Exhibit
        10.1



    NOVASTAR
      MORTGAGE, INC. as Sponsor,

     

    NOVASTAR
      MORTGAGE FUNDING CORPORATION

    as
      Depositor,

     

    U.S.
      BANK
      NATIONAL ASSOCIATION

    as
      Custodian

     

    and

     

    DEUTSCHE
      BANK NATIONAL TRUST COMPANY

    as
      Trustee

     

    MORTGAGE
      LOAN PURCHASE AGREEMENT

     

    Dated
      as
      of February 1, 2007

     

    Fixed
      and
      Adjustable Rate Mortgage Loans


     

    NovaStar
      Mortgage Funding Trust, Series 2007-1

    NovaStar
      Home Equity Loan Asset-Backed Certificate, Series 2007-1 


    
      
        
        

      

      
        
        

        
          

        

      

       

    


    TABLE
      OF CONTENTS

    

      
        	 	 	
                Page(s)

              
	
                ARTICLE
                  I DEFINITIONS

              	 	
                1

              
	
                Section
                  1.01 Definitions

              	 	
                1

              
	
                ARTICLE
                  II SALE OF MORTGAGE LOANS AND RELATED PROVISIONS

              	 	
                2

              
	
                Section
                  2.01 Sale of Mortgage Loans and MI Policies

              	 	
                2

              
	
                Section
                  2.02 [Reserved]

              	 	
                5

              
	
                Section
                  2.03 [Reserved]

              	 	
                5

              
	
                Section
                  2.04 [Reserved]

              	 	
                5

              
	
                ARTICLE
                  III REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH

              	 	
                5

              
	
                Section
                  3.01 Sponsor Representations and Warranties

              	 	
                5

              
	
                Section
                  3.02 Depositor Representations and Warranties

              	 	
                24

              
	
                ARTICLE
                  IV SPONSOR’S COVENANTS

              	 	
                25

              
	
                Section
                  4.01 Covenants of the Sponsor

              	 	
                25

              
	
                Section
                  4.02 Payment of Expenses

              	 	
                25

              
	
                ARTICLE
                  V CONDITIONS TO MORTGAGE LOAN PURCHASE

              	 	
                26

              
	
                Section
                  5.01 Conditions of Depositor’s Obligations.

              	 	
                26

              
	
                ARTICLE
                  VI INDEMNIFICATION BY THE SPONSOR WITH RESPECT TO THE MORTGAGE
                  LOANS

              	 	
                27

              
	
                Section
                  6.01 Indemnification With Respect to the Mortgage Loans.

              	 	
                27

              
	
                Section
                  6.02 Limitation on Liability of the Sponsor

              	 	
                27

              
	
                ARTICLE
                  VII TERMINATION

              	 	
                27

              
	
                Section
                  7.01 Termination

              	 	
                27

              
	
                ARTICLE
                  VIII MISCELLANEOUS PROVISIONS

              	 	
                29

              
	
                Section
                  8.01 Amendment

              	 	
                29

              
	
                Section
                  8.02 Governing Law

              	 	
                29

              
	
                Section
                  8.03 Notices

              	 	
                29

              
	
                Section
                  8.04 Severability of Provisions

              	 	
                30

              
	
                Section
                  8.05 Relationship of Parties

              	 	
                30

              
	
                Section
                  8.06 Counterparts.

              	 	
                30

              
	
                Section
                  8.07 Further Agreements

              	 	
                30

              
	
                Section
                  8.08 Intention of the Parties

              	 	
                31

              
	
                Section
                  8.09 Successors and Assigns; Assignment of Purchase
                  Agreement

              	 	
                31

              
	
                Section
                  8.10 Survival

              	 	
                31

              
	
                Section
                  8.11 Liability of the Trustee

              	 	
                31

              
	 	 	 
	
                EXHIBIT
                  1 Mortgage Loan Schedule

              	 	 
	
                EXHIBIT
                  2(A) [Reserved]

              	 	 
	
                EXHIBIT
                  2(B) [Reserved]

              	 	 


      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

        THIS
          MORTGAGE LOAN PURCHASE AGREEMENT (this “Purchase
          Agreement”),
          dated
          as of February 1, 2007, is made among NovaStar Mortgage, Inc. (the “Sponsor”),
          NovaStar Mortgage Funding Corporation (the “Depositor”),
          U.S.
          Bank National Association (the “Custodian”)
          and
          Deutsche Bank National Trust Company as trustee (the “Trustee”).

         

        WITNESSETH 
          THAT:

         

        WHEREAS,
          pursuant to the terms of this Purchase Agreement, the Sponsor will sell
          the
          Mortgage Loans and the related MI Policies to the Depositor on the Closing
          Date;

         

        WHEREAS,
          pursuant to the terms of the Pooling and Servicing Agreement, the Depositor
          will
          transfer the Mortgage Loans and the related MI Policies, and assign all
          of its
          rights under the Purchase Agreement, to the Trustee, without recourse,
          on the
          Closing Date;

         

        WHEREAS,
          pursuant to the terms of the Pooling and Servicing Agreement, the Trustee
          will
          issue the Certificates;

         

        WHEREAS,
          pursuant to the terms of the Pooling and Servicing Agreement, the Trustee
          will
          transfer the Certificates to the Depositor;

         

        WHEREAS,
          pursuant to the terms of the Underwriting Agreement, the Depositor will
          sell the
          Offered Certificates to the Underwriters; and

         

        WHEREAS,
          pursuant to the terms of the Pooling and Servicing Agreement, the Servicer
          will
          service the Mortgage Loans.

         

        ARTICLE
          I


         

        DEFINITIONS

         

        Section
          1.01 Definitions.

         

        For
          all
          purposes of this Purchase Agreement, except as otherwise expressly provided
          herein or unless the context otherwise requires, capitalized terms not
          otherwise
          defined herein shall have the meanings assigned to such terms in the Definitions
          contained in Appendix A to the Pooling and Servicing Agreement, dated as
          of
          February 1, 2007, among the Custodian, the Trustee, the Depositor and NovaStar
          Mortgage, Inc. as sponsor and servicer (the “Servicer”)
          which
          is incorporated by reference herein. All other capitalized terms used herein
          shall have the meanings specified herein.

         

        
          
            
            

          

          
            1

            
              

            

          

          
            
            

          

        

         

        ARTICLE
          II


         

        SALE
          OF MORTGAGE LOANS AND RELATED PROVISIONS

         

        Section
          2.01 Sale
          of Mortgage Loans and MI Policies.

         

        (a) The
          Sponsor hereby sells, and the Depositor hereby purchases on the Closing
          Date the
          Mortgage Loans identified (and the related MI Policies) on the Mortgage
          Loan
          Schedule annexed hereto as Exhibit 1, the proceeds thereof and all rights
          under
          the Related Documents (including the related Mortgage Files). The Mortgage
          Loans
          consist of a group of conventional, residential first and second lien mortgage
          loans with fixed and adjustable interest rates (the “Group I Mortgage Loans”)
          and a group of conventional, residential first and second lien mortgage
          loans
          with fixed and adjustable interest rates (the “Group II Mortgage Loans”). The
          Mortgage Loans will have a Principal Balance as of the close of business
          on the
          Cut-off Date, after giving effect to any payments due on or before such
          date
          whether or not received, of approximately $1,888,775,707. The sale of the
          Mortgage Loans will take place on the Closing Date, subject to and
          simultaneously with the deposit of the Mortgage Loans into the Trust Fund,
          the
          authentication of the Certificates by the Trustee and the sale of the
          Underwritten Certificates pursuant to the Underwriting Agreement. The purchase
          price (the “Purchase
          Price”)
          for
          the Mortgage Loans to be paid by the Depositor to the Sponsor on the Closing
          Date shall consist of the following:

         

        (i)
          a
          payment in an amount equal to $1,743,619,993 representing the net proceeds
          of
          the sale of the Underwritten Certificates, which payment shall be paid
          to the
          Sponsor by wire transfer in immediately available funds on the Closing
          Date by
          or on behalf of the Depositor, or as otherwise agreed by the Depositor;
          and

         

        (ii)
          the
          Class M-4 Certificates, the Class M-5 Certificates, the Class M-6 Certificates,
          the Class M-7 Certificates, the Class M-8 Certificates, the Class M-9
          Certificates, the Class M-10 Certificates, the Class M-11 Certificates,
          the
          Class M-6N Certificates, the Class M-7N Certificates, the Class M-8N
          Certificates, the Class M-9N Certificates, the Class M-10N Certificates,
          the
          Class M-11N Certificates, the Class M-6 DSI Certificates, the Class M-7
          DSI
          Certificates, the Class M-8 DSI Certificates, the Class M-9 DSI Certificates,
          the Class M-10 DSI Certificates, the Class M-11 DSI Certificates, the Class
          CA
          Certificates and the Class CB Certificates (including the net value represented
          by the Class I Certificates) and the Residual Certificates. 

         

        (b) [Reserved]

         

        (c) In
          connection with such conveyances by the Sponsor, the Sponsor shall on behalf
          of
          and at the direction of the Depositor deliver to, and deposit with the
          Custodian
          on behalf of the Trustee, on or before the Closing Date, the following
          documents
          or instruments with respect to each Mortgage Loan (the “Mortgage
          File”):

         

        (i)
          the
          original Mortgage Note endorsed to “Deutsche Bank National Trust Company, as
          Trustee of the NovaStar Mortgage Funding Trust, Series 2007-1, relating
          to the
          NovaStar Home Equity Loan Asset-Backed Certificates, Series
          2007-1”;

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

         

        (ii)
          the
          original Mortgage with evidence of recording thereon, or, if the original
          Mortgage has not yet been returned from the public recording office, a
          copy of
          the original Mortgage certified by the Sponsor or the public recording
          office in
          which such original Mortgage has been recorded and if the Mortgage Loan
          is
          registered on the MERS System, such Mortgage shall include thereon a statement
          that it is a MOM Loan and shall include the MIN for such Mortgage
          Loan;

         

        (iii)
          unless the Mortgage Loan is registered on the MERS System, an original
          assignment (which may be included in one or more blanket assignments if
          permitted by applicable law) of the Mortgage endorsed to “Deutsche Bank National
          Trust Company, as Trustee of the NovaStar Mortgage Funding Trust, Series
          2007-1,
          relating to the NovaStar Home Equity Loan Asset-Backed Certificates, Series
          2007-1,” and otherwise in recordable form;

         

        (iv)
          originals of any intervening assignments of the Mortgage showing an unbroken
          chain of title from the originator thereof to the Person assigning it to
          the
          Trustee (or to MERS, if the Mortgage Loan is registered on the MERS System,
          and
          noting the presence of a MIN, if the Mortgage Loan is registered on the
          MERS
          System), with evidence of recording thereon, or, if the original of any
          such
          intervening assignment has not yet been returned from the public recording
          office, a copy of such original intervening assignment certified by the
          Sponsor
          or the public recording office in which such original intervening assignment
          has
          been recorded;

         

        (v)
          the
          original policy of title insurance (or a commitment for title insurance,
          if the
          policy is being held by the title insurance company pending recordation
          of the
          Mortgage);

         

        (vi)
          true
          and correct copy of each assumption, modification, consolidation or substitution
          agreement, if any, relating to the Mortgage Loan; and

         

        (vii)
          an
          executed copy of the notice of assignment and acknowledgement of assignment
          with
          respect to the Mortgage Loans covered by the MI Policies.

         

        If
          a
          defect in any Mortgage File is discovered which may materially and adversely
          affect the value of the related Mortgage Loan, or the interests of the
          Trustee
          (as pledgee of the Mortgage Loans), or the Certificateholders in such Mortgage
          Loan, including if any document required to be delivered to the Custodian
          has
          not been delivered (provided that a Mortgage File will not be deemed to
          contain
          a defect for an unrecorded assignment under clause (i) above for 180 days
          following submission of the assignment if the Sponsor has submitted such
          assignment for recording pursuant to the terms of the following paragraph),
          the
          Sponsor shall cure such defect, repurchase the related Mortgage Loan at
          the
          Repurchase Price or substitute an Eligible Substitute Mortgage Loan for
          the
          related Mortgage Loan upon the same terms and conditions set forth in Section
          3.01 hereof as to the Mortgage Loans for breaches of representations and
          warranties.

