be in care of the Owner Trustee at the Corporate Trust Office or at such other address in the State of Delaware as the Owner Trustee may designate by written notice to the Certificateholders, Indenture Trustee and the Depositor.

Section 2.03. Purposes and Powers. The purpose of the Issuing Entity is to engage in the following activities:

(a) to issue the Notes pursuant to the Indenture and to sell such Notes;

(b) with the proceeds of the sale of the Notes and Certificates, to purchase the Mortgage Loans to be included in the Owner Trust Estate from the Depositor pursuant to the Sale and Servicing Agreement;

(c) to assign, grant, transfer, pledge, mortgage and convey the Owner Trust Estate pursuant to the Indenture and to hold, manage and distribute to the Certificateholders any portion of the Owner Trust Estate released from the lien of, and remitted to the Issuing Entity pursuant to, the Indenture;

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(d) to enter into and perform its obligations under the Basic Documents to which it is or is to be a party;

(e) to engage in those activities, including entering into agreements, that are necessary, suitable or convenient to accomplish the foregoing or are incidental thereto or connected therewith;

(f) subject to compliance with the Basic Documents, to engage in such other activities as may be required in connection with conservation of the Owner Trust Estate and the making of distributions and payments to the Noteholders and the Certificateholders; and

(g) to issue the Certificates pursuant to this Agreement.

The Issuing Entity is hereby authorized by the initial beneficiary and the Certificateholders to engage in the foregoing activities. The Issuing Entity shall not engage in any activity other than in connection with the foregoing or other than as required or authorized by the terms of this Agreement or the other Basic Documents.

Section 2.04. Appointment of Owner Trustee. The Depositor hereby appoints the Owner Trustee as trustee of the Issuing Entity effective as of the date hereof, to have all the rights, powers and duties set forth herein and in the Statutory Trust Statute, and the Owner Trustee hereby accepts such appointment.

The Owner Trustee may engage, in the name of the Issuing Entity or in its own name on behalf of the Issuing Entity, in the activities of the Issuing Entity, make and execute contracts on behalf of the Issuing Entity and sue on behalf of the Issuing Entity.

Section 2.05. Initial Capital Contribution of Owner Trust Estate. The Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as of the date hereof, the sum of $1. The Owner Trustee hereby acknowledges receipt in trust from the Depositor, as of the date hereof, of the foregoing contribution, which shall constitute the initial Owner Trust Estate and shall be deposited in the Payment Account. The Depositor shall pay organizational expenses of the Issuing Entity as they may arise or shall, upon the request of the Owner Trustee, promptly reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. Concurrently with the execution of this Agreement, the Issuing Entity will enter into the Sale and Servicing Agreement pursuant to which it will purchase the Mortgage Loans, which comprise the remainder of the Owner Trust Estate. Upon the transfer of the Mortgage Loans pursuant to the Sale and Servicing Agreement, the Owner Trustee shall transfer the initial capital contribution, in the sum of $1, to the Depositor.

Section 2.06. Declaration of Trust. The Owner Trustee hereby declares that it will hold the Owner Trust Estate in trust upon and subject to the conditions set forth herein for the use and benefit of the Certificateholders, subject to the obligations of the Issuing Entity under the Basic Documents and subject to the rights of the Noteholders.

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It is the intention of the parties hereto that the Issuing Entity constitutes a statutory trust under the Statutory Trust Statute and that this Agreement constitutes the governing instrument of such statutory trust. Effective as of the date hereof, the Owner Trustee shall have all rights, powers and duties set forth herein and in the Statutory Trust Statute with respect to accomplishing the purposes of the Issuing Entity. The Owner Trustee shall file the Certificate of Trust with the Secretary of State.

Section 2.07. Liability of the Certificateholders. No Certificateholder shall have any personal liability for any liability or obligation of the Issuing Entity. The Certificates shall be fully paid and nonassessable.

Section 2.08. Title to Trust Property.

(a) Subject to the Indenture, legal title to all of the Owner Trust Estate shall be vested at all times in the Issuing Entity as a separate legal entity except where applicable law in any jurisdiction requires title to any part of the Owner Trust Estate to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee and/or a separate trustee, as the case may be.

(b) The Certificateholders shall not have legal title to any part of the Owner Trust Estate. No transfer by operation of law or otherwise of any interest of the Certificateholders shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of any part of the Owner Trust Estate.

Section 2.09. Situs of Issuing Entity. The Issuing Entity will be located in the State of Delaware and administered as expressly stated hereunder by the Owner Trustee in the State of Delaware. The Issuing Entity shall not have any employees; provided, however, that nothing herein shall restrict or prohibit the Owner Trustee from having employees within or without the State of Delaware.

Section 2.10. Federal Income Tax Treatment of the Issuing Entity. The parties hereto intend that the Depositor, or other entity that is a REIT or a Qualified REIT Subsidiary, will at all times that the Notes are outstanding own a 100% Percentage Interest in the Certificates; that the Depositor or other entity that owns a 100% Percentage Interest in the Certificates will qualify for taxation as a REIT or a Qualified REIT Subsidiary at all times that it is a Certificateholder; and that the Issuing Entity will be a Qualified REIT Subsidiary at all times the Notes are outstanding.

Section 2.11. Covenants of the Certificateholders. Each Certificateholder by becoming a beneficial owner of the Certificate or by its acceptance of a Certificate agrees:

(a) to be bound by the terms and conditions of the Certificates of which such Certificateholder is the beneficial owner and of this Agreement and the other Basic Documents, including any supplements or amendments hereto and thereto and to perform the obligations of a Certificateholder as set forth therein or herein, in all respects as if it were a signatory hereto. This undertaking is made for the benefit of the Issuing Entity, the Owner Trustee and all other Certificateholders, present and future;

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(b) to the appointment of the Owner Trustee as such Certificateholder’s agent and attorney-in-fact to sign any federal income tax information return filed on behalf of the Issuing Entity and, if requested by the Issuing Entity, to sign such federal income tax information return in its capacity as holder of an interest in the Issuing Entity;

(c) not to take any position in such Certificateholder’s tax returns inconsistent with those taken in any tax returns filed by the Issuing Entity; and

(d) not to take any action that would cause the Issuing Entity to become subject to an entity-level tax for federal income tax purposes or fail to take any action that would prevent the Issuing Entity from becoming subject to an entity-level tax for federal income tax purposes.

Section 2.12. Representations and Warranties of the Depositor. The Depositor hereby represents and warrants to the Owner Trustee that:

(a) The Depositor is duly organized and validly existing as a Delaware corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted.

(b) The Depositor has the power and authority to execute and deliver this Agreement and to carry out its terms; the Depositor has full power and authority to transfer and assign the property to be transferred and assigned to and deposited with the Issuing Entity and the Depositor has duly authorized such transfer and assignment and deposit to the Issuing Entity by all necessary trust action; and the execution, delivery and performance of this Agreement has been duly authorized by the Depositor by all necessary trust action.

(c) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or by-laws of the Depositor, or any indenture, agreement or other instrument to which the Depositor is a party or by which it is bound; nor result in the creation or imposition of any lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Basic Documents); nor violate any law or, any order, rule or regulation applicable to the Depositor of any court or of any Federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties.

(d) There are no proceedings or investigations pending or notice of which has been received in writing before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties: (x) asserting the invalidity of this Agreement, (y) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or (z) seeking any determination or ruling that should reasonably be expected to materially and adversely affect the performance by the Depositor of its obligations under, or the validity or enforceability of, this Agreement.

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(e) The Depositor has duly executed and delivered this Agreement, and this Agreement constitutes the legal, valid and binding obligation of the Depositor, enforceable against the Depositor, in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by the application of equitable principles.

(f) The Depositor is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or otherwise) or operations of the Depositor or its properties or might have consequences that would materially and adversely affect its performance hereunder.

(g) The Depositor will hold itself out to the public under its own name as a separate and distinct entity from the Issuing Entity and conduct its business so as not to mislead others as to the identity of the Issuing Entity.

Section 2.13. Covenants of the Depositor. The Depositor agrees and covenants for the benefit of each Certificateholder and the Owner Trustee, during the term of this Agreement, and to the fullest extent permitted by applicable law, that:

(a) it shall not, for any reason, institute proceedings for the Issuing Entity to be adjudicated bankrupt or insolvent, or consent to or join in the institution of bankruptcy or insolvency proceedings against the Issuing Entity, or file a petition seeking or consenting to reorganization or relief under any applicable federal or state law relating to the bankruptcy of the Issuing Entity, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuing Entity or a substantial part of the property of the Issuing Entity or cause or permit the Issuing Entity to make any assignment for the benefit of creditors, or admit in writing the inability of the Issuing Entity to pay its debts generally as they become due, or declare or effect a moratorium on the debt of the Issuing Entity or take any action in furtherance of any such action;

(b) it shall obtain from each counterparty to each Basic Document to which it or the Issuing Entity is a party and each other agreement entered into on or after the date hereof to which it or the Issuing Entity is a party, an agreement by each such counterparty that prior to the occurrence of certain events specified in such agreement, such counterparty shall not institute against, or join any other Person in instituting against, it or the Issuing Entity, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceedings under the laws of the United States or any state of the United States; and

(c) it shall not, for any reason, withdraw or attempt to withdraw from this Agreement or any other Basic Document to which it is a party.

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ARTICLE III

[RESERVED]

ARTICLE IV

CERTIFICATES AND TRANSFER OF INTERESTS

Section 4.01. Initial Ownership. Upon the formation of the Issuing Entity by the contribution by the Depositor pursuant to Section 2.05 and the filing of the Certificate of Trust with the Secretary of State and until the issuance of the Certificates, the Depositor shall be the sole owner of the Issuing Entity.

Section 4.02. The Certificates. The Trust Certificates shall be issued as a single certificate, substantially in the form of Exhibit A hereto, to or upon the order of direction of the Depositor, concurrently with the sale and assignment to the Issuing Entity of the Mortgage Loans by the Depositor. The Class C Certificates shall be issued as a single certificate, substantially in the form of Exhibit E hereto, to or upon the order of direction of the Depositor, concurrently with the sale and assignment to the Issuing Entity of the Mortgage Loans by the Depositor. The Certificates shall represent the entire beneficial interest in the assets of the Issuing Entity subject to the debt represented by the Notes. The Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Owner Trustee, as evidenced by its execution thereof. The Certificates shall be executed on behalf of the Issuing Entity by manual or facsimile signature of an Authorized Officer of the Owner Trustee. Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Issuing Entity, shall be valid, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such offices at the date of authentication and delivery of such Certificates.

A transferee of a Certificate shall become a Certificateholder, and shall be entitled to the rights and subject to the obligations of a Certificateholder hereunder upon such transferee’s acceptance of a Certificate duly registered in such transferee’s name pursuant to Section 4.04.

Section 4.03. Execution, Authentication and Delivery of Certificates. Concurrently with the initial transfer of the Mortgage Loans to the Issuing Entity pursuant to the Sale and Servicing Agreement, the Owner Trustee shall cause the Certificates, representing 100% of the Percentage Interests of the Issuing Entity, to be executed on behalf of the Issuing Entity, authenticated and delivered to or upon the order of the Depositor as initial Certificateholder. No Certificate shall entitle its holder to any benefit under this Agreement, or shall be valid for any purpose, unless there shall appear on such Certificate a certificate of authentication substantially in the form set forth in Exhibit A and in Exhibit E, executed by the Owner Trustee or the Owner Trustee’s authenticating agent, by manual or facsimile signature; such authentication shall constitute conclusive evidence that such Certificate shall have been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication.

Section 4.04. Registration of Transfer and Exchange of Certificates. The Certificate Registrar shall keep or cause to be kept, at the office or agency maintained pursuant to Section 4.08, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Certificate Registrar shall provide for the registration of Certificates and of transfers and exchanges of Certificates as herein provided. The Owner Trustee shall be the initial “Certificate Registrar.”

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Upon surrender for registration of transfer of any Certificate at the office or agency maintained pursuant to Section 4.08, the Owner Trustee, upon the satisfaction of the conditions set forth in Section 4.09(c), shall execute, authenticate and deliver (or shall cause its authenticating agent to authenticate and deliver), in the name of the designated transferee or transferees, one or more new Certificates of a like Percentage Interest dated the date of authentication by the Owner Trustee or any authenticating agent. At the option of a Certificateholder, Certificates may be exchanged for other Certificates of a like Percentage Interest upon surrender of the Certificates to be exchanged at the office or agency maintained pursuant to Section 4.08.

Every Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in the form of Transferor Certificate set forth as Exhibit D hereto, duly executed by the Certificateholder or his attorney duly authorized in writing.

No service charge shall be made for any registration of transfer or exchange of Certificates, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates.

The preceding provisions of this Section 4.04 notwithstanding, the Certificate Registrar shall not register transfers or exchanges of Certificates for a period of fifteen (15) days preceding the Payment Date with respect to the Certificates.

Notwithstanding anything contained herein to the contrary, neither the Certificate Registrar nor the Owner Trustee shall be responsible for ascertaining whether any transfer complies with the registration provisions or exemptions from the Securities Act of 1933, as amended, the Securities Act of 1934, as amended, applicable state securities law or the Investment Company Act of 1940, as amended; provided, however, that if an Investment Letter is specifically required to be delivered to the Owner Trustee by a purchaser or transferee of a Certificate, the Owner Trustee shall be under a duty to examine the same to determine whether it conforms to the form of Investment Letter set forth as Exhibit C hereto and shall promptly notify the party delivering the same if such Investment Letter does not so conform.

Section 4.05. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate shall be surrendered to the Certificate Registrar, or if the Certificate Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there shall be delivered to the Certificate Registrar and the Owner Trustee such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Certificate shall have been acquired by a protected purchaser, the Owner Trustee on behalf of the Issuing Entity shall execute and the Owner Trustee, or the Owner Trustee’s authenticating agent, shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like Percentage Interest. In connection with the issuance of any new Certificate under this Section 4.05, the Owner Trustee or

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the Certificate Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of ownership in the Issuing Entity, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time.

Section 4.06. Persons Deemed Owners. Each person by virtue of becoming a Certificateholder in accordance with this Agreement shall be deemed to be bound by the terns of this Agreement. Prior to due presentation of a Certificate for registration of transfer, the Owner Trustee or the Certificate Registrar may treat the Person in whose name any Certificate shall be registered in the Certificate Register as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 6.02 and for all other purposes whatsoever, and neither the Owner Trustee nor the Certificate Registrar shall be bound by any notice to the contrary.

Section 4.07. Access to List of Certificateholders’ Names and Addresses. The Certificate Registrar shall furnish or cause to be furnished to the Owner Trustee, the Servicer, the Depositor and the Indenture Trustee immediately prior to each Payment Date, a list of the names and addresses of the Certificateholders as of the most recent Record Date. The Certificate Registrar shall notify the Indenture Trustee of any change in the initial Holders of the Certificates. If one or more Certificateholder, together evidencing Percentage Interests totaling not less than 25%, apply in writing to the Certificate Registrar, and such application states that the applicants desire to communicate with other Certificateholders with respect to their rights under this Agreement or under the Certificates and such application is accompanied by a copy of the communication that such applicants propose to transmit, then the Certificate Registrar shall, within five (5) Business Days after the receipt of such application, afford such applicants access during normal business hours to the current list of Certificateholders. Each Certificateholder, by receiving and holding a Certificate, shall be deemed to have agreed not to hold any of the Depositor, the Certificate Registrar or the Owner Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived.

Section 4.08. Maintenance of Office or Agency. The Owner Trustee shall maintain an office or offices or agency or agencies where notices and demands to or upon the Owner Trustee in respect of the Basic Documents may be served, and so long as the Owner Trustee is the Certificate Registrar, where Certificates may be surrendered for registration of transfer or exchange and notices and demands to or upon the Certificate Registrar in respect of the Certificates, may be served. The Owner Trustee initially designates the Corporate Trust Office as its principal corporate trust office for such purposes. The Owner Trustee shall give prompt written notice to the Indenture Trustee, the Depositor and the Certificateholders of any change in the location of the Certificate Register or any such office or agency.

Section 4.09. Restrictions on Transfers of Certificates. (a) Each prospective purchaser and any subsequent transferee of a Certificate (each, a “Prospective Holder”), other than the Depositor, shall execute and deliver to the Owner Trustee and the Certificate Registrar and any of their respective successors an Investment Letter in the form of Exhibit C hereto to the effect that:

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(i) Such Person is (A) a “qualified institutional buyer” as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and is aware that the seller of the Certificate may be relying on the exemption from the registration requirements of the Securities Act provided by Rule 144A and is acquiring such Certificate for its own account or for the account of one or more qualified institutional buyers for whom it is authorized to act, or (B) a Person involved in the organization or operation of the Issuing Entity or an affiliate of such Person within the meaning of Rule 3a-7 of the Investment Company Act of 1940, as amended (including, but not limited to, the Sponsor).

(ii) Such Person understands that the Certificates have not been and will not be registered under the Securities Act and may be offered, sold, pledged or otherwise transferred only to a person whom the seller reasonably believes is (A) a qualified institutional buyer or (B) a Person involved in the organization or operation of the Issuing Entity or an affiliate of such Person, in a transaction pursuant to an effective registration statement under the Securities Act and any applicable state securities laws or exempt from the registration requirements of the Securities Act and any such state securities laws.

(iii) Such Person understands that the Certificates bear a legend to the following effect:

“THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THIS CERTIFICATE MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE ISSUING ENTITY OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT NOT LIMITED TO, NOVASTAR MORTGAGE INC.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT

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AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS CERTIFICATE UNDER THE ACT OR ANY STATE SECURITIES LAWS.”

(b) By its acceptance of a Certificate, each Prospective Holder agrees and acknowledges that no legal or beneficial interest in all or any portion of any Certificate may be transferred directly or indirectly to an entity that holds residual securities as nominee to facilitate the clearance and settlement of such securities through electronic book-entry changes in accounts of participating organizations (a “Book-Entry Nominee”) and any such purported transfer shall be void and have no effect.

The Certificates shall bear an additional legend referring to the restrictions contained in preceding paragraph to the following effect:

THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS.

(c) No transfer of a Certificate or any beneficial interest therein shall be made to any person unless the Owner Trustee has received a representation letter from the Prospective Holder to the effect that such Prospective Holder is not a Plan and is not, directly or indirectly, purchasing such Certificate or interest therein on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with the assets of a Plan.

(d) The Owner Trustee shall not execute, and shall not countersign and deliver, a Certificate in connection with any transfer thereof unless the transferor shall have provided to the Owner Trustee an Investment Letter, signed by the transferee, which certificate shall contain the consent of the transferee to any amendments of this Agreement as may be required to effectuate further the foregoing restrictions on transfer of the Certificates to Book-Entry Nominees, and an agreement by the transferee that it will not transfer a Certificate without providing to the Owner Trustee an Investment Letter.

(e) [Reserved].

(f) Unless the Prospective Holder delivers a certificate to the Owner Trustee to the effect that it is a United States Person, the Prospective Holder, other than NovaStar Mortgage Inc. or an affiliate of NovaStar Mortgage Inc., shall obtain and deliver to the Owner

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Trustee an Opinion of Counsel to the effect that, as a matter of federal income tax law, the transfer of the Certificate to such Prospective Holder will not result in the imposition of any U.S. withholding tax on payments in respect of the Mortgage Loans or the Certificate.

(g) No pledge or transfer of the Certificates shall be effective unless such pledge or transfer is (i) of a 100% Percentage Interest of all of the Certificates, (ii) to a single beneficial owner that represents that it qualifies for taxation as a REIT or is a Qualified REIT Subsidiary and (iii) accompanied by an Opinion of Counsel satisfactory to the Owner Trustee, which Opinion of Counsel shall not, unless otherwise agreed, be an expense of the Issuing Entity, the Certificate Registrar, the Servicer, or the Sponsor, to the effect such pledge or transfer will not cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes.

ARTICLE V

ACTIONS BY OWNER TRUSTEE

Section 5.01. Prior Notice to the Certificateholders with Respect to Certain Matters. With respect to the following matters, the Owner Trustee shall not take action unless at least thirty (30) days before the taking of such action, the Owner Trustee shall have notified the Certificateholders (unless the Certificateholders have directed the Owner Trustee to take action) and the Rating Agencies in writing of the proposed action and the Certificateholders shall not have notified the Owner Trustee in writing prior to the 30th day after such notice is given that such Certificateholders have withheld consent or have provided alternative written direction and in the case of the Rating Agencies, the Rating Agency Condition shall have been met:

(a) the initiation of any claim or lawsuit by the Issuing Entity (except claims or lawsuits brought in connection with the collection of the Mortgage Loans) and the compromise of any action, claim or lawsuit brought by or against the Issuing Entity (except with respect to the aforementioned claims or lawsuits for collection of the Mortgage Loans);

(b) the election by the Issuing Entity to file an amendment to the Certificate of Trust (unless such amendment is required to be filed under the Statutory Trust Statute);

(c) the amendment or other change to this Agreement or any Basic Document in circumstances where the consent of any Certificateholder is required;

(d) the amendment or other change to this Agreement or any other Basic Document in circumstances where the consent of any Certificateholder is not required and such amendment materially adversely affects the interest of the Certificateholders;

(e) the appointment pursuant to the Indenture of a successor Note Registrar, or Indenture Trustee or pursuant to this Agreement of a successor Certificate Registrar or the consent to the assignment by the Note Registrar or Indenture Trustee or Certificate Registrar of their respective obligations under the Indenture or this Agreement, as applicable;

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(f) the consent to the waiver of any default of any Basic Document;

(g) the consent to the assignment by the Indenture Trustee or Servicer of their respective obligations under any Basic Document;

(h) except as provided in Article X hereof, dissolve, terminate or liquidate the Issuing Entity in whole or in part;

(i) merge or consolidate the Issuing Entity with or into any other entity, or convey or transfer all or substantially all of the Issuing Entity’s assets to any other entity;

(j) cause the Issuing Entity to incur, assume or guaranty any indebtedness other than as set forth in this Agreement or the other Basic Documents;

(k) do any act which would make it impossible to carry on the ordinary business of the Issuing Entity as described in Section 2.03 hereof;

(l) confess a judgment against the Issuing Entity;

(m) possess Issuing Entity assets, or assign the Issuing Entity’s right to property, for other than an Issuing Entity purpose;

(n) cause the Issuing Entity to lend any funds to any entity; or

(o) change the Issuing Entity’s purpose and powers from those set forth in this Agreement.

In addition the Issuing Entity shall not commingle its assets with those of any other entity. The Issuing Entity shall maintain its financial and accounting books and records separate from those of any other entity. Except as expressly set forth herein, the Issuing Entity shall pay its indebtedness, operating expenses and liabilities from its own funds, and the Issuing Entity shall not pay the indebtedness, operating expenses and liabilities of any other entity. The Servicer, on behalf of the Issuing Entity, shall maintain appropriate minutes or other records of all appropriate action. The Issuing Entity shall maintain its office separate from the offices of the Sponsor, the Depositor and the Servicer.

Notwithstanding the other provisions of this Section 5.01, the Owner Trustee shall not have the power, except upon the written direction of the Certificateholders, and to the extent otherwise consistent with the Basic Documents, to remove or replace the Servicer or the Indenture Trustee.

Section 5.02. Action by Certificateholders with Respect to Bankruptcy. The Owner Trustee shall not have the power to (i) institute proceedings to have the Issuing Entity declared or adjudicated bankrupt or insolvent, (ii) consent to the institution of bankruptcy or insolvency proceedings against the Issuing Entity, (iii) file a petition or consent to a petition seeking reorganization or relief on behalf of the Issuing Entity under any applicable federal or state law relating to bankruptcy, (iv) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or any similar official) of the Issuing Entity or a substantial portion of the

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property of the Issuing Entity, (v) make any assignment for the benefit of the Issuing Entity’s creditors, (vi) cause the Issuing Entity to admit in writing its inability to pay its debts generally as they become due, or (vii) take any action, or cause the Issuing Entity to take any action, in furtherance of any of the foregoing (any of the above, a “Bankruptcy Action”) without the unanimous prior written consent and approval of all Certificateholders and the Rating Agency Condition shall have been satisfied and the delivery to the Owner Trustee by each such Certificateholder of a certification that such Certificateholder reasonably believes that the Issuing Entity is insolvent. So long as the Indenture remains in effect, no Certificateholder shall have the power to take, and shall not take, any Bankruptcy Action with respect to the Issuing Entity or direct the Owner Trustee to take any Bankruptcy Action with respect to the Issuing Entity. The terms of this Section 5.02 shall survive for one year and one day following the termination of this Agreement.

Section 5.03. Restrictions on Certificateholders’ Power. The Certificateholders shall not direct the Owner Trustee to take or refrain from taking any action if such action or inaction would be contrary to any obligation of the Issuing Entity or the Owner Trustee under this Agreement or any of the other Basic Documents or would be contrary to Section 2.03, nor shall the Owner Trustee be obligated to follow any such direction, if given.

Section 5.04. Majority Control. Except as expressly provided herein, any action that may be taken by the Certificateholders under this Agreement may be taken by the holders of Certificates evidencing more than 50% of the Percentage Interest in the Issuing Entity and such action shall be binding upon all Certificateholders. Except as expressly provided herein, any written notice of the Certificateholders delivered pursuant to this Agreement shall be effective if signed by holders of Certificates evidencing more than 50% of the Percentage Interest in the Issuing Entity at the time of the delivery of such notice and such action shall be binding upon all Certificateholders.

ARTICLE VI

TAX PROVISIONS; CERTAIN DUTIES

Section 6.01. Federal Income Tax Provisions.

The Issuing Entity will be wholly owned by the sole Certificateholder, which as of the Closing Date is the Depositor. The Depositor is a Qualified REIT Subsidiary. As such, the Depositor, as the sole Certificateholder, or the Depositor’s owner will be regarded as (i) owning all assets owned by the Issuing Entity and (ii) having incurred all liabilities incurred by the Issuing Entity, and all transactions between the Issuing Entity and the Depositor will be disregarded.

Section 6.02. Withholding Taxes. In the event that any withholding tax is imposed under federal, state, or local law on the Issuing Entity’s payment (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to such Certificateholder in accordance with this Section 6.02. The Indenture Trustee, on behalf of the Owner Trustee, is hereby authorized and directed to retain in the Payment Account from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax that is

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legally owed by the Issuing Entity (but such authorization shall not prevent the Indenture Trustee from contesting any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The Depositor will provide the Indenture Trustee with a statement indicating the amount of any such withholding tax. The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to such Certificateholder at the time it is withheld by the Indenture Trustee and remitted to the appropriate taxing authority from the Payment Account at the direction of the Indenture Trustee. If there is a possibility that withholding tax is payable with respect to a distribution (such as a distribution to a Certificateholder who is a Non-U.S. Person), the Indenture Trustee may in its sole discretion withhold such amounts in accordance with this paragraph. In the event that a Certificateholder wishes to apply for a refund of any such withholding tax, the Owner Trustee and the Indenture Trustee shall reasonably cooperate with such Certificateholder in making such claim so long as such Certificateholder agrees in writing to reimburse the Owner Trustee for any out-of-pocket expenses incurred.

Section 6.03. Accounting and Reports to the Certificateholders, the Internal Revenue Service and Others. The Depositor shall (a) maintain (or cause to be maintained) the books of the Issuing Entity on a calendar year basis on the accrual method of accounting, and (b) deliver (or cause to be delivered) to each Certificateholder such information, reports or statements as may be required by the Code and applicable Treasury Regulations and as may be required to enable each Certificateholder to prepare its respective federal and state income tax returns. Consistent with the Issuing Entity’s characterization for tax purposes as a Qualified REIT Subsidiary, no federal income tax return shall be filed on behalf of the Issuing Entity unless either (y) the Issuing Entity, the Indenture Trustee or the Certificateholders receive an Opinion of Counsel based on a change in applicable law occurring after the date hereof that the Code requires such a filing or (z) the Internal Revenue Service shall determine that the Issuing Entity is required to file such a return. In the event that the Issuing Entity is required to file tax returns, the Indenture Trustee shall elect under Section 1278 of the Code to include in income currently any market discount that accrues with respect to the Mortgage Loans. The Depositor shall prepare or shall cause to be prepared any tax returns required to be filed by the Issuing Entity. The Depositor, or any other such party required by law, shall promptly sign such returns and such returns shall be filed by, or at the direction of, the Depositor with the appropriate tax authorities. In no event shall the Depositor or the Sponsor be liable for any liabilities, costs or expenses of the Issuing Entity arising out of the application of any tax law, including federal, state, foreign or local income or excise taxes or any other tax imposed on or measured by income (or any interest, penalty or addition with respect thereto or arising from a failure to comply therewith), except, for any such liability, cost or expense attributable to the Depositor’s breach of its obligations under this Agreement.

ARTICLE VII

AUTHORITY AND DUTIES OF OWNER TRUSTEE

Section 7.01. General Authority. The Owner Trustee is authorized and directed to execute and deliver or cause to be executed and delivered the Notes, the Certificates and the Basic Documents to which the Issuing Entity is to be a party and each certificate or other document attached as an exhibit to or contemplated by the Basic Documents to which the Issuing Entity is to

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be a party and any amendment or other agreement or instrument described in Article IV, in each case, as the Depositor shall approve, as evidenced conclusively by the Owner Trustee’s execution thereof. In addition, the Owner Trustee is authorized and directed, on behalf of the Issuing Entity, to execute and deliver to the Authenticating Agent the Trust Request and the Trust Orders referred to in Section 2.11 of the Indenture, directing to the Authenticating Agent to authenticate and deliver the following Notes:

Security	Original Class Note Balance
Class 1A-1	$	518,700,000
Class 2A-1A	$	331,740,000
Class 2A-1B	$	138,225,000
Class 2A-1C	$	82,935,000
Class M-1	$	40,200,000
Class M-2	$	19,200,000
Class M-3	$	11,400,000
Class M-4	$	9,600,000
Class M-5	$	6,600,000
Class M-6	$	6,000,000
Class M-7	$	6,000,000
Class M-8	$	6,000,000
Class M-9	$	6,000,000
Class M-10	$	6,000,000
Class X	$	1,061,223,414 (Notional	)

In addition to the foregoing, the Owner Trustee is authorized, but shall not be obligated, to take all actions required of the Issuing Entity, pursuant to the Basic Documents.

Section 7.02. General Duties.

(a) It shall be the duty of the Owner Trustee:

(i) to discharge (or cause to be discharged) all of its responsibilities pursuant to the terms of this Agreement and the Basic Documents to which the Issuing Entity is a party and as expressly set forth hereunder to administer the Issuing Entity in the interest of the Certificateholders, subject to the Basic Documents and in accordance with the provisions of this Agreement; and

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(ii) to maintain the Issuing Entity’s existence as a statutory trust under the laws of the State of Delaware.

(b) The Owner Trustee shall not be responsible for taking any action on behalf of the Issuing Entity under any Basic Document unless specifically directed in writing to do so in accordance with Section 7.03 of this Agreement.

(c) The Owner Trustee shall not be responsible for any matter regarding the Securities Act, the Exchange Act or the Investment Company Act of 1940, as amended, or the rules or regulations thereunder.

Section 7.03. Action upon Instruction.

(a) Subject to Article V hereof, and in accordance with the terms of the Basic Documents, the Certificateholders may by written instruction direct the Owner Trustee in the management of the Issuing Entity but only to the extent consistent with the limited purpose of the Issuing Entity. Such direction may be exercised at anytime by written instruction of the Certificateholders pursuant to Article V hereof. Without limiting the generality of the foregoing, the Owner Trustee shall act as directed in writing by the Certificateholders and shall take all actions and deliver all documents that the Issuing Entity is required to take and deliver.

(b) The Owner Trustee shall not be required to take any action hereunder or under any other Basic Document if the Owner Trustee shall have reasonably determined, or shall have been advised by counsel, that such action is likely to result in liability on the part of the Owner Trustee or is contrary to the terms hereof or of any other Basic Document or is otherwise contrary to law.

(c) Subject to Article V hereof, whenever the Owner Trustee is unable to decide between alternative courses of action permitted or required by the terms of this Agreement or under any other Basic Document, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction from the Certificateholders as to the course of action to be adopted, and to the extent the Owner Trustee acts in good faith in accordance with any written instruction of the Certificateholders received, the Owner Trustee shall not be liable on account of such action to any Person. If the Owner Trustee shall not have received appropriate instruction within ten (10) days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with this Agreement or the Basic Documents, as it shall deem to be in the best interests of the Certificateholders, and shall have no liability to any Person for such action or inaction.

(d) Subject to Article V hereof, in the event that the Owner Trustee is unsure as to the application of any provision of this Agreement or any other Basic Document or any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement permits any determination by the Owner Trustee or is silent or is incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee may give notice (in

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such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction and, to the extent that the Owner Trustee acts or refrains from acting in good faith in accordance with any such instruction received, the Owner Trustee shall not be liable, on account of such action or inaction, to any Person. If the Owner Trustee shall not have received appropriate instruction within ten (10) days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with this Agreement or the other Basic Documents, as it shall deem to be in the best interests of the Certificateholders, and shall have no liability to any Person for such action or inaction.

Section 7.04. No Duties Except as Specified in this Agreement, the Basic Documents or any Instructions.

(a) The Owner Trustee shall not have any duty or obligation to manage, make any payment with respect to, register, record, sell, dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from taking any action under, or in connection with, this Agreement or any document contemplated hereby to which the Issuing Entity is a party, except as expressly provided by the terms of this Agreement, any other Basic Document or in any document or written instruction received by the Owner Trustee pursuant to Section 7.03; and no implied duties or obligations shall be read into this Agreement or any other Basic Document against the Owner Trustee. The Owner Trustee shall have no responsibility for filing any tax document, financing or continuation statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to prepare or file any Securities and Exchange Commission filing for the Issuing Entity or to record this Agreement or any other Basic Document. The Owner Trustee nevertheless agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any liens on any part of the Owner Trust Estate that result from actions by, or claims against, the Owner Trustee in its individual capacity that are not related to the ownership or the administration of the Owner Trust Estate.

(b) Notwithstanding anything to the contrary herein or in any other document, the Owner Trustee shall not be required to execute, deliver or certify on behalf of the Issuing Entity or any other Person any filings, certificates, affidavits or other instruments required under the Sarbanes-Oxley Act of 2002. Notwithstanding any Person’s right to instruct the Owner Trustee, neither the Owner Trustee nor any agent, employee, director or officer of the Owner Trustee shall have any obligation to execute any certificates or other documents required pursuant to the Sarbanes-Oxley Act of 2002 or the rules and regulations promulgated thereunder, and the refusal to comply with any such instructions shall not constitute a default or breach under any Basic Document.

Section 7.05. No Action Except under Specified Documents or Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal with any part of the Owner Trust Estate except (i) in accordance with the powers granted to and the authority conferred upon the Owner Trustee pursuant to this Agreement, (ii) in accordance with the other Basic Documents and (iii) in accordance with any document or written instruction delivered to the Owner Trustee pursuant to Section 7.03.

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Section 7.06. Restrictions. Neither the Owner Trustee nor the Depositor shall take any action (a) that violates or results in a breach of or is inconsistent with the purposes of the Issuing Entity set forth in Section 2.03; (b) that causes or effectuates a Transfer of the Depositor’s Ownership Interest in the Certificates of the Issuing Entity for so long as the Depositor is a Qualified REIT Subsidiary other than as set forth in Section 4.09(g) or (c) that, to the actual knowledge of the Depositor and the Owner Trustee, would result in the Issuing Entity’s becoming subject to an entity-level tax for federal income tax purposes. The Certificateholders shall not direct the Owner Trustee to take action that would violate the provisions of this Section 7.06.

ARTICLE VIII

CONCERNING THE OWNER TRUSTEE

Section 8.01. Acceptance of Trusts and Duties. The Owner Trustee accepts the trusts hereby created and agrees to perform its duties hereunder with respect to such trusts, but only upon the terms of this Agreement subject to the other Basic Documents. The Owner Trustee also agrees to disburse all moneys actually received by it constituting part of the Owner Trust Estate upon the terms of the other Basic Documents and this Agreement. The Owner Trustee shall not be answerable or accountable hereunder or under any other Basic Document under any circumstances, except (i) for its own willful breach or misconduct or gross negligence or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 8.03 expressly made by the Owner Trustee in its individual capacity. In particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence):

(a) The Owner Trustee shall not be liable for any error of judgment made by a Responsible Officer of the Owner Trustee;

(b) The Owner Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the instructions of the Certificateholders given in accordance with this Agreement;

(c) No provision of this Agreement or any other Basic Document shall require the Owner Trustee to expend or risk funds or otherwise incur any financial liability in the performance of any of its rights or powers hereunder or under any other Basic Document if the Owner Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it;

(d) Under no circumstances shall the Owner Trustee be liable for indebtedness evidenced by or arising under any of the Basic Documents, including the principal of and interest on the Notes;

(e) The Owner Trustee shall not be responsible for or in respect of the validity or sufficiency of this Agreement or for the due execution hereof by the Depositor or for the form, character, genuineness, sufficiency, value or validity of any of the Owner Trust Estate or for or in respect of the validity or sufficiency of the Basic Documents, other than the certificate of authentication on the Certificates, and the Owner Trustee shall in no event assume

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or incur any liability, duty, or obligation to any Noteholder or to any Certificateholders, other than as expressly provided for herein and in the other Basic Documents;

(f) The Owner Trustee shall not be liable for the default or misconduct of the Indenture Trustee or the Servicer under any of the Basic Documents or otherwise and the Owner Trustee shall have no obligation or liability to perform the obligations of the Issuing Entity under this Agreement or the other Basic Documents that are required to be performed by the Depositor, the Indenture Trustee or the Servicer;

(g) The Owner Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation under this Agreement or otherwise or in relation to this Agreement or any Basic Document, at the request, order or direction of the Depositor or any of the Certificateholders, unless such Certificateholders, or the Depositor have offered to the Owner Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Agreement or in any other Basic Document shall not be construed as a duty, and the Owner Trustee shall not be answerable for other than its gross negligence or willful breach or misconduct in the performance of any such act; and

(h) Notwithstanding anything contained herein to the contrary, neither Wilmington Trust Company in its individual capacity nor as Owner Trustee shall be required to take any action in any jurisdiction other than in the State of Delaware if the taking of such action will (i) require the consent or approval or authorization or order of or the giving of notice to, or the registration with or the taking of any other action in respect of, any state or other governmental authority or agency of any jurisdiction other than the State of Delaware; (ii) result in any fee, tax or other governmental charge under the laws of any jurisdiction or any political subdivisions thereof in existence on the date hereof other than the State of Delaware becoming payable by Wilmington Trust Company; or (iii) subject Wilmington Trust Company to personal jurisdiction in any jurisdiction other than the State of Delaware for causes of action arising from acts unrelated to the consummation of the transactions by Wilmington Trust Company in its individual capacity or as Owner Trustee, as the case may be, contemplated hereby. The Owner Trustee shall be entitled to obtain advice of counsel (which advice shall be an expense of the Depositor to determine whether any action required to be taken pursuant to this Agreement or the other Basic Documents results in the consequences described in clauses (i), (ii) and (iii) of the preceding sentence. In the event that said counsel advises the Owner Trustee that such action will result in such consequences, the Owner Trustee will appoint an additional trustee pursuant to Section 11.05 hereof to proceed with such action.

