UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549

                                    FORM 10-K

     [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

     For the fiscal year ended December 31, 2006

     [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     ACT OF 1934

     For the transition period to __________ from _______________

     Commission file number of issuing entity: 333-130694-04

                Morgan Stanley Home Equity Loan Trust 2006-3
          (Exact name of issuing entity as specified in its Charter)

                      Morgan Stanley ABS Capital I Inc.
           (Exact name of depositor as specified in its Charter)

                     Morgan Stanley Mortgage Capital Inc.
             (Exact name of sponsor as specified in its Charter)

                                      Pooling-Tier REMIC 1       30-0363441
                                      Pooling-Tier REMIC 2       32-0174425
                                          Lower-Tier REMIC       35-2271347
                                            Upper-Tier REMIC     36-4588678
             New York                        Grantor Trust       35-6767928
           (State or other jurisdiction                  (I.R.S. Employer
         incorporation or organization                Identification Number)
               of issuing entity)                        of issuing entity)

          1585 Broadway
          New York, New York                                    10036
(Address of principal executive offices                     (Zip Code of
         of issuing entity)                                issuing entity)

            Issuing entity's telephone number, including area code:
                               (212) 761-4000

          Securities registered pursuant to Section 12(b) of the Act:
                                     None.

          Securities registered pursuant to Section 12(g) of the Act:
                                     None.

     Indicate by check mark if the registrant is a well-known seasoned
     issuer, as defined in Rule 405 of the Securities Act.  Yes [ ]  No[X]

     Indicate by check mark if the registrant is not required to file
     reports pursuant to Section 13 or Section 15(d) of the Act.  Yes[ ] No[X]

     Indicate by check mark whether the registrant (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities Exchange
     Act of 1934 during the preceding 12 months (or for such shorter period
     that the registrant was required to file such reports), and (2) has been
     subject to such filing requirements for the past 90 days.  Yes [X]  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to
     Item 405 of Regulation S-K is not contained herein, and will not be
     contained, to the best of the registrant's knowledge, in definitive proxy
     or information statements incorporated by reference in Part III of the
     Form 10-K or any amendment to this Form 10-K.         [ ]

     Indicate by check mark whether the registrant is a large accelerated
     filer, an accelerated filer, or a non-accelerated filer.  See definition
     of "accelerated filer" in Rule 12b-2 of the Exchange Act.  (Check One):

      Large accelerated filer [  ]  Accelerated Filer [  ]
      Non-accelerated Filer [X]

     Indicate by check mark whether the registrant is a shell company (as
     defined in rule 12b-2 of the Act).  [  ] Yes  [X] No

     State the aggregate market value of the voting and non-voting common
     equity held by non-affiliates computed by reference to the price at
     which the common equity was last sold, or the average bid and asked
     price of such common equity, as of the of the last business day of
     the registrant's most recently completed second fiscal quarter

     Not Applicable.

     DOCUMENTS INCORPORATED BY REFERENCE

     See Item 15.

     PART I

     ITEM 1.  Business.

     Not Applicable.

     ITEM 1A.  Risk Factors.

     Not Applicable.

     ITEM 1B.  Unresolved Staff Comments.

     None.

     ITEM 2.  Properties.

     Not Applicable.

     ITEM 3.  Legal Proceedings.

     Not Applicable.

     ITEM 4.  Submission of Matters to a Vote of Security Holders.

     Not Applicable.

     PART II

     ITEM 5.  Market for Registrant's Common Equity, Related Stockholder
     Matters and Issuer Purchases of Equity Securities.

     Not Applicable.

     ITEM 6.  Selected Financial Data.

     Not Applicable.

     ITEM 7.  Management's Discussion and Analysis of Financial Condition and
     Results of Operations.

     Not Applicable.

     ITEM 7A.  Quantitative and Qualitative Disclosures About Market Risk.

     Not Applicable.

     ITEM 8.  Financial Statements and Supplementary Data.

     Not Applicable.

     ITEM 9.  Changes in and Disagreements with Accountants on Accounting and
     Financial Disclosure.

     Not Applicable.

     ITEM 9A  Controls and Procedures.

