Amended amd Restated Trust Agreement


 EXHIBIT 4.2 
 EXECUTION VERSION 
 AMENDED AND RESTATED TRUST AGREEMENT 
 dated as of June 8, 2006 
 by and among

 NOVASTAR CERTIFICATES FINANCING CORPORATION 
 as Depositor, 
 and 
 WILMINGTON TRUST COMPANY, 
 as Owner Trustee 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1 
 Asset-Backed Notes, Series 2006-MTA1







 TABLE OF CONTENTS 
 ARTICLE I 
 DEFINITIONS 
  

					
			
	 Section 1.01.
	 	Capitalized Terms	  	1
	 Section 1.02.
	 	Other Definitional Provisions.	  	4
	
	 ARTICLE II
 ORGANIZATION

			
	 Section 2.01.
	 	Name	  	5
	 Section 2.02.
	 	Office	  	5
	 Section 2.03.
	 	Purposes and Powers	  	5
	 Section 2.04.
	 	Appointment of Owner Trustee	  	6
	 Section 2.05.
	 	Initial Capital Contribution of Owner Trust Estate	  	6
	 Section 2.06.
	 	Declaration of Trust	  	6
	 Section 2.07.
	 	Liability of the Certificateholders	  	7
	 Section 2.08.
	 	Title to Trust Property.	  	7
	 Section 2.09.
	 	Situs of Issuing Entity	  	7
	 Section 2.10.
	 	Federal Income Tax Treatment of the Issuing Entity	  	7
	 Section 2.11.
	 	Covenants of the Certificateholders	  	7
	 Section 2.12.
	 	Representations and Warranties of the Depositor	  	8
	 Section 2.13.
	 	Covenants of the Depositor	  	9
	
	 ARTICLE III
 [Reserved]

	
	 ARTICLE IV
 CERTIFICATES AND TRANSFER OF INTERESTS

			
	 Section 4.01.
	 	Initial Ownership	  	10
	 Section 4.02.
	 	The Certificates	  	10
	 Section 4.03.
	 	Execution, Authentication and Delivery of Certificates	  	10
	 Section 4.04.
	 	Registration of Transfer and Exchange of Certificates	  	10
	 Section 4.05.
	 	Mutilated, Destroyed, Lost or Stolen Certificates	  	11
	 Section 4.06.
	 	Persons Deemed Owners	  	12
	 Section 4.07.
	 	Access to List of Certificateholders’ Names and Addresses	  	12
	 Section 4.08.
	 	Maintenance of Office or Agency	  	12
	 Section 4.09.
	 	Restrictions on Transfers of Certificates	  	12
	
	 ARTICLE V
 ACTIONS BY OWNER TRUSTEE

			
	 Section 5.01.
	 	Prior Notice to the Certificateholders with Respect to Certain Matters	  	15
	 Section 5.02.
	 	Action by Certificateholders with Respect to Bankruptcy	  	16

  

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	 Section 5.03.
	  	 Restrictions on Certificateholders’ Power
	  	17
	 Section 5.04.
	  	 Majority Control
	  	17
	
	ARTICLE VI
	TAX PROVISIONS; CERTAIN DUTIES
			
	 Section 6.01.
	  	 Federal Income Tax Provisions.
	  	17
	 Section 6.02.
	  	 Withholding Taxes
	  	17
	 Section 6.03.
	  	 Accounting and Reports to the Certificateholders, the Internal Revenue Service and Others
	  	18
	
	ARTICLE VII
	AUTHORITY AND DUTIES OF OWNER TRUSTEE
			
	 Section 7.01.
	  	 General Authority
	  	18
	 Section 7.02.
	  	 General Duties.
	  	19
	 Section 7.03.
	  	 Action upon Instruction.
	  	20
	 Section 7.04.
	  	 No Duties Except as Specified in this Agreement, the Basic Documents or any Instructions.
	  	21
	 Section 7.05.
	  	 No Action Except under Specified Documents or Instructions
	  	21
	 Section 7.06.
	  	 Restrictions
	  	22
	
	ARTICLE VIII
	CONCERNING THE OWNER TRUSTEE
			
	 Section 8.01.
	  	 Acceptance of Trusts and Duties
	  	22
	 Section 8.02.
	  	 Furnishing of Documents
	  	23
	 Section 8.03.
	  	 Representations and Warranties of the Owner Trustee
	  	24
	 Section 8.04.
	  	 Reliance; Advice of Counsel.
	  	24
	 Section 8.05.
	  	 Not Acting in Individual Capacity
	  	25
	 Section 8.06.
	  	 Owner Trustee Not Liable for the Certificates or Mortgage Loans
	  	25
	 Section 8.07.
	  	 Owner Trustee May Own Notes
	  	25
	 Section 8.08.
	  	 Licenses
	  	26
	 Section 8.09.
	  	 Legal Proceedings
	  	26
	
	ARTICLE IX
	COMPENSATION OF OWNER TRUSTEE
			
	 Section 9.01.
	  	 Owner Trustee’s Fees and Expenses
	  	26
	 Section 9.02.
	  	 Indemnification
	  	26
	 Section 9.03.
	  	 Payments to the Owner Trustee
	  	27
	
	ARTICLE X
	TERMINATION OF TRUST AGREEMENT
			
	 Section 10.01.
	  	 Termination of Trust Agreement.
	  	27

  

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	ARTICLE XI
	SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
			
	Section 11.01.	  	 Eligibility Requirements for Owner Trustee
	  	28
	Section 11.02.	  	 Resignation or Removal of Owner Trustee
	  	29
	Section 11.03.	  	 Successor Owner Trustee
	  	29
	Section 11.04.	  	 Merger or Consolidation of Owner Trustee
	  	30
	Section 11.05.	  	 Appointment of Co-Trustee or Separate Trustee.
	  	30
	
	ARTICLE XII
	MISCELLANEOUS
			
	Section 12.01.	  	 Supplements and Amendments
	  	31
	Section 12.02.	  	 No Legal Title to Owner Trust Estate in Certificateholders
	  	32
	Section 12.03.	  	 Limitations on Rights of Others
	  	33
	Section 12.04.	  	 Notices.
	  	33
	Section 12.05.	  	 Severability
	  	33
	Section 12.06.	  	 Separate Counterparts
	  	33
	Section 12.07.	  	 Successors and Assigns
	  	33
	Section 12.08.	  	 No Petition
	  	34
	Section 12.09.	  	 No Recourse
	  	34
	Section 12.10.	  	 Headings
	  	34
	Section 12.11.	  	 GOVERNING LAW
	  	34
	Section 12.12.	  	 [Intentionally Omitted.]
	  	34
	Section 12.13.	  	 Third-Party Beneficiaries
	  	34
	Section 12.14.	  	 [Intentionally Omitted.]
	  	34
	 Section 12.15.
	  	 Servicer
	  	34

 EXHIBITS 
 Exhibit A   Form of Trust Certificate 
 Exhibit B   Form of Certificate of Trust 
 Exhibit C   Form of Investment Letter 
 Exhibit D   Form of Transferor Certificate 
 Exhibit E   Form of Class C Certificate 
  

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 This AMENDED AND RESTATED TRUST AGREEMENT, dated as of June 8, 2006, is between NOVASTAR
CERTIFICATES FINANCING CORPORATION, a Delaware corporation, as depositor (the “Depositor”) and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as owner trustee (the “Owner Trustee”). 
 NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows: 
 ARTICLE I 
 DEFINITIONS 
 Section 1.01.
Capitalized Terms. For all purposes of this Agreement, the following terms shall have the meanings set forth below: 
 “Agreement” shall mean this Trust Agreement, as may be amended and supplemented from time to time. 
 “Authorized Officer” shall have the meaning assigned thereto in Appendix I to the Indenture. 
 “Basic
Documents” shall mean this Agreement, the Sale and Servicing Agreement and the Indenture. 
 “Business Day” shall
mean any day other than (i) a Saturday or Sunday or (ii) a day that is either a legal holiday or a day on which banking institutions in the State of New York, the State of Delaware, the State of Missouri, or the state in which the
Indenture Trustee’s office from which payments will be made to the Certificateholder, are authorized or obligated by law, regulation or executive order to be closed. 
 “Certificate” shall mean each Trust Certificate and each Class C Certificate. 
 “Certificateholder” shall mean each Person in whose name a Trust Certificate and a Class C Certificate is registered. 
 “Certificate of Trust” shall mean the Certificate of Trust, in the form of Exhibit B, to be filed for the Issuing Entity pursuant to Section 3810(a) of the Statutory Trust Statute. 
 “Certificate Register” and “Certificate Registrar” shall mean the register mentioned and the registrar appointed
pursuant to Section 4.04. 
 “Class C Certificate”: A certificate which represents (i) the
Certificateholder’s entitlement to receive payments from Excess Cashflow, (ii) the Overcollateralization Amount and (iii) a beneficial interest of the Certificateholder in the Issuing Entity and which is substantially in the form of
Exhibit E to the Trust Agreement. 
  

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 “Class Note Balance” shall have the meaning assigned to such term in the Indenture.

 “Code” shall mean the Internal Revenue Code of 1986, as amended, and, where appropriate in context, Treasury Regulations
promulgated thereunder. 
 “Corporate Trust Office” shall mean, with respect to the Owner Trustee, an office of the Owner
Trustee which for purposes of the Agreement is located at Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001, facsimile number: (302) 636-4140, Attention: Corporate Trust Administration; or at such other address
as the Owner Trustee may designate by notice to the Certificateholders and the Depositor, or an office of any successor Owner Trustee (the address of which the successor Owner Trustee will notify the Certificateholders and the Depositor).

 “Depositor” shall mean NovaStar Certificates Financing Corporation, a Delaware corporation. 
 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended. 
 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
 “Expenses” shall have the meaning assigned to such term in Section 9.02. 
 “Group I Mortgage Loans” shall mean a pool of adjustable-rate mortgage loans, as identified in the related Mortgage Loan Schedule.

 “Group II Mortgage Loans” shall mean a pool of adjustable-rate mortgage loans, as identified in the related Mortgage Loan
Schedule. 
 “Indenture” shall mean the Indenture, dated as of May 1, 2006, by and between the Issuing Entity and the
Indenture Trustee. 
 “Indenture Trustee” means JPMorgan Chase Bank, National Association, as Indenture Trustee under the
Indenture. 
 “Investment Letter” shall have the meaning assigned to such term in Section 4.04. 
 “Issuing Entity” shall mean the NovaStar Mortgage Funding Trust, Series 2006-MTA1, the Delaware statutory trust created pursuant to this
Agreement. 
 “Loan Group” shall mean either Loan Group I or Loan Group II. 
 “Loan Group I” shall mean the Group I Mortgage Loans. 
 “Loan Group II” shall mean the Group II Mortgage Loans. 
 “Mortgage Loans”
shall mean the Group I Mortgage Loans and the Group II Mortgage Loans. 
  

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 “Non-U.S. Person” shall mean an individual, corporation, partnership or other person
other than a United States Person. 
 “Noteholder” shall have the meaning assigned to such terms in the Indenture.

 “Notes” shall mean the Class 1A-1 Notes, Class 2A-1A Notes, Class 2A-1B Notes, Class 2A-1C Notes, Class M-1 Notes, Class
M-2 Notes, Class M-3 Notes, Class M-4 Notes, Class M-5 Notes, Class M-6 Notes, Class M-7 Notes, Class M-8 Notes, Class M-9 Notes, Class M-10 Notes and Class X Notes. 
 “Outstanding” shall have the meaning assigned to such term in the Indenture. 
 “Ownership Interest” means, with respect to any Certificate, any ownership or security interest in such Certificate, including any interest in such Certificate as the Certificateholder thereof and any other interest
therein, whether direct or indirect, legal or beneficial, as owner or as pledgee. 
 “Owner Trust Estate” shall mean the
Trust Estate, including the contribution of $1 referred to in Section 2.05 hereof. 
 “Owner Trustee” shall mean
Wilmington Trust Company, a Delaware banking corporation, not in its individual capacity but solely as owner trustee under this Agreement, and any successor owner trustee hereunder. 
 “Owner Trustee Information” shall mean the information in (a) the Free Writing Prospectus contained in the first two paragraphs
under the heading “The Owner Trustee” and (b) the Prospectus Supplement or any amendment or supplement thereto contained in the first two paragraphs under the heading “The Owner Trustee.” 
 “Payment Date” shall mean the 25th day of each month or, if such 25th day is not a Business Day, the
next succeeding Business Day, commencing June 25, 2006. 
 “Percentage Interest” shall mean with respect to any
Certificate, the percentage portion of the Certificates evidenced thereby as stated on the face of such Certificate. 
 “Plan” shall mean (i) an employee benefit plan (within the meaning of Section 3(3) of ERISA) that is subject to Title I of ERISA, (ii) a plan (within the meaning of Section 4975(e)(1) of the Code) that
is subject to Section 4975 of the Code or (iii) a governmental plan (within the meaning of Section 3(32) of ERISA) that is subject to any federal, state or local law that is, to a material extent, similar to Title I of ERISA or
Section 4975 of the Code. 
 “Prospective Holder” shall have the meaning set forth in Section 4.09(a). 

