Exhibit
      10.2


    ISDA®

    International
      Swaps and Derivatives Association, Inc.

    


    NOVATION
      AGREEMENT

    


    dated
      as
      of June 1, 2007 among:

    


    THE
      ROYAL
      BANK OF SCOTLAND PLC.
      (the
      "Remaining
      Party"),
      

    NOVASTAR
      MORTGAGE, INC. (the "Transferor")
      

    


    AND

    


    NOVASTAR
      MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2007-2 (the "Transferee").

     

    The
      Remaining Party and the Transferor are parties to a 1992 ISDA Master dated
      as of
      July 19, 2006 (the “Old
      Agreement”).
      The
      Remaining Party and the Transferor originally entered into certain transactions
      (each an "Old
      Transaction")
      under
      the Old Agreement, each evidenced by a Confirmation (an "Old
      Confirmation")
      with
      reference number IRG16181489, IRG16181493, IRG16188578, IRG16189509
      respectively, attached hereto as Exhibit I. 

    


    The
      Remaining Party and the Transferee are simultaneously entering into a 1992
      ISDA
      Master Agreement dated as of the date hereof in the form attached hereto as
      Exhibit II (the “New
      Agreement”).

    


    With
      effect from and including June 1, 2007 (the "Novation Date")
      the
      Transferor wishes to transfer by novation to the Transferee, and the Transferee
      wishes to accept the transfer by novation of, all the rights, liabilities,
      duties and obligations of the Transferor under and in respect of each Old
      Transaction, with the exception of the Excluded Rights and Obligations referred
      to below, with the effect that the Remaining Party and the Transferee enter
      into
      a new transaction (each a "New
      Transaction")
      between them having terms identical to those of each Old Transaction, subject
      to
      the same exceptions and as more particularly described below. For the avoidance
      of doubt, the first transaction period being novated in each Old Transaction
      is
      the full period ending on the Fixed Rate Payer Payment Date in March
      2007.

    


    The
      Remaining Party wishes to accept the Transferee as its sole counterparty with
      respect to the New Transactions.

    


    The
      Transferor and the Remaining Party wish to have released and discharged, as
      a
      result and to the extent of the transfer described above, their respective
      obligations under and in respect of the Old Transactions.

    


    Accordingly,
      the parties agree as follows: —


     

    1. Definitions.

    


    Terms
      defined in the ISDA Master Agreement (Multicurrency-Cross Border) as published
      in 1992 by the International Swaps and Derivatives Association, Inc. (the
      "1992
      ISDA Master Agreement")
      are
      used herein as so defined, unless otherwise provided herein. For purposes of
      this Novation Agreement, "Excluded
      Rights and Obligations"
      means
      all obligations of each of the Transferor and the Remaining Party to Transfer
      (as defined in the Credit Support Annex to the Old Agreement) Eligible
      Collateral (as so defined) in respect of the Old Transactions and all related
      rights of the Remaining Party and the Transferor under the Old Agreement.


    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2. Transfer,
      Release, Discharge and Undertakings. 

    


    Subject
      to the execution and delivery of the New Agreement by each of the parties
      thereto to the other, with effect from and including the Novation Date and
      in
      consideration of the mutual representations, warranties and covenants contained
      in this Novation Agreement and other good and valuable consideration (the
      receipt and sufficiency of which are hereby acknowledged by each of the
      parties):

    


    
      	
            	(a)	
              subject
                to Section 2(d) of this Novation Agreement, the Remaining Party and
                the
                Transferor are each released and discharged from further obligations
                to
                each other with respect to each Old Transaction and their respective
                rights against each other thereunder are cancelled, provided that
                such
                release and discharge shall not affect any rights, liabilities or
                obligations of the Remaining Party or the Transferor with respect
                to
                payments or other obligations due and payable or due to be performed
                prior
                to the Novation Date, and all such payments and obligations shall
                be paid
                or performed by the Remaining Party or the Transferor in accordance
                with
                the terms of the Old Transactions;

            


    

    


    
      	
