Exhibit
        10.1

    

    
 

    AMENDMENT
      NO. 2

    TO
      THE

    SALE
      AND SERVICING AGREEMENT

     

    Amendment
      No. 2, dated as of October 1, 2007 (the “Amendment”),
      to
      the Sale and Servicing Agreement (the “Agreement”)
      dated
      as of April 1, 2006, by and among NovaStar Certificates Financing Corporation,
      as depositor (the “Depositor”),
      NovaStar Mortgage, Inc., as sponsor and servicer (the “Sponsor”
or
      “Servicer”),
      NovaStar Mortgage Funding Trust, Series 2006-1, as issuing entity (the
“Issuing
      Entity”),
      U.S.
      Bank National Association, as custodian (the “Custodian”),
      The
      Bank of New York (as successor to JPMorgan Chase Bank, National Association),
      as
      indenture trustee (the “Indenture
      Trustee”)
      and
      The Bank of New York (as successor to J.P. Morgan Trust Company, National
      Association), as co-trustee (the “Co-Trustee”).
      Capitalized terms used and not defined herein shall have the meaning set forth
      in the Agreement and Appendix I thereto.

     

    WHEREAS
      the parties hereto have entered into the Agreement; 

     

    WHEREAS
      the parties hereto now wish to amend certain provisions in the Agreement
      pursuant to Section 11.03 of the Agreement; and

     

    WHEREAS
      the Indenture Trustee shall not consent to this Amendment to the Agreement
      unless it shall have first received an Opinion of Counsel, to the effect that
      (a) this Amendment (i) will not prevent the Notes from being characterized
      as
      debt for United States federal income tax purposes or cause the Issuing Entity
      to be subject to an entity-level tax for federal income tax purposes, and (ii)
      shall not adversely affect in any material respect the interests of any
      Noteholder or the Hedge Counterparties, and (b) any applicable requirements
      and
      conditions set forth in the Agreement with respect to the adoption of amendments
      thereto have been complied with.

     

    NOW,
      THEREFORE, in consideration of the promises and mutual agreements contained
      herein, the parties hereto agree to amend the Agreement pursuant to Section
      11.03 of the Agreement and restate certain provisions thereof as
      follows:

     

    1. The
      Amendment.

     

    (a)  Appendix
      I is hereby amended to add the following definition, between “Administrative
      Fee” and “Affiliate”:

     

    "Advance":
      As to
      any Mortgage Loan, any advance made by the Servicer in respect of any Payment
      Date pursuant to Section 5.25.

     

    2. Condition
      to effectiveness.
      As a
      condition to the effectiveness of this Amendment, an Opinion of Counsel
      satisfying the requirements of Section 11.03 of the Agreement has been received
      by the Parties hereto.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    3. Effect
      of Amendment.
      This
      Amendment to the Agreement shall be effective and the Agreement shall be deemed
      to be modified and amended in accordance herewith on the Payment Date on the
      date on which the Indenture Trustee receives an executed copy of this Amendment.
      This Amendment, once effective, shall be effective as of the date first set
      forth above. The respective rights, limitations, obligations, duties,
      liabilities and immunities of the Depositor, the Sponsor, the Servicer, the
      Issuing Entity, the Custodian, the Co-Trustee and the Indenture Trustee shall
      hereafter be determined, exercised and enforced subject in all respects to
      such
      modifications and amendments, and all the terms and conditions of this Amendment
      shall be and be deemed to be part of the terms and conditions of the Agreement
      for any and all purposes. The Agreement, as amended hereby, is hereby ratified
      and confirmed in all respects.

     

    4. The
      Agreement in Full Force and Effect as Amended.
      Except
      as specifically amended hereby, all the terms and conditions of the Agreement
      shall remain in full force and effect and, except as expressly provided herein,
      the effectiveness of this Amendment shall not operate as, or constitute a waiver
      or modification of, any right, power or remedy of any party to the Agreement.
      All references to the Agreement in any other document or instrument shall be
      deemed to mean the Agreement as amended by this Amendment.

