Document:

Exhibit
      10.5

     

    (Multicurrency
      - Cross Border)

     

    ISDA®

    International
      Swap Dealers Association, Inc.

    MASTER
      AGREEMENT

    
      	
               

              dated
                as of June 1, 2007

            

    

     

    
      	
              WACHOVIA
                BANK,
NATIONAL ASSOCIATION

            	 	
              and

            	 	
              NOVASTAR
                MORTGAGE SUPPLEMENTAL
INTEREST TRUST, SERIES 2007-2, a New
                York
common law trust

            
	
              (“Party
                A”)

            	 	 	 	
              (“Party
                B”)

            

    

     

    have
      entered and/or anticipate entering into one of more transactions (each a
      "Transaction") that are or will be governed by this Master Agreement, which
      includes the schedule (the "Schedule"), and the documents and other confirming
      evidence (each a "Confirmation") exchanged between the parties confirming those
      Transactions.

    Accordingly,
      the parties agree as follows: —

     

    1. Interpretation

     

    (a) Definitions. The
      terms
      defined in Section 14 and in the Schedule will have the meanings therein
      specified for the purpose of this Master Agreement.

     

    (b) Inconsistency.
      In the
      event of any inconsistency between the provisions of the Schedule and the other
      provisions of this Master Agreement, the Schedule will prevail. In the event
      of
      any inconsistency between the provisions of any Confirmation and this Master
      Agreement (including the Schedule), such Confirmation will prevail for the
      purpose of the relevant Transaction.

     

    (c) Single
      Agreement.
      All
      Transactions are entered into in reliance on the fact that this Master Agreement
      and all Confirmations form a single agreement between the parties (collectively
      referred to as this "Agreement"), and the parties would not otherwise enter
      into
      any Transactions.

     

    2. Obligations

     

    (a) General
      Conditions.

     

    (i) Each
      party will make each payment or delivery specified in each Confirmation to
      be
      made by it, subject to the other provisions of this Agreement.

     

    (ii) Payments
      under this Agreement will be made on the due date for value on that date in
      the
      place of the account specified in the relevant Confirmation or otherwise
      pursuant to this Agreement, in freely transferable funds and in the manner
      customary for payments in the required currency. Where settlement is by delivery
      (that is, other than by payment), such delivery will be made for receipt on
      the
      due date in the manner customary for the relevant obligation unless otherwise
      specified in the relevant Confirmation or elsewhere in this
      Agreement.

     

    (iii) Each
      obligation of each party under Section 2(a)(i) is subject to (1) the condition
      precedent that no Event of Default or Potential Event of Default with respect
      to
      the other party has occurred and is continuing, (2) the condition precedent
      that
      no Early Termination Date in respect of the relevant Transaction has occurred
      or
      been effectively designated and (3) each other applicable condition precedent
      specified in this Agreement.

     

    Copyright
©
1992
      by International Swap Dealers
      Association, Inc.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) Change
      of Account.
      Either
      party may change its account for receiving a payment or delivery by giving
      notice to the other party at least five Local Business Days prior to the
      scheduled date for the payment or delivery to which such change applies unless
      such other party gives timely notice of a reasonable objection to such
      change.

     

    (c) Netting.
      If on
      any date amounts would otherwise be payable: —

     

    (i) in
      the
      same currency; and

     

    (ii) in
      respect of the same Transaction,

     

    by
      each
      party to the other, then, on such date, each party’s obligation to make payment
      of any such amount will be automatically satisfied and discharged and, if the
      aggregate amount that would otherwise have been payable by one party exceeds
      the
      aggregate amount that would otherwise have been payable by the other party,
      replaced by an obligation upon the party by whom the larger aggregate amount
      would have been payable to pay to the other party the excess of the larger
      aggregate amount over the smaller aggregate amount.

     

    The
      parties may elect in respect of two or more Transactions that a net amount
      will
      be determined in respect of all amounts payable on the same date in the same
      currency in respect of such Transactions, regardless of whether such amounts
      are
      payable in respect of the same Transaction. The election may be made in the
      Schedule or a Confirmation by specifying that subparagraph (ii) above will
      not
      apply to the Transactions identified as being subject to the election, together
      with the starting date (in which case subparagraph (ii) above will not, or
      will
      cease to, apply to such Transactions from such date). This election may be
      made
      separately for different groups of Transactions and will apply separately to
      each pairing of Offices through which the parties make and receive payments
      or
      deliveries.

     

    (d) Deduction
      or Withholding for Tax.

     

    (i) Gross-Up.
      All
      payments under this Agreement will be made without any deduction or withholding
      for or on account of any Tax unless such deduction or withholding is required
      by
      any applicable law, as modified by the practice of any relevant governmental
      revenue authority, then in effect. If a party is so required to deduct or
      withhold, then that party (“X”) will: —

     

    (1) promptly
      notify the other party (“Y”) of such requirement;

     

    (2) pay
      to
      the relevant authorities the full amount required to be deducted or withheld
      (including the full amount required to be deducted or withheld from any
      additional amount paid by X to Y under this Section 2(d)) promptly upon the
      earlier of determining that such deduction or withholding is required or
      receiving notice that such amount has been assessed against Y;

     

    (3) promptly
      forward to Y an official receipt (or a certified copy), or other documentation
      reasonably acceptable to Y, evidencing such payment to such authorities;
      and

     

    (4) if
      such
      Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which
      Y is
      otherwise entitled under this Agreement, such additional amount as is necessary
      to ensure that the net amount actually received by Y (free and clear of
      Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount
      Y would have received had no such deduction or withholding been required.
      However, X will not be required to pay any additional amount to Y to the extent
      that it would not be required to be paid but for: —

     

    (A) the
      failure by Y to comply with or perform any agreement contained in Section
      4(a)(i), 4(a)(iii) or 4(d); or

     

    (B) the
      failure of a representation made by Y pursuant to Section 3(f) to be accurate
      and true unless such failure would not have occurred but for (I) any action
      taken by a taxing authority, or brought in a court of competent jurisdiction,
      on
      or after the date on which a Transaction is entered into (regardless of whether
      such action is taken or brought with respect to a party to this Agreement)
      or
      (II) a Change in Tax Law.

     

    
      
        
        

      

      
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    (ii) Liability.
If:
      —

     

    (1) X
      is
      required by any applicable law, as modified by the practice of any relevant
      governmental revenue authority, to make any deduction or withholding in respect
      of which X would not be required to pay an additional amount to Y under Section
      2(d)(i)(4);

     

    (2) X
      does
      not so deduct or withhold; and

     

    (3) a
      liability resulting from such Tax is assessed directly against X,

     

    then,
      except to the extent Y has satisfied or then satisfies the liability resulting
      from such Tax, Y will promptly pay to X the amount of such liability (including
      any related liability for interest, but including any related liability for
      penalties only if Y has failed to comply with or perform any agreement contained
      in Section 4(a)(i), 4(a)(iii) or 4(d)).

     

    (e) Default
      Interest; Other Amounts.
      Prior to
      the occurrence or effective designation of an Early Termination Date in respect
      of the relevant Transaction, a party that defaults in the performance of any
      payment obligation will, to the extent permitted by law and subject to Section
      6(c), be required to pay interest (before as well as after judgment) on the
      overdue amount to the other party on demand in the same currency as such overdue
      amount, for the period from (and including) the original due date for payment
      to
      (but excluding) the date of actual payment, at the Default Rate. Such interest
      will be calculated on the basis of daily compounding and the actual number
      of
      days elapsed. If, prior to the occurrence or effective designation of an Early
      Termination Date in respect of the relevant Transaction, a party defaults in
      the
      performance of any obligation required to be settled by delivery, it will
      compensate the other party on demand if and to the extent provided for in the
      relevant Confirmation or elsewhere in this Agreement.

     

    3. Representations

     

    Each
      party represents to the other party (which representations will be deemed to
      be
      repeated by each party on each date on which a Transaction is entered into
      and,
      in the case of the representations in Section 3(f), at all times until the
      termination of this Agreement) that: —

     

    (a) Basic
      Representations.

     

    (i) Status.
      It is
      duly organised and validly existing under the laws of the jurisdiction of its
      organisation or incorporation and, if relevant under such laws, in good
      standing;

     

    (ii) Powers.
      It has
      the power to execute this Agreement and any other documentation relating to
      this
      Agreement to which it is a party, to deliver this Agreement and any other
      documentation relating to this Agreement that it is required by this Agreement
      to deliver and to perform its obligations under this Agreement and any
      obligations it has under any Credit Support Document to which it is a party
      and
      has taken all necessary action to authorise such execution, delivery and
      performance;

     

    (iii) No
      Violation or Conflict.
      Such
      execution, delivery and performance do not violate or conflict with any law
      applicable to it, any provision of its constitutional documents, any order
      or
      judgment of any court or other agency of government applicable to it or any
      of
      its assets or any contractual restriction binding on or affecting it or any
      of
      its assets;

     

    (iv) Consents.
      All
      governmental and other consents that are required to have been obtained by
      it
      with respect to this Agreement or any Credit Support Document to which it is
      a
      party have been obtained and are in full force and effect and all conditions
      of
      any such consents have been complied with; and

     

    (v) Obligations
      Binding.
      Its
      obligations under this Agreement and any Credit Support Document to which it
      is
      a party constitute its legal, valid and binding obligations, enforceable in
      accordance with their respective terms (subject to applicable bankruptcy,
      reorganisation, insolvency, moratorium or similar laws affecting creditors’
rights generally and subject, as to enforceability, to equitable principles
      of
      general application (regardless of whether enforcement is sought in a proceeding
      in equity or at law)).

     

    
      
        
        

      

      
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    (b)
      Absence of Certain Events.
      No Event
      of Default or Potential Event of Default or, to its knowledge, Termination
      Event
      with respect to it has occurred and is continuing and no such event or
      circumstance would occur as a result of its entering into or performing its
      obligations under this Agreement or any Credit Support Document to which it
      is a
      party.

     

    (c) Absence
      of Litigation.
      There is
      not pending or, to its knowledge, threatened against it or any of its Affiliates
      any action, suit or proceeding at law or in equity or before any court,
      tribunal, governmental body, agency or official or any arbitrator that is likely
      to affect the legality, validity or enforceability against it of this Agreement
      or any Credit Support Document to which it is a party or its ability to perform
      its obligations under this Agreement or such Credit Support
      Document.

     

    (d) Accuracy
      of Specified Information.
      All
      applicable information that is furnished in writing by or on behalf of it to
      the
      other party and is identified for the purpose of this Section 3(d) in the
      Schedule is, as of the date of the information, true, accurate and complete
      in
      every material respect.

     

    (e) Payer
      Tax Representation.
      Each
      representation specified in the Schedule as being made by it for the purpose
      of
      this Section 3(e) is accurate and true.

     

    (f) Payee
      Tax Representations.
      Each
      representation specified in the Schedule as being made by it for the purpose
      of
      this Section 3(f) is accurate and true.

     

    4. Agreements

     

    Each
      party agrees with the other that, so long as either party has or may have any
      obligation under this Agreement or under any Credit Support Document to which
      it
      is a party: —

     

    (a) Furnish
      Specified Information.
      It will
      deliver to the other party or, in certain cases under subparagraph (iii) below,
      to such government or taxing authority as the other party reasonably directs:
      —

     

    (i) any
      forms, documents or certificates relating to taxation specified in the Schedule
      or any Confirmation;

     

    (ii) any
      other
      documents specified in the Schedule or any Confirmation; and

     

    (iii) upon
      reasonable demand by such other party, any form or document that may be required
      or reasonably requested in writing in order to allow such other party or its
      Credit Support Provider to make a payment under this Agreement or any applicable
      Credit Support Document without any deduction or withholding for or on account
      of any Tax or with such deduction or withholding at a reduced rate (so long
      as
      the completion, execution or submission of such form or document would not
      materially prejudice the legal or commercial position of the party in receipt
      of
      such demand), with any such form or document to be accurate and completed in
      a
      manner reasonably satisfactory to such other party and to be executed and to
      be
      delivered with any reasonably required certification,

     

    in
      each
      case by the date specified in the Schedule or such Confirmation or, if none
      is
      specified, as soon as reasonably practicable.

     

    (b) Maintain
      Authorisations.
      It will
      use all reasonable efforts to maintain in full force and effect all consents
      of
      any governmental or other authority that are required to be obtained by it
      with
      respect to this Agreement or any Credit Support Document to which it is a party
      and will use all reasonable efforts to obtain any that may become necessary
      in
      the future.

     

    (c) Comply
      with Laws.
      It will
      comply in all material respects with all applicable laws and orders to which
      it
      may be subject if failure so to comply would materially impair its ability
      to
      perform its obligations under this Agreement or any Credit Support Document
      to
      which it is a party.

     

    (d) Tax
      Agreement.
      It will
      give notice of any failure of a representation made by it under Section 3(f)
      to
      be accurate and true promptly upon learning of such failure.

     

    (e) Payment
      of Stamp Tax.
      Subject
      to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect
      of its execution or performance of this Agreement by a jurisdiction in which
      it
      is incorporated, organised, managed and controlled. or considered to have its
      seat, or in which a branch or office through which it is acting for the purpose
      of this Agreement is located (“Stamp Tax Jurisdiction”) and will indemnify the
      other party against any Stamp Tax levied or imposed upon the other party or
      in
      respect of the other party’s execution or performance of this Agreement by any
      such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with
      respect to the other party.

     

    
      
        
        

      

      
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    5. Events
      of Default and Termination Events

     

    (a) Events
      of Default.
      The
      occurrence at any time with respect to a party or, if applicable, any Credit
      Support Provider of such party or any Specified Entity of such party of any
      of
      the following events constitutes an event of default (an “Event of Default”)
      with respect to such party: —

     

    (i) Failure
      to Pay or Deliver.
      Failure
      by the party to make, when due, any payment under this Agreement or delivery
      under Section 2(a)(i) or 2(e) required to be made by it if such failure is
      not
      remedied on or before the third Local Business Day after notice of such failure
      is given to the party;

     

    (ii) Breach
      of Agreement.
      Failure
      by the party to comply with or perform any agreement or obligation (other than
      an obligation to make any payment under this Agreement or delivery under Section
      2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or
      obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or
      performed by the party in accordance with this Agreement if such failure is
      not
      remedied on or before the thirtieth day after notice of such failure is given
      to
      the party;

     

    (iii) Credit
      Support Default.

     

    (1) Failure
      by the party or any Credit Support Provider of such party to comply with or
      perform any agreement or obligation to be complied with or performed by it
      in
      accordance with any Credit Support Document if such failure is continuing after
      any applicable grace period has elapsed;

     

    (2) the
      expiration or termination of such Credit Support Document or the failing or
      ceasing of such Credit Support Document to be in full force and effect for
      the
      purpose of this Agreement (in either case other than in accordance with its
      terms) prior to the satisfaction of all obligations of such party under each
      Transaction to which such Credit Support Document relates without the written
      consent of the other party; or

     

    (3) the
      party
      or such Credit Support Provider disaffirms, disclaims, repudiates or rejects,
      in
      whole or in part, or challenges the validity of, such Credit Support
      Document;

     

    (iv) Misrepresentation.
      A
      representation (other than a representation under Section 3(e) or (f)) made
      or
      repeated or deemed to have been made or repeated by the party or any Credit
      Support Provider of such party in this Agreement or any Credit Support Document
      proves to have been incorrect or misleading in any material respect when made
      or
      repeated or deemed to have been made or repeated;

     

    (v) Default
      under Specified Transaction.
      The
      party, any Credit Support Provider of such party or any applicable Specified
      Entity of such party (1) defaults under a Specified Transaction and, after
      giving effect to any applicable notice requirement or grace period, there occurs
      a liquidation of, an acceleration of obligations under, or an early termination
      of, that Specified Transaction, (2) defaults, after giving effect to any
      applicable notice requirement or grace period, in making any payment or delivery
      due on the last payment, delivery or exchange date of, or any payment on early
      termination of, a Specified Transaction (or such default continues for at least
      three Local Business Days if there is no applicable notice requirement or grace
      period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in
      part, a Specified Transaction (or such action is taken by any person or entity
      appointed or empowered to operate it or act on its behalf);

     

    (vi) Cross
      Default.
      If
“Cross Default” is specified in the Schedule as applying to the party, the
      occurrence or existence of (1) a default, event of default or other similar
      condition or event (however described)
      in respect of such party, any Credit Support Provider of such party or any
      applicable Specified Entity of such party under one or more agreements or
      instruments relating to Specified Indebtedness of any of them (individually
      or
      collectively) in an aggregate amount of not less than the applicable Threshold
      Amount (as specified in the Schedule) which has resulted in such Specified
      Indebtedness becoming, or becoming capable at such time of being declared,
      due
      and payable under such agreements or instruments, before it would otherwise
      have
      been due and payable or (2) a default by such party, such Credit Support
      Provider or such Specified Entity (individually or collectively) in making
      one
      or more payments on the due date thereof in an aggregate amount of not less
      than
      the applicable Threshold Amount under such agreements or instruments (after
      giving effect to any applicable notice requirement or grace
      period);

     

    
      
        
        

      

      
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    (vii) Bankruptcy.
      The
      party, any Credit Support Provider of such party or any applicable Specified
      Entity of such party:-

     

    (1)
      is
      dissolved (other than pursuant to a consolidation, amalgamation or merger);
      (2)
      becomes insolvent or is unable to pay its debts or fails or admits in writing
      its inability generally to pay its debts as they become due; (3) makes a general
      assignment, arrangement or composition with or for the benefit of its creditors;
      (4) institutes or has instituted against it a proceeding seeking a judgment
      of
      insolvency or bankruptcy or any other relief under any bankruptcy or insolvency
      law or other similar law affecting creditors’ rights, or a petition is presented
      for its winding-up or liquidation, and, in the case of any such proceeding
      or
      petition instituted or presented against it, such proceeding or petition (A)
      results in a judgment of insolvency or bankruptcy or the entry of an order
      for
      relief or the making of an order for its winding-up or liquidation or (B) is
      not
      dismissed, discharged, stayed or restrained in each case within 30 days of
      the
      institution or presentation thereof, (5) has a resolution passed for its
      winding-up, official management or liquidation (other than pursuant to a
      consolidation, amalgamation or merger); (6) seeks or becomes subject to the
      appointment of an administrator, provisional liquidator, conservator, receiver,
      trustee, custodian or other similar official for it or for all or substantially
      all its assets; (7) has a secured party take possession of all or substantially
      all its assets or has a distress, execution, attachment, sequestration or other
      legal process levied, enforced or sued on or against all or substantially all
      its assets and such secured party maintains possession, or any such process
      is
      not dismissed, discharged, stayed or restrained, in each case within 30 days
      thereafter; (8) causes or is subject to any event with respect to it which,
      under the applicable laws of any jurisdiction, has an analogous effect to any
      of
      the events specified in clauses (1) to (7) (inclusive); or (9) takes any action
      in furtherance of, or indicating its consent to, approval of, or acquiescence
      in, any of the foregoing acts; or

     

    (viii) Merger
      Without Assumption.
      The
      party or any Credit Support Provider of such party consolidates or amalgamates
      with, or merges with or into, or transfers all or substantially all its assets
      to, another entity and, at the time of such consolidation, amalgamation, merger
      or transfer: -

     

    (1) the
      resulting, surviving or transferee entity fails to assume all the obligations
      of
      such party or such Credit Support Provider under this Agreement or any Credit
      Support Document to which it or its predecessor was a party by operation of
      law
      or pursuant to an agreement reasonably satisfactory to the other party to this
      Agreement; or

     

    (2) the
      benefits of any Credit Support Document fail to extend (without the consent
      of
      the other party) to the performance by such resulting, surviving or transferee
      entity of its obligations under this Agreement.