            	(b)	
              in
                respect of each New Transaction, the Remaining Party and the Transferee
                each undertake liabilities and obligations towards the other and
                acquire
                rights against each other identical in their terms to each corresponding
                Old Transaction (and, for the avoidance of doubt, as if the Transferee
                were the Transferor and with the Remaining Party remaining the Remaining
                Party, save for the Excluded Rights and Obligations and any other
                rights,
                liabilities or obligations of the Remaining Party or the Transferor
                with
                respect to payments or other obligations due and payable or due to
                be
                performed prior to the Novation Date). For the sake of clarity, all
                references to Independent Amounts shall be deemed deleted from the
                Confirmations for each New
                Transaction;

            


    

    


    
      	
            	(c)	
              each
                New Transaction shall be governed by, form part of, and be subject
                to the
                New Agreement and the relevant Old Confirmation (which, in conjunction
                and
                as deemed modified to be consistent with this Novation Agreement,
                shall be
                deemed to be a Confirmation between the Remaining Party and the
                Transferee), and the offices of the Remaining Party and the Transferee
                for
                purposes of each New Transaction shall be their offices at their
                addresses
                for notices provided for in the New Agreement;
                and

            


    

    


    
      	
            	(d)	
              on
                the Novation Date, the Remaining Party shall transfer all of the
                Posted
                Collateral (as defined in the Credit Support Annex to the Old Agreement)
                held by it in respect of the Old Transactions to the account or accounts
                of the Transferor identified by it by notice given to the Remaining
                Party
                as provided in the Old Agreement, and the Transferor shall transfer
                all
                Posted Collateral held by it in respect of the Old Transactions to
                the
                account or accounts of the Remaining Party identified by it by notice
                given to the Transferor as provided in the Old Agreement, in each
                case
                together with all Interest Amount and Distributions thereon (as so
                defined). The Remaining Party’s or the Transferor’s failure to effect
                these transfers will continue to constitute Potential Events of Default
                and may constitute Events of Default under the Old Agreement
                notwithstanding the transfer by novation contemplated
                herein.

            


    

    


    3.  Representations
      and Warranties.

    


    
      	
            	(a)	
              On
                the date of this Novation
                Agreement:

            


    

    


    
      	
            	(i)	
              Each
                of the parties makes to each of the other parties those representations
                and warranties set forth in Section 3(a) of the 1992 ISDA Master
                Agreement
                with references in such Section to "this Agreement" or "any Credit
                Support
                Document" being deemed references to this Novation Agreement
                alone.

            


    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
 

    
      	
            	(ii)	
              The
                Remaining Party and the Transferor each makes to the other, and the
                Remaining Party and the Transferee each makes to the other, the
                representation set forth in Section 3(b) of the 1992 ISDA Master
                Agreement, in each case with respect to the Old Agreement or the
                New
                Agreement, as the case may be, and taking into account the parties
                entering into and performing their obligations under this Novation
                Agreement.

            


    

    


    
      	
            	(iii)	
              Each
                of the Transferor and the Remaining Party represents and warrants
                to each
                other and to the Transferee that: 

            


    

    


    
      	
            	(A)	
              it
                has made no prior transfer (whether by way of security or otherwise)
                of
                the Old Agreement or any interest or obligation in or under the Old
                Agreement or in respect of any Old Transaction;
                and

            


    

    


    
      	
            	(B)	
              without
                prejudice to the obligations of the Remaining Party and the Transferor
                referred to in Section 2(d) of this Novation Agreement, as of the
                Novation
                Date, all obligations of the Transferor and the Remaining Party under
                each
                Old Transaction required to be performed before the Novation Date
                have
                been fulfilled.

