Document:

Exhibit
        4.1

      

      

      
        

        

      

      

      NOVASTAR
        MORTGAGE FUNDING CORPORATION,

      as
        Depositor

      

      

      NOVASTAR
        MORTGAGE, INC.,

      as
        Servicer and as Sponsor

      

      

      U.S.
        BANK
        NATIONAL ASSOCIATION

      as
        Custodian

      

      and

      

      DEUTSCHE
        BANK NATIONAL TRUST COMPANY

      as
        Trustee

      

      POOLING
        AND SERVICING AGREEMENT

      

      Dated
        as
        of February 1, 2007

      

      ________________________________

      

      NovaStar
        Mortgage Funding Trust, Series 2007-1

      

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

      

      

      

      
        

        

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      TABLE
        OF CONTENTS

      

        
          	
                  ARTICLE
                    I DEFINITIONS

                	
                  7

                
	 	 	 
	
                  Section
                    1.01

                	
                  Defined
                    Terms.

                	
                  7

                
	
                  Section
                    1.02

                	
                  Accounting.

                	
                  7

                
	
                  Section
                    1.03

                	
                  Allocation
                    of Certain Interest Shortfalls.

                	
                  8

                
	
                  Section
                    1.04

                	
                  Calculation
                    of Interest on Certificates.

                	
                  8

                
	 	 
	
                  ARTICLE
                    II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF
                    CERTIFICATES

                	
                  8

                
	 	 	 
	
                  Section
                    2.01

                	
                  Establishment
                    of the Issuing Entity; Conveyance of Mortgage Loans and Other
                    Trust
                    Assets.

                	
                  8

                
	
                  Section
                    2.02

                	
                  Acceptance
                    of Mortgage Loans by Custodian, on behalf of the Trustee.

                	
                  11

                
	
                  Section
                    2.03

                	
                  Repurchase
                    or Substitution of Mortgage Loans by the Sponsor.

                	
                  12

                
	
                  Section
                    2.04

                	
                  Acknowledgement
                    of Trustee.

                	
                  15

                
	
                  Section
                    2.05

                	
                  Representations,
                    Warranties and Covenants of the Servicer.

                	
                  15

                
	
                  Section
                    2.06

                	
                  Representations
                    and Warranties of the Depositor.

                	
                  16

                
	
                  Section
                    2.07

                	
                  Issuance
                    of Certificates.

                	
                  17

                
	
                  Section
                    2.08

                	
                  [Reserved].

                	
                  17

                
	
                  Section
                    2.09

                	
                  Designation
                    Under REMIC Provisions.

                	
                  17

                
	 	 
	
                  ARTICLE
                    III ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS

                	
                  17

                
	 	 	 
	
                  Section
                    3.01

                	
                  Servicer
                    to Assure Servicing.

                	
                  17

                
	
                  Section
                    3.02

                	
                  Subservicing
                    Agreements Between Servicer and Subservicers.

                	
                  19

                
	
                  Section
                    3.03

                	
                  Successor
                    Subservicers.

                	
                  20

                
	
                  Section
                    3.04

                	
                  Liability
                    of the Servicer.

                	
                  20

                
	
                  Section
                    3.05

                	
                  Assumption
                    or Termination of Subservicing Agreements by the Trustee.

                	
                  21

                
	
                  Section
                    3.06

                	
                  Collection
                    of Mortgage Loan Payments.

                	
                  21

                
	
                  Section
                    3.07

                	
                  Withdrawals
                    from the Collection Account.

                	
                  24

                
	
                  Section
                    3.08

                	
                  Collection
                    of Taxes, Assessments and Similar Items; Servicing
                    Accounts.

                	
                  25

                
	
                  Section
                    3.09

                	
                  Access
                    to Certain Documentation and Information Regarding the Mortgage
                    Loans.

                	
                  26

                
	
                  Section
                    3.10

                	
                  [Reserved].

                	
                  27

                
	
                  Section
                    3.11

                	
                  Maintenance
                    of Hazard Insurance and Fidelity Coverage.

                	
                  27

                
	
                  Section
                    3.12

                	
                  Due-on-Sale
                    Clauses; Assumption Agreements.

                	
                  28

                
	
                  Section
                    3.13

                	
                  Realization
                    Upon Defaulted Mortgage Loans.

                	
                  29

                
	
                  Section
                    3.14

                	
                  Custodian
                    to Cooperate; Release of Mortgage Files.

                	
                  31

                
	
                  Section
                    3.15

                	
                  Servicing
                    Compensation.

                	
                  32

                
	
                  Section
                    3.16

                	
                  Annual
                    Statements of Compliance.

                	
                  32

                
	
                  Section
                    3.17

                	
                  Assessments
                    of Compliance and Attestation Reports.

                	
                  33

                
	
                  Section
                    3.18

                	
                  Reports
                    filed with Securities and Exchange Commission.

                	
                  34

                
	
                  Section
                    3.19

                	
                  Optional
                    Purchase of Defaulted Mortgage Loans.

                	
                  39

                

        

         

        
          
            
            

          

          
            2

            
              

            

          

          
            
            

          

        

         

        
          	
                  Section
                    3.20

                	
                  Information
                    Required by the Internal Revenue Service Generally and Reports
                    of
                    Foreclosures and Abandonments of Mortgaged Property.

                	
                  39

                
	
                  Section
                    3.21

                	
                  [Reserved].

                	
                  40

                
	
                  Section
                    3.22

                	
                  [Reserved].

                	
                  40

                
	
                  Section
                    3.23

                	
                  Servicing
                    and Administration of the MI Policies.

                	
                  40

                
	
                  Section
                    3.24

                	
                  Determination
                    Date Reports.

                	
                  41

                
	
                  Section
                    3.25

                	
                  Advances.

                	
                  42

                
	
                  Section
                    3.26

                	
                  Compensating
                    Interest Payments.

                	
                  42

                
	
                  Section
                    3.27

                	
                  Advance
                    Facility.

                	
                  42

                
	
                  Section
                    3.28

                	
                  Servicer
                    Rights Facility.

                	
                  45

                
	 	 
	
                  ARTICLE
                    IV FLOW OF FUNDS

                	
                  45

                
	 	 	 
	
                  Section
                    4.01

                	
                  Distributions.

                	
                  45

                
	
                  Section
                    4.02

                	
                  Distribution
                    Account.

                	
                  53

                
	
                  Section
                    4.03

                	
                  Statements.

                	
                  54

                
	
                  Section
                    4.04

                	
                  Supplemental
                    Interest Trust; Excess Cashflow; Reallocations.

                	
                  58

                
	
                  Section
                    4.05

                	
                  [Reserved].

                	
                  62

                
	
                  Section
                    4.06

                	
                  [Reserved].

                	
                  62

                
	
                  Section
                    4.07

                	
                  Allocation
                    of Realized Losses.

                	
                  62

                
	 	 
	
                  ARTICLE
                    V THE CERTIFICATES

                	
                  63

                
	 	 	 
	
                  Section
                    5.01

                	
                  The
                    Certificates.

                	
                  63

                
	
                  Section
                    5.02

                	
                  Registration
                    of Transfer and Exchange of Certificates.

                	
                  64

                
	
                  Section
                    5.03

                	
                  Mutilated,
                    Destroyed, Lost or Stolen Certificates.

                	
                  68

                
	
                  Section
                    5.04

                	
                  Persons
                    Deemed Owners.

                	
                  69

                
	
                  Section
                    5.05

                	
                  Appointment
                    of Paying Agent.

                	
                  69

                
	 	 
	
                  ARTICLE
                    VI THE SERVICER AND THE DEPOSITOR

                	
                  69

                
	 	 	 
	
                  Section
                    6.01

                	
                  Liability
                    of the Servicer and the Depositor.

                	
                  69

                
	
                  Section
                    6.02

                	
                  Merger
                    or Consolidation of, or Assumption of the Obligations of, the
                    Servicer or
                    the Depositor.

                	
                  69

                
	
                  Section
                    6.03

                	
                  Limitation
                    on Liability of the Servicer and Others.

                	
                  70

                
	
                  Section
                    6.04

                	
                  Servicer
                    Not to Resign.

                	
                  70

                
	
                  Section
                    6.05

                	
                  Delegation
                    of Duties.

                	
                  71

                
	
                  Section
                    6.06

                	
                  Servicing
                    Rights Owner to Pay Trustee’s Fees and Expenses;
                    Indemnification.

                	
                  71

                
	 	 
	
                  ARTICLE
                    VII DEFAULT

                	
                  72

                
	 	 	 
	
                  Section
                    7.01

                	
                  Servicing
                    Default.

                	
                  72

                
	
                  Section
                    7.02

                	
                  Trustee
                    to Act; Appointment of Successor.

                	
                  74

                
	
                  Section
                    7.03

                	
                  Waiver
                    of Defaults.

                	
                  76

                
	
                  Section
                    7.04

                	
                  Notification
                    to Certificateholders.

                	
                  76

                
	
                  Section
                    7.05

                	
                  Survivability
                    of Servicer Liabilities.

                	
                  76

                
	 	 
	
                  ARTICLE
                    VIII THE TRUSTEE

                	
                  77

                

        

         

        
          
            
            

          

          
            3

            
              

            

          

          
            
            

          

        

         

        
          	
                  Section
                    8.01

                	
                  Duties
                    of the Trustee.

                	
                  77

                
	
                  Section
                    8.02

                	
                  Rights
                    of Trustee.

                	
                  78

                
	
                  Section
                    8.03

                	
                  Individual
                    Rights of Trustee.

                	
                  80

                
	
                  Section
                    8.04

                	
                  Trustee’s
                    Disclaimer.

                	
                  80

                
	
                  Section
                    8.05

                	
                  Notice
                    of Servicing Default.

                	
                  80

                
	
                  Section
                    8.06

                	
                  [Reserved].

                	
                  80

                
	
                  Section
                    8.07

                	
                  Compensation.

                	
                  80

                
	
                  Section
                    8.08

                	
                  Replacement
                    of Trustee.

                	
                  81

                
	
                  Section
                    8.09

                	
                  Successor
                    Trustee by Merger.

                	
                  81

                
	
                  Section
                    8.10

                	
                  Appointment
                    of Co-Trustee or Separate Trustee.

                	
                  82

                
	
                  Section
                    8.11

                	
                  Eligibility;
                    Disqualification.

                	
                  83

                
	
                  Section
                    8.12

                	
                  [Reserved].

                	
                  83

                
	
                  Section
                    8.13

                	
                  Representations
                    and Warranties.

                	
                  83

                
	
                  Section
                    8.14

                	
                  Directions
                    to Trustee.

                	
                  84

                
	
                  Section
                    8.15

                	
                  The
                    Agents.

                	
                  84

                
	
                  Section
                    8.16

                	
                  Issuing
                    Entity Fiscal Year.

                	
                  84

                
	
                  Section
                    8.17

                	
                  Execution
                    of the Novation Agreements and Hedge Agreements.

                	
                  84

                
	 	 
	
                  ARTICLE
                    IX [RESERVED]

                	
                  85

                
	 	 
	
                  ARTICLE
                    X REMIC ADMINISTRATION

                	
                  85

                
	 	 	 
	
                  Section
                    10.01

                	
                  REMIC
                    Administration.

                	
                  85

                
	
                  Section
                    10.02

                	
                  Prohibited
                    Transactions and Activities.

                	
                  88

                
	 	 
	
                  ARTICLE
                    XI TERMINATION

                	
                  88

                
	 	 	 
	
                  Section
                    11.01

                	
                  Termination.

                	
                  88

                
	
                  Section
                    11.02

                	
                  Additional
                    Termination Requirements.

                	
                  90

                
	 	 
	
                  ARTICLE
                    XII MISCELLANEOUS PROVISIONS

                	
                  91

                
	 	 	 
	
                  Section
                    12.01

                	
                  Amendment.

                	
                  91

                
	
                  Section
                    12.02

                	
                  Recordation
                    of Agreement; Counterparts.

                	
                  92

                
	
                  Section
                    12.03

                	
                  Limitation
                    on Rights of Certificateholders.

                	
                  93

                
	
                  Section
                    12.04

                	
                  Compliance
                    with Regulation AB.

                	
                  93

                
	
                  Section
                    12.05

                	
                  Governing
                    Law; Jurisdiction.

                	
                  94

                
	
                  Section
                    12.06

                	
                  Notices.

                	
                  94

                
	
                  Section
                    12.07

                	
                  Severability
                    of Provisions.

                	
                  96

                
	
                  Section
                    12.08

                	
                  Article
                    and Section References.

                	
                  97

                
	
                  Section
                    12.09

                	
                  Further
                    Assurances.

                	
                  97

                
	
                  Section
                    12.10

                	
                  Benefits
                    of Agreement.

                	
                  97

                
	
                  Section
                    12.11

                	
                  Acts
                    of Certificateholders.

                	
                  97

                
	
                  Section
                    12.12

                	
                  Confidentiality.

                	
                  98

                

        

      

      

      APPENDIX
        A

      APPENDIX
        B

      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

      

      EXHIBITS:

      
        	
                Exhibit
                  A-1

              	
                Form
                  of Class A-1A Certificates

              

      

      
        	
                Exhibit
                  A-2

              	
                Form
                  of Class A-2A1 Certificates

              

      

      
        	
                Exhibit
                  A-3

              	
                Form
                  of Class A-2A2 Certificates

              

      

      
        	
                Exhibit
                  A-4

              	
                Form
                  of Class A-2B Certificates

              

      

      
        	
                Exhibit
                  A-5

              	
                Form
                  of Class A-2C Certificates

              

      

      
        	
                Exhibit
                  A-6

              	
                Form
                  of Class A-2D Certificates

              

      

      
        	
                Exhibit
                  A-7

              	
                Form
                  of Class M-1 Certificates

              

      

      
        	
                Exhibit
                  A-8

              	
                Form
                  of Class M-2 Certificates

              

      

      
        	
                Exhibit
                  A-9

              	
                Form
                  of Class M-3 Certificates

              

      

      
        	
                Exhibit
                  A-10

              	
                Form
                  of Class M-4 Certificates

              

      

      
        	
                Exhibit
                  A-11

              	
                Form
                  of Class M-5 Certificates

              

      

      
        	
                Exhibit
                  A-12

              	
                Form
                  of Class M-6 Certificates

              

      

      
        	
                Exhibit
                  A-13

              	
                Form
                  of Class M-7 Certificates

              

      

      
        	
                Exhibit
                  A-14

              	
                Form
                  of Class M-8 Certificates

              

      

      
        	
                Exhibit
                  A-15

              	
                Form
                  of Class M-9 Certificates

              

      

      
        	
                Exhibit
                  A-16

              	
                Form
                  of Class M-10 Certificates

              

      

      
        	
                Exhibit
                  A-17

              	
                Form
                  of Class M-11 Certificates

              

      

      
        	
                Exhibit
                  A-18

              	
                Form
                  of Class I-1 Certificates

              

      

      
        	
                Exhibit
                  A-19

              	
                Form
                  of Class I-2 Certificates

              

      

      
        	
                Exhibit
                  A-20

              	
                Form
                  of Class I-3 Certificates

              

      

      
        	
                Exhibit
                  A-21

              	
                Form
                  of Class CA Certificates

              

      

      
        	
                Exhibit
                  A-22

              	
                Form
                  of Class CB Certificates

              

      

      
        	
                Exhibit
                  A-23

              	
                Form
                  of Class R Certificates

              

      

      
        	
                Exhibit
                  A-24

              	
                Form
                  of Class M-6 DSI Certificates

              

      

      
        	
                Exhibit
                  A-25

              	
                Form
                  of Class M-7 DSI Certificates

              

      

      
        	
                Exhibit
                  A-26

              	
                Form
                  of Class M-8 DSI Certificates

              

      

      
        	
                Exhibit
                  A-27

              	
                Form
                  of Class M-9 DSI Certificates

              

      

      
        	
                Exhibit
                  A-28

              	
                Form
                  of Class M-10 DSI Certificates

              

      

      
        	
                Exhibit
                  A-29

              	
                Form
                  of Class M-11 DSI Certificates

              

      

      
        	
                Exhibit
                  A-30

              	
                Form
                  of Class M-6N Certificates

              

      

      
        	
                Exhibit
                  A-31

              	
                Form
                  of Class M-7N Certificates

              

      

      
        	
                Exhibit
                  A-32

              	
                Form
                  of Class M-8N Certificates

              

      

      
        	
                Exhibit
                  A-33

              	
                Form
                  of Class M-9N Certificates

              

      

      
        	
                Exhibit
                  A-34

              	
                Form
                  of Class M-10N Certificates

              

      

      
        	
                Exhibit
                  A-35

              	
                Form
                  of Class M-11N Certificates

              

      

      
        	
                Exhibit
                  B

              	
                Mortgage
                  Loan Schedule

              

      

      
        	
                Exhibit
                  C

              	
                [Reserved]

              

      

      
        	
                Exhibit
                  D

              	
                [Reserved]

              

      

      
        	
                Exhibit
                  E

              	
                Request
                  for Release

              

      

      
        	
                Exhibit
                  F-1

              	
                Form
                  of Custodian’s Initial
                  Certification

              

      

      
        	
                Exhibit
                  F-2

              	
                Form
                  of Custodian’s Final Certification

              

      

      
        	
                Exhibit
                  G

              	
                Form
                  of Investment Letter

              

      

      
        	
                Exhibit
                  H

              	
                Form
                  of Residual Certificate Transfer
                  Affidavit

              

      

      
        	
                Exhibit
                  I

              	
                Form
                  of Transferor’s Certificate

              

      

      
        	
                Exhibit
                  J

              	
                Form
                  of Designation Under REMIC
                  Provisions

              

      

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      
        	
                Exhibit
                  K

              	
                Form
                  of Advance Facility Notice

              

      

      
        	
                Exhibit
                  L

              	
                Servicing
                  Criteria to be Addressed in Assessment of
                  Compliance

              

      

      
        	
                Exhibit
                  M

              	
                Form
                  10-D, Form 8-K and Form 10-K Reporting
                  Responsibility

              

      

      
        	
                Exhibit
                  N-1

              	
                Form
                  of Certification to Be Provided by the Depositor with Form
                  10-K

              

      

      
        	
                Exhibit
                  N-2

              	
                Form
                  of Certification to Be Provided to the Depositor by the
                  Trustee

              

      

      
        	
                Exhibit
                  O

              	
                Form
                  of Officer’s Certificate Regarding Annual Statement of
                  Compliance

              

      

      
        	
                Exhibit
                  P

              	
                Form
                  of Trustee Limited Power of
                  Attorney

              

      

      
        	
                Exhibit
                  Q

              	
                Form
                  of Reallocation Notice

              

      

      

      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

      This
        Pooling and Servicing Agreement is dated as of February 1, 2007 (the
“Agreement”),
        among
        NOVASTAR MORTGAGE FUNDING CORPORATION, as depositor (the “Depositor”),
        NOVASTAR MORTGAGE, INC., as servicer (the “Servicer”)
        and as
        sponsor (the “Sponsor”),
        U.S.
        BANK NATIONAL ASSOCIATION, as custodian (the “Custodian”)
        and
        DEUTSCHE BANK NATIONAL TRUST COMPANY, as trustee (the “Trustee”).

      

      ARTICLE
        I

      

      DEFINITIONS

      

      Section
        1.01  Defined
        Terms.
        

      

      Whenever
        used in this Agreement, except as otherwise expressly provided herein or
        unless
        the context otherwise requires, capitalized terms and phrases used herein
        shall
        have the meanings assigned to such terms and phrases in the definitions attached
        hereto as Appendix A, which is incorporated herein by reference. Unless the
        context otherwise requires:

      

      (a)
         a
        term
        has the meaning assigned to it;

      

      (b)
         an
        accounting term not otherwise defined has the meaning assigned to it in
        accordance with generally accepted accounting principles as in effect from
        time
        to time;

      

      (c)
         “or”
is
        not exclusive;

      

      (d)
         “including”
        means including without limitation;

      

      (e)
         words
        in
        the singular include the plural and words in the plural include the
        singular;

      

      (f)
         any
        agreement, instrument or statute defined or referred to herein or in any
        instrument or certificate delivered in connection herewith means such agreement,
        instrument or statute as from time to time amended, modified or supplemented
        and
        includes (in the case of agreements or instruments) references to all
        attachments thereto and instruments incorporated therein; and

      

      (g)
         references
        to a Person are also to such Person’s permitted successors and
        assigns.

      

      Section
        1.02  Accounting.

      

      Unless
        otherwise specified herein, for the purpose of any definition or calculation,
        whenever amounts are required to be netted, subtracted or added or any
        distributions are taken into account such definition or calculation and any
        related definitions or calculations shall be determined without duplication
        of
        such functions.

      

      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

      

      

      Section
        1.03  Allocation
        of Certain Interest Shortfalls.

      

      For
        purposes of calculating the amount of the Monthly Interest Distributable
        Amount
        for the Class A Certificates and the Mezzanine Certificates, for any
        Distribution Date, (1) the aggregate amount of any Net Prepayment Interest
        Shortfalls and any Relief Act Shortfalls incurred in respect of the Mortgage
        Loans for any Distribution Date shall be allocated first to the Excess Cashflow,
        and second, on a pro-rata
        basis
        based on, and to the extent of, the gross Monthly Interest Distributable
        Amount
        for each such Class, among the Class A Certificates and the Mezzanine
        Certificates and (2) the aggregate amount of any Available Funds Cap
        Carryforward Amounts incurred for any Distribution Date shall be allocated
        to
        the Class CA and Class CB Certificates to the extent of the gross Monthly
        Interest Distributable Amount for that Class, after deduction of any Net
        Prepayment Interest Shortfalls and any Relief Act Shortfalls.

      

      All
        Net
        Prepayment Interest Shortfalls and Relief Act Shortfalls shall be allocated
        on
        each Distribution Date among the Classes of each of REMIC I, REMIC II, REMIC
        III, REMIC IV and REMIC V in the proportion that Net Prepayment Interest
        Shortfalls and Relief Act Shortfalls are allocated to the related Master
        REMIC
        Regular Interests.

      

      Section
        1.04  Calculation
        of Interest on Certificates. 

      

      Unless
        otherwise specified, all calculations in respect of interest on the LIBOR
        Certificates shall be made on the basis of the actual number of days elapsed
        in
        the related Accrual Period on the basis of a 360-day year and all other
        calculations of interest described herein, including all calculations in
        respect
        of interest on the Class A-2A2 Certificates, shall be made on the basis of
        a
        360-day year consisting of twelve 30-day months.

      

      ARTICLE
        II

      

      CONVEYANCE
        OF MORTGAGE LOANS;

      ORIGINAL
        ISSUANCE OF CERTIFICATES

      

      Section
        2.01  Establishment
        of the Issuing Entity; Conveyance of Mortgage Loans and Other Trust
        Assets.

      

      The
        parties do hereby create and establish a common law trust, pursuant to the
        laws
        of the State of New York and this Agreement, the Issuing Entity, which, for
        convenience, shall be known as “NovaStar Mortgage Funding Trust, Series
        2007-1.”

      

      The
        Depositor, concurrently with the execution and delivery hereof, does hereby
        transfer, assign, set over and otherwise convey in trust to the Trustee without
        recourse for the benefit of the Certificateholders all the right, title and
        interest of the Depositor, including any security interest therein for the
        benefit of the Depositor, in and to (i) each Mortgage Loan identified on
        the
        Mortgage Loan Schedule, including the related Cut-off Date Principal Balance,
        all interest accruing thereon on and after the Cut-off Date and all collections
        in respect of interest and principal due after the Cut-off Date; (ii) property
        which secured each such Mortgage Loan and which has been acquired by foreclosure
        or deed in lieu of foreclosure; (iii) its interest in any insurance policies
        in
        respect of the Mortgage Loans; (iv) its interest in the MI Policies; (v)
        the
        rights of the Depositor under the Purchase Agreement; (vi) its interest in
        the
        Hedge Agreements; (vii) all other assets included or to be included in the
        Trust
        Fund; and (viii) all proceeds of any of the foregoing. Such assignment includes
        all interest and principal due to the Depositor or the Servicer after the
        related Cut-off Date with respect to the Mortgage Loans.

      

      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

      

      

      In
        connection with such transfer and assignment, the Sponsor, on behalf of the
        Depositor, does hereby deliver to, and deposit with the Custodian, as the
        designated agent holding on behalf of the Trustee, the following documents
        or
        instruments with respect to each Mortgage Loan so transferred and assigned
        (with
        respect to each Mortgage Loan, a “Mortgage
        File”):

      

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

      

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

      

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

      

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

      

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

      

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

      

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

      

      
        
          
          

        

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

      

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

      

      In
        connection with the assignment of any Mortgage Loan registered on the MERS
        System, promptly after the Closing Date in the case of a Mortgage Loan (or
        after
        the date of transfer of any Eligible Substitute Mortgage Loan), the Sponsor
        further agrees that it will cause, at the Sponsor’s own expense, the MERS System
        to indicate that such Mortgage Loan has been assigned by the Sponsor to the
        Trustee in accordance with this Agreement for the benefit of the
        Certificateholders by including (or deleting, in the case of Mortgage Loans
        which are repurchased in accordance with this Agreement) in its computer
        files
        (a) the applicable Trustee code in the field “Trustee” which identifies the
        Trustee and (b) the code “NovaStar 2007-1” (or its equivalent) in the field
“Pool Field” which identifies the series of the Certificates issued in
        connection with such Mortgage Loans. The Sponsor further agrees that it will
        not, and will not permit the Servicer to, and the Servicer agrees that it
        will
        not, alter the codes referenced in this paragraph with respect to any such
        Mortgage Loan during the term of this Agreement unless and until such Mortgage
        Loan is repurchased in accordance with the terms of this Agreement.

      

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

      

      The
        Trustee, as assignee or transferee of the Depositor, shall be entitled to
        all
        scheduled principal payments due after the Cut-off Date, all other payments
        of
        principal due and collected after the Cut-off Date, and all payments of interest
        on the Mortgage Loans. No scheduled payments of principal due on or before
        the
        Cut-off Date and collected after the Cut-off Date shall belong to the Depositor
        pursuant to the terms of the Purchase Agreement. Any late payment charges
        collected in connection with a Mortgage Loan shall be paid to the Servicer
        as
        provided in Section 3.15(b) hereof.

      

      
        
          
          

        

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

      

      Section
        2.02  Acceptance
        of Mortgage Loans by Custodian, on behalf of the Trustee.

      

      (a)
         The
        Custodian, on behalf of the Trustee, acknowledges receipt of, subject to
        the
        review described below and any exceptions it notes pursuant to the procedures
        described below, the documents (or certified copies thereof) referred to
        in
        Section 2.01 hereof and declares that it holds and will continue to hold
        those
        documents and any amendments, replacements or supplements thereto and all
        other
        assets of the Trust Fund in trust for the use and benefit of all present
        and
        future Certificateholders. No later than 45 days after the Closing Date (or,
        with respect to any Eligible Substitute Mortgage Loan, within 5 Business
        Days
        after the receipt by the Custodian, on behalf of the Trustee, thereof and,
        with
        respect to any documents received beyond 45 days after the Closing Date,
        promptly thereafter), the Custodian agrees, on behalf of the Trustee, for
        the
        benefit of the Certificateholders, to review each Mortgage File delivered
        to it
        and to execute and deliver, or cause to be executed and delivered, to the
        Sponsor, the Depositor and the Trustee an initial certification in the form
        annexed hereto as Exhibit F-1. In conducting such review, the Custodian will
        ascertain whether all required documents described in Section 2.01 hereof
        have
        been executed and received and whether those documents relate, determined
        on the
        basis of the Mortgagor name, original principal balance and loan number,
        to the
        Mortgage Loans it has received, as identified in Exhibit B to this Agreement,
        as
        supplemented (provided, however, that with respect to those documents described
        in subclause (vii) of such section, the Custodian’s obligations shall extend
        only to documents actually delivered pursuant to such subclause). In performing
        any such review, the Custodian may conclusively rely on the purported due
        execution and genuineness of any such document and on the purported genuineness
        of any signature thereon. If the Custodian finds that any document constituting
        part of the Mortgage File not to have been executed or received, or to be
        unrelated to the Mortgage Loans identified in Exhibit B or to appear to be
        defective on its face, the Custodian, on behalf of the Trustee, shall promptly
        notify the Sponsor and the Trustee of such finding and the Sponsor’s obligation
        to cure such defect or repurchase or substitute for the related Mortgage
        Loan.

      

      
        
          
          

        

        
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      (b)
         No
        later
        than 180 days after the Closing Date, the Custodian, on behalf of the Trustee,
        will review, for the benefit of the Certificateholders, the Mortgage Files
        and
        will execute and deliver or cause to be executed and delivered to the Sponsor
        ,the Depositor and the Trustee, a final certification in the form annexed
        hereto
        as Exhibit F-2. In conducting such review, the Custodian, on behalf of the
        Trustee, will ascertain whether an original of each document described in
        subclauses (ii)-(iv) of Section 2.01 hereof required to be recorded has been
        returned from the recording office with evidence of recording thereon or
        a
        certified copy has been obtained from the recording office. If the Custodian
        finds any document constituting part of the Mortgage File has not been received,
        or to be unrelated, determined on the basis of the Mortgagor name, original
        principal balance and loan number, to the Mortgage Loans identified in Exhibit
        B
        or to appear defective on its face, the Custodian, on behalf of the Trustee,
        shall promptly notify the Sponsor and the Trustee of such finding and the
        Sponsor’s obligation to cure such defect or repurchase or substitute for the
        related Mortgage Loan.

      

      (c)
         Upon
        deposit of the Repurchase Price in the Collection Account and notification
        of
        the Trustee, by a certification signed by a Servicing Officer (which
        certification shall include a statement to the effect that the Repurchase
        Price
        has been deposited in the Collection Account), upon receipt of a Request
        for
        Release the Custodian shall release to the Sponsor the related Mortgage File
        and
        the Trustee shall execute and deliver all instruments of transfer or assignment,
        without recourse, furnished to it by the Sponsor as are necessary to vest
        in the
        Sponsor title to and rights under the related Mortgage Loan. Such purchase
        shall
        be deemed to have occurred on the date on which certification of the deposit
        of
        the Repurchase Price in the Distribution Account was received by the Trustee.
        The Custodian, on behalf of the Trustee, shall amend the applicable Mortgage
        Loan Schedule to reflect such repurchase and shall forward it to the Trustee.
        The Trustee shall promptly notify the Servicer and the Rating Agencies of
        such
        amendment. 

      

      Section
        2.03  Repurchase
        or Substitution of Mortgage Loans by the Sponsor.

      

      (a)
         Upon
        discovery or receipt of written notice of any materially defective document
        in,
        or that a document is missing from, a Mortgage File or of the breach by the
        Sponsor of any representation, warranty or covenant under the Purchase Agreement
        in respect of any Mortgage Loan which materially adversely affects the value
        of
        such Mortgage Loan or the interest therein of the Certificateholders, the
        party
        making such discovery or receiving such notice shall promptly notify the
        other
        parties hereto, and the Sponsor shall thereupon be required to deliver such
        missing document or cure such defect or breach no later than 90 days from
        the
        date of the discovery or receipt of written notice of such missing document,
        defect or breach, and if the Sponsor does not deliver such missing document
        or
        cure such defect or breach in all material respects during such period, the
        Custodian shall notify the Trustee and the Trustee shall enforce the Sponsor’s
        obligation under the Purchase Agreement and cause the Sponsor to repurchase
        such
        Mortgage Loan from the Trust Fund at the Repurchase Price on or prior to
        the
        Determination Date following the expiration of such 90 day period. 

      

      
        
          
          

        

        
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      (b)
         The
        Repurchase Price for the repurchased Mortgage Loan shall be deposited in
        the
        Collection Account and the Trustee, shall receive written certification from
        the
        Servicer of such deposit and upon receipt of a Request for Release the Custodian
        shall release to the Sponsor the related Mortgage File and the Trustee shall
        execute and deliver such instruments of transfer or assignment, in each case
        without recourse, as the Sponsor shall furnish to it and as shall be necessary
        to vest in the Sponsor any Mortgage Loan released pursuant hereto and the
        Trustee and the Custodian shall have no further responsibility with regard
        to
        such Mortgage File (it being understood that neither the Trustee nor the
        Custodian shall have any responsibility for determining the sufficiency of
        such
        assignment for its intended purpose). In lieu of repurchasing any such Mortgage
        Loan as provided above, the Sponsor may cause such Mortgage Loan to be removed
        from the Trust Fund (in which case it shall become a Deleted Mortgage Loan)
        and
        substitute one or more Eligible Substitute Mortgage Loans in the manner and
        subject to the limitations set forth in Section 2.03(d). It is understood
        and
        agreed that the obligation of the Sponsor to cure or to repurchase (or to
        substitute for) any Mortgage Loan as to which a document is missing, a material
        defect in a constituent document exists or as to which such a breach has
        occurred and is continuing shall constitute the sole remedy against the Sponsor
        respecting such omission, defect or breach available to the Trustee on behalf
        of
        the Certificateholders.

      

      (c)
         Within
        90
        days of the earlier of discovery by the Servicer or receipt of notice by
        the
        Servicer of the breach of any representation, warranty or covenant of the
        Servicer set forth in Section 2.05 which materially and adversely affects
        the
        interests of the Certificateholders in any Mortgage Loan, the Servicer shall
        cure such breach in all material respects.