Section 8.02. Furnishing of Documents. Subject to Section 4.07, the Owner Trustee shall furnish to the Certificateholders promptly upon receipt of a written request therefor, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee under the Basic Documents. On behalf of the Owner Trustee, the Depositor shall furnish to Noteholders promptly upon written request therefor, copies of the Sale and Servicing Agreement and the Indenture.

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Section 8.03. Representations and Warranties of the Owner Trustee. Wilmington Trust Company hereby represents and warrants to the Sponsor, NovaStar Financial Inc., the Depositor and the Certificateholders, that:

(a) It is a banking corporation, duly organized, validly existing and in good standing under the laws of the state of Delaware. It has all requisite power and authority to execute, deliver and perform its obligations under this Agreement.

(b) It has taken all action necessary to authorize the execution and delivery by it of this Agreement, and this Agreement will be executed and delivered by one of its officers who is duly authorized to execute and deliver this Agreement on its behalf.

(c) Neither the execution nor the delivery by it of this Agreement nor the consummation by it of the transactions contemplated hereby nor compliance by it with any of the terns or provisions hereof will contravene any Delaware or Federal law, governmental rule or regulation governing the banking or trust powers of Wilmington Trust Company or any judgment or order binding on it, or constitute any default under its charter documents or by-laws.

(d) This Agreement has been duly authorized, executed and delivered by Wilmington Trust Company and constitutes a valid, legal and binding obligation of Wilmington Trust Company, enforceable against it in accordance with the terms hereof, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights generally and to general principles of equity, regardless of whether such enforcement is considered in a proceeding in equity or at law.

(e) The Owner Trustee is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or other) or operations of Wilmington Trust Company or its properties or might have consequences that would materially adversely affect its performance hereunder.

Section 8.04. Reliance; Advice of Counsel.

(a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, Note, or other document or paper believed by it in good faith to be genuine and believed by it in good faith to be signed by the proper party or parties. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of the determination of which is not specifically prescribed herein, the Owner Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter and such certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon.

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(b) In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Agreement or the other Basic Documents, the Owner Trustee (i) may, at the expense of the Issuing Entity, act directly or through its agents or attorneys pursuant to agreements entered into with any of them, and the Owner Trustee shall not be liable for the conduct or misconduct of such agents or attorneys if such agents or attorneys shall have been selected by the Owner Trustee with reasonable care, and (ii) may, at the expense of the Issuing Entity, consult with counsel, Accountants and other skilled persons to be selected with reasonable care and employed by it. The Owner Trustee shall not be responsible for monitoring the performance of such agents or attorneys or for the failure of others to perform their duties, even if delegated by the Owner Trustee, if such agents or attorneys shall have been selected by the Owner Trustee with reasonable care. The Owner Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the written opinion or advice of any such counsel, Accountants or other such persons and not contrary to this Agreement or any other Basic Document.

Section 8.05. Not Acting in Individual Capacity. Except as provided in Section 8.03, in accepting the trusts hereby created, Wilmington Trust Company acts solely as Owner Trustee hereunder and not in its individual capacity, and all Persons having any claim against the Owner Trustee by reason of the transactions contemplated by this Agreement or any other Basic Document shall look only to the Owner Trust Estate for payment or satisfaction thereof.

Section 8.06. Owner Trustee Not Liable for the Certificates or Mortgage Loans. The recitals contained herein and in the Certificates (other than the signature and countersignature of the Owner Trustee on the Certificates) shall be taken as the statements of the Issuing Entity, and the Owner Trustee assumes no responsibility for the correctness thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Agreement, of any other Basic Document or of the Certificates (other than the signature and countersignature of the Owner Trustee on the Certificates and as specified in Section 8.03 hereof) or the Notes, or of any Mortgage Loans or related documents. The Owner Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Mortgage Loan, or the perfection and priority of any security interest created by any Mortgage Loan or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Owner Trust Estate or its ability to generate the payments to be distributed to the Certificateholders under this Agreement or the Noteholders under the Indenture, including, without limitation, the existence, condition and ownership of any Mortgaged Property, the existence and enforceability of any insurance thereon, the existence and contents of any Mortgage Loan on any computer or other record thereof, the validity of the assignment of any Mortgage Loan to the Issuing Entity or of any intervening assignment, the completeness of any Mortgage Loan, the performance or enforcement of any Mortgage Loan, the compliance by the Depositor or the Servicer with any warranty or representation made under any Basic Document or in any related document or the accuracy of any such warranty or representation or any action of the Indenture Trustee or the Servicer or any subservicer taken in the name of the Owner Trustee.

Section 8.07. Owner Trustee May Own Notes. The Owner Trustee in its individual or any other capacity may become the owner or pledgee of the Notes and may deal with the Sponsor, the Depositor, the Indenture Trustee and the Servicer in banking transactions with the same rights as it would have if it were not Owner Trustee.

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Section 8.08. Licenses. The Depositor shall cause the Issuing Entity to use its best efforts to obtain and maintain the effectiveness of any licenses required in connection with this Agreement and the other Basic Documents and the transactions contemplated hereby and thereby until such time as the Issuing Entity shall terminate in accordance with the terms hereof.

Section 8.09. Legal Proceedings. As required by Regulation AB, the Owner Trustee will promptly notify the Servicer, the Depositor and the Issuing Entity of the commencement or, if applicable, the termination of any and all legal proceedings of which any property of the Owner Trustee is the subject, that is material to the Noteholders and any such proceedings known to be contemplated by governmental authorities. In addition, the Owner Trustee will furnish to the Indenture Trustee, the Servicer, the Depositor and the Issuing Entity, in writing, the necessary disclosure describing such proceedings required to be disclosed under Item 1117 of Regulation AB, for inclusion in reports filed pursuant to the Exchange Act.

ARTICLE IX

COMPENSATION OF OWNER TRUSTEE

Section 9.01. Owner Trustee’s Fees and Expenses. The Owner Trustee shall receive as compensation for its services hereunder such fees as have been separately agreed upon before the date hereof between the Servicer and the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Servicer for its other reasonable expenses hereunder as separately agreed (the “Owner Trustee Fee”).

Section 9.02. Indemnification. The Servicer shall be liable as obligor for, and shall indemnify the Owner Trustee (in its individual and trust capacities) and its successors, assigns, agents and servants (collectively, the “Indemnified Parties”) from and against, any and all liabilities, obligations, losses, damages, taxes (other than taxes imposed on net income), claims, actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, “Expenses”) which may at any time be imposed on, incurred by, or asserted against any Indemnified Party in any way relating to or arising out of this Agreement, the other Basic Documents, the Owner Trust Estate, the administration of the Owner Trust Estate or the action or inaction of the Owner Trustee hereunder, except only that the Servicer shall not be liable for or required to indemnify an Indemnified Party from and against Expenses arising or resulting from any of the matters described in the third sentence of Section 8.01. The indemnities contained in this Section 9.02 shall survive the resignation or termination of the Owner Trustee or the termination of this Agreement. In any event of any claim, action or proceeding for which indemnity will be sought pursuant to this Section, the Servicer will be entitled to participate therein, with counsel selected by the Servicer and reasonably satisfactory to the Indemnified Parties, but after notice from an Indemnified Party to the Servicer of its election to assume the defense thereof, the Servicer shall not be liable to the Indemnified Party under this Section 9.02 for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense of such action; provided, however, that this sentence shall not be in effect if (1) the Servicer shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified

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Party within a reasonable time after notice of commencement of the action, (2) the Servicer shall have authorized the employment of counsel for the Indemnified Party at the expense of the Servicer or (3) in the event any such claim involves a possible imposition of criminal liability or penalty or a material civil penalty on such Indemnified Party, a conflict of interest between such Indemnified Party and the Servicer or another indemnitee or the granting of material injunctive relief against such Indemnified Party, and such Indemnified Party informs the Servicer that such Indemnified Party desires to be represented by separate counsel, in which case, the reasonable fees and expenses of such separate counsel shall be borne by the Servicer. If the Servicer assumes the defense of any such proceeding, the Servicer shall be entitled to settle such proceeding without any liability being assessed against any Indemnified Party or, if such settlement provides for release of any such Indemnified Party without any liability being assessed against any Indemnified Party in connection with all matters relating to the proceeding which have been asserted against such Indemnified Party in such proceeding by the other parties to such settlement, without the prior written consent of such Indemnified Party, but otherwise only with the prior written consent of such Indemnified Party.

Section 9.03. Payments to the Owner Trustee. Any amounts paid to the Owner Trustee pursuant to this Article IX shall be deemed not to be a part of the Owner Trust Estate immediately after such payment.

ARTICLE X

TERMINATION OF TRUST AGREEMENT

Section 10.01. Termination of Trust Agreement.

(a) This Agreement (other than Article IX) shall terminate and the Issuing Entity shall dissolve and be of no further force or effect on the earlier of: (i) the final payment or other liquidation of the Mortgage Loans and the disposition of all REO Properties and the remittance of all funds due hereunder with respect to such Mortgage Loans and REO Properties after the satisfaction and discharge of the Indenture pursuant to Section 4.01 of the Indenture; and (ii) the expiration of 21 years from the death of the last survivor of descendants of Joseph P. Kennedy (the late ambassador of the United States to the Court of St. James). The bankruptcy, liquidation, dissolution, death or incapacity of the any Certificateholder or the Depositor shall not (x) operate to terminate this Agreement or the Issuing Entity, nor (y) entitle Certificateholders’ or the Depositor’s legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of all or any part of the Issuing Entity or Owner Trust Estate nor (z) otherwise affect the rights, obligations and liabilities of the parties hereto.

(b) Except as provided in Section 10.01(a) above, none of the Depositor, the Servicer, nor the Certificateholders shall be entitled to revoke or terminate the Issuing Entity.

(c) Notice of any termination of the Issuing Entity, specifying the Payment Date upon which the Certificateholders shall surrender their Certificates to the Indenture Trustee for payment of the final distributions and cancellation, shall be given by the Owner Trustee to the Certificateholders, the Rating Agencies and the Indenture Trustee mailed within

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five (5) Business Days of receipt by the Owner Trustee from the Servicer of notice of such termination, which notice given by the Owner Trustee shall state (i) the Payment Date upon or with respect to which final payment of the Certificates shall be made upon presentation and surrender of the Certificates at the office of the Indenture Trustee therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Payment Date is not applicable, payments being made only upon presentation and surrender of the Certificates at the office of the Indenture Trustee therein specified. The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Indenture Trustee at the time such notice is given to Certificateholders. Upon presentation and surrender of Certificates, subject to Section 3808 of the Statutory Trust Statute, amounts distributable on such Payment Date pursuant to the terms of the Indenture.

(d) In the event that Certificateholders shall not surrender their Certificates for cancellation within six months after the date specified in the above mentioned written notice, the Owner Trustee shall give a second written notice to Certificateholders to surrender the Certificates for cancellation and receive the final distribution with respect thereto. If within one year after the second notice the Ownership Interest shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning surrender of the Certificates, and the cost thereof shall be paid out of the funds and other assets that shall remain subject to this Agreement. Any funds remaining in the Issuing Entity after exhaustion of such remedies shall be distributed by the Indenture Trustee to the Certificateholders.

(e) Upon the winding up of the Issuing Entity in accordance with Section 3808 of the Statutory Trust Statute and its termination, the Owner Trustee shall cause the Certificate of Trust to be canceled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of Section 3810 of the Statutory Trust Statute.

ARTICLE XI

SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES

Section 11.01. Eligibility Requirements for Owner Trustee. The Owner Trustee shall at all times be a corporation or banking association satisfying the provisions of Section 3807(a) of the Statutory Trust Statute; authorized to exercise trust powers; having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or state authorities; and having (or having a parent that has) a rating of at least “Baa3” by Moody’s, and “A-1” by S&P (or otherwise acceptable to the Rating Agencies). If such entity shall publish reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section 11.01, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of this Section 11.01, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 11.02.

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Section 11.02. Resignation or Removal of Owner Trustee. The Owner Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Issuing Entity, the Depositor, the Servicer and the Indenture Trustee. Upon receiving such notice of resignation, the Depositor shall promptly appoint a successor Owner Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner Trustee shall have been so appointed and have accepted appointment within thirty (30) days after the giving of such notice of resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee.

If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 11.01 and shall fail to resign after written request therefor by the Certificateholders or the Depositor, or if at any time the Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Certificateholders or the Depositor, may remove the Owner Trustee. If the Certificateholders or the Depositor shall remove the Owner Trustee under the authority of the immediately preceding sentence, the Depositor, shall promptly appoint a successor Owner Trustee by written instrument in duplicate, one copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one copy to the successor Owner Trustee and payment of all fees owed to the outgoing Owner Trustee.

Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section 11.02 shall not become effective until acceptance of appointment by the successor Owner Trustee pursuant to Section 11.03, and payment of all fees and expenses owed to the outgoing Owner Trustee. The Servicer shall provide notice of such resignation or removal of the Owner Trustee to each of the Rating Agencies and the Indenture Trustee.

Section 11.03. Successor Owner Trustee. Any successor Owner Trustee appointed pursuant to Section 11.02 shall execute, acknowledge and deliver to the Issuing Entity, the Depositor, the Indenture Trustee and to its predecessor Owner Trustee an instrument accepting such appointment under this Agreement, and thereupon, subject to the payment of all fees and expenses owed to the outgoing Owner Trustee, the resignation or removal of the predecessor Owner Trustee shall become effective and such successor Owner Trustee without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties, and obligations of its predecessor under this Agreement, with like effect as if originally named as Owner Trustee. The predecessor Owner Trustee shall upon payment of its fees and expenses deliver to the successor Owner Trustee all documents and statements and moneys held by it under this Agreement; and the Depositor and the predecessor Owner Trustee shall execute and deliver such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties, and obligations.

No successor Owner Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Owner Trustee shall be eligible pursuant to Section 11.01.

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Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section 11.03, the Depositor shall mail notice of the successor of such Owner Trustee to the Certificateholders, the Indenture Trustee, the Noteholders and the Rating Agencies. If the Depositor fails to mail such notice within ten (10) days after acceptance of appointment by the successor Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed at the expense of the Depositor.

Any successor Owner Trustee appointed pursuant to this Section 11.03 shall file an amendment to the Certificate of Trust with the Secretary of State identifying the name and principal place of business of such successor Owner Trustee in the State of Delaware.

Section 11.04. Merger or Consolidation of Owner Trustee. Any corporation or banking association into which the Owner Trustee may be merged or converted or with which it may be consolidated or any corporation or banking association resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any corporation or banking association succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided such corporation or banking association shall be eligible pursuant to Section 11.01, without the execution or filing of any instrument or any further act on the part of any of the parties hereto, except the filing of an amendment to the Certificate of Trust, if appropriate, anything herein to the contrary notwithstanding; provided, further, that the Owner Trustee shall mail notice of such merger, conversion or consolidation to the Rating Agencies and; provided, further, that the Owner Trustee shall file an amendment to the Certificate of Trust as required under Section 11.03 above.

Section 11.05. Appointment of Co-Trustee or Separate Trustee.

(a) Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Owner Trust Estate or any Mortgaged Property may at the time be located, and for the purpose of performing certain duties and obligations of the Owner Trustee with respect to the Issuing Entity and the Certificates, the Owner Trustee shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Owner Trustee and acceptable to the Depositor to act as co-trustee, jointly with the Owner Trustee, or separate trustee or separate trustees, of all or any part of the Owner Trust Estate, and to vest in such Person, in such capacity, such title to the Issuing Entity, or any part thereof, and, subject to the other provisions of this Section 11.05, such powers, duties, obligations, rights and trusts as the Depositor and the Owner Trustee may consider necessary or desirable. No co-trustee or separate trustee under this Agreement shall be required to meet the terms of eligibility as a successor trustee pursuant to Section 11.01 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 11.03.

(b) Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provision and conditions:

(i) all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it being understood that such separate

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trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties, and obligations (including the holding of title to the Issuing Entity or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee;

(ii) no trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under this Agreement; and

(iii) the Owner Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

(c) Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to the separate trustees and co-trustees, as if given to each of them. Every instrument appointing any separate trustee or co-trustee, other than this Agreement, shall refer to this Agreement and to the conditions of this Article XI. Each separate trustee and co-trustee, upon its acceptance of appointment, shall be vested with the estates specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee.

(d) Any separate trustee or co-trustee may at any time appoint the Owner Trustee as its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Owner Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

ARTICLE XII

MISCELLANEOUS

Section 12.01. Supplements and Amendments. This Agreement may be amended by the Depositor and the Owner Trustee, with prior written notice to the Rating Agencies, but without the consent of any of the Noteholders, the Certificateholders or the Indenture Trustee, to cure any ambiguity, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, such action shall not adversely affect in any material respect the interests of any Noteholder or Certificateholder. An amendment described above shall be deemed not to adversely affect in any material respect the interests of any Noteholder if the party requesting the amendment (i) delivers an Opinion of Counsel, at the expense of the party requesting the change, delivered to the Owner Trustee to such effect and to the effect that

31

such amendment will not cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes, or (ii) satisfies the Rating Agency Condition with respect to such amendment.

This Agreement may also be amended from time to time by the Depositor and the Owner Trustee, subject to the satisfaction of the Rating Agency Condition and with the prior written consent of the Indenture Trustee, the Noteholders evidencing more than 50% of the Class Note Balance of the Outstanding Notes of all of the Classes affected thereby and the Certificateholders evidencing more than 50% of the Percentage Interests of the Issuing Entity, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on the Mortgage Loans or distributions that shall be required to be made for the benefit of the Noteholders or the Certificateholders, (b) reduce the aforesaid percentage of the Class Note Balance of the Outstanding Notes or the Percentage Interests required to consent to any such amendment, in either case of clause (a) or (b) without the consent of the holders of all the outstanding Notes affected thereby and the Certificateholders of all the outstanding Certificates.

Promptly after the execution of any such amendment or consent, the Depositor shall furnish written notification of the substance of such amendment or consent to the Certificateholders, the Indenture Trustee and each of the Rating Agencies.

It shall not be necessary for the consent of the Certificateholders, the Noteholders or the Indenture Trustee pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Certificateholders provided for in this Agreement or in any other Basic Document) and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable requirements as the Owner Trustee may prescribe.

Promptly after the execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause the filing of such amendment with the Secretary of State.

Prior to the execution of any amendment to this Agreement or the Certificate of Trust, the Owner Trustee and the Indenture Trustee (if the Indenture Trustee’s consent for such amendment is required) shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent have been met. The Owner Trustee may, but shall not be obligated to, enter into any such amendment which affects the Owner Trustee’s own rights, duties or immunities under this Agreement or otherwise.

Section 12.02. No Legal Title to Owner Trust Estate in Certificateholders. The Certificateholders shall not have legal title to any part of the Owner Trust Estate. The Certificateholders shall be entitled to receive distributions with respect to their undivided beneficial ownership interest therein only in accordance with Articles VI and X. No transfer, by operation of law or otherwise, of any right, title, or interest of the Certificateholders to and in their

32

ownership interest in the Owner Trust Estate shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of legal title to any part of the Owner Trust Estate.

Section 12.03. Limitations on Rights of Others. The provisions of this Agreement are solely for the benefit of the Owner Trustee, the Sponsor, the Depositor, the Certificateholders and, to the extent expressly provided herein, the Indenture Trustee and the Noteholders, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Owner Trust Estate or under or in respect of this Agreement or any covenants, conditions or provisions contained herein.

Section 12.04. Notices.

(a) Unless otherwise expressly specified or permitted by the terms hereof, all communications provided for or permitted hereunder shall be in writing and shall be deemed to have been given if (1) personally delivered, (2) upon receipt by the intended recipient or three Business Days after mailing if mailed by certified mail, postage prepaid (except that notice to the Owner Trustee shall be deemed given only upon actual receipt by the Owner Trustee), (3) sent by express courier delivery service and received by the intended recipient or (4) except with respect to notices sent to the Owner Trustee, transmitted by telex or facsimile transmission (or any other type of electronic transmission agreed upon by the parties and confirmed by a writing delivered by any of the means described in (1), (2) or (3), at the following addresses: (i) if to the Owner Trustee, at its Corporate Trust Office; and (ii) if to the Depositor, NovaStar Certificates Financing Corporation, 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114, Attention: Matt Kaltenrieder (816) 237-7508; or, as to each such party, at such other address as shall be designated by such party in a written notice to each other party.

(b) Any notice required or permitted to be given to a Certificateholder shall be given by first-class mail, postage prepaid, at the address of such Certificateholder as shown in the Certificate Register. Any notice so mailed within the time prescribed in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice.

Section 12.05. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 12.06. Separate Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

Section 12.07. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, the Depositor, the Owner Trustee and its successors and each Certificateholder and its successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by a Certificateholder shall bind the successors and assigns of such Certificateholder.

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Section 12.08. No Petition. The Owner Trustee, by entering into this Agreement, each Certificateholder, by accepting a Certificate, and the Indenture Trustee and each Noteholder by accepting the benefits of this Agreement, hereby covenant and agree that they will not at any time institute against the Depositor or the Issuing Entity, or join in any institution against the Depositor or the Issuing Entity of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy law in connection with any obligations relating to the Certificates, the Notes, this Agreement or any of the other Basic Documents.

This Section 12.08 will survive for one year and one day following the termination of this Agreement.

Section 12.09. No Recourse. Each Certificateholder by accepting a Certificate acknowledges that such Certificateholder’s Certificate represents a beneficial interest in the Issuing Entity only and does not represent an interest in or an obligation of the Servicer, the Sponsor, the Owner Trustee or any Affiliate thereof and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated in this Agreement, the Certificates or the other Basic Documents.

Section 12.10. Headings. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

Section 12.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

Section 12.12. [Intentionally Omitted.]

Section 12.13. Third-Party Beneficiaries. The Indenture Trustee, the Sponsor and NovaStar Financial Inc. are intended third-party beneficiaries of this Agreement, and this Agreement shall be binding upon and inure to the benefit of the Indenture Trustee, the Sponsor and NovaStar Financial Inc.

Section 12.14. [Intentionally Omitted.]

Section 12.15. Servicer. The Servicer is authorized to prepare, or cause to be prepared, execute and deliver on behalf of the Issuing Entity all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuing Entity, the Sponsor or Owner Trustee to prepare, file or deliver pursuant to the Basic Documents. Upon written request, the Owner Trustee shall execute and deliver to the Servicer a limited power of attorney appointing the Servicer the Issuing Entity’s agent and attorney-in-fact to prepare, or cause to be prepared, execute and deliver all such documents, reports, filings, instruments, certificates and opinions.

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[Remainder of Page Intentionally Left Blank]

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

NOVASTAR CERTIFICATES FINANCING CORPORATION, as Depositor
By:	/s/ Matt Kaltenrieder
Name:	Matt Kaltenrieder
Title:	Vice President
WILMINGTON TRUST COMPANY, As Owner Trustee
By:	/s/ Rachel L. Simpson
Name:	Rachel L. Simpson
Title:	Sr. Financial Services Officer

Solely with respect to obligation under Section 9.02 of this Trust Agreement
NOVASTAR MORTGAGE, INC., as Servicer
By:	/s/ Matt Kaltenrieder
Name:	Matt Kaltenrieder
Title:	Vice President

[Signature page to Amended and Restated Trust Agreement]

EXHIBIT A

FORM OF TRUST CERTIFICATE

THE EQUITY INTEREST IN THE ISSUING ENTITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND OF SUCH STATE LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE ISSUING ENTITY OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT NOT LIMITED TO, NOVASTAR MORTGAGE INC.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS EQUITY INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS.

NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE MADE TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE IS NOT (I) AN EMPLOYEE BENEFIT PLAN (WITHIN THE MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO TITLE OF ERISA, (II) A PLAN (WITHIN THE MEANING OF SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) A GOVERNMENTAL PLAN (WITHIN THE MEANING OF SECTION 3(32) OF ERISA) THAT IS SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS, TO A MATERIAL EXTENT, SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (EACH OF THE FOREGOING, A “PLAN”), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING THIS CERTIFICATE OR A BENEFICIAL INTEREST HEREIN ON BEHALF OF, AS INVESTMENT MANAGER OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A PLAN.

THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A) AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS; AND (C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS PERCENTAGE INTEREST OF THE TAXABLE INCOME RELATING TO THIS CERTIFICATE.

Certificate No. 1 Percentage Interest: 100%

THIS CERTIFIES THAT NovaStar Certificates Financing Corporation (the “Certificateholder”) is the registered owner of a 100% Percentage Interest in NovaStar Mortgage Funding Trust, Series 2006-MTA1 (the “Issuing Entity”) existing under the laws of the State of Delaware and created pursuant to that certain Trust Agreement, dated as of May 22, 2006, as amended and restated on June 8, 2006 (as amended and restated, the “Trust Agreement”), by and between NovaStar Certificates Financing Corporation, as depositor, and Wilmington Trust Company, not its individual capacity but solely as owner trustee under the Trust Agreement (the “Owner Trustee”). Capitalized terms used but not otherwise defined herein have the meanings assigned to such terms in the Trust Agreement. The Owner Trustee, on behalf of the Issuing Entity and not in its individual capacity, has executed this Certificate by one of its duly authorized signatories as set forth below. This Certificate is one of the Certificates referred to in the Trust Agreement and is issued under and is subject to the terms, provisions and conditions of the Trust Agreement to which the Certificateholder by virtue of the acceptance hereof agrees and by which the Certificateholder hereof is bound. Reference is hereby made to the Trust Agreement for the rights of the Certificateholder, as well as for the terms and conditions of the Issuing Entity created by the Trust Agreement.

The recitals contained herein (other than the signature and countersignature of the Owner Trustee) shall be taken as the statements of the Depositor, and the Owner Trustee assumes no responsibility for the correctness thereof.

The Certificateholder, by its acceptance hereof, agrees not to transfer this Certificate except in accordance with terms and provisions of the Trust Agreement.

The Certificateholder, by its acceptance hereof, acknowledges that such Certificateholder’s Certificate represents a beneficial interest in the Issuing Entity only and does not represent an interest in or an obligation of the Servicer, the Depositor, the Sponsor, the Owner Trustee or any Affiliate thereof and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated herein, in the Trust Agreement or the other Basic Documents.

No pledge or transfer of the Certificates shall be effective unless such pledge or transfer is (i) of a 100% Percentage Interest of all the Certificates and (ii) to a beneficial owner that represents that it qualifies for taxation as a REIT or is a Qualified REIT Subsidiary.

THIS CERTIFICATE REPRESENTS AN OWNERSHIP INTEREST IN THE ISSUING ENTITY FOR FEDERAL INCOME TAX PURPOSES.

THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

A-2

IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuing Entity and not in its individual capacity, has caused this Certificate to be duly executed.

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1
WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement
By:
	Authorized Signatory

Dated: June 8, 2006

CERTIFICATE OF AUTHENTICATION

This is one of the Certificates referred to in the within-mentioned Trust Agreement.

WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement
By:
	Authorized Signatory

Dated: June 8, 2006

A-3

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto

PLEASE INSERT SOCIAL SECURITY

OR OTHER IDENTIFYING NUMBER

OF ASSIGNEE

______________________________________________________________________________________________________________________________

(Please print or type name and address, including postal zip code, of assignee)

______________________________________________________________________________________________________________________________

the within instrument, and all rights thereunder, hereby irrevocably constituting and appointing                     , Attorney, to transfer said Instrument on the books of the Certificate Registrar, with full power of substitution in the premises.

Dated:

By:	*/
	Signature Guaranteed:
By:	*/
	Signature Guaranteed:

*/ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Instrument in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company.

A-4

EXHIBIT B

FORM OF CERTIFICATE OF TRUST

CERTIFICATE OF TRUST OF

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1

THIS CERTIFICATE OF TRUST OF NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1 (the “Trust”), is being duly executed and filed by the undersigned, as trustee, to form a statutory trust under the Delaware Statutory Trust Act (12 Del. Code, § 3801 et seq.)(the “Act”).

1. Name. The name of the statutory trust formed hereby is NovaStar Mortgage Funding Trust, Series 2006-MTA1.

2. Delaware Trustee. The name and business address of the trustee of the Issuing Entity in the State of Delaware are Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration.

3. Effective Date. This Certificate of Trust shall be effective upon filing.

B-1

IN WITNESS WHEREOF, the undersigned, has duly executed this Certificate of Trust in accordance with Section 3811(a)(1) of the Act.

WILMINGTON TRUST COMPANY, not in its individual capacity but solely as trustee

By:

Name:

Title:

B-2

EXHIBIT C

FORM OF INVESTMENT LETTER

                    ,             

NovaStar Certificates Financing Corporation

8140 Ward Parkway, Suite 300

Kansas City, Missouri 64114

Wilmington Trust Company

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Re: NovaStar Mortgage Funding Trust, Series 2006-MTA1 (the “Trust”) Asset-Backed Notes, Series 2006-MTA1

Ladies and Gentlemen:

                     (the “Certificateholder”) has purchased or acquired, or intends to purchase or acquire from                     , the current Certificateholder (the “Current Certificateholder”), a Trust Certificate representing a 100% Percentage Interest (the “Certificate”) in the Issuing Entity, which represents an interest in the Issuing Entity created pursuant to that certain Trust Agreement, dated as of May 22, 2006, as amended and restated on June 8, 2006 (the “Trust Agreement”), by and between NovaStar Certificates Financing Corporation, as Depositor and Wilmington Trust Company, as Owner Trustee. Capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Trust Agreement.

CERTIFICATION

The undersigned, as an authorized officer or agent of the Certificateholder, hereby certifies, represents, warrants and agrees on behalf of the Certificateholder as follows:

1. The Certificateholder is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed and is authorized to invest in the Certificate. The person executing this letter on behalf of the Certificateholder is duly authorized to do so on behalf of the Certificateholder.

2. The Certificateholder hereby acknowledges that no transfer of the Certificate may be made unless such transfer is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”); and applicable state securities laws, or is made in accordance with the Securities Act and such laws.

3. The Certificateholder understands that the Certificate has not been and will not be registered under the Securities Act and may be offered, sold, pledged or otherwise transferred to a person whom the transferor reasonably believes is (A) a qualified institutional buyer (as defined in Rule 144A under the Securities Act) or (B) a Person involved in the

C-1

organization or operation of the Issuing Entity or an affiliate of such Person, in a transaction pursuant to an effective registration statement under the Securities Act and any applicable state securities laws or exempt from the registration requirements of the Securities Act and any such state securities laws. The Certifcateholder understands that the Certificate bears a legend to the foregoing effect.

4. The Certificateholder is acquiring the Certificate for its own account or for accounts for which it exercises sole investment discretion, and not with a view to or for sale or other transfer in connection with any distribution of the Certificate in any manner that would violate Section 5 of the Securities Act or any applicable state securities laws, subject nevertheless to any requirement of law that the disposition of the Certificateholder’s property shall at all times be and remain within its control.

5. The Certificateholder is (A) a “qualified institutional buyer” (a “QIB”) as defined in Rule 144A under the Securities Act, and is aware that the transferor of the Certificate may be relying on an exemption from the registration requirements of the Securities Act and is acquiring such Certificate for its own account or for the account of one or more qualified institutional buyers for whom it is authorized to act, or (B) a Person involved in the organization or operation of the Issuing Entity or an affiliate of such Person within the meaning of Rule 3a-7 of the Investment Company Act of 1940, as amended (including, but not limited to, the Sponsor). The Certificateholder is able to bear the economic risks of such an investment. The Certificateholder is a QIB because [STATE FACTUAL BASIS FOR QIB STATUS].

6. If the Certificateholder sells or otherwise transfers the registered ownership of such Certificate, the Certificateholder will comply with the restrictions and requirements with respect to the transfer of the ownership of the Certificate under the Trust Agreement, and the Certificateholder will obtain from any subsequent purchaser or transferee substantially the same certifications, representations, warranties and covenants as required under the Trust Agreement in connection with such subsequent sale or transfer thereof.

7. The Certificateholder is not an entity that will hold a Certificate as nominee (a “Book Entry Nominee”) to facilitate the clearance and settlement of such security through electronic book-entry changes in Accounts or participating organizations.

8. The Certificateholder consents to any amendments of the Trust Agreement as may be required to effectuate further the restrictions on transfer of the Certificates to Book Entry Nominees.

9. The Certificateholder is not a Plan and is not, directly or indirectly, purchasing such Certificate on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with assets of a Plan.

10. The Certificateholder hereby agrees to indemnify each of the Issuing Entity, the Indenture Trustee and the Owner Trustee against any liability that may result if the Certificateholder’s transfer of a Certificate (or any portion thereof) is not exempt from the registration requirements of the Securities Act and any applicable state securities laws or is not made in accordance with such federal and state laws. Such indemnification of the Issuing Entity, the Indenture Trustee, and the Owner Trustee shall survive the termination of the related Trust Agreement.

C-2

11. The Certificateholder qualifies for taxation as a REIT or is a Qualified REIT Subsidiary.

IN WITNESS WHEREOF, the Certificateholder has caused this instrument to be executed on its behalf pursuant to the authority of its Board of Directors, by its duly authorized signatory this                      day of                     ,     .

[NAME OF CERTIFICATEHOLDER]

By:

Name:

Title:

C-3

EXHIBIT D

FORM OF TRANSFEROR CERTIFICATE

                    ,             

NovaStar Certificates Financing Corporation

8140 Ward Parkway, Suite 300

Kansas City, Missouri 64114

Wilmington Trust Company

Rodney Square North

1100 North Market Street

Wilmington, DE 19890

Re: NovaStar Mortgage Funding Trust, Series 2006-MTA1 (the “Trust”) Asset-Backed Notes, Series 2006-MTA1

Ladies and Gentlemen:

In connection with our disposition of the above-referenced Asset-Backed Certificates (the “Certificates”) we certify that (i) we understand that the Certificates have not been registered under the Securities Act of 1933, as amended (the “Act”), and are being transferred by us in a transaction that is exempt from the registration requirements of the Act and (ii) we have not offered or sold any Certificates to, or solicited offers to buy any Certificates from, any person, or otherwise approached or negotiated with any person with respect thereto, in a manner that would be deemed, or taken any other action which would result in, a violation of Section 5 of the Act.

Dated:

[NAME OF TRANSFEROR]

By:

Authorized Officer

D-1

EXHIBIT E

Form of Class C Certificate

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1

HOME EQUITY LOAN ASSET-BACKED CERTIFICATE

CLASS C CERTIFICATES

Comprised of a Certificate Representing

Certain Interests Relating to a Pool of

Mortgage Loans

The Mortgage Loans are Serviced by

NOVASTAR MORTGAGE, INC., as Servicer

(This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Certificates Financing Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Sale and Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Indenture Trustee relating to the Mortgage Loans and other assets held in the Issuing Entity.)

THE EQUITY INTEREST IN THE ISSUING ENTITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND OF SUCH STATE LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE ISSUING ENTITY OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT NOT LIMITED TO, NOVASTAR MORTGAGE INC.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS EQUITY INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS.

NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE MADE TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE IS NOT (I) AN EMPLOYEE BENEFIT PLAN (WITHIN THE MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO TITLE OF ERISA, (II) A PLAN (WITHIN THE

E-1

MEANING OF SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) A GOVERNMENTAL PLAN (WITHIN THE MEANING OF SECTION 3(32) OF ERISA) THAT IS SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS, TO A MATERIAL EXTENT, SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (EACH OF THE FOREGOING, A “PLAN”), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING THIS CERTIFICATE OR A BENEFICIAL INTEREST HEREIN ON BEHALF OF, AS INVESTMENT MANAGER OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A PLAN.

THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A) AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS; AND (C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS PERCENTAGE INTEREST OF THE TAXABLE INCOME RELATING TO THIS CERTIFICATE.

No.: C	Date: June 8, 2006	CUSIP No.: [    ]
Percentage Interest: 100%	Registered Owner: NovaStar Certificates Financing Corporation	Final Scheduled Payment Date: August 25, 2046

The registered owner named above is the registered owner of a fractional interest in (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Sale and Servicing Agreement dated as of May 1, 2006 (the “Sale and Servicing Agreement”) by and among NovaStar Certificates Financing Corporation as the depositor (the “Depositor”), the Indenture Trustee, J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), US Bank National Association, as the custodian (the “Custodian”), NovaStar Mortgage Funding Trust, Series 2006-MTA1, as the issuing entity (the “Issuing Entity”) NovaStar Financial Inc., as a seller and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Company’s interest in any insurance policies in respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Company under the Purchase Agreement and (vi) all other assets included or to be included in the Issuing Entity. Such assignment includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans.

Each owner of record of a Class C Certificate will be entitled to certain distributions, as described under Article VIII of the Indenture.

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In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the Indenture Trustee. The Indenture provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Indenture.

THIS CERTIFICATE REPRESENTS AN OWNERSHIP INTEREST IN THE ISSUING ENTITY FOR FEDERAL INCOME TAX PURPOSES.

NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY.

This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-MTA1, Class C Certificates (the “Class C Certificates”) and issued under and subject to the terms, provisions and conditions of the Trust Agreement, to which the owner of this Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Trust Agreement are the Trust Certificates and all such Certificates are collectively referred to as the “Certificates”.

Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Trust Agreement.

On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Payment Date”) commencing June 25, 2006, the owners of the Class C Certificates as of the close of business on the business day immediately preceding such Payment Date (the “Record Date”) will be entitled to receive payments in respect of interest and principal, if any, relating to such Payment Date, all as described in Article VIII of the Indenture. Payments will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register.

The Indenture Trustee is required to duly and punctually pay payments with respect to this Certificate in accordance with the terms hereof and the Indenture. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Indenture Trustee to such owner for all purposes of the Indenture.

The Mortgage Loans will be serviced by the Servicer pursuant to the Sale and Servicing Agreement. The Sale and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Sale and Servicing Agreement.

This Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Certificates Financing Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit

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Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Indenture) all as more specifically set forth hereinabove and in the Indenture.

Notwithstanding any other provisions in the Indenture, the owner of any Certificate shall have the right which is absolute and unconditional to receive payments to the extent provided in the Indenture with respect to such Certificate or to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such owner.

The Depositor may, at its option, terminate the Indenture on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the sum of (i) the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date and (ii) the Original Pre-Funded Amount, by purchasing, on the next succeeding Payment Date, all of the outstanding Mortgage Loans and REO Properties at the Repurchase Price.

As provided in the Trust Agreement and subject to certain limitations therein set forth, Class C Certificates are exchangeable for new Class C Certificates of authorized denominations evidencing the same aggregate principal amount.

No pledge or transfer of the Certificates shall be effective unless such pledge or transfer is (i) of a 100% Percentage Interest of all the Certificates and (ii) to a beneficial owner that represents that it qualifies for taxation as a REIT or is a Qualified REIT Subsidiary.

The Indenture Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Indenture Trustee or any such agent shall be affected by notice to the contrary.

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IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuing Entity and not in its individual capacity, has caused this Certificate to be duly executed.

NOVASTAR MORTGAGE FUNDING

TRUST, SERIES 2006-MTA1

WILMINGTON TRUST COMPANY, not in its

individual capacity but solely as Owner Trustee

under the Trust Agreement

By:

Authorized Signatory

Dated: June 8, 2006

CERTIFICATE OF AUTHENTICATION

This is one of the Certificates referred to in the within-mentioned Trust Agreement.