“Rating Agency Condition” means, with respect to any action to which a Rating Agency Condition applies, that each Rating Agency shall
have been given ten (10) days (or such shorter period as is acceptable to each Rating Agency) prior notice thereof and that each of the Rating Agencies shall have notified the Indenture Trustee, the Depositor, the Sponsor, the Servicer, the
Owner Trustee and the Issuing Entity in writing that such action will not result in a reduction or withdrawal of the then current rating of the Notes that it maintains. 
  

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 “Record Date” shall mean, with respect to the Certificates and any Payment Date, the
last Business Day of the month preceding the month in which the related Payment Date occurs. 
 “Sale and Servicing
Agreement” shall mean the Sale and Servicing Agreement, dated as of May 1, 2006, among the Sponsor, the Issuing Entity, the Depositor, the Indenture Trustee, and the Servicer. 
 “Secretary of State” shall mean the Secretary of State of the State of Delaware. 
 “Servicer” shall mean NovaStar Mortgage Inc., a Virginia corporation, or any successor servicer appointed pursuant to the Sale and
Servicing Agreement. 
 “Sponsor” shall mean NovaStar Mortgage Inc., a Virginia corporation. 
 “Statutory Trust Statute” shall mean Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code § 3801 et seq., as the same may
be amended from time to time. 
 “Transfer” means any direct or indirect transfer, sale, pledge, hypothecation or other form
of assignment of any Ownership Interest in a Certificate. 
 “Treasury Regulations” shall mean regulations, including
proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations.

 “Trust Certificate” shall mean a certificate evidencing the beneficial interest of the Certificateholder in the Issuing
Entity, substantially in the form attached hereto as Exhibit A. 
 “Underwriter” shall mean Greenwich Capital
Markets, Inc. 
 Section 1.02. Other Definitional Provisions. 
 (a) Capitalized terms used herein and not otherwise defined herein have the meanings assigned to them in Appendix I to the Indenture and
the Sale and Servicing Agreement. 
 (b) All terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise defined therein. 
 (c) As used in this
Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in
any such certificate or other document to the extent not defined, shall have the respective 
  

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 meanings given to them under generally accepted accounting principles. To the extent that the definitions
of accounting terms in this Agreement or in any such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such
certificate or other document shall control. 
 (d) The words “hereof,” “herein,” “hereunder”
and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section and Exhibit references contained in this Agreement are references to Sections and
Exhibits in or to this Agreement unless otherwise specified; and the term “including” shall mean “including without limitation.” 
 (e) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. 
 (f) Any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns. 
 ARTICLE II 
 ORGANIZATION 
 Section 2.01.
Name. The Issuing Entity governed hereby shall be known as “NovaStar Mortgage Funding Trust, Series 2006-MTA1,” in which name the Owner Trustee may conduct the business of the Issuing Entity, make and execute contracts and other
instruments on behalf of the Issuing Entity and sue and be sued on behalf of the Issuing Entity. 
 Section 2.02. Office. The
office of the Issuing Entity shall be in care of the Owner Trustee at the Corporate Trust Office or at such other address in the State of Delaware as the Owner Trustee may designate by written notice to the Certificateholders, Indenture Trustee and
the Depositor. 
 Section 2.03. Purposes and Powers. The purpose of the Issuing Entity is to engage in the following activities:

 (a) to issue the Notes pursuant to the Indenture and to sell such Notes; 
 (b) with the proceeds of the sale of the Notes and Certificates, to purchase the Mortgage Loans to be included in the Owner Trust Estate
from the Depositor pursuant to the Sale and Servicing Agreement; 
 (c) to assign, grant, transfer, pledge, mortgage and
convey the Owner Trust Estate pursuant to the Indenture and to hold, manage and distribute to the Certificateholders any portion of the Owner Trust Estate released from the lien of, and remitted to the Issuing Entity pursuant to, the Indenture;

  

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 (d) to enter into and perform its obligations under the Basic Documents to which it is or
is to be a party; 
 (e) to engage in those activities, including entering into agreements, that are necessary, suitable or
convenient to accomplish the foregoing or are incidental thereto or connected therewith; 
 (f) subject to compliance with the
Basic Documents, to engage in such other activities as may be required in connection with conservation of the Owner Trust Estate and the making of distributions and payments to the Noteholders and the Certificateholders; and 
 (g) to issue the Certificates pursuant to this Agreement. 
 The Issuing Entity is hereby authorized by the initial beneficiary and the Certificateholders to engage in the foregoing activities. The Issuing Entity shall not engage in any activity other than in connection with
the foregoing or other than as required or authorized by the terms of this Agreement or the other Basic Documents. 
 Section 2.04.
Appointment of Owner Trustee. The Depositor hereby appoints the Owner Trustee as trustee of the Issuing Entity effective as of the date hereof, to have all the rights, powers and duties set forth herein and in the Statutory Trust Statute, and
the Owner Trustee hereby accepts such appointment. 
 The Owner Trustee may engage, in the name of the Issuing Entity or in its own name on
behalf of the Issuing Entity, in the activities of the Issuing Entity, make and execute contracts on behalf of the Issuing Entity and sue on behalf of the Issuing Entity. 
 Section 2.05. Initial Capital Contribution of Owner Trust Estate. The Depositor hereby sells, assigns, transfers, conveys and sets over to the Owner Trustee, as of the date hereof, the sum of $1. The Owner
Trustee hereby acknowledges receipt in trust from the Depositor, as of the date hereof, of the foregoing contribution, which shall constitute the initial Owner Trust Estate and shall be deposited in the Payment Account. The Depositor shall pay
organizational expenses of the Issuing Entity as they may arise or shall, upon the request of the Owner Trustee, promptly reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. Concurrently with the execution of this Agreement,
the Issuing Entity will enter into the Sale and Servicing Agreement pursuant to which it will purchase the Mortgage Loans, which comprise the remainder of the Owner Trust Estate. Upon the transfer of the Mortgage Loans pursuant to the Sale and
Servicing Agreement, the Owner Trustee shall transfer the initial capital contribution, in the sum of $1, to the Depositor. 
 Section 2.06. Declaration of Trust. The Owner Trustee hereby declares that it will hold the Owner Trust Estate in trust upon and subject to the conditions set forth herein for the use and benefit of the Certificateholders,
subject to the obligations of the Issuing Entity under the Basic Documents and subject to the rights of the Noteholders. 
  

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 It is the intention of the parties hereto that the Issuing Entity constitutes a statutory trust under the
Statutory Trust Statute and that this Agreement constitutes the governing instrument of such statutory trust. Effective as of the date hereof, the Owner Trustee shall have all rights, powers and duties set forth herein and in the Statutory Trust
Statute with respect to accomplishing the purposes of the Issuing Entity. The Owner Trustee shall file the Certificate of Trust with the Secretary of State. 
 Section 2.07. Liability of the Certificateholders. No Certificateholder shall have any personal liability for any liability or obligation of the Issuing Entity. The Certificates shall be fully paid and
nonassessable. 
 Section 2.08. Title to Trust Property. 
 (a) Subject to the Indenture, legal title to all of the Owner Trust Estate shall be vested at all times in the Issuing Entity as a
separate legal entity except where applicable law in any jurisdiction requires title to any part of the Owner Trust Estate to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee and/or a separate
trustee, as the case may be. 
 (b) The Certificateholders shall not have legal title to any part of the Owner Trust Estate.
No transfer by operation of law or otherwise of any interest of the Certificateholders shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of any part of the Owner
Trust Estate. 
 Section 2.09. Situs of Issuing Entity. The Issuing Entity will be located in the State of Delaware and
administered as expressly stated hereunder by the Owner Trustee in the State of Delaware. The Issuing Entity shall not have any employees; provided, however, that nothing herein shall restrict or prohibit the Owner Trustee from having
employees within or without the State of Delaware. 
 Section 2.10. Federal Income Tax Treatment of the Issuing Entity. The
parties hereto intend that the Depositor, or other entity that is a REIT or a Qualified REIT Subsidiary, will at all times that the Notes are outstanding own a 100% Percentage Interest in the Certificates; that the Depositor or other entity that
owns a 100% Percentage Interest in the Certificates will qualify for taxation as a REIT or a Qualified REIT Subsidiary at all times that it is a Certificateholder; and that the Issuing Entity will be a Qualified REIT Subsidiary at all times the
Notes are outstanding. 
 Section 2.11. Covenants of the Certificateholders. Each Certificateholder by becoming a beneficial
owner of the Certificate or by its acceptance of a Certificate agrees: 
 (a) to be bound by the terms and conditions of the
Certificates of which such Certificateholder is the beneficial owner and of this Agreement and the other Basic Documents, including any supplements or amendments hereto and thereto and to perform the obligations of a Certificateholder as set forth
therein or herein, in all respects as if it were a signatory hereto. This undertaking is made for the benefit of the Issuing Entity, the Owner Trustee and all other Certificateholders, present and future; 
  

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 (b) to the appointment of the Owner Trustee as such Certificateholder’s agent and
attorney-in-fact to sign any federal income tax information return filed on behalf of the Issuing Entity and, if requested by the Issuing Entity, to sign such federal income tax information return in its capacity as holder of an interest in the
Issuing Entity; 
 (c) not to take any position in such Certificateholder’s tax returns inconsistent with those taken in
any tax returns filed by the Issuing Entity; and 
 (d) not to take any action that would cause the Issuing Entity to become
subject to an entity-level tax for federal income tax purposes or fail to take any action that would prevent the Issuing Entity from becoming subject to an entity-level tax for federal income tax purposes. 
 Section 2.12. Representations and Warranties of the Depositor. The Depositor hereby represents and warrants to the Owner Trustee that:

 (a) The Depositor is duly organized and validly existing as a Delaware 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 has the power and authority to execute and deliver this Agreement and to carry out its terms; the Depositor has full
power and authority to transfer and assign the property to be transferred and assigned to and deposited with the Issuing Entity and the Depositor has duly authorized such transfer and assignment and deposit to the Issuing Entity by all necessary
trust action; and the execution, delivery and performance of this Agreement has been duly authorized by the Depositor by all necessary trust action. 
 (c) The consummation of the transactions contemplated by this 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 by-laws 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, 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. 
 (d) There are no proceedings or investigations pending or notice of which has been received in writing before any court, regulatory body,
administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties: (x) asserting the invalidity of this Agreement, (y) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or (z) seeking any determination or ruling that should reasonably be expected to materially and adversely affect the performance by the Depositor of its obligations under, or the validity or enforceability of,
this Agreement. 
  

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 (e) The Depositor has duly executed and delivered this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of the Depositor, enforceable against the Depositor, in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors’ rights generally and by the application of equitable principles. 
 (f) The
Depositor is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental agency, which default might have consequences that would materially and adversely
affect the condition (financial or otherwise) or operations of the Depositor or its properties or might have consequences that would materially and adversely affect its performance hereunder. 
 (g) The Depositor will hold itself out to the public under its own name as a separate and distinct entity from the Issuing Entity and
conduct its business so as not to mislead others as to the identity of the Issuing Entity. 
 Section 2.13. Covenants of the
Depositor. The Depositor agrees and covenants for the benefit of each Certificateholder and the Owner Trustee, during the term of this Agreement, and to the fullest extent permitted by applicable law, that: 
 (a) it shall not, for any reason, institute proceedings for the Issuing Entity to be adjudicated bankrupt or insolvent, or consent to or
join in the institution of bankruptcy or insolvency proceedings against the Issuing Entity, or file a petition seeking or consenting to reorganization or relief under any applicable federal or state law relating to the bankruptcy of the Issuing
Entity, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuing Entity or a substantial part of the property of the Issuing Entity or cause or permit the Issuing Entity to
make any assignment for the benefit of creditors, or admit in writing the inability of the Issuing Entity to pay its debts generally as they become due, or declare or effect a moratorium on the debt of the Issuing Entity or take any action in
furtherance of any such action; 
 (b) it shall obtain from each counterparty to each Basic Document to which it or the
Issuing Entity is a party and each other agreement entered into on or after the date hereof to which it or the Issuing Entity is a party, an agreement by each such counterparty that prior to the occurrence of certain events specified in such
agreement, such counterparty shall not institute against, or join any other Person in instituting against, it or the Issuing Entity, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceedings
under the laws of the United States or any state of the United States; and 
 (c) it shall not, for any reason, withdraw or
attempt to withdraw from this Agreement or any other Basic Document to which it is a party. 
  