     

    5. Counterparts.
      This
      Amendment may be executed by the Parties in several counterparts, each of which
      shall be deemed to be an original and all of which shall constitute together
      but
      one and the same agreement. This Amendment shall become effective when
      counterparts hereof executed on behalf of such Party shall have been
      received.

     

    6. Governing
      Law.
      This
      Amendment shall be construed in accordance with and governed by the laws of
      the
      State of New York applicable to agreements made and to be performed
      therein.

     

    7. Limitation
      of Owner Trustee Liability.
      It is
      expressly understood and agreed by the parties that (a) this document is
      executed and delivered by Wilmington Trust Company, not individually or
      personally, but solely as Owner Trustee, in the exercise of the powers and
      authority conferred and vested in it, pursuant to the Trust Agreement, (b)
      each
      of the representations, undertakings and agreements herein made on the part
      of
      the Issuing Entity is made and intended not as personal representations,
      undertakings and agreements by Wilmington Trust Company but is made and intended
      for the purpose for binding only the Issuing Entity, (c) nothing herein
      contained shall be construed as creating any liability on Wilmington Trust
      Company, individually or personally, to perform any covenant either expressed
      or
      implied contained herein, all such liability, if any, being expressly waived
      by
      the parties hereto and by any person claiming by, through or under the parties
      hereto, and (d) under no circumstances shall Wilmington Trust Company be
      personally liable for the payment of any indebtedness or expenses of the Issuing
      Entity or be liable for the breach or failure of any obligation, representation,
      warranty or covenant made or undertaken by the Issuing Entity under this
      Amendment or any other related documents.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the Depositor, Sponsor, the Servicer, the Issuing Entity,
      the
      Indenture Trustee, the Co-Trustee and the Custodian, have caused this Amendment
      to be duly executed by their officers thereunto duly authorized, all as of
      the
      day and year first above written.

     

    
      	 	
              NOVASTAR
                CERTIFICATES FINANCING CORPORATION, as Depositor

               

              By: 
                /s/ Matt Kaltenrieder       
                

                 Name: Matt
                Kaltenrieder

                    
Title: Vice
                President

               

              NOVASTAR
                MORTGAGE, INC.,

              as
                Sponsor and as Servicer

              
                 

                By: 
                  /s/ Matt Kaltenrieder       
                  

                   Name: Matt
                  Kaltenrieder

                      
Title: Vice
                  President

              

               

              NOVASTAR
                MORTGAGE FUNDING TRUST, SERIES 2006-1, as Issuing Entity

               

              By: WILMINGTON
                TRUST COMPANY, not in its individual capacity, but solely as Owner
                Trustee
                under the Trust Agreement

               

              By: 
                /s/ Roseline K. Maney

                 Name:
                Roseline K. Maney

                 Title: 
                Vice President

               

              U.S.
                BANK NATIONAL ASSOCIATION, as Custodian

               

              By: 
                /s/ Corinne Rhode

                 Name:
                Corinne
                Rhode

                 Title:
                Assistant Vice President

               

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

            


    

     

    
      
        
        

      

      
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              THE
                BANK OF NEW YORK,
                not in its individual capacity but solely as Indenture
                Trustee

               

              By: 
                /s/ Andrew M. Cooper

                 Name:
                Andrew
                M. Cooper

                 Title:
                Assistant Vice President

               

              THE
                BANK OF NEW YORK,
                not in its individual capacity but solely as Co-Trustee

               

              
                By: 
                  /s/ Andrew M. Cooper

                   Name:
                  Andrew
                  M. Cooper

                   Title:
                  Assistant Vice President

                 

              

            
	
              NOVASTAR
                FINANCIAL, INC., solely with respect to Section 4.01

               

              
                By: 
                  /s/ Matt Kaltenrieder       
                  

                   Name: Matt
                  Kaltenrieder

                      
Title: Vice
                  President

              

            	 


    

     

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

    


    
      
        
        

      

      
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