WILMINGTON TRUST COMPANY, not in its individual capacity but solely as Owner Trustee under the Trust Agreement
By:
	Authorized Signatory

Dated: June 8, 2006

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ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto

PLEASE INSERT SOCIAL SECURITY

OR OTHER IDENTIFYING NUMBER

OF ASSIGNEE

(Please print or type name and address, including postal zip code, of assignee)

the within instrument, and all rights thereunder, hereby irrevocably constituting and appointing                     , Attorney, to transfer said Instrument on the books of the Certificate Registrar, with full power of substitution in the premises.

Dated:

By:		*/
	Signature Guaranteed:
By:		*/

*/ NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Instrument in every particular, without alteration, enlargement or any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company.

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EX-10.1

EXHIBIT 10.1

EXECUTION VERSION

SALE AND SERVICING AGREEMENT

dated as of May 1, 2006

by and among

NOVASTAR CERTIFICATES FINANCING CORPORATION

as Depositor,

NOVASTAR MORTGAGE INC.,

as Sponsor and Servicer,

NOVASTAR FINANCIAL INC.,

as a Seller

NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1,

as Issuing Entity,

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

as Indenture Trustee

U.S. BANK NATIONAL ASSOCIATION,

as Custodian

J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION

as Co-Trustee

TABLE OF CONTENTS

		Page
ARTICLE I
DEFINITIONS
Section 1.01.	Certain Defined Terms	1
Section 1.02.	Provisions of General Application	1
ARTICLE II
SALE AND CONVEYANCE OF THE MORTGAGE LOANS
Section 2.01.	Purchase and Sale of Initial Mortgage Loans; Deposit of Derivatives	2
Section 2.02.	Reserved	3
Section 2.03.	Purchase Price	3
Section 2.04.	Possession of Mortgage Files; Access to Mortgage Files	3
Section 2.05.	Delivery of Mortgage Loan Documents	4
Section 2.06.	Acceptance of the Trust Estate; Certain Substitutions; Certification by the Custodian, on behalf of the Indenture Trustee	6
Section 2.07.	Grant of Security Interest	7
Section 2.08.	Further Action Evidencing Assignments	8
Section 2.09.	Conveyance of the Subsequent Mortgage Loans	9
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 3.01.	Representations, Warranties and Covenants of the Servicer	13
Section 3.02.	Representations, Warranties and Covenants of the Sponsor	14
Section 3.03.	Representations, Warranties and Covenants of the Sponsor	16
Section 3.04.	Representations, Warranties and Covenants of the Indenture Trustee	17
Section 3.05.	Representations and Warranties of the Depositor	18
ARTICLE IV
THE MORTGAGE LOANS
Section 4.01.	Representations and Warranties Concerning the Mortgage Loans	19
ARTICLE V
ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS
Section 5.01.	Servicer to Assure Servicing	35
Section 5.02.	Subservicing Agreements Between Servicer and Subservicers	36
Section 5.03.	Successor Subservicers	37
Section 5.04.	Liability of the Servicer	38
Section 5.05.	Assumption or Termination of Subservicing Agreements by the Indenture Trustee	38
Section 5.06.	Collection of Mortgage Loan Payments	39

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Section 5.07.	Withdrawals from the Collection Account	41
Section 5.08.	Collection of Taxes, Assessments and Similar Items; Servicing Accounts	43
Section 5.09.	Access to Certain Documentation and Information Regarding the Mortgage Loans	43
Section 5.10.	[Reserved]	44
Section 5.11.	Maintenance of Hazard Insurance and Fidelity Coverage	44
Section 5.12.	Due-on-Sale Clauses; Assumption Agreements	46
Section 5.13.	Realization Upon Defaulted Mortgage Loans	46
Section 5.14.	Custodian to Cooperate; Release of Mortgage Files	48
Section 5.15.	Servicing Compensation	49
Section 5.16.	Annual Statements of Compliance	50
Section 5.17.	Assessments of Compliance and Attestation Reports	50
Section 5.18.	Reports Filed with Securities and Exchange Commission	51
Section 5.19.	Optional Purchase of Defaulted Mortgage Loans	56
Section 5.20.	Information Required by the Internal Revenue Service Generally and Reports of Foreclosures and Abandonments of Mortgaged Property	57
Section 5.21.	Optional Purchase of Mortgage Loans	57
Section 5.22.	[Reserved]	57
Section 5.23.	Servicing and Administration of the MI Policies	57
Section 5.24.	Determination Date Reports	58
Section 5.25.	Advances	59
Section 5.26.	Compensating Interest Payments	59
Section 5.27.	Advance Facility	60
Section 5.28.	Servicer Rights Facility	62
ARTICLE VI
APPLICATION OF FUNDS
Section 6.01.	Deposits to the Payment Account	63
Section 6.02.	Collection of Money	63
Section 6.03.	Application of Principal and Interest	63
ARTICLE VII
THE SERVICER AND THE DEPOSITOR
Section 7.01.	Liability of the Servicer and the Depositor	63
Section 7.02.	Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or the Depositor	63
Section 7.03.	Limitation on Liability of the Servicer and Others	64
Section 7.04.	Servicer Not to Resign	64
Section 7.05.	Delegation of Duties	65
Section 7.06.	Servicing Rights Owner to Pay Trustee’s Fees and Expenses; Indemnification	65

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ARTICLE VIII
DEFAULT
Section 8.01.	Servicing Default	66
Section 8.02.	Indenture Trustee to Act: Appointment of Successor	68
Section 8.03.	Waiver of Defaults	70
ARTICLE IX
TERMINATION
Section 9.01.	Termination	70
Section 9.02.	Accounting Upon Termination of Servicer	71
ARTICLE X
[RESERVED]
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01.	Limitation on Liability	72
Section 11.02.	Acts of Noteholders	72
Section 11.03.	Amendment	73
Section 11.04.	Recordation of Agreement	74
Section 11.05.	Duration of Agreement	74
Section 11.06.	Notices	74
Section 11.07.	Severability of Provisions	75
Section 11.08.	No Partnership	75
Section 11.09.	Counterparts	75
Section 11.10.	Successors and Assigns	75
Section 11.11.	Headings	75
Section 11.12.	No Petition	75
Section 11.13.	Third Party Beneficiary	75
Section 11.14.	Intent of the Parties	75
Section 11.15.	Compliance With Regulation AB	75
Section 11.16.	Governing Law; Consent to Jurisdiction Waiver of Jury Trial	76
Schedule I	Mortgage Loan Schedule
Appendix I	Defined Terms

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EXHIBITS

Exhibit A	Reserved
Exhibit B	Mortgage Loan Schedule
Exhibit C	Custodian’s Acknowledgement of Receipt
Exhibit D	Initial Certification of Custodian
Exhibit E	Final Certification of Custodian
Exhibit F	Request for Release of Documents
Exhibit G	NovaStar Mortgage Inc.’s Officer’s Certificate
Exhibit H	Servicing Criteria to be Addressed in Assessment of Compliance
Exhibit I	Form 10-D, Form 8-K and Form 10-K Reporting Responsibility
Exhibit J-1	Form of Certification to Be Provided by the Depositor with Form 10-K
Exhibit J-2	Form of Certification to Be Provided to the Depositor by the Indenture Trustee
Exhibit K	Form of Officer’s Certificate Regarding Annual Statement of Compliance
Exhibit L	Form of Advance Facility Notice
Exhibit M	Form of Written Notice to the Indenture Trustee

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SALE AND SERVICING AGREEMENT, dated as of May 1, 2006 (this “Agreement”), by and among NOVASTAR CERTIFICATES FINANCING CORPORATION, a Delaware corporation, as depositor (the “Depositor”), NOVASTAR FINANCIAL INC., as seller (the “Seller”), NOVASTAR MORTGAGE INC., a Virginia corporation, as sponsor (the “Sponsor”), NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1, a Delaware statutory trust, as issuing entity (the “Issuing Entity”), NOVASTAR MORTGAGE INC., a Virginia corporation, as servicer (the “Servicer”), JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a banking association organized under the laws of the United States, as indenture trustee (the “Indenture Trustee”), J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as co-trustee (the “Co-Trustee”) and U.S. BANK NATIONAL ASSOCIATION, a banking association organized under the laws of the United States, as custodian (the “Custodian”).

W I T N E S S E T H

WHEREAS, pursuant to the terms of this Agreement, the Sponsor and the Seller will sell the Initial Mortgage Loans and the related MI Policies to the Depositor on the Closing Date;

WHEREAS, pursuant to the terms of this Agreement, the Depositor will sell to the Issuing Entity, and the Issuing Entity will purchase from the Depositor, the Initial Mortgage Loans and the related MI Policies on the Closing Date;

WHEREAS, immediately after such purchase, the Issuing Entity will pledge such Mortgage Loans to the Indenture Trustee pursuant to the terms of an Indenture, dated as of May 1, 2006 (the “Indenture”), between the Issuing Entity and the Indenture Trustee, and issue the NovaStar Mortgage Funding Trust, Series 2006-MTA1, Asset-Backed Notes (the “Notes”);

WHEREAS, the Servicer has agreed to service the Mortgage Loans, which constitute the principal assets of the Issuing Entity;

WHEREAS, the Custodian on behalf of the Indenture Trustee will hold the Mortgage Loans and certain other assets pledged to the Indenture Trustee pursuant to the Indenture; and

NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the Depositor, the Sponsor, the Issuing Entity, the Servicer, the Indenture Trustee and the Custodian hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.01. Certain Defined Terms. Capitalized terms used herein but not defined herein shall have the meanings ascribed to such terms in Appendix I attached hereto.

Section 1.02. Provisions of General Application.

(a) The terms defined herein and in Appendix I to the Indenture include the plural as well as the singular.

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(b) The words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole. Unless otherwise noted, all references to Articles and Sections shall be deemed to refer to Articles and Sections of this Agreement.

(c) Any reference to statutes are to be construed as including all statutory provisions consolidating, amending or replacing the statute to which reference is made and all regulations promulgated pursuant to such statutes.

(d) All calculations of interest with respect to the LIBOR Notes provided for herein shall be on the basis of a 360-day year and the actual number of days elapsed in the related Interest Accrual Period. All calculations of interest with respect to any Mortgage Loan provided for herein shall be made in accordance with the terms of the related Mortgage Note and Mortgage or, if such documents do not specify the basis upon which interest accrues thereon, on the basis of a 360 day year consisting of twelve 30-day months, to the extent permitted by applicable law.

(e) Any Mortgage Loan payment is deemed to be received on the date such payment is actually received by the Servicer; provided, however, that, for purposes of calculating payments on the Notes, prepayments with respect to any Mortgage Loan are deemed to be received on the date they are applied in accordance with Accepted Servicing Practices consistent with the terms of the related Mortgage Note and Mortgage to reduce the outstanding Principal Balance of such Mortgage Loan on which interest accrues.

ARTICLE II

SALE AND CONVEYANCE OF THE MORTGAGE LOANS

Section 2.01. Purchase and Sale of Initial Mortgage Loans; Deposit of Derivatives.

(a) The Sponsor and the Seller hereby sell, transfer, assign, set over and convey, and the Depositor hereby purchases on the Closing Date the Initial Mortgage Loans identified (and the related MI Policies) on the Mortgage Loan Schedule annexed hereto as Schedule I, the proceeds thereof and all rights under the Related Documents (including the related Mortgage Files). The Initial Mortgage Loans will have a Principal Balance as of the close of business on the Cut-off Date, after giving effect to any payments due on or before such date whether or not received, of approximately $1,061,223,414.92. The sale of the Initial Mortgage Loans will take place on the Closing Date, subject to and simultaneously with the deposit of the Initial Mortgage Loans and the Original Pre-Funded Amount and the Capitalized Interest Account into the Trust Estate, the authentication of the Notes by the Indenture Trustee and the sale of the Notes pursuant to the Underwriting Agreement.

(b) The Sponsor hereby directs the Depositor to sell, transfer, assign, set over and convey, and the Depositor does hereby sell, transfer, assign, set over and convey to the Issuing Entity, in each case without recourse, but subject to the terms and provisions of this Agreement, all of the right, title and interest of the Depositor in and to the Initial Mortgage Loans, including the Cut-Off Date Principal Balance of, and interest due on, such Initial Mortgage Loans listed on Schedule I attached hereto, and all other assets included or to be included in the Trust Estate.

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(c) The Depositor may cause the deposit of derivatives solely for the benefit of the Certificates at any time into the NovaStar Mortgage Funding Trust, Series 2006-MTA1 and any such deposited derivatives shall become part of the Trust Estate.

(d) The parties hereto understand and agree that it is not intended that any Mortgage Loan be included in the Issuing Entity that is a “High-Cost Home Loan” as defined by HOEPA or any other applicable predatory or abusive lending laws.

Section 2.02. Reserved.

Section 2.03. Purchase Price. On the Closing Date, as full consideration for the Depositor’s sale of the Mortgage Loans to the Issuing Entity, the Underwriter, on behalf of the Issuing Entity, will deliver to, or at the direction of, the Depositor an amount in cash equal to approximately $1,187,566,172. Additionally, the Depositor will receive the Certificates issued by the Issuing Entity pursuant to the Trust Agreement. The Sponsor will receive the Class M-8 Notes, Class M-9 Notes and the Class M-10 Notes.

Section 2.04. Possession of Mortgage Files; Access to Mortgage Files.

(a) Upon the receipt by the Depositor, or its designee, of the purchase price for the Initial Mortgage Loans set forth in Section 2.03 hereof, the ownership of each Mortgage Note, each Mortgage and the contents of the Mortgage File related to each Initial Mortgage Loan will be vested in the Issuing Entity, and will be pledged to the Indenture Trustee, for the benefit of the Noteholders.

(b) The Custodian, on behalf of the Indenture Trustee will hold the Mortgage Files in trust for the benefit of all present and future Noteholders. The Custodian shall at all times retain possession of the Mortgage Files in the State of Maryland, except for those Mortgage Files or portions thereof released to the Servicer pursuant to this Agreement or the Indenture.

(c) Consistent with the terms of the Indenture, the Custodian shall afford the Depositor, the Sponsor, the Seller, the Issuing Entity, the Indenture Trustee and the Servicer reasonable access to all records and documentation regarding the Mortgage Loans relating to this Agreement, such access being afforded at customary charges, upon reasonable prior written request and during normal business hours at the offices of the Custodian.

(d) No later than the fifth Business Day of each fourth month, commencing in November 2006, the Custodian, on behalf of the Indenture Trustee shall deliver to the Servicer a report dated as of the first day of such month, identifying those Mortgage Loans for which it has not yet received (i) an original recorded Mortgage or a copy thereof certified to be true and correct by the public recording office in possession of such Mortgage or (ii) in the event that Assignments of Mortgage are required to be recorded in accordance with the provisions of Section 2.05, an original recorded Assignment of Mortgage to the Custodian, on behalf of the Indenture Trustee and any required intervening Assignments of Mortgage or a copy thereof certified to be a true and correct copy by the public recording office in possession of such Assignment of Mortgage.

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Section 2.05. Delivery of Mortgage Loan Documents. In connection with the transfer and assignment of the Mortgage Loans, the Sponsor or the Seller, as applicable, shall, on or before the Closing Date in the case of an Initial Mortgage Loan and two business days prior to the related Subsequent Transfer Date in the case of a Subsequent Mortgage Loan, deliver, or cause to be delivered, to the Depositor and the Depositor shall, on or before the Closing Date, deliver, or cause to be delivered, to the Custodian, as the Indenture Trustee’s designated agent (as pledgee of the Issuing Entity pursuant to the Indenture), the following documents or instruments constituting the Mortgage File with respect to each Mortgage Loan so transferred or assigned (with respect to each Mortgage Loan, a “Mortgage File”):

(i) the original Mortgage Note endorsed to “JPMorgan Chase Bank, National Association, as Indenture Trustee for the NovaStar Home Equity Loan Asset-Backed Notes, Series 2006-MTA1,” including all intervening endorsements showing a complete chain of endorsement;

(ii) the related original mortgage with evidence of recording indicated thereon or a copy thereof certified by the applicable recording office, the Sponsor or the Sponsor’s closing agent (or, if applicable, the Seller or the Seller’s closing agent) in connection with the closing of the Mortgage Loan and if the Mortgage Loan is registered on the MERS system (as described below), such mortgage or an assignment of the Mortgage will reflect MERS as the mortgagee of record and will include the MERS mortgage identification number;

(iii) each intervening mortgage assignment, if any, with evidence of recording indicated thereon, or if the original is not available, a copy thereof certified by the applicable recording office, the Sponsor or the Sponsor’s closing agent (or, if applicable, the Seller or the Seller’s closing agent) in connection with the closing of the Mortgage Loan, showing a complete chain of assignment from the originator of the related Mortgage Loan to the Sponsor or the Seller (or to MERS, if the Mortgage Loan is registered on the MERS system and indicating the mortgage identification number, if the Mortgage Loan is so registered) — which assignment may, at the Sponsor’s option, be combined with the assignment referred to in clause (d) below;

(iv) unless the Mortgage is registered on the MERS system, a mortgage assignment in recordable form, which, if acceptable for recording in the relevant jurisdiction, may be included in a blanket assignment or assignments, of each Mortgage from the Sponsor to the Indenture Trustee;

(v) originals of all assumption, modification and substitution agreements in those instances where the terms or provisions of a Mortgage or Mortgage Note have been modified or such Mortgage or Mortgage Note has been assumed; and

(vi) an original title insurance policy or title opinion (or (A) a copy of the title insurance policy or title opinion or (B) the related binder, commitment or

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preliminary report, or copy thereof, in which case the Sponsor certifies that the original mortgage has been delivered for recordation to the title insurance company that issued such binder, commitment or preliminary report).

If a material defect in any Mortgage File is discovered which may materially and adversely affects the value of the related Mortgage Loan, or the interests of the Indenture Trustee or the Noteholders in such Mortgage Loan, including if any document required to be delivered to the Custodian has not been delivered (provided that a Mortgage File will not be deemed to contain a defect for an unrecorded assignment under clause (iii) above for 180 days following submission of the assignment if the Sponsor or, the Seller, as applicable, has submitted such assignment for recording pursuant to the terms of the following paragraph), the Sponsor or, the Seller, as applicable, shall cure such defect or repurchase the related Mortgage Loan at the Repurchase Price or substitute an Qualified Substitute Mortgage Loan for the related Mortgage Loan upon the same terms and conditions as set forth in Section 5.01 of this Agreement as to the Mortgage Loans and Section 2.09(c) hereof as to the Subsequent Mortgage Loans for breaches of representations and warranties.

Promptly after the Closing Date in the case of each Mortgage Loan (or after the date of transfer of any Qualified Substitute Mortgage Loan), the Sponsor at its own expense shall complete and submit for recording in the appropriate public office for real property records each of the assignments referred to in clause (iii) above, with such assignment completed in favor of the Indenture Trustee, excluding any Mortgage Loan that is registered on the MERS System, if MERS is identified on the Mortgage, or on a properly recorded assignment of Mortgage as the mortgagee of record. While such assignment to be recorded is being recorded, the Custodian shall retain a photocopy of such assignment. If any assignment is lost or returned unrecorded to the Custodian because of any defect therein, the Sponsor or, the Seller, as applicable, is required to prepare a substitute assignment or cure such defect, as the case may be, and the Sponsor or, the Seller, as applicable, shall cause such substitute assignment to be recorded in accordance with this paragraph.

In instances where an original Mortgage, any original intervening assignment of Mortgage or an original policy of title insurance (or a commitment for title insurance) is not, in accordance with clause (ii), (iii) or (vi) above, delivered by the Sponsor or, the Seller, as applicable, to the Custodian, on behalf of the Indenture Trustee, prior to or on the Closing Date in the case of a Mortgage Loan, such failure to deliver such original Mortgage, original intervening assignment of Mortgage or an original policy of title insurance (or a commitment for title insurance) shall not be considered a material defect in a Mortgage File and the Sponsor or, the Seller, as applicable, will deliver or cause to be delivered the originals of such documents to the Custodian, on behalf of the Indenture Trustee, promptly upon receipt thereof.

In connection with the assignment of any Mortgage Loan registered on the MERS System, promptly after the Closing Date in the case of an Mortgage Loan (or after the date of transfer of any Qualified Substitute Mortgage Loan), the Sponsor or, the Seller, as applicable, further agrees that it will cause, at the Sponsor’s or, the Seller’s, as applicable, own expense, the MERS System to indicate that such Mortgage Loan has been assigned by the Sponsor or, the Seller, as applicable, to the Indenture Trustee in accordance with this Agreement for the benefit of the Noteholders by including (or deleting, in the case of Mortgage Loans which are repurchased in

5

accordance with this Agreement) in its computer files (a) the applicable Trustee code in the field “Trustee” which identifies the Indenture Trustee and (b) the code “NovaStar 2006-MTA1” (or its equivalent) in the field “Pool Field” which identifies the series of the Notes issued in connection with such Mortgage Loans. The Sponsor or, the Seller, as applicable, further agrees that it will not, and will not permit the Servicer to, and the Servicer agrees that it will not, alter the codes referenced in this paragraph with respect to any such Mortgage Loan during the term of this Agreement unless and until such Mortgage Loan is repurchased in accordance with the terms of this Agreement.

Effective on the Closing Date, the Indenture Trustee, on behalf of the Noteholders, hereby acknowledges its acceptance of all right, title and interest to the Mortgage Loans and other property, existing on the Closing Date and thereafter created and conveyed to it pursuant to this Article II.

The Indenture Trustee, as assignee or transferee of the Depositor, shall be entitled to all scheduled principal payments due after the Cut-off Date, all other payments of principal due and collected after the Cut-off Date, and all payments of interest on the Mortgage Loans. No scheduled payments of principal due on or before the Cut-off Date and collected after the Cut-off Date shall belong to the Depositor pursuant to the terms of this Agreement. Any late payment charges collected in connection with a Mortgage Loan shall be paid to the Servicer as provided in Section 5.15(b) hereof.

Section 2.06. Acceptance of the Trust Estate; Certain Substitutions; Certification by the Custodian, on behalf of the Indenture Trustee. The Custodian, on behalf of the Indenture Trustee, acknowledges receipt of, subject to the review described below and any exceptions it notes pursuant to the procedures described below, the documents (or certified copies thereof) referred to in Section 2.05 hereof and declares that it holds and will continue to hold those documents and any amendments, replacements or supplements thereto and all other assets of the Trust Estate in trust for the use and benefit of all present and future Noteholders. No later than 45 days after the Closing Date (or, with respect to any Qualified Substitute Mortgage Loan, within 5 Business Days after the receipt by the Custodian, on behalf of the Indenture Trustee, thereof and, with respect to any documents received beyond 45 days after the Closing Date, promptly thereafter), the Custodian, on behalf of the Indenture Trustee, agrees, for the benefit of the Noteholders, to review each Mortgage File delivered to it and to execute and deliver, or cause to be executed and delivered, to the Sponsor an initial certification in the form annexed hereto as Exhibit D. In conducting such review, the Custodian, on behalf of the Indenture Trustee, will ascertain whether all required documents described in Section 2.05 hereof have been executed and received and whether those documents relate, determined on the basis of the Mortgagor name, original principal balance and loan number, to the Mortgage Loans it has received, as identified in Exhibit B to this Agreement, as supplemented (provided, however, that with respect to those documents described in subclause (vii) of such section, the Custodian’s obligations shall extend only to documents actually delivered pursuant to such subclause). In performing any such review, the Custodian, on behalf of the Indenture Trustee, may conclusively rely on the purported due execution and genuineness of any such document and on the purported genuineness of any signature thereon. If the Custodian, on behalf of the Indenture Trustee, finds that any document constituting part of the Mortgage File not to have been executed or received, or to be unrelated to the Mortgage Loans identified in Exhibit B or Attachment B to Exhibit 2 of

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the Purchase Agreement or to appear to be defective on its face, the Custodian, on behalf of the Indenture Trustee, shall promptly notify the Sponsor or the Seller, as applicable of such finding and the Sponsor’s or the Seller’s, as applicable obligation to cure such defect or repurchase or substitute for the related Mortgage Loan.

(a) No later than 180 days after the Closing Date, the Custodian, on behalf of the Indenture Trustee, will review, for the benefit of the Noteholders, the Mortgage Files and will execute and deliver or cause to be executed and delivered to the Sponsor or the Seller, as applicable, a final certification in the form annexed hereto as Exhibit E. In conducting such review, the Custodian, on behalf of the Indenture Trustee, will ascertain whether an original of each document described in subclauses (ii)-(iv) of Section 2.05 hereof required to be recorded has been returned from the recording office with evidence of recording thereon or a certified copy has been obtained from the recording office. If the Custodian, on behalf of the Indenture Trustee, finds any document constituting part of the Mortgage File has not been received, or to be unrelated, determined on the basis of the Mortgagor name, original principal balance and loan number, to the Mortgage Loans identified in Exhibit B or Attachment B to Exhibit 2 of this Agreement or to appear defective on its face, the Custodian, on behalf of the Indenture Trustee, shall promptly notify the Sponsor or the Seller, as applicable and the Indenture Trustee of such finding and the Sponsor’s obligation to cure such defect or repurchase or substitute for the related Mortgage Loan.

(b) Upon deposit of the Repurchase Price in the Collection Account and notification of the Indenture Trustee, by a certification signed by a Servicing Officer (which certification shall include a statement to the effect that the Repurchase Price has been deposited in the Collection Account), the Indenture Trustee shall cause the Custodian to release to the Sponsor or the Seller, as applicable the related Mortgage File and shall cause to be executed and delivered all instruments of transfer or assignment, without recourse, furnished to it by the Sponsor or the Seller, as applicable as are necessary to vest in the Sponsor or the Seller, as applicable title to and rights under the related Mortgage Loan. Such purchase shall be deemed to have occurred on the date on which certification of the deposit of the Repurchase Price in the Payment Account was received by the Indenture Trustee. The Custodian, on behalf of the Indenture Trustee, shall amend the applicable Mortgage Loan Schedule to reflect such repurchase and shall promptly notify the Servicer, and the Rating Agencies of such amendment.

Section 2.07. Grant of Security Interest. (a) It is intended that the conveyance of the Mortgage Loans and other property by the Depositor to the Issuing Entity as provided in this Article II be, and be construed for all purposes other than tax and accounting purposes as, a sale of the Mortgage Loans and such other property by the Depositor to the Issuing Entity. It is, for all purposes other than tax and accounting purposes further, not intended that such conveyance be deemed a pledge of the Mortgage Loans or such other property by the Depositor to the Issuing Entity to secure a debt or other obligation of the Depositor. However, in the event that the Mortgage Loans or any of such other property are held to be property of the Depositor, or if for any reason this Agreement is held or deemed to create a security interest in the Mortgage Loans or any of such other property, then it is intended that: (i) this Agreement shall also be deemed to be a security agreement within the meaning of the Uniform Commercial Code; (ii) the conveyance provided for in this Article II shall be deemed to be a grant by the Depositor to the

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Issuing Entity of a security interest in all of the Depositor’s right, title and interest in and to the Mortgage Loans and such other property and all amounts payable to the holders of the Mortgage Loans in accordance with the terms thereof and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, instruments, securities or other property, including, without limitation, all amounts from time to time held or invested in the Accounts whether in the form of cash, instruments, securities or other property; (iii) the possession by the Custodian on behalf of the Indenture Trustee, of the Mortgage Notes and such other items of property as constitute instruments, money, negotiable documents or chattel paper shall be deemed to be “possession by the secured party” for purposes of perfecting the security interest pursuant to the Uniform Commercial Code; and (iv) notifications to persons holding such property, and acknowledgments, receipts or confirmations from persons holding such property, shall be deemed notifications to, or acknowledgments, receipts or confirmations from financial intermediaries, bailees or agents, as applicable, of the Indenture Trustee for the purpose of perfecting such security interest under applicable law. The Depositor, the Sponsor, the Servicer, on behalf of the Issuing Entity and the Indenture Trustee, shall, to the extent consistent with this Agreement, take such actions as may be reasonably necessary to ensure that, if this Agreement were deemed to create a security interest in the Mortgage Loans or any of such other property, such security interest would be deemed to be a perfected security interest of first priority under applicable law and will be maintained as such throughout the term of this Agreement.

(b) The Depositor, the Seller, the Sponsor and the Servicer shall take no action inconsistent with the Issuing Entity’s ownership of the Trust Estate and each shall indicate or shall cause to be indicated in its records and records held on its behalf that ownership of each Mortgage Loan and the other assets in the Trust Estate is vested in the Issuing Entity, as owner, and is pledged to the Indenture Trustee, for the benefit of the Noteholders pursuant to the terms of the Indenture. The Indenture Trustee is authorized to act, pursuant to the terms of this Agreement for the benefit of the Noteholders and shall be authorized to act at the direction of such parties. In addition, the Depositor, the Seller, the Sponsor and the Servicer shall respond to any inquiries from third parties with respect to ownership of a Mortgage Loan or any other asset in the Trust Estate by stating that it is not the owner of such asset and that the Issuing Entity is the owner of such Mortgage Loan or other asset in the Trust Estate, which is pledged to the Indenture Trustee, for the benefit of the Noteholders.

Section 2.08. Further Action Evidencing Assignments. (a) The Servicer agrees that, from time to time, at its expense, it shall cause the Seller, the Sponsor or Depositor, as the case may be, to, and each of the Seller, the Sponsor and Depositor agree that it shall, promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or appropriate, or that the Servicer or the Indenture Trustee (upon the receipt of written notification of the necessity thereof) may reasonably request, in order to perfect, protect or more fully evidence the transfer of ownership of the Mortgage Loans and other assets in the Trust Estate or to enable the Indenture Trustee, to exercise or enforce any of its rights hereunder. Without limiting the generality of the foregoing, the Seller, the Servicer, the Sponsor and the Depositor shall, upon the request of the Servicer or the Indenture Trustee (upon the receipt of written notification of the necessity thereof) execute and file (or cause to be executed and filed) such real estate filings, financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or notices, as may be necessary or appropriate.

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(b) Each of the Seller, the Sponsor and the Depositor hereby grants to the Servicer and the Indenture Trustee powers of attorney to execute all documents on its behalf under this Agreement as may be necessary or desirable to effectuate the foregoing.

Section 2.09. Conveyance of the Subsequent Mortgage Loans.

(a) Subject to the conditions set forth in paragraph (b) below in consideration of the Issuing Entity’s delivery on the related Subsequent Transfer Dates of all or a portion of the balance of funds in the Pre-Funding Account, the Sponsor shall on any Subsequent Transfer Date sell, transfer, assign, set over and convey, without recourse, to the Depositor, who shall then sell, transfer, assign, set over and convey, without recourse, to the Issuing Entity, but subject to the other terms and provisions of this Sale and Servicing Agreement, all of the right, title and interest of the Sponsor in and to (i) the Subsequent Mortgage Loans (and the related MI Policies) identified on the related Mortgage Loan Schedule attached to the related Subsequent Transfer Instrument delivered by the Sponsor on such Subsequent Transfer Date, (ii) principal due and interest accruing on the Subsequent Mortgage Loans after the related Subsequent Cut-off Date and (i) with respect to such Subsequent Mortgage Loans all items to be delivered pursuant to Section 2.05 above and the other items in the related Mortgage Files; provided, however, that the Sponsor reserves and retains all right, title and interest in and to principal received and interest accruing on the Subsequent Mortgage Loans prior to the related Subsequent Cut-off Date. The transfer by the Sponsor to the Depositor, and by the Depositor to the Trustee, of the Subsequent Mortgage Loans identified on each Mortgage Loan Schedule attached to the related Subsequent Transfer Instrument and the related MI Policies shall be absolute and is intended by the Issuing Entity, the Depositor and the Sponsor to constitute and to be treated as a sale of the Subsequent Mortgage Loans by the Sponsor to the Depositor, and a sale of the Subsequent Mortgage Loans by the Depositor to the Issuing Entity.

The Subsequent Mortgage Loans presented for purchase will be designated as either Group I or Group II. Of the Original Pre-Funded Amount of $138,776,585.08, a maximum of $90,813,688.21 will be used to acquire Subsequent Mortgage Loans for inclusion in Group I and a maximum of $47,962,896.87 will be used to acquire Subsequent Mortgage Loans for inclusion in Group II, subject to the satisfaction of the conditions set forth herein.

In the event such transactions shall be deemed not to be a sale, the Sponsor hereby grants to the Depositor as of each Subsequent Transfer Date a security interest in all of the Sponsor’s right, title and interest in, to and under the related Subsequent Mortgage Loans and such other property, to secure all of the Sponsor’s obligations hereunder, and this Sale and Servicing Agreement shall constitute a security agreement under applicable law, and in such event, the parties hereto acknowledge that the Custodian, in addition to holding the Subsequent Mortgage Loans and the related MI Policies on behalf of the Issuing Entity for the benefit of the Noteholders, holds the Subsequent Mortgage Loans and the related MI Policies as designee of the Depositor. The Sponsor agrees to take or cause to be taken such actions and to execute such documents, including without limitation the filing of all necessary UCC-1 financing statements filed in the Commonwealth of Virginia (which shall be submitted for filing as of the related Subsequent Transfer Date), any continuation statements with respect thereto and any amendments thereto required to reflect a change in the name or corporate structure of the

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Sponsor or the filing of any additional UCC-1 financing statements due to a change in the state of incorporation of the Sponsor as are necessary to perfect and protect the interests of the Depositor and its assignees in the Subsequent Mortgage Loans.

In the event such transactions shall be deemed not to be a sale, the Depositor hereby grants to the Issuing Entity as of each Subsequent Transfer Date a security interest in all of the Depositor’s right, title and interest in, to and under the related Subsequent Mortgage Loans and such other property, to secure all of the Depositor’s obligations hereunder, and this Sale and Servicing Agreement shall constitute a security agreement under applicable law, and in such event, the parties hereto acknowledge that the Custodian, in addition to holding the Subsequent Mortgage Loans and the related MI Policies on behalf of the Indenture Trustee for the benefit of the Noteholders, holds the Subsequent Mortgage Loans and the related MI Policies as designee of the Trustee. The Depositor agrees to take or cause to be taken such actions and to execute such documents, including without limitation, the filing of all necessary UCC-1 financing statements filed in the State of Delaware (which shall be submitted for filing as of the related Subsequent Transfer Date), any continuation statements with respect thereto and any amendments thereto required to reflect a change in the name or corporate structure of the Depositor or the filing of any additional UCC-1 financing statements due to a change in the state of incorporation of the Depositor as are necessary to perfect and protect the interests of the Indenture Trustee and its assignees in Subsequent Mortgage Loans.

The related Mortgage File for each Subsequent Mortgage Loan shall be delivered to the Custodian, on behalf of the Indenture Trustee, prior to the related Subsequent Transfer Date.

The Indenture Trustee on each Subsequent Transfer Date shall acknowledge by signing receipt thereof its acceptance of all right, title and interest to the related Subsequent Mortgage Loans and other property, existing on the Subsequent Transfer Date and thereafter created, conveyed to it pursuant to this Section 2.09.

The Indenture Trustee, as trustee of the Trust Estate, shall be entitled to all scheduled principal payments due after each Subsequent Cut-off Date, all other payments of principal due and collected after each related Subsequent Cut-off Date, and all payments of interest on the Subsequent Mortgage Loans, minus that portion of any such payment which is allocable to the period prior to the related Subsequent Cut-off Date. No scheduled payments of principal due on or before the related Subsequent Cut-off Date and collected after the related Subsequent Cut-off Date shall belong to the Trust Estate pursuant to the terms of this Sale and Servicing Agreement.

The purchase price paid by the Indenture Trustee, at the direction of the Servicer and on behalf of the Indenture Trustee, from amounts released from the Pre-Funding Account shall be one-hundred percent (100%) of the aggregate Principal Balances of the Subsequent Mortgage Loans so transferred (as identified on the Mortgage Loan Schedule attached to the related Subsequent Transfer Instrument provided by the Sponsor).

(b) The Sponsor shall transfer to the Depositor, who shall transfer to the Indenture Trustee, the Subsequent Mortgage Loans and the other property and rights related thereto described in Section 2.09(a) above, and the Indenture Trustee shall cause to be released

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funds from the related Pre-Funding Account, only upon the satisfaction of each of the following conditions on or prior to the related Subsequent Transfer Date:

(i) the Sponsor shall have provided the Depositor, and the Depositor shall have provided the Indenture Trustee and the Custodian, with a timely Addition Notice, which notice shall be given no fewer than four Business Days prior to the related Subsequent Transfer Date and shall designate the Subsequent Mortgage Loans to be sold to the Depositor and then to the Trustee and the aggregate Principal Balances of such Subsequent Mortgage Loans as of the related Subsequent Cut-off Date and any other information reasonably requested by the Trustee with respect to the Subsequent Mortgage Loans;

(ii) the Sponsor shall have delivered to the Depositor, who shall have delivered to the Indenture Trustee and the Custodian, a duly executed Subsequent Transfer Instrument substantially in the form of Exhibit N-1 or N-2, as applicable, (A) confirming the satisfaction of each condition precedent and representations specified in this Section 2.09(b), Section 2.09(c) and in the related Subsequent Transfer Instrument and (B) including a Mortgage Loan Schedule attached thereto listing the Subsequent Mortgage Loans;

(iii) as of each Subsequent Transfer Date, as evidenced by delivery of the Sponsor’s Subsequent Transfer Instrument in the form of Exhibit N-1 and the Depositor’s Subsequent Transfer Instrument is the form of Exhibit N-2, neither the Sponsor nor the Depositor shall be insolvent or have been made insolvent by such transfers, nor shall they be aware of any pending insolvency;

(iv) the Pre-Funding Period shall not have terminated; and

(v) the Sponsor shall have delivered to the Custodian, the Indenture Trustee, the Issuing Entity, the Depositor and the Rating Agencies, Opinions of Counsel addressed to the Rating Agencies, the Indenture Trustee, the Issuing Entity, the Depositor and the Custodian with respect to the transfers of the Subsequent Mortgage Loans substantially in the form of the Opinion of Counsel delivered to the Custodian, the Indenture Trustee, the Issuing Entity, the Depositor and the Rating Agencies on the Closing Date (1) regarding certain corporate matters and (2) confirming the existence of a true sale which may be contained in such opinion delivered on the Closing Date.

(c) The obligation of the Issuing Entity to purchase a Subsequent Mortgage Loan on any Subsequent Transfer Date is subject to the following conditions: (1) each such Subsequent Mortgage Loan shall satisfy the representations and warranties specified in the related Subsequent Transfer Instrument and this Sale and Servicing Agreement; (2) the Sponsor shall not select such Subsequent Mortgage Loans in a manner that it reasonably believes is adverse to the interests of the Majority Noteholders; (3) the Sponsor shall have delivered certain Opinions of Counsel required pursuant to Section 2.09(v) hereof; (4) as of the related Subsequent Cut-off Date, the Subsequent Mortgage Loans shall satisfy the following criteria: (i) each Subsequent Mortgage Loan shall not be 60 or more days contractually delinquent as of the related Subsequent Cut-off Date; (ii) the remaining stated

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term to maturity of each Subsequent Mortgage Loan shall not exceed 480 months; (iii) all of the Subsequent Mortgage Loans are secured by first liens on the related Mortgaged Property; (iv) each Subsequent Mortgage Loan shall have an outstanding Principal Balance of at least $10,000; (v) each Subsequent Mortgage Loan shall be underwritten in accordance with the Underwriting Guidelines; (vi) each Subsequent Mortgage Loan shall have a Loan-to-Value Ratio or a combined Loan-to-Value Ratio of no more than 100%; (vii) each Subsequent Mortgage Loan shall have a stated maturity of no later than September, 2046; (viii) each Subsequent Mortgage Loan shall either have a Mortgage Rate of at least 1.00%; (ix) all of the Subsequent Mortgage Loans shall have an adjustable Mortgage Rate; (x) the weighted average Loan-to-Value Ratio of the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall be no more than 80%; (xi) Reserved (xii) the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall have a weighted average coupon of at least 1.80%; (xiii) pursuant to the Underwriting Guidelines, no fewer than 75% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall be ALT-A and M1 credit risks, no more than 25% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall be comprised of other credit risks (xiv) the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall have a weighted average FICO score issued by a consumer credit rating agency of at least 690; (xv) at least 94% of such Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall be loans for primary residences; (xvi) no more than 70% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall have stated loan documentation, and no more than 15% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance shall have no loan documentation; (xvii) at least 65% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall be loans for single family residences; (xviii) no more than 65% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall be loans that are the subject of cash-out refinances; (xix) the ratings agencies shall have consented either in writing or verbally to the transfer of the Subsequent Mortgage Loans; and (xx) at least 65% of the Subsequent Mortgage Loans shall have prepayment penalties.