     Not Applicable.

     ITEM 9B. Other Information.

     None.

     PART III

     ITEM 10.  Directors, Executive Officers and Corporate Governance.

     Not Applicable.

     ITEM 11.  Executive Compensation.

     Not Applicable.

     ITEM 12.  Security Ownership of Certain Beneficial Owners and Management
               and Related Stockholder Matters.

     Not Applicable.

     ITEM 13.  Certain Relationships and Related Transactions, and
               Director Independence.

     Not Applicable.

     ITEM 14.  Principal Accounting Fees and Services.

     Not Applicable.

     PART IV

     Item 1112(b)(2) of Regulation AB, Significant Obligor Financial
     Information.

     No single obligor represents 10% or more of the pool assets held by the
     issuing entity.

     Item 1114(b)(2) and Item 1115(b) of Regulation AB , Significant
     Enhancement Provider Information.

     None.

     Item 1117 of Regulation AB, Legal Proceedings.

     None.

     Item 1119 of Regulation AB, Affiliations and Certain Relationships and
     Related Transactions.

     None.

     Item 1122 of Regulation AB, Compliance with Applicable Servicing Criteria.

     See Exhibit 33 and 34.
     The 1122 statements for Wells Fargo Bank, N.A. (servicer) has disclosed
     the following instances of material noncompliance with certain servicing
     criteria applicable to the Company during the year ended December 31, 2006:

     1. 1122(d)(3)(i) - Delinquency Reporting - The Company provided incomplete
        data to some third parties who use such data to calculate delinquency
        ratios and determine the status of loans with respect to bankruptcy,
        foreclosure or real estate owned. Instead of the actual due date being
        provided for use in calculating delinquencies, the date of the first
        payment due to the security was provided.

     2. 1122(d)(4)(vii) - Notification of Intent to Foreclose - The Company,
        as required by certain servicing agreements, did not provide investors
        with prior notification of intent to foreclose.

     The 1122 statements for Wells Fargo Bank, National Association (Corporate
     Trust Services) has disclosed material noncompliance with criterion
     1122(d)(3)(i), as applicable to the Company during the twelve months
     ended December 31. 2006.  Certain monthly investor or remittance reports
     included errors in the calculation and/or the reporting of delinquencies
     for the pool assets.

     Item 1123 of Regulation AB, Servicer Compliance Statement.

     See Exhibit 35.

     ITEM 15. Exhibits, Financial Statement Schedules.

     (a) List the following documents filed as a part of the report:

         (1) Not Applicable.

         (2) Not Applicable.


         (3)

       Exhibits 4 and 10 were filed as part of the Registrant's Current
       Report on Form 8-K filed on June 8, 2006 and are incorporated by
       reference:

         Exhibit 4.1 Pooling and Servicing Agreement, dated as of May 1, 2006,
         by and among the Depositor, HomEq Servicing Corporation, as a servicer,
         Wells Fargo Bank, National Association, as a servicer, JPMorgan Chase
         Bank, National Association, as a servicer, First NLC Financial
         Services, LLC, as responsible party, and Deutsche Bank National Trust
         Company, as trustee.

         Exhibit 10.1 Amended and Restated Mortgage Loan Purchase and
         Warranties Agreement, dated as of September 29, 2005, by and between
         Morgan Stanley Mortgage Capital Inc., as purchaser, and First NLC
         Financial Services, LLC, as loan seller (included as Exhibit O to
         Exhibit 4.1).

         Exhibit 10.2 Assignment and Recognition Agreement, dated as of May 25,
         2006, by and among the Company, as assignee, Morgan Stanley Mortgage
         Capital Inc., as assignor, and Meritage Mortgage Corporation, as
         loan seller (included as part of Exhibit P to Exhibit 4.1).

         Exhibit 10.3 Amended and Restated Mortgage Loan Purchase and
         Warranties Agreement, dated as of June 1, 2005, by and between Morgan
         Stanley Mortgage Capital Inc., as purchaser, and Meritage Mortgage
         Corporation, as loan seller (included as part of Exhibit P to
         Exhibit 4.1).

