Exhibit 10.8

BACKUP SERVICING AGREEMENT

This Backup Servicing Agreement (this “Agreement”) is made and entered into as
of February 28, 2007 (the “Effective Date”), by and between DEUTSCHE BANK
NATIONAL TRUST COMPANY, a New York banking corporation, operating out of its
offices in Santa Ana, California (the "Trustee"), solely in its capacity as
trustee of the NovaStar Mortgage Funding Trust, Series 2007-1 (the “Trust”)
pursuant to the Pooling Agreement (as hereinafter defined) and Countrywide Home
Loans Servicing LP, having a principal office at 4500 Park Granada CH-11,
Calabasas, California 91302 (the "Backup Servicer" or "Countrywide").

1. ACCEPTANCE AND TERMS AND CONDITIONS: By acceptance of this Agreement, Backup
Servicer agrees to be bound by, and to comply with all the terms and conditions
of this Agreement, and the Pooling Agreement. All capitalized terms used herein,
and not otherwise defined herein, shall have their respective meanings as set
forth in the Pooling Agreement.

2. SCOPE OF WORK: The Pooling Agreement has specified the services to be
provided by Backup Servicer to the Trust, (the “Services”) as more specifically
set forth on Exhibit A hereto. No later than the time of execution of this
Agreement, the Trustee shall provide Backup Servicer a copy of the executed
Pooling and Servicing Agreement, dated as of February 1, 2007 (the “Pooling
Agreement”) by and among NovaStar Mortgage Funding Corporation, as Depositor
(the “Depositor”), NovaStar Mortgage, Inc., as Servicer and as Sponsor (the
“Servicer” and the “Sponsor”), U.S. Bank National Association, as Custodian (the
“Custodian”) and Deutsche Bank, as Trustee. Services shall be provided to the
Trust in accordance with the procedures described in the Pooling Agreement and
on Exhibit A hereto.

3. FEES AND EXPENSES: For the Services performed and provided under this
Agreement, Backup Servicer shall be paid pursuant to the Pooling Agreement in
accordance with the terms thereof.

4. TERM: Subject to the termination provisions of this Agreement, this Agreement
shall be in effect for so long as the Pooling Agreement has not terminated
pursuant to Section 11.01 thereof (the “Term” of this Agreement).

5. PAYMENT: Prior to becoming the successor Servicer, and except as otherwise
provided on Exhibit A hereto, any fee payable to Backup Servicer shall be paid
on each Distribution Date, as set forth in Section 4.01 of the Pooling Agreement
and if Backup Servicer becomes the successor Servicer under the Pooling
Agreement, then Backup Servicer as successor Servicer shall be entitled to
retain Servicing Fees and other reimbursable amounts as provided in the Pooling
Agreement.

6. APPOINTMENT AS AGENT: The Backup Servicer is hereby appointed as provided in
the Pooling Agreement to act as successor to the Servicer during the Term solely
to the extent necessary for Backup Servicer to render Services in accordance
with the terms and conditions of this Agreement and the Pooling Agreement, and
Backup Servicer hereby accepts such appointment. In all other respects, the
status of Backup Servicer to the Trust shall be that of an independent
contractor and not any other relationship including agent, partner, joint
venturer or employee, and Backup Servicer shall act consistently with its
independent contractor status in connection with such other matters. Backup
Servicer shall not make any representation to any person inconsistent with this
paragraph. None of Backup Servicer’s employees or agents shall be deemed
employees of the Trustee or of the Trust.

7. SUBCONTRACTOR APPROVAL: Backup Servicer shall not assign this Agreement or
the Services hereunder or delegate its rights or duties hereunder or any portion
thereof, without the prior written approval of the Trustee and the Sponsor;
provided, however, that, without the Trustee’s or the Sponsor’s consent, Backup
Servicer may (a) outsource certain specific functions to a third party, and (b)
in order to fulfill its obligations as Backup Servicer hereunder, delegate
certain specific functions to any entity that is directly or indirectly owned by
Backup Servicer or any entity controlling, controlled by or under common control
with, Backup Servicer. Backup Servicer shall remain liable for the conduct of
any subcontractor, including any third party to which it outsources or otherwise
delegates its specific functions, to the same extent as Backup Servicer’s
liability under this Agreement. Backup Servicer shall be solely responsible for
the compensation due to any such subcontractor for Services rendered in
connection with this Agreement.
 