      

      (d)
         Any
        substitution of Eligible Substitute Mortgage Loans for Deleted Mortgage Loans
        made pursuant to Section 2.03(a) must be effected prior to the last Business
        Day
        that is within two years after the Closing Date. As to any Deleted Mortgage
        Loan
        for which the Sponsor substitutes an Eligible Substitute Mortgage Loan or
        Loans,
        such substitution shall be effected by the Sponsor delivering to the Custodian,
        for such Eligible Substitute Mortgage Loan or Loans, the Mortgage Note, the
        Mortgage, the Assignment to the Trustee, and such other documents and
        agreements, with all necessary endorsements thereon, as are required by Section
        2.01, together with an Officers’ Certificate providing that each such Eligible
        Substitute Mortgage Loan satisfies the definition thereof and specifying
        the
        Substitution Adjustment Amount (as described below), if any, in connection
        with
        such substitution. The Custodian shall acknowledge receipt for such Eligible
        Substitute Mortgage Loan or Loans and, within ten Business Days thereafter,
        shall review such documents as specified in Section 2.02 and deliver to the
        Servicer and the Trustee, with respect to such Eligible Substitute Mortgage
        Loan
        or Loans, a certification substantially in the form attached hereto as Exhibit
        F-1, with any applicable exceptions noted thereon. Within one year of the
        date
        of substitution, the Custodian shall deliver to the Servicer and the Trustee
        a
        certification substantially in the form of Exhibit F-2 hereto with respect
        to
        such Eligible Substitute Mortgage Loan or Loans, with any applicable exceptions
        noted thereon. Monthly Payments due with respect to Eligible Substitute Mortgage
        Loans in the month of substitution are not part of the Trust Fund and will
        be
        retained by the Sponsor. For the month of substitution, distributions to
        Certificateholders will reflect the collections and recoveries in respect
        of
        such Deleted Mortgage Loan in the Due Period preceding the month of substitution
        and the Sponsor shall thereafter be entitled to retain all amounts subsequently
        received in respect of such Deleted Mortgage Loan. The Sponsor shall give
        or
        cause to be given written notice to the Certificateholders that such
        substitution has taken place, shall amend the Mortgage Loan Schedule to reflect
        the removal of such Deleted Mortgage Loan from the terms of this Agreement
        and
        the substitution of the Eligible Substitute Mortgage Loan or Loans and shall
        deliver a copy of such amended Mortgage Loan Schedule to the Custodian and
        the
        Trustee. Upon such substitution by the Sponsor, such Eligible Substitute
        Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall
        be
        subject in all respects to the terms of this Agreement and the Purchase
        Agreement, including all applicable representations and warranties thereof
        included in the Purchase Agreement as of the date of substitution.

      

      
        
          
          

        

        
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      For
        any
        month in which the Sponsor substitutes one or more Eligible Substitute Mortgage
        Loans for one or more Deleted Mortgage Loans, the Servicer will determine
        the
        amount (the “Substitution
        Adjustment Amount”),
        if
        any, by which the aggregate Repurchase Price of all such Deleted Mortgage
        Loans
        exceeds the aggregate, as to each such Eligible Substitute Mortgage Loan,
        of the
        principal balance thereof as of the date of substitution, together with one
        month’s interest on such principal balance at the applicable Net Mortgage Rate.
        On the date of such substitution, the Sponsor will deliver or cause to be
        delivered to the Servicer for deposit in the Collection Account an amount
        equal
        to the Substitution Adjustment Amount, if any, and the Custodian, upon receipt
        of the related Eligible Substitute Mortgage Loan or Loans and certification
        by
        the Servicer of such deposit (which shall be delivered to the Trustee and
        the
        Custodian), shall release to the Sponsor the related Mortgage File or Files
        and
        the Trustee shall execute and deliver such instruments of transfer or
        assignment, in each case without recourse, as the Sponsor shall deliver to
        it
        and as shall be necessary to vest therein any Deleted Mortgage Loan released
        pursuant hereto.

      

      In
        addition, the Sponsor shall obtain at its own expense and deliver to the
        Trustee
        an Opinion of Counsel to the effect that such substitution will not cause
        (a)
        any federal tax to be imposed on the Issuing Entity, including without
        limitation, any federal tax imposed on “prohibited transactions” under Section
        860F(a)(l) of the Code or on “contributions after the startup date” under
        Section 860G(d)(l) of the Code, or (b) any REMIC created hereunder to fail
        to
        qualify as a REMIC at any time that any Certificate is outstanding. If such
        Opinion of Counsel can not be delivered, then such substitution may only
        be
        effected at such time as the required Opinion of Counsel can be
        given.

      

      (e)
         Upon
        discovery by the Sponsor, the Servicer, the Custodian or the Trustee that
        any
        Mortgage Loan does not constitute a “qualified mortgage” within the meaning of
        Section 860G(a)(3) of the Code, the party discovering such fact shall within
        two
        Business Days give written notice thereof to the other parties. In connection
        therewith, the Sponsor or the Depositor, as the case may be, shall repurchase
        or, subject to the limitations set forth in Section 2.03(d), substitute one
        or
        more Eligible Substitute Mortgage Loans for the affected Mortgage Loan within
        90
        days of the earlier of discovery or receipt of such notice with respect to
        such
        affected Mortgage Loan. Such repurchase or substitution shall be made by
        the
        Sponsor. Any such repurchase or substitution shall be made in the same manner
        as
        set forth in Section 2.03(a). The Trustee shall reconvey to the Sponsor,
        the
        Mortgage Loan to be released pursuant hereto in the same manner, and on the
        same
        terms and conditions, as it would a Mortgage Loan repurchased for breach
        of a
        representation or warranty.

      

      
        
          
          

        

        
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      Section
        2.04  Acknowledgement
        of Trustee.

      

      The
        Trustee acknowledges that in the event that any transfer of the Mortgage
        Loans
        and the MI Policies from the Sponsor to the Depositor, or from the Depositor
        to
        the Trustee on behalf of the Certificateholders, is determined to constitute
        a
        financing, or from the Depositor to the Trustee on behalf of the
        Certificateholders, is determined to constitute a financing, then in each
        case
        the Custodian, on behalf of the Trustee, will hold the Mortgage Loans and
        the MI
        Policies as the designee and bailee of the Depositor subject, however, in
        each
        case, to a prior lien in favor of the Certificateholders pursuant to the
        terms
        of this Agreement.

      

      Section
        2.05  Representations,
        Warranties and Covenants of the Servicer.

      

      The
        Servicer hereby represents, warrants and covenants to the Trustee, for the
        benefit of each of the Trustee and the Certificateholders, and to the Depositor
        that as of the Closing Date or as of such date specifically provided
        herein:

      

      (i) The
        Servicer is a corporation duly organized, validly existing and in good standing
        under the laws of the State of Virginia and has the corporate power to own
        its
        assets and to transact the business in which it is currently engaged. The
        Servicer is duly qualified to do business as a foreign corporation and is
        in
        good standing in each jurisdiction in which the character of the business
        transacted by it or properties owned or leased by it requires such qualification
        and in which the failure to so qualify would have a material adverse effect
        on
        the business, properties, assets, or condition (financial or other) of the
        Servicer or the validity or enforceability of the Mortgage Loans;

      

      (ii) The
        Servicer has the corporate power and authority to make, execute, deliver
        and
        perform this Agreement and all of the transactions contemplated under this
        Agreement, and has taken all necessary corporate action to authorize the
        execution, delivery and performance of this Agreement. When executed and
        delivered, this Agreement will constitute the legal, valid and binding
        obligation of the Servicer enforceable in accordance with its terms, except
        as
        enforcement of such terms may be limited by bankruptcy, insolvency or similar
        laws affecting the enforcement of creditors’ rights generally and by the
        availability of equitable remedies;

      

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

      

      
        
          
          

        

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

      

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

      

      (vi) The
        Servicer is a member of MERS in good standing, and will comply in all material
        respects with the rules and procedures of MERS in connection with the servicing
        of the Mortgage Loans that are registered with MERS; and

      

      (vii) With
        respect to the Group I Mortgage Loans, the Servicer will accurately and fully
        report its borrower credit files to the three largest credit repositories
        in a
        timely manner.

      

      The
        foregoing representations and warranties shall survive any termination of
        the
        Servicer hereunder.

      

      Section
        2.06  Representations
        and Warranties of the Depositor.

      

      The
        Depositor represents and warrants to the Issuing Entity and the Trustee on
        behalf of the Certificateholders as follows:

      

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

      

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

      

      (c)
         The
        Depositor has the power and authority to execute and deliver this Agreement
        and
        to carry out its terms; the Depositor has full power and authority to purchase
        the property to be purchased from the Sponsor and the Depositor has duly
        authorized such purchase by all necessary corporate action; and the execution,
        delivery and performance of this Agreement have been duly authorized by the
        Depositor by all necessary corporate action. When executed and delivered,
        this
        Agreement will constitute the legal, valid and binding obligation of the
        Depositor enforceable in accordance with its terms, except as enforcement
        of
        such terms may be limited by bankruptcy, insolvency or similar laws affecting
        the enforcement of creditors’ rights generally and by the availability of
        equitable remedies.

      

      
        
          
          

        

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

      

      Section
        2.07  Issuance
        of Certificates.

      

      The
        Trustee acknowledges the assignment to the Trustee of the Mortgage Loans
        and the
        delivery to the Custodian, on behalf of the Trustee of the Mortgage Files,
        subject to the provisions of Sections 2.01 and 2.02, together with the
        assignment to it of all other assets included in the Trust Fund, receipt
        of
        which is hereby acknowledged. Concurrently with such assignment and delivery
        and
        in exchange therefor, the Trustee, pursuant to the written request of the
        Depositor executed by an officer of the Depositor, has executed, and
        authenticated and delivered to or upon the order of the Depositor, the
        Certificates in authorized denominations. The interests evidenced by the
        Certificates, constitute the entire beneficial ownership interest in the
        Trust
        Fund.

      

      Section
        2.08  [Reserved].

      

      Section
        2.09  Designation
        Under REMIC Provisions.

      

      The
        Trustee shall comply with the provisions set forth in Exhibit J.

      

      ARTICLE
        III

      

      ADMINISTRATION
        AND SERVICING

      OF
        THE MORTGAGE LOANS

      

      Section
        3.01  Servicer
        to Assure Servicing.

      

      (a)
         The
        Servicer shall supervise, or take such actions as are necessary to ensure,
        the
        servicing and administration of the Mortgage Loans and any REO Property in
        accordance with all applicable requirements of the Servicing Criteria, with
        this
        Agreement and with its normal servicing practices, which generally shall
        conform
        to the standards of an institution prudently servicing mortgage loans for
        its
        own account and shall have full authority to do anything it reasonably deems
        appropriate or desirable in connection with such servicing and administration.
        The Servicer may perform its responsibilities relating to servicing through
        other agents or independent contractors, but shall not thereby be released
        from
        any of its responsibilities as hereinafter set forth. Subject to Section
        3.06(b), the authority of the Servicer, in its capacity as Servicer, and
        any
        Subservicer acting on its behalf, shall include, without limitation, the
        power
        to (i) consult with and advise any Subservicer regarding administration of
        a
        related Mortgage Loan, (ii) approve any recommendation by a Subservicer to
        foreclose on a related Mortgage Loan, (iii) supervise the filing and collection
        of insurance claims and take or cause to be taken such actions on behalf
        of the
        insured Person thereunder as shall be reasonably necessary to prevent the
        denial
        of coverage thereunder, and (iv) effectuate foreclosure or other conversion
        of
        the ownership of the Mortgaged Property securing a related Mortgage Loan,
        including the employment of attorneys, the institution of legal proceedings,
        the
        collection of deficiency judgments, the acceptance of compromise proposals
        and
        any other matter pertaining to a delinquent Mortgage Loan. The authority
        of the
        Servicer shall include, in addition, the power on behalf of the
        Certificateholders, the Trustee, or any of them to (i) execute and deliver
        customary consents or waivers and other instruments and documents, (ii) consent
        to transfer of any related Mortgaged Property and assumptions of the related
        Mortgage Notes and Mortgages (in the manner provided in this Agreement) and
        (iii) collect any Insurance Proceeds and Liquidation Proceeds. Without limiting
        the generality of the foregoing, the Servicer and any Subservicer acting
        on its
        behalf may, and is hereby authorized, and empowered by the Trustee when the
        Servicer believes it is reasonably necessary in its best judgment in order
        to
        comply with its servicing duties hereunder, to execute and deliver, on behalf
        of
        itself, the Certificateholders, the Trustee, or any of them, any instruments
        of
        satisfaction, cancellation, partial or full release, discharge and all other
        comparable instruments, with respect to the related Mortgage Loans, the
        insurance policies and the accounts related thereto, and the Mortgaged
        Properties. The Servicer may exercise this power in its own name or in the
        name
        of a Subservicer.

      

      
        
          
          

        

        
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      The
        Servicer, in such capacity, may not consent to the placing of a lien senior
        to
        that of the Mortgage on the related Mortgaged Property. 

      

      The
        relationship of the Servicer (and of any successor to the Servicer as servicer
        under this Agreement) to the Issuing Entity and the Trustee under this Agreement
        is intended by the parties to be that of an independent contractor and not
        that
        of a joint venturer, partner or agent.

      

      The
        Servicer shall perform all of its obligations under the Backup Servicing
        Agreement, as though it were a direct party thereto.

      

      (b)
         Notwithstanding
        the provisions of Subsection 3.01(a), the Servicer shall not take any action
        inconsistent with the interests of the Trustee, or the Certificateholders
        or
        with the rights and interests of the Trustee, or the Certificateholders under
        this Agreement.

      

      (c)
         The
        Trustee shall furnish the Servicer with any powers of attorney in the form
        of
        Exhibit P and other documents in form as provided to it necessary or appropriate
        to enable the Servicer to service and administer the related Mortgage Loans
        and
        REO Property and the Trustee shall not be liable for the actions of or the
        use
        or misuse by the Servicer or any Subservicers under such powers of
        attorney.

      

      
        
          
          

        

        
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      (d)
         The
        Servicer further is authorized and empowered by the Trustee, on behalf of
        the
        Certificateholders and the Trustee, when the Servicer believes it is appropriate
        in its best judgment to register any Mortgage Loan on the MERS System, or
        cause
        the removal from the registration of any Mortgage Loan on the MERS System,
        to
        execute and deliver, on behalf of the Trustee and the Certificateholders
        or any
        of them, any and all instruments of assignment and other comparable instruments
        with respect to such assignment or re-recording of a Mortgage in the name
        of
        MERS, solely as nominee for the Trustee and its successors and assigns. Any
        expenses incurred in connection with the actions described in the preceding
        sentence shall be borne by the Servicer with no right of reimbursement;
        provided, that if, as a result of MERS discontinuing or becoming unable to
        continue operations in connection with the MERS System, it becomes necessary
        to
        remove any Mortgage Loan from registration on the MERS System and to arrange
        for
        the assignment of the related Mortgages to the Trustee, then any related
        expenses shall be reimbursable to the Servicer by the Issuing
        Entity.

      

      Section
        3.02  Subservicing
        Agreements Between Servicer and Subservicers.

      

      (a)
         The
        Servicer may enter into Subservicing Agreements with Subservicers for the
        servicing and administration of the Mortgage Loans and for the performance
        of
        any and all other activities of the Servicer hereunder. Each Subservicer
        shall
        be either (i) an institution the accounts of which are insured by the FDIC
        or
        (ii) another entity that engages in the business of originating or servicing
        mortgage loans comparable to the Mortgage Loans, and in either case shall
        be
        authorized to transact business in the state or states in which the related
        Mortgaged Properties it is to service are situated, if and to the extent
        required by applicable law to enable the Subservicer to perform its obligations
        hereunder and under the Subservicing Agreement. Any Subservicing Agreement
        entered into by the Servicer shall include the provision that such Agreement
        may
        be immediately terminated (i) (x) with cause and without any termination
        fee by
        the Servicer hereunder and/or (y) without cause, in which case the Servicer
        shall be solely responsible for any termination fee or penalty resulting
        therefrom and (ii) at the option of the Trustee upon the termination or
        resignation of the Servicer hereunder, in which case the Servicer shall be
        solely responsible for any termination fee or penalty resulting therefrom.
        In
        addition, each Subservicing Agreement shall provide for servicing of the
        Mortgage Loans consistent with the terms of this Agreement. The Servicer
        and the
        Subservicers may enter into Subservicing Agreements and make amendments to
        the
        Subservicing Agreements or enter into different forms of Subservicing Agreements
        providing for, among other things, the delegation by the Servicer to a
        Subservicer of additional duties regarding the administration of the Mortgage
        Loans; provided, however, that any such amendments or different forms shall
        be
        consistent with and not violate the provisions of this Agreement, and that
        no
        such amendment or different form shall be made or entered into which could
        be
        reasonably expected to be materially adverse to the interests of the
        Certificateholders, without the consent of the Certificateholders holding
        at
        least 51% of the aggregate Voting Rights.

      

      (b)
         As
        part
        of its servicing activities hereunder, the Servicer, for the benefit of the
        Trustee, and the Certificateholders, shall enforce the obligations of each
        Subservicer under the related Subservicing Agreement. Such enforcement,
        including, without limitation, the legal prosecution of claims, termination
        of
        Subservicing Agreements and the pursuit of other appropriate remedies, shall
        be
        in such form and carried out to such an extent and at such time as the Servicer,
        in its good faith business judgment, would require were it the owner of the
        related Mortgage Loans. The Servicer shall pay the costs of such enforcement
        at
        its own expense, but shall be reimbursed therefor only (i) from a general
        recovery resulting from such enforcement only to the extent, if any, that
        such
        recovery exceeds all amounts due in respect of the related Mortgage Loan
        or (ii)
        from a specific recovery of costs, expenses or attorneys’ fees against the party
        against whom such enforcement is directed.

      

      
        
          
          

        

        
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      (c)
         The
        Servicer shall not permit a Subservicer, subcontractor or Servicing Function
        Participant to perform any servicing function hereunder with respect to the
        Mortgage Loans unless such Servicing Function Participant first agrees in
        writing with the Servicer to deliver an Assessment of Compliance and an
        Attestation Report in such manner and at such time that permits the Servicer
        to
        comply with Section 3.17 hereof.

      

      Section
        3.03  Successor
        Subservicers.

      

      The
        Servicer shall be entitled to terminate any Subservicing Agreement that may
        exist in accordance with the terms and conditions of such Subservicing Agreement
        and without any limitation by virtue of this Agreement; provided, however,
        that
        upon termination, the Servicer shall either act as servicer of the related
        Mortgage Loans or enter into an appropriate contract with a successor
        Subservicer reasonably acceptable to the Depositor (and with written notice
        to
        the Trustee), pursuant to which such successor Subservicer will be bound
        by all
        relevant terms of the related Subservicing Agreement pertaining to the servicing
        of such Mortgage Loans.

      

      Section
        3.04  Liability
        of the Servicer.

      

      (a)
         Notwithstanding
        any Subservicing Agreement, any of the provisions of this Agreement relating
        to
        agreements or arrangements between the Servicer and a Subservicer or reference
        to actions taken through a Subservicer or otherwise, the Servicer shall under
        all circumstances remain obligated and primarily liable to the Trustee and
        the
        Certificateholders for the servicing and administering of the Mortgage Loans
        and
        any REO Property in accordance with this Agreement. The obligations and
        liability of the Servicer shall not be diminished by virtue of Subservicing
        Agreements or by virtue of indemnification of the Servicer by any Subservicer,
        or any other Person. The obligations and liability of the Servicer shall
        remain
        of the same nature and under the same terms and conditions as if the Servicer
        alone were servicing and administering the related Mortgage Loans. The Servicer
        shall, however, be entitled to enter into indemnification agreements with
        any
        Subservicer or other Person and nothing in this Agreement shall be deemed
        to
        limit or modify such indemnification. For the purposes of this Agreement,
        the
        Servicer shall be deemed to have received any payment on a Mortgage Loan
        on the
        date the Subservicer received such payment.

      

      (b)
         Any
        Subservicing Agreement that may be entered into and any transactions or services
        relating to the Mortgage Loans involving a Subservicer in its capacity as
        such
        and not as an originator shall be deemed to be between the Subservicer and
        the
        Servicer alone, and the Custodian, the Trustee and the Certificateholders
        shall
        not be deemed parties thereto and shall have no claims, rights, obligations,
        duties or liabilities with respect to the Subservicer, except as set forth
        in
        Section 3.05.

      

      
        
          
          

        

        
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      Section
        3.05  Assumption
        or Termination of Subservicing Agreements by the Successor
        Servicer.

      

      (a)
         If
        the
        Back-up Servicer, Trustee or its designee as the successor Servicer, shall
        assume the servicing obligations of the Servicer in accordance with Section
        7.02
        below, the Back-up Servicer, the Trustee or its designee as the successor
        Servicer, to the extent necessary to carry out the provisions of Section
        7.02
        with respect to the Mortgage Loans, shall succeed to all of the rights and
        obligations of the Servicer under each of the Subservicing Agreements. In
        such
        event, the Back-up Servicer, the Trustee or its designee as the successor
        Servicer shall be deemed to have assumed all of the Servicer’s rights and
        obligations therein and to have replaced the Servicer as a party to such
        Subservicing Agreements to the same extent as if such Subservicing Agreements
        had been assigned to the Back-up Servicer, the Trustee or its designee as
        a
        successor Servicer, except that the Back-up Servicer, the Trustee or its
        designee as a successor Servicer shall not be deemed to have assumed any
        obligations or liabilities of the Servicer arising prior to such assumption
        or
        as a result of the Back-up Servicer's, the Trustee’s or its designee’s
        terminating any Subservicer upon the Trustee or its designee becoming successor
        Servicer and the Servicer shall not thereby be relieved of any liability
        or
        obligations under such Subservicing Agreements arising prior to such assumption
        or as a result of the Back-up Servicer's, the Trustee’s or its designee’s
        terminating any Subservicer upon the Back-up Servicer, the Trustee or its
        designee becoming successor Servicer.

      

      (b)
         The
        Back-up Servicer, the Trustee or its designee as the successor Servicer may
        terminate any Subservicer upon becoming successor Servicer. Any termination
        fees
        will be paid by the terminated Subservicer.

      

      (c)
         In
        the
        event that the Back-up Servicer, the Trustee or its designee as successor
        Servicer assumes the servicing obligations of the Servicer under Section
        7.02,
        upon the request of the Back-up Servicer, the Trustee or such designee as
        successor Servicer, the Servicer shall at its own expense deliver to the
        Back-up
        Servicer, the Trustee, or at the Trustee's written request to such designee,
        originals or, if originals are not available, photocopies of all documents,
        files and records, electronic or otherwise, relating to the Subservicing
        Agreements and the related Mortgage Loans or REO Property then being serviced
        and an accounting of amounts collected and held by it, if any, and will
        otherwise cooperate and use its reasonable efforts to effect the orderly
        and
        efficient transfer of the Subservicing Agreements, or responsibilities hereunder
        to the Back-up Servicer, the Trustee, or at its written request to such
        designee, as successor Servicer.

      

      Section
        3.06  Collection
        of Mortgage Loan Payments.

      

      (a)
         The
        Servicer will coordinate and monitor remittances by Subservicers to it with
        respect to the Mortgage Loans in accordance with this Agreement.

      

      (b)
         The
        Servicer shall make its best reasonable efforts to collect or cause to be
        collected all payments required under the terms and provisions of the Mortgage
        Loans and shall follow, and use its best reasonable efforts to cause
        Subservicers to follow, collection procedures comparable to the collection
        procedures of prudent mortgage lenders servicing mortgage loans for their
        own
        account to the extent such procedures shall be consistent with this Agreement.
        Consistent with the foregoing, the Servicer or the related Subservicer may
        in
        its discretion (i) waive or permit to be waived any late payment charge,
        prepayment charge, assumption fee, or any penalty interest in connection
        with
        the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to
        be
        suspended or reduced regular monthly payments for a period of up to six months,
        or arrange or permit an arrangement with a Mortgagor for a scheduled liquidation
        of delinquencies; provided, however, that the Servicer or the related
        Subservicer may permit the foregoing only if it believes, in good faith,
        that
        recoveries of Monthly Payments will be maximized; provided further, however,
        with respect to Mortgage Loans insured by an MI Policy, that the Servicer
        may
        not without the prior written consent of the MI Insurer permit any waiver,
        modification or variance which would (a) reduce or eliminate the coverage
        provided under the MI Policy (b) change the loan rate, (c) forgive any payment
        of principal or interest, (d) lessen the lien priority or (e) extend the
        final
        maturity date of a Mortgage Loan past 12 months after the original maturity
        date
        on such Mortgage Loan. In the event the Servicer or related Subservicer shall
        consent to the deferment of the due dates for payments due on a Mortgage
        Note,
        the Servicer shall nonetheless make an Advance or shall cause the related
        Subservicer to make an advance to the same extent as if such installment
        were
        due, owing and delinquent and had not been deferred through liquidation of
        the
        Mortgaged Property; provided, however, that the obligation of the Servicer
        or
        the related Subservicer to make an Advance shall apply only to the extent
        that
        the Servicer believes, in good faith, that such advances are not Nonrecoverable
        Advances. The Servicer shall pay the amount of any waived prepayment charge
        at
        the time of payoff if such prepayment charge was waived for a reason other
        than
        that specified in this Section 3.06(b).

      

      
        
          
          

        

        
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      (c)
         Within
        five Business Days after the Servicer has determined that all amounts which
        it
        expects to recover from or on account of a Liquidated Mortgage Loan have
        been
        recovered and that no further Liquidation Proceeds will be received in
        connection therewith, the Servicer shall provide to the Trustee a certificate
        of
        a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage
        Loan as
        of the date of such determination.

      

      (d)
         The
        Servicer shall establish a segregated account (the “Collection
        Account”),
        which
        shall be an Eligible Account, which shall be titled “Collection Account,
        Deutsche Bank National Trust Company, as Trustee for the registered holders
        of
        NovaStar Mortgage Funding Trust 2007-1, Home Equity Loan Asset-Backed
        Certificates, Series 2007-1”, in which the Servicer shall deposit or cause to be
        deposited any amounts representing payments on and any collections in respect
        of
        the Mortgage Loans received by it after the Cut-off Date (other than in respect
        of the payments referred to in the following paragraph) within two Business
        Days
        following receipt thereof, including the following payments and collections
        received or made by it (without duplication):

      

      (i) all
        payments of principal or interest on the Mortgage Loans received by the Servicer
        directly from Mortgagors or from the respective Subservicer;

      

      (ii) the
        aggregate Repurchase Price of the Mortgage Loans purchased by the Servicer
        pursuant to Section 3.19;

      

      (iii) Net
        Liquidation Proceeds;

      

      
        
          
          

        

        
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      (iv) all
        proceeds of any Mortgage Loans repurchased by the Sponsor pursuant to the
        Purchase Agreement, and all Substitution Adjustment Amounts required to be
        deposited in connection with the substitution of an Eligible Substitute Mortgage
        Loan pursuant to the Purchase Agreement;

      

      (v) Insurance
        Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds
        resulting from any insurance policy maintained on a Mortgaged
        Property;

      

      (vi) any
        Advance and any Compensating Interest payments; and

      

      (vii) any
        other
        amounts received by the Servicer, including all Foreclosure Profits, assumption
        fees, prepayment penalties and any other fees that are required to be deposited
        in the Collection Account pursuant to this Agreement;

      

      provided,
        however, that with respect to each Due Period, the Servicer shall be permitted
        to retain from payments actually collected in respect of interest on the
        Mortgage Loans, the Servicing Fee for such Due Period. The foregoing
        requirements respecting deposits to the Collection Account are exclusive,
        it
        being understood that, without limiting the generality of the foregoing,
        the
        Servicer need not deposit in the Collection Account late payment charges
        payable
        by Mortgagors, as further described in Section 3.15, or amounts received
        by the
        Subservicer for the accounts of Mortgagors for application towards the payment
        of taxes, insurance premiums, assessments and similar items. In the event
        any
        amount not required to be deposited in the Collection Account is so deposited,
        the Servicer may at any time (prior to being terminated under this Agreement)
        withdraw such amount from the Collection Account, any provision herein to
        the
        contrary notwithstanding. The Servicer shall keep records that accurately
        reflect the funds on deposit in the Collection Account that have been identified
        by it as being attributable to the Mortgage Loans and shall hold all collections
        in the Collection Account for the benefit of the Trustee, and the
        Certificateholders, as their interests may appear.

      

      Funds
        in
        the Collection Account may be invested in Eligible Investments with a maturity
        date no later than the Business Day immediately preceding the Servicer
        Remittance Date, but shall not be commingled with the Servicer’s own funds or
        general assets or with funds respecting payments on mortgage loans or with
        any
        other funds not related to the Certificates. All such investments shall be
        made
        in the name of the Trustee for the benefit of the Certificateholders, provided,
        however, that income earned on such Eligible Investments shall be for the
        account of the Servicer. The Servicer shall be obligated to cover losses
        on such
        Eligible Investments.

      

      (e)
         The
        Servicer will require each Subservicer to hold all funds constituting
        collections on the Mortgage Loans, pending remittance thereof to the Servicer,
        in one or more accounts in the name of the Trustee meeting the requirements
        of
        an Eligible Account, and such funds shall not be invested. The Subservicer
        shall
        segregate and hold all funds collected and received pursuant to each Mortgage
        Loan separate and apart from any of its own funds and general assets and
        any
        other funds. Each Subservicer shall make remittances to the Servicer no later
        than one Business Day following receipt thereof and the Servicer shall deposit
        into the Collection Account any such remittances received from any Subservicer
        within one Business Day following receipt by the Servicer.

      

      
        
          
          

        

        
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      Section
        3.07  Withdrawals
        from the Collection Account.

      

      (a)
         The
        Servicer shall, from time to time as provided herein, make withdrawals from
        the
        Collection Account of amounts on deposit therein pursuant to Section 3.06
        that
        are attributable to the Mortgage Loans for the following purposes (without
        duplication):

      

      (i) to
        deposit in the Distribution Account, by the Servicer Remittance Date prior
        to
        each Distribution Date, all collections on the Mortgage Loans required to
        be
        distributed from the Distribution Account on a Distribution Date;

      

      (ii) to
        the
        extent deposited to the Collection Account, to reimburse itself or the related
        Subservicer for Servicing Advances paid to maintain individual insurance
        policies pursuant to Section 3.11, or Liquidation Expenses, paid pursuant
        to
        Section 3.13, such withdrawal right being limited to amounts received on
        particular Mortgage Loans (other than any Repurchase Price in respect thereof)
        which represent late recoveries of the payments for which such expenses were
        paid, or from related Liquidation Proceeds;

      

      (iii) to
        pay to
        itself out of each payment received on account of interest on a Mortgage
        Loan as
        contemplated by Section 3.15, an amount equal to the related Servicing Fee
        (to
        the extent not retained pursuant to Section 3.06);

      

      (iv) to
        pay to
        itself or the Sponsor, with respect to any Mortgage Loan or property acquired
        in
        respect thereof that has been purchased by the Sponsor, the Servicer or other
        entity, all amounts received thereon and not required to be distributed to
        Certificateholders as of the date on which the related Repurchase Price is
        determined;

      

      (v) to
        reimburse the Servicer or any Subservicer for any unreimbursed Advance or
        Servicing Advance of its own funds or any unreimbursed advance of such
        Subservicer’s own funds, the right of the Servicer or a Subservicer to
        reimbursement pursuant to this subclause (v) being limited to amounts received
        on a particular Mortgage Loan (including, for this purpose, the Repurchase
        Price
        therefor, Insurance Proceeds and Liquidation Proceeds) which represent late
        payments or recoveries of the principal of or interest on such Mortgage Loan
        respecting which such Advance, Servicing Advance or advance was
        made;

      

      (vi) to
        reimburse the Servicer or any Subservicer from Insurance Proceeds or Liquidation
        Proceeds relating to a particular Mortgage Loan for Servicing Advances expended
        by the Servicer or such Subservicer pursuant to Section 3.13: (x) in good
        faith
        in connection with the restoration of the related Mortgaged Property which
        was
        damaged by the uninsured cause, (y) in connection with the liquidation of
        such
        Mortgage Loan, or (z) with respect to an MI Claim Payment Advance made by
        the
        Servicer with respect to such Mortgage Loan;

      

      
        
          
          

        

        
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      (vii) to
        reimburse the Servicer or any Subservicer for any unreimbursed Nonrecoverable
        Advance previously made, and to reimburse any successor Servicer for any
        Servicing Transfer Costs, including any legal fees or expenses relating to
        any
        such transfer, in each case not paid by the transferring Servicer, in each
        case
        otherwise not reimbursed pursuant to this Section 3.07(a);

      

      (viii) to
        withdraw any other amount deposited in the Collection Account that was not
        required to be deposited therein pursuant to Section 3.06; 

      

      (ix) to
        reimburse the Servicer for costs associated with the environmental report
        handling the presence of any toxic or hazardous substance on a Mortgaged
        Property as set forth in Section 3.13(c);

      

      (x) to
        clear
        and terminate the Collection Account upon a termination pursuant to Section
        7.08; 

      

      (xi) to
        pay to
        the Servicer income earned on Eligible Investments in the Collection
        Account;

      

      (xii) to
        pay to
        the MI Insurer the monthly MI Premiums due under each MI Policy from payments
        received (or Advances made) on account of interest due on the related Mortgage
        Loan; and 

      

      (xiii) to
        make
        an Advance with respect to a Mortgage Loan that is Delinquent from funds
        held in
        the Collection Account as contemplated by Section 3.25, provided that the
        amount
        withdrawn for such an Advance is immediately deposited into the Distribution
        Account.

      

      Withdrawals
        made pursuant to clause (xii) shall be made on a first priority basis. In
        connection with withdrawals pursuant to clauses (ii), (iii), (iv), (v) and
        (vi),
        the Servicer’s entitlement thereto is limited to collections or other recoveries
        on the related Mortgage Loan, and the Servicer shall keep and maintain separate
        accounting, on a Mortgage Loan by Mortgage Loan basis, for the purpose of
        justifying any withdrawal from the Collection Account pursuant to such clauses.
        

      

      (b)
         Notwithstanding
        the provisions of this Section 3.07, the Servicer may, but is not required
        to,
        allow the Subservicers to deduct from amounts received by them or from the
        related account maintained by a Subservicer, prior to deposit in the Collection
        Account, any portion to which such Subservicers are entitled as reimbursement
        of
        any reimbursable Advances made by such Subservicers.