         Exhibit 10.4 Second Amended and Restated Mortgage Loan Purchase and
         Warranties Agreement, dated as of November 1, 2005, by and between
         Morgan Stanley Mortgage Capital Inc., as purchaser, and Meritage
         Mortgage Corporation, as loan seller (included as part of Exhibit P
         to Exhibit 4.1).

         Exhibit 10.5 Assignment and Recognition Agreement, dated as of
         May 30, 2006, by and among the Company, as assignee, Morgan Stanley
         Mortgage Capital Inc., as assignor, and AIG Federal Savings Bank,
         as loan seller (included as part of Exhibit Q to Exhibit 4.1).

         Exhibit 10.6 Third Amended and Restated Mortgage Loan Purchase and
         Warranties Agreement, dated as of December 1, 2005, by and among
         Morgan Stanley Mortgage Capital Inc., as purchaser, Wilmington
         Finance Inc., as loan seller, and AIG Federal Savings Bank, as
         loan seller (included as part of Exhibit Q to Exhibit 4.1).

         Exhibit 10.7 Assignment and Recognition Agreement, dated as of
         May 25, 2006, by and among the Company, as assignee, Morgan Stanley
         Mortgage Capital Inc., as assignor, and Accredited Home Lenders, Inc.,
         as loan seller (included as part of Exhibit R to Exhibit 4.1).

         Exhibit 10.8 Fourth Amended and Restated Mortgage Loan Purchase and
         Warranties Agreement, dated as of August 1, 2005, by and between
         Morgan Stanley Mortgage Capital Inc., as purchaser, and Accredited
         Home Lenders, Inc., as loan seller (included as part of Exhibit R
         to Exhibit 4.1).

         Exhibit 10.9 Fifth Amended and Restated Mortgage Loan Purchase and
         Warranties Agreement, dated as of December 1, 2005, by and between
         Morgan Stanley Mortgage Capital Inc., as purchaser, and Accredited
         Home Lenders, Inc., as loan seller (included as part of Exhibit R to
         Exhibit 4.1).

         Exhibit 10.10 Sixth Amended and Restated Mortgage Loan Purchase and
         Warranties Agreement, dated as of February 1, 2006, by and between
         Morgan Stanley Mortgage Capital Inc., as purchaser, and Accredited
         Home Lenders, Inc., as loan seller (included as part of Exhibit R to
         Exhibit 4.1).

         Exhibit 10.11 Assignment and Recognition Agreement, dated as of
         May 25, 2006, by and among the Company, as assignee, Morgan Stanley
         Mortgage Capital Inc., as assignor, and Aegis Mortgage Corporation,
         Inc., as loan seller (included as part of Exhibit S to Exhibit 4.1).

         Exhibit 10.12   Mortgage Loan Purchase and Warranties Agreement, dated
         as February 1, 2006, by and between Aegis and the Sponsor, solely
         insofar as such agreement relates to the Aegis Mortgage Loans
         (included as part of Exhibit S to Exhibit 4.1).

         Exhibit 10.13   Assignment and Recognition Agreement, dated as of
         May 25, 2006, by and among the Company, as assignee, Morgan Stanley
         Mortgage Capital Inc., as assignor, and Lime Financial Services, Ltd.,
         as loan seller (included as part of Exhibit T to Exhibit 4.1).

         Exhibit 10.14   Mortgage Loan Purchase and Warranties Agreement, dated
         as February 1, 2006, by and between Lime and the Sponsor, solely
         insofar as such agreement relates to the Lime Mortgage Loans (included
         as part of Exhibit T to Exhibit 4.1).

         Exhibit 10.15 Assignment and Recognition Agreement, dated as of
         May 25, 2006, by and among the Company, as assignee, Morgan Stanley
         Mortgage Capital Inc., as assignor, and ResMAE Mortgage Corporation,
         as loan seller (included as part of Exhibit U to Exhibit 4.1).

         Exhibit 10.16 Mortgage Loan Purchase and Warranties Agreement, dated
         as February 1, 2006, by and between ResMae and the Sponsor, solely
         insofar as such agreement relates to the ResMAE Mortgage Loans
         (included as part of Exhibit U to Exhibit 4.1).