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 ARTICLE III 
 [RESERVED] 
 ARTICLE IV 
 CERTIFICATES AND TRANSFER OF INTERESTS 
 Section 4.01. Initial
Ownership. Upon the formation of the Issuing Entity by the contribution by the Depositor pursuant to Section 2.05 and the filing of the Certificate of Trust with the Secretary of State and until the issuance of the Certificates, the
Depositor shall be the sole owner of the Issuing Entity. 
 Section 4.02. The Certificates. The Trust Certificates shall be
issued as a single certificate, substantially in the form of Exhibit A hereto, to or upon the order of direction of the Depositor, concurrently with the sale and assignment to the Issuing Entity of the Mortgage Loans by the Depositor. The Class C
Certificates shall be issued as a single certificate, substantially in the form of Exhibit E hereto, to or upon the order of direction of the Depositor, concurrently with the sale and assignment to the Issuing Entity of the Mortgage Loans by the
Depositor. The Certificates shall represent the entire beneficial interest in the assets of the Issuing Entity subject to the debt represented by the Notes. The Certificates shall be printed, lithographed or engraved or may be produced in any other
manner as is reasonably acceptable to the Owner Trustee, as evidenced by its execution thereof. The Certificates shall be executed on behalf of the Issuing Entity by manual or facsimile signature of an Authorized Officer of the Owner Trustee.
Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures shall have been affixed, authorized to sign on behalf of the Issuing Entity, shall be valid, notwithstanding that such individuals or
any of them shall have ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold such offices at the date of authentication and delivery of such Certificates. 
 A transferee of a Certificate shall become a Certificateholder, and shall be entitled to the rights and subject to the obligations of a Certificateholder
hereunder upon such transferee’s acceptance of a Certificate duly registered in such transferee’s name pursuant to Section 4.04. 
 Section 4.03. Execution, Authentication and Delivery of Certificates. Concurrently with the initial transfer of the Mortgage Loans to the Issuing Entity pursuant to the Sale and Servicing Agreement, the Owner Trustee shall cause
the Certificates, representing 100% of the Percentage Interests of the Issuing Entity, to be executed on behalf of the Issuing Entity, authenticated and delivered to or upon the order of the Depositor as initial Certificateholder. No Certificate
shall entitle its holder to any benefit under this Agreement, or shall be valid for any purpose, unless there shall appear on such Certificate a certificate of authentication substantially in the form set forth in Exhibit A and in Exhibit
E, executed by the Owner Trustee or the Owner Trustee’s authenticating agent, by manual or facsimile signature; such authentication shall constitute conclusive evidence that such Certificate shall have been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their authentication. 
 Section 4.04. Registration of Transfer and Exchange
of Certificates. The Certificate Registrar shall keep or cause to be kept, at the office or agency maintained pursuant to Section 4.08, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the
Certificate Registrar shall provide for the registration of Certificates and of transfers and exchanges of Certificates as herein provided. The Owner Trustee shall be the initial “Certificate Registrar.” 
  

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 Upon surrender for registration of transfer of any Certificate at the office or agency maintained
pursuant to Section 4.08, the Owner Trustee, upon the satisfaction of the conditions set forth in Section 4.09(c), shall execute, authenticate and deliver (or shall cause its authenticating agent to authenticate and deliver), in the name
of the designated transferee or transferees, one or more new Certificates of a like Percentage Interest dated the date of authentication by the Owner Trustee or any authenticating agent. At the option of a Certificateholder, Certificates may be
exchanged for other Certificates of a like Percentage Interest upon surrender of the Certificates to be exchanged at the office or agency maintained pursuant to Section 4.08. 
 Every Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written instrument of transfer in the form
of Transferor Certificate set forth as Exhibit D hereto, duly executed by the Certificateholder or his attorney duly authorized in writing. 
 No service charge shall be made for any registration of transfer or exchange of Certificates, but the Owner Trustee or the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Certificates. 
 The preceding provisions of this Section 4.04 notwithstanding,
the Certificate Registrar shall not register transfers or exchanges of Certificates for a period of fifteen (15) days preceding the Payment Date with respect to the Certificates. 
 Notwithstanding anything contained herein to the contrary, neither the Certificate Registrar nor the Owner Trustee shall be responsible for ascertaining
whether any transfer complies with the registration provisions or exemptions from the Securities Act of 1933, as amended, the Securities Act of 1934, as amended, applicable state securities law or the Investment Company Act of 1940, as amended;
provided, however, that if an Investment Letter is specifically required to be delivered to the Owner Trustee by a purchaser or transferee of a Certificate, the Owner Trustee shall be under a duty to examine the same to determine
whether it conforms to the form of Investment Letter set forth as Exhibit C hereto and shall promptly notify the party delivering the same if such Investment Letter does not so conform. 
 Section 4.05. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated Certificate shall be surrendered to the
Certificate Registrar, or if the Certificate Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there shall be delivered to the Certificate Registrar and the Owner Trustee such
security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Certificate shall have been acquired by a protected purchaser, the Owner Trustee on behalf of the Issuing Entity shall execute
and the Owner Trustee, or the Owner Trustee’s authenticating agent, shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like Percentage Interest. In
connection with the issuance of any new Certificate under this Section 4.05, the Owner Trustee or 
  

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 the Certificate Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of ownership in the Issuing Entity, as if originally issued, whether or not the lost, stolen or destroyed
Certificate shall be found at any time. 
 Section 4.06. Persons Deemed Owners. Each person by virtue of becoming a
Certificateholder in accordance with this Agreement shall be deemed to be bound by the terns of this Agreement. Prior to due presentation of a Certificate for registration of transfer, the Owner Trustee or the Certificate Registrar may treat the
Person in whose name any Certificate shall be registered in the Certificate Register as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 6.02 and for all other purposes whatsoever, and neither the
Owner Trustee nor the Certificate Registrar shall be bound by any notice to the contrary. 
 Section 4.07. Access to List of
Certificateholders’ Names and Addresses. The Certificate Registrar shall furnish or cause to be furnished to the Owner Trustee, the Servicer, the Depositor and the Indenture Trustee immediately prior to each Payment Date, a list of the
names and addresses of the Certificateholders as of the most recent Record Date. The Certificate Registrar shall notify the Indenture Trustee of any change in the initial Holders of the Certificates. If one or more Certificateholder, together
evidencing Percentage Interests totaling not less than 25%, apply in writing to the Certificate Registrar, and such application states that the applicants desire to communicate with other Certificateholders with respect to their rights under this
Agreement or under the Certificates and such application is accompanied by a copy of the communication that such applicants propose to transmit, then the Certificate Registrar shall, within five (5) Business Days after the receipt of such
application, afford such applicants access during normal business hours to the current list of Certificateholders. Each Certificateholder, by receiving and holding a Certificate, shall be deemed to have agreed not to hold any of the Depositor, the
Certificate Registrar or the Owner Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. 
 Section 4.08. Maintenance of Office or Agency. The Owner Trustee shall maintain an office or offices or agency or agencies where notices and
demands to or upon the Owner Trustee in respect of the Basic Documents may be served, and so long as the Owner Trustee is the Certificate Registrar, where Certificates may be surrendered for registration of transfer or exchange and notices and
demands to or upon the Certificate Registrar in respect of the Certificates, may be served. The Owner Trustee initially designates the Corporate Trust Office as its principal corporate trust office for such purposes. The Owner Trustee shall give
prompt written notice to the Indenture Trustee, the Depositor and the Certificateholders of any change in the location of the Certificate Register or any such office or agency. 
 Section 4.09. Restrictions on Transfers of Certificates. (a) Each prospective purchaser and any subsequent transferee of a Certificate
(each, a “Prospective Holder”), other than the Depositor, shall execute and deliver to the Owner Trustee and the Certificate Registrar and any of their respective successors an Investment Letter in the form of Exhibit C hereto to
the effect that: 
  

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 (i) Such Person is (A) a “qualified institutional buyer” as defined in
Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and is aware that the seller of the Certificate may be relying on the exemption from the registration requirements of the Securities Act provided by Rule
144A and is acquiring such Certificate for its own account or for the account of one or more qualified institutional buyers for whom it is authorized to act, or (B) a Person involved in the organization or operation of the Issuing Entity or an
affiliate of such Person within the meaning of Rule 3a-7 of the Investment Company Act of 1940, as amended (including, but not limited to, the Sponsor). 
 (ii) Such Person understands that the Certificates have not been and will not be registered under the Securities Act and may be offered, sold, pledged or otherwise transferred only to a person whom the seller
reasonably believes is (A) a qualified institutional buyer or (B) a Person involved in the organization or operation of the Issuing Entity or an affiliate of such Person, in a transaction pursuant to an effective registration statement
under the Securities Act and any applicable state securities laws or exempt from the registration requirements of the Securities Act and any such state securities laws. 
 (iii) Such Person understands that the Certificates bear a legend to the following effect: 
 “THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE
SECURITIES LAWS. THIS CERTIFICATE MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE ACT, IN
A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE ISSUING ENTITY
OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT NOT LIMITED TO, NOVASTAR MORTGAGE INC.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT 
  

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 AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS CERTIFICATE UNDER THE ACT OR ANY STATE SECURITIES
LAWS.” 
 (b) By its acceptance of a Certificate, each Prospective Holder agrees and acknowledges that no legal or
beneficial interest in all or any portion of any Certificate may be transferred directly or indirectly to an entity that holds residual securities as nominee to facilitate the clearance and settlement of such securities through electronic book-entry
changes in accounts of participating organizations (a “Book-Entry Nominee”) and any such purported transfer shall be void and have no effect. 
 The Certificates shall bear an additional legend referring to the restrictions contained in preceding paragraph to the following effect: 
 THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT
SUCH TRANSFEREE IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS. 
 (c) No transfer of a Certificate or any beneficial interest therein shall be made to any person unless the Owner Trustee has received a
representation letter from the Prospective Holder to the effect that such Prospective Holder is not a Plan and is not, directly or indirectly, purchasing such Certificate or interest therein on behalf of, as investment manager of, as named fiduciary
of, as trustee of, or with the assets of a Plan. 
 (d) The Owner Trustee shall not execute, and shall not countersign and
deliver, a Certificate in connection with any transfer thereof unless the transferor shall have provided to the Owner Trustee an Investment Letter, signed by the transferee, which certificate shall contain the consent of the transferee to any
amendments of this Agreement as may be required to effectuate further the foregoing restrictions on transfer of the Certificates to Book-Entry Nominees, and an agreement by the transferee that it will not transfer a Certificate without providing to
the Owner Trustee an Investment Letter. 
 (e) [Reserved]. 
 (f) Unless the Prospective Holder delivers a certificate to the Owner Trustee to the effect that it is a United States Person, the
Prospective Holder, other than NovaStar Mortgage Inc. or an affiliate of NovaStar Mortgage Inc., shall obtain and deliver to the Owner 
  

 14 







 Trustee an Opinion of Counsel to the effect that, as a matter of federal income tax law, the transfer of
the Certificate to such Prospective Holder will not result in the imposition of any U.S. withholding tax on payments in respect of the Mortgage Loans or the Certificate. 
 (g) No pledge or transfer of the Certificates shall be effective unless such pledge or transfer is (i) of a 100% Percentage Interest
of all of the Certificates, (ii) to a single beneficial owner that represents that it qualifies for taxation as a REIT or is a Qualified REIT Subsidiary and (iii) accompanied by an Opinion of Counsel satisfactory to the Owner Trustee,
which Opinion of Counsel shall not, unless otherwise agreed, be an expense of the Issuing Entity, the Certificate Registrar, the Servicer, or the Sponsor, to the effect such pledge or transfer will not cause the Issuing Entity to be subject to an
entity-level tax for federal income tax purposes. 
 ARTICLE V 
 ACTIONS BY OWNER TRUSTEE 
 Section 5.01. Prior Notice to the
Certificateholders with Respect to Certain Matters. With respect to the following matters, the Owner Trustee shall not take action unless at least thirty (30) days before the taking of such action, the Owner Trustee shall have notified the
Certificateholders (unless the Certificateholders have directed the Owner Trustee to take action) and the Rating Agencies in writing of the proposed action and the Certificateholders shall not have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Certificateholders have withheld consent or have provided alternative written direction and in the case of the Rating Agencies, the Rating Agency Condition shall have been met: 
 (a) the initiation of any claim or lawsuit by the Issuing Entity (except claims or lawsuits brought in connection with the collection of
the Mortgage Loans) and the compromise of any action, claim or lawsuit brought by or against the Issuing Entity (except with respect to the aforementioned claims or lawsuits for collection of the Mortgage Loans); 
 (b) the election by the Issuing Entity to file an amendment to the Certificate of Trust (unless such amendment is required to be filed
under the Statutory Trust Statute); 
 (c) the amendment or other change to this Agreement or any Basic Document in
circumstances where the consent of any Certificateholder is required; 
 (d) the amendment or other change to this Agreement
or any other Basic Document in circumstances where the consent of any Certificateholder is not required and such amendment materially adversely affects the interest of the Certificateholders; 
 (e) the appointment pursuant to the Indenture of a successor Note Registrar, or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar or the consent to the assignment by the Note Registrar or Indenture Trustee or Certificate Registrar of their respective obligations under the Indenture or this Agreement, as applicable; 
  

 15 







 (f) the consent to the waiver of any default of any Basic Document; 
 (g) the consent to the assignment by the Indenture Trustee or Servicer of their respective obligations under any Basic Document;

 (h) except as provided in Article X hereof, dissolve, terminate or liquidate the Issuing Entity in whole or in part;