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        Promptly
          after the Closing Date (or after the date of transfer of any Eligible Substitute
          Mortgage Loan), the Sponsor at its own expense shall complete and submit
          for
          recording in the appropriate public office for real property records each
          of the
          assignments referred to in clause (iii) above, with such assignment completed
          in
          favor of the Trustee, excluding any Mortgage Loan that is registered on
          the MERS
          System if MERS is identified on the Mortgage or on a properly recorded
          assignment of Mortgage as the mortgagee of record. While such assignment
          to be
          recorded is being recorded, the Custodian shall retain a photocopy of such
          assignment. If any assignment is lost or returned unrecorded to the Custodian
          because of any defect therein, the Sponsor is required to prepare a substitute
          assignment or cure such defect, as the case may be, and the Sponsor shall
          cause
          such substitute assignment to be recorded in accordance with this
          paragraph.

         

        In
          instances where an original Mortgage or any original intervening assignment
          of
          Mortgage is not, in accordance with clause (ii) or (iv) above, delivered
          by the
          Sponsor to the Custodian, on behalf of the Trustee, prior to or on the
          Closing
          Date, the Sponsor will deliver or cause to be delivered the originals of
          such
          documents to the Custodian, on behalf of the Trustee, promptly upon receipt
          thereof.

         

        In
          connection with the assignment of any Mortgage Loan registered on the MERS
          System, promptly after the Closing Date, the Sponsor further agrees that
          it will
          cause, at the Sponsor’s own expense, the MERS System to indicate that such
          Mortgage Loan has been assigned by the Sponsor to the Trustee in accordance
          with
          this Agreement for the benefit of the Certificateholders by including in
          such
          computer files (a) the applicable Trustee code in the field “Trustee” which
          identifies the Trustee and (b) the code “NovaStar 2007-1” (or its equivalent) in
          the field “Pool” which identifies the series of the Certificates issued in
          connection with such Mortgage Loans. The Custodian will certify in its
          final
          certification that the MERS System shows the Trustee on behalf of the
          Certificateholders as the beneficial owner of the Mortgage Loans registered
          on
          the MERS System.

         

        Effective
          on the Closing Date, the Depositor hereby acknowledges its acceptance of
          all
          right, title and interest to the Mortgage Loans and other property, existing
          on
          the Closing Date and thereafter created and conveyed to it pursuant to
          this
          Section 2.01.

         

        The
          Trustee, as assignee or transferee of the Depositor, shall be entitled
          to all
          scheduled principal payments due after the Cut-off Date, all other payments
          of
          principal due and collected after the Cut-off Date, and all payments of
          interest
          on the Mortgage Loans. No scheduled payments of principal due on or before
          the
          Cut-off Date and collected after the Cut-off Date shall belong to the Depositor
          pursuant to the terms of this Purchase Agreement. The Pooling and Servicing
          Agreement shall provide that any late payment charges collected in connection
          with a Mortgage Loan shall be paid to the Servicer as provided
          therein.

         

        (d) The
          parties hereto intend that the transactions set forth herein constitute
          a sale
          by the Sponsor to the Depositor on the Closing Date of all the Sponsor’s right,
          title and interest in and to the Mortgage Loans and other property as and
          to the
          extent described above. In the event the transactions set forth herein
          shall be
          deemed not to be a sale, the Sponsor hereby grants to the Depositor as
          of the
          Closing Date a security interest in all of the Sponsor’s right, title and
          interest in, to and under the Mortgage Loans and such other property, to
          secure
          all of the Sponsor’s obligations hereunder and this Purchase Agreement shall
          constitute a security agreement under applicable law and in such event,
          the
          parties hereto acknowledge that the Custodian, in addition to holding the
          Mortgage Loans on behalf of the Trustee for the benefit of the
          Certificateholders, holds the Mortgage Loans as designee of the Depositor.
          The
          Sponsor agrees to take or cause to be taken such actions and to execute
          such
          documents, including without limitation the filing of all necessary UCC-1
          financing statements filed in the Commonwealth of Virginia (which shall
          have
          been submitted for filing as of the Closing Date), any continuation statements
          with respect thereto and any amendments thereto required to reflect a change
          in
          the name or corporate structure of the Sponsor, as are necessary to perfect
          and
          protect the interests of the Depositor and their respective assignees in
          each
          Mortgage Loan and the proceeds thereof. The Depositor agrees to take or
          cause to
          be taken such actions and to execute such documents, including without
          limitation the filing of all necessary UCC-1 financing statements, and
          continuation statements with respect thereto and any amendments thereto
          as are
          necessary to perfect and protect the interests of the Trustee and its assignees
          in each Mortgage Loan.

         

        
          
            
            

          

          
            4

            
              

            

          

          
            
            

          

        

         

        The
          parties hereto understand and agree that it is not intended that any Mortgage
          Loan be included in the Trust Fund that is a “High-Cost Home Loan” as defined in
          the New Jersey Home Ownership Act, effective as of November 27, 2003, the
          Home
          Loan Protection Act of New Mexico, effective as of January 1, 2004, the
          Massachusetts Predatory Home Loan Practices Act, effective as of November
          7,
          2004, or the Indiana Home Loan Practices Act effective January 1st,
          2005.

         

        Section
          2.02 [Reserved].

         

        Section
          2.03 [Reserved].

         

        Section
          2.04 [Reserved].

         

        ARTICLE
          III

         

        REPRESENTATIONS
          AND WARRANTIES;

        REMEDIES
          FOR BREACH

         

        Section
          3.01 Sponsor
          Representations and Warranties.

         

        The
          Sponsor hereby represents and warrants to the Depositor and the Trustee
          as of
          the date hereof and as of the Closing Date (or if otherwise specified below,
          as
          of the date so specified):

         

        (a) As
          to the
          Sponsor:

         

        (i)
          The
          Sponsor (i) is a corporation duly organized, validly existing and in good
          standing under the laws of the Commonwealth of Virginia and (ii) is qualified
          and in good standing as a foreign corporation to do business in each
          jurisdiction where such qualification is necessary, except where the failure
          to
          so qualify would not have a material adverse effect on the Sponsor’s ability to
          enter into this Purchase Agreement and to consummate the transactions
          contemplated hereby;

         

        
          
            
            

          

          
            5

            
              

            

          

          
            
            

          

        

         

        (ii)
          The
          Sponsor has the power and authority to make, execute, deliver and perform
          its
          obligations under this Purchase Agreement and all of the transactions
          contemplated under this Purchase Agreement, and has taken all necessary
          corporate action to authorize the execution, delivery and performance of
          this
          Purchase Agreement;

         

        (iii)
          The
          Sponsor is not required to obtain the consent of any other Person or any
          consent, approval or authorization from, or registration or declaration
          with,
          any governmental authority, bureau or agency in connection with the execution,
          delivery, performance, validity or enforceability of this Purchase Agreement
          except for such consents, approvals or authorization, or registration or
          declaration, as shall have been obtained or filed, as the case may
          be;

         

        (iv)
          The
          execution and delivery of this Purchase Agreement and the performance of
          the
          transactions contemplated hereby by the Sponsor will not violate any provision
          of any existing law or regulation or any order or decree of any court applicable
          to the Sponsor or any provision of the certificate of incorporation or
          bylaws of
          the Sponsor, or constitute a material breach of any mortgage, indenture,
          contract or other agreement to which the Sponsor is a party or by which
          the
          Sponsor may be bound;

         

        (v)
          No
          litigation or administrative proceeding of or before any court, tribunal
          or
          governmental body is currently pending, or to the knowledge of the Sponsor
          threatened, against the Sponsor or any of its properties or with respect
          to this
          Purchase Agreement, the Certificates which in the opinion of the Sponsor
          has a
          reasonable likelihood of resulting in a material adverse effect on the
          transactions contemplated by this Purchase Agreement;

         

        (vi)
          This
          Purchase Agreement constitute the legal, valid and binding obligations
          of the
          Sponsor, enforceable against the Sponsor in accordance with its terms,
          except as
          enforceability may be limited by applicable bankruptcy, insolvency,
          reorganization, moratorium or other similar laws now or hereafter in effect
          affecting the enforcement of creditors’ rights in general and except as such
          enforceability may be limited by general principles of equity (whether
          considered in a proceeding at law or in equity);

         

        (vii)
          This Purchase Agreement constitutes a valid transfer and assignment to
          the
          Depositor of all right, title and interest of the Sponsor in and to the
          Cut-off
          Date Principal Balance of the Mortgage Loans, all monies due or to become
          due
          with respect thereto, and all proceeds of such Cut-off Date Principal Balance
          of
          the Mortgage Loans, and this Purchase Agreement constitutes a valid transfer
          and
          assignment to the Trustee of all right, title and interest of the Sponsor
          in,
          all monies due or to become due with respect thereto;

         

        
          
            
            

          

          
            6

            
              

            

          

          
            
            

          

        

         

        (viii)
          The Sponsor is not in default with respect to any order or decree of any
          court
          or any order or regulation of any federal, state or governmental agency,
          which
          default might have consequences that would materially and adversely affect
          the
          condition (financial or other) or operations of the Sponsor or its properties
          or
          might have consequences that would materially adversely affect its performance
          hereunder; and

         

        (ix)
          The
          Servicer or any Subservicer who will be servicing any Mortgage Loan pursuant
          to
          the Pooling and Servicing Agreement or a Subservicing Agreement is qualified
          to
          do business in all jurisdictions in which its activities as Servicer or
          Subservicer of the Mortgage Loans serviced by it require such qualifications
          except where failure to be so qualified will not have a material adverse
          effect
          on such servicing activities.

         

        (b) As
          to
          each Mortgage Loan as of the Closing Date, except as otherwise expressly
          stated:

         

        (i)
          The
          information set forth on the Mortgage Loan Schedule with respect to each
          Mortgage Loan is true and correct in all material respects as of the Closing
          Date, and the information regarding the Mortgage Loans on the computer
          diskette
          or tape delivered to the Trustee prior to the Closing Date is true and
          accurate
          in all material respects and describes the same Mortgage Loans as the Mortgage
          Loans on the Mortgage Loan Schedule;

         

        (ii)
          The
          Mortgage Loans are not being transferred with any intent to hinder, delay
          or
          defraud any creditors;

         

        (iii)
          No
          more than 4.11% and 4.62% of the Mortgage Loans in Group I and the Mortgage
          Loans in Group II, respectively, (by Cut-off Date Principal Balance) were
          secured by condominium units; and no more than 12.07% and 20.31% of the
          Mortgage
          Loans in Group I and the Mortgage Loans in Group II, respectively, (by
          Cut-off
          Date Principal Balance) were secured by properties in planned unit
          developments;

         

        (iv)
          As
          of the Cut-off Date, the remaining term of each Group I Mortgage Loan is
          not
          more than 360 months and not less than 119 months and the remaining term
          of each
          Group II Mortgage Loan is not more than 360 months and not less than 64
          months;

         

        (v)
          No
          more than 81.76% and 43.59% of the Mortgage Loans in Group I and Mortgage
          Loans
          in Group II, respectively, (by Cut-off Date Principal Balance) have been
          the
          subject of cash-out refinances;

         

        (vi)
          No
          more than 3.36% and 2.30% of the Mortgage Loans in Group I and Mortgage
          Loans in
          Group II, respectively, (by Cut-off Date Principal Balance), have been
          the
          subject of rate and term (no cash-out) refinances;

         

        
          
            
            

          

          
            7

            
              

            

          

          
            
            

          

        

         

        (vii)
          No
          fewer than 14.88% and 54.10% of the Mortgage Loans in Group I and Mortgage
          Loans
          in Group II, respectively, (by Cut-off Date Principal Balance) are purchase
          money loans;

         