      

      Section
        3.08  Collection
        of Taxes, Assessments and Similar Items; Servicing Accounts.

      

      (a)
         The
        Servicer shall establish and maintain or cause the related Subservicer to
        establish and maintain, one or more Servicing Accounts. The Servicer or a
        Subservicer will deposit and retain therein all collections from the Mortgagors
        for the payment of taxes, assessments, insurance premiums, or comparable
        items
        as agent of the Mortgagors.

      

      
        
          
          

        

        
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      (b)
         The
        deposits in the Servicing Accounts shall be held in trust by the Servicer
        or a
        Subservicer (and its successors and assigns) in the name of the Trustee.
        Such
        Servicing Accounts shall be Eligible Accounts and, if permitted by applicable
        law, invested in Eligible Investments held in trust by the Servicer or a
        Subservicer as described above and maturing, or be subject to redemption
        or
        withdrawal, no later than the date on which such funds are required to be
        withdrawn, and in no event later than 45 days after the date of investment;
        withdrawals of amounts from the Servicing Accounts may be made only to effect
        timely payment of taxes, assessments, insurance premiums, or comparable items,
        to reimburse the Servicer or a Subservicer for any advances made with respect
        to
        such items, to refund to any Mortgagors any sums as may be determined to
        be
        overages, to pay interest, if required, to Mortgagors on balances in the
        Servicing Accounts or to clear and terminate the Servicing Accounts at or
        any
        time after the termination of this Agreement. Amounts received from Mortgagors
        for deposit into the Servicing Accounts shall be deposited in the Servicing
        Accounts by the Servicer within two days of receipt. The Servicer shall advance
        from its own funds amounts needed to pay items payable from the Servicing
        Accounts if the Servicer reasonably believes that such amounts are recoverable
        from the related Mortgagor. The Servicer shall comply with all laws relating
        to
        the Servicing Accounts, including laws relating to payment of interest on
        the
        Servicing Accounts. If interest earned by the Servicer on the Servicing Accounts
        is not sufficient to pay required interest on the Servicing Accounts, the
        Servicer shall pay the difference from its own funds. The Servicing Accounts
        shall not be the property of the Issuing Entity.

      

      Section
        3.09  Access
        to Certain Documentation and Information Regarding the Mortgage
        Loans.

      

      The
        Servicer shall provide, and shall cause any Subservicer to provide, to the
        Trustee, access to the documentation regarding the related Mortgage Loans
        and
        REO Property and to the Certificateholders or Certificate Owners, the FDIC,
        and
        the supervisory agents and examiners of the FDIC (to which the Custodian
        and
        Trustee shall also provide) access to the documentation regarding the related
        Mortgage Loans required by applicable regulations, such access being afforded
        without charge but only upon reasonable request and during normal business
        hours
        at the offices of the Servicer or the Subservicers that are designated by
        these
        entities (or in the case of the Custodian and the Trustee, during normal
        business hours at its designated office); provided, however, that, unless
        otherwise required by law, the Servicer and any Subservicer shall not be
        required to provide access to such documentation if the provision thereof
        would
        violate the legal right to privacy of any Mortgagor; provided, further, however,
        that the Trustee shall coordinate its request for such access so as not to
        impose an unreasonable burden on, or cause an unreasonable interruption of,
        the
        business of the Servicer or any Subservicer. The Servicer, the Subservicers,
        the
        Trustee and the Custodian shall allow representatives of the above entities
        to
        photocopy any of the documentation and shall provide equipment for that purpose
        at a charge that covers their own actual out-of-pocket costs.

      

      
        
          
          

        

        
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      Section
        3.10  [Reserved].

      

      Section
        3.11  Maintenance
        of Hazard Insurance and Fidelity Coverage.

      

      (a)
         The
        Servicer shall maintain and keep, or cause each Subservicer to maintain and
        keep, with respect to each Mortgage Loan and each REO Property, in full force
        and effect hazard insurance (fire insurance with extended coverage) equal
        to at
        least the lesser of the Principal Balance of the Mortgage Loan or the current
        replacement cost of the Mortgaged Property, and containing a standard mortgagee
        clause, provided, however, that the amount of hazard insurance may not be
        less
        than the amount necessary to prevent loss due to the application of any
        co-insurance provision of the related policy. Unless applicable state law
        requires a higher deductible, the deductible on such hazard insurance policy
        may
        be no more than $1,500 or 1% of the applicable amount of coverage, whichever
        is
        less. In the case of a condominium unit or a unit in a planned unit development,
        the required hazard insurance shall take the form of a multi-peril policy
        covering the entire condominium project or planned unit development, in an
        amount equal to at least 100% of the insurable value based on replacement
        cost.
        If the Servicer shall obtain and maintain a blanket policy consistent with
        its
        general mortgage servicing activities insuring against hazard losses on all
        of
        the Mortgage Loans, it shall conclusively be deemed to have satisfied its
        obligations as set forth in this Section 3.11(a), it being understood and
        agreed
        that such policy may contain a deductible clause, in which case the Servicer
        shall, in the event that there shall not have been maintained on the related
        Mortgaged Property a policy complying with this Section 3.11(a) and there
        shall
        have been a loss which would have been covered by such policy, deposit in
        the
        Collection Account the amount not otherwise payable under the blanket policy
        because of such deductible clause without any right of reimbursement. Any
        such
        deposit by the Servicer shall be made on the last Business Day of the Due
        Period
        in the month in which payments under any such policy would have been deposited
        in the Collection Account. In connection with its activities as servicer
        of the
        Mortgage Loans, the Servicer agrees to present, on behalf of itself, the
        Issuing
        Entity, and the Trustee, claims under any such blanket policy. 

      

      (b)
         Any
        amounts collected by the Servicer or a Subservicer under any such hazard
        insurance policy (other than amounts to be applied to the restoration or
        repair
        of the Mortgaged Property or amounts released to the Mortgagor in accordance
        with the Servicer’s or a Subservicer’s normal servicing procedures, the Mortgage
        Note, the Mortgage or applicable law) shall be deposited in the Collection
        Account.

      

      (c)
         Any
        cost
        incurred by a Servicer or a Subservicer in maintaining any such individual
        hazard insurance policies shall not be added to the amount owing under the
        Mortgage Loan for the purpose of calculating monthly distributions to
        Certificateholders, notwithstanding that the terms of the Mortgage Loan so
        permit. Such costs of maintaining individual hazard insurance policies shall
        be
        recoverable by the Servicer or a Subservicer out of related late payments
        by the
        Mortgagor or out of Insurance Proceeds or Liquidation Proceeds or by the
        Servicer from the Repurchase Price, to the extent permitted by Section
        3.07.

      

      (d)
         No
        earthquake or other additional insurance is to be required of any Mortgagor
        or
        maintained on property acquired with respect to a Mortgage other than pursuant
        to such applicable laws and regulations as shall at any time be in force
        and
        shall require such additional insurance. When, at the time of origination
        of the
        Mortgage Loan or at any subsequent time, the Mortgaged Property is located
        in a
        federally designated special flood hazard area, the Servicer shall ensure
        that,
        with respect to such Mortgage Loan or such REO Property, flood insurance
        is
        acquired (to the extent available and in accordance with mortgage servicing
        industry practice). Such flood insurance shall cover the Mortgaged Property,
        including all items taken into account in arriving at the Appraised Value
        on
        which the Mortgage Loan was based, and shall be in an amount equal to the
        lesser
        of (i) the Principal Balance of the related Mortgage Loan and (ii) the minimum
        amount required under the terms of coverage to compensate for any damage
        or loss
        on a replacement cost basis, but not more than the maximum amount of such
        insurance available for the related Mortgaged Property under either the regular
        or emergency programs of the National Flood Insurance Program (assuming that
        the
        area in which such Mortgaged Property is located is participating in such
        program). Unless applicable state law requires a higher deductible, the
        deductible on such flood insurance may not exceed $1,500 or 1% of the applicable
        amount of coverage, whichever is less.

      

      
        
          
          

        

        
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      (e)
         If
        insurance complying with Subsections 3.11 (a) and (d) has not been maintained
        and there shall have been a loss which would have been covered by such insurance
        had it been maintained, the Servicer shall pay, or cause the related Subservicer
        to pay, for any necessary repairs without any right of
        reimbursement.

      

      (f)
         The
        Servicer shall present, or cause the related Subservicer to present, claims
        under any related hazard insurance or flood insurance policy.

      

      (g)
         The
        Servicer shall obtain and maintain at its own expense, and shall cause each
        Subservicer to obtain and maintain at its own expense, and for the duration
        of
        this Agreement, a blanket fidelity bond and an errors and omissions insurance
        policy covering the Servicer’s and such Subservicer’s officers, employees and
        other persons acting on its behalf in connection with its activities under
        this
        Agreement. The amount of coverage shall correspond with the FNMA/FHMLC levels
        presently maintained by the Servicer. The Servicer shall promptly notify
        the
        Trustee of any material change in the terms of such bond or policy. The Servicer
        shall provide annually by March 31st of each year, to the Trustee a
        certification stating that such bond and policy are in effect. If any such
        bond
        or policy ceases to be in effect, the Servicer shall, to the extent possible,
        give the Trustee ten days’ notice prior to any such cessation and shall use its
        reasonable best efforts to obtain a comparable replacement bond or policy,
        as
        the case may be. Any amounts relating to the Mortgage Loans collected under
        such
        bond or policy shall be deposited in the Collection Account.

      

      Section
        3.12  Due-on-Sale
        Clauses; Assumption Agreements.

      

      (a)
         In
        any
        case in which the Servicer is notified by any Mortgagor or Subservicer that
        a
        Mortgaged Property relating to a Mortgage Loan has been or is about to be
        conveyed by the Mortgagor, the Servicer shall enforce, or shall instruct
        such
        Subservicer to enforce, any due-on-sale clause contained in the related Mortgage
        to the extent permitted under the terms of the related Mortgage Note and
        by
        applicable law. The Servicer or the related Subservicer may repurchase a
        Mortgage Loan at the Repurchase Price when the Servicer requires acceleration
        of
        the Mortgage Loan, but only if the Servicer is satisfied, as evidenced by
        a
        certification signed by a Servicing Officer delivered to the Trustee, that
        such
        Mortgage Loan is in default or default is reasonably foreseeable. If the
        Servicer reasonably believes that such due-on-sale clause cannot be enforced
        under applicable law or if the Mortgage Loan does not contain a due-on-sale
        clause, the Servicer is authorized, and may authorize any Subservicer, to
        consent to a conveyance subject to the lien of the Mortgage, and, with the
        consent of the MI Insurer, if applicable, to take or enter into an assumption
        agreement from or with the Person to whom such property has been or is about
        to
        be conveyed, pursuant to which such Person becomes liable under the related
        Mortgage Note and unless prohibited by applicable state law, on condition,
        however, that the related Mortgage Loan shall continue to be covered by a
        hazard
        policy. In connection with any such assumption, no material term of the related
        Mortgage Note may be changed. The Servicer shall notify the Custodian and
        Trustee, whenever possible, before the completion of such assumption agreement,
        and shall forward to the Custodian the original copy of such assumption
        agreement, which copy shall be added by the Custodian to the related Mortgage
        File and which shall, for all purposes, be considered a part of such Mortgage
        File to the same extent as all other documents and instruments constituting
        a
        part thereof.

      

      
        
          
          

        

        
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      (b)
         Notwithstanding
        the foregoing paragraph or any other provision of this Agreement, the Servicer
        shall not be deemed to be in default, breach or any other violation of its
        obligations hereunder by reason of any assumption of a Mortgage Loan by
        operation of law or any conveyance by the Mortgagor of the related Mortgaged
        Property or assumption of a Mortgage Loan which the Servicer reasonably believes
        it may be restricted by law from preventing, for any reason whatsoever or
        if the
        exercise of such right would impair or threaten to impair any recovery under
        any
        applicable insurance policy.

      

      Section
        3.13  Realization
        Upon Defaulted Mortgage Loans.

      

      (a)
         The
        Servicer shall, or shall direct the related Subservicer to, foreclose upon
        or
        otherwise comparably convert the ownership of properties securing any Mortgage
        Loans that come into and continue in default and as to which no satisfactory
        arrangements can be made for collection of delinquent payments pursuant to
        Section 3.06, except that the Servicer shall not, and shall not direct the
        related Subservicer to, foreclose upon or otherwise comparably convert a
        Mortgaged Property if there is evidence of toxic waste or other environmental
        hazards thereon unless the Servicer follows the procedures in Subsection
        (c)
        below. In connection with such foreclosure or other conversion, the Servicer
        in
        conjunction with the related Subservicer, if any, shall use its best reasonable
        efforts to preserve REO Property and to realize upon defaulted Mortgage Loans
        in
        such manner as to maximize the receipt of principal and interest by the
        Certificateholders, taking into account, among other things, the timing of
        foreclosure and the considerations set forth in Subsection 3.13(b). The
        foregoing is subject to the proviso that the Servicer shall not be required
        to
        expend its own funds in connection with any foreclosure or towards the
        restoration of any property unless it determines in good faith (i) that such
        restoration or foreclosure will increase the proceeds of liquidation of the
        Mortgage Loan to Certificateholders after reimbursement to itself for such
        expenses and (ii) that such expenses will be recoverable to it either through
        Liquidation Proceeds (respecting which it shall have priority for purposes
        of
        reimbursements from the Collection Account pursuant to Section 3.07) or through
        Insurance Proceeds (respecting which it shall have similar priority). The
        Servicer shall be responsible for all costs and expenses constituting
        Liquidation Expenses incurred by it in any such proceedings; provided, however,
        that it shall be entitled to reimbursement thereof (as well as its normal
        servicing compensation) as set forth in Section 3.07. Any income from or
        other
        funds (net of any income taxes) generated by REO Property shall be deemed
        for
        purposes of this Agreement to be Liquidation Proceeds.

      

      
        
          
          

        

        
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      Any
        subsequent collections with respect to any Liquidated Mortgage Loan shall
        be
        deposited to the Collection Account. For purposes of determining the amount
        of
        any Liquidation Proceeds or Insurance Proceeds, or other unscheduled
        collections, the Servicer may take into account any estimated additional
        Liquidation Expenses expected to be incurred in connection with the related
        defaulted Mortgage Loan.

      

      In
        the
        event that a Mortgage Loan would be properly classified as a Liquidated Mortgage
        Loan but for the fact that not all MI Insurance Proceeds claimed under the
        related MI Policy have been received, the Servicer may, from its own funds,
        make
        an advance (an “MI
        Claim Payment Advance”)
        to the
        Collection Account in an amount not to exceed the claimed amount of such
        MI
        Insurance Proceeds not yet received. The Servicer shall not make any MI Claim
        Payment Advance with respect to a claim under an MI Policy if an MI Insurer
        Insolvency Event has occurred and is continuing with respect to the related
        MI
        Insurer. In the event that the MI Claim Payment Advance equals the claimed
        amount on such MI Policy, then upon the deposit of such MI Claim Payment
        Advance
        into the Collection Account the related Mortgage Loan shall be considered
        a
“Liquidated Mortgage Loan.”

      

      In
        the
        event that title to any Mortgaged Property is acquired in foreclosure or
        by deed
        in lieu of foreclosure, the deed or certificate of sale shall be issued to
        the
        Trust Fund and held by the Custodian, who shall hold the same on behalf of
        Trustee in accordance with the Agreement. Notwithstanding any such acquisition
        of title and cancellation of the related Mortgage Loan, such Mortgaged Property
        shall (except as otherwise expressly provided herein) be considered to be
        an
        outstanding Mortgage Loan held as an asset of the Issuing Entity until such
        time
        as such property shall be sold. 

      

      (b)
         The
        Servicer shall not acquire any real property (or any personal property incident
        to such real property) on behalf of the Trust Fund except in connection with
        a
        default or reasonably foreseeable default of a Mortgage Loan. In the event
        that
        the Servicer acquires any real property (or personal property incident to
        such
        real property) on behalf of the Trust Fund in connection with a default or
        imminent default of a Mortgage Loan, such property shall be disposed of by
        the
        Servicer on behalf of the Trust Fund as soon as reasonably practicable, but
        in
        no event later than three years after its acquisition on behalf of the Trust
        Fund.

      

      (c)
         With
        respect to any Mortgage Loan as to which the Servicer or a Subservicer has
        received notice of, or has actual knowledge of, the presence of any toxic
        or
        hazardous substance on the Mortgaged Property, the Servicer shall promptly
        notify the Trustee, and shall act in accordance with any such directions
        and
        instructions provided by the Trustee. If the Trustee has not provided directions
        and instructions to the Servicer in connection with any such Mortgage Loan
        within 5 days of a request by the Servicer for such directions and instructions,
        then the Servicer shall take such action as it deems to be in the best economic
        interest of the Trust Fund (other than proceeding against the Mortgaged
        Property) and is hereby authorized at such time as it deems appropriate to
        release such Mortgaged Property from the lien of the related Mortgage. The
        parties hereto acknowledge that the Servicer shall not obtain on behalf of
        the
        Trust Fund or the Trustee a deed as a result or in lieu of foreclosure, and
        shall not otherwise acquire possession of or title to, or commence any
        proceedings to acquire possession of or title to, or take any other action
        with
        respect to, any Mortgaged Property, if the Trust Fund or the Trustee could
        reasonably be considered to be a responsible party for any liability arising
        from the presence of any toxic or hazardous substance on the Mortgaged
        Property.

      

      
        
          
          

        

        
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      Section
        3.14  Custodian
        to Cooperate; Release of Mortgage Files.

      

      (a)
         Upon
        payment in full of any Mortgage Loan, the Servicer will immediately notify
        the
        Custodian and the Trustee by a certification signed by a Servicing Officer
        (which certification shall include a statement to the effect that all amounts
        received in connection with such payment which are required to be deposited
        in
        the Collection Account have been so deposited) and shall request delivery
        to the
        Servicer or Subservicer, as the case may be, of the Mortgage File. Upon receipt
        of such certification and Request for Release, the Custodian, on behalf of
        the
        Trustee, shall promptly cause to be released the related Mortgage File to
        the
        Servicer or Subservicer and the Trustee shall execute and deliver to the
        Servicer, without recourse, the request for reconveyance, deed of reconveyance
        or release or satisfaction of mortgage or such instrument releasing the lien
        of
        the Mortgage (furnished by the Servicer), together with the Mortgage Note
        with
        written evidence of cancellation thereon.

      

      (b)
         From
        time
        to time as is appropriate, for the servicing or foreclosure of any Mortgage
        Loan
        or collection under an insurance policy, the Servicer may deliver to the
        Trustee
        and the Custodian a Request for Release signed by a Servicing Officer on
        behalf
        of the Servicer in substantially the form attached as Exhibit E hereto. Upon
        receipt of the Request for Release, the Custodian, on behalf of the Trustee,
        shall deliver the Mortgage File or any document therein to the Servicer or
        Subservicer, as the case may be, as bailee for the Trustee.

      

      (c)
         The
        Servicer shall cause each Mortgage File or any document therein released
        pursuant to Subsection 3.14(b) to be returned to the Custodian when the need
        therefor no longer exists, and in any event within 21 days of the Servicer’s
        receipt thereof, unless the Mortgage Loan has become a Liquidated Mortgage
        Loan
        and the Liquidation Proceeds relating to the Mortgage Loan have been deposited
        in the Collection Account or such Mortgage File is being used to pursue
        foreclosure or other legal proceedings. Prior to return of a Mortgage File
        or
        any document to the Custodian, the Servicer, the related insurer or Subservicer
        to whom such file or document was delivered shall retain such file or document
        in its respective control as bailee for the Custodian, on behalf of the Trustee,
        unless the Mortgage File or such document has been delivered to an attorney,
        or
        to a public trustee or other public official as required by law, to initiate
        or
        pursue legal action or other proceedings for the foreclosure of the Mortgaged
        Property either judicially or non-judicially, and the Servicer has delivered
        to
        the Custodian and the Trustee, a certificate of a Servicing Officer certifying
        as to the name and address of the Person to which such Mortgage File or such
        document was delivered and the purpose or purposes of such delivery. If a
        Mortgage Loan becomes a Liquidated Mortgage Loan, the Custodian, on behalf
        of
        the Trustee, shall deliver the Request for Release with respect thereto to
        the
        Servicer upon deposit of the related Liquidation Proceeds in the Collection
        Account.

      

      (d)
         Upon
        receipt of written certification of a Servicing Officer, the Trustee shall
        execute and deliver or cause to be executed and delivered to the Servicer
        any
        court pleadings, requests for trustee’s sale or other documents necessary (i)
        for the foreclosure or trustee’s sale with respect to a Mortgaged Property; (ii)
        for any legal action brought to obtain judgment against any Mortgagor on
        the
        Mortgage Note or Mortgage; (iii) to obtain a deficiency judgment against
        the
        Mortgagor; or (iv) to enforce any other rights or remedies provided by the
        Mortgage Note or Mortgage or otherwise available at law or equity. Each such
        certification shall include a request that such pleadings or documents be
        executed by the Trustee and explain the reasons for which the pleadings or
        documents are required, and certify that the Trustee’s execution and delivery of
        the pleadings or documents will not invalidate any insurance coverage under
        the
        insurance policies or invalidate or otherwise affect the lien of the Mortgage,
        except for the termination of such a lien upon completion of the foreclosure
        or
        trustee’s sale.

      

      
        
          
          

        

        
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      Section
        3.15  Servicing
        Compensation.

      

      (a)
         As
        compensation for its activities hereunder, the Servicer shall be entitled
        to
        receive the Servicing Fee from full payments of accrued interest on each
        Mortgage Loan. The Servicer shall be solely responsible for paying any and
        all
        fees with respect to a Subservicer, and the Trustee and the Trust Fund shall
        not
        bear any fees, expenses or other costs directly associated with any
        Subservicer.

      

      (b)
         The
        Servicer may retain additional servicing compensation in the form of late
        payment charges, to the extent such charges are collected from the related
        Mortgagors and investment earnings on the Collection Account. The Servicer
        shall
        be required to pay all expenses it incurs in connection with servicing
        activities under this Agreement and shall not be entitled in connection with
        servicing activities under this Agreement to reimbursement except as provided
        in
        this Agreement. Expenses to be paid by the Servicer without reimbursement
        under
        this Subsection 3.15(b) shall include payment of the expenses of the accountants
        retained pursuant to Section 3.17.

      

      Section
        3.16  Annual
        Statements of Compliance.

      

      Within
        75
        days after December 31 of each year, beginning in 2008, the Servicer at its
        own
        expense shall deliver to the Trustee, the Depositor and the Rating Agencies,
        an
        Officer’s Certificate of the Servicer (an “Annual
        Statement of Compliance”)
        stating, as to the signer thereof, that (i) a review of the activities of
        the
        Servicer during the preceding calendar year and of performance under this
        Agreement has been made under such officer’s supervision, (ii) to the best of
        such officer’s knowledge, based on such review, the Servicer has fulfilled its
        obligations under this Agreement in all material respects for such year,
        or, if
        there has been a default in the fulfillment of any such obligation, specifying
        each such default known to such officer and the nature and status thereof
        including the steps being taken by the Servicer to remedy such default; (iii)
        a
        review of the activities of each Subservicer during the Subservicer’s most
        recently ended calendar year and its performance under its Subservicing
        Agreement has been made under such officer’s supervision; and (iv) to the best
        of the Servicing Officer’s knowledge, based on his review and the certification
        of an officer of the Subservicer (unless the Servicing Officer has reason
        to
        believe that reliance on such certification is not justified), either each
        Subservicer has performed and fulfilled its duties, responsibilities and
        obligations under this Agreement and its Subservicing Agreement in all material
        respects throughout the year, or, if there has been a default in performance
        or
        fulfillment of any such duties, responsibilities or obligations, specifying
        the
        nature and status of each such default known to the Servicing Officer. Copies
        of
        such statements shall be provided by the Servicer to the Certificateholders
        upon
        request or by the Trustee at the expense of the Servicer should the Servicer
        fail to provide such copies. Such Annual Statement of Compliance shall contain
        no restrictions or limitations on its use. In the event that the Servicer
        has
        delegated any servicing responsibilities with respect to the Mortgage Loans
        to a
        Subservicer or subcontractor that meets the criteria in Item 1108(a)(2)(i)
        through (iii) of Regulation AB, the Servicer shall cause the related Subservicer
        or subcontractor (as the case may be) to deliver a similar Annual Statement
        of
        Compliance by that Subservicer or subcontractor to the Trustee, the Depositor
        and the Rating Agencies as described above as and when required with respect
        to
        such servicer. To the extent that the Trustee does not receive any such similar
        Annual Statement of Compliance from a Subservicer or subcontractor (as the
        case
        may be), it shall be entitled to assume no such Subservicer or subcontractor
        has
        been used by the Servicer. 

      

      
        
          
          

        

        
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      Section
        3.17  Assessments
        of Compliance and Attestation Reports.

      

      The
        Servicer shall service and administer the Mortgage Loans in accordance with
        all
        applicable requirements of the Servicing Criteria. Pursuant to Rules 13a-18
        and
        15d-18 of the Exchange Act and Item 1122 of Regulation AB, each of the Servicer
        and the Trustee (each, an “Attesting
        Party”)
        shall
        deliver to the Trustee and the Depositor on or before March 15th of each
        calendar year in which the Issuing Entity is required to file a Form 10-K
        beginning in 2008, a report regarding such Attesting Party’s assessment of
        compliance (an “Assessment
        of Compliance”)
        with
        the Servicing Criteria during the preceding calendar year. The Assessment
        of
        Compliance, as set forth in Regulation AB, must contain the following:

      

      (a)
         A
        statement by such officer of its responsibility for assessing compliance
        with
        the Servicing Criteria applicable to the related Attesting Party;

      

      (b)
         A
        statement by such officer that such Attesting Party used the Servicing Criteria
        attached as Exhibit L hereto, and which will also be attached to the Assessment
        of Compliance, to assess compliance with the Servicing Criteria applicable
        to
        the related Attesting Party;

      

      (c)
         An
        assessment by such officer of the related Attesting Party’s compliance with the
        applicable Servicing Criteria for the period consisting of the preceding
        calendar year, including disclosure of any material instance of noncompliance
        with respect thereto during such period, which assessment shall be based
        on the
        activities such Attesting Party performs with respect to asset-backed securities
        transactions taken as a whole involving the Servicer, that are backed by
        the
        same asset type as the Mortgage Loans; and

      

      (d)
         A
        statement that a registered public accounting firm has issued an attestation
        report on the related Attesting Party’s Assessment of Compliance for the period
        consisting of the preceding calendar year.

      

      Such
        report at a minimum shall address each of the Servicing Criteria specified
        on
        Exhibit L hereto which are indicated as applicable to the related Attesting
        Party.

      

      On
        or
        before March 15th of each calendar year in which the Issuing Entity is required
        to file a Form 10-K beginning in 2008, each Attesting Party specified in
        this
        Section shall furnish to the Trustee and the Depositor a report (an
“Attestation
        Report”)
        by a
        registered public accounting firm that attests to, and reports on, the
        Assessment of Compliance made by the Servicer, as required by Rules 13a-18
        and
        15d-18 of the Exchange Act and Item 1122(b) of Regulation AB, which Attestation
        Report must be made in accordance with standards for attestation reports
        issued
        or adopted by the Public Company Accounting Oversight Board. 

      

      
        
          
          

        

        
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      The
        Servicer or the Trustee, as the case may be, shall cause any Subservicer,
        and
        each subcontractor determined by it to be materially “participating in the
        servicing function” within the meaning of Item 1122 of Regulation AB, to deliver
        to the Trustee and the Depositor an Assessment of Compliance and Attestation
        Report as and when provided above along with an indication of what Servicing
        Criteria are addressed in such assessment.

      

      Notwithstanding
        the foregoing, as to any Subservicer or subcontractor, an Assessment of
        Compliance is not required to be delivered unless it is required as part
        of a
        Form 10-K with respect to the Issuing Entity.

      

      In
        addition, the Custodian shall deliver to the Sponsor, the Trustee and the
        Depositor an Assessment of Compliance and Attestation Report, as and when
        provided above, which shall at a minimum address each of the Servicing Criteria
        specified on Exhibit L hereto which are indicated as applicable to a
“custodian.”

      

      Section
        3.18  Reports
        filed with Securities and Exchange Commission.

      

      (a)
         (i)
        (A)
        Within 15 days after each Distribution Date for so long as the Issuing Entity
        is
        subject to the Exchange Act reporting requirements, the Trustee shall, in
        accordance with industry standards, file with the Commission via the Electronic
        Data Gathering and Retrieval System (“EDGAR”),
        a
        Form 10-D, signed by the Servicer, with a copy of the monthly statement to
        be
        furnished by the Trustee to the Certificateholders for such Distribution
        Date;
        provided that the Trustee shall have received no later than five (5) calendar
        days after the related Servicer Reporting Date, all information required
        to be
        provided to the Trustee as described below. Any disclosure in addition to
        the
        monthly statement that is required to be included on Form 10-D (“Additional
        Form 10-D Disclosure”)
        shall
        be approved by the Depositor.

      

      Within
        five (5) calendar days after the related Servicer Reporting Date, (i) the
        parties set forth in Exhibit M shall be required to provide, pursuant to
        section
        3.18(a)(iv) below, to the Trustee and the Depositor, to the extent known,
        in
        EDGAR-compatible format at the following email address:
        DBSec.Notifications@db.com, (with a copy to the Depositor) or in such other
        form
        as otherwise agreed upon by the Trustee and the Depositor and such party,
        the
        form and substance of any Additional Form 10-D Disclosure, if applicable,
        and
        (ii) the Depositor will approve, as to form and substance, or disapprove,
        as the
        case may be, the inclusion of the Additional Form 10-D Disclosure on Form
        10-D.
        The Depositor will be responsible for any reasonable fees and expenses assessed
        or incurred by the Trustee in connection with including any Additional Form
        10-D
        Disclosure on Form 10-D pursuant to this Section. 

      

      
        
          
          

        

        
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      (B)
        After
        preparing the Form 10-D, the Trustee shall forward electronically a draft
        copy
        of the Form 10-D to the Depositor and the Servicer for review. No later than
        two
        (2) Business Days prior to the 15th
        calendar
        day after the related Distribution Date, either the Depositor or a senior
        officer of the Servicer in charge of the servicing function shall sign the
        Form
        10-D and return an electronic or fax copy of such signed Form 10-D (with
        an
        original executed hard copy to follow by overnight mail) to the Trustee.
        For
        administrative convenience, the Depositor or the Servicer may deliver executed
        signature pages to the Trustee to be held by the Trustee in escrow and attached
        to a Form 10-D only upon such Depositor’s or Servicer’s electronic notification
        to the Trustee authorizing such attachment. If a Form 10-D cannot be filed
        on
        time or if a previously filed Form 10-D needs to be amended, the Trustee
        will
        follow the procedures set forth in Section 3.18(a)(v). Promptly (but no later
        than one (1) Business Day) after filing with the Commission, the Sponsor
        will
        make available on its internet website a final executed copy of each Form
        10-D.
        The signing party at the Depositor or the Servicer can be contacted as set
        forth
        in Section 12.06. The parties to this Agreement acknowledge that the performance
        by the Trustee of its duties under Sections 3.18(a)(i) and (iv) related to
        the
        timely preparation and filing of Form 10-D is contingent upon such parties
        strictly observing all applicable deadlines in the performance of their duties
        under such Sections. The Trustee shall have no liability for any loss, expense,
        damage, claim arising out of or with respect to any failure to properly prepare
        and/or timely file such Form 10-D, where such failure results from the Trustee’s
        inability or failure to receive, on a timely basis, as set forth herein,
        any
        information from any other party hereto needed to prepare, arrange for execution
        or file such Form 10-D, not resulting from its own negligence, bad faith
        or
        willful misconduct.

      

      (ii)
        (A)
        Within four (4) Business Days after the occurrence of an event requiring
        disclosure on Form 8-K (each such event, a “Reportable
        Event”)
        for so
        long as the Issuing Entity is subject to the Exchange Act reporting
        requirements, the Trustee shall file on behalf of the Issuing Entity any
        Form
        8-K prepared by the Depositor, as required by the Exchange Act, provided
        that the
        Depositor shall file the initial Form 8-K in connection with the issuance
        of the
        Certificates; provided further, that the Trustee shall only be responsible
        for
        filing such Form 8-K if the Trustee has been notified by the Depositor of
        the
        necessity therefore and provided with the disclosure to be included therein.
        Any
        disclosure or information related to a Reportable Event or that is otherwise
        required to be included on Form 8-K (“Form
        8-K Disclosure Information”)
        shall
        be prepared by the Depositor. 

      

      (B)
        For
        so long as the Issuing Entity is subject to the Exchange Act reporting
        requirements, no later than 12:00 p.m. New York time on the 2nd Business
        Day
        after the occurrence of a Reportable Event (i) the parties set forth in Exhibit
        M shall be required pursuant to Section 3.18(a)(iv) below to provide to the
        Depositor, to the extent known, in EDGAR-compatible format, or in such other
        form as otherwise agreed upon by the Depositor and such party, the form and
        substance of any Form 8-K Disclosure Information, if applicable, and (ii)
        the
        Depositor will approve, as to form and substance, or disapprove, as the case
        may
        be, the inclusion of the Form 8-K Disclosure Information on Form 8-K. The
        Depositor will be responsible for any reasonable fees and expenses assessed
        or
        incurred by the Trustee in connection with including any Form 8-K Disclosure
        Information on Form 8-K pursuant to this Section.