 (i) merge or consolidate the Issuing Entity with or into any other entity, or convey or transfer all or substantially all
of the Issuing Entity’s assets to any other entity; 
 (j) cause the Issuing Entity to incur, assume or guaranty any
indebtedness other than as set forth in this Agreement or the other Basic Documents; 
 (k) do any act which would make it
impossible to carry on the ordinary business of the Issuing Entity as described in Section 2.03 hereof; 
 (l) confess a
judgment against the Issuing Entity; 
 (m) possess Issuing Entity assets, or assign the Issuing Entity’s right to
property, for other than an Issuing Entity purpose; 
 (n) cause the Issuing Entity to lend any funds to any entity; or

 (o) change the Issuing Entity’s purpose and powers from those set forth in this Agreement. 
 In addition the Issuing Entity shall not commingle its assets with those of any other entity. The Issuing Entity shall maintain its financial and
accounting books and records separate from those of any other entity. Except as expressly set forth herein, the Issuing Entity shall pay its indebtedness, operating expenses and liabilities from its own funds, and the Issuing Entity shall not pay
the indebtedness, operating expenses and liabilities of any other entity. The Servicer, on behalf of the Issuing Entity, shall maintain appropriate minutes or other records of all appropriate action. The Issuing Entity shall maintain its office
separate from the offices of the Sponsor, the Depositor and the Servicer. 
 Notwithstanding the other provisions of this Section 5.01,
the Owner Trustee shall not have the power, except upon the written direction of the Certificateholders, and to the extent otherwise consistent with the Basic Documents, to remove or replace the Servicer or the Indenture Trustee. 
 Section 5.02. Action by Certificateholders with Respect to Bankruptcy. The Owner Trustee shall not have the power to (i) institute
proceedings to have the Issuing Entity declared or adjudicated bankrupt or insolvent, (ii) consent to the institution of bankruptcy or insolvency proceedings against the Issuing Entity, (iii) file a petition or consent to a petition
seeking reorganization or relief on behalf of the Issuing Entity under any applicable federal or state law relating to bankruptcy, (iv) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or any similar
official) of the Issuing Entity or a substantial portion of the 
  

 16 







 property of the Issuing Entity, (v) make any assignment for the benefit of the Issuing Entity’s creditors,
(vi) cause the Issuing Entity to admit in writing its inability to pay its debts generally as they become due, or (vii) take any action, or cause the Issuing Entity to take any action, in furtherance of any of the foregoing (any of the
above, a “Bankruptcy Action”) without the unanimous prior written consent and approval of all Certificateholders and the Rating Agency Condition shall have been satisfied and the delivery to the Owner Trustee by each such
Certificateholder of a certification that such Certificateholder reasonably believes that the Issuing Entity is insolvent. So long as the Indenture remains in effect, no Certificateholder shall have the power to take, and shall not take, any
Bankruptcy Action with respect to the Issuing Entity or direct the Owner Trustee to take any Bankruptcy Action with respect to the Issuing Entity. The terms of this Section 5.02 shall survive for one year and one day following the termination
of this Agreement. 
 Section 5.03. Restrictions on Certificateholders’ Power. The Certificateholders shall not direct the
Owner Trustee to take or refrain from taking any action if such action or inaction would be contrary to any obligation of the Issuing Entity or the Owner Trustee under this Agreement or any of the other Basic Documents or would be contrary to
Section 2.03, nor shall the Owner Trustee be obligated to follow any such direction, if given. 
 Section 5.04. Majority
Control. Except as expressly provided herein, any action that may be taken by the Certificateholders under this Agreement may be taken by the holders of Certificates evidencing more than 50% of the Percentage Interest in the Issuing Entity and
such action shall be binding upon all Certificateholders. Except as expressly provided herein, any written notice of the Certificateholders delivered pursuant to this Agreement shall be effective if signed by holders of Certificates evidencing more
than 50% of the Percentage Interest in the Issuing Entity at the time of the delivery of such notice and such action shall be binding upon all Certificateholders. 
 ARTICLE VI 
 TAX PROVISIONS; CERTAIN DUTIES 
 Section 6.01. Federal Income Tax Provisions. 
 The Issuing Entity will be wholly owned by the sole Certificateholder, which as of the Closing Date is the Depositor. The Depositor is a Qualified REIT Subsidiary. As such, the Depositor, as the sole
Certificateholder, or the Depositor’s owner will be regarded as (i) owning all assets owned by the Issuing Entity and (ii) having incurred all liabilities incurred by the Issuing Entity, and all transactions between the Issuing Entity
and the Depositor will be disregarded. 
 Section 6.02. Withholding Taxes. In the event that any withholding tax is imposed under
federal, state, or local law on the Issuing Entity’s payment (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to such Certificateholder in accordance with this Section 6.02. The
Indenture Trustee, on behalf of the Owner Trustee, is hereby authorized and directed to retain in the Payment Account from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax that is 
  

 17 







 legally owed by the Issuing Entity (but such authorization shall not prevent the Indenture Trustee from contesting any
such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings). The Depositor will provide the Indenture Trustee with a statement indicating the amount of any such withholding
tax. The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to such Certificateholder at the time it is withheld by the Indenture Trustee and remitted to the appropriate taxing authority
from the Payment Account at the direction of the Indenture Trustee. If there is a possibility that withholding tax is payable with respect to a distribution (such as a distribution to a Certificateholder who is a Non-U.S. Person), the Indenture
Trustee may in its sole discretion withhold such amounts in accordance with this paragraph. In the event that a Certificateholder wishes to apply for a refund of any such withholding tax, the Owner Trustee and the Indenture Trustee shall reasonably
cooperate with such Certificateholder in making such claim so long as such Certificateholder agrees in writing to reimburse the Owner Trustee for any out-of-pocket expenses incurred. 
 Section 6.03. Accounting and Reports to the Certificateholders, the Internal Revenue Service and Others. The Depositor shall
(a) maintain (or cause to be maintained) the books of the Issuing Entity on a calendar year basis on the accrual method of accounting, and (b) deliver (or cause to be delivered) to each Certificateholder such information, reports or
statements as may be required by the Code and applicable Treasury Regulations and as may be required to enable each Certificateholder to prepare its respective federal and state income tax returns. Consistent with the Issuing Entity’s
characterization for tax purposes as a Qualified REIT Subsidiary, no federal income tax return shall be filed on behalf of the Issuing Entity unless either (y) the Issuing Entity, the Indenture Trustee or the Certificateholders receive an
Opinion of Counsel based on a change in applicable law occurring after the date hereof that the Code requires such a filing or (z) the Internal Revenue Service shall determine that the Issuing Entity is required to file such a return. In the
event that the Issuing Entity is required to file tax returns, the Indenture Trustee shall elect under Section 1278 of the Code to include in income currently any market discount that accrues with respect to the Mortgage Loans. The Depositor
shall prepare or shall cause to be prepared any tax returns required to be filed by the Issuing Entity. The Depositor, or any other such party required by law, shall promptly sign such returns and such returns shall be filed by, or at the direction
of, the Depositor with the appropriate tax authorities. In no event shall the Depositor or the Sponsor be liable for any liabilities, costs or expenses of the Issuing Entity arising out of the application of any tax law, including federal, state,
foreign or local income or excise taxes or any other tax imposed on or measured by income (or any interest, penalty or addition with respect thereto or arising from a failure to comply therewith), except, for any such liability, cost or expense
attributable to the Depositor’s breach of its obligations under this Agreement. 
 ARTICLE VII 
 AUTHORITY AND DUTIES OF OWNER TRUSTEE 
 Section 7.01. General Authority. The Owner Trustee is authorized and directed to execute and deliver or cause to be executed and delivered the Notes, the Certificates and the Basic Documents to which the Issuing Entity is to be
a party and each certificate or other document attached as an exhibit to or contemplated by the Basic Documents to which the Issuing Entity is to 

 18 







 be a party and any amendment or other agreement or instrument described in Article IV, in each case, as the Depositor
shall approve, as evidenced conclusively by the Owner Trustee’s execution thereof. In addition, the Owner Trustee is authorized and directed, on behalf of the Issuing Entity, to execute and deliver to the Authenticating Agent the Trust Request
and the Trust Orders referred to in Section 2.11 of the Indenture, directing to the Authenticating Agent to authenticate and deliver the following Notes: 
  

					
	 Security
	  	Original Class Note Balance	 
	 Class 1A-1
	  	$	518,700,000	 
	 Class 2A-1A
	  	$	331,740,000	 
	 Class 2A-1B
	  	$	138,225,000	 
	 Class 2A-1C
	  	$	82,935,000	 
	 Class M-1
	  	$	40,200,000	 
	 Class M-2
	  	$	19,200,000	 
	 Class M-3
	  	$	11,400,000	 
	 Class M-4
	  	$	9,600,000	 
	 Class M-5
	  	$	6,600,000	 
	 Class M-6
	  	$	6,000,000	 
	 Class M-7
	  	$	6,000,000	 
	 Class M-8
	  	$	6,000,000	 
	 Class M-9
	  	$	6,000,000	 
	 Class M-10
	  	$	6,000,000	 
	 Class X
	  	$
 	1,061,223,414
(Notional	 
)

 In addition to the foregoing, the Owner Trustee is authorized, but shall not be obligated, to take all actions
required of the Issuing Entity, pursuant to the Basic Documents. 
 Section 7.02. General Duties. 
 (a) It shall be the duty of the Owner Trustee: 
 (i) to discharge (or cause to be discharged) all of its responsibilities pursuant to the terms of this Agreement and the Basic Documents to which the Issuing Entity is a party and as expressly set forth hereunder to administer the Issuing
Entity in the interest of the Certificateholders, subject to the Basic Documents and in accordance with the provisions of this Agreement; and 
  

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 (ii) to maintain the Issuing Entity’s existence as a statutory trust under the laws
of the State of Delaware. 
 (b) The Owner Trustee shall not be responsible for taking any action on behalf of the Issuing
Entity under any Basic Document unless specifically directed in writing to do so in accordance with Section 7.03 of this Agreement. 
 (c) The Owner Trustee shall not be responsible for any matter regarding the Securities Act, the Exchange Act or the Investment Company Act of 1940, as amended, or the rules or regulations thereunder. 
 Section 7.03. Action upon Instruction. 
 (a) Subject to Article V hereof, and in accordance with the terms of the Basic Documents, the Certificateholders may by written instruction direct the Owner Trustee in the management of the Issuing Entity but only to
the extent consistent with the limited purpose of the Issuing Entity. Such direction may be exercised at anytime by written instruction of the Certificateholders pursuant to Article V hereof. Without limiting the generality of the foregoing, the
Owner Trustee shall act as directed in writing by the Certificateholders and shall take all actions and deliver all documents that the Issuing Entity is required to take and deliver. 
 (b) The Owner Trustee shall not be required to take any action hereunder or under any other Basic Document if the Owner Trustee shall have
reasonably determined, or shall have been advised by counsel, that such action is likely to result in liability on the part of the Owner Trustee or is contrary to the terms hereof or of any other Basic Document or is otherwise contrary to law.

 (c) Subject to Article V hereof, whenever the Owner Trustee is unable to decide between alternative courses of action
permitted or required by the terms of this Agreement or under any other Basic Document, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction from
the Certificateholders as to the course of action to be adopted, and to the extent the Owner Trustee acts in good faith in accordance with any written instruction of the Certificateholders received, the Owner Trustee shall not be liable on account
of such action to any Person. If the Owner Trustee shall not have received appropriate instruction within ten (10) days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary
under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with this Agreement or the Basic Documents, as it shall deem to be in the best interests of the Certificateholders, and shall
have no liability to any Person for such action or inaction. 
 (d) Subject to Article V hereof, in the event that the Owner
Trustee is unsure as to the application of any provision of this Agreement or any other Basic Document or any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the
event that this Agreement permits any determination by the Owner Trustee or is silent or is incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee may give notice
(in 
  

 20 







 such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction and, to the
extent that the Owner Trustee acts or refrains from acting in good faith in accordance with any such instruction received, the Owner Trustee shall not be liable, on account of such action or inaction, to any Person. If the Owner Trustee shall not
have received appropriate instruction within ten (10) days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it may, but shall be under no duty to,
take or refrain from taking such action, not inconsistent with this Agreement or the other Basic Documents, as it shall deem to be in the best interests of the Certificateholders, and shall have no liability to any Person for such action or
inaction. 
 Section 7.04. No Duties Except as Specified in this Agreement, the Basic Documents or any Instructions. 