     

    
      
        
        

      

      
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    (b) Termination
      Events.
      The
      occurrence at any time with respect to a party or, if applicable, any Credit
      Support Provider of such party or any Specified Entity of such party of any
      event specified below constitutes an Illegality if the event is specified in
      (i)
      below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon
      Merger if the event is specified in (iii) below, and, if specified to be
      applicable, a Credit Event Upon
      Merger if the event is specified pursuant to (iv) below or an Additional
      Termination Event if the event is specified pursuant to (v) below:—

     

    (i) Illegality.
      Due to
      the adoption of, or any change in, any applicable law after the date on which
      a
      Transaction is entered into, or due to the promulgation of, or any change in,
      the interpretation by any court, tribunal or regulatory authority with competent
      jurisdiction of any applicable law after such date. it becomes unlawful (other
      than as a result of a breach by the party of Section 4(b)) for such party (which
      will be the Affected Party):—

     

    (1) to
      perform any absolute or contingent obligation to make a payment or delivery
      or
      to receive a payment or delivery in respect of such Transaction or to comply
      with any other material provision of this Agreement relating to such
      Transaction; or

     

    (2) to
      perform, or for any Credit Support Provider of such party to perform, any
      contingent or other obligation which the party (or such Credit Support Provider)
      has under any Credit Support Document relating to such Transaction;

     

    (ii) Tax
      Event.
      Due to
      (x) any action taken by a taxing authority, or brought in a court of competent
      jurisdiction, on or after the date on which a Transaction is entered into
      (regardless of whether such action is taken or brought with respect to a party
      to this Agreement) or (y) a Change in Tax Law, the party (which will be the
      Affected Party) will, or there is a substantial likelihood that it will, on
      the
      next succeeding Scheduled Payment Date (1) be required to pay to the other
      party
      an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4)
      (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2)
      receive a payment from which an amount is required to be deducted or withheld
      for or on account of a Tax (except in respect of interest under Section 2(e),
      6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect
      of
      such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A)
      or (B));

     

    (iii) Tax
      Event Upon Merger.
      The
      party (the “Burdened Party”) on the next succeeding Scheduled Payment Date will
      either (1) be required to pay an additional amount in respect of an
      Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under
      Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount
      has been deducted or withheld for or on account of any Indemnifiable Tax in
      respect of which the other party is not required to pay an additional amount
      (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a
      result of a party consolidating or amalgamating with, or merging with or into,
      or transferring all or substantially all its assets to, another entity (which
      will be the Affected Party) where such action does not constitute an event
      described in Section 5(a)(viii);

     

    (iv) Credit
      Event Upon Merger.
      If
“Credit Event Upon Merger” is specified in the Schedule as applying to the
      party, such party (“X”), any Credit Support Provider of X or any applicable
      Specified Entity of X consolidates or amalgamates with, or merges with or into,
      or transfers all or substantially all its assets to, another entity and such
      action does not constitute an event described in Section 5(a)(viii) but the
      creditworthiness of the resulting, surviving or transferee entity is materially
      weaker than that of X, such Credit Support Provider or such Specified Entity,
      as
      the case may be, immediately prior to such action (and, in such event, X or
      its
      successor or transferee, as appropriate, will be the Affected Party);
      of

     

    (v) Additional
      Termination Event.
      If any
“Additional Termination Event” is specified in the Schedule or any Confirmation
      as applying, the occurrence of such event (and, in such event, the Affected
      Party or Affected Parties shall be as specified for such Additional Termination
      Event in the Schedule or such Confirmation).

     

    (c) Event
      of Default and Illegality.
      If an
      event or circumstance which would otherwise constitute or give rise to an Event
      of Default also constitutes an Illegality, it will be treated as an Illegality
      and will not constitute an Event of Default.

     

    
      
        
        

      

      
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    6. Early
      Termination

     

    (a) Right
      to Terminate Following Event of Default.
      If at
      any time an Event of Default with respect to a party (the “Defaulting Party”)
      has occurred and is then continuing, the other party (the “Non-defaulting
      Party”) may, by not more than 20 days notice to the Defaulting Party specifying
      the relevant Event of Default, designate a day not earlier than the day such
      notice is effective as an Early Termination Date in respect of all outstanding
      Transactions. If, however, “Automatic Early Termination” is specified in the
      Schedule as applying to a party, then an Early Termination Date in respect
      of
      all outstanding Transactions will occur immediately upon the occurrence with
      respect to such party of an Event of Default specified in Section 5(a)(vii)(1),
      (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time
      immediately preceding the institution of the relevant proceeding or the
      presentation of the relevant petition upon the occurrence with respect to such
      party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent
      analogous thereto, (8).

     

    (b) Right
      to Terminate Following Termination Event.

     

    (i) Notice.
      If a
      Termination Event occurs, an Affected Party will, promptly upon becoming aware
      of it, notify the other party, specifying the nature of that Termination Event
      and each Affected Transaction and will also give such other information about
      that Termination Event as the other party may reasonably require.

     

    (ii) Transfer
      to Avoid Termination Event.
      If
      either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there
      is
      only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened
      Party is the Affected Party, the Affected Party will, as a condition to its
      right to designate an Early Termination Date under Section 6(b)(iv), use all
      reasonable efforts (which will not require such party to incur a loss, excluding
      immaterial, incidental expenses) to transfer within 20 days after it gives
      notice under Section 6(b)(i) all its rights and obligations under this Agreement
      in respect of the Affected Transactions to another of its Offices or Affiliates
      so that such Termination Event ceases to exist.

     

    If
      the
      Affected Party is not able to make such a transfer it will give notice to the
      other party to that effect within such 20 day period, whereupon the other party
      may effect such a transfer within 30 days after the notice is given under
      Section 6(b)(i).

     

    Any
      such
      transfer by a party under this Section 6(b)(ii) will be subject to and
      conditional upon the prior written consent of the other party, which consent
      will not be withheld if such other party’s policies in effect at such time would
      permit it to enter into transactions with the transferee on the terms
      proposed.

     

    (iii) Two
      Affected Parties.
      If an
      Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two
      Affected Parties, each party will use all reasonable efforts to reach agreement
      within 30 days after notice thereof is given under Section 6(b)(i) on action
      to
      avoid that Termination Event.

     

    (iv) Right
      to Terminate.
      If:—

     

    (1) a
      transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as
      the
      case may be, has not been effected with respect to all Affected Transactions
      within 30 days after an Affected Party gives notice under Section 6(b)(i);
      or

     

    (2) an
      Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional
      Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened
      Party is not the Affected Party,

     

    either
      party in the case of an Illegality, the Burdened Party in the case of a Tax
      Event Upon Merger, any Affected Party in the case of a Tax Event or an
      Additional Termination Event if there is more than one Affected
      Party, or the party which is not the Affected Party in the case of a Credit
      Event Upon Merger or an
      Additional Termination Event if there is only one Affected Party may, by not
      more than 20 days notice to
      the
      other party and provided that the relevant Termination Event is then
continuing,
      designate a day not earlier than the day such notice is effective as an Early
      Termination Date in respect of all Affected Transactions.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    (c) Effect
      of Designation.

     

    (i) If
      notice
      designating an Early Termination Date is given under Section 6(a) or (b), the
      Early Termination Date will occur on the date so designated, whether or not
      the
      relevant Event of Default or Termination Event is then continuing.

     

    (ii) Upon
      the
      occurrence or effective designation of an Early Termination Date, no further
      payments or deliveries under Section 2(a)(i) or 2(e) in respect of the
      Terminated Transactions will be required to be made, but without prejudice
      to
      the other provisions of this Agreement. The amount, if any, payable in respect
      of an Early Termination Date shall be determined pursuant to Section
      6(e).

     

    (d) Calculations.

     

    (i) Statement.
      On or as
      soon as reasonably practicable following the occurrence of an Early Termination
      Date, each party will make the calculations on its part, if any, contemplated
      by
      Section 6(e) and will provide to the other party a statement (1) showing, in
      reasonable detail, such calculations (including all relevant quotations and
      specifying any amount payable under Section 6(e)) and (2) giving details of
      the
      relevant account to which any amount payable to it is to be paid. In the absence
      of written confirmation from the source of a quotation obtained in determining
      a
      Market Quotation, the records of the party obtaining such quotation will be
      conclusive evidence of the existence and accuracy of such
      quotation.

     

    (ii) Payment
      Date.
      An
      amount calculated as being due in respect of any Early Termination Date under
      Section 6(e) will be payable on the day that notice of the amount payable is
      effective (in the case of an Early Termination Date which is designated or
      occurs as a result of an Event of Default) and on the day which is two Local
      Business Days after the day on which notice of the amount payable is effective
      (in the case of an Early Termination Date which is designated as a result of
      a
      Termination Event). Such amount will be paid together with (to the extent
      permitted under applicable law) interest thereon (before as well as after
      judgment) in the Termination Currency, from (and including) the relevant Early
      Termination Date to (but excluding) the date such amount is paid, at the
      Applicable Rate. Such interest will be calculated on the basis of daily
      compounding and the actual number of days elapsed.

     

    (e) Payments
      on Early Termination.
      If an
      Early Termination Date occurs, the following provisions shall apply based on
      the
      parties’ election in the Schedule of a payment measure, either “Market
      Quotation” or “Loss”, and a payment method, either the “First Method” or the
“Second Method”. If the parties fail to designate a payment measure or payment
      method in the Schedule, it will be deemed that “Market Quotation” or the “Second
      Method”, as the case may be, shall apply. The amount, if any, payable in respect
      of an Early Termination Date and determined pursuant to this Section will be
      subject to any Set-off.

     

    (i) Events
      of Default.
      If the
      Early Termination Date results from an Event of Default:—

     

    (1) First
      Method and Market Quotation.
      If the
      First Method and Market Quotation apply, the Defaulting Party will pay to the
      Non-defaulting Party the excess, if a positive number, of (A) the sum of the
      Settlement Amount (determined by the Non-defaulting Party) in respect of the
      Terminated Transactions and the Termination Currency Equivalent of the Unpaid
      Amounts owing to the Non-defaulting Party over (B) the Termination Currency
      Equivalent of the Unpaid Amounts owing to the Defaulting Party.

     

    (2) First
      Method and Loss.
      If the
      First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting
      Party, if a positive number, the Non-defaulting Party’s Loss in respect of this
      Agreement.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

       

    

    (3) Second
      Method and Market Quotation.
      If the
      Second Method and Market Quotation apply,
      an
      amount will be payable equal to (A) the sum of the Settlement Amount (determined
      by the Non-defaulting
      Party) in respect of the Terminated Transactions and the Termination Currency
      Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B)
      the
      Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting
      Party. If that amount is a positive number, the Defaulting Party will pay it
      to
      the Non-defaulting Party; if it is a negative number, the Non-defaulting Party
      will pay the absolute value of that amount to the Defaulting Party.

     

    (4) Second
      Method and Loss.
      If the
      Second Method and Loss apply, an amount will be payable equal to the
      Non-defaulting Party’s Loss in respect of this Agreement. If that amount is a
      positive number, the Defaulting Party will pay it to the Non-defaulting Party;
      if it is a negative number, the Non-defaulting Party will pay the absolute
      value
      of that amount to the Defaulting Party.

     

    (ii) Termination
      Events.
      If the
      Early Termination Date results from a Termination Event:—

     

    (1) One
      Affected Party.
      If there
      is one Affected Party, the amount payable will be determined in accordance
      with
      Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if
      Loss
      applies, except that, in either case, references to the Defaulting Party and
      to
      the Non-defaulting Party will be deemed to be references to the Affected Party
      and the party which is not the Affected Party, respectively, and, if Loss
      applies and fewer than all the Transactions are being terminated, Loss shall
      be
      calculated in respect of all Terminated Transactions.

     

    (2) Two
      Affected Parties.
      If there
      are two Affected Parties:—

     

    (A) if
      Market
      Quotation applies, each party will determine a Settlement Amount in respect
      of
      the Terminated Transactions, and an amount will be payable equal to (I) the
      sum
      of (a) one-half of the difference between the Settlement Amount of the party
      with the higher Settlement Amount (“X”) and the Settlement Amount of the party
      with the lower Settlement Amount (“Y”) and (b) the Termination Currency
      Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency
      Equivalent of the Unpaid Amounts owing to Y; and

     

    (B) if
      Loss
      applies, each party will determine its Loss in respect of this Agreement (or,
      if
      fewer than all the Transactions are being terminated, in respect of all
      Terminated Transactions) and an amount will be payable equal to one-half of
      the
      difference between the Loss of the party with the higher Loss (“X”) and the Loss
      of the party with the lower Loss (“Y”).

     

    If
      the
      amount payable is a positive number, Y will pay it to X; if it is a negative
      number, X will pay the absolute value of that amount to Y.

     

    (iii) Adjustment
      for Bankruptcy.
      In
      circumstances where an Early Termination Date occurs because “Automatic Early
      Termination” applies in respect of a party, the amount determined under this
      Section 6(e) will be subject to such adjustments as are appropriate and
      permitted by law to reflect any payments or deliveries made by one party to
      the
      other under this Agreement (and retained by such other party) during the period
      from the relevant Early Termination Date to the date for payment determined
      under Section 6(d)(ii).

     

    (iv) Pre-Estimate.
      The
      parties agree that if Market Quotation applies an amount recoverable under
      this
      Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount
      is payable for the loss of bargain and the loss of protection against future
      risks and except as otherwise provided in this Agreement neither party will
      be
      entitled to recover any additional damages as a consequence of such
      losses.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    7. Transfer

     

    Subject
      to Section 6(b)(ii), neither this Agreement nor any interest or obligation
      in or
      under this Agreement may be transferred (whether by way of security or
      otherwise) by either party without the prior written consent of the other party,
      except that:—

     

    (a) a
      party
      may make such a transfer of this Agreement pursuant to a consolidation or
      amalgamation with, or merger with or into, or transfer of all or substantially
      all its assets to, another entity (but without prejudice to any other right
      or
      remedy under this Agreement); and

     

    (b) a
      party
      may make such a transfer of all or any part of its interest in any amount
      payable to it from a Defaulting Party under Section 6(e).

     

    Any
      purported transfer that is not in compliance with this Section will be
      void.

     

    8. Contractual
      Currency

     

    (a) Payment
      in the Contractual Currency.
      Each
      payment under this Agreement will be made in the relevant currency specified
      in
      this Agreement for that payment (the “Contractual Currency”). To the extent
      permitted by applicable law, any obligation to make payments under this
      Agreement in the Contractual Currency will not be discharged or satisfied by
      any
      tender in any currency other than the Contractual Currency, except to the extent
      such tender results in the actual receipt by the party to which payment is
      owed,
      acting in a reasonable manner and in good faith in converting the currency
      so
      tendered into the Contractual Currency, of the full amount in the Contractual
      Currency of all amounts payable in respect of this Agreement. If for any reason
      the amount in the Contractual Currency so received falls short of the amount
      in
      the Contractual Currency payable in respect of this Agreement, the party
      required to make the payment will, to the extent permitted by applicable law,
      immediately pay such additional amount in the Contractual Currency as may be
      necessary to compensate for the shortfall. If for any reason the amount in
      the
      Contractual Currency so received exceeds the amount in the Contractual Currency
      payable in respect of this Agreement, the party receiving the payment will
      refund promptly the amount of such excess.

     

    (b) Judgments.
      To the
      extent permitted by applicable law, if any judgment or order expressed in a
      currency other than the Contractual Currency is rendered (i) for the payment
      of
      any amount owing in respect of this Agreement, (ii) for the payment of any
      amount relating to any early termination in respect of this Agreement or (iii)
      in respect of a judgment or order of another court for the payment of any amount
      described in (i) or (ii) above, the party seeking recovery, after recovery
      in
      full of the aggregate amount to which such party is entitled pursuant to the
      judgment or order, will be entitled to receive immediately from the other party
      the amount of any shortfall of the Contractual Currency received by such party
      as a consequence of sums paid in such other currency and will refund promptly
      to
      the other party any excess of the Contractual Currency received by such party
      as
      a consequence of sums paid in such other currency if such shortfall or such
      excess arises or results from any variation between the rate of exchange at
      which the Contractual Currency is converted into the currency of the judgment
      or
      order for the purposes of such judgment or order and the rate of exchange at
      which such party is able, acting in a reasonable manner and in good faith in
      converting the currency received into the Contractual Currency, to purchase
      the
      Contractual Currency with the amount of the currency of the judgment or order
      actually received by such party. The term “rate of exchange” includes, without
      limitation, any premiums and costs of exchange payable in connection with the
      purchase of or conversion into the Contractual Currency.

     

    (c) Separate
      Indemnities.
      To the
      extent permitted by applicable law, these indemnities constitute separate and
      independent obligations from the other obligations in this Agreement, will
      be
      enforceable as separate and independent causes of action, will apply
      notwithstanding any indulgence granted by the party to which any payment is
      owed
      and will not be affected by judgment being obtained or claim or proof being
      made
      for any other sums payable in respect of this Agreement.

     

    (d) Evidence
      of Loss.
      For the
      purpose of this Section 8, it will be sufficient for a party to demonstrate
      that
      it would have suffered a loss had an actual exchange or purchase been
      made.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    9.
      Miscellaneous

     

    (a) Entire
      Agreement.
      This
      Agreement constitutes the entire agreement and understanding of the parties
      with
      respect to its subject matter and supersedes all oral communication and prior
      writings with respect thereto.

     

    (b) Amendments.
      No
      amendment, modification or waiver in respect of this Agreement will be effective
      unless in writing (including a writing evidenced by a facsimile transmission)
      and executed by each of the parties or confirmed by an exchange of telexes
      or
      electronic messages on an electronic messaging system.

     

    (c) Survival
      of Obligations.
      Without
      prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties
      under this Agreement will survive the termination of any
      Transaction.

     

    (d) Remedies
      Cumulative.
      Except
      as provided in this Agreement, the rights, powers, remedies and privileges
      provided in this Agreement are cumulative and not exclusive of any rights,
      powers, remedies and privileges provided by law.

     

    (e) Counterparts
      and Confirmations.