The acceptance of the Subsequent Mortgage Loans by the Issuing Entity is subject to the Sponsor receiving a written or verbal consent from each of the Rating Agencies that states that the addition of such Subsequent Mortgage Loans will not cause the Rating Agencies to downgrade any of their ratings on the Offered Notes.

Notwithstanding the foregoing, Subsequent Mortgage Loans with characteristics varying from those set forth above may be purchased by the Issuing Entity and included in the Trust Estate, if (i) the Issuing Entity is provided with written confirmation that the aggregate credit risk of such Subsequent Mortgage Loans is similar to that of the Initial Mortgage Loans and (ii) the Sponsor receives and provides to the Issuing Entity a written consent from each of the Rating Agencies that states that the addition of such Subsequent Mortgage Loans will not cause the Rating Agencies to downgrade any of their ratings of the Offered Notes.

(d) Within five Business Days after the end of the Pre-Funding Period, the Sponsor shall deliver to the Rating Agencies, the Indenture Trustee, the Issuing Entity, the Depositor and the Custodian a copy of the updated Mortgage Loan Schedule including the Subsequent Mortgage Loans in electronic format.

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ARTICLE III

REPRESENTATIONS, WARRANTIES AND COVENANTS

Section 3.01. Representations, Warranties and Covenants of the Servicer. The Servicer hereby represents, warrants and covenants to the Indenture Trustee, the Depositor, the Sponsor, the Issuing Entity, the Custodian and the Noteholders that as of the Closing Date or as of such date specifically provided herein:

(i) The Servicer is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and has the corporate power to own its assets and to transact the business in which it is currently engaged. The Servicer is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the business transacted by it or properties owned or leased by it requires such qualification and in which the failure to so qualify would have a material adverse effect on the business, properties, assets, or condition (financial or other) of the Servicer or the validity or enforceability of the Mortgage Loans;

(ii) The Servicer has the corporate power and authority to make, execute, deliver and perform this Agreement and all of the transactions contemplated under this Agreement, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. When executed and delivered, this Agreement will constitute the legal, valid and binding obligation of the Servicer enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by the availability of equitable remedies;

(iii) The Servicer is not required to obtain the consent of any other Person or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement, except for such consent, license, approval or authorization, or registration or declaration, as shall have been obtained or filed, as the case may be;

(iv) The execution and delivery of this Agreement and the performance of the transactions contemplated hereby by the Servicer will not violate any provision of any existing law or regulation or any order or decree of any court applicable to the Servicer or any provision of the certificate of incorporation or bylaws of the Servicer, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Servicer is a party or by which the Servicer may be bound;

(v) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of organization or bylaws of the Servicer or any agreement or other instrument to which the Servicer is a party or by which it is bound;

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(vi) No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Servicer threatened, against the Servicer or any of its properties or with respect to this Agreement or the Notes which, to the knowledge of the Servicer, has a reasonable likelihood of resulting in a material adverse effect on the transactions contemplated by this Agreement;

(vii) The Servicer is a member of MERS in good standing, and will comply in all material respects with the rules and procedures of MERS in connection with the servicing of the Mortgage Loans that are registered with MERS; and

(viii) With respect to the Group I Mortgage Loans, the Servicer will accurately and fully report its borrower credit files to the three largest credit repositories in a timely manner.

(ix) The Servicer shall take all necessary steps to maintain the Indenture Trustee’s perfection and priority in the Mortgage Loans.

The foregoing representations and warranties shall survive any termination of the Servicer hereunder.

Section 3.02. Representations, Warranties and Covenants of the Sponsor. The Sponsor hereby represents and warrants to the Depositor, the Seller, the Custodian, the Issuing Entity and the Indenture Trustee as of the date hereof, as of the Closing Date (or if otherwise specified below, as of the date so specified) and as of each subsequent Transfer Date:

(i) The Sponsor (i) is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Virginia and (ii) is qualified and in good standing as a foreign corporation to do business in each jurisdiction where such qualification is necessary, except where the failure to so qualify would not have a material adverse effect on the Sponsor’s ability to enter into this Agreement and each Sponsor’s Subsequent Transfer Instrument and to consummate the transactions contemplated hereby and thereby;

(ii) The Sponsor has the power and authority to make, execute, deliver and perform its obligations under this Agreement and each Sponsor’s Subsequent Transfer Instrument and all of the transactions contemplated under this Agreement and each Sponsor’s Subsequent Transfer Instrument, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and each Sponsor’s Subsequent Transfer Instrument;

(iii) The Sponsor is not required to obtain the consent of any other Person or any consent, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement or any Sponsor’s Subsequent Transfer Instrument, except for such consents, approvals or authorization, or registration or declaration, as shall have been obtained or filed, as the case may be;

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(iv) The execution and delivery of this Agreement and each Sponsor’s Subsequent Transfer Instrument and the performance of the transactions contemplated hereby and each Sponsor’s Subsequent Transfer Instrument by the Sponsor will not violate any provision of any existing law or regulation or any order or decree of any court applicable to the Sponsor or any provision of the certificate of incorporation or bylaws of the Sponsor, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Sponsor is a party or by which the Sponsor may be bound;

(v) No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Sponsor threatened, against the Sponsor or any of its properties or with respect to this Agreement, the Notes which in the opinion of the Sponsor has a reasonable likelihood of resulting in a material adverse effect on the transactions contemplated by this Agreement or any Sponsor’s Subsequent Transfer Instrument;

(vi) This Agreement constitutes the legal, valid and binding obligation of the Sponsor, enforceable against the Sponsor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity);

(vii) This Agreement constitutes a valid transfer and assignment to the Depositor of all right, title and interest of the Sponsor in and to the Cut-off Date Principal Balance of the Initial Mortgage Loans, all monies due or to become due with respect thereto, and all proceeds of such Cut-off Date Principal Balance of the Mortgage Loans and this Agreement and the related Sponsor’s Subsequent Transfer Instrument constitutes a valid transfer and assignment to the Issuing Entity of all right, title and interest of the Sponsor in and to the Subsequent Cut-off Date Principal Balance of the Subsequent Mortgage Loans, all monies due or to become due with respect thereto, and all Proceeds of such Subsequent Cut-off Date Principal Balance of the Subsequent Mortgage Loans;

(viii) The Sponsor is not in default with respect to any order or decree of any court or any order or regulation of any federal, state or governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or other) or operations of the Sponsor or its properties or might have consequences that would materially adversely affect its performance hereunder; and

(ix) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of organization or bylaws of the Sponsor or any agreement or other instrument to which the Sponsor is a party or by which it is bound;

(x) The Servicer or any Subservicer who will be servicing any Mortgage Loan pursuant to this Agreement or a Subservicing Agreement is qualified to do business in all jurisdictions in which its activities as Servicer or Subservicer of the Mortgage Loans serviced by it require such qualifications except where failure to be so qualified will not have a material adverse effect on such servicing activities.

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Section 3.03. Representations, Warranties and Covenants of the Sponsor. The Seller hereby represents and warrants to the Depositor, the Sponsor, the Custodian, the Issuing Entity and the Indenture Trustee as of the date hereof, as of the Closing Date (or if otherwise specified below, as of the date so specified) and as of each subsequent Transfer Date:

(i) The Seller (i) is a corporation duly organized, validly existing and in good standing under the laws of the Commonwealth of Maryland and (ii) is qualified and in good standing as a foreign corporation to do business in each jurisdiction where such qualification is necessary, except where the failure to so qualify would not have a material adverse effect on the Seller’s ability to enter into this Agreement and each Seller’s Subsequent Transfer Instrument and to consummate the transactions contemplated hereby and thereby;

(ii) The Seller has the power and authority to make, execute, deliver and perform its obligations under this Agreement and each Seller’s Subsequent Transfer Instrument and all of the transactions contemplated under this Agreement and each Seller’s Subsequent Transfer Instrument, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and each Seller’s Subsequent Transfer Instrument;

(iii) The Seller is not required to obtain the consent of any other Person or any consent, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Agreement or any Seller’s Subsequent Transfer Instrument, except for such consents, approvals or authorization, or registration or declaration, as shall have been obtained or filed, as the case may be;

(iv) The execution and delivery of this Agreement and each Seller’s Subsequent Transfer Instrument and the performance of the transactions contemplated hereby and each Seller’s Subsequent Transfer Instrument by the Seller will not violate any provision of any existing law or regulation or any order or decree of any court applicable to the Seller or any provision of the certificate of incorporation or bylaws of the Seller, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Seller is a party or by which the Seller may be bound;

(v) No litigation or administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Seller threatened, against the Seller or any of its properties or with respect to this Agreement, the Notes which in the opinion of the Seller has a reasonable likelihood of resulting in a material adverse effect on the transactions contemplated by this Agreement or any Seller’s Subsequent Transfer Instrument;

(vi) This Agreement constitutes the legal, valid and binding obligation of the Seller, enforceable against the Sponsor in accordance with its terms, except as

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enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity);

(vii) This Agreement constitutes a valid transfer and assignment to the Depositor of all right, title and interest of the Seller in and to the Cut-off Date Principal Balance of the Initial Mortgage Loans, all monies due or to become due with respect thereto, and all proceeds of such Cut-off Date Principal Balance of the Mortgage Loans and this Agreement and the related Sponsor’s Subsequent Transfer Instrument constitutes a valid transfer and assignment to the Issuing Entity of all right, title and interest of the Seller in and to the Subsequent Cut-off Date Principal Balance of the Subsequent Mortgage Loans, all monies due or to become due with respect thereto, and all Proceeds of such Subsequent Cut-off Date Principal Balance of the Subsequent Mortgage Loans;

(viii) The Seller is not in default with respect to any order or decree of any court or any order or regulation of any federal, state or governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or other) or operations of the Seller or its properties or might have consequences that would materially adversely affect its performance hereunder; and

(ix) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of organization or bylaws of the Seller or any agreement or other instrument to which the Seller is a party or by which it is bound;

Section 3.04. Representations, Warranties and Covenants of the Indenture Trustee. The Indenture Trustee hereby represents, warrants and covenants to the Issuing Entity, the Servicer, the Depositor, the Custodian, the Seller and the Sponsor that as of the date of this Agreement and the Subsequent Transfer Instruments or as of such date specifically provided herein:

(i) The Indenture Trustee is duly organized and validly existing as a national banking association in good standing under the laws of the United States with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted;

(ii) The Indenture Trustee has the power and authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery and performance of this Agreement have been duly authorized by the Indenture Trustee by all necessary corporate action;

(iii) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of organization or bylaws of the Indenture Trustee or any agreement or other instrument to which the Indenture Trustee is a party or by which it is bound; and

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(iv) To the Indenture Trustee’s best knowledge, there are no proceedings or investigations pending or threatened before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Indenture Trustee or its properties: (A) asserting the invalidity of this Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or (C) seeking any determination or ruling that might materially and adversely affect the performance by the Indenture Trustee of its obligations under, or the validity or enforceability of, this Agreement.

It is understood and agreed that the representations, warranties and covenants set forth in this Section 3.04 shall survive delivery of the respective Mortgage Files to the Custodian on behalf of the Indenture Trustee.

Section 3.05. Representations and Warranties of the Depositor. The Depositor hereby represents and warrants to the Sponsor, the Seller, the Custodian and the Indenture Trustee as of the date hereof and as of the Closing Date and the Depositor’s Subsequent Transfer Instrument that:

(a) The Depositor is duly organized and validly existing as a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted.

(b) The Depositor is duly qualified to do business as a foreign corporation in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of its property or the conduct of its business shall require such qualifications and in which the failure to so qualify would have a material adverse effect on the business, properties, assets or condition (financial or other) of the Depositor and the ability of the Depositor to perform under this Agreement.

(c) The Depositor has the power and authority to execute and deliver this Agreement and to carry out its terms; the Depositor has full power and authority to purchase the property to be purchased from the Sponsor and the Depositor has duly authorized such purchase by all necessary corporate action; and the execution, delivery and performance of this Agreement have been duly authorized by the Depositor by all necessary corporate action.

(d) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of the Depositor, or any indenture, agreement or other instrument to which the Depositor is a party or by which it is bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to the Basic Documents); nor violate any law or, to the best of the Depositor’s knowledge, any order, rule or regulation

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applicable to the Depositor of any court or of any federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties.

(e) The Depositor (A) is a solvent entity and is paying its debts as they become due and (B) after giving effect to the transfer of the Mortgage Loans, will be a solvent entity and will have sufficient resources to pay its debts as they become due.

It is understood and agreed that the representations, warranties and covenants set forth in this Section 3.05 shall survive delivery of the respective Mortgage Files to the Custodian on behalf of the Indenture Trustee and shall inure to the benefit of the Indenture Trustee.

ARTICLE IV

THE MORTGAGE LOANS

Section 4.01. Representations and Warranties Concerning the Mortgage Loans.

The Sponsor and Seller hereby represents and warrants to the Depositor, the Custodian, the Issuing Entity and the Indenture Trustee as to each Mortgage Loan as of the Closing Date and as to each Subsequent Mortgage Loan as of the Subsequent Transfer Date, except as otherwise expressly stated:

(i) The information set forth on the Mortgage Loan Schedule with respect to each Initial Mortgage Loan is true and correct in all material respects as of the Closing Date, and with respect to each Subsequent Mortgage Loan is true and correct in all material respects as of the related Subsequent Transfer Date or the related Subsequent Transfer Date, and the information regarding the Initial Mortgage Loans and the Subsequent Mortgage Loans on the computer diskette or tape delivered to the Indenture Trustee and the Custodian prior to the Closing Date is true and accurate in all material respects and describes the same Mortgage Loans as the Mortgage Loans on the Mortgage Loan Schedule;

(ii) The Mortgage Loans are not being transferred with any intent to hinder, delay or defraud any creditors;

(iii) No more than 11.46% and 5.51% of the Initial Mortgage Loans in Group I and the Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) were secured by condominium units; and no more than 17.07% and 19.24% of the Initial Mortgage Loans in Group I and the Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) were secured by properties in planned unit developments;

(iv) As of the Cut-off Date, the remaining term of each Group I Initial Mortgage Loan is not more than 343 months and not less than 476 months and the remaining term of each Group II Initial Mortgage Loan is not more than 340 months and not less than 376 months;

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(v) No more than 60.05% and 47.08% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) have been the subject of cash-out refinances;

(vi) No more than 11.51% and 10.71% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance), have been the subject of rate and term (no cash-out) refinances;

(vii) No fewer than 28.44% and 42.22% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) are purchase money loans;

(viii) No more than 59.15% and 85.66% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) are secured by Mortgaged Properties located in the State of California; no more than 12.22% and 2.58% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) are secured by Mortgaged Properties located in the State of Florida; no more than 2.12% and 0.88% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in Group II (by Cut-off Date Principal Balance) are secured by Mortgaged Properties located in the State of Maryland; no more than 26.52% and 10.88% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) are located in any other state;

(ix) The outstanding Principal Balances of the Initial Mortgage Loans in Group I (by Cut-off Date Principal Balance) ranged from $59,929 to $728,092, the average outstanding Principal Balance of the Initial Mortgage Loans in Group I is approximately $272,849; the outstanding Principal Balances of the Initial Mortgage Loans in Group II (by Cut-off Date Principal Balance) ranged from $66,549 to $3,032,861, the average outstanding Principal Balance of the Initial Mortgage Loans in Group II is approximately $566,653;

(x) Approximately 62.04% and 70.48% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) were secured by a lien on a parcel of real property improved by a detached single family residence; no more than 9.31% and 4.77% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) were secured by a lien on a parcel of real estate improved by a multi-unit residence;

(xi) All fees and charges (including finance charges) and whether or not financed, assessed, collected or to be collected with the origination and servicing of each Mortgage Loan has been disclosed in writing to the borrower in accordance with applicable state and federal law and regulation;

(xii) The Mortgage Rates borne by the Initial Mortgage Loans in Group I as of the Closing Date range from 1.600% per annum to 9.238% per annum, and the

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weighted average Mortgage Rate (by Cut-off Date Principal Balance) of the Initial Mortgage Loans in Group I was 7.188% per annum; the Mortgage Rates borne by the Initial Mortgage Loans in Group II as of the Closing Date range from 2.450% per annum to 8.838% per annum, and the weighted average Mortgage Rate (by Cut-off Date Principal Balance) of the Initial Mortgage Loans in Group II was 7.028% per annum;

(xiii) Approximately 11.37% and 2.55% of the Initial Mortgage Loans in Group I and the Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) have a Loan-to-Value Ratio in excess of 80%; no Group I Initial Mortgage Loan or Group II Initial Mortgage Loan in the Mortgage Pool had a Loan-to-Value Ratio or combined Loan-to-Value Ratio at origination in excess of 100%; and the weighted average Loan-to-Value Ratio (by Cut-off Date Principal Balance) of the Initial Mortgage Loans in Group I and the Initial Mortgage Loans in Group II was equal to or less than 74.84% and 74.52%, respectively (by Cut-off Date Principal Balance);

(xiv) All of the Initial Mortgage Loans in Group I and the Initial Mortgage Loans in Group II, respectively, are secured by first liens on the related Mortgaged Property;

(xv) As of the Cut-off Date, the weighted average Loan-to-Value Ratio of the Initial Mortgage Loans in Group I is approximately 74.84%; the weighted average Loan-to-Value Ratio of the Initial Mortgage Loans in Group II is approximately 74.52%; and the gross weighted average coupon of the Mortgage Loans is approximately 7.102%;

(xvi) There is no valid offset, right of rescission, defense, claim or counterclaim of any obligor under any Mortgage Note or Mortgage, including the obligation of the Mortgagor to pay the unpaid principal of or interest on such Mortgage Note, and any applicable right of rescission has expired, nor will the operation of any of the terms of such Mortgage Note or Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, recoupment, counterclaim or defense, including, without limitation, the defense of usury, and no such right of rescission, set-off, recoupment, counterclaim or defense has been asserted with respect thereto, and, to the best of Sponsor’s knowledge, no Mortgagor of the applicable Mortgage is or since the date of origination has been a debtor in any state or federal bankruptcy or insolvency proceeding and no Mortgaged Property has been subject to any such proceeding;

(xvii) There are no mechanics’ liens or any similar liens or claims for work, labor or material affecting any Mortgaged Property which are or may be a lien prior to, or equal with, the lien of such Mortgage, except those which are insured against by the title insurance policy referred to in clause (xxii) below;

(xviii) As of the Closing Date in the case of an Mortgage Loan, each Mortgaged Property is free of material damage and is in good repair and there is no proceeding pending or threatened for the total or partial condemnation of any Mortgage Property.

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(xix) Each Mortgage is a valid and enforceable first lien on the Mortgaged Property including all improvements on the Mortgaged Property securing the related Mortgage Note and each Mortgaged Property is owned by the Mortgagor in fee simple (except with respect to common areas in the case of condominiums, PUDs and de minimis PUDs) subject only to (1) the lien of nondelinquent current real property taxes and assessments, (2) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage, such exceptions appearing of record being acceptable to mortgage lending institutions generally or specifically reflected in the appraisal made in connection with the origination of the related Mortgage Loan or referred to in the lender’s title insurance policy delivered to the originator of the related Mortgage Loan and (3) other matters to which like properties are commonly subject that do not materially interfere with the benefits of the security intended to be provided by such Mortgage. Immediately prior to the sale of such Mortgage Loan to the Depositor pursuant to this Agreement, each of the Sponsor or the Seller, as applicable had full right to sell and assign the same to the Depositor or the Issuing Entity, as the case may be. Immediately following the sale of such Mortgage Loan to the Depositor and the Depositor’s assignment and sale thereof of such Mortgage Loan to the Issuing Entity, the Issuing Entity will have good title thereto subject to no claims or liens, including delinquent tax or assessment liens.

(xx) Each Mortgage Loan at origination complied in all material respects with applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity, real estate settlement procedures, the Truth In Lending Act of 1968, as amended, all applicable predatory and abusive lending laws and disclosure laws and consummation of the transactions contemplated hereby, including without limitation, the receipt of interest by the owner of such Mortgage Loan or the Holders of Notes secured thereby, will not violate any such laws. Any and all statements or acknowledgments required to be made by the Mortgagor relating to such requirements are and will remain in the Mortgage File. Each Mortgage Loan is being serviced in accordance with applicable state and federal laws, including, without limitation, the Truth In Lending Act of 1968, as amended, and other consumer protection laws, real estate settlement procedures, usury, equal credit opportunity and disclosure laws and in a prudent and customary manner;

(xxi) Neither the Sponsor or the Seller, as applicable nor any prior holder of any Mortgage has impaired, waived, altered or modified the Mortgage or Mortgage Notes in any material respect (except that a Mortgage Loan may have been modified by a written instrument which has been recorded, if necessary to protect the interests of the owner of such Mortgage Loan or the Notes, and which has been delivered to the Custodian on behalf of the Indenture Trustee); satisfied, canceled or subordinated such Mortgage in whole or in part; released the applicable Mortgaged Property in whole or in part from the lien of such Mortgage; or executed any instrument of release, cancellation or satisfaction with respect thereto;

(xxii) A lender’s policy of title insurance (on an ALTA or CLTA form) or binder, or other assurance of title customary in the relevant jurisdiction insuring the first lien priority of the Mortgage Loan in an amount at least equal to the original Principal

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Balance of each such Mortgage Loan or a commitment binder or commitment to issue the same was effective on the date of the origination of each Mortgage Loan, each such policy is valid and remains in full force and effect, and each such policy was issued by a title insurer qualified to do business in the jurisdiction where the Mortgaged Property is located, which policy insures the Sponsor or the Seller, as applicable and successor owners of indebtedness secured by the insured Mortgage as to the first lien of the Mortgage as applicable. The Sponsor or the Seller, as applicable is, and such successor owners will be, the sole insured under such lender’s title insurance policy; no claims have been made under such mortgage title insurance policy; no prior holder of the applicable Mortgage, including the Sponsor, has done, by act or omission, anything which would impair the coverage of such mortgage title insurance policy; and each such policy, binder or assurance contains all applicable endorsements;

(xxiii) All of the improvements which were included for the purpose of determining the Appraised Value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of such property and no improvements on adjoining properties encroach upon the Mortgaged Property;

(xxiv) No improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning law or regulation, subdivision law or ordinance, except where the failure to comply would not have a material adverse effect on the market value of the Mortgaged Property. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities and the Mortgaged Property is lawfully occupied under applicable law except where the failure to comply would not have a material adverse effect on the market value of the Mortgaged Property;

(xxv) Each Mortgage Note and the applicable Mortgage are genuine, and each is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium, receivership and other similar laws relating to creditors’ rights generally or by equitable principles (regardless of whether such enforcement is considered in a proceeding in equity or at law). All parties to the Mortgage Note and the Mortgage had legal capacity to execute the Mortgage Note and the Mortgage and each Mortgage Note and Mortgage has been duly and properly executed by such parties;

(xxvi) The proceeds of the Mortgage Loans have been fully disbursed, there is no requirement for future advances thereunder and any and all requirements as to completion of any on-site or off-site improvements and as to disbursement of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in making, closing or recording the Mortgage Loans were paid and the Mortgagor is not entitled to any refund of amounts paid or due under the Mortgage Note;

(xxvii) Each Mortgage contains customary and enforceable provisions that render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security, including (i) in the case of

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a Mortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwise by judicial foreclosure or if applicable, non-judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustee’s sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage Loan will be able to deliver good and merchantable title to the property, subject to any applicable rights of redemption;

(xxviii) With respect to each Mortgage constituting a deed of trust, either a trustee, duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in such Mortgage or if no duly qualified trustee has been properly designated and so serves, the Mortgage contains satisfactory provisions for the appointment of such trustee by the holder of the Mortgage at no cost or expense to such holder, and no fees or expenses are or will become payable by the Noteholders to the trustee under the deed of trust, except in connection with a trustee’s sale after default by the Mortgagor;

(xxix) There exist no deficiencies with respect to escrow deposits and payments, if such are required, for which customary arrangements for repayment thereof cannot be made, and no escrow deficits or payments of other charges or payments due the Sponsor or the Seller, as applicable have been capitalized under the Mortgage or the applicable Mortgage Note;

(xxx) The Mortgage Note is not and has not been secured by any collateral, pledged account or other security other than real estate securing the Mortgagor’s obligations and no Mortgage Loan is secured by more than one Mortgaged Property;

(xxxi) As of the Closing Date, the improvements upon each Mortgaged Property are covered by a valid and existing hazard insurance policy substantially acceptable to FNMA and acceptable to the Sponsor or the Seller, as applicable which policy provides for fire extended coverage and such other hazards as are customary in the area where the Mortgaged Property is located representing coverage in an amount not less than the lesser of (A) the maximum insurable value of the improvements securing such Mortgage Loan and (B) the outstanding Principal Balance of the related Mortgage Loan; if the improvement on the Mortgaged Property is a condominium unit, it is included under the coverage afforded by a blanket policy for the condominium project. All individual insurance policies contain a standard mortgagee clause naming the Sponsor or the Seller, as applicable or the original holder of the Mortgage, and its successors in interest, as mortgagee, and neither the Sponsor nor the Seller has received notice that any premiums due and payable thereon have not been paid; the Mortgage obligates the Mortgagor thereunder to maintain all such insurance at the Mortgagor’s cost and expense, and upon the Mortgagor’s failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at the Mortgagor’s cost and expense and to seek reimbursement therefore from the Mortgagor. There has been no act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of either;

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(xxxii) If the Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, a flood insurance policy in a form meeting the requirements of the current guidelines of the Flood Insurance Administration is in effect with respect to such Mortgaged Property with a generally acceptable carrier in an amount representing coverage not less than the least of (A) the outstanding Principal Balance of the Mortgage Loan, (B) the minimum amount required to compensate for damage or loss on a replacement cost basis and (C) the maximum amount of flood coverage that is available under federal law;

(xxxiii) Except for the Mortgage Loans referred to in clause (xlii) as being delinquent, if any, there is no default, breach, violation or event of acceleration existing under the Mortgage or the applicable Mortgage Note; and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a material default, breach, violation or event of acceleration, and neither the Sponsor or the Seller, as applicable, nor any of their respective affiliates nor any servicer or subservicer of any related Mortgage Loan has waived any default, breach, violation or event of acceleration; no foreclosure action is threatened or has been commenced with respect to the Mortgage Loan;

(xxxiv) Each Mortgage Loan is being serviced by the Servicer in accordance with the terms of the Mortgage Note;

(xxxv) There is no obligation on the part of the Sponsor or the Seller, as applicable or any other party to make any payments with respect to the related Mortgage Loan in addition to the Monthly Payments required to be made by the applicable Mortgagor;

(xxxvi) Any future advances made prior to the Cut-off Date, with respect to any Mortgage Loan have been consolidated with the outstanding principal amount secured by such Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term reflected on the Mortgage Loan Schedule. The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan. The Mortgage Note with respect to any Mortgage Loan does not permit or obligate the Servicer to make future advances to the Mortgagor at the option of the Mortgagor;

(xxxvii) The Sponsor or the Seller, as applicable has caused or will cause to be performed any and all acts required to preserve the rights and remedies of the Depositor and the Indenture Trustee evidencing an interest in the Mortgage Loans in any insurance policies applicable to the Mortgage Loans including, without limitation, any necessary notifications of insurers, assignments of policies or interests therein, and establishments of coinsured, joint loss payee and mortgagee rights in favor of Indenture Trustee;

(xxxviii) Except as set forth in clause (xlii), there are no defaults by the Mortgagor in complying with the terms of any Mortgage, and all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges which previously

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became due and owing have been paid, or, if required by the terms of the Mortgage Loan, an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed, but is not yet due and payable. Except for (A) payments in the nature of escrow payments and (B) interest accruing from the date of the Mortgage Note or date of disbursement of the Mortgage proceeds to the day which precedes by one month the Due Date of the first installment of principal and interest, including, without limitation, taxes and insurance payments, none of the Sponsor, the Seller nor the Servicer has advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required by the Mortgage;

(xxxix) At the time of origination, each Mortgaged Property was the subject of an appraisal which conforms to the underwriting requirements of the related originator; and the Mortgage File contains an appraisal of the applicable Mortgaged Property;

(xl) None of the Mortgage Loans are graduated payment Mortgage Loans or growth equity Mortgage Loans;

(xli) [Reserved.]

(xlii) (a) Except with respect to no more than 2.27% of the Initial Mortgage Loans in Group II (by Cut-off Date Principal Balance), none of the payments of principal of or interest on or in respect of any Initial Mortgage Loans shall be 30 days or more but less than 60 days past due as of the Cut-off Date; and none and 0.07% of the Initial Mortgage Loans in Group I and the Initial Mortgage Loans in Group II, respectively, was 60 days or more past due as of the Cut-off Date; (b) except as set forth in clause (a) above, all payments required to be made by the Mortgagor under the terms of the Mortgage Note have been made and credited; and (c) to the Sponsor’s or the Seller’s knowledge, as applicable, there was no delinquent recording, tax or assessment lien against the property subject to any Mortgage, except where such lien was being contested in good faith and a stay had been granted against levying on the property;

(xliii) Upon payment of the Purchase Price for the Mortgage Loans by the Depositor, pursuant to this Agreement, the Sponsor or the Seller, as applicable has transferred to the Depositor in the case of a Mortgage Loan, good and marketable title to each Mortgage Note and Mortgage free and clear of any and all liens, claims, encumbrances, participation interests, equities, pledges, charges or security interests of any nature and has or had full right and authority, subject to no participation of or agreement with any other person, to sell and assign the same, and following the sale of each Mortgage Loan, the Depositor or the Issuing Entity, as applicable, will own such Mortgage Loan free and clear of any encumbrance, equity interest, participation interest, lien, pledge, charge, claim or security interest;

(xliv) The Sponsor or the Seller, as applicable acquired any right, title and interest in and to the Mortgage Loans in good faith and without notice of any adverse claim;

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(xlv) The Mortgage Note, the Mortgage, the related Assignment of Mortgage and any other documents required to be delivered by the Sponsor or the Seller, as applicable have been delivered to the Custodian. The Custodian is in possession of a complete, true and accurate Mortgage File in accordance with Section 2.01 hereof. Substantially all the Mortgage Loans have monthly payments due on the first day of each month and each Mortgage Loan had an original term to maturity of no greater than 30 years;

(xlvi) Each Mortgage Loan contains a due-on-sale provision, although each Mortgage Loan may be assumable if permitted by the Servicer under certain circumstances;

(xlvii) Each of the Mortgage and the Assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located;

(xlviii) The Mortgagor has not notified the Sponsor or the Seller, as applicable, and neither the Seller nor the Sponsor has knowledge of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act other than as disclosed pursuant to the Prospectus Supplement;

(xlix) To the best of the Sponsor’s or the Seller’s knowledge, as applicable there exists no violation of any local, state, or federal environmental law, rule or regulation in respect of the Mortgaged Property which violation has or could have a material adverse effect on the market value of such Mortgaged Property. Neither the Seller or the Sponsor has knowledge of any pending action or proceeding directly involving the related Mortgaged Property in which compliance with any environmental law, rule or regulation is in issue; and, to the best of the Sponsor’s or the Seller’s knowledge, as applicable nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation constituting a prerequisite to the use and employment of such Mortgaged Property;

(l) Each Mortgage Loan conforms, and all such Mortgage Loans in the aggregate conform in all material respects, to the description thereof set forth in the Prospectus and Prospectus Supplement;

(li) [Reserved]

(lii) No Mortgage Loan is subject to the requirements of the Home Ownership and Equity Protection Act of 1994 (“HOEPA”);

(liii) Immediately prior to the transfer to the Depositor or the Issuing Entity, as applicable, the Sponsor or the Seller, applicable had good and marketable title thereto, and the Sponsor or the Seller, applicable is the sole legal, equitable owner of beneficial title to and holder of the Mortgage Loan. The Sponsor or the Seller, applicable is conveying the same to the Depositor or the Issuing Entity, as applicable, free and clear of any and all liens, claims, encumbrances, participation interests, equities, pledges, charges or security interests of any nature and has full right and authority to sell and assign the same pursuant to this Agreement, except for liens which will be released simultaneously with such conveyance;

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(liv) For each Mortgage Loan, the related Mortgage File contains a true, accurate and correct copy of each of the documents and instruments required to be included therein;

(lv) The Servicer meets all applicable requirements under the Sale and Servicing Agreement, is properly qualified to service each Mortgage Loan and has been servicing each Mortgage Loan prior to the Cut-off Date;

(lvi) Reserved;

(lvii) On the basis of a representation by the Mortgagor at the time of origination of the Initial Mortgage Loans, at least 75.22% and 91.47% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) will be secured by Mortgages on owner-occupied primary residence properties;

(lviii) None of the Initial Mortgage Loans in Group I and the Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) provide for a balloon payment and each Mortgage Note with respect to each such Mortgage Loan requires monthly payments of principal based on either a 40 year or 30 year amortization schedules and have scheduled maturity dates of 30 years or 15 years, respectively, from the due date of the first monthly payment;

(lix) No Mortgage Loan was originated based on an appraisal of the related Mortgaged Property made prior to completion of construction of the improvements thereon;

(lx) None of the Mortgage Loans is a “buy down” mortgage loan;

(lxi) [Reserved].

(lxii) No Mortgage Loan is a “High Cost Home Loan” or “Covered Loan,” as applicable, (as such terms are defined in the then current Standard & Poor’s LEVELS^® Glossary which is now Version 5.6(c) Revised, Appendix E) and no Mortgage Loan is a “High Cost Home Loan” as defined in the Georgia Fair Lending Act, as amended (the “Georgia Act”). No Mortgage Loan that was originated (or modified) on or after October 1, 2002 and before March 7, 2003, is secured by property located in the State of Georgia. There is no Mortgage Loan that was originated on or after March 7, 2003 which is a “high cost home loan” as defined under the Georgia Fair Lending Act;

(lxiii) None of the Mortgage Loans are covered by the requirements of the Home Ownership and Equity Protection Act of 1994, as amended, or any comparable state or local law; none of the Mortgage Loans are “section 32” loans or “high cost” loans as defined by applicable predatory and abusive lending laws; none of the Mortgage Loans (by Cut-off Date Principal Balance) require a mortgagor to pay a Prepayment Charge if the mortgagor prepays a Mortgage Loan more than five years after the date the Mortgage Loan was originated;

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(lxiv) No Mortgage Loan is a “High-Cost Home Loan” as defined in New York Banking Law 6-1;

(lxv) No Mortgage Loan is a “High-Cost Home Loan” as defined in the Arkansas Home Loan Protection Act effective July 16, 2003 (Act 1340 of 2003);

(lxvi) No Mortgage Loan is a “High-Cost Home Loan” as defined in the Kentucky high-cost home loan statute effective June 24, 2003 (Ky. Rev. Stat. Section 360.100);

(lxvii) No Mortgage Loan in the trust is a “high-cost home,” “covered” (excluding home loans defined as “covered home loans” in the New Jersey Home Ownership Security Act of 2002 that were originated between November 26, 2003 and July 7, 2004), “high risk home” or “predatory” loan under any applicable state, federal or local law (or a similarly classified loan using different terminology under a law imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees);

(lxviii) No Mortgage Loan is a “High-Cost Home Loan” as defined in the New Mexico Home Loan Protection Act effective January 1, 2004 (N.M. Stat. Ann. §§ 58-21A-1 et seq.);

(lxix) No Mortgage Loan is a “High-Risk Home Loan” as defined in the Illinois High-Risk Home Loan Act effective January 1, 2004 (815 Ill. Comp. Stat. 137/1 et seq.);

(lxx) No Mortgage Loan is a “High-Cost Home Loan” as defined in the Massachusetts Predatory Home Loan Practices Act effective November 7, 2004 (MA House Bill 4880);

(lxxi) No Mortgage Loan is a “High-Cost Home Loan” as defined in the Indiana Home Loan Practices Act effective January 1st, 2005 (Indiana Code Ann. §§ 24-9-1 et seq.);

(lxxii) Approximately 70.84% of the Initial Mortgage Loans are subject to prepayment charges as of the Cut-off Date;

(lxxiii) [Reserved.]

(lxxiv) No borrower was required to purchase any credit life, disability, accident or health insurance product as a condition of obtaining the extension of credit. No borrower obtained a prepaid single premium credit life, credit disability, credit unemployment or credit property insurance policy in connection with the origination of the Mortgage Loan; No proceeds from any Mortgage Loan were used to purchase single premium credit insurance policies as part of the origination of, or as a condition to closing, such Mortgage Loan;

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(lxxv) Reserved;

(lxxvi) With respect to the Group I Mortgage Loans secured by manufactured housing, such housing will be the principal residence of the borrower upon origination of the Group I Mortgage Loan.

(lxxvii) With respect to the Group I Mortgage Loans that contain a provision permitting the imposition of a premium upon a prepayment prior to maturity: (a) prior to the Mortgage Loan’s origination, the borrower agreed to such premium in exchange for a monetary benefit, including but not limited to a rate or fee reduction; (b) prior to the Mortgage Loan’s origination, the borrower was offered the option of obtaining a Mortgage Loan that did not require payment of such a premium; (c) the prepayment premium is adequately disclosed to the borrower pursuant to applicable state and federal law; (d) no Group I Mortgage Loan originated on or after October 1, 2002 will impose a prepayment premium for a term in excess of three years and any loans originated prior to such date will not impose prepayment penalties in excess of five years; in each case unless the loan was modified to reduce the prepayment period to no more than three years from the date of the note and the borrower was notified in writing of such reduction in prepayment period; and (e) notwithstanding any state or federal law to the contrary, the servicer shall not impose such prepayment premium in any instance when the mortgage loan is accelerated or paid off in connection with the workout of a delinquent mortgage or due to the borrower’s default.

(lxxviii) With respect to the Group I Mortgage Loans, the Group I Mortgage Loan’s Originator offered the borrower mortgage loan products offered by such mortgage loan’s originator, or any affiliate of such mortgage loan’s originator, for which the borrower qualified.