(a) The Owner Trustee shall not have any duty or obligation to manage, make any payment with respect to, register, record, sell,
dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from taking any action under, or in connection with, this Agreement or any document contemplated hereby to which the Issuing Entity is a party, except as
expressly provided by the terms of this Agreement, any other Basic Document or in any document or written instruction received by the Owner Trustee pursuant to Section 7.03; and no implied duties or obligations shall be read into this Agreement
or any other Basic Document against the Owner Trustee. The Owner Trustee shall have no responsibility for filing any tax document, financing or continuation statement in any public office at any time or to otherwise perfect or maintain the
perfection of any security interest or lien granted to it hereunder or to prepare or file any Securities and Exchange Commission filing for the Issuing Entity or to record this Agreement or any other Basic Document. The Owner Trustee nevertheless
agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any liens on any part of the Owner Trust Estate that result from actions by, or claims against, the Owner Trustee in its individual capacity
that are not related to the ownership or the administration of the Owner Trust Estate. 
 (b) Notwithstanding anything to the
contrary herein or in any other document, the Owner Trustee shall not be required to execute, deliver or certify on behalf of the Issuing Entity or any other Person any filings, certificates, affidavits or other instruments required under the
Sarbanes-Oxley Act of 2002. Notwithstanding any Person’s right to instruct the Owner Trustee, neither the Owner Trustee nor any agent, employee, director or officer of the Owner Trustee shall have any obligation to execute any certificates or
other documents required pursuant to the Sarbanes-Oxley Act of 2002 or the rules and regulations promulgated thereunder, and the refusal to comply with any such instructions shall not constitute a default or breach under any Basic Document.

 Section 7.05. No Action Except under Specified Documents or Instructions. The Owner Trustee shall not manage,
control, use, sell, dispose of or otherwise deal with any part of the Owner Trust Estate except (i) in accordance with the powers granted to and the authority conferred upon the Owner Trustee pursuant to this Agreement, (ii) in accordance
with the other Basic Documents and (iii) in accordance with any document or written instruction delivered to the Owner Trustee pursuant to Section 7.03. 
  

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 Section 7.06. Restrictions. Neither the Owner Trustee nor the Depositor shall take any action
(a) that violates or results in a breach of or is inconsistent with the purposes of the Issuing Entity set forth in Section 2.03; (b) that causes or effectuates a Transfer of the Depositor’s Ownership Interest in the Certificates
of the Issuing Entity for so long as the Depositor is a Qualified REIT Subsidiary other than as set forth in Section 4.09(g) or (c) that, to the actual knowledge of the Depositor and the Owner Trustee, would result in the Issuing
Entity’s becoming subject to an entity-level tax for federal income tax purposes. The Certificateholders shall not direct the Owner Trustee to take action that would violate the provisions of this Section 7.06. 
 ARTICLE VIII 
 CONCERNING THE OWNER
TRUSTEE 
 Section 8.01. Acceptance of Trusts and Duties. The Owner Trustee accepts the trusts hereby created and agrees to
perform its duties hereunder with respect to such trusts, but only upon the terms of this Agreement subject to the other Basic Documents. The Owner Trustee also agrees to disburse all moneys actually received by it constituting part of the Owner
Trust Estate upon the terms of the other Basic Documents and this Agreement. The Owner Trustee shall not be answerable or accountable hereunder or under any other Basic Document under any circumstances, except (i) for its own willful breach or
misconduct or gross negligence or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 8.03 expressly made by the Owner Trustee in its individual capacity. In particular, but not by way of limitation
(and subject to the exceptions set forth in the preceding sentence): 
 (a) The Owner Trustee shall not be liable for any
error of judgment made by a Responsible Officer of the Owner Trustee; 
 (b) The Owner Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in accordance with the instructions of the Certificateholders given in accordance with this Agreement; 
 (c) No provision of this Agreement or any other Basic Document shall require the Owner Trustee to expend or risk funds or otherwise incur
any financial liability in the performance of any of its rights or powers hereunder or under any other Basic Document if the Owner Trustee shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such
risk or liability is not reasonably assured or provided to it; 
 (d) Under no circumstances shall the Owner Trustee be liable
for indebtedness evidenced by or arising under any of the Basic Documents, including the principal of and interest on the Notes; 
 (e) The Owner Trustee shall not be responsible for or in respect of the validity or sufficiency of this Agreement or for the due execution hereof by the Depositor or for the form, character, genuineness, sufficiency, value or validity of
any of the Owner Trust Estate or for or in respect of the validity or sufficiency of the Basic Documents, other than the certificate of authentication on the Certificates, and the Owner Trustee shall in no event assume 
  

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 or incur any liability, duty, or obligation to any Noteholder or to any Certificateholders, other than as
expressly provided for herein and in the other Basic Documents; 
 (f) The Owner Trustee shall not be liable for the default
or misconduct of the Indenture Trustee or the Servicer under any of the Basic Documents or otherwise and the Owner Trustee shall have no obligation or liability to perform the obligations of the Issuing Entity under this Agreement or the other Basic
Documents that are required to be performed by the Depositor, the Indenture Trustee or the Servicer; 
 (g) The Owner Trustee
shall be under no obligation to exercise any of the rights or powers vested in it by this Agreement, or to institute, conduct or defend any litigation under this Agreement or otherwise or in relation to this Agreement or any Basic Document, at the
request, order or direction of the Depositor or any of the Certificateholders, unless such Certificateholders, or the Depositor have offered to the Owner Trustee security or indemnity reasonably satisfactory to it against the costs, expenses and
liabilities that may be incurred by the Owner Trustee therein or thereby. The right of the Owner Trustee to perform any discretionary act enumerated in this Agreement or in any other Basic Document shall not be construed as a duty, and the Owner
Trustee shall not be answerable for other than its gross negligence or willful breach or misconduct in the performance of any such act; and 
 (h) Notwithstanding anything contained herein to the contrary, neither Wilmington Trust Company in its individual capacity nor as Owner Trustee shall be required to take any action in any jurisdiction other than in
the State of Delaware if the taking of such action will (i) require the consent or approval or authorization or order of or the giving of notice to, or the registration with or the taking of any other action in respect of, any state or other
governmental authority or agency of any jurisdiction other than the State of Delaware; (ii) result in any fee, tax or other governmental charge under the laws of any jurisdiction or any political subdivisions thereof in existence on the date
hereof other than the State of Delaware becoming payable by Wilmington Trust Company; or (iii) subject Wilmington Trust Company to personal jurisdiction in any jurisdiction other than the State of Delaware for causes of action arising from acts
unrelated to the consummation of the transactions by Wilmington Trust Company in its individual capacity or as Owner Trustee, as the case may be, contemplated hereby. The Owner Trustee shall be entitled to obtain advice of counsel (which advice
shall be an expense of the Depositor to determine whether any action required to be taken pursuant to this Agreement or the other Basic Documents results in the consequences described in clauses (i), (ii) and (iii) of the preceding
sentence. In the event that said counsel advises the Owner Trustee that such action will result in such consequences, the Owner Trustee will appoint an additional trustee pursuant to Section 11.05 hereof to proceed with such action. 

Section 8.02. Furnishing of Documents. Subject to Section 4.07, the Owner Trustee shall furnish to the
Certificateholders promptly upon receipt of a written request therefor, duplicates or copies of all reports, notices, requests, demands, certificates, financial statements and any other instruments furnished to the Owner Trustee under the Basic
Documents. On behalf of the Owner Trustee, the Depositor shall furnish to Noteholders promptly upon written request therefor, copies of the Sale and Servicing Agreement and the Indenture. 
  

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 Section 8.03. Representations and Warranties of the Owner Trustee. Wilmington Trust Company
hereby represents and warrants to the Sponsor, NovaStar Financial Inc., the Depositor and the Certificateholders, that: 
 (a)
It is a banking corporation, duly organized, validly existing and in good standing under the laws of the state of Delaware. It has all requisite power and authority to execute, deliver and perform its obligations under this Agreement. 
 (b) It has taken all action necessary to authorize the execution and delivery by it of this Agreement, and this Agreement will be executed
and delivered by one of its officers who is duly authorized to execute and deliver this Agreement on its behalf. 
 (c)
Neither the execution nor the delivery by it of this Agreement nor the consummation by it of the transactions contemplated hereby nor compliance by it with any of the terns or provisions hereof will contravene any Delaware or Federal law,
governmental rule or regulation governing the banking or trust powers of Wilmington Trust Company or any judgment or order binding on it, or constitute any default under its charter documents or by-laws. 
 (d) This Agreement has been duly authorized, executed and delivered by Wilmington Trust Company and constitutes a valid, legal and binding
obligation of Wilmington Trust Company, enforceable against it in accordance with the terms hereof, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights generally
and to general principles of equity, regardless of whether such enforcement is considered in a proceeding in equity or at law. 
 (e) The Owner Trustee is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default might have consequences that would materially
and adversely affect the condition (financial or other) or operations of Wilmington Trust Company or its properties or might have consequences that would materially adversely affect its performance hereunder. 
 Section 8.04. Reliance; Advice of Counsel. 
 (a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, Note, or other document or paper believed
by it in good faith to be genuine and believed by it in good faith to be signed by the proper party or parties. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other governing body of any corporate party as
conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of the determination of which is not specifically prescribed herein, the Owner Trustee may
for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter and such certificate shall constitute full protection to
the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. 
  

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 (b) In the exercise or administration of the trusts hereunder and in the performance of
its duties and obligations under this Agreement or the other Basic Documents, the Owner Trustee (i) may, at the expense of the Issuing Entity, act directly or through its agents or attorneys pursuant to agreements entered into with any of them,
and the Owner Trustee shall not be liable for the conduct or misconduct of such agents or attorneys if such agents or attorneys shall have been selected by the Owner Trustee with reasonable care, and (ii) may, at the expense of the Issuing
Entity, consult with counsel, Accountants and other skilled persons to be selected with reasonable care and employed by it. The Owner Trustee shall not be responsible for monitoring the performance of such agents or attorneys or for the failure of
others to perform their duties, even if delegated by the Owner Trustee, if such agents or attorneys shall have been selected by the Owner Trustee with reasonable care. The Owner Trustee shall not be liable for anything done, suffered or omitted in
good faith by it in accordance with the written opinion or advice of any such counsel, Accountants or other such persons and not contrary to this Agreement or any other Basic Document. 
 Section 8.05. Not Acting in Individual Capacity. Except as provided in Section 8.03, in accepting the trusts hereby created, Wilmington
Trust Company acts solely as Owner Trustee hereunder and not in its individual capacity, and all Persons having any claim against the Owner Trustee by reason of the transactions contemplated by this Agreement or any other Basic Document shall look
only to the Owner Trust Estate for payment or satisfaction thereof. 
 Section 8.06. Owner Trustee Not Liable for the Certificates or
Mortgage Loans. The recitals contained herein and in the Certificates (other than the signature and countersignature of the Owner Trustee on the Certificates) shall be taken as the statements of the Issuing Entity, and the Owner Trustee assumes
no responsibility for the correctness thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Agreement, of any other Basic Document or of the Certificates (other than the signature and countersignature of the
Owner Trustee on the Certificates and as specified in Section 8.03 hereof) or the Notes, or of any Mortgage Loans or related documents. The Owner Trustee shall at no time have any responsibility or liability for or with respect to the legality,
validity and enforceability of any Mortgage Loan, or the perfection and priority of any security interest created by any Mortgage Loan or the maintenance of any such perfection and priority, or for or with respect to the sufficiency of the Owner
Trust Estate or its ability to generate the payments to be distributed to the Certificateholders under this Agreement or the Noteholders under the Indenture, including, without limitation, the existence, condition and ownership of any Mortgaged
Property, the existence and enforceability of any insurance thereon, the existence and contents of any Mortgage Loan on any computer or other record thereof, the validity of the assignment of any Mortgage Loan to the Issuing Entity or of any
intervening assignment, the completeness of any Mortgage Loan, the performance or enforcement of any Mortgage Loan, the compliance by the Depositor or the Servicer with any warranty or representation made under any Basic Document or in any related
document or the accuracy of any such warranty or representation or any action of the Indenture Trustee or the Servicer or any subservicer taken in the name of the Owner Trustee. 
 Section 8.07. Owner Trustee May Own Notes. The Owner Trustee in its individual or any other capacity may become the owner or pledgee of the
Notes and may deal with the Sponsor, the Depositor, the Indenture Trustee and the Servicer in banking transactions with the same rights as it would have if it were not Owner Trustee. 
  