     

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

     

    (ii) The
      parties intend that they are legally bound by the terms of each Transaction
      from
      the moment they agree to those terms (whether orally or otherwise). A
      Confirmation shall be entered into as soon as practicable and may be executed
      and delivered in counterparts (including by facsimile transmission) or be
      created by an exchange of telexes or by an exchange of electronic messages
      on an
      electronic messaging system, which in each case will be sufficient for all
      purposes to evidence a binding supplement to this Agreement. The parties will
      specify therein or through another effective means that any such counterpart,
      telex or electronic message constitutes a Confirmation.

     

    (f) No
      Waiver of Rights.
      A
      failure or delay in exercising any right, power or privilege in respect of
      this
      Agreement will not be presumed to operate as a waiver, and a single or partial
      exercise of any right, power or privilege will not be presumed to preclude
      any
      subsequent or further exercise, of that right, power or privilege or the
      exercise of any other right, power or privilege.

     

    (g) Headings.
      The
      headings used in this Agreement are for convenience of reference only and are
      not to affect the construction of or to be taken into consideration in
      interpreting this Agreement.

     

    10. Offices;
      Multibranch Parties

     

    (a) If
      Section 10(a) is specified in the Schedule as applying, each party that enters
      into a Transaction through an Office other than its head or home office
      represents to the other party that, notwithstanding the place of booking office
      or jurisdiction of incorporation or organisation of such party, the obligations
      of such party are the same as if it had entered into the Transaction through
      its
      head or home office. This representation will be deemed to be repeated by such
      party on each date on which a Transaction is entered into.

     

    (b) Neither
      party may change the Office through which it makes and receives payments or
      deliveries for the purpose of a Transaction without the prior written consent
      of
      the other party.

     

    (c) If
      a
      party is specified as a Multibranch Party in the Schedule, such Multibranch
      Party may make and receive payments or deliveries under any Transaction through
      any Office listed in the Schedule, and the Office through which it makes and
      receives payments or deliveries with respect to a Transaction will be specified
      in the relevant Confirmation.

     

    11. Expenses

     

    A
      Defaulting Party will, on demand, indemnify and hold harmless the other party
      for and against all reasonable out-of-pocket expenses, including legal fees
      and
      Stamp Tax, incurred by such other party by reason of the enforcement and
      protection of its rights under this Agreement or any Credit Support Document
      to
      which
      the Defaulting Party is a party or by reason of the early termination of any
      Transaction, including, but not limited to, costs of collection.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    12. Notices

     

    (a) Effectiveness.
      Any
      notice or other communication in respect of this Agreement may be given in
      any
      manner set forth below (except that a notice or other communication under
      Section 5 or 6 may not be given by facsimile transmission or electronic
      messaging system) to the address or number or in accordance with the electronic
      messaging system details provided (see the Schedule) and will be deemed
      effective as indicated:—

     

    (i) if
      in
      writing and delivered in person or by courier, on the date it is
      delivered;

     

    (ii) if
      sent
      by telex, on the date the recipient’s answerback is received;

     

    (iii) if
      sent
      by facsimile transmission, on the date that transmission is received by a
      responsible employee of the recipient in legible form (it being agreed that
      the
      burden of proving receipt will be on the sender and will not be met by a
      transmission report generated by the sender’s facsimile machine);

     

    (iv) if
      sent
      by certified or registered mail (airmail, if overseas) or the equivalent (return
      receipt requested), on the date that mail is delivered or its delivery is
      attempted; or

     

    (v) if
      sent
      by electronic messaging system, on the date that electronic message is
      received,

     

    unless
      the date of that delivery (or attempted delivery) or that receipt as applicable,
      is not a Local Business Day or that communication is delivered (or attempted)
      or
      received, as applicable, after the close of business on a Local Business Day,
      in
      which case that communication shall be deemed given and effective on the first
      following day that is a Local Business Day.

     

    (b) Change
      of Addresses.
      Either
      party may by notice to the other change the address, telex or facsimile number
      or electronic messaging system details at which notices or other communications
      are to be given to all

     

    13. Governing
      Law and Jurisdiction

     

    (a) Governing
      Law.
      This
      Agreement will be governed by and construed in accordance with the law specified
      in the Schedule.

     

    (b) Jurisdiction.
      With
      respect to any suit, action or proceedings relating to this Agreement
      (“Proceedings”), each party irrevocably:—

     

    (i) submits
      to the jurisdiction of the English courts, if this Agreement is expressed to
      be
      governed by English law, or to the non-exclusive jurisdiction of the courts
      of
      the State of New York and the United States District Court located in the
      Borough of Manhattan in New York City, if this Agreement is expressed to be
      governed by the laws of the State of New York; and

     

    (ii) waives
      any objection which it may have at any time to the laying of venue of any
      Proceedings brought in any such court, waives any claim that such Proceedings
      have been brought in an inconvenient forum and further waives the right to
      object, with respect to such Proceedings, that such court does not have any
      jurisdiction over such party.

     

    Nothing
      in this Agreement precludes either party from bringing Proceedings in any other
      jurisdiction (outside, if this Agreement is expressed to be governed by English
      law, the Contracting States, as defined in Section 1(3) of the Civil
      Jurisdiction and Judgments Act 1982 or any modification, extension or
      re-enactment thereof for the time being in force) nor will the bringing of
      Proceedings in any one or more jurisdictions preclude the bringing of
      Proceedings in any other jurisdiction.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (c) Service
      of Process.
      Each
      party irrevocably appoints the Process Agent (if any) specified opposite its
      name in the Schedule to receive, for it and on its behalf, service of process
      in
      any Proceedings. If for any reason
      any party’s Process Agent is unable to act as such, such party will promptly
      notify the other party and within 30 days appoint a substitute process agent
      acceptable to the other party. The parties irrevocably consent to service of
      process given in the manner provided for notices in Section 12. Nothing in
      this
      Agreement will affect the right of either party to serve process in any other
      manner permitted by law.

     

    (d) Waiver
      of Immunities.
      Each
      party irrevocably waives, to the fullest extent permitted by applicable law,
      with respect to itself and its revenues and assets (irrespective of their use
      or
      intended use), all immunity on the grounds of sovereignty or other similar
      grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way
      of
      injunction, order for specific performance or for recovery of property, (iv)
      attachment of its assets (whether before or after judgment) and (v) execution
      or
      enforcement of any judgment to which it or its revenues or assets might
      otherwise be entitled in any Proceedings in the courts of any jurisdiction
      and
      irrevocably agrees, to the extent permitted by applicable law, that it will
      not
      claim any such immunity in any Proceedings.

     

    14. Definitions

     

    As
      used
      in this Agreement: —

     

    “Additional
      Termination Event”
has
      the
      meaning specified in Section 5(b).

     

    “Affected
      Party”
has
      the
      meaning specified in Section 5(b).

     

    “Affected
      Transactions”
means
      (a) with respect to any Termination Event consisting of an Illegality, Tax
      Event
      or Tax Event Upon Merger, all Transactions affected by the occurrence of such
      Termination Event and (b) with respect to any other Termination Event, all
      Transactions.

     

    “Affiliate”
means,
      subject to the Schedule, in relation to any person, any entity controlled,
      directly or indirectly, by the person, any entity that controls, directly or
      indirectly, the person or any entity directly or indirectly under common control
      with the person. For this purpose, “control” of any entity or person means
      ownership of a majority of the voting power of the entity or
      person.

     

    “Applicable
      Rate”
means:
      —

     

    (a) in
      respect of obligations payable or deliverable (or which would have been but
      for
      Section 2(a)(iii)) by a Defaulting Party, the Default Rate;

     

    (b) in
      respect of an obligation to pay an amount under Section 6(e) of either party
      from and after the date (determined in accordance with Section 6(d)(ii)) on
      which that amount is payable, the Default Rate;

     

    (c) in
      respect of all other obligations payable or deliverable (or which would have
      been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
      Rate;
      and

     

    (d) 
      in all
      other cases, the Termination Rate.

     

    “Burdened
      Party”
has
      the
      meaning specified in Section 5(b).

     

    “Change
      in Tax Law”
means
      the enactment, promulgation, execution or ratification of, or any change in
      or
      amendment to, any law (or in the application or official interpretation of
      any
      law) that occurs on or after the date on which the relevant Transaction is
      entered into.

     

    “consent”
      includes a consent, approval, action, authorisation, exemption, notice, filing,
      registration or exchange control consent.

     

    “Credit
      Event Upon Merger”
has
      the
      meaning specified in Section 5(b).

     

    “Credit
      Support Document”
means
      any agreement or instrument that is specified as such in this
      Agreement.

     

    “Credit
      Support Provider”
has
      the
      meaning specified in the Schedule.

     

    “Default
      Rate”
means
      a
      rate per annum equal to the cost (without proof or evidence of any actual cost)
      to the relevant payee (as certified by it) if it were to fund or of funding
      the
      relevant amount plus 1% per annum.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    “Defaulting
      Party”
has
      the
      meaning specified in Section 6(a).

     

    “Early
      Termination Date”
means
      the date determined in accordance with Section 6(a) or 6(b)(iv).

     

    “Event
      of Default”
has
      the
      meaning specified in Section 5(a) and, if applicable, in the
      Schedule.

     

    “Illegality”
has
      the
      meaning specified in Section 5(b).

     

    “Indemnifiable
      Tax”
means
      any Tax other than a Tax that would not be imposed in respect of a payment
      under
      this Agreement but for a present or former connection between the jurisdiction
      of the government or taxation authority imposing such Tax and the recipient
      of
      such payment or a person related to such recipient (including, without
      limitation, a connection arising from such recipient or related person being
      or
      having been a citizen or resident of such jurisdiction, or being or having
      been
      organised, present or engaged in a trade or business in such jurisdiction,
      or
      having or having had a permanent establishment or fixed place of business in
      such jurisdiction, but excluding a connection arising solely from such recipient
      or related person having executed, delivered, performed its obligations or
      received a payment under, or enforced, this Agreement or a Credit Support
      Document).

     

    “law”
      includes any treaty, law, rule or regulation (as modified, in the case of tax
      matters, by the practice of any relevant governmental revenue authority) and
      “lawful” and “unlawful” will be construed accordingly.

     

    “Local
      Business Day”
means,
      subject to the Schedule, a day on which commercial banks are open for business
      (including dealings in foreign exchange and foreign currency deposits) (a)
      in
      relation to any obligation under Section 2(a)(i), in the place(s) specified
      in
      the relevant Confirmation or, if not so specified, as otherwise agreed by the
      parties in writing or determined pursuant to provisions contained, or
      incorporated by reference, in this Agreement, (b) in relation to any other
      payment, in the place where the relevant account is located and, if different.
      in the principal financial centre, if any, of the currency of such payment,
      (c)
      in relation to any notice or other communication, including notice contemplated
      under Section 5(a)(i), in the city specified in the address for notice provided
      by the recipient and, in the case of a notice contemplated by Section 2(b),
      in
      the place where the relevant new account is to be located and (d) in relation
      to
      Section 5(a)(v)(2), in the relevant locations for performance with respect
      to
      such Specified Transaction.

     

    “Loss”
means,
      with respect to this Agreement or one or more Terminated Transactions, as the
      case may be, and a party, the Termination Currency Equivalent of an amount
      that
      party reasonably determines in good faith to be its total losses and costs
      (or
      gain, in which case expressed as a negative number) in connection with this
      Agreement or that Terminated Transaction or group of Terminated Transactions,
      as
      the case may be, including any loss of bargain, cost of funding or, at the
      election of such party but without duplication, loss or cost incurred as a
      result of its terminating, liquidating, obtaining or reestablishing any hedge
      or
      related trading position (or any gain resulting from any of them). Loss includes
      losses and costs (or gains) in respect of any payment or delivery required
      to
      have been made (assuming satisfaction of each applicable condition precedent)
      on
      or before the relevant Early Termination Date and not made, except, so as to
      avoid duplication, if Section 6(c)(i)(1) or (3) or 6(e)(ii)(2)(A) applies.
      Loss
      does not include a party’s legal fees and out-of-pocket expenses referred to
      under Section 11. A party will determine its Loss as of the relevant Early
      Termination Date, or, if that is not reasonably practicable, as of the earliest
      date thereafter as is reasonably practicable. A party may (but need not)
      determine its Loss by reference to quotations of relevant rates or prices from
      one or more leading dealers in the relevant markets.

     

    “Market
      Quotation”
      means,
      with respect to one or more Terminated Transactions and a party making the
      determination, an amount determined on the basis of quotations from Reference
      Market-makers. Each quotation will be for an amount, if any, that would be
      paid
      to such party (expressed as a negative number) or by such party (expressed
      as a
      positive number) in consideration of an agreement between such party (taking
      into account any existing Credit Support Document with respect to the
      obligations of such party) and the quoting Reference Market-maker to enter
      into
      a transaction (the “Replacement Transaction”) that would have the effect of
      preserving for such party the economic equivalent of any payment or delivery
      (whether the underlying obligation was absolute or contingent and assuming
      the
      satisfaction of each applicable condition precedent) by the parties under
      Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated
      Transactions that would, but for the occurrence of the relevant Early
      Termination Date, have been
      required after that date. For this purpose, Unpaid Amounts in respect of the
      Terminated Transaction or group of Terminated Transactions are to be excluded
      but, without limitation, any payment or delivery that would, but for the
      relevant Early Termination Date, have been required (assuming satisfaction
      of
      each applicable condition precedent) after that Early Termination Date is to
      be
      included. The Replacement Transaction would be subject to such documentation
      as
      such party and the Reference Market-maker may, in good faith, agree. The party
      making the determination (or its agent) will request each Reference Market-maker
      to provide its quotation to the extent reasonably practicable as of the same
      day
      and time (without regard to different time zones) on or as soon as reasonably
      practicable after the relevant Early Termination Date. The day and time as
      of
      which those quotations are to be obtained will be selected in good faith by
      the
      party obliged to make a determination under Section 6(e), and, if each party
      is
      so obliged, after consultation with the other. If more than three quotations
      are
      provided, the Market Quotation will be the arithmetic mean of the quotations,
      without regard to the quotations having the highest and lowest values, If
      exactly three such quotations are provided, the Market Quotation will be the
      quotation remaining after disregarding the highest and lowest quotations. For
      this purpose, if more than one quotation has the same highest value or lowest
      value, then one of such quotations shall be disregarded. If fewer than three
      quotations are provided, it will be deemed that the Market Quotation in respect
      of such Terminated Transaction or group of Terminated Transactions cannot be
      determined.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    “Non-default
      Rate”
means
      a
      rate per annum equal to the cost (without proof or evidence of any actual cost)
      to the Non-defaulting Party (as certified by it) if it were to fund the relevant
      amount.

     

    “Non-defaulting
      Party”
has
      the
      meaning specified in Section 6(a).

     

    “Office”
means
      a
      branch or office of a party, which may be such party’s head or home
      office.

     

    “Potential
      Event of Default”
means
      any event which, with the giving of notice or the lapse of time or both, would
      constitute an Event of Default.

     

    “Reference
      Market-makers”
means
      four leading dealers in the relevant market selected by the party determining
      a
      Market Quotation in good faith (a) from among dealers of the highest credit
      standing which satisfy all the criteria that such party applies generally at
      the
      time in deciding whether to offer or to make an extension of credit and (b)
      to
      the extent practicable, from among such dealers having an office in the same
      city.

     

    “Relevant
      Jurisdiction”
means,
      with respect to a party, the jurisdictions (a) in which the party is
      incorporated, organised, managed and controlled or considered to have its seat,
      (b) where an Office through which the party is acting for purposes of this
      Agreement is located, (c) in which the party executes this Agreement and (d)
      in
      relation to any payment, from or through which such payment is
      made.

     

    “Scheduled
      Payment Date”
means
      a
      date on which a payment or delivery is to be made under Section 2(a)(i) with
      respect to a Transaction.

     

    “Set-off” means
      set-off, offset, combination of accounts, right of retention or withholding
      or
      similar right or requirement to which the payer of an amount under Section
      6 is
      entitled or subject (whether arising under this Agreement, another contract,
      applicable law or otherwise) that is exercised by, or imposed on, such
      payer.

     

    “Settlement
      Amount”
means,
      with respect to a party and any Early Termination Date, the sum
      of.-

     

    (a) the
      Termination Currency Equivalent of the Market Quotations (whether positive
      or
      negative) for each Terminated Transaction or group of Terminated Transactions
      for which a Market Quotation is determined; and

     

    (b) such
      party’s Loss (whether positive or negative and without reference to any Unpaid
      Amounts) for each Terminated Transaction or group of Terminated Transactions
      for
      which a Market Quotation cannot be determined or would not (in the reasonable
      belief of the party making the determination) produce a commercially reasonable
      result.

     

    “Specified
      Entity”
has
      the
      meaning specified in the Schedule.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    “Specified
      Indebtedness”
means,
      subject to the Schedule, any obligation (whether present or future, contingent
      or otherwise, as principal or surety or otherwise) in respect of borrowed
      money.

     

    “Specified
      Transaction”
means,
      subject to the Schedule, (a) any transaction (including an agreement with
      respect thereto) now existing or hereafter entered into between one party to
      this Agreement (or any Credit Support Provider of such party or any applicable
      Specified Entity of such party) and the other party to this Agreement (or any
      Credit Support Provider of such other party or any applicable Specified Entity
      of such other party) which is a rate swap transaction, basis swap, forward
      rate
      transaction, commodity swap, commodity option, equity or equity index swap,
      equity or equity index option, bond option, interest rate option, foreign
      exchange transaction, cap transaction, floor transaction, collar transaction,
      currency swap transaction, cross-currency rate swap transaction, currency option
      or any other similar transaction (including any option with respect to any
      of
      these transactions), (b) any combination of these transactions and (c) any
      other
      transaction identified as a Specified Transaction in this Agreement or the
      relevant confirmation.

     

    “Stamp
      Tax”
means
      any stamp, registration, documentation or similar tax.

     

    “Tax”
means
      any present or future tax, levy, impost, duty, charge, assessment or fee of
      any
      nature (including interest, penalties and additions thereto) that is imposed
      by
      any government or other taxing authority in respect of any payment under this
      Agreement other than a stamp, registration, documentation or similar
      tax.

     

    “Tax
      Event”
has
      the
      meaning specified in Section 5(b).

     

    “Tax
      Event Upon Merger”
has
      the
      meaning specified in Section 5(b).

     

    “Terminated
      Transactions”
means
      with respect to any Early Termination Date (a) if resulting from a Termination
      Event, all Affected Transactions and (b) if resulting from an Event of Default,
      all Transactions (in either case) in effect immediately before the effectiveness
      of the notice designating that Early Termination Date (or, if “Automatic Early
      Termination” applies, immediately before that Early Termination
      Date).

     

    “Termination
      Currency”
has
      the
      meaning specified in the Schedule.