        (viii)
          No
          more than 7.32% and 16.48% of the Mortgage Loans in Group I and Mortgage
          Loans
          in Group II, respectively, (by Cut-off Date Principal Balance) are secured
          by
          Mortgaged Properties located in the State of California; no more than 18.07%
          and
          18.24% of the Mortgage Loans in Group I and Mortgage Loans in Group II,
          respectively, (by Cut-off Date Principal Balance) are secured by Mortgaged
          Properties located in the State of Florida; no more than 3.91% and 2.98%
          of the
          Mortgage Loans in Group I and Mortgage Loans in Group II (by Cut-off Date
          Principal Balance) are secured by Mortgaged Properties located in the State
          of
          Virginia; no more than 4.09% and 4.19% of the Mortgage Loans in Group I
          and
          Mortgage Loans in Group II (by Cut-off Date Principal Balance) are secured
          by
          Mortgaged Properties located in the State of New Jersey; no more than 3.73%
          and
          4.78% of the Mortgage Loans in Group I and Mortgage Loans in Group II (by
          Cut-off Date Principal Balance) are secured by Mortgaged Properties located
          in
          the State of Maryland; no more than 3.29% and 4.00% of the Mortgage Loans
          in
          Group I and Mortgage Loans in Group II (by Cut-off Date Principal Balance)
          are
          secured by Mortgaged Properties located in the State of New York; no more
          than
          58.54% and 50.38% of the Mortgage Loans in Group I and Mortgage Loans in
          Group
          II, respectively, (by Cut-off Date Principal Balance) are located in any
          other
          state;

         

        (ix)
          The
          outstanding Principal Balances of the Mortgage Loans in Group I (by Cut-off
          Date
          Principal Balance) ranged from $11,550 to $787,305, the average outstanding
          Principal Balance of the Mortgage Loans in Group I is approximately $146,262.31;
          the outstanding Principal Balances of the Mortgage Loans in Group II (by
          Cut-off
          Date Principal Balance) ranged from $7,890 to $1,392,000, the average
          outstanding Principal Balance of the Mortgage Loans in Group II is approximately
          $197,759;

         

        (x)
          Approximately 75.52% and 65.50% of the Mortgage Loans in Group I and Mortgage
          Loans in Group II, respectively, (by Cut-off Date Principal Balance) were
          secured by a first lien on a parcel of real property improved by a detached
          single family residence; no more than 6.55% and 4.41% of the Mortgage Loans
          in
          Group I and Mortgage Loans in Group II, respectively, (by Cut-off Date
          Principal
          Balance) were secured by a first lien on a parcel of real estate improved
          by a
          multi-unit residence;

         

        (xi)
          All
          points and fees related to each Mortgage Loan were disclosed in writing
          to the
          borrower in accordance with applicable state and federal law and the borrower
          has executed a statement to that effect. No borrower was charged “points and
          fees” (whether or not financed) in an amount greater than 5% of the principal
          amount of any such loan originated by the Sponsor, such 5% limitation calculated
          in accordance with the Lender Letter. All fees and charges (including finance
          charges) and whether or not financed, assessed, collected or to be collected
          with the origination and servicing of each Mortgage Loan has been disclosed
          in
          writing to the borrower in accordance with applicable state and federal
          law and
          regulation;

         

        
          
            
            

          

          
            8

            
              

            

          

          
            
            

          

        

         

        (xii)
          The
          Mortgage Rates borne by the adjustable rate Mortgage Loans in Group I as
          of the
          Closing Date range from 5.350% per annum to 12.950% per annum, and the
          weighted
          average Mortgage Rate (by Cut-off Date Principal Balance) of the adjustable
          rate
          Mortgage Loans in Group I was 8.891% per annum; the Mortgage Rates borne
          by
          fixed rate Mortgage Loans in Group I as of the Closing Date range from
          5.650%
          per annum to 14.000% per annum, and the weighted average Mortgage Rate
          (by
          Cut-off Date Principal Balance) of the fixed rate Mortgage Loans in Group
          I was
          8.649% per annum; the Mortgage Rates borne by adjustable rate Mortgage
          Loans in
          Group II as of the Closing Date range from 5.500% per annum to 13.250%
          per
          annum, and the weighted average Mortgage Rate (by Cut-off Date Principal
          Balance) of the adjustable rate Mortgage Loans in Group II was 8.716% per
          annum;
          the Mortgage Rates borne by fixed rate Mortgage Loans in Group II as of
          the
          Closing Date range from 5.500% per annum to 14.500% per annum, and the
          weighted
          average Mortgage Rate (by Cut-off Date Principal Balance) of the fixed
          rate
          Mortgage Loans in Group II was 9.290% per annum;

         

        (xiii)
          Approximately 53.23% and 52.34% of the Mortgage Loans in Group I and the
          Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance)
          have a Loan-to-Value Ratio in excess of 80%; no Group I Mortgage Loan or
          Group
          II Mortgage Loan in the Mortgage Pool had a Loan-to-Value Ratio or combined
          Loan-to-Value Ratio at origination in excess of 100%; and the weighted
          average
          Loan-to-Value Ratio (by Cut-off Date Principal Balance) of the Mortgage
          Loans in
          Group I and the Mortgage Loans in Group II was equal to 82.03% and 84.91%,
          respectively (by Cut-off Date Principal Balance). For any Group I Mortgage
          Loan
          or Group II Mortgage Loan in the Mortgage Pool, if such loan has had a
          material
          modification since origination, the Loan-to-Value Ratio as of such modification
          does not exceed 100%, and any Mortgage Loan seasoned more than 12 months
          does
          not have a Loan-to-Value Ratio in excess of 100% as of the Cut-Off
          Date;

         

        (xiv)
          Approximately 97.79% and 92.47% of the Mortgage Loans in Group I and the
          Mortgage Loans in Group II, respectively (by Cut-off Date Principal Balance),
          are secured by first liens on the related Mortgaged Property; and approximately
          2.21% and 7.53% (by Cut-off Date Principal Balance) of the Mortgage Loans
          in
          Group I and the Mortgage Loans in Group II are secured by second liens
          on the
          related Mortgaged Property;

         

        (xv)
          As
          of the Cut-off Date, the weighted average Loan-to-Value Ratio of the Mortgage
          Loans secured by first liens in Group I is approximately 81.66%; the weighted
          average combined Loan-to-Value Ratio of the Mortgage Loans secured by first
          and
          second liens in Group I is approximately 84.13%; the weighted average
          Loan-to-Value Ratio of the Mortgage Loans secured by first liens in Group
          II is
          approximately 83.73%; the weighted average combined Loan-to-Value Ratio
          of the
          Mortgage Loans secured by first and second liens in Group II is approximately
          90.97%; the weighted average combined Loan-to-Value Ratio of all of the
          Mortgage
          Loans in Group I and Group II is approximately 87.21%; and the gross weighted
          average coupon of the Mortgage Loans is approximately 8.851%;

         

        
          
            
            

          

          
            9

            
              

            

          

          
            
            

          

        

         

        (xvi)
          There is no valid offset, right of rescission, defense, claim or counterclaim
          of
          any obligor under any Mortgage Note or Mortgage, including the obligation
          of the
          Mortgagor to pay the unpaid principal of or interest on such Mortgage Note,
          and
          any applicable right of rescission has expired, nor will the operation
          of any of
          the terms of such Mortgage Note or Mortgage, or the exercise of any right
          thereunder, render either the Mortgage Note or the Mortgage unenforceable,
          in
          whole or in part, or subject to any right of rescission, set-off, recoupment,
          counterclaim or defense, including, without limitation, the defense of
          usury,
          and no such right of rescission, set-off, recoupment, counterclaim or defense
          has been asserted with respect thereto. To the best of Sponsor’s knowledge,
          except for approximately 0.17% of the Mortgage Loans, no Mortgagor of the
          applicable Mortgage is or since the date of origination has been a debtor
          in any
          state or federal bankruptcy or insolvency proceeding and no Mortgaged Property
          has been subject to any such proceeding. With regard to the Mortgage Loans
          that
          involve a Mortgagor who is a debtor in a state or federal bankruptcy or
          insolvency proceeding, each such Mortgagor is, as of the Cut-Off Date,
          current
          under the related bankruptcy plan;

         

        (xvii)
          There are no mechanics’ liens or any similar liens or claims for work, labor or
          material affecting any Mortgaged Property which are or may be a lien prior
          to,
          or equal with, the lien of such Mortgage, except those which are insured
          against
          by the title insurance policy referred to in clause (xxii) below;

         

        (xviii)
          As of the Closing Date, each Mortgaged Property is free of material damage
          and
          is in good repair and there is no proceeding pending or threatened for
          the total
          or partial condemnation of any Mortgage Property;

         

        (xix)
          Each Mortgage is a valid and enforceable first or second lien on the Mortgaged
          Property including all improvements on the Mortgaged Property securing
          the
          related Mortgage Note and each Mortgaged Property is owned by the Mortgagor
          in
          fee simple (except with respect to common areas in the case of condominiums,
          PUDs and de minimis
          PUTDs)
          subject only to (1) the lien of nondelinquent current real property taxes
          and
          assessments, (2) covenants, conditions and restrictions, rights of way,
          easements and other matters of public record as of the date of recording
          of such
          Mortgage, such exceptions appearing of record being acceptable to mortgage
          lending institutions generally or specifically reflected in the appraisal
          made
          in connection with the origination of the related Mortgage Loan or referred
          to
          in the lender’s title insurance policy delivered to the originator of the
          related Mortgage Loan and (3) other matters to which like properties are
          commonly subject that do not materially interfere with the benefits of
          the
          security intended to be provided by such Mortgage. Immediately prior to
          the sale
          of such Mortgage Loan to the Depositor pursuant to this Purchase Agreement,
          the
          Sponsor had full right to sell and assign the same to the Depositor or
          the
          Trustee, as the case may be. Immediately following the sale of such Mortgage
          Loan to the Depositor and the Depositor’s assignment and sale thereof of such
          Mortgage Loan to the Trustee, the Trustee will have good title thereto
          subject
          to no claims or liens, including delinquent tax or assessment
          liens;

         

        
          
            
            

          

          
            10

            
              

            

          

          
            
            

          

        

         

        (xx)
          Each
          Mortgage Loan at origination complied with applicable local, state and
          federal
          laws, including, without limitation, usury, equal credit opportunity, real
          estate settlement procedures, the Truth In Lending Act of 1968, as amended,
          all
          applicable predatory and abusive lending laws and disclosure laws and
          consummation of the transactions contemplated hereby, including without
          limitation, the receipt of interest by the owner of such Mortgage Loan
          or the
          Holders of Certificates secured thereby, will not violate any such laws.
          Any and
          all statements or acknowledgments required to be made by the Mortgagor
          relating
          to such requirements are and will remain in the Mortgage File. Each Mortgage
          Loan is being serviced in accordance with applicable state and federal
          laws,
          including, without limitation, the Truth In Lending Act of 1968, as amended,
          and
          other consumer protection laws, real estate settlement procedures, usury,
          equal
          credit opportunity and disclosure laws and in a prudent and customary
          manner;

         

        (xxi)
          Neither the Sponsor nor any prior holder of any Mortgage has impaired,
          waived,
          altered or modified the Mortgage or Mortgage Notes in any material respect
          (except that a Mortgage Loan may have been modified by a written instrument
          which has been recorded, if necessary to protect the interests of the owner
          of
          such Mortgage Loan or the Certificates, and which has been delivered to
          the
          Trustee); satisfied, canceled or subordinated such Mortgage in whole or
          in part;
          released the applicable Mortgaged Property in whole or in part from the
          lien of
          such Mortgage; or executed any instrument of release, cancellation or
          satisfaction with respect thereto;

         

        (xxii)
          A
          lender’s policy of title insurance (on an ALTA or CLTA form) or binder, or other
          assurance of title customary in the relevant jurisdiction insuring the
          first
          lien priority of the Mortgage Loan in an amount at least equal to the original
          Principal Balance of each such Mortgage Loan or a commitment binder or
          commitment to issue the same was effective on the date of the origination
          of
          each Mortgage Loan, each such policy is valid and remains in full force
          and
          effect, and each such policy was issued by a title insurer qualified to
          do
          business in the jurisdiction where the Mortgaged Property is located, which
          policy insures the Sponsor and successor owners of indebtedness secured
          by the
          insured Mortgage as to the first priority lien of the Mortgage as applicable.
          The Sponsor is, and such successor owners will be, the sole insured under
          such
          lender’s title insurance policy; no claims have been made under such mortgage
          title insurance policy; no prior holder of the applicable Mortgage, including
          the Sponsor, has done, by act or omission, anything which would impair
          the
          coverage of such mortgage title insurance policy; and each such policy,
          binder
          or assurance contains all applicable endorsements;

         

        (xxiii)
          All of the improvements which were included for the purpose of determining
          the
          Appraised Value of the Mortgaged Property lie wholly within the boundaries
          and
          building restriction lines of such property and no improvements on adjoining
          properties encroach upon the Mortgaged Property;