         Exhibit 10.17 ISDA Master Agreement, dated as of May 25, 2006, by
         and between Morgan Stanley Capital Services Inc., the swap provider,
         and Deutsche Bank National Trust Company, the trustee (included as
         part of Exhibit AA to Exhibit 4.1).

         Exhibit 10.18 Schedule to the Master Agreement, dated as of May 25,
         2006, by and between Morgan Stanley Capital Services Inc., the swap
         provider, and Deutsche Bank National Trust Company, the trustee
        (included as part of Exhibit AA to Exhibit 4.1).

         Exhibit 10.19 Credit Support Annex, dated as of May 25, 2006, by and
         between Morgan Stanley Capital Services Inc., the swap provider, and
         Deutsche Bank National Trust Company, the trustee (included as part
         of Exhibit AA to Exhibit 4.1).

         Exhibit 10.20 Confirmation, dated as of May 25, 2006, by and between
         Morgan Stanley Capital Services Inc., the swap provider, and Deutsche
         Bank National Trust Company, the trustee (included as part of Exhibit
         AA to Exhibit 4.1).

         Exhibit 10.21 Guarantee, dated as of May 25, 2006, by Morgan Stanley
        (included as part of Exhibit AA to Exhibit 4.1).

         Exhibit 10.22 Subservicing Agreement, dated May 25, 2006, by and
         between JPMorgan Chase Bank, National Association and Chase Home
         Finance, LLC (included as part of Exhibit BB to Exhibit 4.1).

         Exhibit 31 Section 302 Certification.

         Exhibit 33.1 Wells Fargo Bank, National Association's Annual Report
         on Assessment of Compliance for Year End December 31, 2006.

         Exhibit 33.2 HomEq Servicing Corporation's Annual Report on
         Assessment of Compliance for Year End December 31, 2006.

         Exhibit 33.3 JPMorgan Chase Bank, National Association's Annual
         Report on Assessment of Compliance for Year End December 31, 2006.

         Exhibit 33.4 Trustee's Annual Report on Assessment of Compliance
         for Year End December 31, 2006.

         Exhibit 34.1 Attestation Report on Assessment of Compliance with
         Servicing Criteria for Wells Fargo Bank, National Association's
        (Exhibit 33.1) for Year End December 31, 2006.

         Exhibit 34.2 Attestation Report on Assessment of Compliance with
         Servicing Criteria for HomEq Servicing Corporation's Report
        (Exhibit 33.2) for Year End December 31, 2006.

         Exhibit 34.3 Attestation Report on Assessment of Compliance with
         Servicing Criteria for JPMorgan Chase Bank, National Association's
         Report (Exhibit 33.3) for Year End December 31, 2006.

         Exhibit 34.4 Attestation Report on Assessment of Compliance with
         Servicing Criteria for Trustee's Report (Exhibit 33.4) for Year
         End December 31, 2006.

         Exhibit 35.1 Wells Fargo Bank, National Association's Annual
         Statement of Compliance for Year End December 31, 2006.

         Exhibit 35.2 HomEq Servicing Corporation's Annual Statement
         of Compliance for Year End December 31, 2006.

         Exhibit 35.3 JPMorgan Chase Bank, National Association's Annual
         Statement of Compliance for Year End December 31, 2006.

     (b) See (a) above.

     (c) Not Applicable.








                                      SIGNATURE

          Pursuant to the requirements of Section 13 or 15(d) of the
          Securities Exchange Act of 1934, the registrant has duly caused
          this report to be signed on its behalf by the undersigned,
          thereunto duly authorized.


                             By: Morgan Stanley ABS Capital I Inc.,
                                 as Depositor

                                      By:  /s/ Steven Shapiro
                                           Steven Shapiro
                                           Vice President


     Date: March 30, 2007







     EXHIBIT INDEX

     Exhibit Document

       Exhibits 4 and 10 were filed as part of the Registrant's Current
       Report on Form 8-K filed on June 8, 2006 and are incorporated by
       reference:

      4.1 Pooling and Servicing Agreement, dated as of May 1, 2006, by and
          among the Depositor, HomEq Servicing Corporation, as a servicer,
          Wells Fargo Bank, National Association, as a servicer, JPMorgan
          Chase Bank, National Association, as a servicer, First NLC
          Financial Services, LLC, as responsible party, and Deutsche Bank
          National Trust Company, as trustee.