            


    

    


    
      	
            	(iv)	
              Each
                party represents to each of the other parties:
                --

            


    

    


    
      	
            	(A)	
              Non-Reliance.
                Transferor and the Remaining Party is each acting for its own account,
                and
                with respect to the Transferee, Deutsche Bank National Trust Company
                is
                executing as Trustee for the Transferee. Each has made its own independent
                decisions to enter into this Novation Agreement and as to whether
                this
                Novation Agreement is appropriate or proper for it based upon its
                own
                judgment and upon advice from such advisers as it has deemed necessary.
                It
                is not relying on any communication (written or oral) of the other
                parties
                as investment advice or as a recommendation to enter into this Novation
                Agreement; it being understood that information and explanations
                related
                to the terms and conditions of this Novation Agreement shall not be
                considered investment advice or a recommendation to enter into this
                Novation Agreement. No communication (written or oral) received from
                any
                of the other parties shall be deemed to be an assurance or guarantee
                as to
                the expected results of this Novation
                Agreement;

            


    

    


    
      	
            	(B)	
              Assessment
                and Understanding. It is capable of assessing the merits of and
                understanding (on its own behalf or through independent professional
                advice), and understands and accepts, the terms, conditions and risks
                of
                this Novation Agreement. It is also capable of assuming, and assumes,
                the
                risks of this Novation Agreement;
                and

            


    

    


    
      	
            	(C)	
              Status
                of Parties. None of the other parties is acting as a fiduciary for
                or an
                adviser to it in respect of this Novation
                Agreement.

            


    

    


    
      	
            	(b)	
              The
                Transferor makes no representation or warranty and does not assume
                any
                responsibility with respect to the legality, validity, effectiveness,
                adequacy or enforceability of any New Transaction or the New Agreement
                or
                any documents relating thereto and assumes no responsibility for
                the
                condition, financial or otherwise, of the Remaining Party, the Transferee
                or any other person or for the performance and observance by the
                Remaining
                Party, the Transferee or any other person of any of its obligations
                under
                any New Transaction or the New Agreement or any document relating
                thereto
                and any and all such conditions and warranties, whether express or
                implied
                by law or otherwise, are hereby
                excluded.

            


    

    


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    4. Counterparts.
      

    


    This
      Novation Agreement (and each amendment, modification and waiver in respect
      of
      it) may be executed and delivered in counterparts (including by facsimile
      transmission), each of which
      will be deemed an original.

    


    5. Costs
      and Expenses. 

    


    The
      parties will each pay their own costs and expenses (including legal fees)
      incurred in connection with this Novation Agreement and as a result of the
      negotiation, preparation and execution of this Novation Agreement.

    


    
      
        6.
          Amendments. 

      

    

    


    No
      amendment, modification or waiver in respect of this Novation Agreement will
      be
      effective unless in writing (including a writing evidenced by a facsimile
      transmission) and executed by each of the parties or confirmed by an exchange
      of
      telexes or electronic messages on an electronic messaging system and subject
      to
      the Rating Agency Condition (as defined in the New Agreement).

    


    
      	
              7.

            	
              (a)

            	
              Governing
                Law. 

            


    

    


    This
      Novation Agreement will be governed by and construed in accordance with the
      laws
      of the State of New York without reference to the conflict of laws provisions
      thereof.

    


    
      	 	
              (b)

            	
              Jurisdiction.
                

            


    

    


    The
      terms
      of Section 13(b) of the 1992 ISDA Master Agreement shall apply to this Novation
      Agreement with references in such Section to "this Agreement" being deemed
      references to this Novation Agreement alone.

     

    
      	 	(c) 	 Not
              Acting in Individual Capacity. 


    

     

    
      	 	 	
              Deutsche
                Bank National Trust Company is signing this Novation Agreement solely
                in
                its capacity as Trustee of the Transferee under the Pooling and Servicing
                Agreement among NovaStar Mortgage Funding Corporation, NovaStar Mortgage,
                Inc., U.S. Bank National Association, and Deutsche Bank National
                Trust
                Company dated as of June 1, 2007 (the "Pooling
                and Servicing Agreement")
                and in the exercise of the powers and authority conferred and vested
                in it
                thereunder and not in its individual capacity. It is expressly understood
                and agreed by the parties hereto that (i) each of the representations,
                undertakings and agreements herein stated to be those of Transferee
                is
                made and intended for the purpose of binding only the Transferee,
                (ii)
                nothing herein contained shall be construed as creating any liability
                for
                Deutsche Bank National Trust Company, individually or personally,
                to
                perform any covenant (either express or implied) contained herein
                stated
                to be those of Transferee, and all such liability, if any, is hereby
                expressly waived by the parties hereto, and such waiver shall bind
                any
                third party making a claim by or through one of the parties hereto,
                and
                (iii) under no circumstances shall Deutsche Bank National Trust Company
                be
                liable for the breach or failure of any obligation, representation,
                warranty or covenant made or undertaken by the Transferee under this
                Novation Agreement. All persons having any claim against the Trustee
                reason of the Transactions contemplated by this Novation Agreement
                shall
                look only to the assets of NovaStar Mortgage Supplemental Interest
                Trust,
                Series 2007-2 (subject to the availability of funds therefor in accordance
                with the Flow of Funds as set forth in Article IV of the Pooling
                and
                Servicing Agreement) for payment or satisfaction
                thereof.