         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

         

        (xxiv)
          No
          improvement located on or being part of the Mortgaged Property is in violation
          of any applicable zoning law or regulation, subdivision law or ordinance,
          except
          where the failure to comply would not have a material adverse effect on
          the
          market value of the Mortgaged Property. All inspections, licenses and
          certificates required to be made or issued with respect to all occupied
          portions
          of the Mortgaged Property and, with respect to the use and occupancy and
          fire
          underwriting certificates, have been made or obtained from the appropriate
          authorities and the Mortgaged Property is lawfully occupied under applicable
          law
          except where the failure to comply would not have a material adverse effect
          on
          the market value of the Mortgaged Property;

         

        (xxv)
          Each Mortgage Note and the applicable Mortgage are genuine, and each is
          the
          legal, valid and binding obligation of the maker thereof, enforceable in
          accordance with its terms, except as limited by bankruptcy, insolvency,
          reorganization, moratorium, receivership and other similar laws relating
          to
          creditors’ rights generally or by equitable principles (regardless of whether
          such enforcement is considered in a proceeding in equity or at law). All
          parties
          to the Mortgage Note and the Mortgage had legal capacity to execute the
          Mortgage
          Note and the Mortgage and each Mortgage Note and Mortgage has been duly
          and
          properly executed by such parties;

         

        (xxvi)
          The proceeds of the Mortgage Loans have been fully disbursed, there is
          no
          requirement for future advances thereunder and any and all requirements
          as to
          completion of any on-site or off-site improvements and as to disbursement
          of any
          escrow funds therefor have been complied with. All costs, fees and expenses
          incurred in making, closing or recording the Mortgage Loans were paid and
          the
          Mortgagor is not entitled to any refund of amounts paid or due under the
          Mortgage Note;

         

        (xxvii)
          Each Mortgage contains customary and enforceable provisions that render
          the
          rights and remedies of the holder thereof adequate for the realization
          against
          the Mortgaged Property of the benefits of the security, including (i) in
          the
          case of a Mortgage designated as a deed of trust, by trustee’s sale, and (ii)
          otherwise by judicial foreclosure or if applicable, non-judicial foreclosure.
          Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustee’s
          sale of, the Mortgaged Property pursuant to the proper procedures, the
          holder of
          the Mortgage Loan will be able to deliver good and merchantable title to
          the
          property, subject to any applicable rights of redemption;

         

        (xxviii)
          With respect to each Mortgage constituting a deed of trust, either a trustee,
          duly qualified under applicable law to serve as such, has been properly
          designated and currently so serves and is named in such Mortgage or if
          no duly
          qualified trustee has been properly designated and so serves, the Mortgage
          contains satisfactory provisions for the appointment of such trustee by
          the
          holder of the Mortgage at no cost or expense to such holder, and no fees
          or
          expenses are or will become payable by the Certificateholders to the trustee
          under the deed of trust, except in connection with a trustee’s sale after
          default by the Mortgagor;

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

         

        (xxix)
          There exist no deficiencies with respect to escrow deposits and payments,
          if
          such are required, for which customary arrangements for repayment thereof
          cannot
          be made, and no escrow deficits or payments of other charges or payments
          due the
          Sponsor have been capitalized under the Mortgage or the applicable Mortgage
          Note;

         

        (xxx)
          The
          Mortgage Note is not and has not been secured by any collateral, pledged
          account
          or other security other than real estate securing the Mortgagor’s obligations
          and no Mortgage Loan is secured by more than one Mortgaged
          Property;

         

        (xxxi)
          As
          of the Closing Date, the improvements upon each Mortgaged Property are
          covered
          by a valid and existing hazard insurance policy substantially acceptable
          to FNMA
          and acceptable to the Sponsor which policy provides for fire extended coverage
          and such other hazards as are customary in the area where the Mortgaged
          Property
          is located representing coverage in an amount not less than the lesser
          of (A)
          the maximum insurable value of the improvements securing such Mortgage
          Loan and
          (B) the outstanding Principal Balance of the related Mortgage Loan; if
          the
          improvement on the Mortgaged Property is a condominium unit, it is included
          under the coverage afforded by a blanket policy for the condominium project.
          All
          individual insurance policies contain a standard mortgagee clause naming
          the
          Sponsor or the original holder of the Mortgage, and its successors in interest,
          as mortgagee, and the Sponsor has received no notice that any premiums
          due and
          payable thereon have not been paid; the Mortgage obligates the Mortgagor
          thereunder to maintain all such insurance at the Mortgagor’s cost and expense,
          and upon the Mortgagor’s failure to do so, authorizes the holder of the Mortgage
          to obtain and maintain such insurance at the Mortgagor’s cost and expense and to
          seek reimbursement therefor from the Mortgagor. There has been no act or
          omission which would impair the coverage of any such policy, the benefits
          of the
          endorsement provided for herein, or the validity and binding effect of
          either;

         

        (xxxii)
          If the Mortgaged Property is in an area identified in the Federal Register
          by
          the Federal Emergency Management Agency as having special flood hazards,
          a flood
          insurance policy in a form meeting the requirements of the current guidelines
          of
          the Flood Insurance Administration is in effect with respect to such Mortgaged
          Property with a generally acceptable carrier in an amount representing
          coverage
          not less than the least of (A) the outstanding Principal Balance of the
          Mortgage
          Loan, (B) the minimum amount required to compensate for damage or loss
          on a
          replacement cost basis and (C) the maximum amount of flood coverage that
          is
          available under federal law;

         

        (xxxiii)
          Except for the Mortgage Loans referred to in clause (xlii) as being delinquent,
          if any, there is no default, breach, violation or event of acceleration
          existing
          under the Mortgage or the applicable Mortgage Note; and no event which,
          with the
          passage of time or with notice and the expiration of any grace or cure
          period,
          would constitute a material default, breach, violation or event of acceleration,
          and neither the Sponsor, any of its affiliates nor any servicer or subservicer
          of any related Mortgage Loan has waived any default, breach, violation
          or event
          of acceleration; no foreclosure action is threatened or has been commenced
          with
          respect to the Mortgage Loan;

         

        
          
            
            

          

          
            13

            
              

            

          

          
            
            

          

        

         

        (xxxiv)
          Each Mortgage Loan is being serviced by the Servicer in accordance with
          the
          terms of the Mortgage Note;

         

        (xxxv)
          There is no obligation on the part of the Sponsor or any other party to
          make any
          payments with respect to the related Mortgage Loan in addition to the Monthly
          Payments required to be made by the applicable Mortgagor;

         

        (xxxvi)
          Any future advances made prior to the Cut-off Date with respect to any
          Mortgage
          Loan have been consolidated with the outstanding principal amount secured
          by
          such Mortgage, and the secured principal amount, as consolidated, bears
          a single
          interest rate and single repayment term reflected on the Mortgage Loan
          Schedule.
          The consolidated principal amount does not exceed the original principal
          amount
          of the Mortgage Loan. The Mortgage Note with respect to any Mortgage Loan
          does
          not permit or obligate the Servicer to make future advances to the Mortgagor
          at
          the option of the Mortgagor;

         

        (xxxvii)
          The Sponsor has caused or will cause to be performed any and all acts required
          to preserve the rights and remedies of the Depositor and the Trustee evidencing
          an interest in the Mortgage Loans in any insurance policies applicable
          to the
          Mortgage Loans including, without limitation, any necessary notifications
          of
          insurers, assignments of policies or interests therein, and establishments
          of
          coinsured, joint loss payee and mortgagee rights in favor of
          Trustee;

         

        (xxxviii)
          Except as set forth in clause (xlii), there are no defaults by the Mortgagor
          in
          complying with the terms of any Mortgage, and all taxes, governmental
          assessments, insurance premiums, water, sewer and municipal charges which
          previously became due and owing have been paid, or, if required by the
          terms of
          the Mortgage Loan, an escrow of funds has been established in an amount
          sufficient to pay for every such item which remains unpaid and which has
          been
          assessed, but is not yet due and payable. Except for (A) payments in the
          nature
          of escrow payments and (B) interest accruing from the date of the Mortgage
          Note
          or date of disbursement of the Mortgage proceeds to the day which precedes
          by
          one month the Due Date of the first installment of principal and interest,
          including, without limitation, taxes and insurance payments, neither the
          Sponsor
          nor the Servicer has advanced funds, or induced, solicited or knowingly
          received
          any advance of funds by a party other than the Mortgagor, directly or
          indirectly, for the payment of any amount required by the Mortgage;

         

        (xxxix)
          At the time of origination, each Mortgaged Property was the subject of
          an
          appraisal which conforms to the underwriting requirements of the related
          originator; and the Mortgage File contains an appraisal of the applicable
          Mortgaged Property;

         

        (xl)
          None
          of the Mortgage Loans are graduated payment Mortgage Loans or growth equity
          Mortgage Loans;

         

        
          
            
            

          

          
            14

            
              

            

          

          
            
            

          

        

         

        (xli)
          [Reserved.]

         

        (xlii)
          (a) Except with respect to no more than 0.30% and 1.66% of the Mortgage
          Loans in
          Group I and the Mortgage Loans in Group II, respectively, none of the payments
          of principal of or interest on or in respect of any Mortgage Loans (by
          Cut-off
          Date Principal Balance) shall be 30 days or more but less than 60 days
          past due
          as of the Cut-off Date; and 0.02% and 0.63% of the Mortgage Loans in Group
          I and
          the Mortgage Loans in Group II, respectively, was 60 days or more past
          due as of
          the Cut-off Date; (b) except as set forth in clause (a) above, all payments
          required to be made by the Mortgagor under the terms of the Mortgage Note
          have
          been made and credited; and (c) to the Sponsor’s knowledge, there was no
          delinquent recording, tax or assessment lien against the property subject
          to any
          Mortgage, except where such lien was being contested in good faith and
          a stay
          had been granted against levying on the property;

         

        (xliii)
          Upon payment of the Purchase Price for the Mortgage Loans by the Depositor
          or
          the Trustee (from the Trust Fund), as applicable, pursuant to this Purchase
          Agreement, the Sponsor has transferred to the Depositor good and marketable
          title to each Mortgage Note and Mortgage free and clear of any and all
          liens,
          claims, encumbrances, participation interests, equities, pledges, charges
          or
          security interests of any nature and has or had full right and authority,
          subject to no participation of or agreement with any other person, to sell
          and
          assign the same, and following the sale of each Mortgage Loan, the Depositor,
          will own such Mortgage Loan free and clear of any encumbrance, equity interest,
          participation interest, lien, pledge, charge, claim or security
          interest;

         

        (xliv)
          The Sponsor acquired any right, title and interest in and to the Mortgage
          Loans
          in good faith and without notice of any adverse claim;

         

        (xlv)
          The
          Mortgage Note, the Mortgage, the related Assignment of Mortgage and any
          other
          documents required to be delivered by the Sponsor have been delivered to
          the
          Custodian. The Custodian is in possession of a complete, true and accurate
          Mortgage File in accordance with Section 2.01 hereof. Substantially all
          the
          Mortgage Loans have monthly payments due on the first day of each month
          and each
          Mortgage Loan had an original term to maturity of no greater than 30
          years;

         

        (xlvi)
          Each Mortgage Loan contains a due-on-sale provision, although each Mortgage
          Loan
          may be assumable if permitted by the Servicer under certain
          circumstances;

         

        (xlvii)
          Each of the Mortgage and the Assignment of Mortgage is in recordable form
          and is
          acceptable for recording under the laws of the jurisdiction in which the
          Mortgaged Property is located;

         

        (xlviii)
          The Mortgagor has not notified the Sponsor, and the Sponsor has no knowledge
          of
          any relief requested or allowed to the Mortgagor under the Servicemembers
          Civil
          Relief Act other than as disclosed pursuant to the Prospectus
          Supplement;

         

        
          
            
            

          

          
            15

            
              

            

          

          
            
            

          

        

         

        (xlix)
          To
          the best of the Sponsor’s knowledge, there exists no violation of any local,
          state, or federal environmental law, rule or regulation in respect of the
          Mortgaged Property which violation has or could have a material adverse
          effect
          on the market value of such Mortgaged Property. The Sponsor has no knowledge
          of
          any pending action or proceeding directly involving the related Mortgaged
          Property in which compliance with any environmental law, rule or regulation
          is
          in issue; and, to the best of the Sponsor’s knowledge, nothing further remains
          to be done to satisfy in full all requirements of each such law, rule or
          regulation constituting a prerequisite to the use and employment of such
          Mortgaged Property;