     

    “Termination
      Currency Equivalent”
means,
      in respect of any amount denominated in the Termination Currency, such
      Termination Currency amount and, in respect of any amount denominated in a
      currency other than the Termination Currency (the “Other Currency”), the amount
      in the Termination Currency determined by the party making the relevant
      determination as being required to purchase such amount of such Other Currency
      as at the relevant Early Termination Date, or, if the relevant Market Quotation
      or Loss (as the case may be), is determined as of a later date, that later
      date,
      with the Termination Currency at the rate equal to the spot exchange rate of
      the
      foreign exchange agent (selected as provided below) for the purchase of such
      Other Currency with the Termination Currency at or about 11:00 a.m. (in the
      city
      in which such foreign exchange agent is located) on such date as would be
      customary for the determination of such a rate for the purchase of such Other
      Currency for value on the relevant Early Termination Date or that later date.
      The foreign exchange agent will, if only one party is obliged to make a
      determination under Section 6(e), be selected in good faith by that party and
      otherwise will be agreed by the parties

     

    “Termination
      Event”
means
      an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be
      applicable, a Credit Event Upon Merger or an Additional Termination
      Event.

     

    “Termination
      Rate”
means
      a
      rate per annum equal to the arithmetic mean of the cost (without proof or
      evidence of any actual cost) to each party (as certified by such party) if
      it
      were to fund or of funding such amounts.

     

    “Unpaid
      Amounts”
      owing to
      any party means, with respect to an Early Termination Date, the aggregate of
      (a)
      in respect of all Terminated Transactions, the amounts that became payable
      (or
      that would have become payable but for Section 2(a)(iii)) to such party under
      Section 2(a)(i) on or prior to such Early Termination Date and which remain
      unpaid as at such Early Termination Date and (b) in respect of each Terminated
      Transaction. for each obligation under Section 2(a)(i) which was (or would
      have
      been but for Section 2(a)(iii)) required to be settled by delivery to such
      party
      on or prior to such Early Termination Date and which has not been so settled
      as
      at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required
      to be delivered as
      of the originally scheduled date for delivery, in each case together with (to
      the extent permitted under applicable law) interest, in the currency of such
      amounts, from (and including) the date such amounts or obligations were or
      would
      have been required to have been paid or performed to (but excluding) such Early
      Termination Date, at the Applicable Rate. Such amounts of interest will be
      calculated on the basis of daily compounding and the actual number of days
      elapsed. The fair market value of any obligation referred to in clause (b)
      above
      shall be reasonably determined by the party obliged to make the determination
      under Section 6(e) or, if each party is so obliged, it shall be the average
      of
      the Termination Currency Equivalents of the fair market values reasonably
      determined by both parties.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF the parties have executed this document on the respective dates
      specified below with effect from the date specified on the first page of this
      document.

     

    
      	
              WACHOVIA
                BANK, NATIONAL ASSOCIATION

               

            	 	
              NOVASTAR
                MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2007-2

               

              By:
                Deutsche
                Bank National Trust Company, as Trustee under the Pooling and Servicing
                Agreement, acting not in its individual capacity, but solely in its
                capacity as Trustee to NovaStar Mortgage Supplemental Interest Trust,
                Series 2007-2

               

            
	
              By  
                /s/
                Kim V. Farr

              
                

              

              Name:
                Kim V. Farr

              Title:
                Director

              Date:
                June 1, 2007

            	 	
              By  
                /s/
                Ronaldo Reyes

              
                

              

              Name:
                Ronaldo Reyes

              Title:
                Vice President

              Date:
                June 1, 2007

               

               

            

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SCHEDULE

    TO
      THE

    MASTER
      AGREEMENT

    DATED
      AS OF JUNE 1, 2007

     

    between

     

    WACHOVIA
      BANK, NATIONAL ASSOCIATION,

    A
      national banking association

    ("Party
      A")

     

    and

     

    NOVASTAR
      MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2007-2,

    a
      New York common law trust

    ("Party
      B")

     

    PART
      1

    TERMINATION
      PROVISIONS

     

    
      	
              (a)

            	
              "Specified
                Entity"
                means in relation to Party A and Party B: Not
                Applicable.

            

    

     

    
      	
              (b)

            	
              "Specified
                Transaction"
                means: means, with respect to Party A, all Transactions under this
                Agreement and with respect to Party B,
                none.

            

    

     

    
      	
              (c)

            	
              The
                "Cross-Default"
                provisions of Section 5(a)(vi) will not apply to Party B and will
                apply to
                Party A with a Threshold Amount equal to 3 per cent of Party A's
                "Total
                Equity Capital" (as shown in the most recently filed Consolidated
                Report
                of Condition and Income for a Bank with Domestic and Foreign Offices
                Only
                ("Call Report"), or in any report in replacement
                thereof).

            

    

     

    
      	
              (d)

            	
              The
                "Credit
                Event Upon Merger"
                provisions of Section 5(b)(iv) will not apply to Party A and will
                not
                apply to Party B.

            

    

     

    
      	
              (e)

            	
              The
                "Automatic
                Early Termination"
                provision of Section 6(a) will not apply to Party A and will not
                apply to
                Party B.

            

    

     

    
      	
              (f)

            	
              Payments
                on Early Termination.
                For the purpose of Section 6(e) of this Agreement
                :

            

    

     

    
      	
            	(i)	
              Market
                Quotation
                will apply;

            

    

     

    provided
      that, notwithstanding Section 6 of this Agreement, so long as Party A is (A)
      the
      sole Affected Party in respect of an Additional Termination Event or a Tax
      Event
      Upon Merger or (B) the Defaulting Party in respect of any Event of Default,
      paragraphs (i) to (vi) below shall apply:

     

    
      	 	
              (a)

            	
              The
                definition of "Market Quotation" shall be deleted in its entirety
                and
                replaced with the following:

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    "Market
      Quotation"
      means,
      with respect to one or more Terminated Transactions, a Firm Offer which is
      (1)
      made by a Reference Market-maker that is an Eligible Replacement, (2) for an
      amount that would be paid to Party B (expressed as a negative number) or by
      Party B (expressed as a positive number) in consideration of an agreement
      between Party B and such Reference Market-maker to enter into a transaction
      (the
      "Replacement
      Transaction")
      that
      would have the effect of preserving for such party the economic equivalent
      of
      any payment or delivery (whether the underlying obligation was absolute or
      contingent and assuming the satisfaction of each applicable condition precedent)
      by the parties under Section 2(a)(i) in respect of such Terminated Transactions
      or group of Terminated Transactions that would, but for the occurrence of the
      relevant Early Termination Date, have been required after that Early Termination
      Date, (3) made on the basis that Unpaid Amounts in respect of the Terminated
      Transaction or group of Transactions are to be excluded but, without limitation,
      any payment or delivery that would, but for the relevant Early Termination
      Date,
      have been required (assuming satisfaction of each applicable condition
      precedent) after that Early Termination Date is to be included and (4) made
      in
      respect of a Replacement Transaction with terms substantially the same as those
      of this Agreement (save for the exclusion of provisions relating to Transactions
      that are not Terminated Transactions)." 

     

    (B) The
      definition of "Settlement Amount" shall be deleted in its entirety and replaced
      with the following:

     

    ""Settlement
      Amount"
      means,
      with respect to any Early Termination Date, an amount (as determined by Party
      B
      based on information provided by Reference Market-makers) equal to the
      Termination Currency Equivalent of the amount (whether positive or negative)
      of
      any Market Quotation for the relevant Terminated Transaction or group of
      Terminated Transactions that is accepted by Party B so as to become legally
      binding; provided that:

     

    (1) If,
      on
      the day falling ten Local Business Days after the day on which the Early
      Termination Date is designated or such later day as Party B may specify in
      writing to Party A (but in either case no later than the Early Termination
      Date)
      (such day, the "Latest
      Settlement Amount Determination Day"),
      no
      Market Quotation for the relevant Terminated Transaction or group of Terminated
      Transactions has been accepted by Party B so as to become legally binding and
      one or more Market Quotations have been made and remain capable of becoming
      legally binding upon acceptance, the Settlement Amount shall equal the
      Termination Currency Equivalent of the amount (whether positive or negative)
      of
      the lowest of such Market Quotations; or

     

    (2) If,
      on
      the Latest Settlement Amount Determination Day, no Market Quotation for the
      relevant Terminated Transaction or group of Terminated Transactions is accepted
      by Party B so as to become legally binding and no Market Quotations have been
      made and remain capable of becoming legally binding upon acceptance, the
      Settlement Amount shall equal Party B’s Loss (whether positive or negative and
      without reference to any Unpaid amounts) for the relevant Terminated Transaction
      or group of Terminated Transactions.

     

    (3) For
      the
      purpose of clause (4) of the definition of Market Quotation, Party B shall
      have
      determined (upon receipt of evidence that the Rating Agency Condition has been
      satisfied), whether a Firm Offer is made in respect of a Replacement Transaction
      with commercial terms substantially the same as those of this Agreement (save
      for the exclusion of provisions relating to Transactions that are not Terminated
      Transactions); provided,
      however,
      that
      notwithstanding the provisions of this Part 1(f)(i), nothing in this Agreement
      shall preclude Party A from obtaining Market Quotations.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    (4) At
      any
      time on or before the Latest Settlement Amount Determination Day at which two
      or
      more Market Quotations remain capable of becoming legally binding upon
      acceptance, Party B shall be entitled to accept only the lowest of such Market
      Quotations. 

     

    (5) If
      Party
      B requests Party A in writing to obtain Market Quotations, Party A shall use
      its
      reasonable efforts to do so before the Latest Settlement Amount Determination
      Day.

     

    (6) If
      the
      Settlement Amount is a negative number, Section 6(e)(i)(3) of this Agreement
      shall be deleted in its entirety and replaced with the following:

     

    "Second
      Method and Market Quotation.
      If
      Second Method and Market Quotation apply, subject to Part 1(f)(ii) below, (1)
      Party B shall pay to Party A an amount equal to the absolute value of the
      Settlement Amount in respect of the Terminated Transactions, (2) Party B shall
      pay to Party A the Termination Currency Equivalent of the Unpaid Amounts owing
      to Party A and (3) Party A shall pay to Party B the Termination Currency
      Equivalent of the Unpaid Amounts owing to Party B, provided that, (i) the
      amounts payable under (2) and (3) shall be subject to netting in accordance
      with
      Section 2(c) of this Agreement and (ii) notwithstanding any other provision
      of
      this Agreement, any amount payable by Party A under (3) shall not be netted-off
      against any amount payable by Party B under (1)."; 

    

    (ii) Second
      Method
      will
      apply; provided, however, that Party B shall have no obligation to make any
      payment to Party A under Section 6 as a result of any Event of Default or
      Termination Event other than an Event of Default of Party B under Section
      5(a)(i) of this Agreement or an Additional Termination Event in Part 1(j)(iv)
      or
      (v). This modification of the terms of Section 6 of this Agreement has been
      freely bargained for by the parties and will not affect the obligation, if
      any,
      of Party B with respect to Unpaid Amounts. Party A acknowledges having received
      consideration sufficient to warrant its agreement to the approach contemplated
      in this Part 1(f) provision.

     

    
      	
              (g)

            	
              "Termination
                Currency"
                means United States Dollars.

            

    

     

    
      	
              (h)

            	
              Tax
                Event and Tax Event Upon Merger.
                Section 5(b)(ii) will apply; provided that the words "(x) any action
                taken
                by a taxing authority, or brought in a court of competent jurisdiction,
                on
                or after the date on which a Transaction is entered into (regardless
                of
                whether such action is taken or brought with respect to a party to
                this
                Agreement) or (y)" shall be deleted.

            

    

     

    Section
      5(b)(iii) will apply, provided that Party A shall not be entitled to designate
      an Early Termination Date by reason of a Tax Event upon Merger in respect of
      which it is the Affected Party.

    

    Section
      6(b)(ii) will apply, provided that the words "or if a Tax Event Upon Merger
      occurs and the Burdened Party is the Affected Party" shall be
      deleted.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    
    

     

    
      	
              (i)

            	
              Trigger
                Events.
                If a Collateralization Event (as defined below) occurs with respect
                to
                Party A (or any applicable Credit Support Provider), then (i) Party
                A will
                promptly give notice of the circumstances to Party B (with a copy
                to the
                Trustee) and to each Rating Agency (as defined herein) and (ii)(A)
                Party A
                will at its own expense (and subject to the Rating Agency Condition),
                assign the Transactions under this Agreement to a third party within
                thirty (30) days of such Collateralization Event that meets or exceeds,
                or
                as to which any applicable Credit Support Provider meets or exceeds,
                the
                Approved Ratings Thresholds (as defined below) on terms substantially
                similar to this Agreement and must obtain a release of the mutual
                obligations of Party A and Party B under this Agreement (a "Release")
                and
                provided
                (x) the right to designate an Early Termination Date under the substitute
                documentation on the grounds contemplated in Section 5(a)(vii) of
                this
                Agreement would be enforceable against that entity (or a receiver,
                conservator or trustee for it or its property), subject, if applicable,
                only to such limitations as are provided for in the Federal Deposit
                Insurance Act (the "FDIA"), (y) Party B would, in proceedings of
                the kinds
                contemplated in that provision, have an enforceable right to apply
                any
                collateral posted by the proposed counterparty to secure its obligations
                under the proposed replacement agreement without need for leave of
                court
                or any other person (subject, if applicable, only to such qualifications
                as may be relevant under the FDIA), and (z) no withholding taxes
                would be
                applicable to payments to be made by or to Party B in respect of
                payments
                due under Section 2(a) of the proposed agreement or (B) Party A will,
                at
                its own expense (and subject to the Rating Agency Condition) and
                within
                thirty (30) days of such Collateralization Event, deliver collateral,
                in
                the amount specified under the Credit Support Annex or (C) otherwise
                provide, at its own expense and within thirty (30) days of such
                Collateralization Event, Alternative Credit Support, as defined below,
                subject to the Rating Agency Condition (provided,
                however,
                that if Standard & Poor’s, a division of The McGraw Hill Companies,
                Inc. (it or its successor, "S&P") (A) withdraws its rating for the
                short-term unsecured and unsubordinated debt (the "Short Term Rating")
                of
                Party A or (B) reduces its Short Term Rating of Party A to a level
                below
                "BBB-" (a "Ratings Event"), Party A will no longer be eligible to
                deliver
                collateral pursuant to clause (ii)(B) or provide Alternative Credit
                Support pursuant to clause (ii)(C), but must assign the Transactions
                hereunder, at its own expense, to a third party within five (5) days
                of
                such Ratings Event that meets or exceeds, or as to which any applicable
                Credit Support Provider meets or exceeds, the Approved Ratings Thresholds
                (as defined below) on terms substantially similar to this Agreement
                and
                must obtain a Release under this Agreement and, in the case of a
                Ratings
                Event with respect to S&P, within ten (10) days of such Rating Event,
                must deliver collateral, in the amount specified under the Credit
                Support
                Annex). For purposes of this Transaction, a "Collateralization Event"
                will
                occur with respect to Party A (or any applicable Credit Support Provider),
                if its rating falls below (A) a Short Term Rating at least equal
                to "A-1"
                by S&P (or if no Short Term Rating exists, a rating for the long term
                unsecured and unsubordinated debt of Party A of "A+") such ratings
                being
                referred to herein as the "Approved Ratings Thresholds." For purposes
                of
                this provision, "Rating Agency Condition" means, with respect to
                any
                particular proposed act or omission to act hereunder that the party
                acting
                or failing to act must consult with each Rating Agency (which term
                for the
                avoidance of doubt excludes Moody’s Investors Service, Inc. (it or its
                successor, "Moody’s")) making a rating reduction or withdrawal (each such
                Rating Agency, a "Downgrading Rating Agency") and receive from each
                Downgrading Rating Agency (with a copy to the Trustee) a confirmation
                in
                writing that their respective ratings of the Certificates as in existence
                immediately prior to the Rating Event will be restored or maintained.
                For
                purposes of this Agreement, "Alternative Credit Support" means an
                absolute
                and unconditional guarantee, credit intermediation arrangement, letter
                of
                credit or other additional credit support or collateral. Any Credit
                Support Annex or document governing Alternative Credit Support shall
                be
                made a Credit Support Document for Party A pursuant to an amendment
                to
                this Agreement.

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	
              (j)

            	
              Additional
                Termination Events
                will apply. Each of the following will be an "Additional Termination
                Event":

            

    

     

    (i) A
      Collateralization Event or a Ratings Event has occurred and Party A has not
      complied with (i) above, then an Additional Termination Event will have occurred
      with respect to Party A.

     

    (ii) Moody’s
      Rating Events. 

    

    First
      Rating Trigger Collateral. Party A has failed to comply with or perform any
      obligation to be complied with or performed by Party A in accordance with the
      Credit Support Annex and either (A) the Second Rating Trigger Requirements
      do
      not apply or (B) less than 30 Local Business Days have elapsed since
      the
      last time the Second Rating Trigger Requirements did not apply.

     

    Second
      Rating Trigger Replacement. (A) The Second Rating Trigger Requirements apply
      and
      30 or more Local Business Days have elapsed since the last time the Second
      Rating Trigger Requirements did not apply and (B) (i) at least one Eligible
      Replacement has made a Firm Offer (which remains capable of becoming legally
      binding upon acceptance) to be the transferee of a transfer to be made in
      accordance with Part 5(s)(ii) below and/or (ii) at least one entity with the
      First Trigger Required Ratings and/or the Second Trigger Required Ratings has
      made a Firm Offer (which remains capable of becoming legally binding upon
      acceptance by the offeree) to provide an Eligible Guarantee in respect of all
      of
      Party A’s present and future obligations under this Agreement. 

     

    For
      purposes of this Agreement:

     

    "Eligible
      Guarantee" means an unconditional and irrevocable guarantee that is provided
      by
      a guarantor as principal debtor rather than surety and is directly enforceable
      by Party B, where either (A) a law firm has given a legal opinion confirming
      that none of the guarantor’s payments to Party B under such guarantee will be
      subject to withholding for Tax or (B) such guarantee provides that, in the
      event
      that any of such guarantor’s payments to Party B are subject to withholding for
      Tax, such guarantor is required to pay such additional amount as is necessary
      to
      ensure that the net amount actually received by Party B (free and clear of
      any
      withholding tax) will equal the full amount Party B would have received had
      no
      such withholding been required.

     

    "Eligible
      Replacement" means an entity (A) with the First Trigger Required Ratings and/or
      the Second Trigger Required Ratings or (B) whose present and future obligations
      owing to Party B are guaranteed pursuant to an Eligible Guarantee provided
      by a
      guarantor with the First Trigger Required Ratings and/or the Second Trigger
      Required Ratings as evidenced by Party B's receipt of confirmation that the
      Rating Agency Condition has been satisfied.

     

    "Firm
      Offer" means an offer which, when made, was capable of becoming legally binding
      upon acceptance.

     

    "Moody’s
      Short-term Rating" means a rating assigned by Moody’s under its short-term
      rating scale in respect of an entity’s
      short-term, unsecured and unsubordinated debt obligations.

     

    "Relevant
      Entities" means Party A and any guarantor under an Eligible Guarantee in respect
      of all of Party A’s present and future obligations under this
      Agreement.