(lxxix) With respect to Mortgaged Properties located in the continental United States and Puerto Rico, no Group I Mortgage Loan secured by a single-family residence has a Principal Balance at origination in excess of $417,000; no Group I Mortgage Loan secured by a two-family residence has a Principal Balance at origination in excess of $533,850; no Group I Mortgage Loan secured by a three-family residence has a Principal Balance at origination in excess of $645,300; and no Group I Mortgage Loan secured by a four-family residence has a Principal Balance at origination in excess of $801,950; with respect to Mortgaged Properties located in Alaska, Guam, Hawaii and the Virgin Islands, no Group I Mortgage Loan secured by a single-family residence has a Principal Balance at origination in excess of $625,500; no Group I Mortgage Loan secured by a two-family residence has a Principal Balance at origination in excess of $800,775; no Group I Mortgage Loan secured by a three-family residence has a Principal Balance at origination in excess of $967,950; and no Group I Mortgage Loan secured by a four-family residence has a Principal Balance at origination in excess of $1,202,925;

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(lxxx) No selection procedure reasonably believed by the Sponsor or the Seller, as applicable to be adverse to the interests of the Noteholders was utilized in selecting the Mortgage Loans;

(lxxxi) The terms of the Mortgage Note related to each Mortgage Loan provide that, following an initial period of two or three years following the month in which such Mortgage Loan was originated and semiannually or annually thereafter (each such date, an “Adjustment Date”), the Mortgage Rate on such Mortgage Loan will be adjusted to equal the sum of (a) the related Index and (b) a fixed percentage amount specified in the related Mortgage Note (each, a “Gross Margin”); provided, however, that the Mortgage Rate will not increase or decrease by the related Periodic Rate Cap, and will not increase above a specified maximum Mortgage Rate over the life of the Mortgage Loan (the “Maximum Mortgage Rate”) or decrease below a specified minimum Mortgage Rate over the life of the Mortgage Loan (the “Minimum Mortgage Rate”);

(lxxxii) No error, omission, negligence, misrepresentation, fraud or similar occurrence with respect to a Mortgage Loan has taken place on the part of the Sponsor or the Seller, as applicable, their respective affiliates or employees or any other person involved in the origination of the Mortgage Loan or in the application for any insurance, including, but not limited to the MI Policy, in relation to such Mortgage Loan;

(lxxxiii) Each Mortgage Loan was originated by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or similar institution which is supervised and examined by a federal or state authority;

(lxxxiv) With respect to each Mortgage Loan secured by manufactured housing, such manufactured housing is permanently affixed to a foundation and constitutes real estate under applicable state law;

(lxxxv) No Mortgage Loans are date of payment or simple interest loans;

(lxxxvi) The sale, transfer, assignment and conveyance of Mortgage Loans by the Sponsor or the Seller, as applicable pursuant to this Agreement is not subject to and will not result in any tax, fee or governmental charge payable by the Depositor, the Issuing Entity, the Custodian or the Indenture Trustee to any federal, state or local government (“Transfer Taxes”) other than Transfer Taxes which have or will be paid by the Sponsor or the Seller, as applicable as due;

(lxxxvii) Approximately 5.95% of the Initial Mortgage Loans (by Cut-off Date Principal Balance) with a Loan-to-Value Ratio greater than 60% are covered by an MI Policy issued by an MI Insurer;

(lxxxviii) [Reserved];

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(lxxxix) All requirements for the valid transfer of each MI Policy, including any assignments or notices required in each MI Policy, have been satisfied;

(xc) As of the Closing Date with respect to each Initial Mortgage Loan that is subject to a MI Policy, the Sponsor or the Seller, as applicable is unaware of any existing circumstances which would cause the MI Insurer to deny a claim with respect to such Mortgage Loan;

(xci) All appraisals of the Mortgage Loans by the Sponsor or the Seller, as applicable are full URAR/1004 appraisals;

(xcii) All Prepayment Charges are enforceable and were originated in compliance with all applicable federal, state, and local laws;

(xciii) [Reserved.]

(xciv) With respect to Mortgage Loans that are more than 59 days delinquent as of the Cut-off Date, the Sponsor or the Seller, as applicable has made a specific review of the Servicer’s data and records that reflect mortgagor communications and payment history, and has no actual knowledge of an event, condition or mortgagor communication which would cause the Sponsor or the Seller, as applicable to institute foreclosure proceedings;

(xcv) The servicer for each Group I Mortgage Loan has fully furnished (and will fully furnish), in accordance with the Fair Credit Reporting Act and its implementing regulations, accurate and complete information (i.e., favorable and unfavorable) on its borrower credit files to Equifax, Experian, and Trans Union Credit Information Company (three of the credit repositories), on a monthly basis;

(xcvi) None of the Group I Mortgage Loans are classified as (a) “high cost” loans under the Home Ownership and Equity Protection Act of 1994 or (b) “high cost,” “threshold,” “covered”, “predatory” or “abusive” loans under any other applicable state, federal or local law (including without limitation any regulation or ordinance) (or a similarly classified loan using different terminology under a law imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees); and

(xcvii) With respect to any Group I Mortgage Loan originated on or after August 1, 2004, neither the related mortgage nor the related mortgage note requires the borrower to submit to arbitration to resolve any dispute arising out of or relating in any way to the mortgage loan transaction.

(xcviii) With respect to the Group I Mortgage Loans, the methodology used in underwriting the extension of credit for each Group I Mortgage Loan employs objective mathematical principles which relate the borrower’s income, assets and liabilities to the proposed payment and such underwriting methodology does not rely on the extent of the borrower’s equity in the collateral as the principal determining factor in approving such credit extension. Such underwriting methodology confirmed that at the time of origination (application/approval) the borrower had the reasonable ability to make timely payments on the mortgage loan.

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(xcix) With respect to the Group I Mortgage Loans, no borrower under a Group I Mortgage Loan was charged “points and fees” in an amount greater than (a) $1,000 or (b) 5% of the principal amount of such mortgage loan, whichever is greater. For purposes of this representation, “points and fees” (x) included origination, underwriting, broker and finder’s fees and charges that the lender imposed as a condition of making the mortgage loan, whether they are paid to the lender or a third party; and (y) exclude bona fide discount points, fees paid for actual services rendered in connection with the origination of the mortgage (such as attorneys’ fees, notaries fee and fees paid for property appraisals, credit reports, surveys, title examinations and extracts, flood and tax certifications, and home inspections); the cost of mortgage insurance or credit-risk price adjustments; the costs of title, hazard, and flood insurance policies; state and local transfer taxes or fees; escrow deposits for the future payment of taxes and insurance premiums; and other miscellaneous fees and charges that, in total, do not exceed 0.25 percent of the loan amount.

(c) With respect to the Group I Mortgage Loans, all points, fees and charges (including finance charges), whether or not financed, assessed, collected or to be collected in connection with the origination and servicing of each Group I Mortgage Loan, have been disclosed in writing to the borrower in accordance with applicable state and federal law and regulation.

Upon discovery by the Sponsor or the Seller or upon notice from the Depositor, the Indenture Trustee, or the Custodian, as applicable, of a breach of any representation or warranty in Section 3.05 which materially and adversely affects the interests of the Noteholders the Sponsor or the Seller shall, within 45 days of its discovery or its receipt of notice of such breach, either (i) cure such breach in all material respects or (ii) to the extent that such breach is with respect to a Mortgage Loan or a Related Document, either (A) repurchase such Mortgage Loan from the Indenture Trustee at the Repurchase Price, or (B) substitute one or more Qualified Substitute Mortgage Loans for such Mortgage Loan, in each case in the manner and subject to the conditions and limitations set forth below.

Upon discovery by the Sponsor or the Seller or upon notice from the Depositor, the Issuing Entity, the Indenture Trustee, or the Custodian, as applicable, of a breach of any representation or warranty in this Section 4.01 with respect to any Mortgage Loan or upon the occurrence of a Repurchase Event, which materially and adversely affects the value of the related Mortgage Loan or the interests of any Noteholders or of the Depositor, the Issuing Entity, or the Indenture Trustee in such Mortgage Loan (notice of which shall be given to the Depositor, the Custodian and the Indenture Trustee by the Sponsor, if it discovers the same) the Sponsor or the Seller shall, within 90 days after the earlier of its discovery or receipt of notice thereof, either cure such breach or Repurchase Event in all material respects or either (i) repurchase such Mortgage Loan from the Indenture Trustee at the Repurchase Price, or (ii) substitute one or more Qualified Substitute Mortgage Loans for such Mortgage Loan, in each case in the manner and subject to the conditions set forth below; provided, however, that a breach of any of the representations and warranties found in subsections (xx), (lii), (lxii), (lxvii), (lxxiv), (lxxv),

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(lxxvi), (lxxvii), (lxxviii), (lxxix), (xcvii), (xcviii), (xcix), (c), (ci) and (cii) shall be deemed to materially and adversely affect the interest of the Noteholders. The Repurchase Price for any such Mortgage Loan repurchased by the Sponsor or the Seller shall be deposited or caused to be deposited by the Servicer in the Collection Account maintained by it pursuant to Section 5.06 of this Agreement.

In the event that the Sponsor or the Seller, as applicable elects to substitute an Qualified Substitute Mortgage Loan or Loans for a Deleted Mortgage Loan pursuant to this Section 4.01, the Sponsor shall deliver to the Custodian on behalf of the Indenture Trustee, with respect to such Qualified Substitute Mortgage Loan or Loans, the original Mortgage Note and all other documents and agreements as are required by Section 2.01 hereof, with the Mortgage Note endorsed as required by such Section 2.01 hereof. No substitution will be made in any calendar month after the Determination Date for such month. Monthly Payments due with respect to Qualified Substitute Mortgage Loans in the month of substitution shall not be part of the Trust Estate and will be retained by the Servicer and remitted by the Servicer to the Sponsor on the next succeeding Payment Date. For the month of substitution, payments to the Collection Account pursuant to the Sale and Servicing Agreement will include the Monthly Payment due on a Deleted Mortgage Loan for such month and thereafter the Sponsor or the Seller, as applicable shall be entitled to retain all amounts received in respect of such Deleted Mortgage Loan. The Servicer shall amend or cause to be amended the Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan and the substitution of the Qualified Substitute Mortgage Loan or Loans and the Servicer shall deliver the amended Mortgage Loan Schedule to the Custodian and the Indenture Trustee. Upon such substitution, the Qualified Substitute Mortgage Loan or Loans shall be subject to the terms of this Agreement and the Sale and Servicing Agreement in all respects, the Sponsor or the Seller, as applicable shall be deemed to have made the representations and warranties with respect to the Qualified Substitute Mortgage Loan contained herein set forth in this Section 4.01, to the extent set forth in the definition of “Qualified Substitute Mortgage Loan”, as of the date of substitution, and the Sponsor or the Seller, as applicable shall be obligated to repurchase or substitute for any Qualified Substitute Mortgage Loan as to which a Repurchase Event has occurred as provided herein. In connection with the substitution of one or more Qualified Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the Servicer will determine the amount (such amount, a “Substitution Adjustment Amount”), if any, by which (i) the Repurchase Price that would otherwise apply to such Deleted Mortgage Loan, exceeds (ii) the principal balance of the related Qualified Substitute Mortgage Loan (after application of the principal portion of the Monthly Payments due in the month of substitution that are to be distributed to the Collection Account in the month of substitution). The Sponsor or the Seller, as applicable shall pay the amount of such shortfall to the Servicer for deposit into the Collection Account on the day of substitution, without any reimbursement therefor.

Upon receipt by the Indenture Trustee of written notification, signed by a Servicing Officer, of the deposit of such Repurchase Price or of such substitution of an Qualified Substitute Mortgage Loan and deposit of any applicable Substitution Adjustment Amount as provided above, the Custodian shall, on behalf of the Indenture Trustee, cause to be released to the Sponsor or the Seller, as applicable the related Mortgage File for the Mortgage Loan being repurchased or substituted for and the Indenture Trustee shall execute and deliver such instruments of transfer or assignment prepared by the Servicer, in each case without recourse, as

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shall be necessary to vest in the Sponsor or the Seller, as applicable or its designee such Mortgage Loan released pursuant hereto and thereafter such Mortgage Loan shall not be an asset of the Indenture Trustee.

It is understood and agreed that the obligation of the Sponsor or the Seller, as applicable to cure any breach with respect to or to repurchase or substitute for, any Mortgage Loan as to which such a breach has occurred and is continuing shall, except to the extent provided in Section 8.02 of this Agreement, constitute the sole remedy respecting such breach available to the Depositor, the Indenture Trustee, the Noteholders or the Custodian against the Sponsor or the Seller, as applicable.

It is understood and agreed that the representations and warranties set forth in this Section 4.01 shall survive delivery of the respective Mortgage Files to the Custodian on behalf of the Indenture Trustee.

ARTICLE V

ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS

Section 5.01. Servicer to Assure Servicing.

(a) The Servicer shall supervise, or take such actions as are necessary to ensure, the servicing and administration of the Mortgage Loans and any REO Property in accordance with this Agreement and Accepted Servicing Practices, which generally shall conform to the standards of an institution prudently servicing mortgage loans for its own account and shall have full authority to do anything it reasonably deems appropriate or desirable in connection with such servicing and administration. The Servicer may perform its responsibilities relating to servicing through other agents or independent contractors, but shall not thereby be released from any of its responsibilities as hereinafter set forth. Subject to Section 5.06(b), the authority of the Servicer, in its capacity as Servicer, and any Subservicer acting on its behalf, shall include, without limitation, the power to (i) consult with and advise any Subservicer regarding administration of a related Mortgage Loan, (ii) approve any recommendation by a Subservicer to foreclose on a related Mortgage Loan, (iii) supervise the filing and collection of insurance claims and take or cause to be taken such actions on behalf of the insured Person thereunder as shall be reasonably necessary to prevent the denial of coverage thereunder, and (iv) effectuate foreclosure or other conversion of the ownership of the Mortgaged Property securing a related Mortgage Loan, including the employment of attorneys, the institution of legal proceedings, the collection of deficiency judgments, the acceptance of compromise proposals and any other matter pertaining to a delinquent Mortgage Loan. The authority of the Servicer shall include, in addition, the power on behalf of the Noteholders, the Indenture Trustee, or any of them to (i) execute and deliver customary consents or waivers and other instruments and documents, (ii) consent to transfer of any related Mortgaged Property and assumptions of the related Mortgage Notes and Mortgages (in the manner provided in this Agreement) and (iii) collect any Insurance Proceeds and Liquidation Proceeds. Without limiting the generality of the foregoing, the Servicer and any Subservicer acting on its behalf may, and is hereby authorized, and empowered by the Indenture Trustee when the Servicer believes it is reasonably necessary in its best judgment in

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order to comply with its servicing duties hereunder, to execute and deliver, on behalf of itself, the Noteholders, the Indenture Trustee, or any of them, any instruments of satisfaction, cancellation, partial or full release, discharge and all other comparable instruments, with respect to the related Mortgage Loans, the insurance policies and the accounts related thereto, and the Mortgaged Properties. The Servicer may exercise this power in its own name or in the name of a Subservicer.

The Servicer, in such capacity, may not consent to the placing of a lien senior to that of the Mortgage on the related Mortgaged Property.

The relationship of the Servicer (and of any successor to the Servicer as servicer under this Agreement) to the Issuing Entity and the Indenture Trustee under this Agreement is intended by the parties to be that of an independent contractor and not that of a joint venturer, partner or agent.

(b) Notwithstanding the provisions of Subsection 5.01(a), the Servicer shall not take any action inconsistent with the interests of the Indenture Trustee, or the Noteholders or with the rights and interests of the Indenture Trustee, or the Noteholders under this Agreement.

(c) The Indenture Trustee shall furnish the Servicer with any powers of attorney and other documents in form as provided to it necessary or appropriate to enable the Servicer to service and administer the related Mortgage Loans and REO Property and the Indenture Trustee shall not be liable for the actions of the Servicer or any Subservicers under such powers of attorney.

(d) The Servicer further is authorized and empowered by the Indenture Trustee, on behalf of the Noteholders and the Indenture Trustee, when the Servicer believes it is appropriate in its best judgment to register any Mortgage Loan on the MERS System, or cause the removal from the registration of any Mortgage Loan on the MERS System, to execute and deliver, on behalf of the Indenture Trustee and the Noteholders or any of them, any and all instruments of assignment and other comparable instruments with respect to such assignment or re-recording of a Mortgage in the name of MERS, solely as nominee for the Indenture Trustee and its successors and assigns. Any expenses incurred in connection with the actions described in the preceding sentence shall be borne by the Servicer with no right of reimbursement; provided, that if, as a result of MERS discontinuing or becoming unable to continue operations in connection with the MERS System, it becomes necessary to remove any Mortgage Loan from registration on the MERS System and to arrange for the assignment of the related Mortgages to the Indenture Trustee, then any related expenses shall be reimbursable to the Servicer by the Issuing Entity.

Section 5.02. Subservicing Agreements Between Servicer and Subservicers.

(a) The Servicer may enter into Subservicing Agreements with Subservicers for the servicing and administration of the Mortgage Loans and for the performance of any and all other activities of the Servicer hereunder. Each Subservicer shall be either (i) an institution the accounts of which are insured by the FDIC or (ii) another entity that engages in

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the business of originating or servicing mortgage loans comparable to the Mortgage Loans, and in either case shall be authorized to transact business in the state or states in which the related Mortgaged Properties it is to service are situated, if and to the extent required by applicable law to enable the Subservicer to perform its obligations hereunder and under the Subservicing Agreement. Any Subservicing Agreement entered into by the Servicer shall include the provision that such Agreement may be immediately terminated (i) (x) with cause and without any termination fee by the Servicer hereunder and/or (y) without cause, in which case the Servicer shall be solely responsible for any termination fee or penalty resulting therefrom and (ii) at the option of the Indenture Trustee upon the termination or resignation of the Servicer hereunder, in which case the Servicer shall be solely responsible for any termination fee or penalty resulting therefrom. In addition, each Subservicing Agreement shall provide for servicing of the Mortgage Loans consistent with the terms of this Agreement. The Servicer and the Subservicers may enter into Subservicing Agreements and make amendments to the Subservicing Agreements or enter into different forms of Subservicing Agreements providing for, among other things, the delegation by the Servicer to a Subservicer of additional duties regarding the administration of the Mortgage Loans; provided, however, that any such amendments or different forms shall be consistent with and not violate the provisions of this Agreement, and that no such amendment or different form shall be made or entered into which could be reasonably expected to be materially adverse to the interests of the Noteholders, without the consent of the Noteholders holding at least 51% of the aggregate Voting Rights.

(b) As part of its servicing activities hereunder, the Servicer, for the benefit of the Indenture Trustee, and the Noteholders, shall enforce the obligations of each Subservicer under the related Subservicing Agreement. Such enforcement, including, without limitation, the legal prosecution of claims, termination of Subservicing Agreements and the pursuit of other appropriate remedies, shall be in such form and carried out to such an extent and at such time as the Servicer, in its good faith business judgment, would require were it the owner of the related Mortgage Loans. The Servicer shall pay the costs of such enforcement at its own expense, but shall be reimbursed therefor only (i) from a general recovery resulting from such enforcement only to the extent, if any, that such recovery exceeds all amounts due in respect of the related Mortgage Loan or (ii) from a specific recovery of costs, expenses or attorneys’ fees against the party against whom such enforcement is directed.

Section 5.03. Successor Subservicers.

The Servicer shall be entitled to terminate any Subservicing Agreement that may exist in accordance with the terms and conditions of such Subservicing Agreement and without any limitation by virtue of this Agreement; provided, however, that upon termination, the Servicer shall either act as servicer of the related Mortgage Loans or enter into an appropriate contract with a successor Subservicer, pursuant to which such successor Subservicer will be bound by all relevant terms of the related Subservicing Agreement pertaining to the servicing of such Mortgage Loans.

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Section 5.04. Liability of the Servicer.

(a) Notwithstanding any Subservicing Agreement, any of the provisions of this Agreement relating to agreements or arrangements between the Servicer and a Subservicer or reference to actions taken through a Subservicer or otherwise, the Servicer shall under all circumstances remain obligated and primarily liable to the Indenture Trustee and the Noteholders for the servicing and administering of the Mortgage Loans and any REO Property in accordance with this Agreement. The obligations and liability of the Servicer shall not be diminished by virtue of Subservicing Agreements or by virtue of indemnification of the Servicer by any Subservicer, or any other Person. The obligations and liability of the Servicer shall remain of the same nature and under the same terms and conditions as if the Servicer alone were servicing and administering the related Mortgage Loans. The Servicer shall, however, be entitled to enter into indemnification agreements with any Subservicer or other Person and nothing in this Agreement shall be deemed to limit or modify such indemnification. For the purposes of this Agreement, the Servicer shall be deemed to have received any payment on a Mortgage Loan on the date the Subservicer received such payment.

(b) Any Subservicing Agreement that may be entered into and any transactions or services relating to the Mortgage Loans involving a Subservicer in its capacity as such and not as an originator shall be deemed to be between the Subservicer and the Servicer alone, and the Custodian, the Indenture Trustee and the Noteholders shall not be deemed parties thereto and shall have no claims, rights, obligations, duties or liabilities with respect to the Subservicer, except as set forth in Section 3.05.

Section 5.05. Assumption or Termination of Subservicing Agreements by the Indenture Trustee.

(a) If the Indenture Trustee or its designee as the successor Servicer, shall assume the servicing obligations of the Servicer in accordance with Section 8.02 below, the Indenture Trustee or its designee as the successor Servicer, to the extent necessary to carry out the provisions of Section 8.02 with respect to the Mortgage Loans, shall succeed to all of the rights and obligations of the Servicer under each of the Subservicing Agreements. In such event, the Indenture Trustee or its designee as the successor Servicer shall be deemed to have assumed all of the Servicer’s rights and obligations therein and to have replaced the Servicer as a party to such Subservicing Agreements to the same extent as if such Subservicing Agreements had been assigned to the Indenture Trustee or its designee as a successor Servicer, except that the Indenture Trustee or its designee as a successor Servicer shall not be deemed to have assumed any obligations or liabilities of the Servicer arising prior to such assumption or as a result of the Indenture Trustee’s or its designee’s terminating any Subservicer upon the Indenture Trustee or its designee becoming successor Servicer and the Servicer shall not thereby be relieved of any liability or obligations under such Subservicing Agreements arising prior to such assumption or as a result of the Indenture Trustee’s or its designee’s terminating any Subservicer upon the Indenture Trustee or its designee becoming successor Servicer.

(b) The Indenture Trustee or its designee as the successor Servicer may terminate any Subservicer upon becoming successor Servicer. Any termination fees will be paid by the terminated Subservicer.

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(c) In the event that the Indenture Trustee or its designee as successor Servicer assumes the servicing obligations of the Servicer under Section 8.02, upon the request of the Indenture Trustee or such designee as successor Servicer, the Servicer shall at its own expense deliver to the Indenture Trustee, or at its written request to such designee, originals or, if originals are not available, photocopies of all documents, files and records, electronic or otherwise, relating to the Subservicing Agreements and the related Mortgage Loans or REO Property then being serviced and an accounting of amounts collected and held by it, if any, and will otherwise cooperate and use its reasonable efforts to effect the orderly and efficient transfer of the Subservicing Agreements, or responsibilities hereunder to the Indenture Trustee, or at its written request to such designee as successor Servicer.

Section 5.06. Collection of Mortgage Loan Payments.

(a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement.

(b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or eliminate the coverage provided under the MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 5.06(b).

(c) Within five Business Days after the Servicer has determined that all amounts which it expects to recover from or on account of a Liquidated Mortgage Loan have been recovered and that no further Liquidation Proceeds will be received in connection

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therewith, the Servicer shall provide to the Indenture Trustee an Officer’s Certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as of the date of such determination.

(d) The Servicer shall establish a segregated account (the “Collection Account”), which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Indenture Trustee for the registered holders of NovaStar Mortgage Funding Trust, Series 2006-MTA1, Home Equity Loan Asset-Backed Notes, Series 2006-MTA1”, in which the Servicer shall deposit or cause to be deposited any amounts representing payments on and any collections in respect of the Mortgage Loans received by it after the Cut-Off Date within two Business Days (or such longer period of time due to exception item processing) following receipt thereof, including the following payments and collections received or made by it (without duplication):

(i) all payments of principal or interest on the Mortgage Loans received by the Servicer directly from Mortgagors or from the respective Subservicer;

(ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Servicer pursuant to Section 5.19;

(iii) Net Liquidation Proceeds;

(iv) all proceeds of any Mortgage Loans repurchased by the Sponsor or the Seller, as applicable pursuant to the this Agreement, and all Substitution Adjustment Amounts required to be deposited in connection with the substitution of an Qualified Substitute Mortgage Loan pursuant to this Agreement;

(v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property;

(vi) any Advance and any Compensating Interest payments; and

(vii) any other amounts received by the Servicer, including all Foreclosure Profits, assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement;

provided, however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in Section 5.15, or amounts received by the Subservicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items. In the event any amount not required to be deposited in the Collection Account is so deposited, the Servicer may at any time (prior to being terminated under this Agreement) withdraw such amount from the Collection Account, any provision herein to the contrary notwithstanding. The Servicer shall keep records that accurately reflect the funds on

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deposit in the Collection Account that have been identified by it as being attributable to the Mortgage Loans and shall hold all collections in the Collection Account for the benefit of the Indenture Trustee, and the Noteholders, as their interests may appear.

Funds in the Collection Account may be invested in Eligible Investments with a maturity date no later than the Business Day immediately preceding the Servicer Remittance Date, but shall not be commingled with the Servicer’s own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not related to the Notes. All such investments shall be made in the name of the Indenture Trustee for the benefit of the Noteholders, provided, however, that income earned on such Eligible Investments shall be for the account of the Servicer. Such funds shall be invested at the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by the Indenture Trustee uninvested. The Servicer shall be obligated to cover losses on such Eligible Investments.

(e) The Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending remittance thereof to the Servicer, in one or more accounts in the name of the Indenture Trustee meeting the requirements of an Eligible Account, and such funds shall not be invested. The Subservicer shall segregate and hold all funds collected and received pursuant to each Mortgage Loan separate and apart from any of its own funds and general assets and any other funds. Each Subservicer shall make remittances to the Servicer no later than one Business Day following receipt thereof and the Servicer shall deposit into the Collection Account any such remittances received from any Subservicer within one Business Day following receipt by the Servicer.

Section 5.07. Withdrawals from the Collection Account.

(a) The Servicer shall, from time to time as provided herein, make withdrawals from the Collection Account of amounts on deposit therein pursuant to Section 5.06 that are attributable to the Mortgage Loans for the following purposes (without duplication):

(i) to deposit in the Payment Account, by the Servicer Remittance Date prior to each Payment Date, all collections on the Mortgage Loans required to be distributed from the Payment Account on a Payment Date;

(ii) to the extent deposited to the Collection Account, to reimburse itself or the related Subservicer for previously unreimbursed expenses incurred in maintaining individual insurance policies pursuant to Section 5.11, or Liquidation Expenses, paid pursuant to Section 5.13, such withdrawal right being limited to amounts received on particular Mortgage Loans (other than any Repurchase Price in respect thereof) which represent late recoveries of the payments for which such expenses were paid, or from related Liquidation Proceeds;

(iii) to pay to itself out of each payment received on account of interest on a Mortgage Loan as contemplated by Section 5.15, an amount equal to the related Servicing Fee (to the extent not retained pursuant to Section 5.06);

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(iv) to pay to itself or the Sponsor or the Seller, as applicable, with respect to any Mortgage Loan or property acquired in respect thereof that has been purchased by the Sponsor or the Seller, as applicable, the Servicer or other entity, all amounts received thereon and not required to be distributed to Noteholders as of the date on which the related Repurchase Price is determined;

(v) to reimburse the Servicer or any Subservicer for any unreimbursed Advance of its own funds or any unreimbursed advance of such Subservicer’s own funds, the right of the Servicer or a Subservicer to reimbursement pursuant to this subclause (v) being limited to amounts received on a particular Mortgage Loan (including, for this purpose, the Repurchase Price therefor, Insurance Proceeds and Liquidation Proceeds) which represent late payments or recoveries of the principal of or interest on such Mortgage Loan respecting which such Advance or advance was made;

(vi) to reimburse the Servicer or any Subservicer from Insurance Proceeds or Liquidation Proceeds relating to a particular Mortgage Loan for amounts expended by the Servicer or such Subservicer pursuant to Section 5.13: (x) in good faith in connection with the restoration of the related Mortgaged Property which was damaged by the uninsured cause, (y) in connection with the liquidation of such Mortgage Loan, or (z) with respect to an MI Claim Payment Advance made by the Servicer with respect to such Mortgage Loan;

(vii) to reimburse the Servicer or any Subservicer for any unreimbursed Nonrecoverable Advance previously made, and otherwise not reimbursed pursuant to this Section 5.07(a);

(viii) to withdraw any other amount deposited in the Collection Account that was not required to be deposited therein pursuant to Section 5.06;

(ix) to reimburse the Servicer for costs associated with the environmental report handling the presence of any toxic or hazardous substance on a Mortgaged Property as set forth in Section 5.13(c);

(x) to clear and terminate the Collection Account upon a termination pursuant to Section 9.01;

(xi) to pay to the Servicer income earned on Eligible Investments in the Collection Account;

(xii) to pay to the MI Insurer the monthly MI Premiums due under each MI Policy from payments received (or Advances made) on account of interest due on the related Mortgage Loan; and

(xiii) to make an Advance with respect to a Mortgage Loan that is Delinquent from funds held in the Collection Account as contemplated by Section 5.24, provided that the amount withdrawn for such an Advance is immediately deposited into the Payment Account.

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Withdrawals made pursuant to clause (xii) shall be made on a first priority basis. In connection with withdrawals pursuant to clauses (ii), (iii), (iv), (v) and (vi), the Servicer’s entitlement thereto is limited to collections or other recoveries on the related Mortgage Loan, and the Servicer shall keep and maintain separate accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from the Collection Account pursuant to such clauses.

(b) Notwithstanding the provisions of this Section 5.07, the Servicer may, but is not required to, allow the Subservicers to deduct from amounts received by them or from the related account maintained by a Subservicer, prior to deposit in the Collection Account, any portion to which such Subservicers are entitled as reimbursement of any reimbursable Advances made by such Subservicers.

Section 5.08. Collection of Taxes, Assessments and Similar Items; Servicing Accounts.

(a) The Servicer shall establish and maintain or cause the related Subservicer to establish and maintain, one or more Servicing Accounts. The Servicer or a Subservicer will deposit and retain therein all collections from the Mortgagors for the payment of taxes, assessments, insurance premiums, or comparable items as agent of the Mortgagors.

(b) The deposits in the Servicing Accounts shall be held in trust by the Servicer or a Subservicer (and its successors and assigns) in the name of the Indenture Trustee. Such Servicing Accounts shall be Eligible Accounts and, if permitted by applicable law, invested in Eligible Investments held in trust by the Servicer or a Subservicer as described above and maturing, or be subject to redemption or withdrawal, no later than the date on which such funds are required to be withdrawn, and in no event later than 45 days after the date of investment; withdrawals of amounts from the Servicing Accounts may be made only to effect timely payment of taxes, assessments, insurance premiums, or comparable items, to reimburse the Servicer or a Subservicer for any advances made with respect to such items, to refund to any Mortgagors any sums as may be determined to be overages, to pay interest, if required, to Mortgagors on balances in the Servicing Accounts or to clear and terminate the Servicing Accounts at or any time after the termination of this Agreement. Amounts received from Mortgagors for deposit into the Servicing Accounts shall be deposited in the Servicing Accounts by the Servicer within two days of receipt. The Servicer shall advance from its own funds amounts needed to pay items payable from the Servicing Accounts if the Servicer reasonably believes that such amounts are recoverable from the related Mortgagor. The Servicer shall comply with all laws relating to the Servicing Accounts, including laws relating to payment of interest on the Servicing Accounts. If interest earned by the Servicer on the Servicing Accounts is not sufficient to pay required interest on the Servicing Accounts, the Servicer shall pay the difference from its own funds. The Servicing Accounts shall not be the property of the Issuing Entity.

Section 5.09. Access to Certain Documentation and Information Regarding the Mortgage Loans.

The Servicer shall provide, and shall cause any Subservicer to provide, to the Indenture Trustee, access to the documentation regarding the related Mortgage Loans and REO Property and to the

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Noteholders, Beneficial Owners, the FDIC, and the supervisory agents and examiners of the FDIC (to which the Custodian and Indenture Trustee shall also provide) access to the documentation regarding the related Mortgage Loans required by applicable regulations, such access being afforded without charge but only upon reasonable request and during normal business hours at the offices of the Servicer or the Subservicers that are designated by these entities; provided, however, that, unless otherwise required by law, the Servicer and any Subservicer shall not be required to provide access to such documentation if the provision thereof would violate the legal right to privacy of any Mortgagor; provided, further, however, that the Indenture Trustee shall coordinate its request for such access so as not to impose an unreasonable burden on, or cause an unreasonable interruption of, the business of the Servicer or any Subservicer. The Servicer, the Subservicers, the Indenture Trustee and the Custodian shall allow representatives of the above entities to photocopy any of the documentation and shall provide equipment for that purpose at a charge that covers their own actual out-of-pocket costs.

Section 5.10. [Reserved].

Section 5.11. Maintenance of Hazard Insurance and Fidelity Coverage.

(a) The Servicer shall maintain and keep, or cause each Subservicer to maintain and keep, with respect to each Mortgage Loan and each REO Property, in full force and effect hazard insurance (fire insurance with extended coverage) equal to at least the lesser of the Principal Balance of the Mortgage Loan or the current replacement cost of the Mortgaged Property, and containing a standard mortgagee clause, provided, however, that the amount of hazard insurance may not be less than the amount necessary to prevent loss due to the application of any co-insurance provision of the related policy. Unless applicable state law requires a higher deductible, the deductible on such hazard insurance policy may be no more than $1,500 or 1% of the applicable amount of coverage, whichever is less. In the case of a condominium unit or a unit in a planned unit development, the required hazard insurance shall take the form of a multi-peril policy covering the entire condominium project or planned unit development, in an amount equal to at least 100% of the insurable value based on replacement cost. If the Servicer shall obtain and maintain a blanket policy consistent with its general mortgage servicing activities insuring against hazard losses on all of the Mortgage Loans, it shall conclusively be deemed to have satisfied its obligations as set forth in this Section 5.11(a), it being understood and agreed that such policy may contain a deductible clause, in which case the Servicer shall, in the event that there shall not have been maintained on the related Mortgaged Property a policy complying with this Section 5.11(a) and there shall have been a loss which would have been covered by such policy, deposit in the Collection Account the amount not otherwise payable under the blanket policy because of such deductible clause without any right of reimbursement. Any such deposit by the Servicer shall be made on the last Business Day of the Due Period in the month in which payments under any such policy would have been deposited in the Collection Account. In connection with its activities as servicer of the Mortgage Loans, the Servicer agrees to present, on behalf of itself, the Issuing Entity, and the Indenture Trustee, claims under any such blanket policy.

(b) Any amounts collected by the Servicer or a Subservicer under any such hazard insurance policy (other than amounts to be applied to the restoration or repair of the Mortgaged Property or amounts released to the Mortgagor in accordance with the Servicer’s or a Subservicer’s normal servicing procedures, the Mortgage Note, the Mortgage or applicable law) shall be deposited in the Collection Account.

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(c) Any cost incurred by a Servicer or a Subservicer in maintaining any such individual hazard insurance policies shall not be added to the amount owing under the Mortgage Loan for the purpose of calculating monthly payments to Noteholders, notwithstanding that the terms of the Mortgage Loan so permit. Such costs of maintaining individual hazard insurance policies shall be recoverable by the Servicer or a Subservicer out of related late payments by the Mortgagor or out of Insurance Proceeds or Liquidation Proceeds or by the Servicer from the Repurchase Price, to the extent permitted by Section 5.07.

(d) No earthquake or other additional insurance is to be required of any Mortgagor or maintained on property acquired with respect to a Mortgage other than pursuant to such applicable laws and regulations as shall at any time be in force and shall require such additional insurance. When, at the time of origination of the Mortgage Loan or at any subsequent time, the Mortgaged Property is located in a federally designated special flood hazard area, the Servicer shall ensure that, with respect to such Mortgage Loan or such REO Property, flood insurance is acquired (to the extent available and in accordance with mortgage servicing industry practice). Such flood insurance shall cover the Mortgaged Property, including all items taken into account in arriving at the Appraised Value on which the Mortgage Loan was based, and shall be in an amount equal to the lesser of (i) the Principal Balance of the related Mortgage Loan and (ii) the minimum amount required under the terms of coverage to compensate for any damage or loss on a replacement cost basis, but not more than the maximum amount of such insurance available for the related Mortgaged Property under either the regular or emergency programs of the National Flood Insurance Program (assuming that the area in which such Mortgaged Property is located is participating in such program). Unless applicable state law requires a higher deductible, the deductible on such flood insurance may not exceed $1,500 or 1% of the applicable amount of coverage, whichever is less.

(e) If insurance complying with Subsections 5.11 (a) and (d) has not been maintained and there shall have been a loss which would have been covered by such insurance had it been maintained, the Servicer shall pay, or cause the related Subservicer to pay, for any necessary repairs without any right of reimbursement.

(f) The Servicer shall present, or cause the related Subservicer to present, claims under any related hazard insurance or flood insurance policy.

(g) The Servicer shall obtain and maintain at its own expense, and shall cause each Subservicer to obtain and maintain at its own expense, and for the duration of this Agreement, a blanket fidelity bond and an errors and omissions insurance policy covering the Servicer’s and such Subservicer’s officers, employees and other persons acting on its behalf in connection with its activities under this Agreement. The amount of coverage shall correspond with the FNMA/FHMLC levels presently maintained by the Servicer. The Servicer shall promptly notify the Indenture Trustee of any material change in the terms of such bond or policy. The Servicer shall provide annually by March 31st of each year, to the Indenture

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Trustee a certification stating that such bond and policy are in effect. If any such bond or policy ceases to be in effect, the Servicer shall, to the extent possible, give the Indenture Trustee ten days’ notice prior to any such cessation and shall use its reasonable best efforts to obtain a comparable replacement bond or policy, as the case may be. Any amounts relating to the Mortgage Loans collected under such bond or policy shall be deposited in the Collection Account.

Section 5.12. Due-on-Sale Clauses; Assumption Agreements.

(a) In any case in which the Servicer is notified by any Mortgagor or Subservicer that a Mortgaged Property relating to a Mortgage Loan has been or is about to be conveyed by the Mortgagor, the Servicer shall enforce, or shall instruct such Subservicer to enforce, any due-on-sale clause contained in the related Mortgage to the extent permitted under the terms of the related Mortgage Note and by applicable law. The Servicer or the related Subservicer may repurchase a Mortgage Loan at the Repurchase Price when the Servicer requires acceleration of the Mortgage Loan, but only if the Servicer is satisfied, as evidenced by an Officer’s Certificate delivered to the Indenture Trustee, that such Mortgage Loan is in default or default is reasonably foreseeable. If the Servicer reasonably believes that such due-on-sale clause cannot be enforced under applicable law or if the Mortgage Loan does not contain a due-on-sale clause, the Servicer is authorized, and may authorize any Subservicer, to consent to a conveyance subject to the lien of the Mortgage, and, with the consent of the MI Insurer, if applicable, to take or enter into an assumption agreement from or with the Person to whom such property has been or is about to be conveyed, pursuant to which such Person becomes liable under the related Mortgage Note and unless prohibited by applicable state law, on condition, however, that the related Mortgage Loan shall continue to be covered by a hazard policy. In connection with any such assumption, no material term of the related Mortgage Note may be changed. The Servicer shall notify the Custodian and Indenture Trustee, whenever possible, before the completion of such assumption agreement, and shall forward to the Custodian the original copy of such assumption agreement, which copy shall be added by the Custodian to the related Mortgage File and which shall, for all purposes, be considered a part of such Mortgage File to the same extent as all other documents and instruments constituting a part thereof.