         

        (l)
          Each
          Mortgage Loan conforms, and all such Mortgage Loans in the aggregate conform,
          to
          the description thereof set forth in the Prospectus and Prospectus Supplement
          in
          all material respects;

         

        (li)
          [Reserved]

         

        (lii)
          With regard to the Group I Mortgage Loans, no refinance or purchase money
          mortgage loan has an APR or total points and fees that exceed the thresholds
          set
          by the Home Ownership and Equity Protection Act of 1994 (“HOEPA”) and its
          implementing regulations, including 12 CFR § 226.32(a)(1)(i) and
          (ii);

         

        (liii)
          Immediately prior to the transfer to the Depositor or the Trustee, as
          applicable, the Sponsor had good and marketable title thereto, and the
          Sponsor
          is the sole legal, equitable owner of beneficial title to and holder of
          the
          Mortgage Loan. The Sponsor is conveying the same to the Depositor or the
          Trustee, as applicable, free and clear of any and all liens, claims,
          encumbrances, participation interests, equities, pledges, charges or security
          interests of any nature and has full right and authority to sell and assign
          the
          same pursuant to this Purchase Agreement, except for liens which will be
          released simultaneously with such conveyance;

         

        (liv)
          For
          each Mortgage Loan, the related Mortgage File contains a true, accurate
          and
          correct copy of each of the documents and instruments required to be included
          therein;

         

        (lv)
          The
          Servicer meets all applicable requirements under the Pooling and Servicing
          Agreement, is properly qualified to service each Mortgage Loan and has
          been
          servicing each Mortgage Loan prior to the Cut-off Date;

         

        (lvi)
          No
          instrument of release or waiver has been executed in connection with the
          Mortgage Loans, and no Mortgagor has been released, in whole or in part
          from its
          obligations in connection with a Mortgage Loan except in connection with
          an
          assumption agreement which has been delivered to the Trustee;

         

        (lvii)
          On
          the basis of a representation by the Mortgagor at the time of origination
          of the
          Mortgage Loans, at least 87.75% and 94.05% of the Mortgage Loans in Group
          I and
          Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance)
          will be secured by Mortgages on owner-occupied primary residence
          properties;

         

        
          
            
            

          

          
            16

            
              

            

          

          
            
            

          

        

         

        (lviii)
          Approximately 27.08%, and 31.65% of the Mortgage Loans in Group I and the
          Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance)
          provide for a balloon payment and each Mortgage Note with respect to each
          such
          Mortgage Loan requires monthly payments of principal based on either a
          40 year
          or 30 year amortization schedules and have scheduled maturity dates of
          30 years
          or 15 years, respectively, from the due date of the first monthly
          payment;

         

        (lix)
          No
          Mortgage Loan was originated based on an appraisal of the related Mortgaged
          Property made prior to completion of construction of the improvements
          thereon;

         

        (lx)
          None
          of the Mortgage Loans is a “buy down” mortgage loan;

         

        (lxi)
          [Reserved].

         

        (lxii)
          No
          Mortgage Loan is a “High Cost Home Loan” or “Covered Loan,” as applicable, (as
          such terms are defined in the then current Standard & Poor’s LEVELS®
Glossary which is now Version 5.7 Revised, Appendix E) and no Mortgage
          Loan is a
“High Cost Home Loan” as defined in the Georgia Fair Lending Act, as amended
          (the “Georgia Act”). No Mortgage Loan that was originated (or modified) on or
          after October 1, 2002 and before March 7, 2003, is secured by property
          located
          in the State of Georgia; 

         

        (lxiii)
          None of the Mortgage Loans are covered by the requirements of the Home
          Ownership
          and Equity Protection Act of 1994, as amended, or any comparable state
          or local
          law; none of the Mortgage Loans are “section 32” loans or “high cost” loans as
          defined by applicable predatory and abusive lending laws; no proceeds from
          any
          Mortgage Loan were used to finance any single premium credit insurance
          policies;
          none of the Mortgage Loans (by Cut-off Date Principal Balance) require
          a
          mortgagor to pay a Prepayment Charge if the mortgagor prepays a Mortgage
          Loan
          more than five years after the date the Mortgage Loan was
          originated;

         

        (lxiv)
          No
          Mortgage Loan is a “High-Cost Home Loan” as defined in New York Banking Law
          6-1;

         

        (lxv)
          No
          Mortgage Loan is a “High-Cost Home Loan” as defined in the Arkansas Home Loan
          Protection Act effective July 16, 2003 (Act 1340 of 2003);

         

        (lxvi)
          No
          Mortgage Loan is a “High-Cost Home Loan” as defined in the Kentucky high-cost
          home loan statute effective June 24, 2003 (Ky. Rev. Stat. Section
          360.100);

         

        (lxvii)
          No Mortgage Loan in the trust is a “high-cost home,” “covered” (excluding home
          loans defined as “covered home loans” in the New Jersey Home Ownership Security
          Act of 2002 that were originated between November 26, 2003 and July 7,
          2004),
“high risk home” or “predatory” loan under any applicable state, federal or
          local law (or a similarly classified loan using different terminology under
          a
          law imposing heightened regulatory scrutiny or additional legal liability
          for
          residential mortgage loans having high interest rates, points and/or
          fees);

         

        
          
            
            

          

          
            17

            
              

            

          

          
            
            

          

        

         

        (lxviii)
          No Mortgage Loan is a “High-Cost Home Loan” as defined in the New Mexico Home
          Loan Protection Act effective January 1, 2004 (N.M. Stat. Ann. §§ 58-21A-1 et
          seq.);

         

        (lxix)
          No
          Mortgage Loan is a “High-Risk Home Loan” as defined in the Illinois High-Risk
          Home Loan Act effective January 1, 2004 (815 Ill. Comp. Stat. 137/1 et
          seq.);

         

        (lxx)
          No
          Mortgage Loan is a “High-Cost Home Loan” as defined in the Massachusetts
          Predatory Home Loan Practices Act effective November 7, 2004 (MA House
          Bill
          4880);

         

        (lxxi)
          No
          Mortgage Loan is a “High-Cost Home Loan” as defined in the Indiana Home Loan
          Practices Act effective January 1st, 2005 (Indiana Code Ann. §§ 24-9-1 et
          seq.);

         

        (lxxii)
          Approximately 60.26% of the Mortgage Loans are subject to prepayment penalty
          charges as of the Cut-off Date;

         

        (lxxiii)
          [Reserved.]

         

        (lxxiv)
          No borrower was required to purchase any credit life, disability, accident
          or
          health insurance product as a condition of obtaining the extension of credit.
          No
          borrower obtained a prepaid single premium credit life, credit disability,
          credit unemployment or credit property insurance policy in connection with
          the
          origination of the Mortgage Loan; No proceeds from any Mortgage Loan were
          used
          to purchase single premium credit insurance policies as part of the origination
          of, or as a condition to closing, such Mortgage Loan;

         

        (lxxv)
          With respect to any Group I Mortgage Loan that contains a provision permitting
          imposition of a penalty upon a prepayment prior to maturity: (a) the Mortgage
          Loan provides some benefit to the borrower (e.g.,
          a rate
          or fee reduction) in exchange for accepting such prepayment penalty; (b)
          the
          Mortgage Loan's originator had a written policy of offering the borrower,
          or
          requiring third-party brokers to offer the borrower, the option of obtaining
          a
          Mortgage Loan that did not require payment of such a penalty; (c) the prepayment
          penalty was adequately disclosed to the borrower pursuant to applicable
          state
          and federal law; (d) no Mortgage Loan originated on or after October 1,
          2002
          will provide for prepayment penalties for a term in excess of three years
          and
          any loans originated prior to such date will not provide for prepayment
          penalties for a term in excess of five years; unless the loan was modified
          to
          reduce the prepayment period to no more than three years (in
          the case of subprime loans) or five years (in the case of non-subprime
          loans)
from
          the
          date of the note and the borrower was notified in writing of such reduction
          in
          prepayment period; and (e) such prepayment penalty shall not be imposed
          in any
          instance where the mortgage loan is accelerated or paid off in connection
          with
          the workout of a delinquent mortgage or due to the borrower’s default,
          notwithstanding that the terms of the Mortgage Loan or state or federal
          law
          might permit the imposition of such penalty;

         

        
          
            
            

          

          
            18

            
              

            

          

          
            
            

          

        

         

        (lxxvi)
          [Reserved.]

         

        (lxxvii)
          [Reserved.]

         

        (lxxviii)
          [Reserved.]

         

        (lxxix)
          With respect to Mortgaged Properties located in the continental United
          States
          and Puerto Rico, no Group I Mortgage Loan secured by a single-family residence
          has a Principal Balance at origination in excess of $417,000; no Group
          I
          Mortgage Loan secured by a two-family residence has a Principal Balance
          at
          origination in excess of $524,300; no Group I Mortgage Loan secured by
          a
          three-family residence has a Principal Balance at origination in excess
          of
          $480,000; and no Group I Mortgage Loan secured by a four-family residence
          has a
          Principal Balance at origination in excess of $569,500; with respect to
          Mortgaged Properties located in Alaska, Guam, Hawaii and the Virgin Islands,
          no
          Group I Mortgage Loan secured by a single-family residence has a Principal
          Balance at origination in excess of $625,500; no Group I Mortgage Loan
          secured
          by a two-family residence has a Principal Balance at origination in excess
          of
          $800,775; no Group I Mortgage Loan secured by a three-family residence
          has a
          Principal Balance at origination in excess of $967,950; and no Group I
          Mortgage
          Loan secured by a four-family residence has a Principal Balance at origination
          in excess of $1,202,925;

         

        (lxxx)
          No
          selection procedure reasonably believed by the Sponsor to be adverse to
          the
          interests of the Certificateholders was utilized in selecting the Mortgage
          Loans;

         

        (lxxxi)
          The terms of the Mortgage Note related to each adjustable rate Mortgage
          Loan
          provide that, following an initial period of two, three or five years following
          the month in which such Mortgage Loan was originated and semiannually or
          annually thereafter (each such date, an “Adjustment
          Date”),
          the
          Mortgage Rate on such Mortgage Loan will be adjusted to equal the sum of
          (a) the
          related Index and (b) a fixed percentage amount specified in the related
          Mortgage Note (each, a “Gross
          Margin”);
          provided,
          however,
          that
          the Mortgage Rate generally will not increase or decrease by the related
          Periodic Rate Cap, and will not increase above a specified maximum Mortgage
          Rate
          over the life of the Adjustable Rate Mortgage Loan (the “Maximum
          Mortgage Rate”)
          or
          decrease below a specified minimum Mortgage Rate over the life of the Adjustable
          Rate Mortgage Loan (the “Minimum
          Mortgage Rate”);

         

        (lxxxii)
          None of the Mortgage Loans (by Cut-off Date Principal Balance) are negative
          amortization loans;

         

        
          
            
            

          

          
            19

            
              

            

          

          
            
            

          

        

         

        (lxxxiii)
          No error, omission, negligence, misrepresentation, fraud or similar occurrence
          with respect to a Mortgage Loan has taken place on the part of the Sponsor,
          its
          affiliates or employees or any other person involved in the origination
          of the
          Mortgage Loan or in the application for any insurance, including, but not
          limited to the MI Policy, in relation to such Mortgage Loan;

         

        (lxxxiv)
          Each Mortgage Loan was originated by a mortgagee approved by the Secretary
          of
          Housing and Urban Development pursuant to Sections 203 and 211 of the Act,
          a
          savings and loan association, a savings bank, a commercial bank, credit
          union,
          insurance company or similar institution which is supervised and examined
          by a
          federal or state authority;

         

        (lxxxv)
          With respect to each Mortgage Loan secured by manufactured housing, such
          manufactured housing is permanently affixed to a foundation and constitutes
          real
          estate under applicable state law;

         

        (lxxxvi)
          No Mortgage Loans are date of payment or simple interest loans;

         

        (lxxxvii)
          The sale, transfer, assignment and conveyance of Mortgage Loans by the
          Sponsor
          pursuant to this Purchase Agreement is not subject to and will not result
          in any
          tax, fee or governmental charge payable by the Depositor, the Custodian
          or the
          Trustee to any federal, state or local government (“Transfer Taxes”) other than
          Transfer Taxes which have or will be paid by the Sponsor as due; 

         

        (lxxxviii)
          Each Mortgage Loan is a “qualified mortgage” within Section 860G(a)(3) of the
          Code;

         

        (lxxxix)
          Approximately 43.59% of the Mortgage Loans (by Cut-off Date Principal Balance)
          with a Loan-to-Value Ratio greater than 60% are covered by an MI Policy
          issued
          by an MI Insurer;

         

        (xc)
          Approximately 43.61% of the Mortgage Loans are covered by a MI Policy issued
          by
          an MI Insurer;

         

        (xci)
          All
          requirements for the valid transfer of each MI Policy, including any assignments
          or notices required in each MI Policy, have been satisfied; 

         

        (xcii)
          As
          of the Closing Date with respect to each Mortgage Loan that is subject
          to a MI
          Policy, the Sponsor is unaware of any existing circumstances which would
          cause
          the MI Insurer to deny a claim with respect to such Mortgage Loan; 

         

        (xciii)
          All appraisals of the Mortgage Loans by the Sponsor are full URAR/1004
          appraisals; 

         

        (xciv)
          All Prepayment Charges are enforceable and were originated in compliance
          with
          all applicable federal, state, and local laws;

         

        
          
            
            

          

          
            20

            
              

            

          

          
            
            

          

        

         

        (xcv)
          [Reserved.]

