Exhibit
        4.1

       


      AMENDMENT
        NO. 3

      TO
        THE

      SALE
        AND SERVICING AGREEMENT

       

      Amendment
        No. 3, dated as of October 31, 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) 
            Revised
            Section 5.07(a).

        

      

       

      Section
        5.07(a) is hereby amended so as to read as set forth in Exhibit A
        hereto.

       

      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.

       

      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. 3 to the Sale and Servicing Agreement -
                  Section
                  5.07]

              


      


      
        
           

        

        
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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

              
	 	 
	
                DB
                  STRUCTURED PRODUCTS, INC.

                hereby
                  consents to the foregoing Amendment as lender under certain financing
                  facilities:

                 

                By:__/s/
                  Glenn Minkoff __________________

                Name:
                  Glenn Minkoff

                Title:
                  Director

                 

                WACHOVIA
                  BANK, N.A.

                hereby
                  consents to the foregoing Amendment as lender under certain financing
                  facilities:

                 

                By:__/s/
                  Andrew W. Riebe _______________

                Name:
                  Andrew W. Riebe

                Title:
                  Director

                 

                WACHOVIA
                  CAPITAL MARKETS, LLC

                hereby
                  consents to the foregoing Amendment as lender under certain financing
                  facilities:

                 

                By:__/s/
                  Scott Shuman ___________________

                Name:
                  Scott Shuman

                Title:
                  Vice President

                 

                WACHOVIA
                  INVESTMENT HOLDINGS, LLC 

                hereby
                  consents to the foregoing Amendment as
                  lender under 

                certain
                  financing facilities:

                 

                By:___/s/
                  Goetz Rokahr __________________

                Name:
                  Goetz Rokahr

                Title:
                  Vice President

              	 
	 	 


      

      [Signature
        Page for Amendment No. 3 to the Sale and Servicing Agreement - Section
        5.07]


      
        
           

        

        
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      Exhibit
        A

      Amended
        Section 5.07

       

      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 Servicing Advances paid to maintain 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);

       

      (iv) to
        pay to
        itself or the Sponsor, with respect to any Mortgage Loan or property acquired
        in
        respect thereof that has been purchased by the Sponsor, 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 or
        Servicing 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, Servicing 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 Servicing Advances 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; provided, however, that
        reimbursements pursuant to clause (z) may only be made from MI Insurance
        Proceeds actually paid by the MI Insurer under the MI Policy related to such
        Mortgage Loan;

       


      
        
           

        

        
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      (vii) to
        reimburse the Servicer or any Subservicer for any unreimbursed Nonrecoverable
        Advance or Servicing Advance previously made, and to reimburse any successor
        Servicer for any Servicing Transfer Costs, including any legal fees or expenses
        relating to any such transfer, in each case not paid by the transferring
        Servicer, in each case 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 5.25, provided that the
        amount
        withdrawn for such an Advance is immediately deposited into the Payment
        Account.

       

      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.
        

       


      
        
           

        

        
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