(b) Notwithstanding the foregoing paragraph or any other provision of this Agreement, the Servicer shall not be deemed to be in default, breach or any other violation of its obligations hereunder by reason of any assumption of a Mortgage Loan by operation of law or any conveyance by the Mortgagor of the related Mortgaged Property or assumption of a Mortgage Loan which the Servicer reasonably believes it may be restricted by law from preventing, for any reason whatsoever or if the exercise of such right would impair or threaten to impair any recovery under any applicable insurance policy.

Section 5.13. Realization Upon Defaulted Mortgage Loans.

(a) The Servicer shall, or shall direct the related Subservicer to, foreclose upon or otherwise comparably convert the ownership of properties securing any Mortgage Loans that come into and continue in default and as to which no satisfactory arrangements can be made for collection of delinquent payments pursuant to Section 5.06, except that the

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Servicer shall not, and shall not direct the related Subservicer to, foreclose upon or otherwise comparably convert a Mortgaged Property if there is evidence of toxic waste or other environmental hazards thereon unless the Servicer follows the procedures in Subsection (c) below. In connection with such foreclosure or other conversion, the Servicer in conjunction with the related Subservicer, if any, shall use its best reasonable efforts to preserve REO Property and to realize upon defaulted Mortgage Loans in such manner as to maximize the receipt of principal and interest by the Noteholders, taking into account, among other things, the timing of foreclosure and the considerations set forth in Subsection 5.13(b). The foregoing is subject to the proviso that the Servicer shall not be required to expend its own funds in connection with any foreclosure or towards the restoration of any property unless it determines in good faith (i) that such restoration or foreclosure will increase the proceeds of liquidation of the Mortgage Loan to Noteholders after reimbursement to itself for such expenses and (ii) that such expenses will be recoverable to it either through Liquidation Proceeds (respecting which it shall have priority for purposes of reimbursements from the Collection Account pursuant to Section 5.07) or through Insurance Proceeds (respecting which it shall have similar priority). The Servicer shall be responsible for all costs and expenses constituting Liquidation Expenses incurred by it in any such proceedings; provided, however, that it shall be entitled to reimbursement thereof (as well as its normal servicing compensation) as set forth in Section 5.07. Any income from or other funds (net of any income taxes) generated by REO Property shall be deemed for purposes of this Agreement to be Liquidation Proceeds.

Any subsequent collections with respect to any Liquidated Mortgage Loan shall be deposited to the Collection Account. For purposes of determining the amount of any Liquidation Proceeds or Insurance Proceeds, or other unscheduled collections, the Servicer may take into account any estimated additional Liquidation Expenses expected to be incurred in connection with the related defaulted Mortgage Loan.

In the event that a Mortgage Loan would be properly classified as a Liquidated Mortgage Loan but for the fact that not all MI Insurance Proceeds claimed under the related MI Policy have been received, the Servicer may, from its own funds, make an advance (an “MI Claim Payment Advance”) to the Collection Account in an amount not to exceed the claimed amount of such MI Insurance Proceeds not yet received. The Servicer shall not make any MI Claim Payment Advance with respect to a claim under an MI Policy if an MI Insurer Insolvency Event has occurred and is continuing with respect to the related MI Insurer. In the event that the MI Claim Payment Advance equals the claimed amount on such MI Policy, then upon the deposit of such MI Claim Payment Advance into the Collection Account the related Mortgage Loan shall be considered a “Liquidated Mortgage Loan.”

In the event that title to any Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure, the deed or Note of sale shall be issued to the Indenture Trustee and held by the Custodian, who shall hold the same on behalf of Indenture Trustee and the Issuing Entity in accordance with this Agreement. Notwithstanding any such acquisition of title and cancellation of the related Mortgage Loan, such Mortgaged Property shall (except as otherwise expressly provided herein) be considered to be an outstanding Mortgage Loan held as an asset of the Issuing Entity until such time as such property shall be sold.

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The Indenture Trustee shall have no obligation and no liability for failing to pay premiums, receive returned insurance premiums or maintain the MI Policies.

(b) The Servicer shall not acquire any real property (or any personal property incident to such real property) on behalf of the Trust Estate except in connection with a default or reasonably foreseeable default of a Mortgage Loan. In the event that the Servicer acquires any real property (or personal property incident to such real property) on behalf of the Trust Estate in connection with a default or imminent default of a Mortgage Loan, such property shall be disposed of by the Servicer on behalf of the Trust Estate as soon as reasonably practicable, but in no event later than three years after its acquisition on behalf of the Trust Estate.

(c) With respect to any Mortgage Loan as to which the Servicer or a Subservicer has received notice of, or has actual knowledge of, the presence of any toxic or hazardous substance on the Mortgaged Property, the Servicer shall take such action as it deems to be in the best economic interest of the Trust Estate (other than proceeding against the Mortgaged Property) and is hereby authorized at such time as it deems appropriate to release such Mortgaged Property from the lien of the related Mortgage. The parties hereto acknowledge that the Servicer shall not obtain on behalf of the Issuing Entity a deed as a result or in lieu of foreclosure, and shall not otherwise acquire possession of or title to, or commence any proceedings to acquire possession of or title to, or take any other action with respect to, any Mortgaged Property, if the Issuing Entity could reasonably be considered to be a responsible party for any liability arising from the presence of any toxic or hazardous substance on the Mortgaged Property.

Section 5.14. Custodian to Cooperate; Release of Mortgage Files.

(a) Upon payment in full of any Mortgage Loan, the Servicer will immediately notify the Custodian and the Indenture Trustee by a certification signed by a Servicing Officer (which certification shall include a statement to the effect that all amounts received in connection with such payment which are required to be deposited in the Collection Account have been so deposited) and shall request delivery to the Servicer or Subservicer, as the case may be, of the Mortgage File. Upon receipt of such certification and request, the Custodian, on behalf of the Indenture Trustee, shall promptly cause to be released the related Mortgage File to the Servicer or Subservicer and the Indenture Trustee shall execute and deliver to the Servicer, without recourse, the request for reconveyance, deed of reconveyance or release or satisfaction of mortgage or such instrument releasing the lien of the Mortgage (furnished by the Servicer), together with the Mortgage Note with written evidence of cancellation thereon.

(b) From time to time as is appropriate, for the servicing or foreclosure of any Mortgage Loan or collection under an insurance policy, the Servicer may deliver to the Indenture Trustee and the Custodian a Request for Release signed by a Servicing Officer on behalf of the Servicer in substantially the form attached as Exhibit E hereto. Upon receipt of the Request for Release, the Custodian, on behalf of the Indenture Trustee, shall deliver the Mortgage File or any document therein to the Servicer or Subservicer, as the case may be, as bailee for the Indenture Trustee.

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(c) The Servicer shall cause each Mortgage File or any document therein released pursuant to Subsection 5.14(b) to be returned to the Custodian when the need therefor no longer exists, and in any event within 21 days of the Servicer’s receipt thereof, unless the Mortgage Loan has become a Liquidated Mortgage Loan and the Liquidation Proceeds relating to the Mortgage Loan have been deposited in the Collection Account or such Mortgage File is being used to pursue foreclosure or other legal proceedings. Prior to return of a Mortgage File or any document to the Custodian, the Servicer, the related insurer or Subservicer to whom such file or document was delivered shall retain such file or document in its respective control as bailee for the Custodian, on behalf of the Indenture Trustee, unless the Mortgage File or such document has been delivered to an attorney, or to a public trustee or other public official as required by law, to initiate or pursue legal action or other proceedings for the foreclosure of the Mortgaged Property either judicially or non-judicially, and the Servicer has delivered to the Custodian and the Indenture Trustee, an Officer’s Certificate of a Servicing Officer certifying as to the name and address of the Person to which such Mortgage File or such document was delivered and the purpose or purposes of such delivery. If a Mortgage Loan becomes a Liquidated Mortgage Loan, the Custodian, on behalf of the Indenture Trustee, shall deliver the Request for Release with respect thereto to the Servicer upon deposit of the related Liquidation Proceeds in the Collection Account.

(d) The Indenture Trustee shall execute and deliver or cause to be executed and delivered to the Servicer any court pleadings, requests for trustee’s sale or other documents necessary (i) for the foreclosure or trustee’s sale with respect to a Mortgaged Property; (ii) for any legal action brought to obtain judgment against any Mortgagor on the Mortgage Note or Mortgage; (iii) to obtain a deficiency judgment against the Mortgagor; or (iv) to enforce any other rights or remedies provided by the Mortgage Note or Mortgage or otherwise available at law or equity. Together with such documents or pleadings the Servicer shall deliver to the Indenture Trustee an Officer’s Certificate of a Servicing Officer in which it requests the Indenture Trustee to execute or cause to be executed the pleadings or documents. The Officer’s Certificate shall certify and explain the reasons for which the pleadings or documents are required. It shall further certify that the Indenture Trustee’s execution and delivery of the pleadings or documents will not invalidate any insurance coverage under the insurance policies or invalidate or otherwise affect the lien of the Mortgage, except for the termination of such a lien upon completion of the foreclosure or Indenture Trustee’s sale.

Section 5.15. Servicing Compensation.

(a) As compensation for its activities hereunder, the Servicer shall be entitled to receive the Servicing Fee from full payments of accrued interest on each Mortgage Loan. The Servicer shall be solely responsible for paying any and all fees with respect to a Subservicer, and the Indenture Trustee and the Trust Estate shall not bear any fees, expenses or other costs directly associated with any Subservicer.

(b) The Servicer may retain additional servicing compensation in the form of late payment charges, to the extent such charges are collected from the related Mortgagors and investment earnings on the Collection Account. The Servicer shall be required to pay all expenses it incurs in connection with servicing activities under this Agreement and shall not be entitled in connection with servicing activities under this Agreement to reimbursement

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except as provided in this Agreement. Expenses to be paid by the Servicer without reimbursement under this Subsection 5.15(b) shall include payment of the expenses of the accountants retained pursuant to Section 5.17.

Section 5.16. Annual Statements of Compliance.

The Servicer will deliver to the Issuing Entity, the Indenture Trustee, the Rating Agencies, the Seller and the Sponsor on or before March 1st of each year, beginning March 1st, 2007, an Officer’s Certificate of the Servicer (an “Annual Statement of Compliance”) stating, that (a) a review of the activities of the Servicer, during the preceding calendar year and of its performance under this Agreement has been made under such officer’s supervision and (b) to the best of such officer’s knowledge, based on such review, the Servicer has fulfilled all of its material obligations under this Agreement in all material respects throughout such year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officer and the nature and status thereof. Such Annual Statement of Compliance shall contain no restrictions or limitations on its use. In the event that the Servicer has delegated any servicing responsibilities with respect to the Mortgage Loans to a subservicer or subcontractor that meets the criteria in Item 1108(a)(2)(i) through (iii) of Regulation AB, the Servicer or the related servicer (as the case may be) shall deliver a similar Annual Statement of Compliance by that subservicer or subcontractor to the Indenture Trustee, the Sponsor and the Rating Agencies as described above as and when required with respect to the servicer.

Section 5.17. Assessments of Compliance and Attestation Reports.

The Servicer shall service and administer the Mortgage Loans in accordance with all applicable requirements of the Servicing Criteria. Pursuant to Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB, each of the Servicer and the Indenture Trustee (each, an “Attesting Party”) shall deliver to the Indenture Trustee and the Depositor on or before March 15th of each calendar year in which the Issuing Entity is required to file a Form 10-K beginning in 2007, a report regarding such Attesting Party’s assessment of compliance (an “Assessment of Compliance”) with the Servicing Criteria during the preceding calendar year. The Assessment of Compliance, as set forth in Regulation AB, must contain the following:

(i) A statement by such officer of its responsibility for assessing compliance with the Servicing Criteria applicable to the related Attesting Party;

(ii) A statement by such officer that such Attesting Party used the Servicing Criteria set forth in Item 1122(d) of Regulation AB to assess compliance with the Servicing Criteria applicable to the related Attesting Party;

(iii) An assessment by such officer of the related Attesting Party’s compliance with the applicable Servicing Criteria for the period consisting of the preceding calendar year, including disclosure of any material instance of noncompliance with respect thereto during such period, which assessment shall be based on the activities such Attesting Party performs with respect to asset-backed securities transactions taken as a whole involving the Servicer, that are backed by the same asset type as the Mortgage Loans;

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(iv) A statement that a registered public accounting firm has issued an attestation report on the related Attesting Party’s Assessment of Compliance for the period consisting of the preceding calendar year; and

(v) A statement as to which of the Servicing Criteria, if any, are not applicable to such Attesting Party, which statement shall be based on the activities such Attesting Party performs with respect to asset-backed securities transactions taken as a whole involving such Attesting Party, that are backed by the same asset type as the Mortgage Loans.

Such report at a minimum shall address each of the Servicing Criteria specified on Exhibit H hereto which are indicated as applicable to the related Attesting Party.

On or before March 15th of each calendar year in which the Issuing Entity is required to file a Form 10-K beginning in 2007, each Attesting Party specified in this Section shall furnish to the Indenture Trustee and the Depositor a report (an “Attestation Report”) by a registered public accounting firm that attests to, and reports on, the Assessment of Compliance made by the Servicer, as required by Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122(b) of Regulation AB, which Attestation Report must be made in accordance with standards for attestation reports issued or adopted by the Public Company Accounting Oversight Board.

The Servicer or the Indenture Trustee, as the case may be shall cause any subservicer, and each subcontractor determined by it to be materially “participating in the servicing function” within the meaning of Item 1122 of Regulation AB, to deliver to the Indenture Trustee and the Depositor an Assessment of Compliance and Attestation Report as and when provided above along with an indication of what Servicing Criteria are addressed in such assessment.

Notwithstanding the foregoing, as to any subcontractor (as defined in the related servicing agreement), an Assessment of Compliance is not required to be delivered unless it is required as part of a Form 10-K with respect to the Issuing Entity.

In addition, the Custodian shall deliver to the Sponsor and the Depositor an Assessment of Compliance and Attestation Report, as and when provided above, which shall at a minimum address each of the Servicing Criteria specified on Exhibit H hereto which are indicated as applicable to a “custodian.”

Section 5.18. Reports Filed with Securities and Exchange Commission.

(a) (i) (A) Within 15 days after each Payment Date for so long as the Issuing Entity is subject to the Exchange Act reporting requirements, the Indenture Trustee shall, in accordance with industry standards, file with the Commission via the Electronic Data Gathering and Retrieval System (“EDGAR”), a Form 10-D, signed by the Servicer, with a copy of the monthly statement to be furnished by the Indenture Trustee to the Noteholders for such Payment Date; provided that the Indenture Trustee shall have received no later than five (5) calendar days after the related Servicer Reporting Date, all information required to be provided to the Indenture Trustee as described below. Any disclosure in addition to the Monthly Statement that is required to be included on Form 10-D (“Additional Form 10-D Disclosure”) shall be approved by the Depositor.

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Within five (5) calendar days after the related Servicer Reporting Date, (i) the parties set forth in Exhibit I shall be required to provide, pursuant to section 5.18(a)(iv) below, to the Indenture Trustee and the Depositor, to the extent known (by a Responsible Officer in the case of the Owner Trustee), in EDGAR-compatible format at the following email address: sf_sec@jpmorgan.com, or in such other form as otherwise agreed upon by the Indenture Trustee and the Depositor and such party, the form and substance of any Additional Form 10-D Disclosure, if applicable, and (ii) the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Additional Form 10-D Disclosure on Form 10-D. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Indenture Trustee in connection with including any Additional Form 10-D Disclosure on Form 10-D pursuant to this Section.

(B) After preparing the Form 10-D, the Indenture Trustee shall forward electronically a draft copy of the Form 10-D to the Depositor and the Servicer for review. No later than two (2) Business Days prior to the 15^th calendar day after the related Payment Date, either the Depositor or a senior officer of the Servicer in charge of the servicing function shall sign the Form 10-D and return an electronic or fax copy of such signed Form 10-D (with an original executed hard copy to follow by overnight mail) to the Indenture Trustee. For administrative convenience, the Depositor or the Servicer may deliver executed signature pages to the Indenture Trustee to be held by the Indenture Trustee in escrow and attached to a Form 10-D only upon such Depositor’s or Servicer’s electronic notification to the Indenture Trustee authorizing such attachment. If a Form 10-D cannot be filed on time or if a previously filed Form 10-D needs to be amended, the Indenture Trustee will follow the procedures set forth in Section 5.18(a)(v). Promptly (but no later than one (1) Business Day) after filing with the Commission, the Sponsor will make available on its internet website a final executed copy of each Form 10-D. The signing party at the Depositor or the Servicer can be contacted as set forth in Section 11.06. The parties to this Agreement acknowledge that the performance by the Indenture Trustee of its duties under Sections 5.18(a)(i) and (v) related to the timely preparation and filing of Form 10-D is contingent upon such parties strictly observing all applicable deadlines in the performance of their duties under such Sections. The Indenture Trustee shall have no liability for any loss, expense, damage, claim arising out of or with respect to any failure to properly prepare and/or timely file such Form 10-D, where such failure results from the Indenture Trustee’s inability or failure to receive, on a timely basis, any information from any other party hereto needed to prepare, arrange for execution or file such Form 10-D, not resulting from its own negligence, bad faith or willful misconduct.

(ii) (A) Within four (4) Business Days after the occurrence of an event requiring disclosure on Form 8-K (each such event, a “Reportable Event”) for so long as the Issuing Entity is subject to the Exchange Act reporting requirements, the Indenture Trustee shall prepare and file on behalf of the Issuing Entity any Form 8-K prepared by the Depositor, as required by the Exchange Act, provided that the Depositor shall file the initial Form 8-K in connection with the issuance of the Notes; provided further, that the Indenture Trustee shall only be responsible for filing such Form 8-K if the Indenture Trustee has been notified by the Depositor of the necessity therefore and provided with the disclosure to be included therein. Any disclosure or information related to a Reportable Event or that is otherwise required to be included on Form 8-K (“Form 8-K Disclosure Information”) shall be prepared by the Depositor.

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(B) For so long as the Issuing Entity is subject to the Exchange Act reporting requirements, no later than 12:00 p.m. New York time on the 2nd Business Day after the occurrence of a Reportable Event (i) the parties set forth in Exhibit I shall be required pursuant to Section 5.18(a)(iv) below to provide to the Indenture Trustee and the Depositor, to the extent known, in EDGAR-compatible format, or in such other form as otherwise agreed upon by the Indenture Trustee and the Depositor and such party, the form and substance of any Form 8-K Disclosure Information, if applicable, and (ii) the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Form 8-K Disclosure Information on Form 8-K. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Indenture Trustee in connection with including any Form 8-K Disclosure Information on Form 8-K pursuant to this Section.

(C) No later than the end of business New York City time on the 3^rd Business Day after the Reportable Event, either the Depositor or a senior officer of the Servicer in charge of the servicing function shall sign the Form 8-K and return an electronic or fax copy of such signed Form 8-K (with an original executed hard copy to follow by overnight mail) to the Indenture Trustee. If a Form 8-K cannot be filed on time or if a previously filed Form 8-K needs to be amended, the Indenture Trustee will follow the procedures set forth in Section 5.18(a)(v). Promptly (but no later than 1 Business Day) after filing with the Commission, the Sponsor will, make available on its internet website a final executed copy of each Form 8-K. The signing party at the Depositor or the Servicer can be contacted as set forth in Section 11.06. The parties to this Agreement acknowledge that the performance by the Indenture Trustee of its duties under this Section 5.18(a)(ii) related to the timely preparation and filing of Form 8-K is contingent upon such parties strictly observing all applicable deadlines in the performance of their duties under this Section 5.18(a)(ii). The Indenture Trustee shall have no liability for any loss, expense, damage, claim arising out of or with respect to any failure to properly prepare and/or timely file such Form 8-K, where such failure results from the Indenture Trustee’s inability or failure to receive, on a timely basis, any information from any other party hereto needed to prepare, arrange for execution or file such Form 8-K, not resulting from its own negligence, bad faith or willful misconduct.

(iii) (A) Within 90 days after the end of each fiscal year of the Issuing Entity or such earlier date as may be required by the Exchange Act (the “10-K Filing Deadline”) (it being understood that the fiscal year for the Issuing Entity ends on December 31^st of each year) for so long as the Issuing Entity is subject to the Exchange Act reporting requirements, commencing in March 2007, the Indenture Trustee shall prepare and file on behalf of the Issuing Entity a Form 10-K, in form and substance as required by the Exchange Act. Each such Form 10-K shall include the following items, in each case to the extent they have been delivered to the Indenture Trustee within the applicable time frames set forth in this Agreement, (1) an annual compliance statement of the Servicer and any subservicer, as described under Section 5.16, the annual reports on assessment of compliance with Servicing Criteria for the Servicer, each subservicer and each subcontractor materially participating in the Servicing Function, each Servicing Function Participant, the Indenture Trustee and each custodian, as described under Section 5.10, (2) the registered public accounting firm attestation report for the Servicer, and the Indenture Trustee, as described under Section 5.10, which shall identify any material instance of noncompliance, disclosure identifying such instance of

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noncompliance, and (3) a Sarbanes-Oxley Certification as described in this Section 5.18 (a)(iii)(D) below. Any disclosure or information in addition to (1) through (3) above that is required to be included on Form 10-K (“Additional Form 10-K Disclosure”) shall be determined and prepared by and approved by the Depositor.

(B) No later than March 5th of each year that the Issuing Entity is subject to the Exchange Act reporting requirements, commencing in 2007, (1) the parties set forth in Exhibit I shall be required to provide pursuant to Section 5.18(a)(iv) below to the Indenture Trustee and the Depositor, to the extent known (by a Responsible Officer in the case of the Indenture Trustee and the Owner Trustee), in EDGAR-compatible format, at the email address set forth in Section 11.06 hereof with respect to the Indenture Trustee, or in such other form as otherwise agreed upon by the Indenture Trustee and the Depositor and such party, the form and substance of any Additional Form 10-K Disclosure, if applicable, and (2) the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Additional Form 10-K Disclosure on Form 10-K. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Indenture Trustee in connection with including any Additional Form 10-K Disclosure on Form 10-K pursuant to this Section.

(C) After preparing the Form 10-K, the Indenture Trustee shall forward electronically a draft copy of the Form 10-K to the Depositor and the Servicer for review. No later than 12:00 p.m. New York time on the 4th Business Day prior to the 10-K Filing Deadline, either the Depositor or a senior officer of the Servicer in charge of the servicing function shall sign the Form 10-K and return an electronic or fax copy of such signed Form 10-K (with an original executed hard copy to follow by overnight mail) to the Indenture Trustee. If a Form 10-K cannot be filed on time or if a previously filed Form 10-K needs to be amended, the Indenture Trustee will follow the procedures set forth in Section 5.18(a)(v). Promptly (but no later than one (1) Business Day) after filing with the Commission, the Sponsor will make available on its internet website a final executed copy of each Form 10-K. The signing party at the Depositor or the Servicer can be contacted as set forth in Section 11.06. The parties to this Agreement acknowledge that the performance by the Indenture Trustee of its duties under Sections 5.18(a)(iii) and (v) related to the timely preparation and filing of Form 10-K is contingent upon such parties strictly observing all applicable deadlines in the performance of their duties under such Section 5.16 and Section 5.17. The Indenture Trustee shall have no liability for any loss, expense, damage, claim arising out of or with respect to any failure to properly prepare and/or timely file such Form 10-K, where such failure results from the Indenture Trustee’s inability or failure to receive, on a timely basis, any information from any other party hereto needed to prepare, arrange for execution or file such Form 10-K, not resulting from its own negligence, bad faith or willful misconduct.

(D) Each Form 10-K shall include a certification (the “Sarbanes-Oxley Certification”), required to be included therewith pursuant to the Sarbanes-Oxley Act. The Servicer and the Indenture Trustee, shall and the Servicer shall cause any subservicer or subcontractor engaged by it to, provide to the Person who signs the Sarbanes-Oxley Certification (the “Certifying Person”), by March 15 of each year in which the Issuing Entity is subject to the reporting requirements of the Exchange Act, a certification (each, a “Back-Up Certification”), in the form attached hereto as Exhibit J-2, upon which the Certifying Person, the entity for which the Certifying Person acts as an officer, and such entity’s officers, directors and Affiliates (collectively with the Certifying

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Person, “Certification Parties”) can reasonably rely. The senior officer of the Servicer shall serve as the Certifying Person on behalf of the Issuing Entity. Such officer of the Certifying Person can be contacted as set forth in Section 11.06. In the event the Indenture Trustee is terminated or resigns pursuant to the terms of this Agreement, the Indenture Trustee shall provide a Back-Up Certification to the Certifying Person pursuant to this Section 5.18(a)(iii) with respect to the period of time it was subject to this Agreement.

(iv) With respect to any Additional Form 10-D Disclosure or Additional From 10-K Disclosure (collectively, the “Additional Disclosure”) relating to the Trust Estate, the Indenture Trustee’s obligation to include such Additional Information in the applicable Exchange Act report is subject to receipt from the entity that is indicated in Exhibit I as the responsible party for providing that information, if other than the Indenture Trustee, as and when required as described in Section 5.18(a)(i) through (iii) above. Each of the Servicer, Sponsor, and Depositor hereby agree to notify and provide to the extent known to the Indenture Trustee and the Depositor all Additional Disclosure relating to the Trust Estate, with respect to which such party is indicated in Exhibit I as the responsible party for providing that information.

(v) With respect to any Form 8-K Disclosure Information (collectively, the “8-K Additional Disclosure”) relating to the Trust Estate, the Depositor’s obligation to include such 8-K Additional Information in the applicable Exchange Act report is subject to receipt from the entity that is indicated in Exhibit I as the responsible party for providing that information, if other than the Depositor, as and when required as described in Section 5.18(a)(i) through (iii) above. Each of the Indenture Trustee, Servicer, Sponsor, and Depositor hereby agree to notify and provide to the extent known to the Depositor all 8-K Additional Disclosure relating to the Trust Estate, with respect to which such party is indicated in Exhibit I as the responsible party for providing that information.

(vi) (A) On or prior to January 30 of the first year in which the Indenture Trustee is able to do so under applicable law, the Indenture Trustee shall file a Form 15 relating to the automatic suspension of reporting in respect of the Issuing Entity under the Exchange Act.

(B) In the event that the Indenture Trustee is unable to timely file with the Commission all or any required portion of any Form 10-D or 10-K required to be filed by this Agreement because required disclosure information was either not delivered to it or delivered to it after the delivery deadlines set forth in this Agreement or for any other reason, the Indenture Trustee will immediately notify the Depositor and the Servicer. In the case of Form 10-D and 10-K, the Depositor, Servicer and Indenture Trustee will cooperate to prepare and file a Form 12b-25 and a 10-DA and 10-KA as applicable, pursuant to Rule 12b-25 of the Exchange Act. In the case of Form 8-K, the Depositor will, upon receipt of all required Form 8-K Disclosure Information provide such Form 8-K Disclosure Information to the Indenture Trustee for inclusion on the next Form 10-D. In the event that any previously filed Form 10-D or 10-K needs to be amended, the Indenture Trustee (to the extent of actual knowledge) will notify the Depositor and the Servicer and such parties will cooperate to prepare any necessary 10-DA or 10-KA. Any Form 15, Form 12b-25 or any amendment to Form 8-K, 10-D or 10-K shall be signed by a senior officer of the Servicer. The Depositor and Servicer acknowledge that the performance by the Indenture

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Trustee of its duties under this Section 5.18(a)(v) related to the timely preparation and filing of Form 15, a Form 12b-25 or any amendment to Form 10-D or 10-K is contingent upon the Servicer and the Depositor performing their duties under this Section. The Indenture Trustee shall have no liability for any loss, expense, damage, claim arising out of or with respect to any failure to properly prepare and/or timely file any such Form 15, Form 12b-25 or any amendments to Forms 10-D or 10-K, where such failure results from the Indenture Trustee’s inability or failure to receive, on a timely basis, any information from any other party hereto needed to prepare, arrange for execution or file such Form 15, Form 12b-25 or any amendments to Forms 8-K, 10-D or 10-K, not resulting from its own negligence, bad faith or willful misconduct.

The Depositor agrees to promptly furnish to the Indenture Trustee, from time to time upon request, such further information, reports and financial statements within its control related to this Agreement, the Mortgage Loans as is necessary for the preparation and filing of all required reports with the Commission. The Indenture Trustee shall have no responsibility to file any items other than those specified in this Section 5.18; provided, however, the Indenture Trustee will cooperate with the Depositor in connection with any additional filings with respect to the Issuing Entity as the Depositor deems necessary under the Exchange Act. Copies of all reports filed by the Indenture Trustee under the Exchange Act shall be sent to the Depositor as set forth in Section 11.06.

(b) In connection with the filing of any 10-K hereunder, the Indenture Trustee shall sign a certification (a “Form of Back-Up Certification to Form 10-K Certificate,” substantially in the form attached hereto as Exhibit J-2) for the Depositor regarding certain aspects of the Form 10-K certification signed by the Depositor, provided, however, that the Indenture Trustee shall not be required to undertake an analysis of any accountant’s report attached as an exhibit to the Form 10-K.

Section 5.19. Optional Purchase of Defaulted Mortgage Loans.

(a) The Servicer shall have the right, but not the obligation, to purchase any Mortgage Loan which becomes 90 days or more delinquent at a purchase price equal to the Repurchase Price (a) within 29 days after the date the Mortgage Loan becomes 90 days delinquent or (b) on the date the Servicer liquidates the related Mortgaged Property. The procedure for such purchase shall be the same as for a repurchase made by the Sponsor or the Seller under this Agreement. With respect to any Mortgage Loans being purchased pursuant to this Section 5.19, the Servicer shall purchase the most delinquent Mortgage Loans before purchasing other less delinquent Mortgage Loans. The Servicer or the related Subservicer may purchase a Mortgage Loan at the Repurchase Price when the Servicer requires acceleration of the Mortgage Loan, but only if the Servicer is satisfied, as evidenced by an Officer’s Certificate delivered to the Indenture Trustee, that such Mortgage Loan is in default or default is reasonably foreseeable and that the conditions to such optional purchase as set forth herein have been fulfilled.

(b) The Servicer may not repurchase pursuant to this Section 5.19 more than 10% of the Mortgage Loans, measured by the outstanding Principal Balance of the Mortgage Loans repurchased as a percentage of the Cut-off Date Principal Balance.

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Section 5.20. Information Required by the Internal Revenue Service Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.

The Servicer shall prepare and deliver all federal and state information reports when and as required by all applicable state and federal income tax laws. In particular, with respect to the requirement under Section 6050J of the Code to the effect that the Servicer or Subservicer shall make reports of foreclosures and abandonments of any mortgaged property, the Servicer or Subservicer shall file reports relating to each instance occurring during the previous calendar year in which the Servicer (i) acquires an interest in any Mortgaged Property through foreclosure or other comparable conversion in full or partial satisfaction of a Mortgage Loan, or (ii) knows or has reason to know that any Mortgaged Property has been abandoned. The reports from the Servicer or Subservicer shall be in form and substance sufficient to meet the reporting requirements imposed by Section 6050J, Section 6050H (reports relating to mortgage interest received) and Section 6050P of the Code (reports relating to cancellation of indebtedness).

Section 5.21. Optional Purchase of Mortgage Loans.

The Depositor has the right, but not the obligation, to purchase any Mortgage Loan at a purchase price equal to the Repurchase Price, if the Depositor deems it advisable in the administration or servicing of the Mortgage Loans. The Depositor may not repurchase pursuant to this Section 5.21 more than twenty-five (25) of the Mortgage Loans. The procedure for such purchase shall be the same as for a repurchase made by the Sponsor under this Agreement.

Section 5.22. [Reserved].

Section 5.23. Servicing and Administration of the MI Policies.

(a) The Servicer shall take all such actions on behalf of the Indenture Trustee as are necessary to service, maintain and administer the MI Policies and to perform the Indenture Trustee’s obligations and enforce the Indenture Trustee’s rights under the MI Policies, which actions shall conform to the standards of an institution prudently administering MI Policies for its own account. Except as expressly set forth herein, the Servicer shall have full authority on behalf of the Issuing Entity to do anything it reasonably deems appropriate or desirable in connection with the servicing, maintenance and administration of the MI Policies. The Servicer shall make its best reasonable efforts to file all insured claims under the MI Policies and collect from the MI Insurer all Insurance Proceeds due to the Indenture Trustee under the MI Policies. The Servicer shall not take, or permit any subservicer to take, any action which would result in non-coverage under any applicable MI Policy of any loss which, but for the actions of the Servicer or Subservicer, would have been covered thereunder. To the extent coverage is available, the Servicer shall keep or cause to be kept in full force and effect each such MI Policy for the life of the Mortgage Loan; provided, however, that if a MI Insurer Insolvency Event has occurred and is continuing, the Servicer may terminate the MI Policy on any Mortgage Loan that is not then past due. The Servicer shall cooperate with the MI Insurer and shall use its best efforts to furnish all reasonable aid, evidence and information in the possession of the Servicer or to which the Servicer has access with respect to any Mortgage Loan.

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(b) The Servicer shall deposit into the Collection Account pursuant to Section 5.06(d)(v) hereof all MI Insurance Proceeds received from the MI Insurer under the terms of the MI Policies. The Servicer shall withdraw from the Collection Account and pay to the MI Insurer pursuant to Section 5.07(a)(xii) hereof, the monthly MI Premiums due to the MI Insurer in accordance with the terms of the MI Insurance Agreements. Even in the event that the Indenture Trustee has actual knowledge that any MI Premiums have in fact not been paid, the Indenture Trustee shall not have any duty, and shall have no liability for failing to distribute such amounts.

(c) Notwithstanding the provisions of Subsection 5.22(a) and (b), the Servicer shall not take any action in regard to the MI Policies inconsistent with the interests of the Indenture Trustee or the Noteholders or with the rights and interests of the Indenture Trustee or the Noteholders under this Agreement; provided, however, that payments of the monthly MI Premiums to the MI Insurer pursuant to Subsection 5.22(b) above and Section 5.07(a)(xii) hereof shall be deemed not to be inconsistent with such interests.

(d) The Indenture Trustee shall furnish the Servicer with any powers of attorney and other documents in form as provided to it necessary or appropriate to enable the Servicer to service and administer the MI Policies; provided, however, that the Indenture Trustee shall not be liable for the actions of the Servicer under such powers of attorney.

(e) If at any time during the term of this Agreement, a MI Insurer Insolvency Event has occurred and is continuing, the Servicer agrees to review, not less often than monthly, the financial condition of the related MI Insurer with a view towards determining whether recoveries under the MI Policy are jeopardized for reasons related to the financial condition of the related MI Insurer. In such event, the Servicer may obtain an additional MI Policy or a replacement MI Policy, the MI Premiums on which would be paid by the Servicer from the Collection Account pursuant to Section 5.07(a)(xii) hereof.

(f) The Servicer shall comply with all other terms, conditions and obligations set forth in the MI Policies.

Section 5.24. Determination Date Reports.

On the second Business Day following each Determination Date (the “Servicer Reporting Date”), the Servicer shall deliver to the Indenture Trustee a report, prepared as of the close of business on the Determination Date (the “Determination Date Report”), and shall forward to the Indenture Trustee in the form of computer readable electronic file, electromagnetic tape or disk a copy of such report in a format acceptable to the Indenture Trustee. The Determination Date Report and any written information supplemental thereto shall include such information with respect to the Mortgage Loans that is reasonably available to the Servicer and that is required by the Indenture Trustee for purposes of making the calculations and providing the reports referred to in this Agreement, as set forth in written specifications or guidelines issued by the Indenture Trustee from time to time. Such information shall include the aggregate amounts required to be withdrawn from the Collection Account and deposited into the Payment Account pursuant to Section 5.07. Such information shall also include (a) the number of Mortgage Loans that prepaid in the previous month; (b) the loan balance of each such Mortgage Loan; (c) whether a

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prepayment penalty was applied to such Mortgage Loan; and (d) the amount of prepayment penalty with respect to each such Mortgage Loan. The Servicer agrees to cooperate with the Indenture Trustee in providing all information as is reasonably requested by the Indenture Trustee to prepare the reports required under this Agreement.

The determination by the Servicer of such amounts shall, in the absence of obvious error, be presumptively deemed to be correct for all purposes hereunder and the Indenture Trustee shall be fully protected in relying upon the same without any independent check or verification.

Section 5.25. Advances.

If any Monthly Payment (together with any advances from the Subservicers) on a Mortgage Loan that was due on the immediately preceding Due Date and delinquent on the Determination Date is delinquent other than as a result of application of the Relief Act, the Servicer will deposit in the Collection Account not later than the Servicer Remittance Date immediately preceding the related Payment Date an amount equal to such deficiency net of the related Servicing Fee for such Mortgage Loan, except to the extent the Servicer determines any such advance to be nonrecoverable from Liquidation Proceeds, Insurance Proceeds or future payments on such Mortgage Loan. Subject to the foregoing and in the absence of such a determination, the Servicer shall continue to make such advances through the date that the related Mortgaged Property has, in the judgment of the Servicer, been completely liquidated.

The Servicer may fund an Advance from its own corporate funds, advances made by any subservicer or funds held in the Collection Account for future payment or withdrawal.

Advances made from funds held in the Collection Account may be made by the Servicer from subsequent collections of principal and interest received on other Mortgage Loans and deposited into the Collection Account. Advances made from the Collection Account are not limited to subsequent collections of principal and interest received on the delinquent Mortgage Loan with respect to which an Advance is made. If on the Servicer Remittance Date prior to any Payment Date funds in the Collection Account are less than the amount required to be paid to the Noteholders on such Payment Date, then the Servicer shall deposit its own funds into the Payment Account in the amount of the lesser of (i) any unreimbursed Advances previously made by the Servicer with funds held in the Collection Account or (ii) the shortfall in the Collection Account, provided, however, that in no event shall the Servicer deposit into the Collection Account an amount that is less than any shortfall in the Collection Account attributable to delinquent payments on Mortgage Loans which the Servicer deems to be recoverable and which has not been covered by an Advance from the Servicer’s own corporate funds or any subservicer’s funds. If applicable, on the Servicer Remittance Date preceding each Payment Date, the Servicer shall present an Officer’s Certificate to the Indenture Trustee (i) stating that the Servicer elects not to make an Advance in a stated amount and (ii) detailing the reason it deems the advance to be nonrecoverable.

Section 5.26. Compensating Interest Payments.

The Servicer shall deposit in the Collection Account not later than the Servicer Remittance Date preceding the Payment Date an amount equal to the Compensating Interest for the related Determination Date. The Servicer shall not be entitled to any reimbursement of any Compensating Interest payment.

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Section 5.27. Advance Facility.