      

      (C)
        No
        later than the end of business New York City time on the 3rd
        Business
        Day after the Reportable Event, either the Depositor or a senior officer
        of the
        Servicer in charge of the servicing function shall sign the Form 8-K and
        deliver
        an electronic or fax copy of such signed Form 8-K in EDGAR-compatible form
        (with
        an original executed hard copy to follow by overnight mail) to the Trustee.
        If a
        Form 8-K cannot be filed on time or if a previously filed Form 8-K needs
        to be
        amended, the Trustee will follow the procedures set forth in Section 3.18(a)(v).
        Promptly (but
        no
        later than 1 Business Day) after filing with the Commission, the Sponsor
        will,
        make available on its internet website a final executed copy of each Form
        8-K.
        The signing party at the Depositor or the Servicer can be contacted as set
        forth
        in Section 12.06. The parties to this Agreement acknowledge that the performance
        by the Trustee of its duties under this Section 3.18(a)(ii) related to the
        timely filing of Form 8-K is contingent upon such parties strictly observing
        all
        applicable deadlines in the performance of their duties under this Section
        3.18(a)(ii). The Trustee shall have no liability for any loss, expense, damage,
        claim arising out of or with respect to the preparation of the Form 8-K by
        the
        Depositor or for any failure by the Trustee to timely file such Form 8-K,
        where
        such failure results from the Trustee’s inability or failure to receive, on a
        timely basis, as set forth herein, any information from any other party hereto
        needed to prepare, arrange for execution or file such Form 8-K, not resulting
        from its own negligence, bad faith or willful misconduct.

      

      
        
          
          

        

        
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      (iii)
        (A)
        Within 90 days after the end of each fiscal year of the Issuing Entity or
        such
        earlier date as may be required by the Exchange Act (the “10-K
        Filing Deadline”)
        (it
        being understood that the fiscal year for the Issuing Entity ends on December
        31st
        of each
        year) for so long as the Issuing Entity is subject to the Exchange Act reporting
        requirements, commencing in March 2008, the Trustee shall prepare and file
        on
        behalf of the Issuing Entity a Form 10-K, in form and substance as required
        by
        the Exchange Act. Each such Form 10-K shall include the following items,
        in each
        case to the extent they have been delivered to the Trustee within the applicable
        time frames set forth in this Agreement, (1) an annual compliance statement
        of
        the Servicer and any Subservicer, as described under Section 3.16, the annual
        reports on assessment of compliance with Servicing Criteria for the Servicer,
        each Subservicer and each subcontractor materially participating in the
        Servicing Function, each Servicing Function Participant, the Trustee and
        the
        Custodian, as described under Section 3.17, (2) the registered public accounting
        firm attestation report for the Servicer, each Subservicer and each
        subcontractor materially participating in the Servicing Function, each Servicing
        Function Participant, the Trustee and the Custodian, as described under Section
        3.17, which shall identify any material instance of noncompliance, disclosure
        identifying such instance of noncompliance, and (3) a Sarbanes-Oxley
        Certification as described in this Section 3.18(a)(iii)(D) below. All such
        information and data shall be provided to the Trustee in EDGAR-compatible
        form
        and delivered to the email address set forth in Section 12.06. Any disclosure
        or
        information in addition to (1) through (3) above that is required to be included
        on Form 10-K (“Additional
        Form 10-K Disclosure”)
        shall
        be determined and prepared by and approved by the Depositor. 

      

      (B)
        No
        later than March 5th of each year that the Issuing Entity is subject to the
        Exchange Act reporting requirements, commencing in 2008, (1) the parties
        set
        forth in Exhibit M shall be required to provide pursuant to Section 3.18(a)(iv)
        below to the Trustee and the Depositor, to the extent known, in EDGAR-compatible
        format, at the email address set forth in Section 12.06 hereof with respect
        to
        the Trustee, or in such other form as otherwise agreed upon by the Trustee
        and
        the Depositor and such party, the form and substance of any Additional Form
        10-K
        Disclosure, if applicable, and (2) the Depositor will approve, as to form
        and
        substance, or disapprove, as the case may be, the inclusion of the Additional
        Form 10-K Disclosure on Form 10-K. The Depositor will be responsible for
        any
        reasonable fees and expenses assessed or incurred by the Trustee in connection
        with including any Additional Form 10-K Disclosure on Form 10-K pursuant
        to this
        Section.

      

      
        
          
          

        

        
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      (C)
        After
        preparing the Form 10-K, the Trustee shall forward electronically a draft
        copy
        of the Form 10-K to the Depositor and the Servicer for review. No later than
        12:00 p.m. New York time on the 4th Business Day prior to the 10-K Filing
        Deadline, either the Depositor or a senior officer of the Servicer in charge
        of
        the servicing function shall sign the Form 10-K and return an electronic
        or fax
        copy of such signed Form 10-K (with an original executed hard copy to follow
        by
        overnight mail) to the Trustee. If a Form 10-K cannot be filed on time or
        if a
        previously filed Form 10-K needs to be amended, the Trustee will follow the
        procedures set forth in Section 3.18(a)(v). Promptly (but no later than one
        (1)
        Business Day) after filing with the Commission, the Sponsor will make available
        on its internet website a final executed copy of each Form 10-K. The signing
        party at the Depositor or the Servicer can be contacted as set forth in Section
        12.06. The parties to this Agreement acknowledge that the performance by
        the
        Trustee of its duties under Sections 3.18(a)(iii) and (iv) related to the
        timely
        preparation and filing of Form 10-K is contingent upon such parties strictly
        observing all applicable deadlines in the performance of their duties under
        such
        Section 3.16 and Section 3.17. The Trustee shall have no liability for any
        loss,
        expense, damage, claim arising out of or with respect to any failure to properly
        prepare and/or timely file such Form 10-K, where such failure results from
        the
        Trustee’s inability or failure to receive, on a timely basis, as set forth
        herein, any information from any other party hereto needed to prepare, arrange
        for execution or file such Form 10-K, not resulting from its own negligence,
        bad
        faith or willful misconduct.

      

      (D)
        Each
        Form 10-K shall include a certification (the “Sarbanes-Oxley
        Certification”),
        required to be included therewith pursuant to the Sarbanes-Oxley Act. The
        Servicer and the Trustee, shall and the Servicer shall cause any Subservicer
        or
        subcontractor engaged by it to, provide to the Person who signs the
        Sarbanes-Oxley Certification (the “Certifying
        Person”),
        by
        March 15 of each year in which the Issuing Entity is subject to the reporting
        requirements of the Exchange Act, a certification (each, a “Back-Up
        Certification”),
        in
        the form attached hereto as Exhibit N-2, upon which the Certifying Person, the
        entity for which the Certifying Person acts as an officer, and such entity’s
        officers, directors and Affiliates (collectively with the Certifying Person,
        “Certification
        Parties”)
        can
        reasonably rely. The senior officer of the Servicer shall serve as the
        Certifying Person on behalf of the Issuing Entity. Such officer of the
        Certifying Person can be contacted as set forth in Section 12.06. In the
        event
        the Trustee is terminated or resigns pursuant to the terms of this Agreement,
        the Trustee shall provide a Back-Up Certification to the Certifying Person
        pursuant to this Section 3.18(a)(iii) with respect to the period of time
        it was
        subject to this Agreement.

      

      (iv)
        With
        respect to any Additional Form 10-D Disclosure or Additional From 10-K
        Disclosure (collectively, the “Additional
        Disclosure”)
        relating to the Trust Fund, the Trustee’s obligation to include such Additional
        Information in the applicable Exchange Act report is subject to receipt from
        the
        entity that is indicated in Exhibit M as the responsible party for providing
        that information, if other than the Trustee, as and when required as described
        in Section 3.18(a)(i) through (iii) above. Each of the Servicer, Sponsor,
        and
        Depositor hereby agree to notify and provide to the extent known to the Trustee
        and the Depositor all Additional Disclosure relating to the Trust Fund, with
        respect to which such party is indicated in Exhibit M as the responsible
        party
        for providing that information. 

      

      
        
          
          

        

        
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      (v)
        With
        respect to any Form 8-K Disclosure Information (collectively, the “8-K
        Additional Disclosure”)
        relating to the Trust Fund, the Depositor’s obligation to include such 8-K
        Additional Information in the applicable Exchange Act report is subject to
        receipt from the entity that is indicated in Exhibit M as the responsible
        party
        for providing that information, if other than the Depositor, as and when
        required as described in Section 3.18(a)(i) through (iii) above. Each of
        the
        Trustee, Servicer, Sponsor, and Depositor hereby agree to notify and provide
        to
        the extent known to the Depositor all 8-K Additional Disclosure relating
        to the
        Trust Fund, with respect to which such party is indicated in Exhibit M as
        the
        responsible party for providing that information. 

      

      (vi)
        (A)
        On or prior to January 30 of the first year in which the Trustee is able
        to do
        so under applicable law, the Trustee shall file a Form 15 relating to the
        automatic suspension of reporting in respect of the Issuing Entity under
        the
        Exchange Act. The Trustee will promptly notify the Depositor, the Servicer
        and
        the Hedge Counterparties after filing Form 15. 

      

      (B)
        In
        the event that the Trustee is unable to timely file with the Commission all
        or
        any required portion of any Form 10-D or 10-K required to be filed by this
        Agreement because required disclosure information was either not delivered
        to it
        or delivered to it after the delivery deadlines set forth in this Agreement
        or
        for any other reason, the Trustee will immediately notify the Depositor and
        the
        Servicer. In the case of Form 10-D and 10-K, the Depositor, Servicer and
        Trustee
        will cooperate to prepare and file a Form 12b-25 and a 10-D/A and 10-K/A
        as
        applicable, pursuant to Rule 12b-25 of the Exchange Act. In the case of Form
        8-K, the Depositor will, upon receipt of all required Form 8-K Disclosure
        Information provide such Form 8-K Disclosure Information to the Trustee for
        inclusion on the next Form 10-D. In the event that any previously filed Form
        10-D or 10-K needs to be amended, the Trustee (to the extent of actual
        knowledge) will notify the Depositor and the Servicer and such parties will
        cooperate to prepare any necessary 10-D/A or 10-K/A. Any Form 15, Form 12b-25
        or
        any amendment to Form 8-K, 10-D or 10-K shall be signed by a senior officer
        of
        the Servicer. The Depositor and Servicer acknowledge that the performance
        by the
        Trustee of its duties under this Section 3.18(a)(v) related to the timely
        preparation and filing of Form 15, or any amendment to Form 10-D or 10-K,
        is
        contingent upon the Servicer and the Depositor performing their duties under
        this Section. The Trustee shall have no liability for any loss, expense,
        damage,
        claim arising out of or with respect to any failure to properly prepare and/or
        timely file any such Form 15 or any amendments to Forms 10-D or 10-K, where
        such
        failure results from the Trustee’s inability or failure to receive, on a timely
        basis, any information from any other party hereto needed to prepare, arrange
        for execution or file such Form 15 or any amendments to Forms 8-K, 10-D or
        10-K,
        not resulting from its own negligence, bad faith or willful misconduct. The
        Depositor shall be responsible for preparing and filing any required Form
        12b-25
        and the Trustee shall have no obligations with respect thereto.

      

      The
        Depositor agrees to promptly furnish to the Trustee, from time to time upon
        request, such further information, reports and financial statements within
        its
        control related to this Agreement, the Mortgage Loans as is necessary for
        the
        preparation and filing of all required reports with the Commission. The Trustee
        shall have no responsibility to file any items other than those specified
        in
        this Section 3.18; provided, however, the Trustee will cooperate with the
        Depositor in connection with any additional filings with respect to the Issuing
        Entity as the Depositor deems necessary under the Exchange Act. Copies of
        all
        reports filed by the Trustee under the Exchange Act shall be sent to the
        Depositor as set forth in Section 12.06. 

      

      
        
          
          

        

        
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      (b)
         In
        connection with the filing of any 10-K hereunder, the Trustee shall sign
        a
        certification (a “Form
        of Back-Up Certification to Form 10-K Certificate,”
        substantially in the form attached hereto as Exhibit N-2) for the Depositor
        regarding certain aspects of the Form 10-K certification signed by the
        Depositor, provided, however, that the Trustee shall not be required to
        undertake an analysis of any accountant’s report attached as an exhibit to the
        Form 10-K.

      

      (c)
         Notwithstanding
        anything to the contrary contained in this Agreement, the Servicer shall
        indemnify the Depositor and the Trustee and any director, officer, employee
        or
        agent of the Depositor or the Trustee and hold them harmless against any
        and all
        claims, losses, damages, penalties, fines, forfeitures, reasonable and necessary
        legal fees and related costs, judgments, and any other costs, fees and expenses
        that any of them may sustain in any way related to any failure by the Servicer
        or any Subservicer engaged by the Servicer or any Subcontractor utilized
        by the
        Servicer to deliver any information, report, certification or accountants’
letter when and as required under this Section, including without limitation
        any
        failure by the Servicer to identify any Subcontractor “participating in the
        servicing function” within the meaning of Item 1122 of Regulation AB. If such
        indemnification is unavailable or insufficient to hold harmless any Person
        entitled to indemnification thereunder, then the Servicer shall contribute
        to
        the amount paid or payable to the Person entitled to indemnification as a
        result
        of the losses, claims, damages or liabilities of such Person in such proportion
        as is appropriate to reflect the relative fault of such Person on the one
        hand
        and the Servicer, on the other, in connection with the Servicer’s obligations
        pursuant to this Section. This Section shall survive the termination of this
        Agreement or the earlier resignation or removal of the Servicer. 

      

      Section
        3.19  Optional
        Purchase of Defaulted Mortgage Loans.

      

      Subject
        to the limitations set forth in Section 10.02 hereof, the Servicer shall
        have
        the right, but not the obligation, to purchase any Mortgage Loan which becomes
        90 days or more delinquent at a purchase price equal to the Repurchase Price
        (a)
        within 29 days after the date the Mortgage Loan becomes 90 days delinquent
        or
        (b) on the date the Servicer liquidates the related Mortgaged Property. The
        procedure for such purchase shall be the same as for a repurchase made by
        the
        Sponsor under the Purchase Agreement. With respect to any Mortgage Loans
        being
        purchased pursuant to this Section 3.19, the Servicer shall purchase the
        most
        delinquent Mortgage Loans before purchasing other less delinquent Mortgage
        Loans. The Servicer or the related Subservicer may purchase a Mortgage Loan
        at
        the Repurchase Price when the Servicer requires acceleration of the Mortgage
        Loan, but only if the Servicer is satisfied, as evidenced by a certification
        from a Servicing Officer delivered to the Trustee, that such Mortgage Loan
        is in
        default or default is reasonably foreseeable.

      

      Section
        3.20  Information
        Required by the Internal Revenue Service Generally and Reports of Foreclosures
        and Abandonments of Mortgaged Property.

      

      The
        Servicer shall prepare and deliver all federal and state information reports
        when and as required by all applicable state and federal income tax laws.
        In
        particular, with respect to the requirement under Section 6050J of the Code
        to
        the effect that the Servicer or Subservicer shall make reports of foreclosures
        and abandonments of any mortgaged property, the Servicer or Subservicer shall
        file reports relating to each instance occurring during the previous calendar
        year in which the Servicer (i) acquires an interest in any Mortgaged Property
        through foreclosure or other comparable conversion in full or partial
        satisfaction of a Mortgage Loan, or (ii) knows or has reason to know that
        any
        Mortgaged Property has been abandoned. The reports from the Servicer or
        Subservicer shall be in form and substance sufficient to meet the reporting
        requirements imposed by Section 6050J, Section 6050H (reports relating to
        mortgage interest received) and Section 6050P of the Code (reports relating
        to
        cancellation of indebtedness).

      

      
        
          
          

        

        
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      Section
        3.21  [Reserved].

      

      Section
        3.22  [Reserved].

      

      Section
        3.23  Servicing
        and Administration of the MI Policies.

      

      (a)
         The
        Servicer shall take all such actions on behalf of the Trustee as are necessary
        to service, maintain and administer the MI Policies and to perform the Trustee’s
        obligations and enforce the Trustee’s rights under the MI Policies, which
        actions shall conform to the standards of an institution prudently administering
        MI Policies for its own account. Except as expressly set forth herein, the
        Servicer shall have full authority on behalf of the Issuing Entity to do
        anything it reasonably deems appropriate or desirable in connection with
        the
        servicing, maintenance and administration of the MI Policies. The Servicer
        shall
        make its best reasonable efforts to file all insured claims under the MI
        Policies and collect from the MI Insurer all Insurance Proceeds due to the
        Trustee under the MI Policies. The Servicer shall not take, or permit any
        Subservicer to take, any action which would result in non-coverage under
        any
        applicable MI Policy of any loss which, but for the actions of the Servicer
        or
        Subservicer, would have been covered thereunder. To the extent coverage is
        available, the Servicer shall keep or cause to be kept in full force and
        effect
        each such MI Policy for the life of the Mortgage Loan; provided, however,
        that
        if a MI Insurer Insolvency Event has occurred and is continuing, the Servicer
        may terminate the MI Policy on any Mortgage Loan that is not then past due.
        The
        Servicer shall cooperate with the MI Insurer and shall use its best efforts
        to
        furnish all reasonable aid, evidence and information in the possession of
        the
        Servicer or to which the Servicer has access with respect to any Mortgage
        Loan.

      

      (b)
         The
        Servicer shall deposit into the Collection Account pursuant to Section
        3.06(d)(v) hereof all MI Insurance Proceeds received from the MI Insurer
        under
        the terms of the MI Policies. The Servicer shall withdraw from the Collection
        Account and pay to the MI Insurer pursuant to Section 3.07(a)(xii) hereof,
        the
        monthly MI Premiums due to the MI Insurer in accordance with the terms of
        the MI
        Insurance Agreements. In the event that the Trustee has actual knowledge
        that
        any MI Premiums have in fact not been paid, the Trustee shall distribute
        such
        amounts (in such amounts as specified by the MI Insurer in writing) to the
        MI
        Insurer from the Interest Remittance Amount for the related Mortgage Loans,
        at
        the same level of priority as the Trustee Fee.

      

      (c)
         Notwithstanding
        the provisions of Subsection 3.23(a) and (b), the Servicer shall not take
        any
        action in regard to the MI Policies inconsistent with the interests of the
        Trustee or the Certificateholders or with the rights and interests of the
        Trustee or the Certificateholders under this Agreement; provided, however,
        that
        payments of the monthly MI Premiums to the MI Insurer pursuant to Subsection
        3.23(b) above and Section 3.07(a)(xii) hereof shall be deemed not to be
        inconsistent with such interests.

      

      
        
          
          

        

        
          40

          
            

          

        

        
          
          

        

      

      

      

      (d)
         The
        Trustee shall furnish the Servicer with any powers of attorney in the form
        of
        Exhibit P and other documents in form as provided to it necessary or appropriate
        to enable the Servicer to service and administer the MI Policies; provided,
        however, that the Trustee shall not be liable for the actions of, or the
        use or
        misuse by, the Servicer under such powers of attorney.

      

      (e)
         If
        at any
        time during the term of this Agreement, a MI Insurer Insolvency Event has
        occurred and is continuing, the Servicer agrees to review, not less often
        than
        monthly, the financial condition of the related MI Insurer with a view towards
        determining whether recoveries under the MI Policy are jeopardized for reasons
        related to the financial condition of the related MI Insurer. In such event,
        the
        Servicer may obtain an additional MI Policy or a replacement MI Policy, the
        MI
        Premiums on which would be paid by the Servicer from the Collection Account
        pursuant to Section 3.07(a)(xii) hereof.

      

      (f)
         The
        Servicer shall comply with all other terms, conditions and obligations set
        forth
        in the MI Policies.

      

      Section
        3.24  Determination
        Date Reports.

      

      On
        the
        second Business Day (or, if the Backup Servicer becomes the successor Servicer,
        the third Business Day) following each Determination Date (the “Servicer
        Reporting Date”),
        the
        Servicer shall deliver to the Trustee a report, prepared as of the close
        of
        business on the Determination Date (the “Determination
        Date Report”),
        and
        shall forward to the Trustee in the form of computer readable electromagnetic
        tape or disk a copy of such report in a format acceptable to the Trustee.
        The
        Determination Date Report and any written information supplemental thereto
        shall
        include such information with respect to the Mortgage Loans that is reasonably
        available to the Servicer and that is required by the Trustee for purposes
        of
        making the calculations and providing the reports referred to in this Agreement,
        as set forth in written specifications or guidelines issued by the Trustee
        from
        time to time. Such information shall include the aggregate amounts required
        to
        be withdrawn from the Collection Account and deposited into the Distribution
        Account pursuant to Section 3.07. Such information shall also include (a)
        the
        number of Mortgage Loans that prepaid in the previous month; (b) the loan
        balance of each such Mortgage Loan; (c) whether a prepayment penalty was
        applied
        to such Mortgage Loan; and (d) the amount of prepayment penalty with respect
        to
        each such Mortgage Loan. The Servicer agrees to cooperate with the Trustee
        in
        providing all information as is reasonably requested by the Trustee to prepare
        the reports required under the Agreement.

      

      The
        determination by the Servicer of such amounts shall, in the absence of obvious
        error, be presumptively deemed to be correct for all purposes hereunder and
        the
        Trustee shall be fully protected in relying upon the same without any
        independent check or verification.

      

      
        
          
          

        

        
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      Section
        3.25  Advances.

      

      If
        any
        Monthly Payment (together with any advances from the Subservicers) on a Mortgage
        Loan that was due on the immediately preceding Due Date and delinquent on
        the
        Determination Date is delinquent other than as a result of application of
        the
        Relief Act, the Servicer will deposit in the Collection Account not later
        than
        the Servicer Remittance Date immediately preceding the related Distribution
        Date
        an amount equal to such deficiency net of the related Servicing Fee for such
        Mortgage Loan, except to the extent the Servicer determines any such advance
        to
        be nonrecoverable from Liquidation Proceeds, Insurance Proceeds or future
        payments on such Mortgage Loan. Subject to the foregoing and in the absence
        of
        such a determination, the Servicer shall continue to make such advances through
        the date that the related Mortgaged Property has, in the judgment of the
        Servicer, been completely liquidated. 

      

      The
        Servicer may fund an Advance from its own corporate funds, advances made
        by any
        Subservicer or funds held in the Collection Account for future payment or
        withdrawal.

      

      Advances
        made from funds held in the Collection Account may be made by the Servicer
        from
        subsequent collections of principal and interest received on other Mortgage
        Loans and deposited into the Collection Account. Advances made from the
        Collection Account are not limited to subsequent collections of principal
        and
        interest received on the delinquent Mortgage Loan with respect to which an
        Advance is made. If on the Servicer Remittance Date prior to any Distribution
        Date funds in the Collection Account are less than the amount required to
        be
        paid to the Certificateholders on such Distribution Date, then the Servicer
        shall deposit its own funds into the Distribution Account in the amount of
        the
        lesser of (i) any unreimbursed Advances previously made by the Servicer with
        funds held in the Collection Account or (ii) the shortfall in the Collection
        Account, provided, however, that in no event shall the Servicer deposit into
        the
        Collection Account an amount that is less than any shortfall in the Collection
        Account attributable to delinquent payments on Mortgage Loans which the Servicer
        deems to be recoverable and which has not been covered by an Advance from
        the
        Servicer’s own corporate funds or any Subservicer’s funds. If applicable, on the
        Servicer Remittance Date preceding each Distribution Date, the Servicer shall
        present an Officers’ Certificate to the Trustee (i) stating that the Servicer
        elects not to make an Advance in a stated amount and (ii) detailing the reason
        it deems the advance to be nonrecoverable.

      

      Section
        3.26  Compensating
        Interest Payments.

      

      The
        Servicer shall deposit in the Collection Account not later than the Servicer
        Remittance Date preceding the Distribution Date an amount equal to the
        Compensating Interest related to the related Determination Date. The Servicer
        shall not be entitled to any reimbursement of any Compensating Interest payment.
        

      

      Section
        3.27  Advance
        Facility.

      

      (a)
         The
        Servicer on behalf of the Trust Fund, is hereby authorized to enter into
        a
        facility (such an arrangement, an “Advance
        Facility”)
        with
        any Person which provides that such Person (an “Advancing
        Person”)
        may
        fund Advances and/or Servicing Advances under this Agreement, although no
        such
        facility shall reduce or otherwise affect the Servicer’s obligation to fund such
        Advances and/or Servicing Advances. No consent of the Trustee,
        Certificateholders or any other party shall be required before the Servicer
        may
        enter into an Advance Facility nor shall the Trustee or the Certificateholders
        be a third party beneficiary of any obligation of an Advancing Person to
        the
        Servicer. If the Servicer enters into an Advance Facility, the Servicer and
        the
        related Advancing Person shall deliver to the Trustee at the address set
        forth
        in Section 12.06 hereof a written notice (an “Advance
        Facility Notice”)
        (in
        the form attached hereto as Exhibit K), stating (a) the identity of the
        Advancing Person and (b) the identity of the Person (the “Servicer’s
        Assignee”)
        that
        will, subject to Section 3.27(b) hereof, have the right to make withdrawals
        from
        the Collection Account pursuant to Section 3.07 hereof to reimburse previously
        unreimbursed Advances and/or Servicing Advances (“Advance
        Reimbursement Amounts”).
        If
        the Servicer enters into such an Advance Facility pursuant to this Section
        3.27,
        the Trustee shall execute the acknowledgment of the Advance Facility Notice,
        as
        prepared by the Servicer confirming its receipt of written notice of the
        existence of such Advance Facility. To the extent that an Advancing Person
        purchases or funds any Advance or any Servicing Advance and provides the
        Trustee
        with written notice (in the form attached hereto as Exhibit K) acknowledged
        by
        the Servicer that such Advancing Person is entitled to reimbursement directly
        from the Trustee pursuant to the terms of the Advance Facility, such Advancing
        Person shall be entitled to receive reimbursement pursuant to this Agreement
        for
        such amount to the extent provided in Section 3.27(b). Such notice from the
        Advancing Person must specify the amount of the reimbursement, the Section
        of
        this Agreement that permits the applicable Advance or Servicing Advance to
        be
        reimbursed, the section(s) of the Advance Facility that entitle the Advancing
        Person to request reimbursement from the Trustee, on behalf of the Trust
        Fund,
        rather than the Servicer, the Advancing Person’s wire transfer instructions, and
        include the Servicer’s acknowledgment thereto or proof of an Event of Default
        under the Advance Facility. The Trustee shall have no duty or liability with
        respect to any calculation of any reimbursement to be paid to an Advancing
        Person and shall be entitled to rely without independent investigation on
        the
        Advancing Person’s notice provided pursuant to this Section 3.27. An Advancing
        Person whose obligations hereunder are limited to the funding of Advances
        and/or
        Servicing Advances shall not be required to meet the qualifications of a
        Sub-Servicer pursuant to Section 6.06 hereof. 

      

      
        
          
          

        

        
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      (b)
         Notwithstanding
        the foregoing, and for the avoidance of doubt, (i) the Servicer and/or the
        Servicer’s Assignee shall only be entitled to reimbursement of Advance
        reimbursement amounts hereunder from withdrawals from the Collection Account
        pursuant to Section 3.07 of this Agreement and shall not otherwise be entitled
        to make withdrawals or receive amounts that shall be deposited in the
        Distribution Account, and (ii) none of the Trustee or the Certificateholders
        shall have any right to, or otherwise be entitled to, receive any Advance
        reimbursement amounts to which the Servicer or Servicer’s Assignee, as
        applicable, shall be entitled pursuant to Section 3.07 hereof. An Advance
        Facility may be terminated by the joint written direction of the Servicer
        and
        the related Advancing Person. Written notice of such termination shall be
        delivered to the Trustee in the manner set forth in Section 12.06 hereof.
        None
        of the Depositor or the Trustee shall, as a result of the existence of any
        Advance Facility, have any additional duty or liability with respect to the
        calculation or payment of any Advance reimbursement amount, nor, as a result
        of
        the existence of any Advance Facility, shall the Depositor or the Trustee
        have
        any additional responsibility to track or monitor the administration of the
        Advance Facility or the payment of Advance reimbursement amounts to the
        Servicer’s Assignee. The Servicer shall indemnify the Depositor, the Trustee,
        any successor Servicer and the Trust Fund for any claim, loss, liability
        or
        damage resulting from any claim by the related Advancing Person, except to
        the
        extent that such claim, loss, liability or damage resulted from or arose
        out of
        negligence, recklessness or willful misconduct on the part of the Depositor,
        the
        Trustee or any successor Servicer, as the case may be, or failure by the
        successor Servicer or the Trustee, as the case may be, to remit funds as
        required by this Agreement or the commission of an act or omission to act
        by the
        successor Servicer or the Trustee, as the case may be, and the passage of
        any
        applicable cure or grace period, such that an Event of Default under this
        Agreement occurs or such entity is subject to termination for cause under
        this
        Agreement. The Servicer shall maintain and provide to any successor Servicer
        and, upon request, the Trustee a detailed accounting on a loan-by-loan basis
        as
        to amounts advanced by, pledged or assigned to, and reimbursed to any Advancing
        Person. The successor Servicer shall be entitled to rely on any such information
        provided by the predecessor Servicer, and the successor Servicer shall not
        be
        liable for any errors in such information.

      

      
        
          
          

        

        
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      (c)
         If
        an
        Advancing Person is entitled to reimbursement for any particular Advance
        or
        Servicing Advance as set forth in Section 3.27(a), then the Servicer shall
        not
        be permitted to reimburse itself therefor under Section 3.07, but instead
        the
        Servicer shall include such amounts in the applicable remittance to the Trustee
        made pursuant to Section 3.06(d) to the extent of amounts on deposit in the
        Collection Account on the related Servicer Remittance Date. The Trustee is
        hereby authorized to pay to an Advancing Person reimbursements for Advances
        and
        Servicing Advances from the Distribution Account to the same extent the Servicer
        would have been permitted to reimburse itself for such Advances and/or Servicing
        Advances in accordance with Section 3.07, had the Servicer made such Advance
        or
        Servicing Advance.

      

      (d)
         All
        Advances and Servicing Advances made pursuant to the terms of this Agreement
        shall be deemed made and shall be reimbursed on a “first in first out” (FIFO)
        basis. In the event the Servicer’s Assignee shall have received some or all of
        an Advance reimbursement amount related to Advances and/or Servicing Advances
        that were made by a Person other than such predecessor Servicer or its related
        Advancing Person in error, then such Servicer’s Assignee shall be required to
        remit any portion of such Advance reimbursement amount to each Person entitled
        to such portion of such Advance reimbursement amount. Without limiting the
        generality of the foregoing, the Servicer shall remain entitled to be reimbursed
        pursuant to Section 3.07 for all Advances and/or Servicing Advances funded
        by
        the Servicer to the extent the related Advance reimbursement amounts have
        not
        been assigned, sold or pledged to such Advancing Person or Servicer’s
        Assignee.

      

      (e)
         In
        the
        event the Servicer is terminated pursuant to Section 7.01, the Advancing
        Person
        shall succeed to the terminated Servicer’s right of reimbursement set forth in
        Section 7.02 to the extent of such Advancing Person’s financing of Advances or
        Servicing Advances hereunder then remaining unreimbursed.

      

      (f)
         Any
        amendment to this Section 3.27 or to any other provision of this Agreement
        that
        may be necessary or appropriate to effect the terms of an Advance Facility
        as
        described generally in this Section 3.27, including amendments to add provisions
        relating to a successor Servicer, may be entered into by the Trustee, the
        Depositor and the Servicer without the consent of any Certificateholder,
        provided such amendment complies with Section 12.01 hereof. All reasonable
        costs
        and expenses (including attorneys’ fees) of each party hereto of any such
        amendment shall be borne solely by the Servicer. The parties hereto hereby
        acknowledge and agree that: (a) the Advances and/or Servicing Advances financed
        by, sold and/or pledged to an Advancing Person under any Advance Facility
        are
        obligations owed to the Servicer payable only from the cash flows and proceeds
        received under this Agreement for reimbursement of Advances and/or Servicing
        Advances only to the extent provided herein, and the Trustee and the Trust
        Fund
        are not, as a result of the existence of any Advance Facility, obligated
        or
        liable to repay any Advances and/or Servicing Advances financed by the Advancing
        Person; (b) the Servicer will be responsible for remitting to the Advancing
        Person the applicable amounts collected by it as reimbursement for Advances
        and/or Servicing Advances purchased or funded by the Advancing Person, subject
        to the provisions of this Agreement; and (c) the Trustee shall not have any
        responsibility to track or monitor the administration of the financing
        arrangement between the Servicer and any Advancing Person.

      

      
        
          
          

        

        
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      Section
        3.28  Servicer
        Rights Facility.

      

      The
        Servicing Rights Owner is hereby authorized to finance, pledge and/or assign
        any
        or all of its right, title and interest in, to and under this Agreement to
        one
        or more lenders (each, a “Servicing Rights Pledgee”) selected by the Servicing
        Rights Owner. The Trustee and the Depositor hereby (i) consent to any such
        financing, pledge and/or assignment (without the need for the delivery of
        any
        notice or other communication to the Trustee or the Depositor, or for the
        execution by the Trustee or the Depositor of any agreement or other document
        or
        instrument, other than this Agreement), and (ii) agree that upon delivery
        by the
        Servicing Rights Pledgee to the Trustee of a letter signed by the Servicing
        Rights Pledgee (without further need for the delivery of any notice or other
        communication to the Trustee or the Depositor, or for the execution by the
        Trustee or the Depositor of any agreement or other document or instrument
        in
        addition to this Agreement), the Trustee shall appoint the Servicing Rights
        Pledgee or its designee as successor Servicer upon termination of the Servicer,
        provided that at the time of such appointment, the Servicing Rights Pledgee
        or
        such designee meets the requirements of a successor Servicer pursuant to
        Section
        7.02, agrees to be subject to the terms of this Agreement and provided further
        that such appointment does not cause any of the Rating Agencies to withdraw,
        downgrade or qualify the ratings they have assigned to any of the Certificates,
        as evidenced by a confirmation from the Rating Agencies. For the avoidance
        of
        doubt, the Servicing Rights Pledgee or its designee (as the case may be)
        shall
        not be otherwise required to satisfy any other eligibility requirements of
        a
        successor Servicer pursuant to Section 6.04.