 

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8. REPRESENTATIONS AND WARRANTIES OF BACKUP SERVICER: Backup Servicer shall
provide all Services with at least the same degree of care as that used by
prudent mortgage servicing institutions which provide similar services. Backup
Servicer warrants and represents that (a) it is duly organized and in good
standing under applicable law; (b) it has the full power and authority to
perform under this Agreement and under the Pooling Agreement, and (c) the
execution and delivery of this Agreement will not conflict with or result in a
breach of the terms and conditions of any other agreement to which Backup
Servicer is a party. Backup Servicer further warrants and represents that any
Services provided by Backup Servicer: (i) shall comply with all applicable laws,
regulations, standards and codes, and (ii) shall otherwise fully conform in all
respects to the Scope of Work document included as part of this Agreement.
Backup Servicer shall promptly correct nonconforming Services at no additional
charge.

9. REPRESENTATIONS AND WARRANTIES OF THE TRUSTEE: The Trustee warrants and
represents that (a) it is duly organized and in good standing under applicable
law; and (b) it has the full power and authority to perform under this Agreement
pursuant to the powers vested in it under the Pooling Agreement and as provided
therein to execute and deliver this Agreement.

10. INTELLECTUAL PROPERTY RIGHTS WARRANTY: In addition to its representations
and warranties under Section 8 above, Backup Servicer warrants and represents
that it owns, or has the right to use or license (and sublicense where
applicable) under valid and enforceable agreements, all intellectual property or
proprietary rights, including copyrights, patents or pending applications for
patent protection, derivative works, publicity rights, trade secrets,
trademarks, trade names, service marks, logos, and all improvements or
modifications of the foregoing (collectively, “Intellectual Property”), in any
and all jurisdictions and in any and all media, reasonably necessary for or
related to the performance of the Services. Backup Servicer further represents
and warrants the performance of the Services and the Trustee’s use of any
materials furnished by Backup Servicer shall not infringe or violate the
Intellectual Property rights of any third party.

11. INDEMNIFICATION BY THE BACKUP SERVICER:

(a) Backup Servicer hereby agrees to indemnify, hold harmless and defend the
Trustee and the Trust, their respective successors and assigns, and each of
their officers, directors and employees (collectively, the “Indemnitees”), at
Backup Servicer’s sole expense, from any judgment, loss, damage, penalty, cost,
fine and/or expense (including reasonable attorneys' fees) that the Indemnitees
may suffer or incur by reason of any claim or the defense of any claim, suit, or
proceeding to the extent caused by:

(i) any acts or omissions, negligence or willful or wanton misconduct of Backup
Servicer, its subcontractors, and or any of their officers, agents, servants, or
employees, whether attributable wholly or in part, resulting in liability or
injury to the Indemnitees;

(ii) the breach or alleged breach of any of the undertakings, representations or
warranties made by Backup Servicer;

(b) Backup Servicer shall defend, at its sole expense, every such claim, suit,
or proceeding, and shall be given authority, information, and assistance for, at
Backup Servicer's sole expense, the defense of such claim, suit, or proceeding.
Backup Servicer shall pay all judgments, losses, damages, penalties, costs,
fines, and expenses awarded against the Indemnitees in every such claim, suit,
or proceeding and indemnify, defend and hold harmless the Indemnitees at Backup
Servicer’s sole expense, from any judgment, loss, damage, penalty, cost, fine
and/or expense (including reasonable attorneys' fees) which any of them may
incur by reason thereof.