      10.1  Amended and Restated Mortgage Loan Purchase and Warranties
            Agreement, dated as of September 29, 2005, by and between
            Morgan Stanley Mortgage Capital Inc., as purchaser, and First NLC
            Financial Services, LLC, as loan seller (included as Exhibit O to
            Exhibit 4.1).

      10.2  Assignment and Recognition Agreement, dated as of May 25, 2006,
            by and among the Company, as assignee, Morgan Stanley Mortgage
            Capital Inc., as assignor, and Meritage Mortgage Corporation, as
            loan seller (included as part of Exhibit P to Exhibit 4.1).

      10.3  Amended and Restated Mortgage Loan Purchase and Warranties
            Agreement, dated as of June 1, 2005, by and between Morgan
            Stanley Mortgage Capital Inc., as purchaser, and Meritage
            Mortgage Corporation, as loan seller (included as part of
            Exhibit P to Exhibit 4.1).

      10.4  Second Amended and Restated Mortgage Loan Purchase and Warranties
            Agreement, dated as of November 1, 2005, by and between Morgan
            Stanley Mortgage Capital Inc., as purchaser, and Meritage
            Mortgage Corporation, as loan seller (included as part of
            Exhibit P to Exhibit 4.1).

      10.5  Assignment and Recognition Agreement, dated as of May 30, 2006,
            by and among the Company, as assignee, Morgan Stanley Mortgage
            Capital Inc., as assignor, and AIG Federal Savings Bank,
            as loan seller (included as part of Exhibit Q to Exhibit 4.1).

      10.6  Third Amended and Restated Mortgage Loan Purchase and
            Warranties Agreement, dated as of December 1, 2005, by and among
            Morgan Stanley Mortgage Capital Inc., as purchaser, Wilmington
            Finance Inc., as loan seller, and AIG Federal Savings Bank, as
            loan seller (included as part of Exhibit Q to Exhibit 4.1).

      10.7  Assignment and Recognition Agreement, dated as of May 25, 2006,
            by and among the Company, as assignee, Morgan Stanley Mortgage
            Capital Inc., as assignor, and Accredited Home Lenders, Inc.,
            as loan seller (included as part of Exhibit R to Exhibit 4.1).

      10.8  Fourth Amended and Restated Mortgage Loan Purchase and Warranties
            Agreement, dated as of August 1, 2005, by and between Morgan
            Stanley Mortgage Capital Inc., as purchaser, and Accredited
            Home Lenders, Inc., as loan seller (included as part of Exhibit R
            to Exhibit 4.1).

      10.9  Fifth Amended and Restated Mortgage Loan Purchase and Warranties
            Agreement, dated as of December 1, 2005, by and between
            Morgan Stanley Mortgage Capital Inc., as purchaser, and Accredited
            Home Lenders, Inc., as loan seller (included as part of Exhibit R
            to Exhibit 4.1).

      10.10 Sixth Amended and Restated Mortgage Loan Purchase and Warranties
            Agreement, dated as of February 1, 2006, by and between Morgan
            Stanley Mortgage Capital Inc., as purchaser, and Accredited
            Home Lenders, Inc., as loan seller (included as part of Exhibit
            R to Exhibit 4.1).

      10.11 Assignment and Recognition Agreement, dated as of May 25, 2006,
            by and among the Company, as assignee, Morgan Stanley Mortgage
            Capital Inc., as assignor, and Aegis Mortgage Corporation, Inc.,
            as loan seller (included as part of Exhibit S to Exhibit 4.1).

      10.12 Mortgage Loan Purchase and Warranties Agreement, datedas
            February 1, 2006, by and between Aegis and the Sponsor, solely
            insofar as such agreement relates to the Aegis Mortgage Loans
           (included as part of Exhibit S to Exhibit 4.1).