      

      ARTICLE
        IV

      

      FLOW
        OF FUNDS

      

      Section
        4.01  Distributions.

      

      (a)
         On
        each
        Distribution Date, the Trustee, will first distribute the Prepayment Charges
        collected on the Group I Mortgage Loans and on the Group II Mortgage Loans
        during the prior Prepayment Period to the Holders of the Class CA Certificates.
        After making that distribution, the Trustee, shall (based solely on the
        information provided to the Trustee by the Servicer pursuant to Section 3.24
        hereof) withdraw from the Distribution Account that portion of Available
        Funds
        for such Distribution Date consisting of the Interest Remittance Amount and
        the
        Principal Remittance Amount for such Distribution Date, and, subject to the
        special rules relating to Reallocations provided in Section 4.04(e) hereof,
        make
        the following disbursements and transfers in the order of priority described
        below, in each case to the extent of the Interest Remittance Amount and the
        Principal Remittance Amount remaining for such Distribution Date:

      

      
        
          
          

        

        
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      (i) On
        each
        Distribution Date, the Trustee, will distribute, pro-rata from the Group
        I
        Interest Remittance Amount and the Group II Interest Remittance Amount, the
        Trustee Fee, the Back-up Servicing Fee and the Custodian Fee which are due
        on
        that Distribution Date to the Trustee and Custodian respectively. After making
        that distribution, the Trustee will then apply the remaining Interest Remittance
        Amount to the payment of interest then due on the certificates in the following
        order of priority:

      

      (A)
         first,
        on each
        Distribution Date on or prior to the Class I Termination Date, payable (i)
        from
        the Group I Interest Remittance Amount to the Supplemental Interest Trust
        as the
        Holder of the Class I Certificates, the product of (x) the sum of (1) the
        Class
        I Monthly Interest Distributable Amount and (2) any unpaid Hedge Termination
        Payments that are not Defaulted Hedge Termination Payments, multiplied by
        (y)
        the Group I Class I Percentage, (ii) from the Group II Interest Remittance
        Amount, to the Supplemental Interest Trust as the Holder of the Class I
        Certificates, the product of (x) the sum of (1) the Class I Monthly Interest
        Distributable Amount and (2) any unpaid Hedge Termination Payments that are
        not
        Defaulted Hedge Termination Payments, multiplied by (y) the Group II Class
        I
        Percentage and (iii) if the amounts in (i) and (ii) above are insufficient
        to
        pay to the Supplemental Interest Trust as the Holder of the Class I Certificates
        the sum of (1) the Class I Monthly Interest Distributable Amount and (2)
        any
        unpaid Hedge Termination Payments that are not Defaulted Hedge Termination
        Payments, then such insufficiency shall be paid pro rata from the Group I
        Principal Remittance Amount and the Group II Principal Remittance
        Amount);

      

      
        	 	
                (B)
                  

              	
                second,
                  concurrently, with equal priority of
                  payment:

              

      

      

      (I)
         payable
        solely from the Group I Interest Remittance Amount for that Distribution
        Date
        or, to the extent that the Group I Interest Remittance Amount is less than
        the
        related Monthly Interest Distributable Amount for the Class A-1A Certificates,
        also from the Group II Cross Collateralization Amount for that Distribution
        Date, to the Holders of the Class A-1A Certificates, the Monthly Interest
        Distributable Amount for the Class A-1A Certificates;

      

      (II)
         payable
        solely from the Group II Interest Remittance Amount for that Distribution
        Date
        or, to the extent that the Group II Interest Remittance Amount is less than
        the
        related aggregate Monthly Interest Distributable Amount for the Class A-2A1,
        Class A-2A2, Class A-2B, Class A-2C and Class A-2D Certificates, also from
        the
        Group I Cross Collateralization Amount for that Distribution Date, concurrently
        to the Holders of the Class A-2A1, Class A-2A2, Class A-2B, Class A-2C and
        Class
        A-2D Certificates, the related Monthly Interest Distributable Amount, pro-rata
        based on the amounts of interest each such Class is otherwise entitled to
        receive on such Distribution Date; 

      

      
        
          
          

        

        
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      (C)
         third,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class M-1 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-1
        Certificates;

      

      (D)
         fourth,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class M-2 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-2
        Certificates;

      

      (E)
         fifth,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class M-3 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-3
        Certificates;

      

      (F)
         sixth,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class M-4 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-4
        Certificates;

      

      (G)
         seventh,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class M-5 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-5
        Certificates;

      

      (H)
         eighth,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class M-6 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-6
        Certificates;

      

      (I)
         ninth,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class M-7 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-7
        Certificates;

      

      (J)
         tenth,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class M-8 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-8
        Certificates;

      

      (K)
         eleventh,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class M-9 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-9
        Certificates;

      

      (L)
         twelfth,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class M-10 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-10
        Certificates;

      

      (M)
         thirteenth,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount to the Holders of the Class M-11 Certificates,
        the
        Monthly Interest Distributable Amount for the Class M-11
        Certificates;

      

      (N)
         fourteenth,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Supplemental Interest Trust, the Excess
        Cashflow relating to interest (net of any amounts distributed pursuant to
        Section 4.04(d)(i)), to be distributed pursuant to Sections 4.04 (d)(ii);
        and

      

      
        
          
          

        

        
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      (O)
         fifteenth,
        payable
        from the remaining Group I Interest Remittance Amount and the remaining Group
        II
        Interest Remittance Amount, to the Holders of the Class R Certificates, any
        remainder.

      

      (ii) On
        each
        Distribution Date (a) prior to the Crossover Date or (b) on which a Trigger
        Event is in effect, the Trustee, shall (based solely on the information provided
        to the Trustee by the Servicer pursuant to Section 3.24 hereof) withdraw
        from
        the Distribution Account that portion of the Available Funds relating to
        principal plus the Extra Principal Distribution Amount (to be distributed
        pursuant to Section 4.04 (d)(i)) for such Distribution Date and (after making
        payments to the Supplemental Interest Trust as the Holder of the Class I
        Certificates in respect of any Class I Monthly Interest Distributable Amount
        remaining unpaid from the Interest Remittance Amount) make the following
        disbursements and transfers in the order of priority described
        below:

      

      
        	 	
                (A)
                  

              	
                first,
                  concurrently, with equal priority of
                  payment:

              

      

      

      (I)
         payable
        solely from the Group I Principal Distribution Amount, to the Holders of
        the
        Class A-1A Certificates, the entire amount of the Group I Principal Distribution
        Amount, until the Certificate Principal Balance of the Class A-1A Certificates
        has been reduced to zero; and

      

      (II)
         payable
        solely from the Group II Principal Distribution Amount, to the Holders of
        the
        Group II Certificates (to be distributed among such Certificates pursuant
        to
        Section 4.01(d)), the entire amount of the Group II Principal Distribution
        Amount, until the aggregate Certificate Principal Balance of the Group II
        Certificates has been reduced to zero;

      

      
        	 	
                (B)
                  

              	
                second,

              

      

      

      (I)
         if
        the
        Certificate Principal Balance of the Class A-1A Certificates has been reduced
        to
        zero, then to the Holders of the Group II Certificates (to be distributed
        among
        such Certificates pursuant to Section 4.01(d)), the amount of any remaining
        Group I Principal Distribution Amount, until the aggregate Certificate Principal
        Balance of the Group II Certificates has been reduced to zero; or

      

      (II)
         if
        the
        aggregate Certificate Principal Balance of the Group II Certificates has
        been
        reduced to zero, then to the Holders of the Class A-1A Certificates, the
        amount
        of any remaining Group II Principal Distribution Amount, until the Certificate
        Principal Balance of the Class A-1A Certificates has been reduced to
        zero;

      

      (C)
         third,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-1 Certificates,
        the entire remaining Principal Distribution Amount until the Certificate
        Principal Balance of the Class M-1 Certificates has been reduced to
        zero;

      

      
        
          
          

        

        
          48

          
            

          

        

        
          
          

        

      

      

      

      (D)
         fourth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-2 Certificates,
        the entire remaining Principal Distribution Amount until the Certificate
        Principal Balance of the Class M-2 Certificates has been reduced to
        zero;

      

      (E)
         fifth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-3 Certificates,
        the entire remaining Principal Distribution Amount until the Certificate
        Principal Balance of the Class M-3 Certificates has been reduced to
        zero;

      

      (F)
         sixth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-4 Certificates,
        the entire remaining Principal Distribution Amount until the Certificate
        Principal Balance of the Class M-4 Certificates has been reduced to
        zero;

      

      (G)
         seventh,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-5 Certificates,
        the entire remaining Principal Distribution Amount until the Certificate
        Principal Balance of the Class M-5 Certificates has been reduced to
        zero;

      

      (H)
         eighth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-6 Certificates,
        the entire remaining Principal Distribution Amount until the Certificate
        Principal Balance of the Class M-6 Certificates has been reduced to
        zero;

      

      (I)
         ninth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-7 Certificates,
        the entire remaining Principal Distribution Amount until the Certificate
        Principal Balance of the Class M-7 Certificates has been reduced to
        zero;

      

      (J)
         tenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-8 Certificates,
        the entire remaining Principal Distribution Amount until the Certificate
        Principal Balance of the Class M-8 Certificates has been reduced to
        zero;

      

      (K)
         eleventh,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-9 Certificates,
        the entire remaining Principal Distribution Amount until the Certificate
        Principal Balance of the Class M-9 Certificates has been reduced to
        zero;

      

      (L)
         twelfth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-10 Certificates,
        the entire remaining Principal Distribution Amount, until the Certificate
        Principal Balance of the Class M-10 Certificates has been reduced to
        zero;

      

      (M)
         thirteenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-11 Certificates,
        the entire remaining Principal Distribution Amount, until the Certificate
        Principal Balance of the Class M-11 Certificates has been reduced to
        zero;

      

      
        
          
          

        

        
          49

          
            

          

        

        
          
          

        

      

      

      

      (N)
         fourteenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Trustee and the Custodian, pro-rata,
        any amounts owed to them under the Basic Documents remaining
        unpaid;

      

      (O)
         fifteenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Servicer, the amount of any
        reimbursement of indemnification owed to it by the Issuing Entity pursuant
        to
        Section 6.03 hereof;

      

      (P)
         sixteenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount and any remaining Available Funds relating
        to
        principal, to the Holders of the Class CA Certificates, for the benefit of
        the
        Supplemental Interest Trust, the entire remaining Principal Remittance Amount
        up
        to the extent of the Overcollateralization Amount; and

      

      (Q)
         seventeenth,
        payable
        from the Group I Principal Distribution Amount and the Group II Principal
        Distribution Amount, to the Holders of the Class R Certificates, for the
        benefit
        of the Supplemental Interest Trust, any remainder.

      

      (iii) On
        each
        Distribution Date (a) on or after the Crossover Date and (b) on which a Trigger
        Event is not in effect, the Trustee, shall (based solely on the information
        provided to the Trustee by the Servicer pursuant to Section 3.24 hereof)
        withdraw from the Distribution Account that portion of the Available Funds
        relating to principal plus the Extra Principal Distribution Amount (to be
        distributed pursuant to Section 4.04 (d)(i)) for such Distribution Date and
        (after making payments to the Supplemental Interest Trust as the Holder of
        the
        Class I Certificates in respect of any Class I Monthly Interest Distributable
        Amount remaining unpaid from the Interest Remittance Amount) make the following
        disbursements and transfers in the order of priority described
        below:

      

      
        	 	
                (A)
                  

              	
                first,
                  concurrently, with equal priority of
                  payment:

              

      

      

      (I)
         payable
        solely from the Group I Principal Distribution Amount, to the Holders of
        the
        Class A-1A Certificates, the Group I Certificate Principal Distribution Amount,
        until the Certificate Principal Balance of the Class A-1A Certificates has
        been
        reduced to zero; and

      

      (II)
         payable
        solely from the Group II Principal Distribution Amount, to the Holders of
        the
        Group II Certificates (to be distributed among such Certificates pursuant
        to
        Section 4.01(d)), the Group II Certificate Principal Distribution Amount,
        until
        the aggregate Certificate Principal Balance of the Group II Certificates
        has
        been reduced to zero;

      

      
        	 	
                (B)
                  

              	
                second,
                  concurrently, with equal priority of
                  payment:

              

      

      

      
        
          
          

        

        
          50

          
            

          

        

        
          
          

        

      

      

      

      (I)
         if
        the
        Group I Principal Distribution Amount was insufficient to pay the Group I
        Certificate Principal Distribution Amount, then payable from the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class A-1A Certificates,
        the unpaid portion of the Group I Certificate Principal Distribution Amount
        based on the aggregate unpaid portion of the Class A Principal Distribution
        Amount; or

      

      (II)
         if
        the
        Group II Principal Distribution Amount was insufficient to pay the Group
        II
        Certificate Principal Distribution Amount, then payable from the remaining
        Group
        I Principal Distribution Amount, to the Holders of the Group II Certificates
        (to
        be distributed among such Certificates pursuant to Section 4.01(d)), the
        unpaid
        portion of the Group II Certificate Principal Distribution Amount based on
        the
        aggregate unpaid portion of the Class A Principal Distribution
        Amount;

      

      (C)
         third,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-1 Certificates,
        the Class M-1 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-1 Certificates has been reduced to zero;

      

      (D)
         fourth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-2 Certificates,
        the Class M-2 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-2 Certificates has been reduced to zero;

      

      (E)
         fifth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-3 Certificates,
        the Class M-3 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-3 Certificates has been reduced to zero;

      

      (F)
         sixth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-4 Certificates,
        the Class M-4 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-4 Certificates has been reduced to zero;

      

      (G)
         seventh,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-5 Certificates,
        the Class M-5 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-5 Certificates has been reduced to zero;

      

      (H)
         eighth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-6 Certificates,
        the Class M-6 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-6 Certificates has been reduced to zero;

      

      (I)
         ninth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-7 Certificates,
        the Class M-7 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-7 Certificates has been reduced to zero;

      

      
        
          
          

        

        
          51

          
            

          

        

        
          
          

        

      

      

      

      (J)
         tenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-8 Certificates,
        the Class M-8 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-8 Certificates has been reduced to zero;

      

      (K)
         eleventh,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-9 Certificates,
        the Class M-9 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-9 Certificates has been reduced to zero;

      

      (L)
         twelfth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-10 Certificates,
        the Class M-10 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-10 Certificates has been reduced to zero;

      

      (M)
         thirteenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Holders of the Class M-11 Certificates,
        the Class M-11 Principal Distribution Amount, until the Certificate Principal
        Balance of the Class M-11 Certificates has been reduced to zero;

      

      (N)
         fourteenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Trustee and the Custodian, pro-rata,
        any amounts owed to them under the Basic Documents remaining
        unpaid;

      

      (O)
         fifteenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount, to the Servicer, the amount of any
        reimbursement of indemnification owed to it by the Issuing Entity pursuant
        to
        Section 6.03 hereof;

      

      (P)
         sixteenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount and any remaining Available Funds relating
        to
        principal, to the Holders of the Class CA Certificates, for the benefit of
        the
        Supplemental Interest Trust, the entire remaining Principal Remittance Amount
        up
        to the extent of the Overcollateralization Amount; and 

      

      (Q)
         seventeenth,
        payable
        from the remaining Group I Principal Distribution Amount and the remaining
        Group
        II Principal Distribution Amount and any remaining Available Funds relating
        to
        principal, to the Holders of the Class R Certificates, for the benefit of
        the
        Supplemental Interest Trust, any remainder.

      

      (b)
         Method
        of Distribution.
        The
        Trustee shall make distributions in respect of a Distribution Date to each
        Certificateholder of record on the related Record Date (other than as provided
        in Section 11.01 respecting the final distribution), in the case of
        Certificateholders of the Regular Certificates, by wire transfer, or upon
        written request at least five Business Days prior to the related Distribution
        Date by check or money order mailed to such Certificateholder at the address
        appearing in the Certificate Register. Distributions among Certificateholders
        shall be made in proportion to the Percentage Interests evidenced by the
        Certificates held by such Certificateholders.

      

      
        
          
          

        

        
          52

          
            

          

        

        
          
          

        

      

      

      

      (c)
         Distributions
        on Book-Entry Certificates.
        Each
        distribution with respect to a Book-Entry Certificate shall be paid to the
        Depository, which shall credit the amount of such distribution to the accounts
        of its Depository Participants in accordance with its normal procedures.
        Each
        Depository Participant shall be responsible for disbursing such distribution
        to
        the Certificate Owners that it represents and to each indirect participating
        brokerage firm (a “brokerage firm” or “indirect participating firm”) for which
        it acts as agent. Each brokerage firm shall be responsible for disbursing
        funds
        to the Certificate Owners that it represents. All such credits and disbursements
        with respect to a Book-Entry Certificate are to be made by the Depository
        and
        the Depository Participants in accordance with the provisions of the
        Certificates. None of the Custodian, the Trustee, the Depositor, the Servicer
        or
        the Sponsor shall have any responsibility therefor except as otherwise provided
        by applicable law.

      

      (d)
         All
        principal amounts distributed to the Group II Certificates shall be distributed
        in the following order:

      

      
        	 	
                (i)

              	
                concurrently
                  to the Class A-2A1 and Class A-2A2 Certificates pro rata by their
                  respective Certificate Principal Balances, until their Certificate
                  Principal Balances have been reduced to zero,

              

      

      

      
        	 	
                (ii)

              	
                to
                  the Class A-2B Certificates until its Certificate Principal Balance
                  has been reduced to zero,

              

      

      

      
        	 	
                (iii)

              	
                to
                  the Class A-2C Certificates until its Certificate Principal Balance
                  has
                  been reduced to zero, and

              

      

      

      
        	 	
                (iv)

              	
                to
                  the Class A-2D Certificates until its Certificate Principal Balance
                  has
                  been reduced to zero.

              

      

      

      However,
        if the aggregate Certificate Principal Balance of the Mezzanine Certificates
        and
        the Overcollateralization Amount is reduced or written down to zero, principal
        distributions to the Classes of Group II Certificates will be made pro rata,
        based on their respective Certificate Principal Balances until their respective
        Certificate Principal Balances are paid to zero.

      

      Section
        4.02  Distribution
        Account.

      

      (a)
         No
        later
        than the Closing Date, the Trustee, shall establish and maintain a segregated
        trust account that is an Eligible Account, which shall be titled “Distribution
        Account, Deutsche Bank National Trust Company, as Trustee for the registered
        holders of NovaStar Mortgage Funding Trust 2007-1, Home Equity Loan Asset-Backed
        Certificates, Series 2007-1” (the “Distribution
        Account”).
        The
        Trustee shall, promptly upon receipt, deposit in the Distribution Account
        and
        retain therein the Interest Remittance Amount and the Principal Remittance
        Amount remitted on each Servicer Remittance Date to the Trustee by the Servicer.
        Funds deposited in the Distribution Account shall be held in trust by the
        Trustee for the Certificateholders for the uses and purposes set forth
        herein.

      

      
        
          
          

        

        
          53

          
            

          

        

        
          
          

        

      

      

      

      (b)
         The
        Trustee shall invest funds deposited in the Distribution Account in Eligible
        Investments in accordance with the written direction of the Servicer with
        a
        maturity date no later than the Business Day immediately proceeding the date
        on
        which such funds are required to be withdrawn from such account pursuant
        to this
        Agreement. All income or other gain from such investments may be released
        from
        the Distribution Account and paid to the Servicer. The Servicer shall be
        obligated to cover losses on such Eligible Investments. If the Trustee does
        not
        receive such written investment direction it shall retain the funds uninvested.
        The Trustee or its Affiliates are permitted to receive additional compensation
        that could be deemed to be in the Trustee’s economic self-interest for (i)
        serving as investment adviser, administrator, shareholder, servicing agent,
        custodian or sub-custodian with respect to certain of the investments, (ii)
        using affiliates to effect transactions in certain investments and (iii)
        effecting transactions in certain investments. Such compensation is not payable
        or reimbursable under this Agreement. The Trustee shall not be liable for
        the
        selection of investments or for investment losses incurred thereon.

      

      (c)
         Amounts
        on deposit in the Distribution Account shall be withdrawn by the Trustee
        as
        follows:

      

      (i) To
        fund
        the distributions described in Section 4.01 hereof;

      

      (ii) To
        withdraw any amount not required to be deposited in the Distribution Account
        or
        deposited therein in error;

      

      (iii) To
        clear
        and terminate the Distribution Account upon the termination of this Agreement,
        with any amounts remaining on deposit therein being paid to the Holders of
        the
        Class R Certificates; and

      

      (iv) To
        distribute any amounts of investment income to the Servicer.

      

      (d)
         On
        each
        Distribution Date, the Trustee shall distribute all amounts on deposit in
        the
        Distribution Account (other than investment income) established by it to
        Certificateholders in respect of the Certificates and to such other persons
        in
        the order of priority set forth in Section 4.01 hereof.

      

      Section
        4.03  Statements.

      

      (a)
         On
        each
        Distribution Date, based solely on information provided to it by the Servicer
        in
        its Determination Date Report, the Trustee shall prepare and make available
        to
        each Holder of the Regular Certificates, the Hedge Counterparties, the Servicer
        and the Rating Agencies, a statement as to the distributions made on such
        Distribution Date:

      

      (i) the
        amount of the distribution made on such Distribution Date to the Holders
        of each
        Class of Regular Certificates, separately identified, allocable to principal
        and
        the amount of the distribution made to the Holders of the Class C Certificates
        allocable to Prepayment Charges;

      

      
        
          
          

        

        
          54

          
            

          

        

        
          
          

        

      

      

      

      (ii) the
        amount of the distribution made on such Distribution Date to the Holders
        of each
        Class of Regular Certificates allocable to interest, separately
        identified;

      

      (iii) the
        Pool
        Balance of the Group I Mortgage Loans and the Group II Mortgage Loans at
        the
        Close of Business at the end of the related Due Period;

      

      (iv) the
        number, aggregate principal balance, and weighted average Mortgage Rate of
        the
        Mortgage Loans as of the related Determination Date;

      

      (v) the
        number and aggregate unpaid principal balance of Mortgage Loans (identified
        by
        Group) that (A) were Delinquent (exclusive of Mortgage Loans in bankruptcy
        or
        foreclosure and REO Properties) (1) 30 to 59 days, (2) 60 to 89 days and
        (3) 90
        or more days (B) as to which foreclosure proceedings have been commenced
        and
        that (i) are not Delinquent, and (ii) are Delinquent (1) 30 to 59 days, (2)
        60
        to 89 days and (3) 90 or more days, (C) are related to a REO Property and
        that
        (i) are not Delinquent and (ii) are Delinquent (1) 30 to 59 days, (2) 60
        to 89
        days and (3) 90 or more days and (D) are related to a Mortgagor that was
        subject
        to a bankruptcy proceeding and that (i) are not Delinquent and (ii) are
        Delinquent (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days,
        in each
        case on a contractual and bankruptcy legal basis;

      

      (vi) the
        aggregate amount of Principal Prepayments made during the related Prepayment
        Period;

      

      (vii) the
        aggregate amount of Realized Losses incurred during the related Prepayment
        Period and the cumulative amount of Realized Losses;

      

      (viii) the
        Certificate Principal Balance of each Class of the Class A Certificates and
        each
        Class of the Mezzanine Certificates, after giving effect to the distributions
        made on such Distribution Date;

      

      (ix) the
        Unpaid Interest Shortfall Amount, if any, with respect to each Class of the
        Class A Certificates and each Class of the Mezzanine Certificates for such
        Distribution Date;

      

      (x) the
        aggregate amount of any Prepayment Interest Shortfalls for such Distribution
        Date, to the extent not covered by payments by the Servicer pursuant to Section
        3.26;

      

      (xi) the
        Credit Enhancement Percentage for such Distribution Date;

      

      (xii) the
        Available Funds Cap Carryforward Amount for each Class of the Class A
        Certificates and each Class of the Mezzanine Certificates if any, for such
        Distribution Date and the amount remaining unpaid after reimbursements therefor
        on such Distribution Date;

      

      
        
          
          

        

        
          55

          
            

          

        

        
          
          

        

      

      

      

      (xiii) the
        respective Pass-Through Rates applicable to each Class of the Class A
        Certificates and each Class of the Mezzanine Certificates for such Distribution
        Date and the Pass-Through Rate applicable to each Class of the Class A
        Certificates and each Class of the Mezzanine Certificates for the immediately
        succeeding Distribution Date;

      

      (xiv) the
        Supplemental Interest Payment for each Class on such Distribution
        Date;

      

      (xv) the
        difference between (x) the aggregate notional amount of the Hedge Agreements
        and
        (y) the aggregate Certificate Principal Balance of the Class A Certificates
        and
        Mezzanine Certificates on such Distribution Date;

      

      (xvi) the
        Required Overcollateralization Amount for such Distribution Date;

      

      (xvii) the
        Excess Cashflow for such Distribution Date;

      

      (xviii) the
        aggregate amount of Scheduled Principal Payments made during the related
        Due
        Period;

      

      (xix) the
        aggregate amount of Principal Prepayments made during the related Due Period
        in
        which the related Mortgagor paid the related Mortgage Loan in full;

      

      (xx) the
        aggregate amount of Principal Prepayments in part made during the related
        Prepayment Period;

      

      (xxi) the
        number and the aggregate principal balance of all Liquidated Mortgage Loans
        for
        the related Prepayment Period;

      

      (xxii) the
        aggregate amount of Net Liquidation Proceeds received during the related
        Prepayment Period;

      

      (xxiii) the
        dollar amount of claims made, amounts paid by the MI Insurer in respect of
        claims made, and premiums due and paid under the MI Policy; and

      

      (xxiv) the
        amount equal to the difference between (x) the Class I Monthly Interest
        Distributable Amount and (y) any amounts received by the Supplemental Interest
        Trust from the Hedge Counterparties in respect of the Hedge Agreements,
        respectively; provided, however, that if the resulting number is a negative
        number, then the absolute value of such negative number.

      

      In
        the
        case of information furnished pursuant to subclauses (i) and (ii) above,
        the
        amounts shall be expressed in a separate section of the report as a dollar
        amount for each Class for each $1,000 original dollar amount as of the Closing
        Date.

      

      
        
          
          

        

        
          56

          
            

          

        

        
          
          

        

      

      

      

      For
        all
        purposes of this Agreement, with respect to any Mortgage Loan, delinquencies
        shall be determined and reported based on the “OTS” methodology for determining
        delinquencies on mortgage loans similar to the Mortgage Loans as described
        in
        the definition of “Delinquent.”

      

      The
        Trustee may, in the absence of manifest error, conclusively rely upon the
        Determination Date Report of the Servicer in its preparation of the statement
        to
        Certificateholders pursuant to this Section 4.03.

      

      (b)
         Within
        a
        reasonable period of time after the end of each calendar year, the Trustee
        shall, upon written request, furnish to each Person who at any time during
        the
        calendar year was a Certificateholder of a Regular Certificate, if requested
        in
        writing by such Person, such information as is reasonably necessary to provide
        to such Person a statement containing the information set forth in subclauses
        (i) and (ii) above, aggregated for such calendar year or applicable portion
        thereof during which such Person was a Certificateholder. Such obligation
        of the
        Trustee shall be deemed to have been satisfied to the extent that substantially
        comparable information shall be prepared and furnished by the Trustee to
        Certificateholders pursuant to any requirements of the Code as are in force
        from
        time to time.

      

      (c)
         On
        each
        Distribution Date, the Trustee shall make available on its website to the
        Residual Certificateholders a copy of the reports forwarded to the Regular
        Certificateholders in respect of such Distribution Date with such other
        information as the Trustee deems necessary or appropriate.

      

      (d)
         Within
        a
        reasonable period of time after the end of each calendar year, the Trustee
        shall
        deliver to each Person who at any time during the calendar year was a Residual
        Certificateholder, if requested in writing by such Person, such information
        as
        is reasonably necessary to provide to such Person a statement containing
        the
        information provided pursuant to the previous paragraph aggregated for such
        calendar year or applicable portion thereof during which such Person was
        a
        Residual Certificateholder. Such obligation of the Trustee shall be deemed
        to
        have been satisfied to the extent that substantially comparable information
        shall be prepared and furnished to Certificateholders by the Trustee pursuant
        to
        any requirements of the Code as from time to time in force.

      

      (e)
         On
        each
        Distribution Date, the Trustee shall post on its website at https://www.tss.db.com/invr,
        which
        posting shall be accessible to each Certificateholder and the Hedge
        Counterparties, the statement prepared pursuant to paragraph (a) of this
        Section
        4.03. Assistance in using the website can be obtained by calling the Trustee’s
        investor relations desk at 1-800-735-7777. Such parties that are unable to
        use
        the website are entitled to have a paper copy mailed to them via first class
        mail by providing a written request of such to the Trustee at its Corporate
        Trust Office. The Trustee shall have the right to change the way such statements
        are distributed in order to make such distribution more convenient and/or
        accessible to the above parties and the Trustee shall provide timely and
        adequate notification to all above parties regarding any such changes. The
        Trustee shall not have any responsibility to (i) verify information provided
        by
        the Servicer to be included in such statement or (ii) include any information
        required to be included in such statement if the Servicer has failed to timely
        produce such information to the Trustee, as required pursuant
        hereto.

      

      
        
          
          

        

        
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      Section
        4.04  Supplemental
        Interest Trust; Excess Cashflow; Reallocations.

      

      (a)
         (i)
        The
        parties do hereby create and establish a sub-trust of the Trust Fund which
        shall
        hold an account, which, no later than the Closing Date, the Trustee shall,
        at
        the direction of the Servicer, establish and maintain, as a segregated trust
        account that is an Eligible Account, which shall be titled “Supplemental
        Interest Trust, Deutsche Bank National Trust Company, as Trustee for the
        registered holders of NovaStar Mortgage Funding Trust 2007-1, Home Equity
        Loan
        Asset-Backed Certificates, Series 2007-1.” The Trustee shall, promptly upon
        receipt, deposit in the Supplemental Interest Trust amounts of Excess Cashflow,
        if any, pursuant to Section 4.01 and each distribution of the Class I Monthly
        Interest Distributable Amount pursuant to Section 4.01(a)(i)(A), if any.
        Funds
        deposited in the Supplemental Interest Trust shall be held in trust by the
        Trustee for the Certificateholders for the uses and purposes set forth herein.
        Neither the Supplemental Interest Trust nor the related Supplemental Interest
        Account shall be an asset of any of the REMICs created hereunder.

      

      (i) (a)
        On
        each Distribution Date prior to the Class I Termination Date, the funds in
        the
        Supplemental Interest Trust (as reduced from time to time in accordance with
        this Section 4.04) will equal the sum of (x) any amounts received under any
        Hedge Agreement pursuant to Section 4.04(f), (y) the Class I Monthly Interest
        Distributable Amount and (z) any amounts of Excess Cashflow not used to maintain
        the Required Overcollateralization Amount.

      

      On
        each
        Distribution Date commencing in February 2010, the funds in the Supplemental
        Interest Trust (as reduced from time to time in accordance with this Section
        4.04) will equal any amounts of Excess Cashflow not used to maintain the
        Required Overcollateralization Amount.

      

      (b)
         The
        Trustee will invest funds deposited in the Supplemental Interest Trust as
        directed in writing by the Servicer in Eligible Investments with a maturity
        date
        (i) no later than the Business Day immediately preceding the date on which
        such
        funds are required to be withdrawn from such account pursuant to this Agreement,
        if a Person other than the Trustee or an Affiliate manages or advises such
        investment, and (ii) no later than the date on which such funds are required
        to
        be withdrawn from such account pursuant to this Agreement, if the Trustee
        or an
        Affiliate manages or advises such investment. If the Trustee does not receive
        such written investment instructions it shall retain such funds uninvested.
        All
        income and gain realized from investment of funds deposited in the Supplemental
        Interest Trust shall be credited to such Account. The Trustee will not be
        liable
        for investment losses on investments selected by the Servicer pursuant to
        this
        Section 4.04(b). The Supplemental Interest Trust will not be an asset of
        any of
        the REMICs created hereunder.