     

    An
      entity
      shall have the "First Trigger Required Ratings" (A) where such entity is the
      subject of a Moody’s Short-term Rating, if such rating is "Prime-1"
      and its long-term, unsecured and unsubordinated debt or counterparty obligations
      are rated "A2" or above by Moody’s or (B) where such entity is not the subject
      of a Moody’s Short-term Rating, if its long-term, unsecured and unsubordinated
      debt or counterparty obligations are rated "A1" or above by Moody’s.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    the
      "Second Rating Trigger Requirements" shall apply so long as no Relevant Entity
      has the Second Trigger Required Ratings.

     

    An
      entity
      shall have the "Second Trigger Required Ratings" (A) where such entity is the
      subject of a Moody’s Short-term Rating, if such rating is "Prime-2"
      or above and its long-term, unsecured and unsubordinated debt or counterparty
      obligations are rated "A3" or above by Moody’s and (B) where such entity is not
      the subject of a Moody’s Short-term Rating, if its long-term, unsecured and
      unsubordinated debt or counterparty obligations are rated "A3" or above by
      Moody’s.

     

    So
      long
      as the Second Rating Trigger Requirements apply,
      Party A
      will at its own cost use commercially reasonable efforts to, as soon as
      reasonably practicable, procure either
      (A) an
      Eligible Guarantee
      in
      respect of all of Party A’s present and future obligations under this Agreement
      to be provided by a guarantor with the First Trigger Required Ratings and/or
      the
      Second Trigger Required Ratings
      or (B)
a
      transfer in accordance with Part 5(s)(ii) below.

     

    (iii) A
      Hedge
      Disclosure Event (as defined below) has occurred and Party A has not, within
      ten
      (10) days after such Hedge Disclosure Event, complied with one of the solutions
      listed below.

     

    It
      shall
      be a hedge disclosure event ("Hedge Disclosure Event") if at any time after
      the
      date hereof, for so long as Party B is required to file periodic reports under
      the Securities Exchange Act of 1934, as amended, with respect to the
      Certificates, NovaStar Mortgage, Inc. (the
      "Sponsor") shall notify Party A that in the reasonable determination of the
      Sponsor acting in good faith, the "aggregate significance percentage" of all
      derivative instruments (as such term is defined in Item 1115 of Regulation
      AB)
      provided by Party A and any of its affiliates to Party B (the "Significance
      Percentage") is 10% or more.

     

    Following
      a Hedge Disclosure Event, Party A shall take one of the following actions at
      its
      own expense: either (A) (1) if the Significance Percentage is 10%
      or
      more, but less than 20%, Party A shall provide
      the information set forth in Item
      1115(b)(1) of Regulation AB
      for
      Party A (or
      for
      the group of affiliated entities, if applicable)
      or (2)
      if the Significance Percentage is 20%
      or
      more, Party A shall provide
      the information set forth in Item
      1115(b)(2) of Regulation AB
      for
      Party A (or
      for
      the group of affiliated entities, if applicable)
      (collectively, the "Additional Hedge Disclosure Information") to the Sponsor
      or
      (B) Party A shall assign all of its rights and obligations under one or more
      Transactions (such that the Significance Percentage no longer exceeds 10% in
      the
      reasonable discretion of the Sponsor acting in good faith ) to a replacement
      counterparty that is rated at or above the Approved Ratings Threshold and the
      Second Trigger Required Ratings and subject to the Rating Agency Condition,
      pursuant to documentation substantially similar to the documentation then in
      place and subject to prior notification to the Rating Agencies, which
      counterparty is willing to provide the Additional Hedge Disclosure Information
      (with respect to itself or
      for
      its group of affiliated entities, if applicable)
      to the
      Sponsor, in the event that the significance percentage of Transactions to which
      it is a counterparty exceeds 10% in the reasonable determination of the Sponsor
      acting in good faith (or, so long as Party A is able to provide the Swap
      Financial Disclosure required pursuant to Item 1115(b)(1) of Regulation AB,
      such
      that the Significance Percentage no longer exceeds 20%, in the event Party
      A is
      requested to provide the Swap Financial Disclosure required pursuant to Item
      1115(b)(2) of Regulation AB).
      If
      permitted by Regulation AB, any Additional Hedge Disclosure may be provided
      by
      incorporation by reference from reports filed pursuant to the Exchange
      Act.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    "Regulation
      AB" means Subpart 229.1100 - Asset Backed Securities (Regulation AB), 17 C.F.R.
      §§229.1100-229.1123, as such may be amended from time to time, and subject to
      such clarification and interpretation as have been provided by the Securities
      and Exchange Commission ("SEC") in the adopting release (Asset-Backed
      Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan.
      7, 2005)) or by the staff of the SEC, or as may be provided by the SEC or its
      staff from time to time.

     

    For
      the
      purposes of the Termination Events (i), (ii) and (iii) above, Party A shall
      be
      the sole Affected Party.

     

    (iv) Deutsche
      Bank National Trust Company, as trustee (together with its successors and
      assigns, the "Trustee") receives notice (a "Termination Notice") of an
      optional termination of the Pooling and Servicing Agreement among NovaStar
      Mortgage Funding Corporation, NovaStar Mortgage, Inc., U.S. Bank, National
      Association, and Deutsche Bank National Trust Company dated as of June 1, 2007
      (the "Pooling and Servicing Agreement") under Article XI of the Pooling and
      Servicing Agreement (an "Optional Termination") and there remains no more than
      5
      Business Days prior to the proposed termination date. In the case of an Optional
      Termination, both Party A and Party B shall have the right to cause a
      termination of this Agreement and, for the purposes of Section 6(e)(ii) of
      this
      Agreement, Party B shall be the sole Affected Party. Following notification
      from
      the Trustee that it has received a Termination Notice, Party A shall provide
      the
      Trustee from time to time, upon request, with good faith estimates of the amount
      that would be payable under Section 6(e)(ii) in the event of such Optional
      Termination. Any termination payment payable in respect of such Additional
      Termination Event shall be paid on the relevant termination date.

     

    (v) The
      Pooling and Servicing Agreement is amended or otherwise modified, without the
      prior written consent of Party A, if such amendment or modification would
      materially adversely affect the rights of Party A under the Pooling and
      Servicing Agreement or this Agreement, where such consent is required under
      the
      Pooling and Servicing Agreement. For the purposes of this Additional Termination
      Event, Party B shall be the sole Affected Party.

     

    
      	
              (k)

            	
              Events
                of Default.

            

    

     

    
      	 	
              (i)

            	
              The
                following Events of Default will not apply to Party A: Section 5(a)(ii)
                and Section 5(a)(v). 

            

    

     

    
      	 	
              (ii)

            	
              The
                following Events of Default will not apply to Party B: Section 5(a)(ii),
                Section 5(a)(iv), Section 5(a)(v), Section 5(a)(vi), and Section
                5(a)(viii). In addition, Section 5(a)(vii) is hereby modified by
                deleting
                clauses (2), (7) and (9).

            

    

     

    
      	 	
              (iii)

            	
              Section
                5(a)(vii)(4) will not apply to Party B with respect to proceedings
                or
                petitions instituted or presented by Party A or any Affiliate of
                Party
                A.

            

    

     

    
      	 	
              (iv)

            	
              Section
                5(a)(vii)(6) will not apply to Party B to the extent that it refers
                to (i)
                any appointment that is effected by or pursuant to the Transaction
                Documents or (ii) any appointment that Party B has not become subject
                to.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    
      	 	
              (v)

            	
              Section
                5(a)(vii)(8) will not apply to Party B to the extent that it applies
                to
                Section 5(a)(vii)(2),(4),(6), and (7) (except to the extent that
                such
                provisions are not disapplied with respect to Party B).
                

            

    

     

    
      	 	
              (vi)

            	
              Section
                5(a)(iii) will not apply to Party B except that Section 5(a)(iii)(1)
                will
                apply in respect of Party B’s obligations under Paragraph 3(b) of the
                Credit Support Annex. 

            

    

     

    
      	 	
              (vii)

            	
              Notwithstanding
                Sections 5(a)(i) and 5(a)(iii), any failure by Party A to comply
                with or
                perform any obligation to be complied with or performed by Party
                A under
                the Credit Support Annex shall not be an Event of Default unless
                (A) (i)
                the Second Rating Trigger Requirements apply and at
                least 30 Local Business Days have elapsed since the last time the
                Second
                Rating Trigger Requirements did not apply and (ii) such failure is
                not
                remedied on or before the third Local Business Day after notice of
                such
                failure is given to Party A or
                (B) (i) a Ratings Event has occurred and at least 10 Local Business
                Days
                have elapsed since the date such Ratings Event occurred and (ii)
                such
                failure is not remedied on or before the third Local Business Day
                after
                notice of such failure is given to Party
                A.

            

    

     

    No
      Event
      of Default shall occur to a party when a failure to pay or deliver, or a
      default, event of default or other similar condition or event, as the case
      may
      be, arises solely (1) out of a wire transfer problem or an operational or
      administrative error or omission (so long as the required funds or property
      required to make that payment or delivery were otherwise available to that
      party), or (2) from the general unavailability of the relevant currency due
      to
      exchange controls or other similar governmental action, but in either case
      only
      if the payment or delivery is made within three Local Business Days after the
      problem has been corrected, the error or omission has been discovered or the
      currency becomes generally available.

    

    The
      foregoing is without prejudice to application to Party A and Party B of the
      Events of Default in Paragraph 7 of any Credit Support Annex made part of this
      Agreement pursuant to Part 1(h) of this Schedule.

    

    PART
      2

    TAX
      REPRESENTATIONS

     

    
      	
              (a)

            	
              Payer
                Tax Representation.
                For the purpose of Section 3(e) of this Agreement, each party will
                make
                with respect to itself the following representation:
                None.

            

    

     

    
      	
              (b)

            	
              Payee
                Tax Representations.
                For the purposes of Section 3(f), each party makes the following
                representations: None.

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    PART
      3

    AGREEMENT
      TO DELIVER DOCUMENTS

     

    For
      the
      purpose of Sections 4(a)(i) and (ii) of this Agreement, each party agrees to
      deliver the following documents, as applicable:

     

    (a) Tax
      Forms.

     

    (i) Tax
      forms
      to be delivered by Party A: An executed U.S. Internal Revenue Service Form
      W-9
      (or successor thereto) that eliminates U.S. federal backup withholding tax
      on
      payments to Party A under this Agreement. Party A will deliver such tax form
      (1)
      before the first payment date under this Agreement, (2) as soon as practicable
      upon reasonable demand by Party B, and (3) as soon as practicable upon learning
      that any such form previously provided by Party A has become obsolete or
      incorrect.

     

    (ii) Tax
      forms
      to be delivered by Party B: An executed U.S. Internal Revenue Service Form
      W-9
      (or successor thereto) or any other applicable form that eliminates U.S. federal
      backup withholding tax on payments to Party B under this Agreement. Party B
      will
      deliver such tax form (1) before the first payment date under this Agreement,
      (2) as soon as practicable upon reasonable demand by Party A, and (3) as soon
      as
      practicable upon actual knowledge that any such form previously provided by
      Party B has become obsolete or incorrect.

     

    (b) Other
      Documents to be Delivered.

     

    
      	
              PARTY
                

              REQUIRED
                TO
DELIVER
DOCUMENT

            	 	
              FORM/DOCUMENT/
CERTIFICATE

            	 	
              DATE
                BY WHICH
TO BE DELIVERED

            	 	
              COVERED
                BY
SECTION 3(d)
REPRESENTATION

            
	
              Party
                A & B

            	 	
              Signing
                Authority, being evidence of authority, incumbency and specimen signature
                of each person executing any document on its behalf in connection
                with
                this Agreement and any Credit Support Document. 

            	 	
              Upon
                execution of this Agreement and, if requested, any
                Confirmation.

            	 	
              Yes

            
	 	 	 	 	 	 	 
	
              Party
                A

            	 	
              A
                copy, certified by the secretary or assistant secretary of Party
                A, of the
                resolutions of Party A’s board of directors authorizing the execution,
                delivery and performance by Party A of this Agreement and authorizing
                Party A to enter into Transactions hereunder.

            	 	
              Upon
                execution of this Agreement.

            	 	
              Yes.

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    
      	
              Party
                B

            	 	
              Executed
                copies of the Pooling and Servicing Agreement (as defined above),
                the
                Prospectus Supplement, and such other documents as requested by Party
                A.
                

            	 	
              Upon
                execution of this Agreement.

            	 	
              No

            
	 	 	 	 	 	 	 
	
              Party
                B

            	 	
              Any
                and all proposed and executed amendments to the Pooling and Servicing
                Agreement (as defined below). 

            	 	
              Each
                (i) date of distribution to the Certificateholders or (ii) date of
                proposal by Party B, as applicable.

            	 	
              No

            
	 	 	 	 	 	 	 
	
              Party
                B

            	 	
              Such
                information in connection with the Certificates or the Pooling and
                Servicing Agreement (as defined below) as Party A may reasonably
                request.
                

            	 	
              As
                soon as practicable after request.

            	 	
              No

            
	 	 	 	 	 	 	 
	
              Party
                A & Party B

            	 	
              Legal
                opinions acceptable to the other party in the form and substance
                to be
                satisfactory to the other party. 

            	 	
              Upon
                execution of this Agreement.

            	 	
              No

            

    

    

    PART
      4

    MISCELLANEOUS

     

    
      	
              (a)

            	
              Addresses
                For Notices.
                For the purpose of Section 12(a) of this
                Agreement:

            

    

     

    (i) Notices
      or communications shall, with respect to a particular Transaction, be sent
      to
      the address, telex number or facsimile number reflected in the Confirmation
      of
      that Transaction. In addition (or in the event the Confirmation for a
      Transaction does not provide relevant addresses/information for notice), with
      respect to notices provided pursuant to Section 5 and 6 of this Agreement,
      notice shall be provided to:

     

    
      
        	
                Address
                  for notices or communications to Party A:

              
	
                 

                Address:

              	
                 

                301
                  South College, DC-8

              
	 	
                Charlotte,
                  NC 28202-0600

              
	
                Attention:
                  

              	
                Derivatives
                  Documentation Group

              
	
                Phone
                  No.:

              	
                (704)
                  383-8778

              
	
                Facsimile
                  No.:

              	
                (704)
                  383-0575

              
	 
	
                Address
                  for notices or communications to Party B:

              
	 
	
                Address:

              	
                c/o
                  NovaStar Mortgage Inc.

              
	 	
                8140
                  Ward Parkway, Suite 300

              
	 	
                Kansas
                  City, Missouri 64114

              
	
                Attention:

              	
                Matt
                  Kaltenrieder

              
	
                Facsimile
                  No.:

              	
                816-237-7515

              

      

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      
        	
                With
                  a copy to:

              	 
	 	 
	
                Address:

              	
                Deutsche
                  Bank National Trust Company

              
	 	
                1761
                  East St. Andrew Place

              
	 	
                Santa
                  Ana, California 92705

              
	
                Attention:

              	
                Trust
                  Administration- NS0702

              
	
                Facsimile
                  No.:

              	
                714-247-6478

              
	 	 
	
                With
                  a copy to:

              	 
	 	 
	
                Address:

              	
                Standard
                  & Poor's Ratings Services

              
	 	
                55
                  Water Street

              
	 	
                New
                  York, New York 10041-0003

              
	
                Attention:

              	
                Residential
                  Mortgage Surveillance Group

              
	
                Facsimile
                  No.:

              	
                212-438-2652

              
	 	 
	
                With
                  a copy to:

              	 
	 	 
	
                Address:

              	
                Moody's
                  Investors Service

              
	 	
                99
                  Church Street

              
	 	
                New
                  York, New York 10007

              
	
                Attention:

              	
                RMBS
                  Monitoring Department

              
	
                Facsimile
                  No.:

              	
                212
                  298 7139

              

      

    

     

    
      	 	
              (ii)

            	
              Notices.
                Section 12(a) is amended by adding in the third line thereof after
                the
                phrase "messaging system" and before the ")" the words "; provided,
                however, any such notice or other communication may be given by facsimile
                transmission (it
                being agreed that the burden of proving receipt will be on the sender
                and
                will not be met by a transmission report generated by the sender’s
                facsimile machine)".

            

    

     

    
      	
              (b)

            	
              Process
                Agent.
                For purposes of Section 13(c) of this
                Agreement:

            

    

     

    Party
      A
      appoints as its Process Agent: Not applicable

     

    Party
      B
      appoints as its Process Agent: Not applicable

     

    
      	
              (c)

            	
              Offices.
                The provisions of Section 10(a) will apply to this
                Agreement.

            

    

     

    
      	
              (d)

            	
              Multibranch
                Party.
                For purpose of Section 10(c) of this
                Agreement:

            

    

     

    Party
      A
      is not a Multibranch Party.

     

    Party
      B
      is not a Multibranch Party.

     

    
      	
              (e)

            	
              Calculation
                Agent.
                Party A.

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
              (f)

            	
              Credit
                Support Documents.
                

            

    

     

    In
      the
      case of Party A and Party B means the credit support annex entered into between
      Party A and Party B in relation to this Master Agreement (the "Credit Support
      Annex") and ,with respect to Party A only, any Eligible Guarantee.

     

    
      	
              (g)

            	
              Credit
                Support Provider. 

            

    

     

    In
      relation to Party A, the guarantor under any guarantee in support of Party
      A’s
      obligations under this Agreement, and in relation to Party B, Party B in its
      capacity as a party to the Credit Support Annex.

     

    
      	
              (h)

            	
              Governing
                Law.
                THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
                THE
                LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS WHOLLY PERFORMED
                WITHIN NEW YORK, WITHOUT REFERENCE TO CHOICE OF LAW DOCTRINE (OTHER
                THAN
                SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
                LAW).

            

    

     

    
      	
              (i)

            	
              Single
                Agreement.
                Section 1(c) shall be amended by the addition of the words ", the
                credit
                support annex entered into between Party A and Party B in relation
                to this
                Master Agreement" after the words "Master
                Agreement".

            

    

     

    
      	
              (j)

            	
              Local
                Business Day.
                The definition of Local Business Day in Section 14 of this Agreement
                shall
                be amended by the addition of the words "or any Credit Support Document"
                after "Section 2(a)(i)" and the addition of the words "or Credit
                Support
                Document" after "Confirmation".

            

    

     

    
      	
              (k)

            	
              Netting
                of Payments.
                Sub-paragraph (ii) of Section 2(c) of this Agreement will apply to
                all
                Transactions hereunder, unless otherwise provided in the relevant
                Confirmation(s).

            

    

     

    
      	
              (l)

            	
              "Affiliate"
                will have the meaning specified in Section 14 but will have no meaning
                as
                applied to Party B.