            


    

    


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    The
      foregoing may not be construed to give to Majority Certificateholders any rights
      under this Novation  Agreement.

     

    
      	 	
              (d)

            	
              Pooling
                and Servicing Agreement.

            


    

     

    Capitalized
      terms used in this Novation Agreement that are not defined herein and are
      defined in the Pooling and Servicing Agreement shall have the respective
      meanings assigned to them in the Pooling and Servicing Agreement. 

     

    
      	 	
              (e)

            	
              Agency
                Role of Greenwich Capital Markets, Inc.
                In
                connection with this Novation Agreement, Greenwich Capital Markets,
                Inc.
                has acted as agent on behalf of the Remaining Party. Greenwich Capital
                Markets, Inc. has not guaranteed and is not otherwise responsible
                for the
                obligations of the Remaining Party under this
                Agreement.

            


    

    


    
      	 	
              (f)

            	
              Calculation
                

            


    

    


    
      	 	 	
              Promptly
                after each Reset Date, but
                in no event later than three New York Business Days prior to each
                related
                Distribution Date, the
                Calculation Agent shall deliver the reset notice in writing via mail
                or
                facsimile to the Trustee at the address provided in the notices portion
                of
                the New Agreement. 

            


    

    


    
      	 	
              (g)

            	
              Account
                Details

            


    

    


    
      	 	
              Remaining
                Party: 

            	
               The
                Royal Bank of Scotland 

            


      	 	 	
               Bank: JPMorgan Chase Bank

               ABA No.: 021000021

               Account No.: 400930153

               Attention: Financial Markets Fixed Income and
                Interest Rate Derivative Operations, London

               SWIFT Code: SWIFT RBOSGB2RTCM with JPMorgan Chase
                Bank, New York CHASUS33

            


      	 	 	 


      	 	Transferee:	
               Deutsche Bank National Trust Company

              ABA # 021001033

              Acct # 01419663

              Acct Name NYLTD Funds Control - Stars West

              Ref: Trust Administration -
                NS0702

            


    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF the parties have executed this Novation Agreement on the
      respective dates specified below with effect from and including the Novation
      Date.

    


    
      	 THE
              ROYAL
              BANK OF SCOTLAND PLC	 	 	 NOVASTAR
              MORTGAGE, INC.
	 	 	 	 
	 By: Greenwich Capital Markets, Inc.,
              its agent	 	 	 
	 	 	 	 
	 	 	 	 
	By: 
              /s/ Deborah Pfeifer	 	 	By: 
              /s/ David L. Farris 
	
              
                
Name:
                Deborah Pfeifer 

            	 	 	
              
                
Name:
                David L. Farris

            
	
              Title:
                Vice
                President 

            	 	 	
              Title:
                Vice
                President

            


    

       

    NOVASTAR
      MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2007-2

    


    By:
      Deutsche Bank National Trust Company, as 

    Trustee
      under the Pooling and Servicing 

    Agreement,
      acting not in its individual capacity,

    but
      solely in its capacity as Trustee to NovaStar

    Mortgage
      Supplemental Interest Trust, Series 2007-2

    


    
      	 	 	 	 
	By:
              /s/ Ronaldo Reyes	 	 	
            
	
              
                
Name:
                Ronaldo Reyes

            	 	 	
            
	
              Title:
                Vice
                President 

            	 	 	 




    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    


    Exhibit
      I

    


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