      

      (c)
         On
        each
        Distribution Date, the Trustee shall distribute the funds held in the
        Supplemental Interest Trust as follows: 

      

      (i) first,
        on each
        Distribution Date up to and including the Class I Termination Date, from
        funds
        other than funds relating to Excess Cashflow, and if such funds are
        insufficient, any Excess Cashflow remaining after the distributions set forth
        in
        Section 4.04(d)(i), to each Hedge Counterparty, its related Swap Amount and/or
        Cap Amount for such Distribution Date, and any unpaid Hedge Termination Payment
        owed to a Hedge Counterparty that is not a Defaulted Hedge Termination
        Payment;

      

      
        
          
          

        

        
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      (ii) second,
        from
        funds other than funds relating to Excess Cashflow, and if such funds are
        insufficient, any Excess Cashflow remaining after the distributions set forth
        in
        Section 4.04(d)(i), and after taking into account any amounts applied pursuant
        to clause (i) above, the amount necessary, if any, to eliminate any
        Overcollateralization Deficiency, after taking into account any Excess Cashflow
        previously applied to such purpose on such Distribution Date (provided, however,
        the amount paid pursuant to this Section 4.04(c)(ii) on any Distribution
        Date
        shall not exceed the excess of (A) the cumulative amount of Realized Losses
        from
        the Cut-Off Date through the last day of the related Payment Period over
        (B) the
        sum of all amounts paid pursuant to this Section 4.04(c)(ii) on all prior
        Distribution Dates);

      

      (iii) third,
        any
        remaining amounts to pay:

      

      (a)
         first,
        concurrently pro rata based on their respective amounts of Available Funds
        Cap
        Shortfall, from funds other than funds relating to Excess Cashflow, and if
        such
        funds are insufficient, any Excess Cashflow remaining after the distributions
        set forth in Section 4.04(d)(i), and after taking into account any amounts
        applied pursuant to clauses (i) and (ii) above, to each Class of Class A
        Certificates, the Supplemental Interest Payment for each Class of Class A
        Certificates (in each case only up to the amount necessary to pay any the
        related Supplemental Interest Amount Due); and

      

      (b)
         second,
        in
        direct order of priority (i.e., commencing with the Class M-1 Certificates
        and
        ending with the Class M-11 Certificates):

      

      (1) to
        each
        Class of Mezzanine Certificates which is not a Reallocable Class, from funds
        other than funds relating to Excess Cashflow, and if such funds are
        insufficient, any Excess Cashflow remaining after the distributions set forth
        in
        Section 4.04(d)(i), and after taking into account any amounts applied pursuant
        to clauses (i) and (ii) above, or clause (iii)(a) above, the Supplemental
        Interest Payment for each Class of Mezzanine Certificates (in each case only
        up
        to the amount necessary to pay the related Supplemental Interest Amount Due);
        and 

      

      (2) with
        respect to all or any portion of a Reallocable Class which has not previously
        been the subject of a Reallocation (a) the Supplemental Interest Payment
        otherwise allocated to Class M-6 Certificates shall be distributed to the
        Class
        M-6N Certificates and shall be the Non-Derivative Supplemental Interest Payment
        for the Class M-6 Certificates, the Supplemental Interest Payment otherwise
        allocated to the Class M-7 Certificates shall be distributed to the Class
        M-7N
        Certificates and shall be the Non-Derivative Supplemental Interest Payment
        for
        the Class M-7 Certificates, the Supplemental Interest Payment otherwise
        allocated to the Class M-8 Certificates shall be distributed to the Class
        M-8N
        Certificates and shall be the Non-Derivative Supplemental Interest Payment
        for
        the Class M-8 Certificates, the Supplemental Interest Payment otherwise
        allocated to the Class M-9 Certificates shall be distributed to the Class
        M-9N
        Certificates and shall be the Non-Derivative Supplemental Interest Payment
        for
        the Class M-9 Certificates, the Supplemental Interest Payment otherwise
        allocated to the Class M-10 Certificates shall be distributed to the Class
        M-10N
        Certificates and shall be the Non-Derivative Supplemental Interest Payment
        for
        the Class M-10 Certificates and the Supplemental Interest Payment otherwise
        allocated to the Class M-11 Certificates shall be distributed to the Class
        M-11N
        Certificates and shall be the Non-Derivative Supplemental Interest Payment
        for
        the Class M-11 Certificates, and (b) the Derivative Supplemental Interest
        Payment for the Class M-6 Certificates shall be paid to the Holders of the
        Class
        M-6 DSI Certificates, the Derivative Supplemental Interest Payment for the
        Class
        M-7 Certificates shall be paid to the Holders of the Class M-7 DSI Certificates,
        the Derivative Supplemental Interest Payment for the Class M-8 Certificates
        shall be paid to the Holders of the Class M-8 DSI Certificates, the Derivative
        Supplemental Interest Payment for the Class M-9 Certificates shall be paid
        to
        the Holders of the Class M-9 DSI Certificates, the Derivative Supplemental
        Interest Payment for the Class M-10 Certificates shall be paid to the Holders
        of
        the Class M-10 DSI Certificates and the Derivative Supplemental Interest
        Payment
        for the Class M-11 Certificates shall be paid to the Holders of the Class
        M-11
        DSI Certificates.

      

      
        
          
          

        

        
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      (iv) fourth,
        from
        any remaining funds, to the Hedge Counterparties to which such amounts are
        owed,
pro
        rata,
        any
        Defaulted Hedge Termination Payments and any indemnity payments provided
        for in
        Part 5 of the Hedge Agreements; and

      

      (v) fifth,
        from
        any remaining funds, to the Holders of the Class CB Certificates, an amount
        equal to the Class CB Interest Distributable Amount for such Distribution
        Date;
        and

      

      (vi) sixth,
        any
        remaining amounts, to the Holders of the Class CA Certificates.

      

      (d)
         On
        each
        Distribution Date, the Trustee shall distribute the funds relating to Excess
        Cashflow as follows:

      

      (i) prior
        to
        any deposit to the Supplemental Interest Trust, to the Holders of the Class
        or
        Classes of Certificates then entitled to receive distributions in respect
        of
        principal, in an amount equal to any Extra Principal Distribution Amount,
        distributable to such holders in the same order of priority as the Group
        I
        Principal Distribution Amount and the Group II Principal Distribution Amount
        as
        described in Section 4.01; and

      

      
        
          
          

        

        
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      (ii) to
        the
        Supplemental Interest Trust to distribute in accordance with Section
        4.04(c).

      

      (e)
         With
        respect to each Class of Reallocable Certificates, each Class of Class N
        Certificates and each Class of DSI Certificates:

      

      (i) upon
        receipt by the Trustee from the Depositor of a Reallocation Notice (which
        Reallocation Notice must be received by the Trustee at least seven Business
        Days
        prior to the Distribution Date on which the Reallocation is sought to be
        effective), the Trustee shall allocate, on all future Distribution Dates,
        the
        related Percentage Interests of distributions made on account of the specified,
        related Class DSI Certificates and Class N Certificates (which must be the
        identical Percentage Interest in each related Class DSI Certificate and Class
        N
        Certificate, e.g.,
        75%
        Percentage Interest in Class M-10 DSI and 75% Percentage Interest in Class
        M-10N) to the Holders of the related Class of Reallocable Certificates
        (e.g.,
        following the prior example, Class M-10); and

      

      (ii) unless
        subject to a prior Reallocation, all amounts otherwise distributable to each
        Reallocable Class (or Percentage Interest therein not previously Reallocated)
        pursuant to Section 4.01 hereof shall be distributed instead to the related
        Class of Class N Certificates.

      

      (f)
         [reserved].

      

      (g)
         In
        the
        event that a Hedge Counterparty elects to post collateral as provided in
        the
        related Hedge Agreement, the Trustee shall establish and maintain an Eligible
        Account with respect to the related Hedge Agreement (each, a “Hedge
        Collateral Account”)
        for
        the benefit of such Hedge Counterparty, as applicable, and the
        Certificateholders, as their interests may appear, into which such collateral
        shall be deposited. The Trustee may or shall (as indicated) make withdrawals
        from the related Hedge Collateral Account for the purposes of (i) entering
        into
        a substitute hedge agreement, (ii) funding the amount of any payment due
        to be
        made by such Hedge Counterparty under the related Hedge Agreement, as
        applicable, following the failure by such Hedge Counterparty to make that
        payment or (iii) as permitted pursuant to the related Hedge Agreement or
        this
        Agreement. The Trustee shall make withdrawals from the related Hedge Collateral
        Account and transfer the collateral (i) as required of the Trustee pursuant
        to
        the related Hedge Agreement or (ii) to the related Hedge Counterparty if
        the
        circumstances which required the posting of collateral no longer exist; and
        to
        the extent necessary to perform such obligation, the Trustee is required
        to
        liquidate any investments held in such Hedge Collateral Account. In the event
        that additional collateral is required to be posted by a Hedge Counterparty
        under the related Hedge Agreement, as applicable, the Trustee shall promptly
        make a demand on such Hedge Counterparty to post such additional collateral.
        To
        the extent cash makes up all or any portion of the collateral in a Hedge
        Collateral Account, such cash shall be invested in overnight (or redeemable
        within two local business days of demand) investments rated at least “A-1+” by
        S&P and “Prime-1” by Moody’s or “AAAm” or “AAAm-G” by S&P and “Aaa” by
        Moody’s (or such other investments as may be affirmed in writing by S&P and
        Moody’s), in accordance with the related Hedge Agreement. Such funds shall be
        invested at the written direction of the applicable Hedge Counterparty, or
        in
        case of an event of default or additional termination event with respect
        to
        which the Hedge Counterparty is the defaulting or sole affected party under
        the
        relevant Hedge Agreement, the Servicer, and if neither the Hedge Counterparty
        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 the applicable Hedge Counterparty.
        Any
        and all interest generated by such investment shall be transferred to the
        related Hedge Counterparty as provided in the related Hedge Agreement, as
        applicable, or where unspecified, on each Distribution Date. In connection
        with
        the maintenance and administration of a Hedge Collateral Account, the Trustee
        may request and rely on written instructions from the Hedge Counterparty
        or the
        Servicer, which the Hedge Counterparty and the Servicer hereby agree to provide,
        with respect to the maintenance and administration of such account. For the
        avoidance of doubt, the Trustee shall not have any right to apply any amounts
        or
        assets in any Hedge Collateral Account except in accordance with the enforcement
        and realization of its security interest pursuant to the related Hedge Agreement
        or otherwise in accordance with the related Hedge Agreement. The Trustee
        shall
        not be liable for the selection of investments or for investment losses incurred
        thereon.

      

      
        
          
          

        

        
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      The
        Trustee may designate an agent to maintain any Hedge Collateral Account,
        provided that the following conditions are satisfied: (i) the agent 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 S&P and “A+” or better by Fitch a and (ii)
        the total assets of the agent shall exceed $25,000,000. Under such
        circumstances, all references to the Trustee in this subsection (f) shall
        be to
        the Trustee’s agent appointed pursuant to this paragraph.

      

      Section
        4.05  
        [Reserved].

      

      Section
        4.06  [Reserved].

      

      Section
        4.07  Allocation
        of Realized Losses.

      

      All
        Realized Losses on the Mortgage Loans shall be allocated by the Trustee on
        each
        Distribution Date as follows: first,
        to
        amounts of Excess Cashflow, second,
        to the
        Overcollateralization Amount, third,
        to the
        Class M-11 Certificates, until the Certificate Principal Balance thereof
        has
        been reduced to zero; fourth,
        to the
        Class M-10 Certificates, until the Certificate Principal Balance thereof
        has
        been reduced to zero; fifth,
        to the
        Class M-9 Certificates, until the Certificate Principal Balance thereof has
        been
        reduced to zero; sixth,
        to the
        Class M-8 Certificates, until the Certificate Principal Balance thereof has
        been
        reduced to zero; seventh,
        to the
        Class M-7 Certificates, until the Certificate Principal Balance thereof has
        been
        reduced to zero; eighth,
        to the
        Class M-6 Certificates, until the Certificate Principal Balance thereof has
        been
        reduced to zero; ninth,
        to the
        Class M-5 Certificates, until the Certificate Principal Balance thereof has
        been
        reduced to zero; tenth,
        to the
        Class M-4 Certificates, until the Certificate Principal Balance thereof has
        been
        reduced to zero; eleventh,
        to the
        Class M-3 Certificates, until the Certificate Principal Balance thereof has
        been
        reduced to zero; twelfth,
        to the
        Class M-2 Certificates, until the Certificate Principal Balance thereof has
        been
        reduced to zero; and thirteenth,
        to the
        Class M-1 Certificates, until the Certificate Principal Balance thereof has
        been
        reduced to zero. All Realized Losses to be allocated to the Certificate
        Principal Balances of all Classes on any Distribution Date shall be so allocated
        after the actual distributions to be made on such date as provided above.
        All
        references above to the Certificate Principal Balance of any Class of
        Certificates shall be to the Certificate Principal Balance of such Class
        immediately prior to the relevant Distribution Date, before reduction thereof
        by
        any Realized Losses, in each case to be allocated to such Class of Certificates,
        on such Distribution Date. In no event shall Realized Losses be allocated
        to the
        Class A-1A Certificates, the Group II Certificates or the Class I
        Certificates.

      

      
        
          
          

        

        
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      Any
        allocation of Realized Losses to a Mezzanine Certificate on any Distribution
        Date shall be made by reducing the Certificate Principal Balance thereof
        by the
        amount so allocated. Any Subsequent Recoveries will be allocated to the
        Mezzanine Certificates in the reverse order of the Realized Loss allocation
        set
        forth in the preceding paragraph, to the extent of the Realized Loss allocated
        to each related Certificate.

      

      ARTICLE
        V

      

      THE
        CERTIFICATES

      

      Section
        5.01  The
        Certificates.

      

      Each
        of
        the Class A Certificates, the Mezzanine Certificates, the Class DSI
        Certificates, the Class C Certificates, the Class I Certificates and the
        Residual Certificates shall be substantially in the forms annexed hereto
        as
        exhibits, and shall, on original issue, be executed, authenticated and delivered
        by the Trustee to or upon the order of the Depositor concurrently with the
        sale
        and assignment to the Issuing Entity of the Trust Fund. The Class A Certificates
        and Mezzanine Certificates shall be initially evidenced by one or more
        Certificates representing a Percentage Interest with a minimum dollar
        denomination of $25,000 and integral dollar multiples of $1,000 in excess
        thereof, with a minimum investment of $100,000 (if the Certificates are
        Book-Entry Certificates), except that one Certificate of each such Class
        of
        Certificates may be in a different denomination so that the sum of the
        denominations of all outstanding Certificates of such Class shall equal the
        Certificate Principal Balance of such Class on the Closing Date. The Class
        DSI
        Certificates, the Class C Certificates, the Class I Certificates and the
        Residual Certificates are issuable in any Percentage Interests; provided,
        however, that the sum of all such percentages for each such Class totals
        100%
        and no more than ten Certificates of each Class may be issued.

      

      The
        Certificates shall be executed on behalf of the Issuing Entity by manual
        or
        facsimile signature on behalf of the Trustee by a Responsible Officer.
        Certificates bearing the manual or facsimile signatures of individuals who
        were,
        at the time when such signatures were affixed, authorized to sign on behalf
        of
        the Trustee shall bind the Issuing Entity, notwithstanding that such individuals
        or any of them have ceased to be so authorized prior to the authentication
        and
        delivery of such Certificates or did not hold such offices at the date of
        such
        Certificate. No Certificate shall be entitled to any benefit under this
        Agreement or be valid for any purpose, unless such Certificate shall have
        been
        manually authenticated by the Trustee substantially in the form provided
        for
        herein, and such authentication upon any Certificate shall be conclusive
        evidence, and the only evidence, that such Certificate has been duly
        authenticated and delivered hereunder. All Certificates shall be dated the
        date
        of their authentication. Subject to Section 5.02(c), the Class A Certificates,
        the Mezzanine Certificates and the Class DSI Certificates shall be Book-Entry
        Certificates. The other Classes of Certificates shall be Definitive
        Certificates.

      

      
        
          
          

        

        
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      Section
        5.02  Registration
        of Transfer and Exchange of Certificates.

      

      (a)
         The
        Certificate Registrar shall cause to be kept at the Corporate Trust Office
        a
        Certificate Register in which, subject to such reasonable regulations as
        it may
        prescribe, the Certificate Registrar shall provide for the registration of
        Certificates and of transfers and exchanges of Certificates as herein provided.
        The Trustee shall initially serve as Certificate Registrar for the purpose
        of
        registering Certificates and transfers and exchanges of Certificates as herein
        provided.

      

      Upon
        surrender for registration of transfer of any Certificate at the office
        designated in the definition of “Corporate Trust Office” maintained for such
        purpose pursuant to the foregoing paragraph and, in the case of a Residual
        Certificate, upon satisfaction of the conditions set forth below, the Trustee
        on
        behalf of the Issuing Entity shall execute, authenticate and deliver, in
        the
        name of the designated transferee or transferees, one or more new Certificates
        of the same aggregate Percentage Interest.

      

      At
        the
        option of the Certificateholders, Certificates may be exchanged for other
        Certificates in authorized denominations and the same aggregate Percentage
        Interests, upon surrender of the Certificates to be exchanged at such designated
        office. Whenever any Certificates are so surrendered for exchange, the Trustee
        shall execute on behalf of the Issuing Entity and authenticate and deliver
        the
        Certificates which the Certificateholder making the exchange is entitled
        to
        receive. Every Certificate presented or surrendered for registration of transfer
        or exchange shall (if so required by the Trustee or the Certificate Registrar)
        be duly endorsed by, or be accompanied by a written instrument of transfer
        satisfactory to the Trustee and the Certificate Registrar duly executed by,
        the
        Holder thereof or his attorney duly authorized in writing. 

      

      (b)
         Except
        as
        provided in paragraph (c) below, the Book-Entry Certificates shall at all
        times
        remain registered in the name of the Depository or its nominee and at all
        times:
        (i) registration of such Certificates may not be transferred by the Trustee
        except to another Depository; (ii) the Depository shall maintain book-entry
        records with respect to the Certificate Owners and with respect to ownership
        and
        transfers of such Certificates; (iii) ownership and transfers of registration
        of
        such Certificates on the books of the Depository shall be governed by applicable
        rules established by the Depository; (iv) the Depository may collect its
        usual
        and customary fees, charges and expenses from its Depository Participants;
        (v)
        the Trustee shall for all purposes deal with the Depository as representative
        of
        the Certificate Owners of the Certificates for purposes of exercising the
        rights
        of Holders under this Agreement, and requests and directions for and votes
        of
        such representative shall not be deemed to be inconsistent if they are made
        with
        respect to different Certificate Owners; (vi) the Trustee may rely and shall
        be
        fully protected in relying upon information furnished by the Depository with
        respect to its Depository Participants and furnished by the Depository
        Participants with respect to indirect participating firms and Persons shown
        on
        the books of such indirect participating firms as direct or indirect Certificate
        Owners; and (vii) the direct participants of the Depository shall have no
        rights
        under this Agreement under or with respect to any of the Certificates held
        on
        their behalf by the Depository, and the Depository may be treated by the
        Trustee, the Trustee and its agents, employees, officers and directors as
        the
        absolute owner of the Certificates for all purposes whatsoever.

      

      
        
          
          

        

        
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      All
        transfers by Certificate Owners of Book-Entry Certificates shall be made
        in
        accordance with the procedures established by the Depository Participant
        or
        brokerage firm representing such Certificate Owners. Each Depository Participant
        shall only transfer Book-Entry Certificates of Certificate Owners that it
        represents or of brokerage firms for which it acts as agent in accordance
        with
        the Depository’s normal procedures. The parties hereto are hereby authorized to
        execute a Letter of Representations with the Depository or take such other
        action as may be necessary or desirable to register a Book-Entry Certificate
        to
        the Depository. In the event of any conflict between the terms of any such
        Letter of Representation and this Agreement, the terms of this Agreement
        shall
        control.

      

      (c)
         If
        (i)(x)
        the Depository or the Depositor advises the Trustee in writing that the
        Depository is no longer willing or able to discharge properly its
        responsibilities as Depository and (y) the Depositor is unable to locate
        a
        qualified successor, or (ii) after the occurrence of a Servicing Default,
        the
        Certificate Owners of the Book-Entry Certificates representing not less than
        51%
        of the Voting Rights advise the Trustee and Depository through the Financial
        Intermediaries and the Depository Participants in writing that the continuation
        of a book-entry system through the Depository to the exclusion of definitive,
        fully registered certificates (“Definitive
        Certificates”)
        to
        Certificate Owners is no longer in the best interests of the Certificate
        Owners.
        Upon surrender to the Certificate Registrar of the Book-Entry Certificates
        by
        the Depository, accompanied by registration instructions from the Depository
        for
        registration, the Trustee shall, at the Sponsor’s expense, execute on behalf of
        the Issuing Entity and authenticate the Definitive Certificates. Neither
        the
        Depositor nor the Trustee shall be liable for any delay in delivery of such
        instructions and may conclusively rely on, and shall be protected in relying
        on,
        such instructions. Upon the issuance of Definitive Certificates, the Trustee,
        the Certificate Registrar, the Servicer, any Paying Agent and the Depositor
        shall recognize the Holders of the Definitive Certificates as Certificateholders
        hereunder.

      

      (d)
         No
        transfer, sale, pledge or other disposition of any Class M-10 Certificate,
        Class
        M-11 Certificate, Class N Certificate, Class DSI Certificate, Class CA
        Certificate, Class CB Certificate or Residual Certificate shall be made unless
        such disposition is exempt from the registration requirements of the Securities
        Act of 1933, as amended (the “1933
        Act”),
        and
        any applicable state securities laws or is made in accordance with the 1933
        Act
        and laws. In the event of any such transfer, except with respect to transfers
        of
        any Class M-10 Certificate, Class M-11 Certificate, Class N Certificate,
        Class
        DSI Certificate, Class CA Certificate, Class CB Certificate or Residual
        Certificates by or to the Depositor by or to NCFLLC by or to NCFC, or by
        or to
        NCFC by or to NCFLLC by or to Greenwich Capital Financial Products, Inc.,
        Wachovia Investment Holdings, LLC, or Newport Funding Corp., unless (i) such
        transfer is made in reliance upon Rule 144A under the 1933 Act and an investment
        letter, in substantially the form attached hereto as Exhibit G, is delivered
        by
        the Transferee to the Trustee) or (ii) a written Opinion of Counsel (which
        may
        be in-house counsel) acceptable to and in form and substance reasonably
        satisfactory to the Trustee and the Depositor is delivered to them stating
        that
        such transfer may be made pursuant to (x) the 1933 Act, or an exemption thereto,
        describing the applicable provision or exemption and the basis therefore,
        and
        (y) the Investment Company Act of 1940, or an exemption thereto, describing
        the
        applicable provision or exemption and the basis therefore, which Opinion
        of
        Counsel shall not be an expense of the Trustee or the Depositor. The Holder
        of a
        Class M-10 Certificate, Class M-11 Certificate, Class N Certificate, Class
        DSI
        Certificate, Class CA Certificate, Class CB Certificate or Residual Certificate
        desiring to effect such transfer shall indemnify and hold harmless the Trustee
        and the Depositor against any liability that may result if the transfer is
        not
        so exempt or is not made in accordance with such federal and state
        laws.

      

      
        
          
          

        

        
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      The
        Class
        I Certificates shall be registered in the name of the Supplemental Interest
        Trust and shall not be transferable.

      

      No
        transfer of a Class M-6 Certificate, Class M-7 Certificate, Class M-8
        Certificate, Class M-9 Certificate, Class M-10 Certificate, Class M-11
        Certificate, Class N Certificate, Class DSI Certificate, Class CA Certificate,
        Class CB Certificate or Residual Certificate or any interest therein shall
        be
        made to any Plan or to any Person acting, directly or indirectly, on behalf
        of
        any such Plan or acquiring such Certificates with “plan assets” of a Plan within
        the meaning of the Department of Labor regulation promulgated at 29 C.F.R.
§
2510.3-101 or otherwise (“Plan
        Assets”).
        Each
        Person who acquires any Ownership Interest in such Classes of Certificates
        shall
        be deemed, by the acceptance or acquisition of such Ownership Interest, to
        represent that it is not a Plan and is not acting, directly or indirectly,
        on
        behalf of a Plan or acquiring such Ownership Interest with Plan Assets.
The
        foregoing restrictions shall not apply to the transfer of any Class
        M-6, Class M-7, Class M-8 or Class M-9 Certificate
        that has been sold pursuant to a Qualified Underwriting, provided such transfer
        satisfies the other conditions under an Underwriter Exemption. The foregoing
        restrictions shall not apply to the transfer of any Class M-10 Certificate
        or
        Class M-11 Certificate that has been sold pursuant to a Qualified Underwriting,
        provided such transfer is to an “insurance company general account” (within the
        meaning of PTCE 95-60) and the conditions set forth in Sections I and III
        of
        PTCE 95-60 have been satisfied. 

      

      Reallocations
        are not, in and of themselves, “transfers, sales, pledges or other dispositions”
of the related Classes requiring any action pursuant to this Section
        5.02.

      

      The
        Depositor agrees to provide, upon request of any holder of a private Certificate
        or of any prospective purchaser of a private Certificate designated by such
        holder, at or prior to the time of sale, reasonably current information
        concerning the Issuing Entity and the Mortgage Loans, as more specifically
        detailed pursuant to Rule 144A(d) under the 1933 Act.

      

      Each
        Person who has or who acquires any Ownership Interest in a Residual Certificate
        shall be deemed by the acceptance or acquisition of such Ownership Interest
        to
        have agreed to be bound by the following provisions and to have irrevocably
        appointed the Depositor or its designee as its attorney-in-fact to negotiate
        the
        terms of any mandatory sale under clause (v) below and to execute all
        instruments of transfer and to do all other things necessary in connection
        with
        any such sale, and the rights of each Person acquiring any Ownership Interest
        in
        a Residual Certificate are expressly subject to the following
        provisions:

      

      (i) Each
        Person holding or acquiring any Ownership Interest in a Residual Certificate
        shall be a Permitted Transferee and shall promptly notify the Trustee of
        any
        change or impending change in its status as a Permitted Transferee.

      

      (ii) No
        Person
        shall acquire an Ownership Interest in a Residual Certificate unless such
        Ownership Interest is a pro-rata undivided interest.

      

      
        
          
          

        

        
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      (iii) In
        connection with any proposed transfer of any Ownership Interest in a Residual
        Certificate, the Trustee shall as a condition to registration of the transfer,
        require delivery to it, in form and substance satisfactory to it, of each
        of the
        following:

      

      (A)
         an
        affidavit in the form of Exhibit H hereto from the proposed transferee to
        the
        effect that such transferee is a Permitted Transferee and that it is not
        acquiring its Ownership Interest in the Residual Certificate that is the
        subject
        of the proposed transfer as a nominee, Trustee or agent for any Person who
        is
        not a Permitted Transferee; and

      

      (B)
         an
        affidavit in the form of Exhibit I hereto from the proposed transferor to
        the
        effect that no purpose of the transfer is to impede the assessment or collection
        of any tax. 

      

      (iv) Any
        attempted or purported transfer of any Ownership Interest in a Residual
        Certificate in violation of the provisions of this Section shall be absolutely
        null and void and shall vest no rights in the purported transferee. If any
        purported transferee shall, in violation of the provisions of this Section,
        become a Holder of a Residual Certificate, then the prior Holder of such
        Residual Certificate that is a Permitted Transferee shall, upon discovery
        that
        the registration of transfer of such Residual Certificate was not in fact
        permitted by this Section, be restored to all rights as Holder thereof
        retroactive to the date of registration of transfer of such Residual
        Certificate. The Trustee shall be under no liability to any Person for any
        registration of transfer of a Residual Certificate that is in fact not permitted
        by this Section or for making any distributions due on such Residual Certificate
        to the Holder thereof or taking any other action with respect to such Holder
        under the provisions of this Agreement so long as the Trustee received the
        documents specified in clause (iii). The Trustee shall be entitled to recover
        from any Holder of a Residual Certificate that was in fact not a Permitted
        Transferee at the time such distributions were made all distributions made
        on
        such Residual Certificate. Any such distributions so recovered by the Trustee
        shall be distributed and delivered by the Trustee to the prior Holder of
        such
        Residual Certificate that is a Permitted Transferee.

      

      (v) If
        any
        Person other than a Permitted Transferee acquires any Ownership Interest
        in a
        Residual Certificate in violation of the restrictions in this Section, then
        the
        Trustee shall have the right but not the obligation, without notice to the
        Holder of such Residual Certificate or any other Person having an Ownership
        Interest therein, to notify the Depositor to arrange for the sale of such
        Residual Certificate. The proceeds of such sale, net of commissions (which
        may
        include commissions payable to the Depositor or its affiliates in connection
        with such sale), expenses and taxes due, if any, will be remitted by the
        Trustee
        to the previous Holder of such Residual Certificate that is a Permitted
        Transferee, except that in the event that the Trustee determines that the
        Holder
        of such Residual Certificate may be liable for any amount due under this
        Section
        or any other provisions of this Agreement, the Trustee may withhold a
        corresponding amount from such remittance as security for such claim. The
        terms
        and conditions of any sale under this clause (v) shall be determined in the
        sole
        discretion of the Trustee and the Depositor and neither of them shall be
        liable
        to any Person having an Ownership Interest in a Residual Certificate as a
        result
        of its exercise of such discretion.

      

      
        
          
          

        

        
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      (vi) If
        any
        Person other than a Permitted Transferee acquires any Ownership Interest
        in a
        Residual Certificate in violation of the restrictions in this Section, then
        the
        Trustee upon receipt of reasonable compensation will provide to the Internal
        Revenue Service, and to the persons specified in Sections 860E(e)(3) and
        (6) of
        the Code, information needed to compute the tax imposed under Section 860E(e)
        of
        the Code on transfers of residual interests to disqualified
        organizations.

      

      The
        foregoing provisions of this Section shall cease to apply to transfers occurring
        on or after the date on which there shall have been delivered to the Trustee,
        in
        form and substance satisfactory to the Trustee, (i) written notification
        from
        each Rating Agency that the removal of the restrictions on Transfer set forth
        in
        this Section will not cause such Rating Agency to downgrade its rating of
        the
        Certificates and (ii) an Opinion of Counsel to the effect that such removal
        will
        not cause any REMIC created hereunder to fail to qualify as a
        REMIC.

      

      (e)
         No
        service charge shall be made for any registration of transfer or exchange
        of
        Certificates of any Class, but the Certificate Registrar may require payment
        of
        a sum sufficient to cover any tax or governmental charge that may be imposed
        in
        connection with any transfer or exchange of Certificates.

      

      All
        Certificates surrendered for registration of transfer or exchange shall be
        cancelled by the Certificate Registrar and disposed of pursuant to its standard
        procedures.

      

      Section
        5.03  Mutilated,
        Destroyed, Lost or Stolen Certificates.

      

      If
        (i)
        any mutilated Certificate is surrendered to the Certificate Registrar or
        the
        Certificate Registrar receives evidence to its satisfaction of the destruction,
        loss or theft of any Certificate and (ii) there is delivered to the Trustee,
        the
        Depositor and the Certificate Registrar such security or indemnity as may
        be
        required by them to save each of them harmless, then, in the absence of notice
        to the Trustee or the Certificate Registrar that such Certificate has been
        acquired by a bona fide purchaser, the Trustee shall execute on behalf of
        the
        Issuing Entity, authenticate and deliver, in exchange for or in lieu of any
        such
        mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
        tenor and Percentage Interest. Upon the issuance of any new Certificate under
        this Section, the Trustee or the Certificate Registrar may require the payment
        of a sum sufficient to cover any tax or other governmental charge that may
        be
        imposed in relation thereto and any other expenses (including the fees and
        expenses of the Trustee and the Certificate Registrar) in connection therewith.
        Any duplicate Certificate issued pursuant to this Section, shall constitute
        complete and indefeasible evidence of ownership in the Issuing Entity, as
        if
        originally issued, whether or not the lost, stolen or destroyed Certificate
        shall be found at any time.

      

      
        
          
          

        

        
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      Section
        5.04  Persons
        Deemed Owners.

      

      The
        Servicer, the Depositor, the Trustee, the Certificate Registrar, any Paying
        Agent and any agent of the Servicer, the Depositor, the Trustee, the Certificate
        Registrar or any Paying Agent may treat the Person, including a Depository,
        in
        whose name any Certificate is registered as the owner of such Certificate
        for
        the purpose of receiving distributions pursuant to Section 4.01 and for all
        other purposes whatsoever, and none of the Servicer, the Issuing Entity,
        the
        Trustee nor any agent of any of them shall be affected by notice to the
        contrary.

      

      Section
        5.05  Appointment
        of Paying Agent.

      

      (a)
         The
        Paying Agent shall make distributions to Certificateholders from the
        Distribution Account pursuant to Section 4.01 and shall report the amounts
        of
        such distributions to the Trustee. The duties of the Paying Agent may include
        the obligation to distribute statements prepared by the Trustee pursuant
        to
        Section 4.03 and provide information to Certificateholders as required
        hereunder. The Paying Agent hereunder shall at all times be an entity duly
        incorporated and validly existing under the laws of the United States of
        America
        or any state thereof, authorized under such laws to exercise corporate trust
        powers and subject to supervision or examination by federal or state
        authorities. The Paying Agent shall initially be the Trustee. The Trustee
        may
        appoint a successor to act as Paying Agent, which appointment shall be
        reasonably satisfactory to the Depositor.

      

      (b)
         The
        Trustee shall cause the Paying Agent (if other than the Trustee) to execute
        and
        deliver to the Trustee an instrument in which such Paying Agent shall agree
        with
        the Trustee that such Paying Agent shall hold all sums, if any, held by it
        for
        payment to the Certificateholders in trust for the benefit of the
        Certificateholders entitled thereto until such sums shall be paid to such
        Certificateholders and shall agree that it shall comply with all requirements
        of
        the Code regarding the withholding of payments in respect of Federal income
        taxes due from Certificate Owners and otherwise comply with the provisions
        of
        this Agreement applicable to it.

      

      ARTICLE
        VI

      

      THE
        SERVICER AND THE DEPOSITOR

      

      Section
        6.01  Liability
        of the Servicer and the Depositor.

      

      The
        Servicer shall be liable in accordance herewith only to the extent of the
        obligations specifically imposed upon and undertaken by Servicer herein.
        The
        Depositor shall be liable in accordance herewith only to the extent of the
        obligations specifically imposed upon and undertaken by the
        Depositor.

      

      Section
        6.02  Merger
        or Consolidation of, or Assumption of the Obligations of, the Servicer or
        the
        Depositor.

      

      Any
        entity into which the Servicer or Depositor may be merged or consolidated,
        or
        any entity resulting from any merger, conversion or consolidation to which
        the
        Servicer or the Depositor shall be a party, or any corporation succeeding
        to the
        business of the Servicer or the Depositor, shall be the successor of the
        Servicer or the Depositor, as the case may be, hereunder, without the execution
        or filing of any paper or any further act on the part of any of the parties
        hereto, anything herein to the contrary notwithstanding; provided, however,
        that
        the successor Servicer shall satisfy all the requirements of Section 7.02
        with
        respect to the qualifications of a successor Servicer.

      

      
        
          
          

        

        
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      Section
        6.03  Limitation
        on Liability of the Servicer and Others.

      

      Neither
        the Servicer nor any of the directors or officers or employees or agents
        of the
        Servicer shall be under any liability to the Issuing Entity or the
        Certificateholders for any action taken or for refraining from the taking
        of any
        action by the Servicer in good faith pursuant to this Agreement, or for errors
        in judgment; provided,
        however,
        that
        this provision shall not protect the Servicer or any such Person against
        any
        liability which would otherwise be imposed by reason of its willful misfeasance,
        bad faith or negligence in the performance of duties of the Servicer or by
        reason of its reckless disregard of its obligations and duties of the Servicer
        hereunder.