         

        (xcvi)
          With respect to mortgage loans that are more than 59 days delinquent as
          of the
          Cut-off Date, the Sponsor has made a specific review of the Servicer’s data and
          records that reflect mortgagor communications and payment history, and
          has no
          actual knowledge of an event, condition or mortgagor communication which
          would
          cause the Sponsor to institute foreclosure proceedings; 

         

        (xcvii)
          The servicer for each Group I Mortgage Loan has fully furnished (and will
          fully
          furnish), in accordance with the Fair Credit Reporting Act and its implementing
          regulations, accurate and complete information (i.e., favorable and unfavorable)
          on its borrower credit files to Equifax, Experian, and Trans Union Credit
          Information Company (three of the credit repositories), on a monthly basis;
          

         

        (xcviii)
          None of the Group I Mortgage Loans are classified as (a) “high cost” loans under
          the Home Ownership and Equity Protection Act of 1994 or (b) “high cost,”
“threshold,” “covered”, “predatory” or “abusive” loans under any other
          applicable state, federal or local law (including without limitation any
          regulation or ordinance) (or a similarly classified loan using different
          terminology under a law imposing heightened regulatory scrutiny or additional
          legal liability for residential mortgage loans having high interest rates,
          points and/or fees); 

         

        (xcix)
          With respect to any Group I Mortgage Loan originated on or after August
          1, 2004,
          neither the related mortgage nor the related mortgage note requires the
          borrower
          to submit to arbitration to resolve any dispute arising out of or relating
          in
          any way to the mortgage loan transaction;

         

        (c)
          With
          respect to any Group I Mortgage Loan, the borrower was not encouraged or
          required to select a mortgage loan product offered by the mortgage loan’s
          originator which is a higher cost product designed for less creditworthy
          borrowers, taking into account such facts as, without limitation, the mortgage
          loan’s requirements and the borrower’s credit history, income, assets and
          liabilities. For each Group I Mortgage Loan, with respect to a borrowers
          seeking
          financing through a mortgage loan originator’s higher-priced subprime lending
          channel, such borrower was directed towards or offered the mortgage loan
          originator’s standard mortgage line if the borrower was able to qualify for one
          of the standard products; 

         

        (ci)
          With
          respect to any Group I Mortgage Loan, the methodology used in underwriting
          the
          extension of credit for each Group I Mortgage Loan did not rely solely
          on the
          extent of the borrower’s equity in the collateral as the principal determining
          factor in approving such extension of credit. The methodology employed
          objective
          criteria such as the borrower’s income, assets and liabilities, to the proposed
          mortgage payment and, based on such methodology, the mortgage loan’s originator
          made a reasonable determination that at the time of origination the borrower
          had
          the ability to make timely payments on the mortgage loan; 

         

        
          
            
            

          

          
            21

            
              

            

          

          
            
            

          

        

         

        (cii)
          With respect to any Group I Mortgage Loan, no borrower was charged “points and
          fees” in an amount greater than (a) $1,000 or (b) 5% of the principal amount
          of
          such Mortgage Loan, whichever is greater. For purposes of this representation,
          “points and fees” (x) include
          origination, underwriting, broker and finder’s fees and charges that the lender
          imposed as a condition of making the mortgage loan, whether they are paid
          to the
          lender or a third party; and (y) exclude
          bona
          fide discount points, fees paid for actual services rendered in connection
          with
          the origination of the mortgage (such as attorneys’ fees, notaries fees and fees
          paid for property appraisals, credit reports, surveys, title examinations
          and
          extracts, flood and tax certifications, and home inspections); the cost
          of
          mortgage insurance or credit-risk price adjustments; the costs of title,
          hazard,
          and flood insurance policies; state and local transfer taxes or fees; escrow
          deposits for the future payment of taxes and insurance premiums; and other
          miscellaneous fees and charges, which miscellaneous fees and charges, in
          total,
          do not exceed 0.25% of the loan amount; 

         

        (ciii)
          For each Group I Mortgage Loan, with respect to any subordinate lien Mortgage
          Loan, such lien is on a one- to four-family residence that is the principal
          residence of the borrower; 

         

        (civ)
          For
          each Group I Mortgage Loan, no subordinate lien Mortgage Loan has an original
          principal balance that exceeds one-half of the one-unit limitation for
          first
          lien mortgage loans, i.e., $208,500 (in Alaska, Guam, Hawaii or Virgin
          Islands:
          $312,750), without regard to the number of units; 

         

        (cv)
          For
          each Group I Mortgage Loan, the original principal balance of the first
          lien
          mortgage loan plus the original principal balance of any subordinate lien
          mortgage loans relating to the same mortgaged property does not exceed
          the
          applicable loan limit for first lien mortgage loans for that property type
          (as
          set out in clause (lxxix) above);

         

        (cvi)
          There is no Group I Mortgage Loan that is "seasoned", where the date of
          the
          mortgage note is more than 1 year before the date of issuance of the related
          Certificates.

         

        Upon
          discovery by the Sponsor or upon notice from the Depositor, the Trustee,
          or the
          Custodian, as applicable, of a breach of any representation or warranty
          in
          subsection (a) of this Section which materially and adversely affects the
          interests of the Certificateholders the Sponsor shall, within 45 days of
          its
          discovery or its receipt of notice of such breach, either (i) cure such
          breach
          in all material respects or (ii) to the extent that such breach is with
          respect
          to a Mortgage Loan or a Related Document, either (A) repurchase such Mortgage
          Loan from the Trustee at the Repurchase Price, or (B) substitute one or
          more
          Eligible Substitute Mortgage Loans for such Mortgage Loan, in each case
          in the
          manner and subject to the conditions and limitations set forth
          below.

         

        Upon
          discovery by the Sponsor or upon notice from the Depositor, the Trustee,
          or the
          Custodian, as applicable, of a breach of any representation or warranty
          in this
          subsection (b) with respect to any Mortgage Loan or upon the occurrence
          of a
          Repurchase Event, which materially and adversely affects the value of the
          related Mortgage Loan or the interests of any Certificateholders or of
          the
          Depositor or the Trustee in such Mortgage Loan (notice of which shall be
          given
          to the Depositor and the Trustee by the Sponsor, if it discovers the same)
          the
          Sponsor shall, within 90 days after the earlier of its discovery or receipt
          of
          notice thereof, either cure such breach or Repurchase Event in all material
          respects or either (i) repurchase such Mortgage Loan from the Trustee at
          the
          Repurchase Price, or (ii) substitute one or more Eligible Substitute Mortgage
          Loans for such Mortgage Loan, in each case in the manner and subject to
          the
          conditions set forth below; provided,
          however,
          that a
          breach of any of the representations and warranties found in subsections
          b(xx),
          (b)(lii), (b)(lxii), (b)(lxvii), (b)(lxxiv), (b)(lxxv), (b)(lxxix), (b)(xcvii),
          (b)(xcviii) and (b)(xcix) shall be deemed to materially and adversely affect
          the
          interest of the Certificateholders. The Repurchase Price for any such Mortgage
          Loan repurchased by the Sponsor shall be deposited or caused to be deposited
          by
          the Servicer in the Collection Account maintained by it pursuant to Section
          3.06
          of the Pooling and Servicing Agreement.

         

        
          
            
            

          

          
            22

            
              

            

          

          
            
            

          

        

         

        In
          the
          event that the Sponsor elects to substitute an Eligible Substitute Mortgage
          Loan
          or Loans for a Deleted Mortgage Loan pursuant to this Section 3.01, the
          Sponsor
          shall deliver to the Custodian on behalf of the Trustee, with respect to
          such
          Eligible Substitute Mortgage Loan or Loans, the original Mortgage Note
          and all
          other documents and agreements as are required by Section 2.01 hereof,
          with the
          Mortgage Note endorsed as required by such Section 2.01 hereof. No substitution
          will be made in any calendar month after the Determination Date for such
          month.
          Monthly Payments due with respect to Eligible Substitute Mortgage Loans
          in the
          month of substitution shall not be part of the Trust Fund and will be retained
          by the Servicer and remitted by the Servicer to the Sponsor on the next
          succeeding Payment Date. For the month of substitution, distributions to
          the
          Collection Account pursuant to the Pooling and Servicing Agreement will
          include
          the Monthly Payment due on a Deleted Mortgage Loan for such month and thereafter
          the Sponsor shall be entitled to retain all amounts received in respect
          of such
          Deleted Mortgage Loan. The Servicer shall amend or cause to be amended
          the
          Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage
          Loan and
          the substitution of the Eligible Substitute Mortgage Loan or Loans and
          the
          Servicer shall deliver the amended Mortgage Loan Schedule to the Custodian
          and
          the Trustee. Upon such substitution, the Eligible Substitute Mortgage Loan
          or
          Loans shall be subject to the terms of this Purchase Agreement and the
          Pooling
          and Servicing Agreement in all respects, the Sponsor shall be deemed to
          have
          made the representations and warranties with respect to the Eligible Substitute
          Mortgage Loan contained herein set forth in this Section 3.01(b), to the
          extent
          set forth in the definition of “Eligible Substitute Mortgage Loan”, as of the
          date of substitution, and the Sponsor shall be obligated to repurchase
          or
          substitute for any Eligible Substitute Mortgage Loan as to which a Repurchase
          Event has occurred as provided herein. In connection with the substitution
          of
          one or more Eligible Substitute Mortgage Loans for one or more Deleted
          Mortgage
          Loans, the Servicer will determine the amount (such amount, a “Substitution
          Adjustment Amount”), if any, by which (i) the Repurchase Price that would
          otherwise apply to such Deleted Mortgage Loan, exceeds (ii) the principal
          balance of the related Eligible Substitute Mortgage Loan (after application
          of
          the principal portion of the Monthly Payments due in the month of substitution
          that are to be distributed to the Collection Account in the month of
          substitution). The Sponsor shall pay the amount of such shortfall to the
          Servicer for deposit into the Collection Account on the day of substitution,
          without any reimbursement therefor.

         

        
          
            
            

          

          
            23

            
              

            

          

          
            
            

          

        

         

        Upon
          receipt by the Trustee of written notification, signed by a Servicing Officer,
          of the deposit of such Repurchase Price or of such substitution of an Eligible
          Substitute Mortgage Loan and deposit of any applicable Substitution Adjustment
          Amount as provided above, the Custodian shall, on behalf of the Trustee,
          cause
          to be released to the Sponsor the related Mortgage File for the Mortgage
          Loan
          being repurchased or substituted for and the Trustee shall execute and
          deliver
          such instruments of transfer or assignment prepared by the Servicer, in
          each
          case without recourse, as shall be necessary to vest in the Sponsor or
          its
          designee such Mortgage Loan released pursuant hereto and thereafter such
          Mortgage Loan shall not be an asset of the Trustee.