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 Section 8.08. Licenses. The Depositor shall cause the Issuing Entity to use its best efforts
to obtain and maintain the effectiveness of any licenses required in connection with this Agreement and the other Basic Documents and the transactions contemplated hereby and thereby until such time as the Issuing Entity shall terminate in
accordance with the terms hereof. 
 Section 8.09. Legal Proceedings. As required by Regulation AB, the Owner Trustee will
promptly notify the Servicer, the Depositor and the Issuing Entity of the commencement or, if applicable, the termination of any and all legal proceedings of which any property of the Owner Trustee is the subject, that is material to the Noteholders
and any such proceedings known to be contemplated by governmental authorities. In addition, the Owner Trustee will furnish to the Indenture Trustee, the Servicer, the Depositor and the Issuing Entity, in writing, the necessary disclosure describing
such proceedings required to be disclosed under Item 1117 of Regulation AB, for inclusion in reports filed pursuant to the Exchange Act. 
 ARTICLE IX 
 COMPENSATION OF OWNER TRUSTEE 
 Section 9.01. Owner Trustee’s Fees and Expenses. The Owner Trustee shall receive as compensation for its services hereunder such fees as
have been separately agreed upon before the date hereof between the Servicer and the Owner Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Servicer for its other reasonable expenses hereunder as separately agreed (the
“Owner Trustee Fee”). 
 Section 9.02. Indemnification. The Servicer shall be liable as obligor for, and shall
indemnify the Owner Trustee (in its individual and trust capacities) and its successors, assigns, agents and servants (collectively, the “Indemnified Parties”) from and against, any and all liabilities, obligations, losses, damages,
taxes (other than taxes imposed on net income), claims, actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively,
“Expenses”) which may at any time be imposed on, incurred by, or asserted against any Indemnified Party in any way relating to or arising out of this Agreement, the other Basic Documents, the Owner Trust Estate, the administration
of the Owner Trust Estate or the action or inaction of the Owner Trustee hereunder, except only that the Servicer shall not be liable for or required to indemnify an Indemnified Party from and against Expenses arising or resulting from any of the
matters described in the third sentence of Section 8.01. The indemnities contained in this Section 9.02 shall survive the resignation or termination of the Owner Trustee or the termination of this Agreement. In any event of any claim,
action or proceeding for which indemnity will be sought pursuant to this Section, the Servicer will be entitled to participate therein, with counsel selected by the Servicer and reasonably satisfactory to the Indemnified Parties, but after notice
from an Indemnified Party to the Servicer of its election to assume the defense thereof, the Servicer shall not be liable to the Indemnified Party under this Section 9.02 for any legal or other expenses subsequently incurred by such Indemnified
Party in connection with the defense of such action; provided, however, that this sentence shall not be in effect if (1) the Servicer shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent
the Indemnified 
  

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 Party within a reasonable time after notice of commencement of the action, (2) the Servicer shall have authorized
the employment of counsel for the Indemnified Party at the expense of the Servicer or (3) in the event any such claim involves a possible imposition of criminal liability or penalty or a material civil penalty on such Indemnified Party, a
conflict of interest between such Indemnified Party and the Servicer or another indemnitee or the granting of material injunctive relief against such Indemnified Party, and such Indemnified Party informs the Servicer that such Indemnified Party
desires to be represented by separate counsel, in which case, the reasonable fees and expenses of such separate counsel shall be borne by the Servicer. If the Servicer assumes the defense of any such proceeding, the Servicer shall be entitled to
settle such proceeding without any liability being assessed against any Indemnified Party or, if such settlement provides for release of any such Indemnified Party without any liability being assessed against any Indemnified Party in connection with
all matters relating to the proceeding which have been asserted against such Indemnified Party in such proceeding by the other parties to such settlement, without the prior written consent of such Indemnified Party, but otherwise only with the prior
written consent of such Indemnified Party. 
 Section 9.03. Payments to the Owner Trustee. Any amounts paid to the Owner Trustee
pursuant to this Article IX shall be deemed not to be a part of the Owner Trust Estate immediately after such payment. 
 ARTICLE X

 TERMINATION OF TRUST AGREEMENT 
 Section 10.01. Termination of Trust Agreement. 
 (a) This Agreement (other than
Article IX) shall terminate and the Issuing Entity shall dissolve and be of no further force or effect on the earlier of: (i) the final payment or other liquidation of the Mortgage Loans and the disposition of all REO Properties and the
remittance of all funds due hereunder with respect to such Mortgage Loans and REO Properties after the satisfaction and discharge of the Indenture pursuant to Section 4.01 of the Indenture; and (ii) the expiration of 21 years from the
death of the last survivor of descendants of Joseph P. Kennedy (the late ambassador of the United States to the Court of St. James). The bankruptcy, liquidation, dissolution, death or incapacity of the any Certificateholder or the Depositor shall
not (x) operate to terminate this Agreement or the Issuing Entity, nor (y) entitle Certificateholders’ or the Depositor’s legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for
a partition or winding up of all or any part of the Issuing Entity or Owner Trust Estate nor (z) otherwise affect the rights, obligations and liabilities of the parties hereto. 
 (b) Except as provided in Section 10.01(a) above, none of the Depositor, the Servicer, nor the Certificateholders shall be entitled
to revoke or terminate the Issuing Entity. 
 (c) Notice of any termination of the Issuing Entity, specifying the Payment Date
upon which the Certificateholders shall surrender their Certificates to the Indenture Trustee for payment of the final distributions and cancellation, shall be given by the Owner Trustee to the Certificateholders, the Rating Agencies and the
Indenture Trustee mailed within 
  

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 five (5) Business Days of receipt by the Owner Trustee from the Servicer of notice of such
termination, which notice given by the Owner Trustee shall state (i) the Payment Date upon or with respect to which final payment of the Certificates shall be made upon presentation and surrender of the Certificates at the office of the
Indenture Trustee therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Payment Date is not applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Indenture Trustee therein specified. The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Indenture Trustee at the time such notice is given to
Certificateholders. Upon presentation and surrender of Certificates, subject to Section 3808 of the Statutory Trust Statute, amounts distributable on such Payment Date pursuant to the terms of the Indenture. 
 (d) In the event that Certificateholders shall not surrender their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a second written notice to Certificateholders to surrender the Certificates for cancellation and receive the final distribution with respect thereto. If within one year
after the second notice the Ownership Interest shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning
surrender of the Certificates, and the cost thereof shall be paid out of the funds and other assets that shall remain subject to this Agreement. Any funds remaining in the Issuing Entity after exhaustion of such remedies shall be distributed by the
Indenture Trustee to the Certificateholders. 
 (e) Upon the winding up of the Issuing Entity in accordance with
Section 3808 of the Statutory Trust Statute and its termination, the Owner Trustee shall cause the Certificate of Trust to be canceled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of
Section 3810 of the Statutory Trust Statute. 
 ARTICLE XI 
 SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES 
 Section 11.01.
Eligibility Requirements for Owner Trustee. The Owner Trustee shall at all times be a corporation or banking association satisfying the provisions of Section 3807(a) of the Statutory Trust Statute; authorized to exercise trust powers;
having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by Federal or state authorities; and having (or having a parent that has) a rating of at least “Baa3” by Moody’s, and
“A-1” by S&P (or otherwise acceptable to the Rating Agencies). If such entity shall publish reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for
the purpose of this Section 11.01, the combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Owner Trustee
shall cease to be eligible in accordance with the provisions of this Section 11.01, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 11.02. 
  

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 Section 11.02. Resignation or Removal of Owner Trustee. The Owner Trustee may at any time
resign and be discharged from the trusts hereby created by giving written notice thereof to the Issuing Entity, the Depositor, the Servicer and the Indenture Trustee. Upon receiving such notice of resignation, the Depositor shall promptly appoint a
successor Owner Trustee by written instrument, in duplicate, one copy of which instrument shall be delivered to the resigning Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner Trustee shall have been so appointed and
have accepted appointment within thirty (30) days after the giving of such notice of resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. 
 If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 11.01 and shall fail to resign after
written request therefor by the Certificateholders or the Depositor, or if at any time the Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be
appointed, or any public officer shall take charge or control of the Owner Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Certificateholders or the Depositor, may remove the Owner
Trustee. If the Certificateholders or the Depositor shall remove the Owner Trustee under the authority of the immediately preceding sentence, the Depositor, shall promptly appoint a successor Owner Trustee by written instrument in duplicate, one
copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one copy to the successor Owner Trustee and payment of all fees owed to the outgoing Owner Trustee. 
 Any resignation or removal of the Owner Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section 11.02
shall not become effective until acceptance of appointment by the successor Owner Trustee pursuant to Section 11.03, and payment of all fees and expenses owed to the outgoing Owner Trustee. The Servicer shall provide notice of such resignation
or removal of the Owner Trustee to each of the Rating Agencies and the Indenture Trustee. 
 Section 11.03. Successor Owner
Trustee. Any successor Owner Trustee appointed pursuant to Section 11.02 shall execute, acknowledge and deliver to the Issuing Entity, the Depositor, the Indenture Trustee and to its predecessor Owner Trustee an instrument accepting such
appointment under this Agreement, and thereupon, subject to the payment of all fees and expenses owed to the outgoing Owner Trustee, the resignation or removal of the predecessor Owner Trustee shall become effective and such successor Owner Trustee
without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties, and obligations of its predecessor under this Agreement, with like effect as if originally named as Owner Trustee. The predecessor Owner
Trustee shall upon payment of its fees and expenses deliver to the successor Owner Trustee all documents and statements and moneys held by it under this Agreement; and the Depositor and the predecessor Owner Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties, and obligations. 
 No successor Owner Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 11.01. 
  

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 Upon acceptance of appointment by a successor Owner Trustee pursuant to this Section 11.03, the
Depositor shall mail notice of the successor of such Owner Trustee to the Certificateholders, the Indenture Trustee, the Noteholders and the Rating Agencies. If the Depositor fails to mail such notice within ten (10) days after acceptance of
appointment by the successor Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed at the expense of the Depositor. 
 Any successor Owner Trustee appointed pursuant to this Section 11.03 shall file an amendment to the Certificate of Trust with the Secretary of State identifying the name and principal place of business of such successor Owner Trustee
in the State of Delaware. 
 Section 11.04. Merger or Consolidation of Owner Trustee. Any corporation or banking association into
which the Owner Trustee may be merged or converted or with which it may be consolidated or any corporation or banking association resulting from any merger, conversion or consolidation to which the Owner Trustee shall be a party, or any corporation
or banking association succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee hereunder, provided such corporation or banking association shall be eligible pursuant to
Section 11.01, without the execution or filing of any instrument or any further act on the part of any of the parties hereto, except the filing of an amendment to the Certificate of Trust, if appropriate, anything herein to the contrary
notwithstanding; provided, further, that the Owner Trustee shall mail notice of such merger, conversion or consolidation to the Rating Agencies and; provided, further, that the Owner Trustee shall file an amendment to the
Certificate of Trust as required under Section 11.03 above. 
 Section 11.05. Appointment of Co-Trustee or Separate Trustee.

 (a) Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements
of any jurisdiction in which any part of the Owner Trust Estate or any Mortgaged Property may at the time be located, and for the purpose of performing certain duties and obligations of the Owner Trustee with respect to the Issuing Entity and the
Certificates, the Owner Trustee shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Owner Trustee and acceptable to the Depositor to act as co-trustee, jointly with the Owner Trustee, or
separate trustee or separate trustees, of all or any part of the Owner Trust Estate, and to vest in such Person, in such capacity, such title to the Issuing Entity, or any part thereof, and, subject to the other provisions of this
Section 11.05, such powers, duties, obligations, rights and trusts as the Depositor and the Owner Trustee may consider necessary or desirable. No co-trustee or separate trustee under this Agreement shall be required to meet the terms of
eligibility as a successor trustee pursuant to Section 11.01 and no notice of the appointment of any co-trustee or separate trustee shall be required pursuant to Section 11.03. 
 (b) Each separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provision
and conditions: 
 (i) all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be
conferred upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it being understood that such separate 
  

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 trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act),
except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties, and
obligations (including the holding of title to the Issuing Entity or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee;

 (ii) no trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under
this Agreement; and 
 (iii) the Owner Trustee may at any time accept the resignation of or remove any separate trustee or
co-trustee. 
 (c) Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to the separate
trustees and co-trustees, as if given to each of them. Every instrument appointing any separate trustee or co-trustee, other than this Agreement, shall refer to this Agreement and to the conditions of this Article XI. Each separate trustee and
co-trustee, upon its acceptance of appointment, shall be vested with the estates specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this
Agreement, specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee. 
 (d) Any separate trustee or co-trustee may at any time appoint the Owner Trustee as its agent or attorney-in-fact with full power and authority, to the
extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates,
properties, rights, remedies and trusts shall vest in and be exercised by the Owner Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. 
 ARTICLE XII 
 MISCELLANEOUS 
 Section 12.01. Supplements and Amendments. This Agreement may be amended by the Depositor and the Owner Trustee, with prior written notice to
the Rating Agencies, but without the consent of any of the Noteholders, the Certificateholders or the Indenture Trustee, to cure any ambiguity, to correct or supplement any provisions in this Agreement or for the purpose of adding any provisions to
or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, such action shall not adversely affect in any
material respect the interests of any Noteholder or Certificateholder. An amendment described above shall be deemed not to adversely affect in any material respect the interests of any Noteholder if the party requesting the amendment
(i) delivers an Opinion of Counsel, at the expense of the party requesting the change, delivered to the Owner Trustee to such effect and to the effect that 
  