      

      The
        Servicer and any director or officer or employee or agent of the Servicer
        may
        rely in good faith on any document of any kind prima facie properly executed
        and
        submitted by any Person respecting any matters arising hereunder. The Servicer
        and any director or officer or employee or agent of the Servicer shall be
        indemnified by the Issuing Entity and held harmless against any loss, liability
        or expense incurred in connection with any legal action relating to this
        Agreement or the Certificates, including any amount paid to the Trustee pursuant
        to Section 6.06(b), other than any loss, liability or expense related to
        any
        specific Mortgage Loan or Mortgage Loans (except as any such loss, liability
        or
        expense shall be otherwise reimbursable pursuant to this Agreement) and any
        loss, liability or expense incurred by reason of its willful misfeasance,
        bad
        faith or negligence in the performance of its duties hereunder or by reason
        of
        its reckless disregard of its obligations and duties hereunder. The Servicer
        shall not be under any obligation to appear in, prosecute or defend any legal
        action which is not incidental to its duties to service the Mortgage Loans
        in
        accordance with this Agreement, and which in its opinion may involve it in
        any
        expense or liability; provided, however, that the Servicer may in its sole
        discretion undertake any such action which it may deem necessary or desirable
        in
        respect of this Agreement, and the rights and duties of the parties hereto
        and
        the interests of the Certificateholders hereunder. In such event, the reasonable
        legal expenses and costs of such action and any liability resulting therefrom
        shall be expenses, costs and liabilities of the Issuing Entity, and the Servicer
        shall be entitled to be reimbursed therefor. The Servicer’s right to indemnity
        or reimbursement pursuant to this Section 6.03 shall survive any resignation
        or
        termination of the Servicer pursuant to Section 6.04 or 7.01 with respect
        to any
        losses, expenses, costs or liabilities arising prior to such resignation
        or
        termination (or arising from events that occurred prior to such resignation
        or
        termination). Any reimbursements or indemnification to the Servicer from
        the
        Issuing Entity pursuant to this Section 6.03 shall be payable in the priority
        set forth in Section 4.01 hereof.

      

      Section
        6.04  Servicer
        Not to Resign.

      

      Subject
        to the provisions of Section 6.02, the Servicer shall not resign from the
        obligations and duties hereby imposed on it except upon determination that
        the
        performance of its obligations or duties hereunder are no longer permissible
        under applicable law provided,
        however,
        that no
        such resignation by the Servicer shall become effective until the Back-up
        Servicer shall have assumed the Servicer’s responsibilities and obligations
        hereunder. Any such resignation shall not relieve the Servicer of responsibility
        for any of the obligations specified in Sections 7.01 and 7.02 as obligations
        that survive the resignation or termination of the Servicer. The Servicer
        shall
        have no claim (whether by subrogation or otherwise) or other action against
        any
        Certificateholder for any amounts paid by the Servicer pursuant to any provision
        of this Pooling and Agreement. Any such determination permitting the resignation
        of the Servicer under clause (i) above shall be evidenced by an Opinion of
        Counsel to such effect delivered to the Trustee.

      

      
        
          
          

        

        
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      Section
        6.05  Delegation
        of Duties.

      

      In
        the
        ordinary course of business, the Servicer at any time may delegate any of
        its
        duties hereunder to any Person, including any of its Affiliates, who agrees
        to
        conduct such duties in accordance with the same standards with which the
        Servicer complies pursuant to Section 3.01. Such delegation shall not relieve
        the Servicer of its liabilities and responsibilities with respect to such
        duties
        and shall not constitute a resignation within the meaning of Section
        6.04.

      

      Section
        6.06  Servicing
        Rights Owner to Pay Trustee’s Fees and Expenses;
        Indemnification.

      

      (a)
         The
        Servicing Rights Owner covenants and agrees to pay to the Trustee and any
        co-trustee of the Trustee from time to time, and the Trustee and any such
        co-trustee shall be entitled to, reasonable compensation, including all
        indemnification payments (which shall not be limited by any provision of
        law in
        regard to the compensation of a trustee of an express trust) for all services
        rendered by each of them in the execution of the trusts created hereunder
        and in
        the exercise and performance of any of the powers and duties and the Servicing
        Rights Owner will pay or reimburse the Trustee and any co-trustee upon request
        for all reasonable expenses, disbursements and advances incurred or made
        by the
        Trustee or any co-trustee of the Trustee in accordance with any of the
        provisions of this Agreement except any such expense, disbursement or advance
        as
        may arise from its negligence or bad faith.

      

      (b)
         The
        Servicing Rights Owner agrees to indemnify the Trustee for, and to defend
        and
        hold, the Trustee harmless against, any claim, tax, penalty, loss, liability
        or
        expense of any kind whatsoever, incurred without gross negligence or willful
        misconduct on the part of the Trustee as such and/or in its individual capacity,
        arising out of, or in connection with, the performance of the Trustee’s duties
        under this Agreement or the other Basic Documents, including the reasonable
        costs and expenses (including reasonable legal fees and expenses) of defending
        itself against any claim in connection with the exercise or performance of
        any
        of its powers or duties hereunder, provided that:

      

      (i) with
        respect to any such claim, the Trustee shall have given the Servicing Rights
        Owner written notice thereof promptly after the Trustee shall have actual
        knowledge thereof, provided that failure to promptly notify shall not relieve
        the Servicing Rights Owner of its liability to indemnify hereunder except
        to the
        extent it has been materially prejudiced thereby;

      

      
        
          
          

        

        
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      (ii) while
        maintaining control over its own defense, the Trustee shall cooperate and
        consult fully with the Servicing Rights Owner in preparing such defense;
        and

      

      (iii) notwithstanding
        anything in this Agreement to the contrary, the Servicing Rights Owner shall
        not
        be liable for settlement of any claim by the Trustee entered into without
        the
        prior consent of the Servicing Rights Owner, which consent shall not be
        unreasonably withheld.

      

      No
        termination of this Agreement and resignation and removal of the Trustee
        shall
        affect the obligations created by this Section 6.06 of the Servicing Rights
        Owner to indemnify the Trustee under the conditions and to the extent set
        forth
        herein. This section shall survive the termination of this Agreement and
        resignation and removal of the Trustee. Any amounts to be paid by the Servicing
        Rights Owner pursuant to this Subsection may not be paid from the Trust Fund
        except as provided in Section 6.03.

      

      Notwithstanding
        the foregoing, the indemnification provided by the Servicing Rights Owner
        in
        this Section 6.06 shall not pertain to any loss, liability or expense of
        the
        Trustee including the costs and expenses of defending itself against any
        claim,
        incurred in connection with any actions taken by the Trustee at the direction
        of
        the Certificateholders, as the case may be, pursuant to the terms of this
        Agreement.

      

      (c)
         The
        Servicer agrees to indemnify the Trust Fund in an amount equal to the amount
        of
        any claim made under a MI Policy for which coverage is denied by the MI Insurer
        because (and if the MI Insurer’s denial of coverage is contested by the
        Servicing Rights Owner or the Servicer, a court or arbitrator finally determines
        that coverage is not available under the MI Policy because) of the Servicer’s
        failure to abide by the terms of the MI Policy or the MI Insurance Agreement
        or
        the Servicer’s failure to abide by the NFI Underwriting Guidelines or the NFI
        Servicing Guidelines, as attached to the MI Insurance Agreement.

      

      (d)
         In
        the
        event the Trustee becomes the Servicer pursuant to Section 7.02 hereof, the
        Trustee shall not be obligated, in its individual capacity, to pay any
        obligation of the Servicer under clause (c) above or clause (e)
        below.

      

      (e)
         To
        the
        extent any amounts set forth in clause (a) or (b) above are not paid by the
        Servicing Rights Owner for any reason, such amounts shall be paid by the
        Servicer, except that, if the successor servicer is the Backup Servicer or
        the
        Trustee, then any such amounts shall be paid by NovaStar Mortgage, Inc.,
        and if
        not paid by NovaStar Mortgage, Inc., then by the Issuing Entity.

      

      ARTICLE
        VII

      

      DEFAULT

      

      Section
        7.01  Servicing
        Default.

      

      (a)
         If
        any
        one of the following events (a “Servicing
        Default”)
        shall
        occur and be continuing:

      

      
        
          
          

        

        
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      (i) Any
        failure by the Servicer to deposit in the Collection Account or Distribution
        Account (A) any Advances and Compensating Interest or (B) any other Deposit
        required to be made under the terms of this Agreement, which, in the case
        of
        this clause (B), continues unremedied for a period of three Business Days
        after
        the date upon which written notice of such failure shall have been given
        to the
        Servicer by the Trustee or to the Servicer and the Trustee by the Holders
        of
        Certificates evidencing at least 25% of the Voting Rights; or

      

      (ii) Failure
        on the part of the Servicer duly to observe or perform in any material respect
        any other covenants or agreements of the Servicer set forth in this Agreement,
        which failure, in each case, materially and adversely affects the interests
        of
        Certificateholders or the breach of any representation or warranty of the
        Servicer in this Agreement which materially and adversely affects the interests
        of the Certificateholders, and which in either case continues unremedied
        for a
        period of 30 days after the date on which written notice of such failure
        or
        breach, requiring the same to be remedied, and stating that such notice is
        a
“Notice of Default” hereunder, shall have been given to the Servicer by the
        Trustee or to the Servicer and the Trustee by the Holders of Certificates
        evidencing at least 25% of the Voting Rights; or

      

      (iii) The
        entry
        against the Servicer of a decree or order by a court or agency or supervisory
        authority having jurisdiction in the premises for the appointment of a trustee,
        conservator, receiver or liquidator in any insolvency, conservatorship,
        receivership, readjustment of debt, marshaling of assets and liabilities
        or
        similar proceedings, or for the winding up or liquidation of its affairs,
        and
        the continuance of any such decree or order unstayed and in effect for a
        period
        of 60 consecutive days; or

      

      (iv) The
        Servicer shall voluntarily go into liquidation, consent to the appointment
        of a
        conservator, receiver, liquidator or similar person in any insolvency,
        readjustment of debt, marshaling of assets and liabilities or similar
        proceedings of or relating to the Servicer or of or relating to all or
        substantially all of its property, or a decree or order of a court, agency
        or
        supervisory authority having jurisdiction in the premises for the appointment
        of
        a conservator, receiver, liquidator or similar person in any insolvency,
        readjustment of debt, marshaling of assets and liabilities or similar
        proceedings, or for the winding-up or liquidation of its affairs, shall have
        been entered against the Servicer and such decree or order shall have remained
        in force undischarged, unbonded or unstayed for a period of 60 days; or the
        Servicer shall admit in writing its inability to pay its debts generally
        as they
        become due, file a petition to take advantage of any applicable insolvency
        or
        reorganization statute, make an assignment for the benefit of its creditors
        or
        voluntarily suspend payment of its obligations; or

      

      (v) The
        Cumulative Loss Percentage exceeds (a) with respect to the first 12 Distribution
        Dates, 2.50%, (b) with respect to the next 12 Distribution Dates, 4.00% (c)
        with
        respect to the next 12 Distribution Dates, 5.25%, (d) with respect to the
        next
        12 Distribution Dates, 6.25%, (e) with respect to the next 12 Distribution
        Dates, 7.00%, (f) and with respect to all Distribution Dates thereafter,
        8.50%;
        or

      

      
        
          
          

        

        
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      (vi) Realized
        Losses on the Mortgage Loans over any twelve-month period exceeds 3.00% of
        the
        sum of the aggregate Principal Balance of the Mortgage Loans as of the Cut-off
        Date; or 

      

      (vii) The
        Rolling 90 Day Delinquency Percentage exceeds 23%.

      

      (b)
         then,
        and
        in each and every such case, so long as a Servicing Default shall not have
        been
        remedied within the applicable grace period, (x) with respect solely to clause
        (a)(i)(A) above, if such Advance is not made by 5:00 P.M., New York time,
        on the
        Business Day immediately following the Servicer Remittance Date (provided
        the
        Trustee shall give the Servicer (with a copy to the Back-up Servicer) notice
        of
        such failure to advance by 5:00 P.M., New York time, on the Servicer Remittance
        Date), the Trustee shall terminate all of the rights and obligations of the
        Servicer under this Agreement and the Back-up Servicer, shall assume, pursuant
        to Section 7.02, the duties of a successor Servicer and (y) in the case of
        (a)(i)(B), (a) (ii), (a) (iii), (a) (iv), (a) (v), (a) (vi) and (a) (vii)
        above,
        the Trustee shall, at the direction of the Holders of Certificates evidencing
        at
        least 51% of the Voters Rights, by notice then given in writing to the Servicer
        (and to the Trustee if given by Holders of Certificates), terminate all of
        the
        rights and obligations of the Servicer as servicer under this Agreement.
        Any
        such notice to the Servicer shall also be given to the Servicing Rights Pledgee,
        the Trustee, the Back-up Servicer, each Rating Agency, the Depositor, each
        Hedge
        Counterparty (if prior to the Class I Termination Date) and the Sponsor.
        On or
        after the receipt by the Servicer (and by the Trustee if such notice is given
        by
        the Holders) of such written notice, all authority and power of the Servicer
        under this Agreement, whether with respect to the Certificates or the Mortgage
        Loans or otherwise, shall pass to and be vested in the Back-up
        Servicer.

      

      In
        the event of a Servicing Default, notwithstanding anything to the contrary
        in
        this agreement, the Trustee and the Depositor hereby agree that upon delivery
        to
        the Trustee by the Servicing Rights Pledgee of a letter signed by the Servicing
        Rights Pledgee within 15 days of when the Servicer provides the Servicing
        Rights
        Pledgee notice of such Servicing Default, the Servicing Rights Pledgee or
        its
        designee shall be appointed as successor Servicer (whether or not the Backup
        Servicer is then acting as Backup Servicer or as successor Servicer), provided
        that at the time of such appointment, the Servicing Rights Pledgee or such
        designee meets the requirements of a successor Servicer set forth in Section
        7.02 below, the Servicing Rights Pledgee or such designee agrees to be subject
        to the terms of this Agreement and the Servicing Rights Pledgee or such designee
        assumes the Advance obligations of the successor Servicer as outlined in
        Section
        7.02(a), provided, however, that at such time the Servicing Rights Pledgee
        will
        have the right to reimbursement as outlined in Section 3.07 and pays any
        required release fee to the Backup Servicer.

      

      Section
        7.02  Trustee
        to Act; Appointment of Successor.

      

      (a)
         Within
        90
        days of the time the Servicer (and the Trustee if notice is sent by the Holders)
        receives a notice of termination pursuant to Section 7.01, the Back-up Servicer
        shall be the successor in all respects to the Servicer in its capacity as
        servicer under this Agreement and the transactions set forth or provided
        for
        herein and shall be subject to all the responsibilities, duties and liabilities
        relating thereto placed on the Servicer by the terms and provisions hereof
        arising on and after its succession. Notwithstanding the foregoing, the parties
        hereto agree that the Back-up Servicer, in its capacity as successor Servicer,
        immediately will assume all of the obligations of the Servicer to make Advances;
        provided however, that the obligation of the Back-up Servicer to make Advances
        is subject to the standards set forth in Section 3.25 hereof. Notwithstanding
        the foregoing, the Back-up Servicer, in its capacity as successor Servicer,
        shall not be responsible for the lack of information and/or documents that
        it
        cannot obtain through reasonable efforts. As compensation for acting as
        successor Servicer, the Backup Servicer (or other successor Servicer) shall
        receive the Servicing Fee. The appointment of a successor Servicer shall
        not
        affect any liability of the predecessor Servicer which may have arisen under
        this Agreement prior to its termination as Servicer to pay any deductible
        under
        an insurance policy pursuant to Section 3.11 or to indemnify the Trustee
        pursuant to Section 3.06, nor shall any successor Servicer (including the
        Backup
        Servicer or the Trustee as successor Servicer) be liable for any acts or
        omissions of the predecessor Servicer or for any breach by such Servicer
        of any
        of its representations or warranties contained herein or in any related document
        or agreement. The Trustee and such successor shall take such action, consistent
        with this Agreement, as shall be necessary to effectuate any such succession.
        All Servicing Transfer Costs shall be paid by the predecessor Servicer upon
        presentation of reasonable documentation of such costs, and if such predecessor
        Servicer defaults in its obligation to pay such costs, such costs shall be
        paid
        by the successor Servicer (in which case the successor Servicer shall be
        entitled to reimbursement therefor from the assets of the Issuing Entity)
        or if
        not paid, then by the Trustee from the Trust Fund.

      

      
        
          
          

        

        
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      (b)
         Any
        successor Servicer shall pay over to the prior Servicer amounts representing
        recoveries of Advances funded by such prior Servicer from sources other than
        the
        amounts held in the Collection Account for future distribution as contemplated
        by Section 3.25 hereof, such amounts to be paid over the respect to the oldest
        outstanding Advances first, in accordance with the provisions of Section
        3.07(a)
        hereof.

      

      (c)
         Any
        successor, including the Back-up Servicer, to the Servicer as servicer shall
        during the term of its service as servicer continue to service and administer
        the Mortgage Loans for the benefit of Certificateholders, and maintain in
        force
        a policy or policies of insurance covering errors and omissions in the
        performance of its obligations as Servicer hereunder and a Fidelity Bond
        in
        respect of its officers, employees and agents to the same extent as the Servicer
        is so required pursuant to Section 3.11.

      

      (d)
         In
        connection with the termination or resignation of the Servicer hereunder,
        either
        (i) the successor Servicer, shall represent and warrant that it is a member
        of
        MERS in good standing and shall agree to comply in all material respects
        with
        the rules and procedures of MERS in connection with the servicing of the
        Mortgage Loans that are registered with MERS, in which case the predecessor
        Servicer shall cooperate with the successor Servicer in causing MERS to revise
        its records to reflect the transfer of servicing to the successor Servicer
        as
        necessary under MERS’ rules and regulations, or (ii) the predecessor Servicer
        shall cooperate with the successor Servicer in causing MERS to execute and
        deliver an assignment of Mortgage in recordable form to transfer the Mortgages
        from MERS to the Trustee and to execute and deliver such other notices,
        documents and other instruments as may be necessary or desirable to effect
        a
        transfer of such Mortgage Loans or servicing of such Mortgage Loan on the
        MERS
        System to the successor Servicer. The predecessor Servicer shall file or
        cause
        to be filed any such assignment in the appropriate recording offices. The
        predecessor Servicer shall bear any and all fees of MERS, costs of preparing
        any
        assignments of Mortgage, and fees and costs of filing any assignments of
        Mortgage that may be required under this subsection (c). The successor Servicer
        shall cause assignment to be delivered to the Trustee promptly upon receipt
        of
        the original with evidence of recording thereon or a copy certified by the
        public recording office in which such assignment was recorded. 

      

      
        
          
          

        

        
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      Section
        7.03  Waiver
        of Defaults.

      

      The
        Majority Certificateholders may, on behalf of all Certificateholders, waive
        any
        events permitting removal of the Servicer as servicer pursuant to this Article
        VII by delivering written notice to the Trustee, provided,
        however,
        that
        the Majority Certificateholders may not waive a default in making a required
        distribution on a Certificate without the consent of the Holder of such
        Certificate. Upon any waiver of a past default, such default shall cease
        to
        exist and any Servicing Default arising therefrom shall be deemed to have
        been
        remedied for every purpose of this Agreement. No such waiver shall extend
        to any
        subsequent or other default or impair any right consequent thereto except
        to the
        extent expressly so waived. Notice of any such waiver shall be given by the
        Trustee to the Rating Agencies.

      

      Section
        7.04  Notification
        to Certificateholders.

      

      (a)
         Upon
        any
        termination or appointment of a successor to the Servicer pursuant to this
        Article VII, the Trustee shall give prompt written notice thereof to the
        Hedge
        Counterparties, if prior to the Class I Termination Date, to the
        Certificateholders at their respective addresses appearing in the Certificate
        Register and to each Rating Agency.

      

      (b)
         No
        later
        than 60 days after the occurrence of any event which constitutes or which,
        with
        notice or a lapse of time or both, would constitute a Servicing Default for
        five
        Business Days after a Responsible Officer of the Trustee obtains actual
        knowledge or written notice of the occurrence of such an event, the Trustee
        shall transmit by mail to the Hedge Counterparties, if prior to the Class
        I
        Termination Date, and all Certificateholders notice of such occurrence unless
        such default or Servicing Default shall have been waived or cured.

      

      Section
        7.05  Survivability
        of Servicer Liabilities.

      

      Notwithstanding
        anything herein to the contrary, upon termination of the Servicer hereunder,
        any
        liabilities of the Servicer which accrued prior to such termination shall
        survive such termination.

      

      
        
          
          

        

        
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      ARTICLE
        VIII

      

      THE
        TRUSTEE

      

      Section
        8.01  Duties
        of the Trustee.

      

      On
        the
        Closing Date, the Trustee will act as paying agent and will distribute the
        proceeds from the sale of the Offered Certificates according to the closing
        settlement statement provided by the Sponsor. If a Servicing Default has
        occurred and is continuing, the Trustee shall exercise the rights and powers
        vested in it by this Agreement and use the same degree of care and skill
        in its
        exercise as a prudent person would exercise or use under the circumstances
        in
        the conduct of such person’s own affairs.

      

      (a)
         Except
        during the continuance of a Servicing Default:

      

      (i) the
        Trustee undertakes to perform such duties and only such duties as are
        specifically set forth in this Agreement with respect to the Trustee and
        no
        implied covenants or obligations shall be read into this Agreement against
        the
        Trustee; and 

      

      (ii) in
        the
        absence of bad faith on its part, the Trustee may conclusively rely, as to
        the
        truth of the statements and the correctness of the opinions expressed therein,
        upon certificates or opinions furnished to the Trustee and conforming to
        the
        requirements of this Agreement; provided, however, that the Trustee shall
        examine the certificates and opinions delivered to it to determine whether
        or
        not they conform on their face to the requirements of this
        Agreement.

      

      (b)
         The
        Trustee may not be relieved from liability for its own negligent action,
        its own
        negligent failure to act or its own willful misconduct, except
        that:

      

      (i) the
        Trustee shall not be liable for interest on any money received by the
        Trustee;

      

      (ii) the
        Trustee shall not be liable for any error of judgment made in good faith
        by its
        Responsible Officer unless it is proved that the Trustee was negligent in
        ascertaining the pertinent facts; and

      

      (iii) the
        Trustee shall not be liable with respect to any action it takes or omits
        to take
        in good faith in accordance with a direction received by it from the Majority
        Certificateholders.

      

      Money
        held in trust by the Trustee need not be segregated from other trust funds
        except to the extent required by law or the terms of this
        Agreement.

      

      No
        provision of this Agreement shall require the Trustee to expend or risk its
        own
        funds or otherwise incur financial liability in the performance of any of
        its
        duties hereunder or in the exercise of any of its rights or powers, if it
        shall
        have reasonable grounds to believe that repayment of such funds or indemnity
        satisfactory to it against such risk or liability is not reasonably assured
        to
        it.

      

      
        
          
          

        

        
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      Subject
        to the other provisions of this Agreement and without limiting the generality
        of
        this Section 8.01, the Trustee shall have no duty (A) to see to any recording,
        filing or depositing of this Agreement or any agreement referred to herein
        or
        any financing statement or continuation statement evidencing a security
        interest, or to see to the maintenance of any such recording or filing or
        depositing or to any rerecording, refiling or redepositing of any thereof,
        (B)
        to see to any insurance, (C) to see to the payment or discharge of any tax,
        assessment, or other governmental charge or any lien or encumbrance of any
        kind
        owing with respect to, assessed or levied against, any part of the Trust
        Fund
        other than from funds available in the Distribution Account, or (D) to confirm
        or verify the contents of any reports or certificates of the Servicer delivered
        to the Trustee believed by the Trustee to be genuine and to have been signed
        or
        presented by the proper party or parties.

      

      (c)
         The
        Trustee shall act as successor to the Servicer to the extent provided in
        Section
        7.02 hereof.

      

      (d)
         For
        all
        purposes under this Agreement, the Trustee shall not be deemed to have notice
        or
        knowledge of any Servicing Default unless a Responsible Officer assigned
        to and
        working in the Trustee’s corporate trust department has actual knowledge thereof
        or unless written notice of any event which is in fact such Servicing Default
        is
        received by the Trustee at the Corporate Trust Office, and such notice
        references the Certificates generally, the Issuing Entity, or this
        Agreement.

      

      The
        Trustee is hereby authorized to execute and shall execute this Agreement
        and the
        Purchase Agreement and shall perform their respective duties and satisfy
        their
        respective obligations thereunder. Every provision of this Agreement relating
        to
        the conduct or affecting the liability of or affording protection to the
        Trustee
        shall apply to the Trustee’s execution of this Agreement and the Purchase
        Agreement and the performance of their respective duties and satisfaction
        of its
        obligations hereunder and thereunder.

      

      In
        order
        to comply with laws, rules and regulations applicable to banking institutions,
        including those relating to the funding of terrorist activities and money
        laundering, the Trustee is required to obtain, verify and record certain
        information relating to individuals and entities which maintain a business
        relationship with the Trustee. Accordingly, each of the parties agrees to
        provide to the Trustee upon its request from time to time such party’s complete
        name, address, tax identification number and such other identifying information
        together with copies of such party’s constituting documentation, securities
        disclosure documentation and such other identifying documentation as may
        be
        available for such party.

      

      Section
        8.02  Rights
        of Trustee.

      

      The
        Trustee may rely and shall be protected in acting or refraining from acting
        on
        any resolution, officer’s certificate, opinion of counsel, certificate of
        auditors or other certificate, statement, instrument, or document believed
        by it
        to be genuine and to have been signed or presented by the proper person.
        The
        Trustee need not investigate any fact or matter stated in the
        document.

      

      
        
          
          

        

        
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      Before
        the Trustee acts or refrains from acting, it may require an Officers’
Certificate or an Opinion of Counsel reasonably satisfactory in form and
        substance to the Trustee which Officers’ Certificate or Opinion of Counsel shall
        not be at the expense of the Trustee or the Trust Fund. The Trustee shall
        not be
        liable for any action either of them takes or omits to take in good faith
        in
        reliance on an Officers’ Certificate or Opinion of Counsel.

      

      The
        Trustee may execute any of its trusts or powers hereunder and the Trustee
        may
        perform any of its respective duties hereunder either directly or by or through
        agents or attorneys or a custodian or nominee and the Trustee shall have
        no
        liability for any misconduct or negligence on the part of such agent, attorney
        or custodian appointed by the Trustee with due care; provided, further, that
        the
        Trustee shall not be responsible for any act or omission of the
        Custodian.

      

      The
        Trustee shall not be liable for any action either of them takes or omits
        to take
        in good faith which it believes to be authorized or within its rights or
        powers;
        provided, however, that the Trustee’s conduct does not constitute willful
        misconduct, negligence or bad faith.

      

      The
        Trustee may consult with counsel chosen by it with due care, and the advice
        or
        opinion of counsel with respect to legal matters relating to this Agreement
        and
        the Certificates shall be full and complete authorization and protection
        from
        liability in respect to any action taken, omitted or suffered by either of
        them
        hereunder in good faith and in accordance with the advice or opinion of such
        counsel.

      

      The
        Trustee shall be under no obligation to exercise any of the trusts or powers
        vested in it by this Agreement or to institute, conduct or defend any litigation
        hereunder or in relation hereto at the request, order or direction of any
        of the
        Certificateholders, pursuant to the provisions of this Agreement, unless
        such
        Certificateholders shall have offered to the Trustee security or indemnity
        satisfactory to it against the costs, expenses and liabilities which may
        be
        incurred therein or thereby (which in the case of the Majority
        Certificateholders will be deemed to be satisfied by a letter agreement with
        respect to such costs from such Majority Certificateholders); nothing contained
        herein shall, however, relieve the Trustee of the obligation, upon the
        occurrence of a Servicing Default of which a Responsible Officer of the Trustee
        shall have actual knowledge (which has not been cured), to exercise such
        of the
        rights and powers vested in it by this Agreement, and to use the same degree
        of
        care and skill in their exercise, as a prudent person would exercise or use
        under the circumstances in the conduct of such person’s own
        affairs.

      

      The
        Trustee shall not be bound to make any investigation into the facts or matters
        stated in any resolution, certificate, statement, instrument, opinion, report,
        notice, request, consent, order, approval, bond or other paper or document,
        unless requested in writing to do by the Majority Certificateholders; provided,
        however, that if the payment within a reasonable time to the Trustee of the
        costs, expenses or liabilities likely to be incurred by it in the making
        of such
        investigation is, in the opinion of the Trustee, not reasonably assured to
        the
        Trustee by the security afforded to it by the terms of this Agreement, the
        Trustee may require indemnity reasonably satisfactory to it against such
        cost,
        expense or liability as a condition to taking any such action. The reasonable
        expense of every such examination shall be paid by the Servicer or, if paid
        by
        the Trustee, shall be repaid by the Servicer upon demand from the Servicer’s own
        funds.

      

      
        
          
          

        

        
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      The
        rights of the Trustee to perform any discretionary act enumerated in this
        Agreement shall not be construed as a duty, and the Trustee shall not be
        answerable for other than its negligence or willful misconduct in the
        performance of such act.

      

      The
        Trustee shall not be required to give any bond or surety in respect of the
        execution of the Trust Fund created hereby or the powers granted
        hereunder.

      

      Section
        8.03  Individual
        Rights of Trustee.

      

      The
        Trustee in its individual or any other capacity may become the owner or pledgee
        of Certificates and may otherwise deal with the Sponsor or its Affiliates
        with
        the same rights it would have if it were not Trustee. Any Certificates
        Registrar, co-registrar or co-paying agent may do the same with like rights.
        However, the Trustee must comply with Section 8.11 hereof.

      

      Section
        8.04  Trustee’s
        Disclaimer.

      

      The
        Trustee shall not be responsible for and makes no representation as to the
        validity or adequacy of this Agreement or the Certificates, or of any Mortgage
        Loan or related document, or of MERS or the MERS System. The Trustee shall
        not
        be accountable for the use of the proceeds from the Certificates, and the
        Trustee shall not be responsible for any statement of the Issuing Entity
        in this
        Agreement or in any document issued in connection with the sale of the
        Certificates or in the Certificates other than the Trustee’s or the Certificate
        Registrar’s certificate of authentication.

      

      Section
        8.05  Notice
        of Servicing Default.

      

      The
        Trustee shall mail to each Certificateholder notice of the Servicing Default
        within 10 days after a Responsible Officer has actual knowledge thereof unless
        such Servicing Default shall have been waived or cured. Except in the case
        of a
        Servicing Default in payment of principal of or interest on any Certificate,
        the
        Trustee may withhold the notice if and so long as it in good faith determines
        that withholding the notice is in the interests of
        Certificateholders.

      

      Section
        8.06  [Reserved].

      

      Section
        8.07  Compensation.

      

      The
        amount of the Trustee Fee and Custodian Fee shall be paid to the Trustee
        and
        Custodian, respectively, on each Distribution Date pursuant to Section
        4.01(a)(i) of this Agreement, and all amounts owing to the Trustee hereunder
        in
        excess of such amount shall be paid solely as provided in this Agreement.
        The
        Trustee’s compensation shall not be limited by any law on compensation of a
        trustee of an express trust. 

      

      
        
          
          

        

        
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      Section
        8.08  Replacement
        of Trustee.

      

      No
        resignation or removal of the Trustee and no appointment of a successor Trustee
        shall become effective until the acceptance of appointment by the successor
        Trustee pursuant to this Section 8.08. The Trustee may resign at any time
        by so
        notifying the Hedge Counterparties, if prior to the Class I Termination Date,
        and the Depositor. The Majority Certificateholders may at any time remove
        the
        Trustee by so notifying the Hedge Counterparties, if prior to the Class I
        Termination Date, the Depositor and the Trustee, and the Depositor may appoint
        a
        successor Trustee. The Depositor shall remove the Trustee if:

      

      (a)
         the
        Trustee fails to comply with Section 8.11 hereof;

      

      (b)
         the
        Trustee is adjudged a bankrupt or insolvent;

      

      (c)
         a
        receiver or other public officer takes charge of the Trustee or its respective
        property; or

      

      (d)
         the
        Trustee otherwise becomes incapable of acting as a trustee with trust
        powers.

      

      If
        the
        Trustee resigns or is removed or if a vacancy exists in the office of the
        Trustee for any reason (the Trustee in such event being referred to herein
        as
        the retiring Trustee), the Depositor shall promptly appoint a successor
        Trustee.

      

      A
        successor Trustee shall deliver a written acceptance of its appointment to
        the
        retiring Trustee, the Back-up Servicer, the Depositor, the Rating Agencies
        and
        the Servicer. Thereupon, the resignation or removal of the retiring Trustee
        shall become effective, and the successor Trustee shall have all the rights,
        powers and duties of the Trustee or under this Agreement. The successor Trustee
        shall mail a notice of its succession to Hedge Counterparties, if prior to
        the
        Class I Termination Date, and the Certificateholders. The retiring Trustee
        shall
        promptly transfer all property held by it as Trustee to the successor
        Trustee.

      

      If
        a
        successor Trustee does not take office within 60 days after the retiring
        Trustee
        resigns or is removed, the retiring Trustee, the Depositor, the Trustee or
        the
        Majority Certificateholders may petition any court of competent jurisdiction
        for
        the appointment of a successor Trustee.

      

      Section
        8.09  Successor
        Trustee by Merger.

      

      If
        the
        Trustee consolidates with, merges or converts into, or transfers all or
        substantially all of its corporate trust business or assets to, another
        corporation or banking association, the resulting, surviving or transferee
        corporation, without any further act, shall be the successor Trustee; provided,
        that such corporation or banking association shall be otherwise qualified
        and
        eligible under Section 8.11 hereof. 