            

    

     

    PART
      5

    OTHER
      PROVISIONS

     

    (a) ISDA
      Definitions Incorporated by Reference.
      The
      definitions and provisions of the 2000 ISDA Definitions (the "ISDA Definitions")
      (as published by the International Swaps and Derivatives Association, Inc.
      --
      "ISDA") are incorporated by reference herein. Any terms used and not otherwise
      defined herein which are contained in the ISDA Definitions shall have the
      meaning set forth therein. In the event of any conflict between the ISDA
      Definitions and any other ISDA-published definitions referenced in a
      Confirmation, such Confirmation and the ISDA-published definitions referred
      to
      therein shall control for purposes of the particular Transaction. For the
      avoidance of doubt, any reference to a "Swap Transaction", if any, in the
      Definitions is deemed to be a reference to a "Transaction" for the purpose
      of
      interpreting this Agreement or any Confirmation, and any reference to a
      "Transaction" in this Agreement or any Confirmation is deemed to be a reference
      to a "Swap Transaction" for the purpose of interpreting the
      Definitions.

     

    (b) Condition
      Precedent.
      The
      condition precedent specified in Section 2(a)(iii)(1) of this Agreement does
      not
      apply to a payment or delivery owing by a party if the other party shall have
      satisfied in full all of its payment and delivery obligations under Section
      2(a)(i) of this Agreement and shall at the relevant time have no future payment
      or delivery obligations, whether absolute or contingent, under Section
      2(a)(i).

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (c) Additional
      Representations.
      Section
      3 is hereby amended by adding at the end thereof the following
      subparagraph:

     

    "(g)
      No
      Agency.
      It is
      entering into this Agreement, the Credit Support Document and any other document
      relating to this Agreement and each Transaction hereunder as principal and
      not
      as agent or in any capacity, fiduciary or otherwise, and no other person has
      an
      interest herein."

     

    (d) Tax.
      Notwithstanding the definition of "Indemnifiable Tax" in Section 14 of this
      Agreement, in relation to payments by Party A, any Tax shall be an Indemnifiable
      Tax and in relation to Party
      B,
      no Tax shall be an Indemnifiable Tax. 

     

    (e) Swap
      Exemption.
      Each
      party hereto represents to the other party on and as of the date hereof and
      on
      each date on which a Transaction is entered into between them hereunder, that
      it
      is an "eligible contract participant" as defined in the Commodity Exchange
      Act,
      as amended.

     

    (f) Relationship
      between Parties.
      In
      connection with the negotiation of, the entering into, of this Agreement, and
      any other documentation relating to this Agreement to which it is a party or
      that it is required by this Agreement to deliver, each party hereby represents
      and warrants, and, in connection with the negotiation of, the entering into,
      and
      the confirming of the execution of each Transaction, each party will be deemed
      to represent, to the other party as of the date hereof (or, in connection with
      any Transaction, as of the date which it enters into such Transaction) that
      (absent a written agreement between the parties that expressly imposes
      affirmative obligations to the contrary for that Transaction):

     

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

     

    (ii) Assessment
      and Understanding
      It is
      capable of assessing the merits of and understanding (on its own behalf or
      through independent professional advice), and understands and accepts, the
      terms, conditions and risks of that Transaction. It is also capable of assuming,
      and assumes, the risks of that Transaction. It has determined to its
      satisfaction whether or not the rates, prices or amounts and other economic
      terms of each Transaction and the indicative quotations (if any) provided by
      the
      other party reflect those in the relevant market for similar transactions,
      and
      all trading decisions have been the result of arm’s length negotiations between
      the parties.

     

    (iii) Status
      of Parties
      The
      other party is not acting as a fiduciary for or an adviser to it in respect
      of
      that Transaction.

     

    (iv) Related
      Transactions.
      It is
      aware that each other party to this Agreement and its Affiliates may from time
      to time (A) take positions in instruments that are identical or economically
      related to a Transaction or (B) have an investment banking or other commercial
      relationship with the issuer of an instrument underlying a
      Transaction.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (v) Confirmation
      Procedures. Upon
      receipt thereof, Party B shall examine the terms of each Confirmation sent
      by
      Party A, and unless Party B objects to the terms within three New York business
      days after receipt of that Confirmation, those terms shall be deemed accepted
      and correct absent manifest error, in which case that Confirmation will be
      sufficient to form a binding supplement to this Agreement notwithstanding
      Section 9(e)(ii) of this Agreement.

     

    (g) Waiver
      of Jury Trial.
      EACH
      PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
      PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
      TRANSACTION.

     

    (h) Consent
      to Telephonic Recording.
      Each
      party hereto consents to the monitoring or recording, at any time and from
      time
      to time, by the other party of the telephone conversations of trading and
      marketing personnel of the parties and their authorized representatives in
      connection with this Agreement or any Transaction or potential Transaction;
      and
      each party, waives any further notice of such monitoring or recording and agree
      to give proper notice and obtain any necessary consent of such personnel or
      any
      such monitoring or recording.

     

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

     

    (j) Amendment
      of the Pooling and Servicing Agreement.

     

    (1) Party
      B
      will not amend, supplement or otherwise modify the Pooling and Servicing
      Agreement except in compliance with the provisions of Section 12.01 of
      the
      Pooling and Servicing Agreement.

     

    (2) As
      provided in Section 12.01 of the Pooling and Servicing Agreement, Party A will
      be provided with any proposed amendment to the Pooling and Servicing Agreement
      that requires the consent of Party A, and with a copy of any executed amendment
      to the Pooling and Servicing Agreement. 

     

    (k) Consent
      to Assignment.
      Notwithstanding Section 7 of this Agreement, Party A hereby acknowledges that
      Deutsche Bank National Trust Company is acting as Trustee pursuant to the
      Pooling and Servicing Agreement and consents to the transfer to the Trustee
      of a
      security interest in all rights of Party B under this Agreement. Deutsche Bank
      National Trust Company, acting as Trustee on behalf of the holders of the
      Certificates, shall have the right to enforce this Agreement, including the
      terms of Part 1(i), against Party A. Party A acknowledges that the Trustee
      shall
      be entitled to give notices and to perform and satisfy the obligations of Party
      B hereunder on behalf of Party B. Party A shall be entitled to rely on any
      notice or communication from the Trustee to that effect; provided, further,
      that
      any such notice or communication shall be in writing and delivered to Party
      A in
      accordance with Section 12 hereof. Party A shall be entitled to assume the
      authenticity of any such notice or communication, including, without limitation,
      any written wiring account information of Party B or the Trust, and shall have
      no obligation to verify the accuracy of any facts asserted therein or the
      authority of the sender thereof. Party B hereby indemnifies Party A against
      any
      losses, costs, claims or liabilities arising from Party A’s reliance on any such
      notice or communication (subject to the availability of funds therefor in
      accordance with Article IV (Flow of Funds) of the Pooling and Servicing
      Agreement), and Party A shall be released from any further obligations to Party
      B to the extent that it has rendered performance of such obligations to the
      Trustee for the benefit of the holders of the Certificates. The parties
      acknowledge that the indemnity contained in this Part 5(j) shall be subject
      to
      Section 4.04 of
      the
      Pooling and Servicing Agreement and is only due to the extent funds are
      available for the payment thereof in accordance with the Pooling and Servicing
      Agreement. 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (l) Regarding
      Party A. Party
      B
      acknowledges and agrees that Party A has had and will have no involvement in
      and, accordingly, Party A accepts no responsibility for: (i) the establishment,
      structure, or choice of assets of Party B or the Trust; (ii) the selection
      of
      any person performing services for or acting on behalf of Party B or the Trust;
      (iii) the selection of Party A as a Hedge Counterparty; (iv) the terms of the
      Certificates; (v) the preparation of or passing on the disclosure and other
      information contained in then free writing prospectus dated May 24, 2007 or
      the
      prospectus supplement dated May [ ], 2007 (other than certain information
      provided by Party A expressly for inclusion therein in the form attached hereto
      as Exhibit I), the Pooling and Servicing Agreement or any other agreements
      or
      documents used by Party B, the Trust or any other party in connection with
      the
      marketing and sale of the Certificates; (vi) the ongoing operations and
      administration of Party B or the Trust, including the furnishing of any
      information to Party B or the Trust which is not specifically required under
      this Agreement; or (vii) any other aspect of Party B's or the Trust 's
      existence.

     

    (m) No
      Petition for Bankruptcy. Party
      A,
      by entering into this Agreement, hereby covenants and agrees that in connection
      with any obligations of Party B under this Agreement, Party A will not institute
      against Party B or the Trust (as defined in the Pooling and Servicing
      Agreement), any bankruptcy, reorganization, arrangement, insolvency or
      liquidation proceeding, or other proceeding under any federal or state
      bankruptcy or similar law, for one year (or, if longer, the applicable
      preference period) and a day after the latest maturing security issued by the
      Trust is paid;
      provided
      however,
      that
      nothing herein shall preclude or estop Party A prior to the expiration of the
      applicable preference period (i) from taking any action prior to the expiration
      of the applicable preference period in (x) any case or proceeding voluntarily
      filed or commenced by Party B
      or the
      Trust
      or (y)
      any involuntary insolvency proceeding filed or commenced against Party B
or
      the
      Trust
      by a
      person other than Party A or (ii) from commencing against Party B or
      the
      Trust
      or any
      properties of Party B or
      the
      Trust
      any
      legal action which is not a bankruptcy, reorganization, arrangement, insolvency,
      moratorium or liquidation proceeding. This provision shall survive termination
      of this Agreement for any reason whatsoever.

     

    (n) Representations
      of Party B. As
      an
      inducement to Party A for entering into this Agreement and each Transaction
      hereunder, Party B represents that for the purposes of the Pooling and Servicing
      Agreement: 

     

    (i) Party
      A
      is a "Hedge Counterparty",

     

    (ii) each
      Transaction entered into between Party A and Party B hereunder is a "Hedge
      Agreement" and

     

    (iii) any
      net
      payments (a difference between a Fixed and a Floating Amount) due to Party
      A
      under each Cap Agreement is a "Cap Amount". 

     

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

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (p) Amendment
      of Provisions and Transfer of Rights and Obligations.
      Without
      limiting the provisions of Section 7(a) of this Agreement, no amendment or
      transfer of the rights or obligations under this Agreement will be effective
      without the prior written confirmation of each Rating Agency (other than
      Moody's) that such amendment or transfer will not result in the reduction or
      withdrawal of the then current ratings for any outstanding
      Certificates.

     

    (q) Acknowledgement
      of Pledge of Collateral.
      Party A
      acknowledges Party B’s pledge of its assets under the Pooling and Servicing
      Agreement and understands that the proceeds of such assets will be applied,
      including to payments hereunder, only in the order set forth in the Pooling
      and
      Servicing Agreement.

     

    (r) Set-Off.
      Notwithstanding
      any provision of this Agreement or any other existing or future agreement,
      Party
      A hereby irrevocably waives any and all rights it may have to set-off, net,
      recoup or otherwise withhold or suspend or condition payment or performance
      of
      any obligation between it and Party B against any obligation between it and
      Party B under any other agreements; provided that nothing herein shall be
      construed as limiting the provisions contained in Section 2(c) or any other
      Section of this Agreement or Paragraphs 8(a) and 8(b) of the Credit Support
      Annex with respect to the netting of the parties’ respective obligations under
      this Agreement or the right of Party B to exercise any set-off right, by
      operation of law or otherwise. Except as stated above, the provisions for
      Set-off set forth in Section 6(e) of the Agreement shall not apply.

     

    (s) Transfers

     

    
      	 	
              (i)

            	
              Section
                7 of this Agreement shall not apply to Party A and, subject to Section
                6(b)(ii) and Part 5(s)(ii) below, Party A may not transfer (whether
                by way
                of security or otherwise) any interest or obligation in or under
                this
                Agreement without the prior written consent of Party
                B.

            

    

     

    
      	 	
              (ii)

            	
              Subject
                to Part 5(t) below, Party A may (at its own cost) transfer all or
                substantially all of its rights and obligations with respect to this
                Agreement to any other entity (a "Transferee")
                that is an Eligible Replacement, provided that Party B shall have
                determined which shall be evidenced by satisfaction of the Rating
                Agency
                Condition, whether or not a transfer relates to all or substantially
                all
                of Party A’s rights and obligations under this Agreement. Following such
                transfer, all references to Party A shall be deemed to be references
                to
                the Transferee.

            

    

     

    
      	 	
              (iii)

            	
              If
                an entity has made a Firm Offer (which remains capable of becoming
                legally
                binding upon acceptance (which shall be evidenced by Party B's receipt
                of
                confirmation that the Rating Agency Condition has been satisfied))
                to be
                the transferee of a transfer to be made in accordance with (ii) above,
                Party B shall (at Party A’s cost) at Party A’s written request, execute
                such documentation provided to it as is reasonably deemed necessary
                by
                Party A to effect such transfer.

            

    

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (t) Rating
      Agency Notification.
      Notwithstanding any other provision of this Agreement, this Agreement shall
      not
      be amended, no Early Termination Date shall be effectively designated by Party
      B, and no transfer of any rights or obligations under this Agreement shall
      be
      made (other than a transfer of all of Party A’s rights and obligations with
      respect to this Agreement in accordance with Part 5(s)(ii) above) unless Moody’s
      has been given prior written notice of such amendment, designation or transfer.
      

     

    (u) Gross
      Up.
      Section
      2(d)(i)(4) shall not apply to Party B as X, and Section 2(d)(ii) shall not
      apply
      to Party B as Y, in each case such that Party B shall not be required to pay
      any
      additional amounts referred to therein.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, Party A and Party B have caused this Schedule to be duly
      executed as of the date first written above.

     

    
      	
              WACHOVIA
                BANK, NATIONAL ASSOCIATION

            	
              NOVASTAR
                MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2007-2

               

              By:
                Deutsche Bank National Trust Company, as Trustee under the Pooling
                and
                Servicing Agreement, acting not in its individual capacity, but solely
                in
                its capacity as Trustee to NovaStar Mortgage Supplemental Interest
                Trust,
                Series 2007-2

            
	 	 
	
              By  
                /s/
                Kim V. Farr 

              
                

              

              Name:
                Kim V. Farr

              Title:
                Director

            	
              By  
                /s/
                Ronaldo Reyes

              
                

              

              Name:
                Ronaldo Reyes

              Title:
                Vice President

               

            

    

    

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    Exhibit
      I

     

    (Party
      A disclosure for prospectus supplement)

     

    Wachovia
      Bank, National Association

     

    Wachovia
      Bank, National Association ("Wachovia") is a national banking association that
      has, as of the date of this [free writing prospectus][prospectus
      supplement],
      long-term debt ratings from S&P, Fitch Ratings and Moody’s of "AA", "AA-"
      and "Aa1", respectively, and short-term debt ratings from S&P, Fitch Ratings
      and Moody’s of "A-1+", "Fl+" and "P-1", respectively. The ratings reflect the
      respective rating agency’s current assessment of the creditworthiness of
      Wachovia and may be subject to revision or withdrawal at any time by the rating
      agencies. Wachovia will provide upon request, without charge, to each person
      to
      whom this [free
      writing prospectus][prospectus
      supplement]
      is
      delivered, a copy of the most recent audited annual financial statements of
      the
      Wachovia Corporation, the parent company of Wachovia. Requests for such
      information should be directed to Wachovia Corporation - Investor Relations,
      (704) 374-6782 or in writing at Wachovia Corporation, Investor Relations, 301
      South College Street, Charlotte, NC 28288-0206.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Elections
      and Variables

    to
      the 1994 ISDA Credit Support Annex

    To
      the Schedule to the ISDA Master Agreement dated as of June 1,
      2007

     

    between
      Party A and Party B

     

    dated
      as of

     

    June
      1,
      2007

     

    between

     

    
      	
              WACHOVIA
                BANK, NATIONAL ASSOCIATION

            	
               

               

              and

            	
              NOVASTAR
                MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES
                2007-2

            
	
              _______________________________________

              (“Party
                A”)

            	 	
              _________________________________________

              (“Party
                B”)

            

    

     

    This
      Annex supplements, forms part of, and is subject to, the ISDA Master Agreement
      referred to above (this “Agreement”), is party of its Schedule and is a Credit
      Support Document under this Agreement with respect to each party.

     

    Accordingly,
      the parties agree as follows:

     

    Paragraphs
      1 - 12. Incorporation

     

    Paragraphs
      1 through 12 inclusive of the ISDA Credit Support Annex (Bilateral Form) (ISDA
      Agreements Subject to New York Law Only) published in 1994 by the International
      Swaps and Derivatives Association, Inc. are incorporated herein by reference
      and
      made a part hereof.

     

    Paragraph
      13.

     

    
      	(a)  	
              Security
                Interest for
“Obligations”.

            

    

     

    The
      term
“Obligations”
      as used
      in this Annex includes the following additional obligations: None.

    

    
      	(b)  	
              Credit
                Support Obligations.

            

    

     

    
      	(i)  	
              Delivery
                Amount, Return Amount and Credit Support
                Amount.

            

    

     

    
      	(A)  	
              “Delivery
                Amount”
                has the meaning specified in Paragraph 3(a), except that the words
“upon a
                demand made by the Secured Party on or promptly following a Valuation
                Date” shall be deleted and replaced by the words “on each Valuation Date;”
                provided,
                that the Delivery Amount shall be calculated, with respect to collateral
                posting required by each Rating Agency, by using (i) such Rating
                Agency’s
                Valuation Percentages as provided below to determine Value and (ii)
                the
                Credit Support Amount related to such Rating Agency. The Delivery
                Amount
                shall be the greatest of such calculated
                amounts.

            

    

     

    
      	(B)  	
              “Return
                Amount”
                has the meaning
                specified in Paragraph 3(b); provided,
                that the Return Amount shall be calculated, with respect to collateral
                posting required by each Rating Agency, by using (i) such Rating
                Agency’s
                Valuation Percentages as provided below to determine Value and (ii)
                the
                Credit Support Amount related to such Rating Agency. The Return Amount
                shall be the least of such calculated
                amounts.

            

    

     

    
      
        
        

      

      
        1

        
          

        

      

       

       

    

    
      	(C)  	
              “Credit
                Support Amount”
                has the meaning specified in Paragraph 13(j)(iii).
                