(a) The Servicer on behalf of the Trust Estate, is hereby authorized to enter into a facility (such an arrangement, an “Advance Facility”) with any Person which provides that such Person (an “Advancing Person”) may fund Advances and/or Servicing Advances under this Agreement, although no such facility shall reduce or otherwise affect the Servicer’s obligation to fund such Advances and/or Servicing Advances. No consent of the Indenture Trustee, Noteholders or any other party shall be required before the Servicer may enter into an Advance Facility nor shall the Indenture Trustee or the Noteholders be a third party beneficiary of any obligation of an Advancing Person to the Servicer. If the Servicer enters into an Advance Facility, the Servicer and the related Advancing Person shall deliver to the Indenture Trustee at the address set forth in Section 11.06 hereof a written notice (an “Advance Facility Notice”) (in the form attached hereto as Exhibit L), stating (a) the identity of the Advancing Person and (b) the identity of the Person (the “Servicer’s Assignee”) that will, subject to Section 5.27(b) hereof, have the right to make withdrawals from the Collection Account pursuant to Section 5.07 hereof to reimburse previously unreimbursed Advances and/or Servicing Advances (“Advance Reimbursement Amounts”). If the Servicer enters into such an Advance Facility pursuant to this Section 5.27, the Indenture Trustee shall execute the acknowledgment of the Advance Facility Notice, as prepared by the Servicer confirming its receipt of written notice of the existence of such Advance Facility. To the extent that an Advancing Person purchases or funds any Advance or any Servicing Advance and provides the Indenture Trustee with written notice (in the form attached hereto as Exhibit M) acknowledged by the Servicer that such Advancing Person is entitled to reimbursement directly from the Indenture Trustee pursuant to the terms of the Advance Facility, such Advancing Person shall be entitled to receive reimbursement pursuant to this Agreement for such amount to the extent provided in Section 5.27(b). Such notice from the Advancing Person must specify the amount of the reimbursement, the Section of this Agreement that permits the applicable Advance or Servicing Advance to be reimbursed, the section(s) of the Advance Facility that entitle the Advancing Person to request reimbursement from the Indenture Trustee, on behalf of the Trust Estate, rather than the Servicer, the Advancing Person’s wire transfer instructions, and include the Servicer’s acknowledgment thereto or proof of an Event of Default under the Advance Facility. The Indenture Trustee shall have no duty or liability with respect to any calculation of any reimbursement to be paid to an Advancing Person and shall be entitled to rely without independent investigation on the Advancing Person’s notice provided pursuant to this Section 5.27. An Advancing Person whose obligations hereunder are limited to the funding of Advances and/or Servicing Advances shall not be required to meet the qualifications of a Sub-Servicer pursuant to Section 5.02 hereof.

(b) Notwithstanding the foregoing, and for the avoidance of doubt, (i) the Servicer and/or the Servicer’s Assignee shall only be entitled to reimbursement of Advance reimbursement amounts hereunder from withdrawals from the Collection Account pursuant to Section 5.07 of this Agreement and shall not otherwise be entitled to make withdrawals or receive amounts that shall be deposited in the Payment Account, and (ii) none of the Indenture

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Trustee or the Noteholders shall have any right to, or otherwise be entitled to, receive any Advance reimbursement amounts to which the Servicer or Servicer’s Assignee, as applicable, shall be entitled pursuant to Section 5.07 hereof. An Advance Facility may be terminated by the joint written direction of the Servicer and the related Advancing Person. Written notice of such termination shall be delivered to the Indenture Trustee in the manner set forth in Section 11.06 hereof. None of the Depositor or the Indenture Trustee shall, as a result of the existence of any Advance Facility, have any additional duty or liability with respect to the calculation or payment of any Advance reimbursement amount, nor, as a result of the existence of any Advance Facility, shall the Depositor or the Indenture Trustee have any additional responsibility to track or monitor the administration of the Advance Facility or the payment of Advance reimbursement amounts to the Servicer’s Assignee. The Servicer shall indemnify the Depositor, the Indenture Trustee, any successor Servicer and the Trust Estate for any claim, loss, liability or damage resulting from any claim by the related Advancing Person, except to the extent that such claim, loss, liability or damage resulted from or arose out of negligence, recklessness or willful misconduct on the part of the Depositor, the Indenture Trustee or any successor Servicer, as the case may be, or failure by the successor Servicer or the Indenture Trustee, as the case may be, to remit funds as required by this Agreement or the commission of an act or omission to act by the successor Servicer or the Indenture Trustee, as the case may be, and the passage of any applicable cure or grace period, such that an Event of Default under this Agreement occurs or such entity is subject to termination for cause under this Agreement. The Servicer shall maintain and provide to any successor Servicer and, upon request, the Indenture Trustee a detailed accounting on a loan-by-loan basis as to amounts advanced by, pledged or assigned to, and reimbursed to any Advancing Person. The successor Servicer shall be entitled to rely on any such information provided by the predecessor Servicer, and the successor Servicer shall not be liable for any errors in such information.

(c) If an Advancing Person is entitled to reimbursement for any particular Advance or Servicing Advance as set forth in Section 5.27(a), then the Servicer shall not be permitted to reimburse itself therefor under Section 5.07, but instead the Servicer shall include such amounts in the applicable remittance to the Indenture Trustee made pursuant to Section 5.06(d) to the extent of amounts on deposit in the Collection Account on the related Servicer Remittance Date. The Indenture Trustee is hereby authorized to pay to an Advancing Person reimbursements for Advances and Servicing Advances from the Payment Account to the same extent the Servicer would have been permitted to reimburse itself for such Advances and/or Servicing Advances in accordance with Section 5.07, had the Servicer made such Advance or Servicing Advance.

(d) All Advances and Servicing Advances made pursuant to the terms of this Agreement shall be deemed made and shall be reimbursed on a “first in first out” (FIFO) basis. In the event the Servicer’s Assignee shall have received some or all of an Advance reimbursement amount related to Advances and/or Servicing Advances that were made by a Person other than such predecessor Servicer or its related Advancing Person in error, then such Servicer’s Assignee shall be required to remit any portion of such Advance reimbursement amount to each Person entitled to such portion of such Advance reimbursement amount. Without limiting the generality of the foregoing, the Servicer shall remain entitled to be reimbursed pursuant to Section 5.07 for all Advances and/or Servicing Advances funded by the Servicer to the extent the related Advance reimbursement amounts have not been assigned, sold or pledged to such Advancing Person or Servicer’s Assignee.

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(e) In the event the Servicer is terminated pursuant to Section 8.01, the Advancing Person shall succeed to the terminated Servicer’s right of reimbursement set forth in Section 8.02 to the extent of such Advancing Person’s financing of Advances or Servicing Advances hereunder then remaining unreimbursed.

(f) Any amendment to this Section 5.27 or to any other provision of this Agreement that may be necessary or appropriate to effect the terms of an Advance Facility as described generally in this Section 5.27, including amendments to add provisions relating to a successor Servicer, may be entered into by the Indenture Trustee, the Depositor and the Servicer without the consent of any Noteholder, provided such amendment complies with Section 11.03 hereof. All reasonable costs and expenses (including attorneys’ fees) of each party hereto of any such amendment shall be borne solely by the Servicer. The parties hereto hereby acknowledge and agree that: (a) the Advances and/or Servicing Advances financed by, sold and/or pledged to an Advancing Person under any Advance Facility are obligations owed to the Servicer payable only from the cash flows and proceeds received under this Agreement for reimbursement of Advances and/or Servicing Advances only to the extent provided herein, and the Indenture Trustee and the Trust Estate are not, as a result of the existence of any Advance Facility, obligated or liable to repay any Advances and/or Servicing Advances financed by the Advancing Person; (b) the Servicer will be responsible for remitting to the Advancing Person the applicable amounts collected by it as reimbursement for Advances and/or Servicing Advances purchased or funded by the Advancing Person, subject to the provisions of this Agreement; and (c) the Indenture Trustee shall not have any responsibility to track or monitor the administration of the financing arrangement between the Servicer and any Advancing Person.

Section 5.28. Servicer Rights Facility.

The Servicing Rights Owner is hereby authorized to finance, pledge and/or assign any or all of its right, title and interest in, to and under this Agreement to one or more lenders (each, a “Servicing Rights Pledgee”) selected by the Servicing Rights Owner. The Indenture Trustee and the Depositor hereby (i) consent to any such financing, pledge and/or assignment (without the need for the delivery of any notice or other communication to the Indenture Trustee or the Depositor, or for the execution by the Indenture Trustee or the Depositor of any agreement or other document or instrument, other than this Agreement), and (ii) agree that upon delivery by the Servicing Rights Pledgee to the Indenture Trustee of a letter signed by the Servicing Rights Pledgee (without further need for the delivery of any notice or other communication to the Indenture Trustee or the Depositor, or for the execution by the Indenture Trustee or the Depositor of any agreement or other document or instrument in addition to this Agreement), the Indenture Trustee shall appoint the Servicing Rights Pledgee or its designee as successor Servicer, provided that at the time of such appointment, the Servicing Rights Pledgee or such designee meets the requirements of a successor Servicer pursuant to Section 8.02 and agrees to be subject to the terms of this Agreement. For the avoidance of doubt, the Servicing Rights Pledgee or its designee (as the case may be) shall not be otherwise required to satisfy any other eligibility requirements of a successor Servicer pursuant to Section 7.04.

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ARTICLE VI

APPLICATION OF FUNDS

Section 6.01. Deposits to the Payment Account. By 12:00 noon (New York time) on each Servicer Remittance Date, the Servicer shall remit to the Indenture Trustee for deposit in the Payment Account, from funds on deposit in the Collection Account, an amount equal to the Servicer Remittance Amount with respect to the related Payment Date, minus any portion thereof payable to the Servicer pursuant to Section 6.03.

Section 6.02. Collection of Money. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of all money and other property payable to or receivable by the Indenture Trustee pursuant to this Agreement, including all payments due on the Mortgage Loans in accordance with the respective terms and conditions of such Mortgage Loans and required to be paid over to the Indenture Trustee by the Servicer. The Indenture Trustee shall hold all such money and property received by it, as part of the Trust Estate and shall apply it as provided in the Indenture.

Section 6.03. Application of Principal and Interest. In the event that Net Liquidation Proceeds on a Liquidated Mortgage Loan are less than the Principal Balance of the related Mortgage Loan plus accrued interest thereon, or any Mortgagor makes a partial payment of any Monthly Payment due on a Mortgage Loan, such Net Liquidation Proceeds or partial payment shall be applied to payment of the related Mortgage Note as provided therein, and if not so provided, first to interest accrued at the Mortgage Interest Rate and then to principal.

ARTICLE VII

THE SERVICER AND THE DEPOSITOR

Section 7.01. Liability of the Servicer and the Depositor.

The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by Servicer herein. The Depositor shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Depositor.

Section 7.02. Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or the Depositor.

Any entity into which the Servicer or Depositor may be merged or consolidated, or any entity resulting from any merger, conversion or consolidation to which the Servicer or the Depositor shall be a party, or any corporation succeeding to the business of the Servicer or the Depositor, shall be the successor of the Servicer or the Depositor, as the case may be, hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything herein to the contrary notwithstanding; provided, however, that the successor Servicer shall satisfy all the requirements of Section 8.02 with respect to the qualifications of a successor Servicer.

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Section 7.03. Limitation on Liability of the Servicer and Others.

The Servicer and any director or officer or employee or agent of the Servicer may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Servicer and any director or officer or employee or agent of the Servicer shall be indemnified by the Issuing Entity and held harmless against any loss, liability or expense incurred in connection with any legal action relating to this Agreement or the Notes, including any amount paid to the Indenture Trustee pursuant to Section 7.06(b), other than any loss, liability or expense related to any specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense shall be otherwise reimbursable pursuant to this Agreement) and any loss, liability or expense incurred by reason of its willful misfeasance, bad faith or negligence in the performance of its duties hereunder or by reason of its reckless disregard of its obligations and duties hereunder. The Servicer shall not be under any obligation to appear in, prosecute or defend any legal action which is not incidental to its duties to service the Mortgage Loans in accordance with this Agreement, and which in its opinion may involve it in any expense or liability; provided, however, that the Servicer may in its sole discretion undertake any such action which it may deem necessary or desirable in respect of this Agreement, and the rights and duties of the parties hereto and the interests of the Noteholders hereunder. In such event, the reasonable legal expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Issuing Entity, and the Servicer shall be entitled to be reimbursed therefor. The Servicer’s right to indemnity or reimbursement pursuant to this Section 7.03 shall survive any resignation or termination of the Servicer pursuant to Section 7.04 or 8.01 with respect to any losses, expenses, costs or liabilities arising prior to such resignation or termination (or arising from events that occurred prior to such resignation or termination). Any reimbursements or indemnification to the Servicer from the Issuing Entity pursuant to this Section 7.03 shall be payable in the priority set forth in Section 8.01 of the Indenture.

Section 7.04. Servicer Not to Resign.

Subject to the provisions of Section 7.04, the Servicer shall not resign from the obligations and duties hereby imposed on it except (i) upon determination that the performance of its obligations or duties hereunder are no longer permissible under applicable law or (ii) upon satisfaction of the following conditions: (a) the Servicer has proposed a successor servicer to the Indenture Trustee in writing; and (b) each Rating Agency shall have delivered a letter to the Indenture Trustee prior to the appointment of the successor servicer stating that the proposed appointment of such successor servicer as Servicer hereunder will not result in the reduction or withdrawal of then current rating of the Notes; provided, however, that (x) no such resignation by the Servicer shall become effective until such successor servicer or, in the case of (i) above, the Indenture Trustee or its designee as successor Servicer shall have assumed the Servicer’s responsibilities and obligations hereunder or shall have designated a successor servicer in accordance with Section 7.02 and (y) any appointment of a successor servicer shall be subject to the provisions of Section 5.28. Any such resignation shall not relieve the Servicer of responsibility for any of the obligations specified in Sections 7.03 and 7.06 as obligations that survive the resignation or termination of the Servicer. The Servicer shall have no claim (whether by subrogation or otherwise) or other action against any Noteholder for any amounts paid by the Servicer pursuant to any provision of this Agreement. Any such determination permitting the resignation of the Servicer under clause (i) above shall be evidenced by an Opinion of Counsel to such effect delivered to the Indenture Trustee.

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Section 7.05. Delegation of Duties.

In the ordinary course of business, the Servicer at any time may delegate any of its duties hereunder to any Person, including any of its Affiliates, who agrees to conduct such duties in accordance with the same standards with which the Servicer complies pursuant to Section 5.01. Such delegation shall not relieve the Servicer of its liabilities and responsibilities with respect to such duties and shall not constitute a resignation within the meaning of Section 7.04.

Section 7.06. Servicing Rights Owner to Pay Trustee’s Fees and Expenses; Indemnification.

(a) The Servicing Rights Owner covenants and agrees to indemnify and pay to the Indenture Trustee and any co-trustee of the Indenture Trustee from time to time, and the Indenture Trustee and any such co-trustee shall be entitled to, reasonable compensation, including all indemnification payments (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust) for all services rendered by each of them in the execution of the trusts created hereunder and in the exercise and performance of any of the powers and duties and the Servicing Rights Owner will pay or reimburse the Indenture Trustee and any co-trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Indenture Trustee or any co-trustee of the Indenture Trustee in accordance with any of the provisions of this Agreement except any such expense, disbursement or advance as may arise from its negligence or bad faith.

(b) The Servicing Rights Owner agrees to indemnify the Indenture Trustee for, and to defend and hold, the Indenture Trustee harmless against, any claim, tax, penalty, loss, liability or expense of any kind whatsoever, incurred without gross negligence or willful misconduct on the part of the Indenture Trustee as such and/or in its individual capacity, arising out of, or in connection with, the performance of the Indenture Trustee’s duties under this Agreement or the other Basic Documents, including the reasonable costs and expenses (including reasonable legal fees and expenses) of defending itself against any claim in connection with the exercise or performance of any of its powers or duties hereunder, provided that:

(i) with respect to any such claim, the Indenture Trustee shall have given the Servicing Rights Owner written notice thereof promptly after the Indenture Trustee shall have actual knowledge thereof;

(ii) while maintaining control over its own defense, the Indenture Trustee shall cooperate and consult fully with the Servicing Rights Owner in preparing such defense; and

(iii) notwithstanding anything in this Agreement to the contrary, the Servicing Rights Owner shall not be liable for settlement of any claim by the Indenture Trustee entered into without the prior consent of the Servicing Rights Owner, which consent shall not be unreasonably withheld.

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No termination of this Agreement and resignation and removal of the Indenture Trustee shall affect the obligations created by this Section 7.06 of the Servicing Rights Owner to indemnify the Indenture Trustee under the conditions and to the extent set forth herein. This section shall survive the termination of this Agreement and resignation and removal of the Indenture Trustee. Any amounts to be paid by the Servicing Rights Owner pursuant to this Subsection may not be paid from the Issuing Entity except as provided in Article V and Article VIII of the Indenture, but only to the extent unpaid by the Servicing Rights Owner.

Notwithstanding the foregoing, the indemnification provided by the Servicing Rights Owner in this Section 7.06 shall not pertain to any loss, liability or expense of the Indenture Trustee including the costs and expenses of defending itself against any claim, incurred in connection with any actions taken by the Indenture Trustee at the direction of the Noteholders, as the case may be, pursuant to the terms of this Agreement.

(c) The Servicer agrees to indemnify the Issuing Entity in an amount equal to the amount of any claim made under a MI Policy for which coverage is denied by the MI Insurer because (and if the MI Insurer’s denial of coverage is contested by the Servicer, a court or arbitrator finally determines that coverage is not available under the MI Policy because) of the Servicer’s failure to abide by the terms of the MI Policy or the MI Insurance Agreement or the Servicer’s failure to abide by the NFI Underwriting Guidelines or the NFI Servicing Guidelines, as attached to the MI Insurance Agreement.

(d) In the event the Indenture Trustee becomes the Servicer pursuant to Section 8.02 hereof, the Trustee shall not be obligated, in its individual capacity, to pay any obligation of the Servicer under clause (c) above.

(e) To the extent any amounts set forth in clause (a) or (b) above are not paid by the Servicing Rights Owner, such amounts shall be paid by the Servicer.

ARTICLE VIII

DEFAULT

Section 8.01. Servicing Default.

(a) If any one of the following events shall occur and be continuing it shall be a “Servicing Default”:

(i) Any failure by the Servicer to deposit in the Collection Account or Payment Account (A) any Advances and Compensating Interest or (B) any other deposit required to be made under the terms of this Agreement, which, in the case of this clause (B), continues unremedied for a period of three Business Days after the date upon which written notice of such failure shall have been given to the Servicer by the Indenture Trustee or to the Servicer and the Indenture Trustee by the Holders of Notes evidencing at least 25% of the Voting Rights; or

(ii) Failure on the part of the Servicer duly to observe or perform in any material respect any other covenants or agreements of the Servicer set forth in this

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Agreement, which failure, in each case, materially and adversely affects the interests of Noteholders or the breach of any representation or warranty of the Servicer in this Agreement which materially and adversely affects the interests of the Noteholders, and which in either case continues unremedied for a period of 30 days after the date on which written notice of such failure or breach, requiring the same to be remedied, and stating that such notice is a “Notice of Default” hereunder, shall have been given to the Servicer by the Indenture Trustee or to the Servicer and the Indenture Trustee by the Holders of Notes evidencing at least 25% of the Voting Rights; or

(iii) The entry against the Servicer of a decree or order by a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a trustee, conservator, receiver or liquidator in any insolvency, conservatorship, receivership, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or

(iv) The Servicer shall voluntarily go into liquidation, consent to the appointment of a conservator, receiver, liquidator or similar person in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of its property, or a decree or order of a court, agency or supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver, liquidator or similar person in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the winding-up or liquidation of its affairs, shall have been entered against the Servicer and such decree or order shall have remained in force undischarged, unbonded or unstayed for a period of 60 days; or the Servicer shall admit in writing its inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations; or

(v) The Cumulative Loss Percentage exceeds (a) with respect to the first 12 Payment Dates, 1.00%, (b) with respect to the next 12 Payment Dates, 2.00% (c) with respect to the next 12 Payment Dates, 2.25%, (d) with respect to the next 12 Payment Dates, 2.25%, (e) with respect to the next 12 Payment Dates, 3.00%, (f) and with respect to all Payment Dates thereafter, 3.375% and (g) with respect to all Payment Dates thereafter, 3.75%; or

(vi) Realized Losses on the Mortgage Loans over any twelve-month period exceeds 1.35% of the sum of the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date; or

(vii) The Rolling 90 Day Delinquency Percentage exceeds 15.00%; or

(viii) The occurrence of an Event of Default under the Indenture.

(b) So long as a Servicing Default shall not have been remedied within the applicable grace period, (x) with respect solely to clause (i)(A) above, if such Advance is not

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made by 5:00 P.M., New York time, on the Business Day immediately following the Servicer Remittance Date (provided the Indenture Trustee shall give the Servicer notice of such failure to advance by 5:00 P.M., New York time, on the Servicer Remittance Date), the Indenture Trustee shall terminate all of the rights and obligations of the Servicer under this Agreement and the Indenture Trustee, or a successor servicer appointed in accordance with Section 8.02, shall assume, pursuant to Section 8.02, the duties of a successor Servicer and (y) in the case of (i)(B), (ii), (iii), (iv), (v) and (vi) and (vii) above, the Indenture Trustee may, and, at the direction of the Holders of Notes evidencing at least 51% of the Voting Rights the Indenture Trustee shall, by notice then given in writing to the Servicer (and to the Indenture Trustee if given by Holders of Notes), terminate all of the rights and obligations of the Servicer as servicer under this Agreement. Any such notice to the Servicer shall also be given to the Servicing Rights Pledgee, Indenture Trustee, each Rating Agency, the Depositor and the Sponsor. On or after the receipt by the Servicer (and by the Indenture Trustee if such notice is given by the Holders) of such written notice, all authority and power of the Servicer under this Agreement, whether with respect to the Notes or the Mortgage Loans or otherwise, shall pass to and be vested in the Indenture Trustee or other successor Servicer appointed in accordance with Section 8.02.

In the event of a Servicing Default, notwithstanding anything to the contrary in this agreement, the Indenture Trustee and the Depositor hereby agree that upon delivery to the Indenture Trustee by the Servicing Rights Pledgee of a letter signed by the Servicing Rights Pledgee within 15 days of when the Servicer provides the Servicing Rights Pledgee notice of such Servicing Default, the Servicing Rights Pledgee or its designee shall be appointed as successor Servicer, provided that at the time of such appointment, the Servicing Rights Pledgee or such designee meets the requirements of a successor Servicer set forth in Section 8.02 below, the Servicing Rights Pledgee or such designee agrees to be subject to the terms of this Agreement and the Servicing Rights Pledgee or such designee assumes the Delinquency Advance obligations of the Indenture Trustee as outlined in Section 8.02(a), provided, however, that at such time the Servicing Rights Pledgee will have the right to reimbursement as outlined in Section 5.07.

Section 8.02. Indenture Trustee to Act: Appointment of Successor. (a) Within 90 days of the time the Servicer (and the Indenture Trustee if notice is sent by the Holders) receives a notice of termination pursuant to Section 8.01, the Indenture Trustee (or such other successor Servicer as is approved in accordance with this Agreement) shall be the successor in all respects to the Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and provisions hereof arising on and after its succession. Notwithstanding the foregoing, the parties hereto agree that the Indenture Trustee, in its capacity as successor Servicer, immediately will assume all of the obligations of the Servicer to make Delinquency Advances; provided however, that the obligation of the Indenture Trustee to make Delinquency Advances is subject to the standards set forth in Section 5.25 hereof. Notwithstanding the foregoing, the Indenture Trustee, in its capacity as successor Servicer, shall not be responsible for the lack of information and/or documents that it cannot obtain through reasonable efforts. As compensation therefor, the Indenture Trustee (or such other successor Servicer) shall be entitled to such compensation as the Servicer would have been entitled to hereunder if no such notice of termination had been given. Notwithstanding the above, (i) if the

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Indenture Trustee is unwilling to act as successor Servicer or (ii) if the Indenture Trustee is legally unable so to act, the Indenture Trustee shall appoint or petition a court of competent jurisdiction to appoint, any established housing and home finance institution, bank or other mortgage loan or home equity loan servicer having a net worth of not less than $10,000,000 as the successor to the Servicer hereunder in the assumption of all or any part of the responsibilities, duties or liabilities of the Servicer hereunder; provided, that the appointment of any such successor Servicer will not result in the qualification, reduction or withdrawal of the ratings assigned to the Notes by the Rating Agencies as evidenced by letters to such effect from the Rating Agencies. Pending appointment of a successor to the Servicer hereunder, unless the Indenture Trustee is prohibited by law from so acting, the Indenture Trustee shall act in such capacity as hereinabove provided. In connection with such appointment and assumption, the successor shall be entitled to receive compensation out of payments on Mortgage Loans in an amount equal to the compensation which the Servicer would otherwise have received pursuant to Section 5.15 (or such other compensation as the Indenture Trustee and such successor shall agree, not to exceed the Servicing Fee). The appointment of a successor Servicer shall not affect any liability of the predecessor Servicer which may have arisen under this Agreement prior to its termination as Servicer to pay any deductible under an insurance policy pursuant to Section 5.13 or to indemnify the Indenture Trustee pursuant to Section 7.06, nor shall any successor Servicer be liable for any acts or omissions of the predecessor Servicer or for any breach by such Servicer of any of its representations or warranties contained herein or in any related document or agreement. The Indenture Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession. All Servicing Transfer Costs shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs, and if such predecessor Servicer defaults in its obligation to pay such costs, such costs shall be paid by the successor Servicer (in which case the successor Servicer or the Indenture Trustee, as applicable, shall be entitled to reimbursement therefor from the assets of the Issuing Entity).

(b) Any successor, including the Indenture Trustee, to the Servicer as servicer shall during the term of its service as servicer continue to service and administer the Mortgage Loans for the benefit of Noteholders, and maintain in force a policy or policies of insurance covering errors and omissions in the performance of its obligations as Servicer hereunder and a Fidelity Bond in respect of its officers, employees and agents to the same extent as the Servicer is so required pursuant to Section 5.13.

(c) In connection with the termination or resignation of the Servicer hereunder, either (i) the successor Servicer, shall represent and warrant that it is a member of MERS in good standing and shall agree to comply in all material respects with the rules and procedures of MERS in connection with the servicing of the Mortgage Loans that are registered with MERS, in which case the predecessor Servicer shall cooperate with the successor Servicer in causing MERS to revise its records to reflect the transfer of servicing to the successor Servicer as necessary under MERS’ rules and regulations, or (ii) the predecessor Servicer shall cooperate with the successor Servicer in causing MERS to execute and deliver an assignment of Mortgage in recordable form to transfer the Mortgages from MERS to the Indenture Trustee and to execute and deliver such other notices, documents and other instruments as may be necessary or desirable to effect a transfer of such Mortgage Loans or servicing of such Mortgage Loan on the MERS System to the successor Servicer. The

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predecessor Servicer shall file or cause to be filed any such assignment in the appropriate recording offices. The predecessor Servicer shall bear any and all fees of MERS, costs of preparing any assignments of Mortgage, and fees and costs of filing any assignments of Mortgage that may be required under this subsection (c). The successor Servicer shall cause assignment to be delivered to the Indenture Trustee promptly upon receipt of the original with evidence of recording thereon or a copy certified by the public recording office in which such assignment was recorded.

Section 8.03. Waiver of Defaults. The Majority Noteholders may, on behalf of all Noteholders, waive any events permitting removal of the Servicer as servicer pursuant to this Article VIII; provided, however, that the Majority Noteholders may not waive a default in making a required payment on a Note without the consent of the Holder of such Note. Upon any waiver of a past default, such default shall cease to exist, and any Servicing Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement; provided that nothing herein shall be construed to impair the right of the Servicer Rights Pledgee to obtain the designation of a successor Servicer pursuant to Section 8.01(b). No such waiver shall extend to any subsequent or other default or impair any right consequent thereto except to the extent expressly so waived. Notice of any such waiver shall be given by the Indenture Trustee to the Rating Agencies.

ARTICLE IX

TERMINATION

Section 9.01. Termination. (a) Subject to Section 8.02, this Agreement shall terminate upon notice to a Responsible Officer of the Indenture Trustee of either: (i) the disposition of all funds with respect to the last Mortgage Loan and the remittance of all funds due hereunder and the payment of all amounts due and payable to the Indenture Trustee and the Custodian or (ii) mutual consent of the Owner Trustee, on behalf of the Issuing Entity, at the direction of all the Noteholders, the Indenture Trustee, the Servicer, the Custodian, and all Noteholders in writing.

(b) In addition, subject to Section 9.02, the Sponsor may, at its sole option, cost and expense, terminate the Issuing Entity in accordance with the terms of Section 10.01 of the Indenture.

(c) If on any date, the Servicer determines that there are no outstanding Mortgage Loans and no other funds or assets in the Trust Estate other than funds in the Payment Account, the Servicer shall send a final payment notice promptly to the Indenture Trustee, who shall forward notice to each Noteholder in accordance with Section 9.01(d).

(d) Notice of any termination, specifying the Payment Date upon which the Issuing Entity will terminate and the Noteholders shall surrender their Notes to the Indenture Trustee for final payment and cancellation, shall be given promptly by the Servicer to the Indenture Trustee, who shall forward the notice by letter to Noteholders mailed during the month of such final payment before the Servicer Remittance Date in such month, specifying (i) the Payment Date upon which final payment of the Notes will be made upon presentation and surrender of Notes at the office of the Indenture Trustee therein designated, (ii) the

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amount of any such final payment and (iii) that the Record Date otherwise applicable to such Payment Date is not applicable, payments being made only upon presentation and surrender of the Notes at the office of the Indenture Trustee therein specified.

(e) In the event that all of the Noteholders do not surrender their Notes for cancellation within six (6) months after the time specified in the above-mentioned written notice, the Indenture Trustee shall give a second written notice to the remaining Noteholders to surrender their Notes for cancellation and receive the final payment with respect thereto. If within six (6) months after the second notice, all of the Notes shall not have been surrendered for cancellation, the Indenture Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Noteholders concerning surrender of their Notes and the cost thereof shall be paid out of the funds and other assets which remain subject hereto. If within nine (9) months after the second notice all the Notes shall not have been surrendered for cancellation, the Noteholders shall be entitled to all unclaimed funds and other assets which remain subject hereto and the Indenture Trustee upon transfer of such funds shall be discharged of any responsibility for such funds and the Noteholders shall look only to the Certificateholders for payment. Such funds shall remain uninvested.

Section 9.02. Accounting Upon Termination of Servicer. Upon termination of the Servicer, the Servicer shall, at its expense:

(a) deliver to the successor servicer or, if none shall yet have been appointed, to the Indenture Trustee, the funds in any Account administered by the Servicer;

(b) deliver to the successor servicer or, if none shall yet have been appointed, to the Indenture Trustee all Mortgage Files and related documents and statements held by it hereunder and a Mortgage Loan portfolio computer tape;

(c) deliver to the successor servicer, or, if none shall yet have been appointed, to the Indenture Trustee a full accounting of all funds, including a statement showing the Monthly Payments collected by it and a statement of monies held in trust by it for the payments or charges with respect to the Mortgage Loans; and

(d) execute and deliver such instruments and perform all acts reasonably requested in order to effect the orderly and efficient transfer of servicing of the Mortgage Loans to the successor servicer and to more fully and definitively vest in such successor all rights, powers, duties, responsibilities, obligations and liabilities of the Servicer under this Agreement.

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ARTICLE X

[RESERVED]

ARTICLE XI

MISCELLANEOUS PROVISIONS

Section 11.01. Limitation on Liability. (a) None of the Issuing Entity, the Owner Trustee, the Depositor, the Sponsor, the Servicer, the Indenture Trustee, the Custodian or any of the directors, officers, employees or agents of such Persons shall be under any liability to the Issuing Entity, the Noteholders for any action taken, or for refraining from the taking of any action, in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the Issuing Entity, the Owner Trustee, the Depositor, the Sponsor, the Servicer, the Seller, the Indenture Trustee, the Custodian or any such Person against liability for any breach of warranties or representations made herein by such party, or against any specific liability imposed on each such party pursuant to this Agreement or against any liability which would otherwise be imposed upon such party by reason of willful misfeasance, bad faith or negligence in the performance of duties or by reason of failure to perform its obligations or duties hereunder. The Issuing Entity, the Owner Trustee, the Depositor, the Sponsor, the Servicer, the Seller, the Indenture Trustee, the Custodian and any director, officer, employee or agent of such Person may rely in good faith on any document of any kind which, prima facie, is properly executed and submitted by any appropriate Person respecting any matters arising hereunder.

(b) It is expressly understood and agreed by the parties hereto that (i) this Agreement is executed and delivered by Wilmington Trust Company, not individually or personally but solely as Owner Trustee under the Trust Agreement, in the exercise of the powers and authority conferred and vested in it under the Trust Agreement, (ii) each of the representations, undertakings and agreements herein made on the part of the Issuing Entity is made and intended not as personal representations, undertakings and agreements by Wilmington Trust Company but is made and intended for the purpose for binding only the Issuing Entity, (iii) nothing herein contained shall be construed as creating any liability on Wilmington Trust Company, individually or personally, to perform any covenant either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties hereto and by any Person claiming by, through or under the parties hereto and (iv) under no circumstances shall Wilmington Trust Company be personally liable for the payment of any indebtedness or expenses of the Issuing Entity or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by the Issuing Entity under this Agreement or any other related documents.

Section 11.02. Acts of Noteholders. (a) Subject to Section 7.04 and except as otherwise specifically provided herein, whenever Noteholder action, consent or approval is required under this Agreement, such action, consent or approval shall be deemed to have been taken or given on behalf of, and shall be binding upon, all Noteholders if the Majority Noteholders agree to take such action or give such consent or approval.

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(b) No Noteholder shall have any right to vote (except as expressly provided for herein) or in any manner otherwise control the operation and management of the Issuing Entity, or the obligations of the parties hereto, nor shall anything herein set forth, or contained in the terms of the Notes, be construed so as to constitute the Noteholders from time to time as partners or members of an association; nor shall any Noteholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision hereof.

Section 11.03. Amendment. (a) This Agreement may be amended from time to time by the Owner Trustee, on behalf of the Issuing Entity, the Seller, the Servicer, the Depositor, Sponsor, the Custodian and the Indenture Trustee by written agreement, without notice to or consent of the Noteholders to cure any ambiguity, to correct or supplement any provisions herein, to comply with any changes in the Code, or to make any other provisions with respect to matters or questions arising under this Agreement which shall not be inconsistent with the provisions of this Agreement; provided, however, that such action shall not adversely affect in any material respect the interests of any Noteholder and will not prevent the Notes from being characterized as debt for United States federal income tax purposes or cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes, as evidenced by (i) an Opinion of Counsel stating that such action will not prevent the Notes from being characterized as debt for United States federal income tax purposes or cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes, at the expense of the party requesting the change, delivered to the Indenture Trustee to such effect and (ii) (x) an Opinion of Counsel stating that such action shall not adversely affect in any material respect the interests of any Noteholder or (y) a letter from each Rating Agency confirming that such action will not result in the reduction, qualification or withdrawal of the then-current ratings on the Notes. The Indenture Trustee shall give prompt written notice to the Rating Agencies of any amendment made pursuant to this Section 11.03.

(b) This Agreement may be amended from time to time by the Owner Trustee, on behalf of the Issuing Entity, the Servicer, the Seller, the Depositor, the Sponsor, the Custodian and the Indenture Trustee, with the consent of the Noteholders representing more than 50% of the outstanding Principal Balance of the Notes of each affected Class and all of the Certificateholders; provided, however, that no such amendment shall reduce in any manner the amount of, or delay the timing of, payments received on Mortgage Loans which are required to be paid on any Class of Notes without the consent of the Holders of such Class of Notes or reduce the percentage for the Holders of which are required to consent to any such amendment without the consent of the Holders of 100% of such Class of Notes affected thereby.

(c) It shall not be necessary for the consent of Holders under this Section 11.03 to approve the particular form of any proposed amendment, but it shall be sufficient if such consent shall approve the substance thereof.

(d) Notwithstanding the provisions of this Section 11.03, Sections 5.17 and 5.18 may be amended as necessary to comply with the provisions of Regulation AB without the consent of the Noteholders.

73

(e) In executing, or accepting the additional trusts created by, any supplemental indenture permitted by Article IX of the Indenture or the modifications thereby of the trusts created by the Indenture, the Indenture Trustee shall be entitled to receive, and (subject to Section 6.01 of the Indenture) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by the Indenture. The Indenture Trustee may, but shall not be obligated to, enter into any such supplemental indenture that affects the Indenture Trustee’s own rights, duties or immunities under the Indenture or otherwise. The Servicer, on behalf of the Issuing Entity, shall cause executed copies of any supplemental indentures to be delivered to the Rating Agencies.

Section 11.04. Recordation of Agreement. To the extent permitted by applicable law, this Agreement, or a memorandum thereof if permitted under applicable law, is subject to recordation in all appropriate public offices for real property records in all of the counties or other comparable jurisdictions in which any or all of the properties subject to the Mortgages are situated, and in any other appropriate public recording office or elsewhere, such recordation to be effected by the Servicer at the Noteholders’ expense on direction and at the expense of Majority Noteholders requesting such recordation, but only when accompanied by an Opinion of Counsel to the effect that such recordation materially and beneficially affects the interests of the Noteholders or is necessary for the administration or servicing of the Mortgage Loans.

Section 11.05. Duration of Agreement. This Agreement shall continue in existence and effect until terminated as herein provided.

Section 11.06. Notices. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given when delivered to (i) in the case of the Servicer, NovaStar Mortgage Inc., 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114, Attention: Matt Kaltenrieder; (ii) in the case of the Seller NovaStar Financial Inc., 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114; (iii) in the case of the Issuing Entity, NovaStar Mortgage Funding Trust, Series 2006-MTA1, c/o the Owner Trustee at its Corporate Trust Office, Attention: Corporate Trust Administration; (iv) in the case of the Indenture Trustee, JPMorgan Chase Bank, National Association, 4 New York Plaza, 6th Floor, New York, NY 10004-2477, Attention: Worldwide Securities Services/Structured Finance Services (NovaStar Mortgage Funding Trust, Series 2006-MTA1); (v) in the case of the Sponsor, NovaStar Mortgage Inc., 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114, Attention: Matt Kaltenrieder; (vi) in the case of Moody’s Investors Service Inc., 99 Church Street, New York, New York 10007, Attention: Shachar Gonen; Standard & Poor’s , 26 Broadway, New York, New York 10004-1064, Attention: Julia Clements; and Fitch Ratings, One State Street Plaza, 30th Floor, New York, New York 10004, Attention: Michele Patterson, Tel: (212) 908-0779; (vii) in the case of the Custodian, U.S. Bank National Association, 4527 Metropolitan Court, Suite C, Frederick, Maryland 21704, Attention: Ronald Fisher; (viii) in the case of the Depositor, NovaStar Certificates Financing Corporation, 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114, Attention: Matt Kaltenrieder and (ix) in the case of the Noteholders, as set forth in the Note Register. Any such notices shall be deemed to be effective with respect to any party hereto upon the receipt of such notice by such party, except that notices to the Noteholders shall be effective upon mailing or personal delivery.

74

Section 11.07. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall be held invalid for any reason whatsoever, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other covenants, agreements, provisions or terms of this Agreement.

Section 11.08. No Partnership. Nothing herein contained shall be deemed or construed to create a co-partnership or joint venture between the parties hereto and the services of the Servicer shall be rendered as an independent contractor and not as agent for the Noteholders.