(c) Backup Servicer shall indemnify, hold harmless, and defend the Indemnitees,
at Backup Servicer's sole expense, against every claim, suit, proceeding,
judgment, loss, damage, penalty, cost, fine and/or expense (including reasonable
attorneys' fees) brought against or imposed upon the Indemnitees for any
violation or alleged violation of any applicable law by Backup Servicer or by
any officer, agent, employee, or subcontractor of Backup Servicer.
 
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(d) Backup Servicer hereby agrees to perform all required obligations with
respect to compliance with the Exchange Act as set forth in the Pooling
Agreement and to fully indemnify the parties thereto with respect to any
noncompliance with such obligations.

(e) With regard to each of (a), (b), (c) and (d) above, the Indemnitees shall
have the right to participate in the defense and settlement of any claims.

12. INDEMNIFICATION OF BACKUP SERVICER:

The Trust hereby agrees to indemnify, hold harmless and defend Backup Servicer,
its successors and assigns, and each of their officers, directors and employees
(collectively, the “Backup Servicer Indemnitees”), at the Trust’s sole expense,
from any judgment, loss, damage, penalty, cost, fine and/or expense (including
reasonable attorneys' fees) that the Backup Servicer’s Indemnitees may suffer or
incur by reason of any claim or the defense of any claim, suit, or proceeding,
to the same extent and on the same terms as the Servicer is indemnified, as
provided in Section 6.03 of the Pooling Agreement; provided that, in addition,
the Backup Servicer's Indemnities shall also be indemnified by the Trust for any
claims, etc. based upon the acts or omissions of the prior Servicer, any
originator of any Mortgage Loan or of any other third party.

13. POOLING AGREEMENT INDEMNITEES. The Indemnification arrangements provided for
in Sections 11 and 12 hereof are in addition to any indemnification arrangements
which may be provided for in the Pooling Agreement.

14. LIMITATION OF LIABILITY OF BACKUP SERVICER AND OTHERS: Neither Backup
Servicer nor any of the officers, employees or agents of Backup Servicer shall
be under any liability to the Trust or the Trustee for any action taken or for
refraining from the taking of any action, to the same extent as the Servicer
would not be so liable under such circumstances, as provided in Section 6.03 of
the Pooling Agreement.

15. LIMITATION ON LIABILITY: NONE OF THE TRUSTEE, THE TRUST OR THE BACKUP
SERVICER SHALL, UNDER ANY CIRCUMSTANCES, BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INDIRECT, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL LOSSES, DAMAGES, COSTS, OR
EXPENSES WHATSOEVER.

16. TRUSTEE CAPACITY:  It is expressly understood and agreed by the parties
hereto that, notwithstanding the execution of this Agreement by Trustee on
behalf of the Trust, Trustee shall perform only as required pursuant to the
Pooling Agreement and each of the representations, undertakings and agreements
herein made by the Pooling Agreement is made and intended for the purpose of
binding only the Trust, and that the Trustee in its individual capacity shall
not be personally liable under any circumstance for the payment of any
indebtedness, expense, or obligation or be personally liable for the breach or
failure of any obligation, representation, warranty or covenant made or
undertaken except as provided in the Pooling Agreement. The Trustee shall be
afforded all of the rights, protections and immunities available to the Trustee
under the Pooling Agreement in connection with its performance hereunder. 

17. TERMINATION:  The Trustee may, at the direction of the Servicing Rights
Pledgee (as defined in the Pooling Agreement) terminate all or any part of this
Agreement upon thirty (30) days prior written notice to Backup Servicer, in
which case Backup Servicer shall be entitled to retain the Servicing Fees
accruing prior to the date of termination. In the event of such termination
Backup Servicer shall immediately stop rendering Services hereunder and shall
immediately cause any of its subcontractors to cease work and deliveries. To the
extent the termination occurs pursuant to this Section, the Trust shall, at the
expense of the Servicing Rights Pledgee, reimburse Backup Servicer for all costs
and expenses incurred in connection with the transition of Services.

18. AMENDMENT:  This Agreement may be amended from time to time by the parties
hereto, provided that any amendment be accompanied by a letter from the Rating
Agencies that the amendment will not result in the downgrading, qualification or
withdrawal of the rating then assigned to any Class of Certificates.