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 such amendment will not cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes, or
(ii) satisfies the Rating Agency Condition with respect to such amendment. 
 This Agreement may also be amended from time to time by
the Depositor and the Owner Trustee, subject to the satisfaction of the Rating Agency Condition and with the prior written consent of the Indenture Trustee, the Noteholders evidencing more than 50% of the Class Note Balance of the Outstanding Notes
of all of the Classes affected thereby and the Certificateholders evidencing more than 50% of the Percentage Interests of the Issuing Entity, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions
of this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided, however, no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the
timing of, collections of payments on the Mortgage Loans or distributions that shall be required to be made for the benefit of the Noteholders or the Certificateholders, (b) reduce the aforesaid percentage of the Class Note Balance of the
Outstanding Notes or the Percentage Interests required to consent to any such amendment, in either case of clause (a) or (b) without the consent of the holders of all the outstanding Notes affected thereby and the Certificateholders of all
the outstanding Certificates. 
 Promptly after the execution of any such amendment or consent, the Depositor shall furnish written
notification of the substance of such amendment or consent to the Certificateholders, the Indenture Trustee and each of the Rating Agencies. 
 It shall not be necessary for the consent of the Certificateholders, the Noteholders or the Indenture Trustee pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such
consent shall approve the substance thereof. The manner of obtaining such consents (and any other consents of Certificateholders provided for in this Agreement or in any other Basic Document) and of evidencing the authorization of the execution
thereof by Certificateholders shall be subject to such reasonable requirements as the Owner Trustee may prescribe. 
 Promptly after the
execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause the filing of such amendment with the Secretary of State. 
 Prior to the execution of any amendment to this Agreement or the Certificate of Trust, the Owner Trustee and the Indenture Trustee (if the Indenture Trustee’s consent for such amendment is required) shall be entitled to receive and
rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and that all conditions precedent have been met. The Owner Trustee may, but shall not be obligated to, enter into any such
amendment which affects the Owner Trustee’s own rights, duties or immunities under this Agreement or otherwise. 
 Section 12.02.
No Legal Title to Owner Trust Estate in Certificateholders. The Certificateholders shall not have legal title to any part of the Owner Trust Estate. The Certificateholders shall be entitled to receive distributions with respect to their
undivided beneficial ownership interest therein only in accordance with Articles VI and X. No transfer, by operation of law or otherwise, of any right, title, or interest of the Certificateholders to and in their 
  

 32 







 ownership interest in the Owner Trust Estate shall operate to terminate this Agreement or the trusts hereunder or entitle
any transferee to an accounting or to the transfer to it of legal title to any part of the Owner Trust Estate. 
 Section 12.03.
Limitations on Rights of Others. The provisions of this Agreement are solely for the benefit of the Owner Trustee, the Sponsor, the Depositor, the Certificateholders and, to the extent expressly provided herein, the Indenture Trustee and the
Noteholders, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Owner Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein. 
 Section 12.04. Notices. 
 (a) Unless otherwise expressly specified or permitted by the terms hereof, all communications provided for or permitted hereunder shall be
in writing and shall be deemed to have been given if (1) personally delivered, (2) upon receipt by the intended recipient or three Business Days after mailing if mailed by certified mail, postage prepaid (except that notice to the Owner
Trustee shall be deemed given only upon actual receipt by the Owner Trustee), (3) sent by express courier delivery service and received by the intended recipient or (4) except with respect to notices sent to the Owner Trustee, transmitted
by telex or facsimile transmission (or any other type of electronic transmission agreed upon by the parties and confirmed by a writing delivered by any of the means described in (1), (2) or (3), at the following addresses: (i) if to the
Owner Trustee, at its Corporate Trust Office; and (ii) if to the Depositor, NovaStar Certificates Financing Corporation, 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114, Attention: Matt Kaltenrieder (816) 237-7508; or, as to each
such party, at such other address as shall be designated by such party in a written notice to each other party. 
 (b) Any
notice required or permitted to be given to a Certificateholder shall be given by first-class mail, postage prepaid, at the address of such Certificateholder as shown in the Certificate Register. Any notice so mailed within the time prescribed in
this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. 
 Section 12.05. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 
 Section 12.06. Separate Counterparts. This Agreement may be executed by the parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 
 Section 12.07. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, the Depositor, the Owner Trustee and its successors and each Certificateholder and its
successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by a Certificateholder shall bind the successors and assigns of such Certificateholder. 
  

 33 







 Section 12.08. No Petition. The Owner Trustee, by entering into this Agreement, each
Certificateholder, by accepting a Certificate, and the Indenture Trustee and each Noteholder by accepting the benefits of this Agreement, hereby covenant and agree that they will not at any time institute against the Depositor or the Issuing Entity,
or join in any institution against the Depositor or the Issuing Entity of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy law in connection
with any obligations relating to the Certificates, the Notes, this Agreement or any of the other Basic Documents. 
 This Section 12.08
will survive for one year and one day following the termination of this Agreement. 
 Section 12.09. No Recourse. Each
Certificateholder by accepting a Certificate acknowledges that such Certificateholder’s Certificate represents a beneficial interest in the Issuing Entity only and does not represent an interest in or an obligation of the Servicer, the Sponsor,
the Owner Trustee or any Affiliate thereof and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated in this Agreement, the Certificates or the other Basic Documents. 
 Section 12.10. Headings. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define
or limit any of the terms or provisions hereof. 
 Section 12.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 
 Section 12.12. [Intentionally Omitted.] 
 Section 12.13. Third-Party Beneficiaries. The Indenture Trustee, the Sponsor and NovaStar Financial Inc. are intended third-party beneficiaries of this Agreement, and this Agreement shall be binding upon and inure to the benefit
of the Indenture Trustee, the Sponsor and NovaStar Financial Inc. 
 Section 12.14. [Intentionally Omitted.] 
 Section 12.15. Servicer. The Servicer is authorized to prepare, or cause to be prepared, execute and deliver on behalf of the Issuing Entity
all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuing Entity, the Sponsor or Owner Trustee to prepare, file or deliver pursuant to the Basic Documents. Upon written request, the Owner
Trustee shall execute and deliver to the Servicer a limited power of attorney appointing the Servicer the Issuing Entity’s agent and attorney-in-fact to prepare, or cause to be prepared, execute and deliver all such documents, reports, filings,
instruments, certificates and opinions. 
  

 34 







 [Remainder of Page Intentionally Left Blank] 
  

 35 







 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective
officers hereunto duly authorized, 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
	
	WILMINGTON TRUST COMPANY, As Owner Trustee
		
	By:	 	 /s/ Rachel L. Simpson

	Name:	 	Rachel L. Simpson
	Title:	 	Sr. Financial Services Officer


  

			
	Solely with respect to obligation under Section 9.02 of this Trust Agreement
	
	 NOVASTAR MORTGAGE, INC.,
 as
Servicer

		
	By:	 	 /s/ Matt Kaltenrieder

	Name:	 	Matt Kaltenrieder
	Title:	 	Vice President

 [Signature page to Amended and Restated Trust Agreement] 






 EXHIBIT A 
 FORM OF TRUST CERTIFICATE 
 THE EQUITY INTEREST IN THE ISSUING ENTITY REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN AND WILL
NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER
HEREOF ONLY TO (I) A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT AND OF SUCH STATE LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE ISSUING ENTITY OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT NOT
LIMITED TO, NOVASTAR MORTGAGE INC.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS EQUITY
INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN SHALL BE MADE TO ANY PERSON UNLESS
THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE IS NOT (I) AN EMPLOYEE BENEFIT PLAN (WITHIN THE MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS
AMENDED (“ERISA”)) THAT IS SUBJECT TO TITLE OF ERISA, (II) A PLAN (WITHIN THE MEANING OF SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) A
GOVERNMENTAL PLAN (WITHIN THE MEANING OF SECTION 3(32) OF ERISA) THAT IS SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS, TO A MATERIAL EXTENT, SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (EACH OF THE FOREGOING, A “PLAN”),
AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING THIS CERTIFICATE OR A BENEFICIAL INTEREST HEREIN ON BEHALF OF, AS INVESTMENT MANAGER OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A PLAN. 
 THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT
SUCH TRANSFEREE (A) AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY
THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS; AND (C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS PERCENTAGE INTEREST OF THE TAXABLE INCOME RELATING TO THIS CERTIFICATE. 







			
	 Certificate No. 1
	 	Percentage Interest: 100%

 THIS CERTIFIES THAT NovaStar Certificates Financing Corporation (the
“Certificateholder”) is the registered owner of a 100% Percentage Interest in NovaStar Mortgage Funding Trust, Series 2006-MTA1 (the “Issuing Entity”) existing under the laws of the State of Delaware and created
pursuant to that certain Trust Agreement, dated as of May 22, 2006, as amended and restated on June 8, 2006 (as amended and restated, the “Trust Agreement”), by and between NovaStar Certificates Financing Corporation, as
depositor, and Wilmington Trust Company, not its individual capacity but solely as owner trustee under the Trust Agreement (the “Owner Trustee”). Capitalized terms used but not otherwise defined herein have the meanings assigned to
such terms in the Trust Agreement. The Owner Trustee, on behalf of the Issuing Entity and not in its individual capacity, has executed this Certificate by one of its duly authorized signatories as set forth below. This Certificate is one of the
Certificates referred to in the Trust Agreement and is issued under and is subject to the terms, provisions and conditions of the Trust Agreement to which the Certificateholder by virtue of the acceptance hereof agrees and by which the
Certificateholder hereof is bound. Reference is hereby made to the Trust Agreement for the rights of the Certificateholder, as well as for the terms and conditions of the Issuing Entity created by the Trust Agreement. 
 The recitals contained herein (other than the signature and countersignature of the Owner Trustee) shall be taken as the statements of the Depositor, and
the Owner Trustee assumes no responsibility for the correctness thereof. 
 The Certificateholder, by its acceptance hereof, agrees not to
transfer this Certificate except in accordance with terms and provisions of the Trust Agreement. 
 The Certificateholder, by its acceptance
hereof, acknowledges that such Certificateholder’s Certificate represents a beneficial interest in the Issuing Entity only and does not represent an interest in or an obligation of the Servicer, the Depositor, the Sponsor, the Owner Trustee or
any Affiliate thereof and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated herein, in the Trust Agreement or the other Basic Documents. 
 No pledge or transfer of the Certificates shall be effective unless such pledge or transfer is (i) of a 100% Percentage Interest of all the
Certificates and (ii) to a beneficial owner that represents that it qualifies for taxation as a REIT or is a Qualified REIT Subsidiary. 
 THIS CERTIFICATE REPRESENTS AN OWNERSHIP INTEREST IN THE ISSUING ENTITY FOR FEDERAL INCOME TAX PURPOSES. 
 THIS CERTIFICATE SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 

 

 A-2 







 IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuing Entity and not in its individual
capacity, has caused this Certificate to be duly executed. 
  

			
	 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1

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

		
	By:	 	  

		 	Authorized Signatory


 Dated: June 8, 2006 
 CERTIFICATE OF AUTHENTICATION 
 This
is one of the Certificates referred to in the within-mentioned Trust Agreement. 
  

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

		
	By:	 	  

		 	Authorized Signatory


 Dated: June 8, 2006 
  

 A-3 







 ASSIGNMENT 
 FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto 
 PLEASE INSERT
SOCIAL SECURITY 
 OR OTHER IDENTIFYING NUMBER 
 OF ASSIGNEE 
 ______________________________________________________________________________________________________________________________ 
 (Please print or type name and address, including postal zip code, of assignee) 
 ______________________________________________________________________________________________________________________________ 
 the within
instrument, and all rights thereunder, hereby irrevocably constituting and appointing                     , Attorney, to transfer said
Instrument on the books of the Certificate Registrar, with full power of substitution in the premises. 
 Dated: 

 

			
	 By:
	 	                                      
                                     
 */
		 	                Signature Guaranteed:
		
	 By:
	 	                                      
                                     
 */
		 	                Signature Guaranteed:




	*/	NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Instrument in every particular, without alteration, enlargement or
any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. 

  

 A-4 







 EXHIBIT B 
 FORM OF CERTIFICATE OF TRUST 
 CERTIFICATE OF TRUST OF 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1 
 THIS CERTIFICATE OF TRUST OF
NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1 (the “Trust”), is being duly executed and filed by the undersigned, as trustee, to form a statutory trust under the Delaware Statutory Trust Act (12 Del. Code, § 3801 et
seq.)(the “Act”). 
 1. Name. The name of the statutory trust formed hereby is NovaStar Mortgage Funding
Trust, Series 2006-MTA1. 
 2. Delaware Trustee. The name and business address of the trustee of the Issuing Entity in
the State of Delaware are Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration. 
 3. Effective Date. This Certificate of Trust shall be effective upon filing. 
  

 B-1 







 IN WITNESS WHEREOF, the undersigned, has duly executed this Certificate of Trust in
accordance with Section 3811(a)(1) of the Act. 
  

			
	 WILMINGTON TRUST COMPANY, not in its individual capacity but solely as trustee

		
	By:	 	  

	Name:	 	
	Title:	 	


  

 B-2 







 EXHIBIT C 
 FORM OF INVESTMENT LETTER 
                     ,              
 NovaStar Certificates Financing Corporation 
 8140 Ward Parkway, Suite 300 
 Kansas City, Missouri 64114 
 Wilmington Trust Company 
 Rodney Square North 
 1100 North Market Street 
 Wilmington, DE 19890 
  

			
	Re:	  	 NovaStar Mortgage Funding Trust, Series 2006-MTA1 (the “Trust”)
 Asset-Backed Notes, Series 2006-MTA1


 Ladies and Gentlemen: 
                      (the
“Certificateholder”) has purchased or acquired, or intends to purchase or acquire from                     , the current
Certificateholder (the “Current Certificateholder”), a Trust Certificate representing a 100% Percentage Interest (the “Certificate”) in the Issuing Entity, which represents an interest in the Issuing Entity created
pursuant to that certain Trust Agreement, dated as of May 22, 2006, as amended and restated on June 8, 2006 (the “Trust Agreement”), by and between NovaStar Certificates Financing Corporation, as Depositor and Wilmington
Trust Company, as Owner Trustee. Capitalized terms used and not otherwise defined herein have the meanings assigned to such terms in the Trust Agreement. 
 CERTIFICATION 
 The undersigned, as an authorized officer or agent of the Certificateholder, hereby
certifies, represents, warrants and agrees on behalf of the Certificateholder as follows: 
 1. The Certificateholder is duly organized,
validly existing and in good standing under the laws of the jurisdiction in which it was formed and is authorized to invest in the Certificate. The person executing this letter on behalf of the Certificateholder is duly authorized to do so on behalf
of the Certificateholder. 
 2. The Certificateholder hereby acknowledges that no transfer of the Certificate may be made unless such
transfer is exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”); and applicable state securities laws, or is made in accordance with the Securities Act and such laws.