Section 11.09. Counterparts. This Agreement may be executed in one or more counterparts and by the different parties hereto on separate counterparts, each of which, when so executed, shall be deemed to be an original; such counterparts, together, shall constitute one and the same agreement.

Section 11.10. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the Issuing Entity, the Servicer, the Seller, the Depositor, the Sponsor, the Indenture Trustee and the Noteholders and their respective successors and permitted assigns.

Section 11.11. Headings. The headings of the various sections of this Agreement have been inserted for convenience of reference only and shall not be deemed to be part of this Agreement.

Section 11.12. No Petition. The Servicer, by entering into this Agreement hereby covenants and agrees, and the Noteholders, by the acceptance of their Notes are deemed to covenant and agree, that they will not at any time institute against the Issuing Entity, or join in any institution against the Issuing Entity of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy law in connection with any obligations relating to the Certificates, the Notes, this Agreement or any of the other Basic Documents.

This Section 11.12 will survive for one year and one day following the termination of this Agreement.

Section 11.13. Third Party Beneficiary. The parties agree that the Owner Trustee and the Servicing Rights Pledgee are intended and shall have all rights of a third-party beneficiary of this Agreement.

Section 11.14. Intent of the Parties. It is the intent of the parties hereto and Noteholders that, for federal, state and local income, single business and franchise tax purposes, the Notes be treated as debt. The parties to this Agreement and the Holder of each Note, by acceptance of its Note, and each Beneficial Owner thereof, agree to treat, and to take no action inconsistent with the treatment of, the related Notes in accordance with the preceding sentence for federal, state and local income, single business and franchise tax purposes.

Section 11.15. Compliance With Regulation AB. Each of the parties hereto acknowledges and agrees that the purpose of Sections 5.17 and 5.18 of this Agreement is to

75

facilitate compliance by the Sponsor and the Depositor with the provisions of Regulation AB, as such may be amended or clarified from time to time. Therefore, each of the parties agrees that (a) the obligations of the parties hereunder shall be interpreted in such a manner as to accomplish compliance with Regulation AB, (b) the parties’ obligations hereunder will be supplemented and modified as necessary to be consistent with any such amendments, interpretive advice or guidance, convention or consensus among active participants in the asset-backed securities markets, advice of counsel, or otherwise in respect of the requirements of Regulation AB and (c) the parties shall comply, to the extent practicable from a timing and information systems perspective, with requests made by the Sponsor or the Depositor for delivery of additional or different information as the Sponsor or the Depositor may determine in good faith is necessary to comply with the provisions of Regulation AB.Governing Law; Consent to Jurisdiction Waiver of Jury Trial. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF NEW YORK.

(b) THE ISSUING ENTITY, THE SERVICER, THE SELLER, THE DEPOSITOR, THE SPONSOR AND THE INDENTURE TRUSTEE HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET FORTH IN SECTION 11.06 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE (5) DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. THE ISSUING ENTITY, THE DEPOSITOR, THE SELLER, THE SPONSOR, THE SERVICER AND THE INDENTURE TRUSTEE EACH HEREBY WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 11.15 SHALL AFFECT THE RIGHT OF THE ISSUING ENTITY, THE DEPOSITOR, THE SPONSOR, THE SELLER, THE SERVICER OR THE INDENTURE TRUSTEE TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT ANY OF THEIR RIGHTS TO BRING ANY ACTION OR PROCEEDING IN THE COURTS OF ANY OTHER JURISDICTION.

(c) THE ISSUING ENTITY, THE DEPOSITOR, THE SPONSOR, THE SERVICER AND THE INDENTURE TRUSTEE EACH HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY.

[Remainder of Page Intentionally Left Blank]

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IN WITNESS WHEREOF, the Servicer, the Issuing Entity, the Indenture Trustee, the Depositor and the Sponsor have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.

NOVASTAR MORTGAGE INC., as Sponsor and Servicer
By:	/s/ Matt Kaltenrieder
Name:	Matt Kaltenrieder
Title:	Vice President
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1,
By:	WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee under the Trust Agreement
	By:	/s/ Rachel L. Simpson
	Name:	Rachel L. Simpson
	Title:	Sr. Financial Services Officer
NOVASTAR CERTIFICATES FINANCING CORPORATION, as Depositor
By:	/s/ Matt Kaltenrieder
Name:	Matt Kaltenrieder
Title:	Vice President
JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Indenture Trustee
By:	/s/ Andrew M. Cooper
Name:	Andrew M. Cooper
Title:	Assistant Vice President
J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as Co-Trustee
By:	/s/ Mark W. McDermott
Name:	Mark W. McDermott
Title:	Vice President

[Signature Page 1 to Sale and Servicing Agreement]

U.S. BANK NATIONAL ASSOCIATION, as Custodian
By:	/s/ Ronald L. Fisher
Name:	Ronald L. Fisher
Title:	Vice President
NOVASTAR FINANCIAL INC., as Seller
By:	/s/ Matt Kaltenrieder
Name:	Matt Kaltenrieder
Title:	Vice President

[Signature Page 2 to Sale and Servicing Agreement]

SCHEDULE I

MORTGAGE LOAN SCHEDULE

[Delivered to the Sponsor, the Depositor, the Indenture Trustee and the Custodian at Closing.]

A-1

APPENDIX I

DEFINED TERMS

[See Appendix I to Indenture]

EXHIBIT A

[Reserved]

A-1

EXHIBIT B

MORTGAGE LOAN SCHEDULE

B-1

EXHIBIT C

CUSTODIAN’S ACKNOWLEDGEMENT OF RECEIPT

                    , 2006

JPMorgan Chase Bank, National Association 4 New York Plaza, 6th Floor New York, New York 10004 Attn: Worldwide Securities Services/Structured Finance Services - NovaStar Series 2006-MTA1	NovaStar Mortgage Inc. 8140 Ward Parkway, Suite 300 Kansas City, Missouri 64114
NovaStar Certificates Financing Corporation 8140 Ward Parkway, Suite 300 Kansas City, Missouri 64114

Re: Sale and Servicing Agreement, dated as of May 1, 2006 among NovaStar Mortgage Inc., as Sponsor and Servicer, NovaStar Certificates Financing Corporation, as depositor, NovaStar Mortgage Funding Trust, Series 2006-MTA1, JPMorgan Chase Bank, National Association, as Indenture Trustee, J.P. Morgan Trust Company, National Association, as Co-Trustee and U.S. Bank National Association, as Custodian

Ladies and Gentlemen:

In accordance with Section 2.05 of the above-captioned Sale and Servicing Agreement, the undersigned, as Custodian, on behalf of the Indenture Trustee, hereby acknowledges receipt by it in good faith without notice of adverse claims, subject to the provisions of Sections 2.04 and 2.05 of the Sale and Servicing Agreement (as such provisions relate to the Mortgage Loan), of, with respect to each Mortgage Loan, a Mortgage File containing the original Mortgage Note, except with respect to the list of exceptions attached hereto, and based on its examination and only as to the foregoing, the information set forth in items (i), (ii) (with respect to property address only, excluding zip code), (iii) and (vi) of the definition of the “Mortgage Loan Schedule” accurately reflects information set forth in the Mortgage Note, and declares that it holds and will hold such documents and the other documents delivered to it constituting the Mortgage Files, and that it holds or will hold all such assets and such other assets included in the definition of “Trust Estate” that are delivered to it for the exclusive use and benefit of all present and future Noteholders.

The Custodian, on behalf of the Indenture Trustee has made no independent examination of any such documents beyond the review specifically required in the above-referenced Sale and Servicing Agreement. The Custodian, on behalf of the Indenture Trustee makes no representations as to: (i) the validity, legality, recordability, sufficiency, perfection, priority, enforceability or genuineness of any such documents or any of the Mortgage Loans identified on the Mortgage Loan Schedule, or (ii) the collectability, insurability, effectiveness or suitability of any such Mortgage Loan.

C-1

The Mortgage Loan Schedule is attached to this Receipt.

Capitalized words and phrases used herein shall have the respective meanings assigned to them in Appendix I to the Indenture, dated as of May 1, 2006, by and between NovaStar Mortgage Funding Trust, Series 2006-MTA1 and the Indenture Trustee.

U.S. BANK NATIONAL ASSOCIATION, not in its individual capacity but solely as Custodian

By:

Name:

Title:

C-2

EXHIBIT D

INITIAL CERTIFICATION

                    , 2006

JPMorgan Chase Bank, National Association 4 New York Plaza, 6th Floor New York, New York 10004 Attn: Worldwide Securities Services/Structured Finance Services - NovaStar Series 2006-MTA1	NovaStar Mortgage Inc. 8140 Ward Parkway, Suite 300 Kansas City, Missouri 64114
NovaStar Certificates Financing Corporation 8140 Ward Parkway, Suite 300 Kansas City, Missouri 64114

Re: Sale and Servicing Agreement, dated as of May 1, 2006 among NovaStar Mortgage Inc., as Sponsor and Servicer, NovaStar Certificates Financing Corporation, as depositor, NovaStar Mortgage Funding Trust, Series 2006-MTA1, and JPMorgan Chase Bank, National Association, as Indenture Trustee

Ladies and Gentlemen:

In accordance with the provisions of Section 2.06(a) of the above-referenced Sale and Servicing Agreement, the undersigned, as Custodian, on behalf of the Indenture Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan listed on the attachment hereto), it has reviewed the documents delivered to it pursuant to Section 2.05(a) of the Sale and Servicing Agreement and has determined that, except as noted on the attachment hereto, (i) all documents required to be delivered to it pursuant to Section 2.05(a)(i)-(iv) and (vi) of the above-referenced Sale and Servicing Agreement are in its possession, (ii) such documents have been reviewed by it and appear regular on their face and have not been mutilated, damaged, torn or otherwise physically altered (handwritten additions, changes or corrections do not constitute physical alteration if they reasonably appear to have been initialed by the Mortgagor) and relates to such Mortgage Loan and (iii) based on its examination and only as to the foregoing documents, the information set forth in the Mortgage Loan Schedule as to the information in clauses (i), (ii) (with respect to property address only, excluding zip code), (iii) and (vi) of the definition of “Mortgage Loan Schedule” respecting such Mortgage Loan accurately reflects the information set forth in Mortgage File. The Custodian, on behalf of the Indenture Trustee has made no independent examination of such documents beyond the review specifically required in the above-referenced Sale and Servicing Agreement. The Custodian, on behalf of the Indenture Trustee makes no representations as to: (x) the validity, legality, recordability, sufficiency, perfection, priority, enforceability or genuineness of any such documents contained in each or any of the Mortgage Loans identified on the Mortgage Loan Schedule, or (y) the collectability, insurability, effectiveness or suitability of any such Mortgage Loan.

D-1

Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Sale and Servicing Agreement.

U.S. BANK NATIONAL ASSOCIATION, not in its individual capacity but solely as Custodian

By:

Name:

Title:

D-2

EXHIBIT E

FINAL CERTIFICATION

                    , 20    

JPMorgan Chase Bank, National Association 4 New York Plaza, 6th Floor New York, New York 10004 Attn: Worldwide Securities Services/Structured Finance Services - NovaStar Series 2006-MTA1	NovaStar Mortgage Inc. 8140 Ward Parkway, Suite 300 Kansas City, Missouri 64114
NovaStar Certificates Financing Corporation 8140 Ward Parkway, Suite 300 Kansas City, Missouri 64114

Re: Sale and Servicing Agreement, dated as of May 1, 2006 among NovaStar Mortgage Inc., as Sponsor and Servicer, NovaStar Certificates Financing Corporation, as depositor, NovaStar Mortgage Funding Trust, Series 2006-MTA1, JPMorgan Chase Bank, National Association, as Indenture Trustee, J.P. Morgan Trust Company, National Association, as Co-Trustee and U.S. Bank National Association, as Custodian

Ladies and Gentlemen:

In accordance with the provisions of Section 2.06(b) of the above-referenced Sale and Servicing Agreement, the undersigned, as Custodian, on behalf of the Indenture Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or any Mortgage Loan listed on the attachment hereto), it has reviewed the documents delivered to it pursuant to Section 2.05(a) of the Sale and Servicing Agreement and has determined that, except as noted on the attachment hereto, (i) all documents required to be delivered to it pursuant to Section 2.05(a)(i)-(iv) and (vi) of the above referenced Sale and Servicing Agreement are in its possession, (ii) such documents have been reviewed by it and appear regular on their face and have not been mutilated, damaged, torn or otherwise physically altered (handwritten additions, changes or corrections do not constitute physical alteration if they reasonably appear to have been initialed by the Mortgagor) and relates to such Mortgage Loan and (iii) based on its examination and only as to the foregoing documents, the information set forth in items (i), (ii) (with respect to property address only, excluding zip code), (iii) and (vi) of the definition of the Mortgage Loan Schedule respecting such Mortgage Loan that can be determined from the face of such documents accurately reflects the information set forth in the Mortgage File. The Custodian, on behalf of the Indenture Trustee has made no independent examination of such documents beyond the review specifically required in the above-referenced Sale and Servicing Agreement. The Custodian, on behalf of the Indenture Trustee makes no representations as to: (x) the validity, legality, recordability, sufficiency, perfection, priority, enforceability or genuineness of any such documents contained in each or any of the Mortgage Loans identified on the Mortgage Loan Schedule, or (y) the collectability, insurability, effectiveness or suitability of any such Mortgage Loan.

E-1

Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Sale and Servicing Agreement.

U.S. BANK NATIONAL ASSOCIATION, not in its individual capacity but solely as Custodian

By:

Name:

Title:

E-2

EXHIBIT F

REQUEST FOR RELEASE OF DOCUMENTS

To: U.S. Bank National Association

4527 Metropolitan Court

Suite C

Frederick, MD 21704

Attention: Ronald L. Fisher

Re: Sale and Servicing Agreement, dated as of May 1, 2006 among NovaStar Mortgage Inc., as Sponsor and Servicer, NovaStar Certificates Financing Corporation, as depositor, NovaStar Mortgage Funding Trust, Series 2006-MTA1, JPMorgan Chase Bank, National Association, as Indenture Trustee J.P. Morgan Trust Company, National Association, as Co-Trustee and U.S. Bank National Association, as Custodian

In connection with the administration of the Mortgage Loans held by you as Custodian for the Issuing Entity pursuant to the above-captioned Sale and Servicing Agreement, we request the release, and hereby acknowledge receipt, of the Mortgage File for the Mortgage Loan described below, for the reason indicated.

Mortgage Loan Number:

Mortgagor Name, Address & Zip Code:

Reason for Requesting Documents (check one):

____	1.	Mortgage Paid in Full
____	2.	Foreclosure
____	3.	Substitution
____	4.	Other Liquidation (Repurchases, etc.)
____	5.	Nonliquidation Reason:	Reason:________________________

Address to which Indenture Trustee should

Deliver the Mortgage File:	_____________________________________
	_____________________________________
	_____________________________________
	By:
	(authorized signer)
	Issuing Entity:
	Address:
	Date:

F-1

EXHIBIT G

NOVASTAR MORTGAGE INC.

OFFICER’S CERTIFICATE

I,             , certify that:

1. I have reviewed this annual report on Form 10-K, and all reports on Form 8-K containing payment or servicing reports filed in respect of periods included in the year covered by this annual report, of NovaStar Mortgage Funding Trust, Series 2006-MTA1;

2. Based on my knowledge, the information in these reports, taken as a whole, does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading as of the last day of the period covered by this annual report;

3. Based on my knowledge, the payment or servicing information required to be provided to the indenture trustee by the servicer under the pooling and servicing, or similar, agreement is included in these reports;

4. Based on my knowledge and upon the annual compliance statement included in the report and required to be delivered to the indenture trustee in accordance with the terms of the sale and servicing, or similar, agreement, and except as disclosed in the reports, the servicer has fulfilled its obligations under the servicing agreement; and

5. The reports disclose all significant deficiencies relating to the servicer’s compliance with the minimum servicing standards based upon the report provided by an independent public accountant, after conducting a review in compliance with the Uniform Single Attestation Program for Mortgage Bankers or similar procedure, as set forth in the pooling and servicing, or similar, agreement that is included in these reports.

In giving the certifications above, I have reasonably relied on information provided to me by the following unaffiliated parties:             .

Date:

Name:

Title:

G-1

EXECUTION VERSION

EXHIBIT H

SERVICING CRITERIA TO BE ADDRESSED IN ASSESSMENT OF COMPLIANCE

Where there are multiple checks for criteria the attesting party will identify in their management assertion that they are attesting only to the portion of the payment chain they are responsible for in the related transaction agreements.

Key: X – obligation

Reg AB Reference	Servicing Criteria	Servicer	Indenture Trustee	Custodian
	General Servicing Considerations
1122(d)(1)(i)	Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.	X	X
1122(d)(1)(ii)	If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing activities.	If applicable
1122(d)(1)(iii)	Any requirements in the transaction agreements to maintain a back-up servicer for the Pool Assets are maintained.	If become contractually obligated
1122(d)(1)(iv)	A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements.	X
	Cash Collection and Administration
1122(d)(2)(i)	Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements.	X	X
1122(d)(2)(ii)	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel	X	X
1122(d)(2)(iii)	Advances of funds or guarantees regarding collections, cash flows or payments, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements.	X

H-1

Reg AB Reference	Servicing Criteria	Servicer	Indenture Trustee	Custodian
1122(d)(2)(iv)	The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of over collateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements.	X	X
1122(d)(2)(v)	Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act.	X	X*
1122(d)(2)(vi)	Unissued checks are safeguarded so as to prevent unauthorized access	X
1122(d)(2)(vii)	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements.	X	X

* The Indenture Trustee need only provide if it is determined that any account maintained by the Indenture Trustee is a custodial account for purposes of the Servicing Criteria. This item is subject to further clarification from the SEC.

H-2

Reg AB Reference	Servicing Criteria	Servicer	Indenture Trustee	Custodian
	Investor Remittances and Reporting
1122(d)(3)(i)	Reports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements. Specifically, such reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the Commission as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of Pool Assets serviced by the Servicer.	X	X
1122(d)(3)(ii)	Amounts due to investors are allocated and remitted in accordance with timeframes, payment priority and other terms set forth in the transaction agreements.	X	X
1122(d)(3)(iii)	Disbursements made to an investor are posted within two business days to the Servicer’s investor records, or such other number of days specified in the transaction agreements.	X	X
1122(d)(3)(iv)	Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.	X	X
	Pool Asset Administration
1122(d)(4)(i)	Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents.	X		X
1122(d)(4)(ii)	Pool assets and related documents are safeguarded as required by the transaction agreements			X
1122(d)(4)(iii)	Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.	X	X

H-3

Reg AB Reference	Servicing Criteria	Servicer	Indenture Trustee	Custodian
1122(d)(4)(iv)	Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the Servicer’s obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents.	X
1122(d)(4)(v)	The Servicer’s records regarding the pool assets agree with the Servicer’s records with respect to an obligor’s unpaid principal balance.	X
1122(d)(4)(vi)	Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or reagings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents.	X
1122(d)(4)(vii)	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements.	X
1122(d)(4)(viii)	Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment).	X
1122(d)(4)(ix)	Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.	X

H-4

Reg AB Reference	Servicing Criteria	Servicer	Indenture Trustee	Custodian
1122(d)(4)(x)	Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements.	X
1122(d)(4)(xi)	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.	X
1122(d)(4)(xii)	Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the Servicer’s funds and not charged to the obligor, unless the late payment was due to the obligor’s error or omission.	X
1122(d)(4)(xiii)	Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction agreements.	X
1122(d)(4)(xiv)	Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.	X
1122(d)(4)(xv)	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.	X

H-5

EXECUTION VERSION

EXHIBIT I

FORM 10-D, FORM 8-K AND FORM 10-K

REPORTING RESPONSIBILITY

As to each item described below, the entity indicated as the Responsible Party shall be primarily responsible for reporting the information to the party identified as responsible for preparing the Securities Exchange Act Reports pursuant to Section 5.18 of the Sale and Servicing Agreement.

Under Item 1 of Form 10-D: a) items marked “8.06 statement” are required to be included in the periodic reports prepared by the Indenture Trustee under Section 8.06 of the Indenture, provided by the Indenture Trustee based on information received from the Servicer; and b) items marked “Form 10-D report” are required to be in the Form 10-D report but not the 8.06 statement, provided by the party indicated. Information under all other Items of Form 10-D is to be included in the Form 10-D report. All such information and any other Items of Form 8-K and Form 10-K set forth in this exhibit shall be sent to the Indenture Trustee and the Depositor.

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
10-D	Must be filed within 15 days of the payment date for the asset-backed securities.
	1	Payment and Pool Performance Information
		Item 1121(a) – payment and Pool Performance Information
		(1) Any applicable record dates, accrual dates, determination dates for calculating payments and actual payment dates for the payment period.		X (8.06 Statement)
		(2) Cash flows received and the sources thereof for payments, fees and expenses.		X (8.06 Statement)
		(3) Calculated amounts and payment of the flow of funds for the period itemized by type and priority of payment, including:		X (8.06 Statement)

I-1

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
		(i) Fees or expenses accrued and paid, with an identification of the general purpose of such fees and the party receiving such fees or expenses.		X (8.06 Statement)
		(ii) Payments accrued or paid with respect to enhancement or other support identified in Item 1114 of Regulation AB (such as insurance premiums or other enhancement maintenance fees), with an identification of the general purpose of such payments and the party receiving such payments.		X (8.06 Statement)
		(iii) Principal, interest and other payments accrued and paid on the asset-backed securities by type and by class or series and any principal or interest shortfalls or carryovers.		X (8.06 Statement)
		(iv) The amount of excess cash flow or excess spread and the disposition of excess cash flow.		X (8.06 Statement)
		(4) Beginning and ending principal balances of the asset-backed securities.		X (8.06 Statement)

I-2

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
		(5) Interest rates applicable to the pool assets and the asset-backed securities, as applicable. Consider providing interest rate information for pool assets in appropriate distributional groups or incremental ranges.		X (8.06 Statement)
		(6) Beginning and ending balances of transaction accounts, such as reserve accounts, and material account activity during the period.		X (8.06 Statement)
		(7) Any amounts drawn on any credit enhancement or other support identified in Item 1114 of Regulation AB, as applicable, and the amount of coverage remaining under any such enhancement, if known and applicable.		X (8.06 Statement)
		(8) Number and amount of pool assets at the beginning and ending of each period, and updated pool composition information, such as weighted average coupon, weighted average remaining term, pool factors and prepayment amounts.		X (8.06 Statement)		Updated pool composition information fields to be as specified by Depositor from time to time
		(9) Delinquency and loss information for the period.		X (8.06 Statement)

I-3

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
		In addition, describe any material changes to the information specified in Item 1100(b)(5) of Regulation AB regarding the pool assets. (methodology)	X
		(10) Information on the amount, terms and general purpose of any advances made or reimbursed during the period, including the general use of funds advanced and the general source of funds for reimbursements.		X (8.06 Statement)
		(11) Any material modifications, extensions or waivers to pool asset terms, fees, penalties or payments during the payment period or that have cumulatively become material over time.	X			X	X
		(12) Material breaches of pool asset representations or warranties or transaction covenants.	X			X	X
		(13) Information on ratio, coverage or other tests used for determining any early amortization, liquidation or other performance trigger and whether the trigger was met.		X (8.06 Statement)

I-4

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
		(14) Information regarding any new issuance of asset-backed securities backed by the same asset pool,				X	X
		Information regarding any pool asset changes (other than in connection with a pool asset converting into cash in accordance with its terms), such as additions or removals in connection with a prefunding or revolving period and pool asset substitutions and repurchases (and purchase rates, if applicable), and cash flows available for future purchases, such as the balances of any prefunding or revolving accounts, if applicable.	X			X
		Disclose any material changes in the solicitation, credit-granting, underwriting, origination, acquisition or pool selection criteria or procedures, as applicable, used to originate, acquire or select the new pool assets.				X	X
		Item 1121(b) – Pre-Funding or Revolving Period Information				X
		Updated pool information as required under Item 1121(b).

I-5

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
	2	Legal Proceedings
		Item 1117 – Legal proceedings pending against the following entities, or their respective property, that is material to Noteholders, including proceedings known to be contemplated by governmental authorities:
		Sponsor					X
		Depositor				X
		Owner Trustee			X
		Issuing entity				X
		Servicer, other Servicer servicing 20% or more of pool assets at time of report, other material servicers	X
		Indenture Trustee		X
		Custodian						X
	3	Sales of Securities and Use of Proceeds
		Information from Item 2(a) of Part II of Form 10-Q:				X
		With respect to any sale of securities by the sponsor, depositor or issuing entity, that are backed by the same asset pool or are otherwise issued by the issuing entity, whether or not registered, provide the sales and use of proceeds information in Item 701 of Regulation S-K. Pricing information can be omitted if securities were not registered.

I-6

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
	4	Defaults Upon Senior Securities
		Information from Item 3 of Part II of Form 10-Q:				X	X
		Report the occurrence of any Event of Default (after expiration of any grace period and provision of any required notice)
	5	Submission of Matters to a Vote of Noteholders
		Information from Item 4 of Part II of Form 10-Q		X
	6	Significant Obligors of Pool Assets
		Item 1112(b) – Significant Obligor Financial Information*				X
		*This information need only be reported on the Form 10-D for the payment period in which updated information is required pursuant to the Item.
	7	Significant Enhancement Provider Information
		Item 1114(b)(2) – Credit Enhancement Provider Financial Information*
		Determining applicable disclosure threshold					X

I-7

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
		Requesting required financial information or effecting incorporation by reference					X
		Item 1115(b) – Derivative Counterparty Financial Information*
		Determining current maximum probable exposure					X
		Determining current significance percentage					X
		Requesting required financial information or effecting incorporation by reference					X
		*This information need only be reported on the Form 10-D for the payment period in which updated information is required pursuant to the Items.
	8	Other Information
		Disclose any information required to be reported on Form 8-K during the period covered by the Form 10-D but not reported	The Responsible Party for the applicable Form 8- K item as indicated below.
	9	Exhibits
		Payment Report		X

I-8

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
		Exhibits required by Item 601 of Regulation S-K, such as material agreements				X
8-K	Must be filed within four business days of an event reportable on Form 8-K.
	1.01	Entry into a Material Definitive Agreement
		Disclosure is required regarding entry into or amendment of any definitive agreement that is material to the securitization, even if depositor is not a party.	X			X	X
		Examples: servicing agreement, custodial agreement.
		Note: disclosure not required as to definitive agreements that are fully disclosed in the prospectus

I-9

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
	1.02	Termination of a Material Definitive Agreement
		Disclosure is required regarding termination of any definitive agreement that is material to the securitization (other than expiration in accordance with its terms), even if depositor is not a party.	X			X	X
		Examples: servicing agreement, custodial agreement.
	1.03	Bankruptcy or Receivership
		Disclosure is required regarding the bankruptcy or receivership, if known to the Depositor, Indenture Trustee, Sponsor or Servicer, with respect to any of the following:	X			X	X
		Sponsor, Depositor, Servicer, affiliated Servicer, other Servicer servicing 20% or more of pool assets at time of report, other material servicers, Indenture Trustee, Trustee, significant obligor, credit enhancer (10% or more), derivatives counterparty, custodian

I-10

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
	2.04	Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement
		Includes an early amortization, performance trigger or other event, including event of default, that would materially alter the payment priority/payment of cash flows/amortization schedule.	N/A	N/A	N/A	N/A	N/A	N/A
		Disclosure will be made of events other than waterfall triggers which are disclosed in the 8.06 statement
	3.03	Material Modification to Rights of Noteholders
		Disclosure is required of any material modification to documents defining the rights of Noteholders, including the Sale and Servicing Agreement				X	X
	5.03	Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year
		Disclosure is required of any amendment “to the governing documents of the issuing entity”				X

I-11

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
	5.06	Change in Shell Company Status
		[Not applicable to ABS issuers]				X
	6.01	ABS Informational and Computational Material
		[Not included in reports to be filed under Section 3.19]				X
	6.02	Change of Servicer or Trustee
		Requires disclosure of any removal, replacement, substitution or addition of any servicer, affiliated servicer, other servicer servicing 10% or more of pool assets at time of report, other material servicers, or trustee.	X			X
		Reg AB disclosure about any new servicer is also required.	X
		Reg AB disclosure about any new trustee is also required.		X (by new indenture trustee)	X (by new owner trustee)
	6.03	Change in Credit Enhancement or Other External Support
		Covers termination of any enhancement in manner other than by its terms, the addition of an enhancement, or a material change in the enhancement provided. Applies to external credit enhancements as well as derivatives.				X	X

I-12

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
		Reg AB disclosure about any new enhancement provider is also required.				X
	6.04	Failure to Make a Required Payment		X
	6.05	Securities Act Updating Disclosure
		If any material pool characteristic differs by 5% or more at the time of issuance of the securities from the description in the final prospectus, provide updated Reg AB disclosure about the actual asset pool.				X
		If there are any new servicers or originators required to be disclosed under Regulation AB as a result of the foregoing, provide the information called for in Items 1108 and 1110 respectively.				X
	7.01	7.01 Regulation FD Disclosure	X			X	X
	8.01	Other Events
		Any event, with respect to which information is not otherwise called for in Form 8-K, that the registrant deems of importance to Noteholders.				X	X
	9.01	Financial Statements and Exhibits	The Responsible Party applicable to reportable event.
10-K	Must be filed within 90 days of the fiscal year end for the registrant.

I-13

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
	9B	Other Information
		Disclose any information required to be reported on Form 8-K during the fourth quarter covered by the Form 10-K but not reported	The Responsible Party for the applicable Form 8-K Item as indicated above.
	15	Exhibits and Financial Statement Schedules
		Item 1112(b) – Significant Obligor Financial Information				X
		Item 1114(b)(2) – Credit Enhancement Provider Financial Information
		Determining applicable disclosure threshold					X
		Requesting required financial information or effecting incorporation by reference					X
		Item 1115(b) – Derivative Counterparty Financial Information
		Determining current maximum probable exposure					X
		Determining current significance percentage					X

I-14

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
		Requesting required financial information or effecting incorporation by reference					X
		Item 1117 – Legal proceedings pending against the following entities, or their respective property, that is material to Noteholders, including proceedings known to be contemplated by governmental authorities:
		Sponsor					X
		Depositor				X
		Owner Trustee			X
		Issuing entity				X
		Servicer, affiliated Servicer, other Servicer servicing 20% or more of pool assets at time of report, other material servicers	X
		Indenture Trustee		X
		Custodian						X
		Item 1119 – Affiliations and relationships between the following entities, or their respective affiliates, that are material to Noteholders:
		Sponsor					X
		Depositor				X
		Owner Trustee				X	X

I-15

Form	Item	Description	Servicer	Indenture Trustee	Owner Trustee	Depositor	Sponsor	Custodian
		Servicer, affiliated Servicer, other Servicer servicing 20% or more of pool assets at time of report, other material servicers	X
		Indenture Trustee		X
		Custodian						X
		Credit Enhancer/Support Provider				X
		Significant Obligor				X
		Item 1122 – Assessment of Compliance with Servicing Criteria	X	X
		Item 1123 – Servicer Compliance Statement	X

I-16

EXHIBIT J-1

FORM OF CERTIFICATION TO BE PROVIDED BY THE DEPOSITOR WITH

FORM 10-K

Re: NovaStar Mortgage Funding Trust, Series 2006-MTA1 (the “Issuing Entity”) Asset-Backed Notes, Series 2006-MTA1

I, [identify the certifying individual], certify, that:

1. I have reviewed this report on Form 10-K, and all reports on Form 10-D required to be filed in respect of the period covered by this report on Form 10-K of NovaStar Mortgage Funding Trust, Series 2006-MTA1, Asset Backed Notes, Series 2006-MTA1 (the “Exchange Act periodic reports”);

2. Based on my knowledge, the Exchange Act periodic reports, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, all of the payment, servicing and other information required to be provided under Form 10-D for the period covered by this report is included in the Exchange Act periodic reports;

4. Based on my knowledge and the servicer compliance statement required in this report under Item 1123 of Regulation AB, and except as disclosed in the Exchange Act periodic reports, the servicer has fulfilled its obligations under the sale and servicing agreement; and

5. All of the reports on assessment of compliance with servicing criteria for asset-backed securities and their related attestation reports on assessment of compliance with servicing criteria for asset-backed securities required to be included in this report in accordance with Item 1122 of Regulation AB and Exchange Act Rules 13a-18 and 15d-18 have been included as an exhibit to this report, except as otherwise disclosed in this report. Any material instances of noncompliance described in such reports have been disclosed in this report on From 10-K.

In giving the certifications above, I have reasonably relied on information provided to me by the following unaffiliated parties: [                    ].

NOVASTAR CERTIFICATES FINANCING CORPORATION

By:

Name:

Title:

Date:

J-1-1

EXHIBIT J-2

FORM OF CERTIFICATION TO BE PROVIDED TO THE DEPOSITOR BY

THE [INDENTURE TRUSTEE] [SERVICER]

Re: NovaStar Mortgage Funding Trust, Series 2006-MTA1 (the “Issuing Entity”) Asset-Backed Notes, Series 2006-MTA1

Reference is made to the Sale and Servicing Agreement, dated as of May 1, 2006 (the “Servicer Agreement”), by and among JPMorgan Chase Bank, National Association (the “Indenture Trustee”), NovaStar Certificates Financing Corporation, as depositor (the “Depositor”), NovaStar Mortgage, Inc., as sponsor and servicer (the “Sponsor” and the “Servicer”, respectively), U.S. Bank National Association, as custodian (the “Custodian”) and the Issuing Entity. The [Indenture Trustee][Servicer] hereby certifies to the Depositor and its officers, directors and affiliates, and with the knowledge and intent that they will rely upon this certification, that:

(i) The [Indenture Trustee][Servicer] has reviewed the annual report on Form 10-K for the fiscal year [   ], and all reports on Form 10-D containing distribution reports filed in respect of periods included in the year covered by that annual report, relating to the above-referenced issuing entity;

(ii) Subject to paragraph (iv), the distribution information in the distribution reports contained in all monthly Form 10-D’s included in the year covered by the annual report on Form 10-K for the calendar year [    ], taken as a whole, does not contain any untrue statement of a material fact or omit to state a material fact required by the Servicing Agreement to be included therein and necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading as of the last day of the period covered by that annual report;

(iii) The distribution information required to be provided by the [Indenture Trustee][Servicer] under the Servicing Agreement is included in these reports; and

(iv) In compiling the distribution information and making the foregoing certifications, the [Indenture Trustee][Servicer] has relied upon information furnished to it by the Servicer under the Servicing Agreement. The [Indenture Trustee][Servicer] shall have no responsibility or liability for any inaccuracy in such reports resulting from information so provided by the Servicer.

[JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Indenture Trustee][NOVASTAR MORTGAGE, INC., as Servicer]

By:

Name:

Title:

J-2-1

EXHIBIT K

OFFICER’S CERTIFICATE REGARDING ANNUAL STATEMENT OF

COMPLIANCE

NovaStar Mortgage Funding Trust, Series 2006-MTA1

Asset-Backed Notes, Series 2006-MTA1

I,                                                      , hereby certify that I am a duly appointed                                                                   of NovaStar Mortgage, Inc. (the “Servicer”), and further certify as follows:

1. This certification is being made pursuant to the terms of the Sale and Servicing Agreement, dated as of May 1, 2006 (the “Servicing Agreement”), among NovaStar Mortgage Inc., as Sponsor and Servicer, NovaStar Certificates Financing Corporation, as depositor, NovaStar Mortgage Funding Trust, Series 2006-MTA1, JPMorgan Chase Bank, National Association, as Indenture Trustee and U.S. Bank National Association, as Custodian.

2. I have reviewed the activities of the Servicer during the preceding calendar year and the Servicer’s performance under the Servicing Agreement has been made under my supervision and to the best of my knowledge, based on such review, the Servicer has fulfilled all of its obligations under the Servicing Agreement in all material respects throughout the year.

Capitalized terms not otherwise defined herein have the meanings set forth in the Servicing Agreement.

Date:

Name:

Title:

K-1

EXHIBIT L

FORM OF ADVANCE FACILITY NOTICE

[date]

JPMorgan Chase Bank, National Association

4 New York Plaza, 6th Floor

New York, NY 10004-2477

Attention: Worldwide Securities Services/ Structured Finance Services - NovaStar Series 2006-MTA1

Re: Sale and Servicing Agreement, dated as of May 1, 2006 among NovaStar Mortgage Inc., as Sponsor and Servicer, NovaStar Certificates Financing Corporation, as depositor, NovaStar Mortgage Funding Trust, Series 2006-MTA1, JPMorgan Chase Bank, National Association, as Indenture Trustee (“Indenture Trustee”) J.P. Morgan Trust Company, National Association, as Co-Trustee and U.S. Bank National Association, as Custodian (the “Agreement”)

In accordance with Section 5.27(a) of the above-captioned Agreement, the undersigned hereby notifies the Indenture Trustee of the following information:

The Servicer has entered into an Advance Facility.

The Advancing Person is [                    ].

[                    ], as the Servicer’s Assignee, has the right to make withdrawals from the Collection Account subject to Section 3.26(b) of this Agreement to reimburse previously unreimbursed Advances and/or Servicing Advances pursuant to Section 3.07 of this Agreement.

[Remainder of Page Intentionally Left Blank]

L-1

Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Agreement.

NOVASTAR MORTGAGE INC.

as Servicer

By:

Name:

Title:

[                                         ]

as Advancing Person

By:

Name:

Title:

The undersigned hereby acknowledges receipt of this notice pursuant to Section 5.27(a) of the Agreement.

ACKNOWLEDGED AND AGREED:

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Indenture Trustee

By:

Name:

Title:

L-2

EXHIBIT M

FORM OF WRITTEN NOTICE TO THE INDENTURE TRUSTEE

JPMorgan Chase Bank, National Association

4 New York Plaza, 6th Floor

New York, NY 10004-2477

Attention: Worldwide Securities Services/ Structured Finance Services—NovaStar Series 2006-MTA1

Re: Sale and Servicing Agreement, dated as of May 1, 2006 among NovaStar Mortgage Inc., as Sponsor and Servicer, NovaStar Certificates Financing Corporation, as depositor, NovaStar Mortgage Funding Trust, Series 2006-MTA1, JPMorgan Chase Bank, National Association, as Indenture Trustee (“Indenture Trustee”) J.P. Morgan Trust Company, National Association, as Co-Trustee and U.S. Bank National Association, as Custodian (the “Agreement”)

In accordance with Section 5.27(a) and (b) of the above-captioned Agreement, [name of Advancing Person] hereby notifies the Indenture Trustee that [name of Advancing Person] has [purchased] [funded] [an Advance]/[a Servicing Advance] and is entitled to reimbursement from the Indenture Trustee pursuant to the terms of the Advance Facility.

(a) The amount of the reimbursement owed is an amount equal to $[            ].

(b) Section [    ] of the Agreement permits this [Advance]/[Servicing Advance] to be reimbursed.

(c) Section [    ] of the Advance Facility entitles [name of Advancing Person] to request reimbursement from the Issuing Entity, rather than from the Servicer.

(d) [name of Advancing Person]’s wire transfer instructions are as follows:

[insert wire transfer instructions]

(e) [Proof of Event of Default under the Advance Facility, if applicable.]

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M-1

Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Agreement.

[                                    ]

as Advancing Person

By:

Name:

Title:

ACKNOWLEDGED AND AGREED:

NOVASTAR MORTGAGE INC.,

as Servicer

By:

Name:

Title:

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