            

    

     

    
      	(ii)  	
              Eligible
                Collateral.
                The Valuation
                Percentages1
                listed below shall apply to the following Eligible Collateral:
                

            

    

     

    
      
        	
                Instrument

              	 	
                Valuation
                  Percentages applicable with respect to calculating Moody's First
                  Trigger
                  Credit Support Amount

              	 	
                Valuation
                  Percentages applicable with respect to calculating Moody's Second
                  Trigger
                  Credit Support Amount

              	 	
                Valuation
                  Percentages applicable with respect to calculating S&P Credit Support
                  Amount

              	 
	 	 	
                Moody’s

              	 	
                Moody’s

              	 	
                S&P

              	 
	
                U.S.
                  Dollar Cash

              	 	 	
                100

              	
                %

              	 	
                100

              	
                %

              	 	
                100

              	
                %

              
	
                Fixed
                  Rate Treasury Debt issued by U.S. Treasury Department with Remaining
                  Maturity:

              
	
                <1
                  Year

              	 	 	
                100

              	
                %

              	 	
                100

              	
                %

              	 	
                98.90

              	
                %

              
	
                1
                  to 2 years

              	 	 	
                100

              	
                %

              	 	
                99

              	
                %

              	 	
                98.00

              	
                %

              
	
                2
                  to 3 years

              	 	 	
                100

              	
                %

              	 	
                98

              	
                %

              	 	
                97.40

              	
                %

              
	
                3
                  to 5 years

              	 	 	
                100

              	
                %

              	 	
                97

              	
                %

              	 	
                95.50

              	
                %

              
	
                5
                  to 7 years

              	 	 	
                100

              	
                %

              	 	
                95

              	
                %

              	 	
                93.70

              	
                %

              
	
                7
                  to 10 years

              	 	 	
                100

              	
                %

              	 	
                94

              	
                %

              	 	
                92.50

              	
                %

              
	
                10
                  to 20 years

              	 	 	
                100

              	
                %

              	 	
                89

              	
                %

              	 	
                91.10

              	
                %

              
	
                >
                  20 years

              	 	 	
                100

              	
                %

              	 	
                87

              	
                %

              	 	
                88.60

              	
                %

              
	
                Floating-Rate
                  Negotiable U.S. Dollar Denominated Treasury Debt Issued by The
                  U.S.
                  Treasury Department

              
	
                All
                  Maturities

              	 	 	
                100

              	
                %

              	 	
                99

              	
                %

              	 	
                Not
                  Eligible Collateral

              	 
	
                Fixed-Rate
                  U.S. Dollar Denominated Treasury U.S. Agency Debentures with Remaining
                  Maturity:

              
	
                <
                  1 Year

              	 	 	
                100

              	
                %

              	 	
                99

              	
                %

              	 	
                98.50

              	
                %

              
	
                1
                  to 2 years

              	 	 	
                100

              	
                %

              	 	
                98

              	
                %

              	 	
                97.70

              	
                %

              
	
                2
                  to 3 years

              	 	 	
                100

              	
                %

              	 	
                97

              	
                %

              	 	
                97.30

              	
                %

              
	
                3
                  to 5 years

              	 	 	
                100

              	
                %

              	 	
                96

              	
                %

              	 	
                94.50

              	
                %

              
	
                5
                  to 7 years

              	 	 	
                100

              	
                %

              	 	
                94

              	
                %

              	 	
                93.10

              	
                %

              
	
                7
                  to 10 years

              	 	 	
                100

              	
                %

              	 	
                93

              	
                %

              	 	
                90.70

              	
                %

              
	
                10
                  to 20 years

              	 	 	
                100

              	
                %

              	 	
                88

              	
                %

              	 	
                87.70

              	
                %

              
	
                >
                  20 years

              	 	 	
                100

              	
                %

              	 	
                86

              	
                %

              	 	
                84.40

              	
                %

              
	
                Floating-Rate
                  U.S. Dollar Denominated U.S. Agency Debentures

              
	
                All
                  maturities

              	 	 	
                100

              	
                %

              	 	
                98

              	
                %

              	 	
                Not
                  Eligible Collateral

              	 
	
                Qualified
                  Commercial Paper

              
	
                 

              	 	 	
                0

              	%*	 	
                0

              	%*	 	
                99

              	
                %

              

      

    

     

    For
      the
      purposes of the above table, “Qualified
      Commercial Paper”
means
      commercial
      paper
      with a rating of at least P-1 by Moody’s and A-1+ by S&P and having a
      remaining maturity
      of not more than one month.

    

    *or
      such
      other percentage in respect of which Moody’s has provided a rating
      affirmation.

    

    
      	(iii)  	
              Thresholds.

            

    

     

    
      	(A)  	
              “Independent
                Amount” 
                means with respect to Party A: Zero

            

    

     

    “Independent
      Amount”
      means
      with respect to Party B: Zero

     

    
      
        

      

      1
        With
        respect to collateral types not listed below, such assets will be subject
        to
        review by each of S&P and Moody’s.

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	(B)  	
              “Threshold”
                means with respect to Party A: infinity; provided
                that the Threshold with respect to Party A shall be zero for so long
                as no
                Relevant Entity has the First Trigger Required Ratings or a
                Collateralization Event is occurring and (i) no Relevant Entity has
                had
                the First Trigger Required Ratings since this Annex was executed,
                or (ii)
                at least 30 Local Business Days have elapsed since the last time
                a
                Relevant Entity had the First Trigger Required Ratings, or (iii)
                no
                Relevant Entity has met the Approved Ratings Thresholds since this
                Annex
                was executed, or (iv) at least 30 calendar days have elapsed since
                the
                last time a Collateralization Event occurred or (v) a Ratings Event
                is
                occurring.

            

    

     

    “Threshold”
      means
      with respect to Party B: infinity.

     

    
      	(C)  	
              “Minimum
                Transfer Amount”
                means
                with respect to Party A: USD $100,000; provided,
                however,
                that if S&P is rating the Certificates and the aggregate Certificate
                Principal Balances of the rated Certificates falls below $50,000,000,
                then
                the Minimum Transfer Amount shall mean USD $50,000.
                

            

    

     

    
      	(D)  	
              “Minimum
                Transfer Amount”
                means with respect to Party B: USD $100,000 (or
                if the Posted Collateral is less than $100,000, the aggregate Value
                of
                Posted Collateral),
                provided,
                however,
                that if S&P is rating the Certificates and the aggregate Certificate
                Principal Balances of the rated Certificates falls below $50,000,000,
                then
                the Minimum Transfer Amount shall mean USD $50,000 (or if the Posted
                Collateral is less than $50,000, the aggregate Value of Posted
                Collateral).

            

    

     

    
      	(E)  	
              Rounding.
                The Delivery Amount will be rounded up to the nearest integral multiple
                of
                USD $10,000. The Return Amount will be rounded down to the nearest
                integral multiple of USD $10,000.

            

    

     

    
      	(iv)  	
              “Exposure”
                has the meaning specified in Paragraph 12, except that (1) after
                the word
                “Agreement” the words “(assuming, for this purpose only, that Part
                1(f)(i) of
                the Schedule is deleted)” shall be inserted and (2) at the end of such
                definition, the words “with terms substantially the same as those of this
                Agreement.”

            

    

     

    
      	(c)  	
              Valuation
                and Timing.

            

    

     

    
      	(i)  	
              “Valuation
                Agent”
                means Party A in all circumstances.

            

    

     

    
      	(ii)  	
              “Valuation
                Date”
                means the first Local Business Day in each
                week.

            

    

     

    
      	(iii)  	
              “Valuation
                Time”
                means the close of business in the city of the Valuation Agent on
                the
                Local Business Day immediately preceding the Valuation Date or date
                of
                calculation, as applicable, provided that the calculations of Value
                and
                Credit Support Amount will, as far as practicable, be made as of
                approximately the same time on the same date.

            

    

     

    
      	(iv)  	
              “Notification
                Time”
                means 11:00 a.m., New York time, on a Local Business
                Day.

            

    

     

    
      	(d)  	
              Conditions
                Precedent and Secured Party’s Rights and Remedies.
                None.

            

    

     

    
      	(e)  	
              Substitution.
                

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	(i)  	
              “Substitution
                Date”
                has the meaning specified in Paragraph
                4(d)(ii).

            

    

     

    
      	(ii)  	
              Consent.
                If specified here as applicable, then the Pledgor must obtain the
                Secured
                Party’s consent for any substitution pursuant to Paragraph 4(d):
                Inapplicable.

            

    

     

    
      	(f)  	
              Dispute
                Resolution.

            

    

     

    
      	(i)  	
              “Resolution
                Time”
                means 1:00 p.m., New York time on the Local Business Day following
                the
                date on which the notice is given that gives rise to a dispute under
                Paragraph 5.

            

    

     

    
      	(ii)  	
              Value.
                For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of Eligible
                Credit Support or Posted Credit Support as of the relevant Valuation
                Date
                or date of Transfer will be calculated as follows:
                

            

    

     

    
      	(A)  	
              with
                respect to any Eligible Credit Support or Posted Credit Support comprising
                securities (“Securities”)
                the sum of (a)(x) the last bid price on such date for such Securities
                on
                the principal national securities exchange on which such Securities
                are
                listed, multiplied by the applicable Valuation Percentage; or (y)
                where
                any Securities are not listed on a national securities exchange,
                the bid
                price for such Securities quoted as at the close of business on such
                date
                by any principal market maker (which shall not be and shall be independent
                from the Valuation Agent) for such Securities chosen by the Valuation
                Agent, multiplied by the applicable Valuation Percentage; or (z)
                if no
                such bid price is listed or quoted for such date, the last bid price
                listed or quoted (as the case may be), as of the day next preceding
                such
                date on which such prices were available, multiplied by the applicable
                Valuation Percentage; plus (b) the accrued interest where applicable
                on
                such Securities (except to the extent that such interest shall have
                been
                paid to the Pledgor pursuant to Paragraph 5(c)(ii) or included in
                the
                applicable price) as of such date;
                and

            

    

     

    
      	(B)  	
              with
                respect to any Cash, the face amount
                thereof.

            

    

     

    
      	(iii)  	
              Alternative.
                The provisions of Paragraph 5 will
                apply.

            

    

     

    
      	(g)  	
              Holding
                and Using Posted
                Collateral.

            

    

     

    
      	(i)  	
              Eligibility
                to Hold Posted Collateral; Custodians:

            

    

     

    A
      Custodian will be entitled to hold Posted Collateral on behalf of Party B
      pursuant to Paragraph 6(b); provided
      that:

     

    (1)  Posted
      Collateral may be held only in the following jurisdiction: United
      States.

     

    (2)  The
      Custodian for Party B (A) is a commercial bank or trust company which is
      unaffiliated with Party B and organized under the laws of the United States
      or
      state thereof, having combined
      capital and surplus of at least $25,000,000 as set forth in its most recent
      published annual report of condition, (B) it or its parent shall have a
      long-term debt rating of "A1" or better by Moody’s, "A+" (or better) and "A-1"
      (or better) by Standard & Poor’s and
      (C)
      shall hold all Eligible Credit Support in the Hedge Collateral Account, as
      defined in the Pooling and Servicing Agreement. 

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (3)  Initially,
      the Custodian for Cash and Securities for Party B is: The Trustee under the
      Pooling and Servicing Agreement, or any successor trustee thereto.

     

    
      	(ii)  	
              Use
                of Posted Collateral.
                The provisions of Paragraph 6(c) will not apply to Party B. The Trustee
                shall invest Cash Posted Credit Support in such overnight (or redeemable
                within two Local Business Days of demand) investments rated at least
                (1)
                A-1, AAAm or AAAm-G by S&P and (2) Aaa or Prime-1 by Moody’s (or such
                other investments as may be affirmed in writing by S&P and Moody’s) as
                directed by Party A (unless an Event of Default or an Additional
                Termination Event has occurred with respect to which Party A is the
                Defaulting Party or sole Affected Party, in which case such funds
                shall be
                invested at the written direction of the Servicer, or if neither
                Party A
                nor the Servicer provides such written instructions, such funds shall
                be
                retained by the Trustee uninvested) with gains and losses incurred
                in
                respect of such investments to be for the account of Party
                A.

            

    

     

    
      	(iii)  	
              Notice.
                If a party or its Custodian fails to meet the criteria for eligibility
                to
                hold (or, in the case of a party, to use) Posted Collateral set forth
                in
                this Paragraph 13(g), such party shall promptly notify the other
                party of
                such ineligibility.

            

    

     

    
      	(h)  	
              Distributions
                and Interest Amount.

            

    

     

    
      	(i)  	
              Interest
                Rate.
                The “Interest
                Rate”
                will be the actual rate of interest earned by Party B or the Custodian
                if
                the Cash is invested at the direction of Party A in accordance with
                Paragraph 13(g)(ii) above, otherwise the “Interest
                Rate”
                will be the federal funds overnight rate as published by the Board
                of
                Governors of the Federal Reserve System in H.15 (519) or its successor
                publication, or such other rate as the parties may agree from time
                to
                time.

            

    

     

    
      	(ii)  	
              Transfer
                of Interest Amount.
                The transfer of the Interest Amount will be made on the second Local
                Business Day following the end of each calendar month and on any
                other
                Local Business Day on which Posted Collateral in the form of Cash
                is
                transferred to the Pledgor pursuant to Paragraph 3(b), in each case
                to the
                extent that a Delivery Amount would not be created or increased by
                that
                transfer, provided
                that Party B shall not be obliged to so transfer any Interest Amount
                unless and until it has earned and received such
                interest.

            

    

     

    
      	(iii)  	
              Alternative
                to Interest Amount.
                The provisions of Paragraph 6(d)(ii) will apply.
                

            

    

     

    
      	(i)  	
              Address
                for Transfers.

            

    

     

    Party
      A:
      To be notified to Party B by Party A at the time of the request for the
      transfer.

     

    Party
      B:
      To be notified to Party A by Party B upon request by Party A.

     

    
      	(j)  	
              Other
                Provisions.

            

    

     

    
      	(i)  	
              Costs
                of Transfer on
                Exchange.

            

    

     

    
      	 	
              Notwithstanding
                Paragraph 10, the Pledgor will be responsible for, and will reimburse
                the
                Secured Party for, all transfer and other taxes and other costs involved
                in the transfer of Eligible Credit Support either from the Pledgor
                to the
                Secured Party or from the Secured Party to the
                Pledgor.

            

    

    

    
      	(ii)  	
              Cumulative
                Rights.

            

    

     

    
      	 	
              The
                rights, powers and remedies of the Secured Party under this Annex
                shall be
                in addition to all rights, powers and remedies given to the Secured
                Party
                by the Agreement or by virtue of any statute or rule of law, all
                of which
                rights, powers and remedies shall be cumulative and may be exercised
                successively or concurrently without impairing the rights of the
                Secured
                Party in the Posted Credit Support created pursuant to this
                Annex.

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	(iii)  	
              Ratings
                Criteria. 

            

    

     

    “Credit
      Support Amount”
      shall be
      (a) the S&P Credit Support Amount, (b) the Moody’s First Trigger Credit
      Support Amount, or (c) the Moody’s Second Trigger Credit Support Amount, as
      applicable.

    

    With
      respect to Moody’s:

    

    “Moody’s
      First Trigger Credit Support Amount”
means,
      for any Valuation Date, the excess, if any, of

     

    
      	(I)  	
              (A)for
                any Valuation Date on which (I) a First Trigger Failure Condition
                has
                occurred and has been continuing (x) for at least 30 Local Business
                Days
                or (y) since this Annex was executed and (II) it is not the case
                that a
                Moody’s Second Trigger Event has occurred and been continuing for at least
                30 Local Business Days, an amount equal to the greater of (a) zero
                and (b)
                the sum of the Secured Party’s aggregate Exposure for all Transactions and
                the aggregate of Moody’s Additional Collateralized Amounts for all
                Transactions.

            

    

     

    
      	 	 	
              For
                the purposes of this definition, the “Moody’s
                Additional Collateralized Amount”
                with respect to any Transaction shall mean at the option of Party
                A
                either: 

            

    

    

    
      	 	 	
              (i)
                the lesser of (x) the product of the Moody’s First Trigger DV01 Multiplier
                and DV01 for such Transaction and such Valuation Date and (y) the
                product
                of Moody’s First Trigger Notional Amount Multiplier and the Notional
                Amount for such Transaction for the Calculation Period which includes
                such
                Valuation Date; or

            

    

    

    
      	 	 	
              (ii)
                the product of the applicable Moody's First Trigger Factor set forth
                in
                Table 1 attached hereto and the Notional Amount for such Transaction
                for
                the Calculation Period which includes such Valuation Date;
                or

            

    

    
      	 	 	 

    

    (B) for
      any
      other Valuation Date, zero, over

     

    
      	(II)  	
              the
                Threshold for Party A such Valuation
                Date.

            

    

     

    “First
      Trigger Failure Condition”
means
      that no Relevant Entity has credit ratings from Moody’s at least equal to the
      Moody’s First Trigger Required Ratings.

    

    “DV01”
      means,
      with respect to a Transaction and any date of determination, the sum of the
      estimated change in the Secured Party’s Exposure with respect to such
      Transaction that would result from a one basis point change in the relevant
      swap
      curve on such date, as determined by the Valuation Agent in good faith and
      in a
      commercially reasonable manner. The Valuation Agent shall, upon request of
      Party
      B, provide to Party B a statement showing in reasonable detail such
      calculation.

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    “Moody’s
      First Trigger DV01 Multiplier”
means
      25.

    

    “Moody’s
      First Trigger Notional Amount Multiplier”
means
      4%.

    

    “Moody’s
      Second Trigger Credit Support Amount”
means,
      for any Valuation Date, the excess, if any, of

     

    
      	(I)  	
              (A)for
                any Valuation Date on which it is the case that a Second Trigger
                Failure
                Condition has occurred and been continuing for at least 30 Local
                Business
                Days, an amount equal to the greatest of (a) zero, (b) the aggregate
                amount of the Next Payments for all Next Payment Dates and (c) the
                sum of
                the Secured Party's aggregate Exposure and the aggregate of Moody's
                Additional Collateralized Amounts for all
                Transactions.

            

    

     

    
      	 	 	
              For
                the purposes of this definition:

            

    

    

    
      	 	 	
              “Moody's
                Additional Collateralized Amount”
                with respect to any Transaction shall mean at the option of Party
                A
                either:

            

    

     

    
      	 	 	
              (i)
                the lesser of (x) the product of the Moody’s Second Trigger DV01
                Multiplier and DV01 for such Transaction and such Valuation Date
                and (y)
                the product of the Moody’s Second Trigger Notional Amount Multiplier and
                the Notional Amount for such Transaction for the Calculation Period
                which
                includes such Valuation Date; or

            

    

    

    
      	 	 	
              (ii)
                the product of the applicable Moody's Second Trigger Factor set forth
                in
                Table 2 attached hereto and the Notional Amount for such Transaction
                for
                the Calculation Period which includes such Valuation Date;
                or

            

    

    

    (B) for
      any
      other Valuation Date, zero, over

     

    
      	(II)  	
              the
                Threshold for Party A for such Valuation
                Date.

            

    

     

    “Next
      Payment”
means,
      in respect of each Next Payment Date, the greater of (i) the amount of any
      payments due to be made by Party A under Section 2(a) on such Next Payment
      Date
      less any payments due to be made by Party B under Section 2(a) on such Next
      Payment Date (in each case, after giving effect to any applicable netting under
      Section 2(c)) and (ii) zero.

    

    “Next
      Payment Date”
means
      each date on which the next scheduled payment under any Transaction is due
      to be
      paid.

    

    “Second
      Trigger Failure Condition”
means
      that no Relevant Entity has credit ratings from Moody’s at least equal to the
      Moody’s Second Trigger Ratings Threshold.

    

    “Moody’s
      Second Trigger DV01 Multiplier”
means
      90.

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    “Moody’s
      Second Trigger Notional Amount Multiplier”
means
      9%.