         

        It
          is
          understood and agreed that the obligation of the Sponsor to cure any breach
          with
          respect to or to repurchase or substitute for, any Mortgage Loan as to
          which
          such a breach has occurred and is continuing shall, except to the extent
          provided in Section 6.01 of this Purchase Agreement, constitute the sole
          remedy
          respecting such breach available to the Depositor, the Trustee, the
          Certificateholders or the Custodian against the Sponsor.

         

        It
          is
          understood and agreed that the representations and warranties set forth
          in this
          Section 3.01 shall survive delivery of the respective Mortgage Files to
          the
          Custodian on behalf of the Trustee.

         

        Section
          3.02 Depositor
          Representations and Warranties.

         

        The
          Depositor hereby represents and warrants to the Sponsor and the Trustee
          as of
          the date hereof and as of the Closing Date that:

         

        (a) The
          Depositor is duly organized and validly existing as a corporation in good
          standing under the laws of the State of Delaware, with power and authority
          to
          own its properties and to conduct its business as such properties are currently
          owned and such business is presently conducted.

         

        (b) The
          Depositor is duly qualified to do business as a foreign corporation in
          good
          standing and has obtained all necessary licenses and approvals in all
          jurisdictions in which the ownership or lease of its property or the conduct
          of
          its business shall require such qualifications and in which the failure
          to so
          qualify would have a material adverse effect on the business, properties,
          assets
          or condition (financial or other) of the Depositor and the ability of the
          Depositor to perform under this Purchase Agreement.

         

        (c) The
          Depositor has the power and authority to execute and deliver this Purchase
          Agreement and to carry out its terms; the Depositor has full power and
          authority
          to purchase the property to be purchased from the Sponsor and the Depositor
          has
          duly authorized such purchase by all necessary corporate action; and the
          execution, delivery and performance of this Purchase Agreement have been
          duly
          authorized by the Depositor by all necessary corporate action.

         

        (d) The
          consummation of the transactions contemplated by this Purchase Agreement
          and the
          fulfillment of the terms hereof do not conflict with, result in any breach
          of
          any of the terms and provisions of, or constitute (with or without notice
          or
          lapse of time) a default under, the articles of incorporation or bylaws
          of the
          Depositor, or any indenture, agreement or other instrument to which the
          Depositor is a party or by which it is bound; nor result in the creation
          or
          imposition of any Lien upon any of its properties pursuant to the terms
          of any
          such indenture, agreement or other instrument (other than pursuant to the
          Basic
          Documents); nor violate any law or, to the best of the Depositor’s knowledge,
          any order, rule or regulation applicable to the Depositor of any court
          or of any
          federal or state regulatory body, administrative agency or other governmental
          instrumentality having jurisdiction over the Depositor or its
          properties.

         

        
          
            
            

          

          
            24

            
              

            

          

          
            
            

          

        

         

        (e) The
          Depositor (A) is a solvent entity and is paying its debts as they become
          due and
          (B) after giving effect to the transfer of the Mortgage Loans, will be
          a solvent
          entity and will have sufficient resources to pay its debts as they become
          due.

         

        ARTICLE
          IV


         

        SPONSOR’S
          COVENANTS

         

        Section
          4.01 Covenants
          of the Sponsor.

         

        The
          Sponsor hereby covenants as of the date hereof and as of the Closing Date
          that,
          except for the transfer hereunder, on and after the Closing Date, the Sponsor
          will not sell, pledge, assign or transfer to any other Person, or grant,
          create,
          incur or assume any Lien on, any Mortgage Loan, whether now existing or
          hereafter created, or any interest therein; the Sponsor will notify the
          Custodian and the Trustee of the existence of any such Lien on any Mortgage
          Loan
          immediately upon discovery thereof; the Sponsor will defend the right,
          title and
          interest of the Trustee, on its own behalf and as assignee of the Depositor,
          in,
          to and under the Mortgage Loans, whether now existing or hereafter created,
          against all claims of third parties claiming through or under the
          Sponsor.

         

        In
          the
          event that the Custodian or the Trustee receives actual notice of any Transfer
          Taxes arising out of the transfer, assignment and conveyance of the Mortgage
          Loans, on written demand by the Custodian, or upon the Sponsor’s otherwise being
          given notice thereof by the Custodian, the Sponsor shall pay any and all
          such
          Transfer Taxes (it being understood that the Holders of the Certificates,
          the
          Depositor, the Custodian and the Trustee shall have no obligation to pay
          such
          Transfer Taxes).

         

        Section
          4.02 Payment
          of Expenses.

         

        (a) The
          Sponsor will pay on the Closing Date all expenses incident to the performance
          of
          its obligations under this Purchase Agreement and the Underwriting Agreement,
          including (i) the preparation, printing and any filing of the preliminary
          prospectus, Prospectus Supplement and Prospectus (including any schedules
          or
          exhibits and any document incorporated therein by reference) originally
          filed
          and of each amendment or supplement thereto, (ii) the preparation, printing
          and
          delivery to the Underwriters of this Purchase Agreement and the Underwriting
          Agreement, the Pooling and Servicing Agreement and such other documents
          as may
          be required in connection with the offering, purchase, sale and delivery
          of the
          Certificates, (iii) the preparation, issuance and delivery of the certificates
          for the Class A Certificates and Mezzanine Certificates to the Underwriters,
          including any charges of DTC, Clearstream Luxembourg and the Euroclear
          System in
          connection therewith; (iv) the qualification of the Class A Certificates
          and
          Mezzanine Certificates under securities laws in accordance with the provisions
          of Section 3(f) of the Underwriting Agreement, including filing fees and
          the
          reasonable fees and disbursements of counsel for the Underwriters in connection
          therewith and in connection with the preparation of the Blue Sky Survey
          and any
          supplement thereto for delivery to potential investors, (v) in addition
          to the
          initial printing and filing costs under (i) above, the printing and delivery
          to
          the Underwriters of copies of each preliminary prospectus and of the Prospectus
          and any amendments or supplements thereto for delivery to potential investors,
          (vi) the fees and expenses of the Trustee and the Custodian, including
          the fees
          and disbursements of counsel for the Trustee and the Custodian in connection
          with the Pooling and Servicing Agreement, the Purchase Agreement and the
          Certificates and (vii) any fees payable in connection with the rating of
          the
          Certificates.

         

        
          
            
            

          

          
            25

            
              

            

          

          
            
            

          

        

         

        (b) If
          the
          Underwriting Agreement is terminated by the Underwriters in accordance
          with the
          provisions of Section 5 or Section 9(a)(i) thereof, the Sponsor shall reimburse
          the Underwriters for all of their out-of-pocket expenses, including the
          reasonable fees and disbursements of counsel for the Underwriters.

         

        ARTICLE
          V


         

        CONDITIONS
          TO MORTGAGE LOAN PURCHASE

         

        Section
          5.01 Conditions
          of Depositor’s Obligations.

         

        The
          Depositor’s obligations to purchase the Mortgage Loans which each accepts for
          purchase hereunder shall be subject to each of the following
          conditions:

         

        (i)
          the
          Mortgage File for each Mortgage Loan shall have been delivered in accordance
          with this Purchase Agreement;

         

        (ii)
          the
          representations and warranties set forth in Section 3.01(b) hereof with
          respect
          to each Mortgage Loan shall be true as of the Closing Date;

         

        (iii)
          the
          Underwriters or their affiliates shall have had an opportunity to perform
          a due
          diligence review of each Mortgage Loan; and

         

        (iv)
          the
          Sponsor shall have provided to the Underwriters or their affiliates such
          other
          documents which are then required to have been delivered under this Purchase
          Agreement or which are reasonably requested by the Underwriters or their
          affiliates, which other documents may include UCC financing statements,
          a
          favorable opinion or opinions of counsel with respect to matters which
          are
          reasonably requested by the Underwriters, and/or an Officers’
Certificate.

         

        
          
            
            

          

          
            26

            
              

            

          

          
            
            

          

        

         

        ARTICLE
          VI


         

        INDEMNIFICATION
          BY THE SPONSOR

        WITH
          RESPECT TO THE MORTGAGE LOANS

         

        Section
          6.01 Indemnification
          With Respect to the Mortgage Loans.

         

        The
          Sponsor shall indemnify and hold harmless the Depositor, Trustee and the
          Custodian from and against any loss, liability or expense arising from
          the
          breach by the Sponsor of its representations and warranties in Section
          3.01 of
          this Purchase Agreement which materially and adversely affects the value
          of any
          Mortgage Loan or the Depositor’s assignees’ interest in any Mortgage Loan or
          from the failure by the Sponsor to perform its obligations under this Purchase
          Agreement in any material respect.

         

        Section
          6.02 Limitation
          on Liability of the Sponsor.

         

        None
          of
          the directors, officers, employees or agents of the Sponsor shall be under
          any
          liability to the Depositor, it being expressly understood that all such
          liability is expressly waived and released as a condition of, and as
          consideration for, the execution of this Purchase Agreement. Except as
          and to
          the extent expressly provided in the Basic Documents, the Sponsor shall
          not be
          under any liability to the Trustee, the Custodian or the Certificateholders.
          The
          Sponsor and any director, officer, employee or agent of the Sponsor may
          rely in
          good faith on any document of any kind prima
          facie
          properly
          executed and submitted by any Person respecting any matters arising
          hereunder.

         

        ARTICLE
          VII


         

        TERMINATION

         

        Section
          7.01 Termination.

         

        (a) Except
          as
          provided in Section 7.01(b) hereof, the respective obligations and
          responsibilities of the Sponsor, the Depositor, the Trustee and the Custodian
          created hereby shall terminate, except for the Sponsor’s indemnity obligations
          as provided herein, upon the termination of the Trust Fund pursuant to
          the terms
          of the Pooling and Servicing Agreement.

         

        (b) The
          Depositor may terminate this Purchase Agreement, by notice to the Sponsor,
          at
          any time at or prior to the Closing Date:

         

        (i)
          if
          the Underwriting Agreement is terminated by the Underwriters pursuant to
          the
          terms of the Underwriting Agreement or if there has been, since the time
          of
          execution of this Purchase Agreement or since the respective dates as of
          which
          information is given in the Prospectus, any material adverse change in
          the
          financial condition, earnings, business affairs or business prospects of
          the
          Sponsor, whether or not arising in the ordinary course of business,
          or

         

        (ii)
          if
          there has occurred any material adverse change in the financial markets
          in the
          United States, any outbreak of hostilities or escalation thereof or other
          calamity or crisis or any change or development involving a prospective
          change
          in national or international political, financial or economic conditions,
          in
          each case the effect of which is such as to make it, in the judgment of
          the
          Underwriters, impracticable to market the Offered Certificates or to enforce
          contracts for the sale of the Offered Certificates, or

         

        
          
            
            

          

          
            27

            
              

            

          

          
            
            

          

        

         

        (iii)
          if
          trading in any securities of the Sponsor has been suspended or limited
          by the
          Commission or the New York Stock Exchange, or if trading generally on the
          American Stock Exchange or the New York Stock Exchange or in the NASDAQ
          National
          Market System has been suspended or limited, or minimum or maximum prices
          for
          trading have been fixed, or maximum ranges for prices have been required,
          by any
          of said exchanges or by such system or by order of the Commission, the
          National
          Association of Securities Dealers, Inc. or any other governmental authority,
          

         

        (iv)
          if a
          banking moratorium has been declared by either federal or New York
          authorities,

         

        (v)
          either (A) a change in control of the Sponsor shall have occurred other
          than in
          connection with and as a result of the issuance and sale by the Sponsor
          or
          registered, publicly offered common stock; or (B) the Underwriters determine
          in
          their sole discretion that any material adverse change has occurred in
          the
          management of the Sponsor,

         

        (vi)
          there is (A) a material breach by the Sponsor of any representation and
          warranty
          contained in this Purchase Agreement or the Underwriting Agreement other
          than a
          representation or warranty relating to particular Mortgage Loans, and the
          Underwriters have reason to believe in good faith either that such breach
          is not
          curable within two (2) days or that such breach may not have been cured
          in all
          material respects at the expiration of two (2) days following discovery
          thereof
          by the Sponsor or (B) a failure by the Sponsor to make any payment payable
          by it
          under this Purchase Agreement or (C) any other failure by the Sponsor to
          observe
          and perform in any material respect its material covenants, agreements
          and
          obligations with the Depositor, including without limitation those contained
          in
          this Purchase Agreement, and the Depositor has reason to believe in good
          faith
          that such failure may not have been cured in all material respects at the
          expiration of two (2) days following discovery thereof by the Sponsor,
          or

         

        (vii)
          the
          Sponsor fails to provide written notification to the Underwriters of any
          change
          in its loan origination, acquisition or appraisal guidelines or practices,
          or
          the Sponsor, without the prior consent of the Underwriters (which shall
          not be
          unreasonably withheld), amends in any material respect its loan origination,
          acquisition or appraisal guidelines or practices.