19. GOVERNING LAW: THIS AGREEMENT 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 SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
 
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20. NOTICES: All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if when delivered to:

 
a)
in the case of the Backup Servicer:

Countrywide Home Loans/Portfolio Services Group
1800 Tapo Canyon Rd, MS SV2-103A
Simi Valley, CA 93063
Attention: Tom Lin

 
b)
in the case of Rating Agencies:

Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.
55 Water Street - 41st Floor
New York, New York 10041
Attention: Daniel Larkin

Moody’s Investors Service, Inc.
99 Church Street
New York, New York 10007
Attention: Rachel Peng

 
c)
in the case of the Trustee:

Deutsche Bank National Trust Company
1761 East St. Andrew Place
Santa Ana, CA 92705
Attention: Trust Administration -- NS0701

21. SEVERABILITY OF PROVISIONS: If any one or more of the covenants, agreements,
provisions or terms of this Agreement shall be for any reason whatsoever held
invalid, 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
provisions of this Agreement.

22. THIRD-PARTY BENEFICIARIES: This Agreement will inure to the benefit of and
be binding upon the parties hereto, the parties to the Pooling Agreement and the
Certificateholders and their respective successors and permitted assigns. Except
as otherwise provided in this Agreement, no other Person will have any right or
obligation hereunder. The Trustee shall have the right to exercise all rights of
the Trust under this Agreement. The Sponsor and its officers and directors (in
their corporate or individual capacity) shall have the right to bring an action
against the Backup Servicer as it relates to a failure of the Backup Servicer to
comply with its obligations under Section 11(d) of this Agreement.

23. 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.

24. 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.

25. NO PETITION: The Backup Servicer, by entering into this Agreement, hereby
covenants and agrees that it will not at any time institute against the Trust,
or join in any institution against the Trust, any bankruptcy proceedings under
any United States federal or state bankruptcy or similar law in connection with
any obligations of the Trust. This section shall survive the satisfaction and
discharge of the Pooling Agreement by one year.
 
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26. NO RECOURSE: The Backup Servicer acknowledges that no recourse may be had
against the Trust, except as may be expressly set forth in this Agreement.

27. CONSENT TO JURISDICTION: The parties to this Agreement each hereby
irrevocably submits to the non exclusive jurisdiction of any New York State or
federal court sitting in the Borough of Manhattan in The City of New York in any
action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, and all such parties hereby irrevocably agree
that all claims in respect of such action or proceeding may be hard and
determined in such New York State or federal court and hereby irrevocably waive,
to the fullest extent that they may legally do so, the defense of an
inconvenient forum to the maintenance of such action or proceeding. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.

28. RELATIONSHIP TO POOLING AGREEMENT. In the event of any inconsistency between
this Agreement and the Pooling Agreement, the Pooling Agreement shall control.

 

 

 
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have caused this Agreement to be executed by their duly authorized
representatives as of the day and year first above written.
 
 
DEUTSCHE BANK NATIONAL TRUST
COMPANY, not in its individual
capacity but solely as Trustee
COUNTRYWIDE HOME LOANS SERVICING LP,
as Backup Servicer
By: Countrywide GP, INC.
       
By:/s/ Ronaldo Reyes            
By:/s/ Thomas P. Lin            
Name:Ronaldo Reyes            
Name:Thomas P. Lin            
Title:Vice President              
Title:Senior Vice President         

 
 

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EXHIBIT A

SCOPE OF WORK

Dated as of February 28, 2007

(a) Compensation:

The Servicer shall pay a nonrefundable initial fee of $15,000 to Countrywide to
act as cold Backup Servicer. Such fee shall be payable within thirty days of the
execution of this Agreement. Thereafter, until such time as the Backup Servicer
is terminated, or becomes the Successor Servicer, the Backup Servicer shall
receive a monthly fee payable as provided in Section 4.01(a)(i) of the Pooling
Agreement, equal to the greater of (1) 1/12 of 0.01% per annum times the Pool
Balance as of the first day of the related Due Period (as defined in the Pooling
Agreement) and (2) $2,250.