    

    With
      respect to S&P:

    

    “S&P
      Credit Support Amount”
means,
      for any Valuation Date, the excess, if any, of:

    

    
      	 	
              (I)

            	
              (A)
                

            	
              for
                any Valuation Date (x) on which a Collateralization Event with respect
                to
                S&P has occurred and been continuing for at least 30 calendar days
                or
                (y) on which a Ratings Event with respect to S&P has occurred and is
                continuing, an amount equal to the sum of (1) the aggregate Secured
                Party’s Exposure for such Valuation Date with respect to all Transactions
                and (2) the aggregate of the products of the Volatility Buffer for
                each
                Transaction and the Notional Amount of each Transaction for the
                Calculation Period of each such Transaction which includes such Valuation
                Date, or

            

    

    

    
      	 	
              (B)

            	
              for
                any other Valuation Date, zero,
                over

            

    

    

    (II) the
      Threshold for Party A for such Valuation Date.

    

    “Volatility
      Buffer”
shall
      mean the percentage set forth in the following table with respect to any
      Transaction: 

     

    
      
        	
                Short-term
                  credit rating of Party A’s Credit Support Provider

              	 	
                Remaining
                  Weighted Average Life Maturity up to 3 years

              	
                 

              	
                Remaining
                  Weighted Average Life Maturity up to 5 years

              	
                 

              	
                Remaining
                  Weighted Average Life Maturity up to 10 years

              	
                 

              	
                Remaining
                  Weighted Average Life Maturity up to 30 years

              	 
	
                At
                  least “A-2”

              	 	 	
                2.75

              	 	 	
                3.25

              	 	 	
                4.00

              	 	 	
                4.75

              	 
	
                “A-3”

              	 	 	
                3.25

              	 	 	
                4.00

              	 	 	
                5.00

              	 	 	
                6.25

              	 
	
                “BB+”
                  or lower

              	 	 	
                3.50

              	 	 	
                4.50

              	 	 	
                6.75

              	 	 	
                7.50

              	 

      

    

     

    
      	(iv)  	
              Demands
                and Notices.

            

    

     

    All
      demands, specifications and notices under this Annex will be made pursuant
      to
      the Notices Section of this Agreement, save that any demand, specification
      or
      notice:

     

    
      	(A)  	
              shall
                be given to or made at the following
                addresses:

            

    

     

    If
      to
      Party A: 

     

    As
      set
      forth in Part 4(a) of the Schedule.

     

    If
      to
      Party B: 

     

    As
      set
      forth in Part 4(a) of the Schedule.

     

    or
      at
      such other address as the relevant party may from time to time designate by
      giving notice (in accordance with the terms of this subparagraph) to the other
      party;

     

    
      	(B)  	
              shall
                be deemed to be effective at the time such notice is actually received
                unless such notice is received on a day which is not a Local Business
                Day
                or after the Notification Time on any Local Business Day in which
                event
                such notice shall be deemed to be effective on the next succeeding
                Local
                Business Day.

            

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

    
      	(v)  	
              Agreement
                as to Single Secured Party and
                Pledgor

            

    

     

    
      	 	 	
              Party
                A and Party B agree that, notwithstanding anything to the contrary
                in the
                first sentence of this Annex, Paragraph 1(b) or Paragraph 2 or the
                definitions in Paragraph 12, except with respect to Party B’s obligations
                under Paragraph 3(b), (a) the term “Secured Party” as used in this Annex
                means only Party B, (b) the term “Pledgor” as used in this Annex means
                only Party A, (c) only Party A makes the pledge and grant in Paragraph
                2,
                the acknowledgement in the final sentence of Paragraph 8(a) and the
                representations in Paragraph 9 and (d) only Party A will be required
                to
                make Transfers of Eligible Credit Support hereunder. Party A and
                Party B
                further agree that, notwithstanding anything to the contrary in the
                recital to this Annex or Paragraph 7, this Annex will constitute
                a Credit
                Support Document only with respect to Party
                A.

            

    

    

    
      	(vi)  	
              Trustee
                Capacity. 

            

    

     

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

            

    

    

    
      	(vii)  	
              External
                Marks. 

            

    

     

    At
      such
      time as the long-term senior debt rating of Party A’s Credit Support Provider is
      BBB or lower from S&P, Party A in its capacity as Valuation Agent shall get
      external verification of its calculation of Exposure on a monthly basis. This
      verification shall be at Party A’s expense and may not be verified by the same
      entity more than four (4) times in any twelve (12)-month period. The external
      mark should reflect the higher of two (2) bids from counterparties that would
      be
      willing and eligible to provide the swap in the absence of the current provider.
      Such bids and any external marks received by the Valuation Agent shall be
      provided to S&P. The calculation of Exposure should be based on the greater
      of the internal and external marks. 

    

    
      
        
        

      

      
        9

        
          

        

      

       

      
        
        

      

    

    
      	(viii)  	
              Event
                of Default.

            

    

     

    Subclause
      (iii) of Paragraph 7 shall not apply to Party B.

     

    [Signature
      page follows]

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF,
      the
      parties have executed this document by their duly authorized officers with
      effect from the date specified on the first page hereof.

     

    
      	WACHOVIA
              BANK, NATIONAL ASSOCIATION	 	 	NOVASTAR
              MORTGAGE SUPPLEMENTAL INTEREST 
              TRUST,
                SERIES 2007-2

            
	
            	 	 	
            
	 	 	 	By:
              Deutsche Bank National Trust Company, as Trustee under the Pooling
              and
              Servicing Agreement, acting not in its individual capacity, but solely
              in
              its capacity as Trustee to NovaStar Mortgage Supplemental Interest
              Trust,
              Series 2007-2

    

     

    
      	 
              
               

            	 	 	 
	
              By
                /s/
                Kim V. Farr

            	 	 	By /s/
              Ronaldo Reyes
	
              
                

              

              
                Name:
                  Kim V. Farr

                Title:
                  Director

              

            	 	 	
              
                

              

              Name:
                Ronaldo Reyes

              Title:
                Vice President

            
	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Table
      1

     

    Moody’s
      First Trigger Factor

     

    
      
        	
                Remaining

                Weighted
                  Average Life 

                of
                  Hedge in Years

              	 	
                Weekly

                Collateral

                Posting

              	 
	
                1
                  or less

              	 	 	
                0.25

              	
                %

              
	
                More
                  than 1 but not more than 2

              	 	 	
                0.50

              	
                %

              
	
                More
                  than 2 but not more than 3

              	 	 	
                0.70

              	
                %

              
	
                More
                  than 3 but not more than 4

              	 	 	
                1.00

              	
                %

              
	
                More
                  than 4 but not more than 5

              	 	 	
                1.20

              	
                %

              
	
                More
                  than 5 but not more than 6

              	 	 	
                1.40

              	
                %

              
	
                More
                  than 6 but not more than 7

              	 	 	
                1.60

              	
                %

              
	
                More
                  than 7 but not more than 8

              	 	 	
                1.80

              	
                %

              
	
                More
                  than 8 but not more than 9

              	 	 	
                2.00

              	
                %

              
	
                More
                  than 9 but not more than 10

              	 	 	
                2.20

              	
                %

              
	
                More
                  than 10 but not more than 11

              	 	 	
                2.30

              	
                %

              
	
                More
                  than 11 but not more than 12

              	 	 	
                2.50

              	
                %

              
	
                More
                  than 12 but not more than 13

              	 	 	
                2.70

              	
                %

              
	
                More
                  than 13 but not more than 14

              	 	 	
                2.80

              	
                %

              
	
                More
                  than 14 but not more than 15

              	 	 	
                3.00

              	
                %

              
	
                More
                  than 15 but not more than 16

              	 	 	
                3.20

              	
                %

              
	
                More
                  than 16 but not more than 17

              	 	 	
                3.30

              	
                %

              
	
                More
                  than 17 but not more than 18

              	 	 	
                3.50

              	
                %

              
	
                More
                  than 18 but not more than 19

              	 	 	
                3.60

              	
                %

              
	
                More
                  than 19 but not more than 20

              	 	 	
                3.70

              	
                %

              
	
                More
                  than 20 but not more than 21

              	 	 	
                3.90

              	
                %

              
	
                More
                  than 21 but not more than 22

              	 	 	
                4.00

              	
                %

              
	
                More
                  than 22 but not more than 23

              	 	 	
                4.00

              	
                %

              
	
                More
                  than 23 but not more than 24

              	 	 	
                4.00

              	
                %

              
	
                More
                  than 24 but not more than 25

              	 	 	
                4.00

              	
                %

              
	
                More
                  than 25 but not more than 26

              	 	 	
                4.00

              	
                %

              
	
                More
                  than 26 but not more than 27

              	 	 	
                4.00

              	
                %

              
	
                More
                  than 27 but not more than 28

              	 	 	
                4.00

              	
                %

              
	
                More
                  than 28 but not more than 29

              	 	 	
                4.00

              	
                %

              
	
                More
                  than 29

              	 	 	
                4.00

              	
                %

              

      

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Table
      2

     

    Moody’s
      Second Trigger Factor for Interest Rate Swaps with Fixed Notional
      Amounts

     

    
      
        	
                Remaining

                Weighted
                  Average Life 

                of
                  Hedge in Years

              	 	
                Weekly

                Collateral

                Posting

              	 
	
                1
                  or less

              	 	 	
                0.60

              	
                %

              
	
                More
                  than 1 but not more than 2

              	 	 	
                1.20

              	
                %

              
	
                More
                  than 2 but not more than 3

              	 	 	
                1.70

              	
                %

              
	
                More
                  than 3 but not more than 4

              	 	 	
                2.30

              	
                %

              
	
                More
                  than 4 but not more than 5

              	 	 	
                2.80

              	
                %

              
	
                More
                  than 5 but not more than 6

              	 	 	
                3.30

              	
                %

              
	
                More
                  than 6 but not more than 7

              	 	 	
                3.80

              	
                %

              
	
                More
                  than 7 but not more than 8

              	 	 	
                4.30

              	
                %

              
	
                More
                  than 8 but not more than 9

              	 	 	
                4.80

              	
                %

              
	
                More
                  than 9 but not more than 10

              	 	 	
                5.30

              	
                %

              
	
                More
                  than 10 but not more than 11

              	 	 	
                5.60

              	
                %

              
	
                More
                  than 11 but not more than 12

              	 	 	
                6.00

              	
                %

              
	
                More
                  than 12 but not more than 13

              	 	 	
                6.40

              	
                %

              
	
                More
                  than 13 but not more than 14

              	 	 	
                6.80

              	
                %

              
	
                More
                  than 14 but not more than 15

              	 	 	
                7.20

              	
                %

              
	
                More
                  than 15 but not more than 16

              	 	 	
                7.60

              	
                %

              
	
                More
                  than 16 but not more than 17

              	 	 	
                7.90

              	
                %

              
	
                More
                  than 17 but not more than 18

              	 	 	
                8.30

              	
                %

              
	
                More
                  than 18 but not more than 19

              	 	 	
                8.60

              	
                %

              
	
                More
                  than 19 but not more than 20

              	 	 	
                9.00

              	
                %

              
	
                More
                  than 20 but not more than 21

              	 	 	
                9.00

              	
                %

              
	
                More
                  than 21 but not more than 22

              	 	 	
                9.00

              	
                %

              
	
                More
                  than 22 but not more than 23

              	 	 	
                9.00

              	
                %

              
	
                More
                  than 23 but not more than 24

              	 	 	
                9.00

              	
                %

              
	
                More
                  than 24 but not more than 25

              	 	 	
                9.00

              	
                %

              
	
                More
                  than 25 but not more than 26

              	 	 	
                9.00

              	
                %

              
	
                More
                  than 26 but not more than 27

              	 	 	
                9.00

              	
                %

              
	
                More
                  than 27 but not more than 28

              	 	 	
                9.00

              	
                %

              
	
                More
                  than 28 but not more than 29

              	 	 	
                9.00

              	
                %

              
	
                More
                  than 29

              	 	 	
                9.00

              	
                %Exhibit
      10.6

    ISDA®

    International
      Swaps and Derivatives Association, Inc.

    

    NOVATION
      AGREEMENT

    

    dated
      as
      of June 1, 2007 among:

    

    DEUTSCHE
      BANK AG, NEW YORK BRANCH (the "Remaining
      Party"),
      

    NOVASTAR
      MORTGAGE, INC. (the "Transferor")
      

    

    AND

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

    

    The
      Remaining Party and NovaStar Financial, Inc. are parties to a 1992 Master dated
      as of November 30, 2004 (the “NFI/DB
      Master Agreement”).
      The
      Remaining Party and NovaStar Financial, Inc. originally entered into certain
      transactions (each an "Old
      Transaction")
      under
      the NFI/DB Master Agreement, each evidenced by a Confirmation (an "Old
      Confirmation")
      attached hereto as Exhibit I. The Old Transactions were transferred by novation
      to the Transferor pursuant to the Novation Agreement dated July 19, 2006, among
      NovaStar Finanacial, Inc., the Remaining Party and the Transferor, and made
      subject to a 1992 ISDA Master Agreement dated as of July 19, 2006, between
      the
      Remaining Party and the Transferor (the "Old
      Agreement").
      

    

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

    

    With
      effect from and including June 1, 2007 (the "Novation Date")
      the
      Transferor wishes to transfer by novation to the Transferee, and the Transferee
      wishes to accept the transfer by novation of, all the rights, liabilities,
      duties and obligations of the Transferor under and in respect of each Old
      Transaction, with the exception of the Excluded Rights and Obligations referred
      to below with the effect that the Remaining Party and the Transferee will enter
      into a new transaction (each a "New
      Transaction"
      and,
      collectively, the “New
      Transactions”)
      between them having terms identical to those of each applicable Old Transaction,
      subject to the same exceptions and as more particularly described
      below.

    

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

    

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

    

    Accordingly,
      the parties agree as follows: 

    

    1. Definitions.

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    2. Transfer,
      Release, Discharge and Undertakings. 

    

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

    

    
      	
            	(a)	
              on
                the Novation Date, subject to Section 2(d) of this Novation Agreement,
                the
                Transferor hereby transfers all of its rights, liabilities, duties
                and
                obligations, with the exception of the Excluded Rights and Obligations,
                relative to, and in connection with the Old Transaction to the Transferee.
                

            

    

    

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

            

    

    

    
      	
            	(c)	
              in
                respect of each New Transaction, the Remaining Party and the Transferee
                each hereby undertake liabilities and obligations towards the other
                and
                acquire rights against each other identical in their terms to each
                corresponding Old Transaction (and, for the avoidance of doubt, as
                if the
                Transferee were the Transferor and with the Remaining Party remaining
                the
                Remaining Party, save for the Excluded Rights and Obligations and
                any
                other rights, liabilities or obligations of the Remaining Party or
                the
                Transferor with respect to payments or other obligations due and
                payable
                or due to be performed prior to the Novation
                Date);

            

    

    

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

            

    

    

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

            

    

    

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    3. Representations
      and Warranties.

    

    
      	
            	(a)	
              On
                the date of this Novation
                Agreement:

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
            	(b)	
              The
                Transferor makes no representation or warranty and does not assume
                any
                responsibility with respect to the legality, validity, effectiveness,
                adequacy or enforceability of any New Transaction or the New Agreement
                or
                any documents relating thereto and assumes no responsibility for
                the
                condition, financial or otherwise, of the Remaining Party, the Transferee
                or any other person or for the performance and observance by the
                Remaining
                Party, the Transferee or any other person of any of its obligations
                under
                any New Transaction or the New Agreement or any document relating
                thereto
                and any and all such conditions and warranties, whether express or
                implied
                by law or otherwise, are hereby excluded; provided,
                however,
                that nothing in the foregoing shall be construed to relieve the Transferor
                from any liability it may have for any of its representations, warranties
                or obligations as the servicer or otherwise under the Pooling and
                Servicing Agreement among NovaStar
                Pooling
                Mortgage Funding, Inc., U.S. Bank, National Association, and Deutsche
                Bank
                National Trust Company dated as of August 1, 2006 (the “Pooling
                and Servicing Agreement”).

            

    

    

    4. Counterparts.
      

    

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

    

    5. Costs
      and Expenses. 

    

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

    

    
      
        6.
          Amendments. 

      

    

    

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

    

    
      	
              7.

            	
              (a)

            	
              Governing
                Law. 

            

    

    

    This
      Novation Agreement will be governed by and construed in accordance with the
      laws
      of the State of New York without reference to the conflict of laws provisions
      thereof (other than Section 5-1401 of the New York General Obligations
      Law).

    

    
      	 	
              (b)

            	
              Jurisdiction.
                

            

    

    

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

    

    
      	 	
              (c)

            	
              Not
                Acting in Individual Capacity. 

            

    

    

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

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

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

    

    
      	 	
              (d)

            	
              Pooling
                and Servicing Agreement.

            

    

     

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

     

    
      	 	
              (e)

            	
              Calculation

            

    

    Not
      later
      than each Reset Date, the Calculation Agent shall deliver in writing to the
      Trustee the results of any calculations made on such reset date to the Indenture
      Trustee address as provided in the notices portion of the New Agreement.

    

    
      	 	
              (f)

            	
              Account
                Details

            

    

    

    Remaining
      Party

    

      
        	
                Account
                  with:

              	
                DB
                  Trust Co. Americas, New York

              
	
                SWIFT
                  Code:

              	
                BKTRUS33/
                  ABA 021001033

              
	
                Favor
                  of:

              	
                Deutsche
                  Bank AG, New York

              
	
                Account
                  Number:

              	
                01
                  473 969

              

      

    

     

    Transferee

    Deutsche
      Bank National Trust Company

    ABA
      #
      021001033

    Acct
      #
      01419663

    Acct
      Name
      NYLTD Funds Control-Star West

    Ref:
      Trust Administration- NS0702

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

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

    

    
      	DEUTSCHE BANK AG, NEW YORK BRANCH	 	 	NOVASTAR MORTGAGE, INC.
	 	 	 	 
	 	 	 	 
	By: 
              /s/ Kathleen Yohe	 	 	By:
              /s/ David
              L. Farris 
	
              
                
Name:
                Kathleen Yohe

            	 	 	
              
                
Name:
                David L. Farris

            
	
              Title:
                Vice
                President

            	 	 	
              Title:
                Vice
                President

            

    

     

    
      	
              NOVASTAR
                MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2007-2

               

              By:
                Deutsche Bank National Trust Company, as 

              Trustee
                under the Pooling and Servicing Agreement, 

              acting
                not in its individual capacity, but solely in its 

              capacity
                as Trustee to NovaStar Mortgage 

              Supplemental
                Interest Trust, Series 2007-2

            

    

    

    
      	 	 	 	 
	By: 
              /s/ Ronaldo Reyes 	 	 	
            
	
              
                
Name:
                Ronaldo Reyes

            	 	 	
            
	
              Title:
                Vice President

            	 	 	 

    

    

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    Exhibit
      I

    

    [Old
      Hedge Confirmations attached behind this page]

    

    
      
        
        

      

      
        7

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00124-of-00352.parquet"}]]