      10.13 Assignment and Recognition Agreement, dated as of May 25, 2006,
            by and among the Company, as assignee, Morgan Stanley Mortgage
            Capital Inc., as assignor, and Lime Financial Services, Ltd.,
            as loan seller (included as part of Exhibit T to Exhibit 4.1).

      10.14 Mortgage Loan Purchase and Warranties Agreement, dated as February
            1, 2006, by and between Lime and the Sponsor, solely insofar as
            such agreement relates to the Lime Mortgage Loans (included as part
            of Exhibit T to Exhibit 4.1).

      10.15 Assignment and Recognition Agreement, dated as of May 25, 2006,
            by and among the Company, as assignee, Morgan Stanley Mortgage
           Capital Inc., as assignor, and ResMAE Mortgage Corporation,
           as loan seller (included as part of Exhibit U to Exhibit 4.1).

      10.16 Mortgage Loan Purchase and Warranties Agreement, dated as
            February 1, 2006, by and between ResMae and the Sponsor, solely
            insofar as such agreement relates to the ResMAE Mortgage Loans
           (included as part of Exhibit U to Exhibit 4.1).

      10.17 ISDA Master Agreement, dated as of May 25, 2006, by and between
            Morgan Stanley Capital Services Inc., the swap provider, and
            Deutsche Bank National Trust Company, the trustee (included as
            part of Exhibit AA to Exhibit 4.1).

      10.18 Schedule to the Master Agreement, dated as of May 25, 2006, by
            and between Morgan Stanley Capital Services Inc., the swap
            provider, and Deutsche Bank National Trust Company, the trustee
           (included as part of Exhibit AA to Exhibit 4.1).

      10.19 Credit Support Annex, dated as of May 25, 2006, by and between
            Morgan Stanley Capital Services Inc., the swap provider, and
            Deutsche Bank National Trust Company, the trustee (included as part
            of Exhibit AA to Exhibit 4.1).

      10.20 Confirmation, dated as of May 25, 2006, by and between Morgan
            Stanley Capital Services Inc., the swap provider, and Deutsche
            Bank National Trust Company, the trustee (included as part of
            Exhibit AA to Exhibit 4.1).

      10.21 Guarantee, dated as of May 25, 2006, by Morgan Stanley (included
            as part of Exhibit AA to Exhibit 4.1).

      10.22 Subservicing Agreement, dated May 25, 2006, by and between JPMorgan
            Chase Bank, National Association and Chase Home Finance, LLC
            (included as part of Exhibit BB to Exhibit 4.1).


      31   Section 302 Certification.

      33.1 Wells Fargo Bank, National Association's Annual Report on
           Assessment of Compliance for Year End December 31, 2006.

      33.2 HomEq Servicing Corporation's Annual Report on Assessment of
           Compliance for Year End December 31, 2006.

      33.3 JPMorgan Chase Bank, National Association's Annual Report on
           Assessment of Compliance for Year End December 31, 2006.

      33.4 Trustee's Annual Report on Assessment of Compliance for Year
           End December 31, 2006.

      34.1 Attestation Report on Assessment of Compliance with Servicing
           Criteria for Wells Fargo Bank, National Association's Report
           (Exhibit 33.1) for Year End December 31, 2006.

      34.2 Attestation Report on Assessment of Compliance with Servicing
           Criteria for HomEq Servicing Corporation's Report (Exhibit 33.2)
           for Year End December 31, 2006.

      34.3 Attestation Report on Assessment of Compliance with Servicing
           Criteria for JPMorgan Chase Bank, National Association's Report
           (Exhibit 33.3) for Year End December 31, 2006.

      34.4 Attestation Report on Assessment of Compliance with Servicing
           Criteria for Trustee's Report (Exhibit 33.4) for Year End
           December 31, 2006.

      35.1 Wells Fargo Bank, National Association's Annual Statement of
           Compliance for Year End December 31, 2006.

      35.2 HomEq Servicing Corporation's Report Annual Statement of
           Compliance for Year End December 31, 2006.

      35.3 JPMorgan Chase Bank, National Association's Report Annual
           Statement of Compliance for Year End December 31, 2006.