 3. The Certificateholder understands that the Certificate has not been and will not be registered under the Securities Act and may be
offered, sold, pledged or otherwise transferred to a person whom the transferor reasonably believes is (A) a qualified institutional buyer (as defined in Rule 144A under the Securities Act) or (B) a Person involved in the 
  

 C-1 







 organization or operation of the Issuing Entity or an affiliate of such Person, in a transaction pursuant to an effective
registration statement under the Securities Act and any applicable state securities laws or exempt from the registration requirements of the Securities Act and any such state securities laws. The Certifcateholder understands that the Certificate
bears a legend to the foregoing effect. 
 4. The Certificateholder is acquiring the Certificate for its own account or for accounts for
which it exercises sole investment discretion, and not with a view to or for sale or other transfer in connection with any distribution of the Certificate in any manner that would violate Section 5 of the Securities Act or any applicable state
securities laws, subject nevertheless to any requirement of law that the disposition of the Certificateholder’s property shall at all times be and remain within its control. 
 5. The Certificateholder is (A) a “qualified institutional buyer” (a “QIB”) as defined in Rule 144A under the Securities
Act, and is aware that the transferor of the Certificate may be relying on an exemption from the registration requirements of the Securities Act and is acquiring such Certificate for its own account or for the account of one or more qualified
institutional buyers for whom it is authorized to act, or (B) a Person involved in the organization or operation of the Issuing Entity or an affiliate of such Person within the meaning of Rule 3a-7 of the Investment Company Act of 1940, as
amended (including, but not limited to, the Sponsor). The Certificateholder is able to bear the economic risks of such an investment. The Certificateholder is a QIB because [STATE FACTUAL BASIS FOR QIB STATUS]. 
 6. If the Certificateholder sells or otherwise transfers the registered ownership of such Certificate, the Certificateholder will comply with the
restrictions and requirements with respect to the transfer of the ownership of the Certificate under the Trust Agreement, and the Certificateholder will obtain from any subsequent purchaser or transferee substantially the same certifications,
representations, warranties and covenants as required under the Trust Agreement in connection with such subsequent sale or transfer thereof. 
 7. The Certificateholder is not an entity that will hold a Certificate as nominee (a “Book Entry Nominee”) to facilitate the clearance and settlement of such security through electronic book-entry changes in Accounts or
participating organizations. 
 8. The Certificateholder consents to any amendments of the Trust Agreement as may be required to effectuate
further the restrictions on transfer of the Certificates to Book Entry Nominees. 
 9. The Certificateholder is not a Plan and is not,
directly or indirectly, purchasing such Certificate on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with assets of a Plan. 
 10. The Certificateholder hereby agrees to indemnify each of the Issuing Entity, the Indenture Trustee and the Owner Trustee against any liability that may result if the Certificateholder’s transfer of a
Certificate (or any portion thereof) is not exempt from the registration requirements of the Securities Act and any applicable state securities laws or is not made in accordance with such federal and state laws. Such indemnification of the Issuing
Entity, the Indenture Trustee, and the Owner Trustee shall survive the termination of the related Trust Agreement. 
  

 C-2 







 11. The Certificateholder qualifies for taxation as a REIT or is a Qualified REIT Subsidiary. 

IN WITNESS WHEREOF, the Certificateholder has caused this instrument to be executed on its behalf pursuant to the authority of its Board of Directors,
by its duly authorized signatory this                      day of
                    ,     . 
  

			
	[NAME OF CERTIFICATEHOLDER]
		
	By:	 	  

	Name:	 	
	Title:	 	


  

 C-3 







 EXHIBIT D 
 FORM OF TRANSFEROR CERTIFICATE 
                     ,              
 NovaStar Certificates Financing Corporation 
 8140 Ward Parkway, Suite 300 
 Kansas City, Missouri 64114 
 Wilmington Trust Company 
 Rodney Square North 
 1100 North Market Street 
 Wilmington, DE 19890 
  

			
	Re:	  	 NovaStar Mortgage Funding Trust, Series 2006-MTA1 (the “Trust”)
 Asset-Backed Notes, Series 2006-MTA1


 Ladies and Gentlemen: 
 In connection with our disposition of the above-referenced Asset-Backed Certificates (the “Certificates”) we certify that (i) we
understand that the Certificates have not been registered under the Securities Act of 1933, as amended (the “Act”), and are being transferred by us in a transaction that is exempt from the registration requirements of the Act and
(ii) we have not offered or sold any Certificates to, or solicited offers to buy any Certificates from, any person, or otherwise approached or negotiated with any person with respect thereto, in a manner that would be deemed, or taken any other
action which would result in, a violation of Section 5 of the Act. 
 Dated: 
  

			
	[NAME OF TRANSFEROR]
		
	By:	 	  

	Authorized Officer


  

 D-1 







 EXHIBIT E 
 Form of Class C Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-MTA1 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS C CERTIFICATES 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage
Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Certificates Financing Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate
representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Sale and Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Indenture Trustee
relating to the Mortgage Loans and other assets held in the Issuing Entity.) 
 THE EQUITY INTEREST IN THE ISSUING ENTITY REPRESENTED BY THIS CERTIFICATE HAS
NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND OF SUCH STATE LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE ISSUING ENTITY OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (INCLUDING, BUT NOT LIMITED TO, NOVASTAR MORTGAGE INC.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS
OBLIGATED TO REGISTER THIS EQUITY INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN
SHALL BE MADE TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE IS NOT (I) AN EMPLOYEE BENEFIT PLAN (WITHIN THE MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO TITLE OF ERISA, (II) A PLAN (WITHIN THE 
  

 E-1 







 MEANING OF SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO
SECTION 4975 OF THE CODE OR (III) A GOVERNMENTAL PLAN (WITHIN THE MEANING OF SECTION 3(32) OF ERISA) THAT IS SUBJECT TO ANY FEDERAL, STATE OR LOCAL LAW THAT IS, TO A MATERIAL EXTENT, SIMILAR TO TITLE I OF ERISA OR SECTION 4975 OF THE CODE (EACH OF
THE FOREGOING, A “PLAN”), AND IS NOT DIRECTLY OR INDIRECTLY PURCHASING THIS CERTIFICATE OR A BENEFICIAL INTEREST HEREIN ON BEHALF OF, AS INVESTMENT MANAGER OF, AS TRUSTEE OF, OR WITH THE ASSETS OF A PLAN. 
 THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER TRUSTEE AND THE
CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE (A) AGREES TO BE BOUND BY AND TO ABIDE BY THE TRANSFER RESTRICTIONS APPLICABLE TO THIS CERTIFICATE; (B) IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO
FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN ACCOUNTS OF PARTICIPATING ORGANIZATIONS; AND (C) UNDERSTANDS THAT IT MUST TAKE INTO ACCOUNT ITS PERCENTAGE INTEREST OF THE TAXABLE INCOME RELATING
TO THIS CERTIFICATE. 
  

					
	No.: C	  	Date: June 8, 2006	  	CUSIP No.: [    ]
			
	 Percentage Interest:
 100%
	  	 Registered Owner: NovaStar
 Certificates
Financing
 Corporation
	  	 Final Scheduled Payment
 Date: August 25,
2046


 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Sale and Servicing Agreement dated as of May 1, 2006 (the “Sale and Servicing Agreement”) by and among NovaStar Certificates Financing
Corporation as the depositor (the “Depositor”), the Indenture Trustee, J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), US Bank National Association, as the custodian (the “Custodian”),
NovaStar Mortgage Funding Trust, Series 2006-MTA1, as the issuing entity (the “Issuing Entity”) NovaStar Financial Inc., as a seller and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the
“Sponsor”), including the related Cut-off Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest and principal due after the Cut-off Date; (ii) property which
secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Company’s interest in any insurance policies in respect of the Mortgage Loans; (iv) all proceeds of any of the
foregoing; (v) the rights of the Company under the Purchase Agreement and (vi) all other assets included or to be included in the Issuing Entity. Such assignment includes all interest and principal due to the Depositor or the Servicer
after the Cut-off Date with respect to the Mortgage Loans. 
 Each owner of record of a Class C Certificate will be entitled to certain
distributions, as described under Article VIII of the Indenture. 
  

 E-2 







 In order to receive the final distribution hereon, the owner hereof is required to present this
Certificate to the Indenture Trustee. The Indenture provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Indenture. 
 THIS CERTIFICATE REPRESENTS AN OWNERSHIP INTEREST IN THE ISSUING ENTITY FOR FEDERAL INCOME TAX PURPOSES. 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar
Home Equity Loan Asset-Backed Certificates, Series 2006-MTA1, Class C Certificates (the “Class C Certificates”) and issued under and subject to the terms, provisions and conditions of the Trust Agreement, to which the owner of this
Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Trust Agreement are the Trust Certificates and all such Certificates are collectively referred to as the “Certificates”. 
 Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Trust Agreement. 
 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Payment
Date”) commencing June 25, 2006, the owners of the Class C Certificates as of the close of business on the business day immediately preceding such Payment Date (the “Record Date”) will be entitled to receive payments in respect
of interest and principal, if any, relating to such Payment Date, all as described in Article VIII of the Indenture. Payments will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the
person entitled thereto as it appears on the Certificate Register. 
 The Indenture Trustee is required to duly and punctually pay payments
with respect to this Certificate in accordance with the terms hereof and the Indenture. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Indenture Trustee to such owner for all
purposes of the Indenture. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Sale and Servicing Agreement. The Sale and
Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Sale and Servicing Agreement. 
 This Certificate does not represent a
deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Certificates Financing Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit 
  

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 Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate
is limited in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Indenture) all as more specifically set forth hereinabove and in the
Indenture. 
 Notwithstanding any other provisions in the Indenture, the owner of any Certificate shall have the right which is absolute and
unconditional to receive payments to the extent provided in the Indenture with respect to such Certificate or to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such owner.

 The Depositor may, at its option, terminate the Indenture on any date on which the aggregate of the Principal Balances of the Mortgage
Loans on such date is equal to or less than 10% of the sum of (i) the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date and (ii) the Original Pre-Funded Amount, by purchasing, on the next succeeding Payment Date, all
of the outstanding Mortgage Loans and REO Properties at the Repurchase Price. 
 As provided in the Trust Agreement and subject to certain
limitations therein set forth, Class C Certificates are exchangeable for new Class C Certificates of authorized denominations evidencing the same aggregate principal amount. 
 No pledge or transfer of the Certificates shall be effective unless such pledge or transfer is (i) of a 100% Percentage Interest of all the
Certificates and (ii) to a beneficial owner that represents that it qualifies for taxation as a REIT or is a Qualified REIT Subsidiary. 
 The Indenture Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Indenture Trustee or any such agent shall be affected by notice to the
contrary. 
  

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 IN WITNESS WHEREOF, the Owner Trustee, on behalf of the Issuing Entity and not in its individual
capacity, has caused this Certificate to be duly executed. 
  

			
	 NOVASTAR MORTGAGE FUNDING
 TRUST, SERIES
2006-MTA1

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

		
	By:	 	  

	Authorized Signatory


 Dated: June 8, 2006 
 CERTIFICATE OF AUTHENTICATION 
 This
is one of the Certificates referred to in the within-mentioned Trust Agreement. 
  

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

		 	Authorized Signatory


 Dated: June 8, 2006 
  

 E-5 







 ASSIGNMENT 
 FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto 
 PLEASE INSERT SOCIAL SECURITY 
 OR OTHER IDENTIFYING NUMBER 
 OF ASSIGNEE 
  
  

 (Please print or type name and address, including postal zip code, of assignee) 
  
  

 the within instrument, and all rights thereunder, hereby irrevocably constituting and appointing
                    , Attorney, to transfer said Instrument on the books of the Certificate Registrar, with full power of substitution in the
premises. 
 Dated: 
  

					
	By:	 	  
	 	*/
		 	Signature Guaranteed:	 	
			
	By:	 	  
	 	*/




	*/	NOTICE: The signature to this assignment must correspond with the name as it appears upon the face of the within Instrument in every particular, without alteration, enlargement or
any change whatever. Such signature must be guaranteed by a member firm of the New York Stock Exchange or a commercial bank or trust company. 

  

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