Exhibit 10.1

 
AMENDMENT NO. 2
TO THE
SALE AND SERVICING AGREEMENT
 
Amendment No. 2, dated as of October 1, 2007 (the “Amendment”), to the Sale and
Servicing Agreement (the “Agreement”) dated as of April 1, 2006, by and among
NovaStar Certificates Financing Corporation, as depositor (the “Depositor”),
NovaStar Mortgage, Inc., as sponsor and servicer (the “Sponsor” or “Servicer”),
NovaStar Mortgage Funding Trust, Series 2006-1, as issuing entity (the “Issuing
Entity”), U.S. Bank National Association, as custodian (the “Custodian”), The
Bank of New York (as successor to JPMorgan Chase Bank, National Association), as
indenture trustee (the “Indenture Trustee”) and The Bank of New York (as
successor to J.P. Morgan Trust Company, National Association), as co-trustee
(the “Co-Trustee”). Capitalized terms used and not defined herein shall have the
meaning set forth in the Agreement and Appendix I thereto.
 
WHEREAS the parties hereto have entered into the Agreement;
 
WHEREAS the parties hereto now wish to amend certain provisions in the Agreement
pursuant to Section 11.03 of the Agreement; and
 
WHEREAS the Indenture Trustee shall not consent to this Amendment to the
Agreement unless it shall have first received an Opinion of Counsel, to the
effect that (a) this Amendment (i) 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, and (ii) shall not adversely affect in any material respect the
interests of any Noteholder or the Hedge Counterparties, and (b) any applicable
requirements and conditions set forth in the Agreement with respect to the
adoption of amendments thereto have been complied with.
 
NOW, THEREFORE, in consideration of the promises and mutual agreements contained
herein, the parties hereto agree to amend the Agreement pursuant to Section
11.03 of the Agreement and restate certain provisions thereof as follows:
 
1. The Amendment.
 
(a)  Appendix I is hereby amended to add the following definition, between
“Administrative Fee” and “Affiliate”:
 
"Advance": As to any Mortgage Loan, any advance made by the Servicer in respect
of any Payment Date pursuant to Section 5.25.
 
2. Condition to effectiveness. As a condition to the effectiveness of this
Amendment, an Opinion of Counsel satisfying the requirements of Section 11.03 of
the Agreement has been received by the Parties hereto.
 

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3. Effect of Amendment. This Amendment to the Agreement shall be effective and
the Agreement shall be deemed to be modified and amended in accordance herewith
on the Payment Date on the date on which the Indenture Trustee receives an
executed copy of this Amendment. This Amendment, once effective, shall be
effective as of the date first set forth above. The respective rights,
limitations, obligations, duties, liabilities and immunities of the Depositor,
the Sponsor, the Servicer, the Issuing Entity, the Custodian, the Co-Trustee and
the Indenture Trustee shall hereafter be determined, exercised and enforced
subject in all respects to such modifications and amendments, and all the terms
and conditions of this Amendment shall be and be deemed to be part of the terms
and conditions of the Agreement for any and all purposes. The Agreement, as
amended hereby, is hereby ratified and confirmed in all respects.
 
4. The Agreement in Full Force and Effect as Amended. Except as specifically
amended hereby, all the terms and conditions of the Agreement shall remain in
full force and effect and, except as expressly provided herein, the
effectiveness of this Amendment shall not operate as, or constitute a waiver or
modification of, any right, power or remedy of any party to the Agreement. All
references to the Agreement in any other document or instrument shall be deemed
to mean the Agreement as amended by this Amendment.
 
5. Counterparts. This Amendment may be executed by the Parties in several
counterparts, each of which shall be deemed to be an original and all of which
shall constitute together but one and the same agreement. This Amendment shall
become effective when counterparts hereof executed on behalf of such Party shall
have been received.
 
6. Governing Law. This Amendment shall be construed in accordance with and
governed by the laws of the State of New York applicable to agreements made and
to be performed therein.
 
7. Limitation of Owner Trustee Liability. It is expressly understood and agreed
by the parties that (a) this document is executed and delivered by Wilmington
Trust Company, not individually or personally, but solely as Owner Trustee, in
the exercise of the powers and authority conferred and vested in it, pursuant to
the Trust Agreement, (b) 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, (c) 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 (d) 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 Amendment or any other related
documents.
 
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IN WITNESS WHEREOF, the Depositor, Sponsor, the Servicer, the Issuing Entity,
the Indenture Trustee, the Co-Trustee and the Custodian, have caused this
Amendment to be duly executed by their officers thereunto duly authorized, all
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
 
NOVASTAR MORTGAGE, INC.,
as Sponsor and as Servicer
 
By:  /s/ Matt Kaltenrieder       
   Name: Matt Kaltenrieder
       Title: Vice President
 
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1, as Issuing Entity
 
By: WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as
Owner Trustee under the Trust Agreement
 
By:  /s/ Roseline K. Maney
   Name: Roseline K. Maney
   Title:  Vice President
 
U.S. BANK NATIONAL ASSOCIATION, as Custodian
 
By:  /s/ Corinne Rhode
   Name: Corinne Rhode
   Title: Assistant Vice President
 
[Signature Page for Amendment No. 2 to the Sale and Servicing Agreement]

 
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THE BANK OF NEW YORK, not in its individual capacity but solely as Indenture
Trustee
 
By:  /s/ Andrew M. Cooper
   Name: Andrew M. Cooper
   Title: Assistant Vice President
 
THE BANK OF NEW YORK, not in its individual capacity but solely as Co-Trustee
 
By:  /s/ Andrew M. Cooper
   Name: Andrew M. Cooper
   Title: Assistant Vice President
 
NOVASTAR FINANCIAL, INC., solely with respect to Section 4.01
 
By:  /s/ Matt Kaltenrieder       
   Name: Matt Kaltenrieder
       Title: Vice President
 

 
[Signature Page for Amendment No. 2 to the Sale and Servicing Agreement]

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