If appointed as Successor Servicer under the Pooling Agreement, Countrywide
shall be entitled to compensation based on the greater of (a) the Servicing Fee
provided for in the Pooling Agreement or (b) the aggregate servicing fee per
mortgage loan as set forth on Exhibit B attached hereto plus reimbursement of
any compensating interest and prepayment interest shortfall obligations. In
addition Countrywide shall be entitled to receive all other compensation
otherwise payable to the Servicer under the related Pooling Agreement, including
but not limited to the late fees, interest on deposits into the collection and
escrow accounts as well as any other ancillary income payable to the Servicer.
Such servicing compensation shall begin to accrue on the effective date of any
servicing transfer.

(b) Responsibilities of Backup Servicer:

For so long as Countrywide acts as Backup Servicer, the Servicer shall provide
to Countrywide a monthly pool activity tape no later than the 18th day of each
month (in a format acceptable to Countrywide). Countrywide shall retain such
reports as Backup Servicer for the Trust and shall have no further obligations
to render Services as Backup Servicer. Upon request, in anticipation of
transferring the servicing to Countrywide, and no earlier than sixty (60) days
prior notice of the anticipated transfer, the Servicer shall provide Countrywide
with a preliminary electronic data file as of the last cut off date from the
Servicer.

The Backup Servicer has no reporting, monitoring or reconciliation obligations
during the back-up servicing period (i.e., prior to becoming the successor
Servicer).

If the Backup Servicer becomes the successor Servicer under the Pooling
Agreement, the Backup Servicer shall thereafter perform all of the duties of the
Servicer under the Pooling Agreement.

(c) Costs and Expenses:

Countrywide and the Trust shall each be responsible for its own expenses in
connection with the performance of its obligations under this Agreement, which
include, but are not limited to, its legal and accounting fees and data
conversion costs. Without limiting the generality of the foregoing, in
connection with the transfer of servicing from the terminated Servicer to
Countrywide, Countrywide shall be reimbursed from the terminated Servicer (or,
if not from the terminated Servicer, then as provided in Section 3.07 of the
Pooling Agreement) for (i) all servicing transfer costs and expenses incurred by
Countrywide not to exceed $10 per loan, (ii) its out-of-pocket costs incurred to
transfer any third party contracts including but not limited to the transfer of
flood insurance monitoring and real estate tax service contracts with respect to
the Mortgage Loans, (iii) any other documented third party costs or expenses in
connection with the physical transfer of servicing to Countrywide, and (iv) any
costs to correct any material errors or insufficiencies in the servicing data.
Countrywide shall not be responsible for any fees or expenses related to the
preparation and recording of assignments, transfer of servicing in MERS and any
other third party costs. If Countrywide is terminated as successor Servicer
without cause by the Trustee at the direction of the Servicing Rights Pledgee
(as defined in the Pooling Agreement), Countrywide shall be entitled to a
service release fee to be paid by the Servicing Rights Pledgee equal to $10.00
per loan (subject to a minimum of $10,000 per transfer) and shall be entitled to
100% reimbursement of any advances made pursuant to the Pooling Agreement
including but not limited to unpaid delinquency advances, servicing advances,
and prepayment interest shortfall advances.

 
 

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EXHIBIT B

MINIMUM SERVICING FEES

Minimum Servicing Fee
1st lien
2nd lien
 
Current
$   10.00
$   10.00
per loan/mo
30 days delinquent
$   35.00
$   35.00
per loan/mo
60 days delinquent
$   75.00
$   75.00
per loan/mo
90 days delinquent
$   90.00
$   65.00
per loan/mo
120+ days delinquent
$   90.00
$   35.00
per loan/mo
Foreclosure
$ 150.00
$ 225.00
per loan/mo
Bankruptcy
$   35.00
$   35.00
per loan/mo
REO
$ 300.00
$ 300.00
per loan/month

 
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