         

        If
          this
          Purchase Agreement is terminated pursuant to this Section 7.01(b), such
          termination shall be without liability of any party to any other party
          except as
          provided in Section 4.02 hereof.

         

        
          
            
            

          

          
            28

            
              

            

          

          
            
            

          

        

         

        ARTICLE
          VIII


         

        MISCELLANEOUS
          PROVISIONS

         

        Section
          8.01 Amendment.

         

        This
          Purchase Agreement may be amended from time to time by the Sponsor, the
          Depositor, the Trustee and the Custodian by written agreement signed by
          the
          Sponsor, the Depositor, the Trustee and the Custodian.

         

        Section
          8.02 Governing
          Law.

         

        This
          Purchase Agreement shall be governed by and construed in accordance with
          the
          laws of the State of New York and the obligations, rights and remedies
          of the
          parties hereunder shall be determined in accordance with such laws.

         

        Section
          8.03 Notices.

         

        All
          demands, notices and communications hereunder shall be in writing and shall
          be
          deemed to have been duly given if personally delivered at or mailed by
          registered mail, postage prepaid, addressed as follows:

         

        
          	 	
                  (i)

                	
                  if
                    to the Sponsor:

                


        

        NovaStar
          Mortgage, Inc. 

        8140
          Ward
          Parkway 

        Suite
          300


        Kansas
          City, Missouri 64114

        Attention:
          Matt Kaltenrieder

         

        or,
          such
          other address as may hereafter be furnished to the Depositor in writing
          by the
          Sponsor.

         

        
          	 	
                  (ii)

                	
                  if
                    to the Depositor:

                


        

        NovaStar
          Mortgage Funding Corporation 

        8140
          Ward
          Parkway

        Suite
          300

        Kansas
          City, Missouri 64114

        Attention:
          Matt Kaltenrieder

         

        or
          such
          other address as may hereafter be furnished to the Sponsor in writing by
          the
          Depositor.

         

        
          	 	
                  (iii)

                	
                  if
                    to the Custodian:

                


        

        U.S.
          Bank
          National Association

        4527
          Metropolitan Court, Suite C

        Frederick,
          Maryland 21704

        Attention:
          Robert D. Ruiz

         

        
          
            
            

          

          
            29

            
              

            

          

          
            
            

          

        

         

        or
          such
          other address as may hereafter be furnished to the Sponsor in writing by
          the
          Custodian.

         

        
          	 	
                  (iv)

                	
                  if
                    to the Trustee:

                


        

        Deutsche
          Bank National Trust Company 

        1761
          East
          St. Andrew Place 

        Santa
          Ana, CA 92705

        Attention:
          Trust Administration - NS0701

         

        or
          such
          other address as may hereafter be furnished to the Sponsor in writing by
          the
          Trustee.

         

        Section
          8.04 Severability
          of Provisions.

         

        If
          any
          one or more of the covenants, agreements, provisions or terms of this Purchase
          Agreement shall be held invalid for any reason whatsoever, then such covenants,
          agreements, provisions or terns shall be deemed severable from the remaining
          covenants, agreements, provisions or terms of this Purchase Agreement and
          shall
          in no way affect the validity or enforceability of the other provisions
          of this
          Purchase Agreement.

         

        Section
          8.05 Relationship
          of Parties.

         

        Nothing
          herein contained shall be deemed or construed to create a partnership or
          joint
          venture between the parties hereto, and the services of the Sponsor shall
          be
          rendered as an independent contractor and not as agent for the
          Depositor.

         

        Section
          8.06 Counterparts.

         

        This
          Purchase Agreement may be executed in two or more counterparts and by the
          different parties hereto on separate counterparts, each of which, when
          so
          executed, shall be deemed to be an original and such counterparts together
          shall
          constitute one and the same agreement.

         

        Section
          8.07 Further
          Agreements.

         

        The
          Depositor and the Sponsor each agree to execute and deliver to the other
          such
          additional documents, instruments or agreements as may be necessary or
          appropriate to effectuate the purposes of this Purchase Agreement. Each
          of the
          Depositor and the Sponsor agrees to use its best reasonable efforts to
          take all
          actions necessary to be taken by it to cause the Class A-1A Certificates
          to be
          rated “Aaa” by Moody’s and “AAA” by S&P, the Class A-2A1 Certificates to be
          rated “Aaa” by Moody’s and “AAA” by S&P, the Class A-2A2 Certificates to be
          rated “Aaa” by Moody’s and “AAA” by S&P, the Class A-2B Certificates to be
          rated “Aaa” by Moody’s and “AAA” by S&P, the Class A-2C Certificates to be
          rated “Aaa” by Moody’s and “AAA” by S&P, the Class A-2D Certificates to be
          rated “Aaa” by Moody’s and “AAA” by S&P, the Class M-1 Certificates to be
          rated “Aa1” by Moody’s and “AA+” by S&P, the Class M-2 Certificates to be
          rated “Aa2” by Moody’s and “AA” by S&P, the Class M-3 Certificates to be
          rated “Aa3” by Moody’s and “AA-” by S&P, the Class M-4 Certificates to be
          rated “A1” by Moody’s and “A+” by S&P, the Class M-5 Certificates to be
          rated “A2” by Moody’s and “A” by S&P, the Class M-6 Certificates to be rated
“A3” by Moody’s and “A-” by S&P, the Class M-7 Certificates to be rated
“Baa1” by Moody’s and “BBB+” by S&P, the Class M-8 Certificates to be rated
“Baa2” by Moody’s and “BBB” by S&P, the Class M-9 Certificates to be rated
“Baa3” by Moody’s and “BBB-” by S&P, the Class M-10 Certificates to be rated
“Ba1” by Moody’s and “BB+” by S&P, the Class M-11 Certificates to be rated
“Ba2” by Moody’s and “BB” by S&P, and each party will cooperate with the
          other in connection therewith.

         

        
          
            
            

          

          
            30

            
              

            

          

          
            
            

          

        

         

        Section
          8.08 Intention
          of the Parties.

         

        It
          is the
          intention of the parties that (i) the Depositor is purchasing on the Closing
          Date, and the Sponsor is selling on the Closing Date, the Mortgage Loans,
          rather
          than the Depositor providing to the Sponsor a loan secured by the Mortgage
          Loans
          on the Closing Date, and (ii) the Trustee is purchasing on the Closing
          Date, and
          the Depositor is selling on the Closing Date, the Mortgage Loans, rather
          than
          the Trustee providing to the Depositor a loan secured by the Mortgage Loans,
          Accordingly, the parties hereto each intend to treat these transactions
          as (i) a
          sale by the Sponsor, and a purchase by the Depositor, of the Mortgage Loans
          on
          the Closing Date, and (ii) a sale by the Depositor, and a purchase by the
          Trustee, of the Mortgage Loans on the Closing Date.

         

        Section
          8.09 Successors
          and Assigns; Assignment of Purchase Agreement.

         

        This
          Purchase Agreement shall bind and inure to the benefit of and be enforceable
          by
          the Sponsor, the Depositor, the Trustee, the Custodian, and their respective
          successors and assigns. The obligations of the Sponsor under this Purchase
          Agreement cannot be assigned or delegated to a third party without the
          consent
          of the Depositor, which consent shall be at the Depositor’s discretion. The
          parties hereto acknowledge that (i) the Depositor is acquiring the Mortgage
          Loans for the purpose of selling them to the Trustee, who will hold the
          Mortgage
          Loans in trust for the benefit of the Certificateholders. As an inducement
          to
          the Depositor and the Trustee to purchase the Mortgage Loans, the Sponsor
          acknowledges and consents to (i) the assignment by the Depositor to the
          Trustee
          of all of the Depositor’s rights or remedies against the Sponsor pursuant to
          this Purchase Agreement and to (ii) the enforcement or exercise of any
          rights
          against the Sponsor pursuant to this Purchase Agreement by the Depositor
          and the
          Trustee. Such enforcement of a right or remedy by the Trustee, shall have
          the
          same force and effect as if the right or remedy had been enforced or exercised
          by the Depositor directly.

         

        Section
          8.10 Survival.

         

        The
          representations and warranties made herein by the Sponsor and the provisions
          of
          Article V hereof shall survive the purchase of the Mortgage Loans
          hereunder.

         

        Section
          8.11 Liability
          of the Trustee. 

         

        The
          Trustee is entering into the Basic Documents to which it is a party solely
          as
          Trustee, hereunder and thereunder, and not in its individual capacity,
          and all
          persons having any claim against the Trustee by reason of the transactions
          contemplated by this Agreement or any other Basic Document shall look only
          to
          the Trust Fund for payment or satisfaction thereof.

         

        [Signature
          page to follow]


        
          
            
            

          

          
            31

            
              

            

          

           

        


        IN
          WITNESS WHEREOF, the Sponsor, the Depositor, the Custodian and the Trustee
          have
          caused their names to be signed to this Mortgage Loan Purchase Agreement
          by
          their respective officers thereunto duly authorized as of the day and year
          first
          above written.

        
          	 	 	 
	 	
                  NOVASTAR
                    MORTGAGE, INC. 

                  as
                    Sponsor

                
	 
 	 
 	 
 
	 	By:  	/s/ Matt
                  Kaltenrieder
	 	
                  

                  Name: Matt
                    Kaltenrieder 

                  Title: Vice
                    President

                


        

         

        
          	 	 	 
	 	
                  NOVASTAR
                    MORTGAGE FUNDING 

                  CORPORATION
                    

                  as
                    Depositor

                
	 
 	 
 	 
 
	 	By:  	/s/ Matt
                  Kaltenrieder
	 	
                  

                  Name: Matt
                    Kaltenrieder 

                  Title: Vice
                    President

                


        

         

        
          	 	 	 
	 	
                  U.S.
                    BANK NATIONAL ASSOCIATION, 

                  as
                    Custodian

                
	 
 	 
 	 
 
	 	By:  	/s/ Sheryl
                  Johnson
	 	
                  
                    

                  

                  Name:
                    Sheryl Johnson

                  Title:
                    Vice President

                


        

         

        
          	 	 	 
	 	
                  DEUTSCHE
                    BANK NATIONAL TRUST COMPANY, 

                  not
                    in its individual capacity, 

                  but
                    solely as Trustee

                
	 
 	 
 	 
 
	 	By:  	/s/ Karlene
                  Benvenuto
	 	
                  

                  Name:
                    Karlene Benvenuto

                  Title:
                    Authorized Signer

                


        

         

        
          
            	 	 	 
	 	By:  	/s/ Ronaldo
                    Reyes
	 	
                    

                    
                      Name:
                        Ronaldo Reyes

                      Title:
                        Vice President

                    

                  


          

           

          
            
              
              

            

            
              32

              
                

              

            

            
              
              

            

          

           

          
            	 	 	 
	 	
                    NOVASTAR
                      FINANCIAL, INC., solely with respect to 

                    Section
                      3.01(b)

                  
	 
 	 
 	 
 
	 	By:  	/s/ Matt
                    Kaltenrieder
	 	
                    

                    Name: Matt
                      Kaltenrieder 

                    Title: Vice
                      President

                  


          

        

         

        [Signature
          Page to Mortgage Loan Purchase Agreement (2 of 2)]


        
          
            
            

          

          
            33

            
              

            

          

           

        


        EXHIBIT
          1

         

        MORTGAGE
          LOAN SCHEDULE

         

        [Provided
          to Depositor and to Trustee at the Closing]



        
          
            
            

          

          
            
            

            
              

            

          

           

        


        EXHIBIT
          2(A)

         

        [Reserved]


        
          
            
            

          

          
            EX
              2(A)-1

            
              

            

          

           

        


        EXHIBIT
          2(B)

        


        [Reserved]