      

      If
        at the
        time such successor or successors by merger, conversion or consolidation
        to the
        Trustee, shall succeed to the trusts created by this Agreement and any of
        the
        Certificates shall have been authenticated but not delivered, any such successor
        to the Trustee may adopt the certificate of authentication of any predecessor
        trustee and deliver such Certificates so authenticated; and if at that time
        any
        of the Certificates shall not have been authenticated, any successor to the
        Trustee may authenticate such Certificates either in the name of any predecessor
        hereunder or in the name of the successor to the Trustee; and in all such
        cases
        such certificates shall have the full force as the Certificates or this
        Agreement provide that such certificates of the Trustee shall have.

      

      
        
          
          

        

        
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      Section
        8.10  Appointment
        of Co-Trustee or Separate Trustee.

      

      Notwithstanding
        any other provisions of this Agreement, at any time, for the purpose of meeting
        any legal requirement of any jurisdiction in which any part of the Trust
        Fund
        may at the time be located, the Trustee shall, at the expense of the Trust
        Fund,
        have the power and may execute and deliver all instruments to appoint one
        or
        more Persons to act as a co-trustee or co-trustees, or separate trustee or
        separate trustees, of all or any part of the Trust Fund, and to vest in such
        Person or Persons, in such capacity and for the benefit of the
        Certificateholders, such title to the Trust Fund, or any part hereof, and,
        subject to the other provisions of this Section, such powers, duties,
        obligations, rights and trusts as the Trustee may consider necessary or
        desirable. No co-trustee or separate trustee hereunder shall be required
        to meet
        the terms of eligibility as a successor trustee under Section 8.11 hereof
        and
        notice to, and no consent of the Certificateholders of the appointment of
        any
        co-trustee or separate trustee shall be required.

      

      Every
        separate trustee and co-trustee shall, to the extent permitted by law, be
        appointed and act subject to the following provisions and
        conditions:

      

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

      

      (b)
         no
        trustee hereunder shall be personally liable by reason of any act or omission
        of
        any other trustee hereunder; and

      

      (c)
         the
        Trustee may at any time accept the resignation of or remove any separate
        trustee
        or co-trustee.

      

      Any
        notice, request or other writing given to the Trustee shall be deemed to
        have
        been given to each of then separate trustees and co-trustees, as effectively
        as
        if given to each of them. Every instrument appointing any separate trustee
        or
        co-trustee shall refer to this Agreement and the conditions of this Article
        VIII. Each separate trustee and co-trustee, upon its acceptance of the trusts
        conferred, shall be vested with the estates or property specified in its
        instrument of appointment, either jointly with the Trustee or separately,
        as may
        be provided therein, subject to all the provisions of this Agreement,
        specifically including every provision of this Agreement relating to the
        conduct
        of, affecting the liability of, or affording protection to, the Trustee.
        Every
        such instrument shall be filed with the Trustee.

      

      
        
          
          

        

        
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      Any
        separate trustee or co-trustee may at any time constitute the Trustee, its
        agent
        or attorney-in-fact with full power and authority, to the extent not prohibited
        by law, to do any lawful act under or in respect of this Agreement on its
        behalf
        and in its name. If any separate trustee or co-trustee shall die, become
        incapable of acting, resign or be removed, all of its estates, properties,
        rights, remedies and trusts shall vest in and be exercised by the Trustee,
        to
        the extent permitted by law, without the appointment of a new or successor
        trustee.

      

      Section
        8.11  Eligibility;
        Disqualification.

      

      The
        Trustee shall be a corporation or association organized and doing business
        under
        the laws of a state of the United States. The Trustee is subject to supervision
        or examination by federal or state authority. The Trustee shall at all times
        be
        reasonably acceptable to the Depositor and authorized to exercise corporate
        trust powers. The Trustee shall have a combined capital and surplus of at
        least
        $50,000,000 as set forth in its most recent published annual report of condition
        and it or its parent shall have a long-term debt rating of Baa3 or better
        by
        Moody’s, BBB or better by Standard & Poor’s and BBB or F-2 or better by
        Fitch. The Trustee shall also have a short term rating of A-1 or better by
        Standard & Poor’s.

      

      Section
        8.12  [Reserved].

      

      Section
        8.13  Representations
        and Warranties.

      

      (a)
         The
        Trustee hereby represents that:

      

      (i) The
        Trustee is duly organized and validly existing as a national banking association
        in good standing under the laws of the United States with power and authority
        to
        own its properties and to conduct its business as such properties are currently
        owned and such business is presently conducted;

      

      (ii) The
        Trustee has the power and authority to execute and deliver this Agreement
        and to
        carry out its terms; and the execution, delivery and performance of this
        Agreement have been duly authorized by the Trustee by all necessary corporate
        action;

      

      (iii) The
        consummation of the transactions contemplated by this Agreement and the
        fulfillment of the terms hereof do not conflict with, result in any breach
        of
        any of the terms and provisions of, or constitute (with or without notice
        or
        lapse of time) a default under, the articles of organization or bylaws of
        the
        Trustee or any agreement or other instrument to which the Trustee is a party
        or
        by which it is bound which would materially adversely affect its ability
        to
        perform hereunder or under the Basic Documents; and

      

      (iv) To
        the
        Trustee’s best knowledge, there are no proceedings or investigations pending or
        threatened before any court, regulatory body, administrative agency or other
        governmental instrumentality having jurisdiction over the Trustee or its
        properties: (A) asserting the invalidity of this Agreement, (B) seeking to
        prevent the consummation of any of the transactions contemplated by this
        Agreement or (C) seeking any determination or ruling that might materially
        and
        adversely affect the performance by the Trustee of its obligations under,
        or the
        validity or enforceability of, this Agreement.

      

      
        
          
          

        

        
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      Section
        8.14  Directions
        to Trustee.

      

      The
        Trustee is hereby directed:

      

      (a)
         to
        accept
        the Mortgage Loans and hold the assets of the Trust Fund in trust for the
        Certificateholders;

      

      (b)
         to
        authenticate and deliver the Certificates of each Class substantially in
        the
        forms prescribed by Exhibits A-1, A-2, A-3, A-4, A-5, A-7, A-8, A-9, A-10,
        A-11,
        A-12, A-13, A-14, A-15, A-16, A-17, A-18, A-19, A-20, A-21, A-22, A-23, A-24,
        A-25, A-26, A-27, A-28, A-29, A-30, A-31, A-32, A-33, A-34 and A-35 in accordance with the terms of this Agreement;

      

      (c)
         to
        execute the Hedge Agreements as trustee on behalf of the Supplemental Interest
        Trust;

      

      (d)
         to
        execute the Back-up Servicing Agreement on behalf of the Trust; and

      

      (e)
         to
        take
        all other actions as shall be required to be taken by the terms of this
        Agreement.

      

      Section
        8.15  The
        Agents.

      

      The
        provisions of this Agreement relating to the limitations of the Trustee’s
        liability and to its indemnity shall inure also to the Paying Agent, and
        the
        Certificate Registrar.

      

      Section
        8.16  Issuing
        Entity Fiscal Year.

      

      The
        fiscal year of the Issuing Entity shall end on December 31 of each
        year.

      

      Section
        8.17  Execution
        of the Novation Agreements and Hedge Agreements.

      

      The
        Depositor hereby directs the Trustee to enter into and execute the Novation
        Agreements and the Hedge Agreements on the Closing Date on behalf of the
        Supplemental Interest Trust. The Sponsor, the Depositor, the Servicer and
        the
        Certificateholders (by their acceptance of such Certificates) acknowledge
        that
        Deutsche Bank National Trust Company is entering into the Hedge Agreements
        solely in its capacity as Trustee of the Trust Fund and not in its individual
        capacity.

      

      If
        an
“Early Termination Date” is designated as a result of a “Termination Event” or
        an “Event of Default” (each as defined in the related Hedge Agreement) shall
        occur and be continuing and any Hedge Counterparty is the “Defaulting Party” or
        the “Affected Party” (as defined in the related Hedge Agreement), the Trustee
        shall, if so directed by the Holders of Certificates evidencing not less
        than
        50% of the Voting Rights (and if permitted by the related Hedge Agreement),
        replace the related Hedge Counterparty with a successor designated by such
        Holders, provided that such successor must comply with all the applicable
        requirements of such Hedge Agreement. The Trustee will deliver any notices
        and
        communications relating to the Hedge Agreements, solely as directed by the
        Servicer. 

      

      
        
          
          

        

        
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      ARTICLE
        IX

      

      [Reserved]

      

      ARTICLE
        X

      

      REMIC
        ADMINISTRATION

      

      Section
        10.01  REMIC
        Administration.

      

      (a)
         [Reserved].

      

      (b)
         February
        28, 2007 is hereby designated as the “Startup Day” of each REMIC within the
        meaning of Section 860G(a)(9) of the Code.

      

      (c)
         The
        Servicer shall pay any and all tax related expenses (not including taxes)
        of
        each REMIC, including but not limited to any professional fees or expenses
        related to audits or any administrative or judicial proceedings with respect
        to
        each REMIC that involve the Internal Revenue Service or state tax authorities,
        but only to the extent that (i) such expenses are ordinary or routine expenses,
        including expenses of a routine audit but not expenses of litigation (except
        as
        described in (ii)); or (ii) such expenses or liabilities (including taxes
        and
        penalties) are attributable to the negligence or willful misconduct of the
        Servicer in fulfilling its duties hereunder. The Servicer shall be entitled
        to
        reimbursement of expenses to the extent provided in clause (i) above from
        the
        Collection Account.

      

      (d)
         The
        Trustee shall (a) maintain (or cause to be maintained) the books of the Issuing
        Entity on a calendar year basis using the accrual method of accounting, (b)
        deliver (or cause to be delivered) to each Certificateholder as may be required
        by the Code and applicable Treasury Regulations, including the REMIC Provisions,
        such information as may be required to enable each Certificateholder to prepare
        its federal and state income tax returns, (c) prepare and file or cause to
        be
        prepared and filed such Tax Returns relating to the Issuing Entity as may
        be
        required by the Code and applicable Treasury Regulations (including timely
        making elections to treat specified assets of the Issuing Entity as one or
        more
        REMICs for federal income tax purposes and any other such elections as may
        from
        time to time be required or appropriate under any applicable state or federal
        statutes, rules or regulations), (d) collect or cause to be collected any
        required withholding tax with respect to income or distributions to
        Certificateholders and prepare or cause to be prepared the appropriate forms
        relating thereto and (e) maintain records as required by the REMIC
        Provisions.

      

      
        
          
          

        

        
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      (e)
         The
        Holder of the Residual Certificate at any time holding the largest Percentage
        Interest thereof shall be the “tax matters person” as defined in the REMIC
        Provisions (the “Tax
        Matters Person”)
        with
        respect to each REMIC and shall act as Tax Matters Person for each REMIC.
        The
        Trustee, as agent for the Tax Matters Person, shall perform on behalf of
        each
        REMIC all reporting and other tax compliance duties that are the responsibility
        of such REMIC under the Code, the REMIC Provisions, or other compliance guidance
        issued by the Internal Revenue Service or any state or local taxing authority.
        Among its other duties, if required by the Code, the REMIC Provisions, or
        other
        such guidance, the Trustee, as agent for the Tax Matters Person, shall provide
        (i) to the Treasury or other governmental authority such information as is
        necessary for the application of any tax relating to the transfer of a Residual
        Certificate to any Disqualified Organization or non-U.S. Person and (ii)
        to the
        Certificateholders such information or reports as are required by the Code
        or
        REMIC Provisions.

      

      (f)
         The
        Trustee, the Servicer and the Holders of Certificates shall take any action
        or
        cause the REMIC to take any action necessary to create or maintain the status
        of
        each REMIC as a REMIC under the REMIC Provisions and shall assist each other
        as
        necessary to create or maintain such status. Neither the Trustee, the Servicer
        nor the Holder of any Residual Certificate shall take any action, cause any
        REMIC created hereunder to take any action or fail to take (or fail to cause
        to
        be taken) any action that, under the REMIC Provisions, if taken or not taken,
        as
        the case may be, could (i) endanger the status of such REMIC as a REMIC or
        (ii)
        result in the imposition of a tax upon such REMIC (including but not limited
        to
        the tax on prohibited transactions as defined in Code Section 860F(a)(2)
        and the
        tax on prohibited contributions set forth on Section 860G(d) of the Code)
        (either such event, an “Adverse
        REMIC Event”)
        unless
        the Trustee and the Servicer have received an Opinion of Counsel (at the
        expense
        of the party seeking to take such action) to the effect that the contemplated
        action will not endanger such status or result in the imposition of such
        a tax.
        In addition, prior to taking any action with respect to any REMIC created
        hereunder or the assets therein, or causing such REMIC to take any action,
        which
        is not expressly permitted under the terms of this Agreement, any Holder
        of a
        Residual Certificate will consult with the Trustee and the Servicer, or their
        respective designees, in writing, with respect to whether such action could
        cause an Adverse REMIC Event to occur with respect to any REMIC, and no such
        Person shall take any such action or cause any REMIC to take any such action
        as
        to which the Trustee or the Servicer has advised it in writing that an Adverse
        REMIC Event could occur.

      

      (g)
         Each
        Holder of a Residual Certificate shall pay when due any and all taxes imposed
        on
        each REMIC created hereunder by federal or state governmental authorities.
        To
        the extent that such Issuing Entity taxes are not paid by a Residual
        Certificateholder, the Trustee shall pay any remaining REMIC taxes out of
        current or future amounts otherwise distributable to the Holder of the Residual
        Certificate in the REMICs or, if no such amounts are available, out of other
        amounts held in the Distribution Account, and shall reduce amounts otherwise
        payable to Holders of regular interests in the related REMIC.

      

      (h)
         The
        Trustee, as agent for the Tax Matters Person, shall, for federal income tax
        purposes, maintain books and records with respect to each REMIC created
        hereunder on a calendar year and on an accrual basis.

      

      (i)
         After
        the
        Closing Date, no additional contributions of assets shall be made to any
        REMIC
        created hereunder, except as expressly provided in this Agreement with respect
        to Qualified Replacement Mortgages.

      

      
        
          
          

        

        
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      (j)
         Neither
        of the Trustee nor the Servicer shall enter into any arrangement by which
        any
        REMIC created hereunder will receive a fee or other compensation for
        services.

      

      (k)
         The
        Trustee will apply for an Employee Identification Number from the Internal
        Revenue Service via a Form SS-4 or other acceptable method for REMIC I, REMIC
        II, REMIC III, REMIC IV, REMIC V and the Master REMIC.

      

      (l)
         The
        Trustee shall treat the Supplemental Interest Trust as an outside reserve
        fund
        within the meaning of Treasury Regulation Section 1.860G-2(h) that is owned
        by
        the Holders of the Class CA Certificates and that is not an asset of any
        REMIC.
        The Trustee shall treat the rights of the holders of the Class A and Mezzanine
        Certificates to receive any interest payments in excess of the REMIC
        Pass-Through Rate on the Master REMIC Regular Interest corresponding to such
        Class of Certificates as rights in an interest rate cap contract written
        by the
        Class CA Certificateholders in favor of the holders of the Class A and Mezzanine
        Certificates. Thus, each Class A and Mezzanine Certificate shall be treated
        as
        representing not only ownership of a regular interest in the Master REMIC,
        but
        also ownership of an interest in an interest rate cap contract. Furthermore,
        the
        Trustee shall treat the obligation of the Holders of the Class A and Mezzanine
        Certificates to make certain payments to the Supplemental Interest Account
        to
        the extent that the payment on the Pass-Through Rate on the Master REMIC
        Regular
        Interest exceeds the interest payment on the corresponding Class of Certificates
        as an obligation to make payments pursuant to an interest rate cap contract
        written by the Holders of the Class A and Mezzanine Certificates in favor
        of the
        Class CA Certificateholder. In no event shall any payments provided for in
        this
        subsection be treated as payments with respect to a “regular interest” in a
        REMIC within the meaning of Code Section 860G(a)(1). The pledge of payments
        on
        the Class CB Certificates to the Supplemental Interest Trust will be treated
        as
        a limited guaranty written by the Holder of the Class CB Certificate for
        the
        benefit of the Holders of the Class CA Certificate. Such guaranty is expected
        to
        have nominal value. To the extent that the Class CB Interest Distributable
        Amount paid to the Supplemental Interest Trust as described in Section 10.01(n)
        is not paid in full to the Holders of the Class CB Certificates pursuant
        to
        Section 4.04(c)(v), a right of reimbursement will arise in favor of the Holders
        of the Class CB Certificates against the Holders of the Class CA Certificates.
        

      

      (m)
         Notwithstanding
        the priority and sources of payments set forth in Article IV hereof or
        otherwise, the Trustee shall account for all distributions on the Certificates
        as set forth in this section.

      

      (n)
         For
        federal income tax purposes, payments pursuant to Section 4.01(a)(i)(O) shall
        be
        treated as having been made to the extent of remaining Interest Remittance
        Amount (i) first, to the Holders of the Class CA Certificates, the Class
        CA
        Interest Distributable Amount and (ii) second, to the Holders of the Class
        CB
        Certificates, the Class CB Interest Distributable Amount.

      

      (o)
         For
        federal income tax purposes, payments of Excess Cashflow pursuant to Section
        4.04(d)(i) will be treated as having been made (i) first, from Excess Cashflow
        relating to the Class CB Interest Distributable Amount and (ii) second, from
        Excess Cashflow relating to amounts otherwise distributable on the Class
        CA
        Certificates.

      

      
        
          
          

        

        
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      (p)
         None
        of
        the Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class M-8 DSI
        Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates or
        the
        Class M-11 DSI Certificates will be treated as regular or residual interest
        in
        any REMIC created hereunder.

      

      Section
        10.02  Prohibited
        Transactions and Activities.

      

      Except
        as
        specifically provided in this Agreement, none of the Depositor, the Servicer
        nor
        the Trustee shall sell, dispose of, or substitute for any of the Mortgage
        Loans,
        if such disposition, acquisition, substitution, or acceptance would (a) affect
        adversely the status of any REMIC created hereunder as a REMIC or (b) cause
        any
        REMIC created hereunder to be subject to a tax on prohibited transactions
        or
        prohibited contributions pursuant to the REMIC Provisions.

      

      ARTICLE
        XI

      

      TERMINATION

      

      Section
        11.01  Termination.

      

      (a)
         The
        respective obligations and responsibilities of the Sponsor, the Servicer,
        the
        Depositor and the Trustee created hereby (other than the obligation of the
        Trustee to make certain payments to Certificateholders after the final
        Distribution Date and the obligation of the Servicer to send certain notices
        as
        hereinafter set forth and the obligation of the Servicer to indemnify the
        Trustee in accordance with Section 6.06) shall terminate upon notice to the
        Trustee upon the earliest of (i) the Distribution Date on which the Certificate
        Principal Balances of the Regular Certificates have been reduced to zero,
        (ii)
        the final payment or other liquidation of the last Mortgage Loan held by
        the
        Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage
        Loans as described below and (iv) the Assumed Final Maturity Date.
        Notwithstanding the foregoing, in no event shall the trust created hereby
        continue beyond the expiration of 21 years from the death of the last survivor
        of the descendants of Joseph P. Kennedy, the late ambassador of the United
        States to the Court of St. James, living on the date hereof.

      

      The
        Servicer may, at its option, terminate this Agreement on any date on which
        the
        aggregate of the Principal Balances of the Mortgage Loans on such date is
        equal
        to or less than 10% of the Maximum Collateral Amount, by purchasing, on the
        next
        succeeding Distribution Date, all of the outstanding Mortgage Loans and REO
        Properties at a price equal to the aggregate Principal Balance of the Mortgage
        Loans and REO Properties plus accrued and unpaid interest thereon at the
        weighted average of the Mortgage Rates through the end of the Due Period
        preceding the final Distribution Date plus unreimbursed Servicing Advances,
        Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and
        REO
        Properties, any accrued and unpaid Available Funds Cap Shortfall Amount and
        Available Funds Cap Carryforward Amount (without duplication of amounts already
        paid) and any unpaid amount due the Trustee, the Hedge Counterparties and
        the
        Custodian under this Agreement; provided,
        however,
        that in
        no event shall such price be less than the amount necessary to pay the sum
        of
        (i) 100% of the aggregate Certificate Principal Balance of each Class of
        Certificates, (ii) accrued and unpaid interest thereon at the related
        Pass-Through Rate (including accrued and unpaid interest at the related REMIC
        Pass-Through Rate for the Class CA and Class CB Certificates) through the
        date
        on which the trust is terminated, (iii) any unpaid Administrative Fees and
        (iv)
        any unpaid amount due to the Hedge Counterparties (including any Hedge
        Termination Payments) (the “Termination
        Price”);
        provided, however, that such option may only be exercised if the Termination
        Price is sufficient to pay all interest accrued on, as well as amounts necessary
        to retire the principal balance of, each class of net interest margin notes
        issued pursuant to the Indenture at the time the option is
        exercised.

      

      
        
          
          

        

        
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      In
        connection with any such purchase pursuant to and
        subject to the requirements of the
        preceding paragraph, the Servicer shall deposit in the Distribution Account
        all
        amounts then on deposit in the Collection Account, which deposit shall be
        deemed
        to have occurred immediately preceding such purchase, and which amount shall
        be
        applied in accordance with the priorities set forth in Article IV
        hereof.

      

      Any
        such
        purchase shall be accomplished by deposit into the Distribution Account on
        the
        Distribution Date of the Termination Price.

      

      The
        Servicer may assign or pledge to any Person its right to exercise the foregoing
        option by giving written notice of the assignment or pledge to the Trustee.
        Any
        assignee of such option may further assign or pledge its interest in such
        option.

      

      (b)
         In
        the
        event that the Certificate Principal Balances of all of the Class A and
        Mezzanine have not been reduced to zero by the Assumed Final Maturity Date,
        the
        Trustee, shall (i) sign a plan of complete liquidation prepared and provided
        to
        it by the Servicer of each REMIC created hereunder meeting the requirements
        of a
“Qualified Liquidation” under Section 860F of the Code and any regulations
        thereunder, (ii) sell all of the assets of the Trust Fund for cash, pursuant
        to
        the terms of the plan of complete liquidation, (iii) distribute the proceeds
        of
        the sale to the Certificateholders in accordance with Section 4.01 hereof,
        and
        (iv) terminate the Issuing Entity. By their acceptance of Certificates, the
        Holders thereof hereby agree to appoint the Trustee as their attorney in
        fact
        to: (i) adopt such a plan of complete liquidation (and the Certificateholders
        hereby appoint the Trustee as their attorney in fact to sign such a plan)
        as
        appropriate and (ii) to take such other action in connection therewith as
        may be
        reasonably required to carry out such plan of complete liquidation in accordance
        with the terms thereof.

      

      (c)
         Notice
        of
        any termination, specifying the Distribution Date (which shall be a date
        that
        would otherwise be a Distribution Date) upon which the Certificateholders
        may
        surrender their Certificates to the Trustee for payment of the final
        distribution and cancellation, shall be given promptly by the Trustee upon
        the
        Trustee receiving notice of such date from the Servicer, by letter to the
        Hedge
        Counterparties (if prior to the Class I Termination Date) and the
        Certificateholders mailed not earlier than the 15th day and not later than
        the
        25th day of the month next preceding the month of such final distribution
        specifying (1) the Distribution Date upon which final distribution of the
        Certificates will be made upon presentation and surrender of such Certificates
        at the office or agency of the Trustee therein designated, (2) the amount
        of any
        such final distribution and (3) that the Record Date otherwise applicable
        to
        such Distribution Date is not applicable, distributions being made only upon
        presentation and surrender of the Certificates at the office or agency of
        the
        Trustee therein specified.

      

      
        
          
          

        

        
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      (d)
         Upon
        presentation and surrender of the Certificates, the Trustee shall cause to
        be
        distributed to the Holders of the Certificates on the Distribution Date for
        such
        final distribution, in proportion to the Percentage Interests of their
        respective Class and to the extent that funds are available for such purpose,
        an
        amount equal to the amount required to be distributed to such Holders in
        accordance with the provisions of Section 4.01 for such Distribution Date.
        

      

      (e)
         In
        the
        event that all Certificateholders shall not surrender their Certificates
        for
        final payment and cancellation on or before such final Distribution Date,
        the
        Trustee shall promptly following such date cause all funds in the Distribution
        Account not distributed in final distribution to Certificateholders to be
        withdrawn therefrom and credited to the remaining Certificateholders by
        depositing such funds in a separate trust account for the benefit of such
        Certificateholders, which shall be held uninvested, and the Servicer (if
        the
        Servicer has exercised its right to purchase the Mortgage Loans) or the Trustee
        (in any other case) shall give a second written notice to the remaining
        Certificateholders, to surrender their Certificates for cancellation and
        receive
        the final distribution with respect thereto. If within nine months after
        the
        second notice all the Certificates shall not have been surrendered for
        cancellation, the Residual Certificateholder shall be entitled to all unclaimed
        funds and other assets which remain subject hereto, and the Trustee upon
        transfer of such funds shall be discharged of any responsibility for such
        funds,
        and the Certificateholders shall look to the Residual Certificateholder for
        payment.

      

      Section
        11.02  Additional
        Termination Requirements.

      

      (a)
         In
        the
        event that the Servicer exercises its purchase option as provided in Section
        11.01 or the Trustee terminates the Issuing Entity, each REMIC shall be
        terminated in accordance with the following additional requirements, unless
        the
        Trustee shall have been furnished with an Opinion of Counsel to the effect
        that
        the failure of the Issuing Entity to comply with the requirements of this
        Section will not (i) result in the imposition of taxes on “prohibited
        transactions” of the Issuing Entity as defined in Section 860F of the Code or
        (ii) cause any REMIC constituting part of the Issuing Entity to fail to qualify
        as a REMIC at any time that any Certificates are outstanding:

      

      (i) Within
        90
        days prior to the final Distribution Date, the Servicer shall adopt and prepare,
        and the Trustee shall sign, a plan of complete liquidation of each REMIC
        created
        hereunder meeting the requirements of a “Qualified Liquidation” under Section
        860F of the Code and any regulations thereunder; and

      

      (ii) At
        or
        after the time of adoption of such a plan of complete liquidation and at
        or
        prior to the final Distribution Date, the Trustee shall sell all of the assets
        of the Trust Fund to the Servicer for cash pursuant to the terms of the plan
        of
        complete liquidation.

      

      (b)
         By
        their
        acceptance of Certificates, the Holders thereof hereby agree to appoint the
        Trustee as their attorney in fact to: (i) adopt such a plan of complete
        liquidation (and the Certificateholders hereby appoint the Trustee as their
        attorney in fact to sign such plan) as appropriate and (ii) to take such
        other
        action in connection therewith as may be reasonably required to carry out
        such
        plan of complete liquidation all in accordance with the terms
        hereof.

      

      
        
          
          

        

        
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      ARTICLE
        XII

      

      MISCELLANEOUS
        PROVISIONS

      

      Section
        12.01  Amendment.

      

      This
        Agreement may be amended from time to time by the parties hereto, and without
        the consent of the Certificateholders or the Hedge Counterparties (i) to
        cure
        any ambiguity, (ii) to correct or supplement any provisions herein which
        may be
        defective or inconsistent with any other provisions herein or (iii) to make
        any
        other provisions with respect to matters or questions arising under this
        Agreement which shall not be inconsistent with the provisions of this Agreement;
        provided that any such amendment will have no material adverse effect, as
        evidenced by an Opinion of Counsel as described below, on the Hedge
        Counterparties provided,
        however,
        that
        any such action listed in clause (i) through (iii) above shall be deemed
        not to
        adversely affect in any respect the interests of (A) any Certificateholder,
        if
        evidenced by (i) written notice to the Depositor, the Servicer and the Trustee
        from the Rating Agencies that such action will not result in the reduction
        or
        withdrawal of the rating of any outstanding Class of Certificates with respect
        to which it is a Rating Agency or (ii) an Opinion of Counsel delivered to
        the
        Servicer, the Depositor and the Trustee and (B) any Hedge Counterparty, (i)
        if
        evidenced by an opinion of counsel from outside counsel of recognized
        international reputation in the field of sophisticated financial transactions
        delivered to the Servicer, the Depositor, the Trustee, each Hedge Counterparty
        with a copy to the Rating Agencies stating that such actions will have no
        material adverse effect on the Hedge Counterparties or (ii) if the written
        consent of the Hedge Counterparties is obtained. This Agreement may be amended
        by the parties hereto without the consent of the Hedge Counterparties after
        the
        Class I Termination Date.

      

      In
        addition, this Agreement may be amended from time to time by the parties
        hereto
        with the consent of the Majority Certificateholders for the purpose of adding
        any provisions to or changing in any manner or eliminating any of the provisions
        of this Agreement or of modifying in any manner the rights of the Holders
        of
        Certificates; provided, however, that no such amendment or waiver shall (w)
        reduce in any manner the amount of, or delay the timing of, payments on the
        Certificates or distributions which are required to be made on any Certificate
        without the consent of the Holder of such Certificate, (x) adversely affect
        in
        any material respect the interests of the Holders of any Class of Certificates
        in a manner other than as described in clause (w) above, without the consent
        of
        the Holders of Certificates of such Class evidencing at least a 66% Percentage
        Interest in such Class, (y) reduce the percentage of Voting Rights required
        by
        clause (x) above without the consent of the Holders of all Certificates of
        such
        Class then outstanding or (z) have a material adverse effect on the interests
        of
        the Hedge Counterparties without such Hedge Counterparties’ written consent.
        Upon approval of an amendment, a copy of such amendment shall be sent to
        the
        Rating Agencies.

      

      Notwithstanding
        the provisions of this Section 12.01, Sections 3.17 and 3.18 may be amended
        as
        necessary to comply with the provisions of Regulation AB without the consent
        of
        the Certificateholders.

      

      The
        Servicer shall send to the Hedge Counterparties (for so long as the Hedge
        Agreements are outstanding) a copy of any executed amendment made pursuant
        to
        this Section 12.01. If the consent of the Hedge Counterparties is required
        for
        any amendment, a copy of such proposed amendment shall be sent to the Hedge
        Counterparties 10 days (or such shorter time period as shall be agreed to
        by the
        parties) prior to the effective date thereof.

      

      
        
          
          

        

        
          91

          
            

          

        

        
          
          

        

      

      

      

      Notwithstanding
        any provision of this Agreement to the contrary, the Trustee shall not consent
        to any amendment to this Agreement unless it shall have first received an
        Opinion of Counsel, delivered by (and at the expense of) the Person seeking
        such
        Amendment, to the effect that such amendment will not result in the imposition
        of taxes on “prohibited transactions” of the Issuing Entity as defined in
        Section 860F of the Code or cause any REMIC constituting part of the Issuing
        Entity to fail to qualify as a REMIC at any time that any Certificates are
        outstanding, and that the amendment is being made in accordance with the
        terms
        hereof. Additionally, prior to entering into any amendment, the Trustee shall
        be
        entitled to receive from the party requesting such amendment an Opinion of
        Counsel stating that such amendment is authorized and permitted pursuant
        to the
        terms of this Agreement and all conditions precedent to its execution and
        delivery have been satisfied.

      

      Promptly
        after the execution of any such amendment the Trustee shall furnish, at the
        expense of the Person that requested the amendment if such Person is the
        Sponsor
        or the Servicer (but in no event at the expense of the Trustee), otherwise
        at
        the expense of the Issuing Entity, a copy of such amendment and the Opinion
        of
        Counsel referred to in the immediately preceding paragraph to the Servicer
        and
        each Rating Agency.

      

      It
        shall
        not be necessary for the consent of Certificateholders under this Section
        12.01
        to approve the particular form of any proposed amendment; instead it shall
        be
        sufficient if such consent shall approve the substance thereof. The manner
        of
        obtaining such consents and of evidencing the authorization of the execution
        thereof by Certificateholders shall be subject to such reasonable regulations
        as
        the Trustee may prescribe.

      

      The
        Trustee shall not be obligated to enter into any amendment pursuant to this
        Section 12.01 that affects its rights, duties and immunities under this
        Agreement or otherwise.

      

      Section
        12.02  Recordation
        of Agreement; Counterparts.

      

      To
        the
        extent permitted by applicable law, this Agreement is subject to recordation
        in
        all appropriate public offices for real property records in all the counties
        or
        other comparable jurisdictions in which any or all of the properties subject
        to
        the Mortgages are situated, and in any other appropriate public recording
        office
        or elsewhere, such recordation to be effected by the Servicer at the expense
        of
        the Issuing Entity, but only upon direction of Certificateholders accompanied
        by
        an Opinion of Counsel to the effect that such recordation materially and
        beneficially affects the interests of the Certificateholders.

      

      For
        the
        purpose of facilitating the recordation of this Agreement as herein provided
        and
        for other purposes, this Agreement may be executed simultaneously in any
        number
        of counterparts, each of which counterparts shall be deemed to be an original,
        and such counterparts shall together constitute but one and the same
        instrument.

      

      
        
          
          

        

        
          92

          
            

          

        

        
          
          

        

      

      

      

      Section
        12.03  Limitation
        on Rights of Certificateholders.

      

      The
        death
        or incapacity of any Certificateholder shall not (i) operate to terminate
        this
        Agreement or the Issuing Entity, (ii) entitle such Certificateholder’s legal
        representatives or heirs to claim an accounting or to take any action or
        proceeding in any court for a partition or winding up of the Issuing Entity,
        or
        (iii) otherwise affect the rights, obligations and liabilities of the parties
        hereto or any of them.

      

      Except
        as
        expressly provided for herein, no Certificateholder shall have any right
        to vote
        or in any manner otherwise control the operation and management of the Issuing
        Entity, or the obligations of the parties hereto, nor shall anything herein
        set
        forth or contained in the terms of the Certificates be construed so as to
        constitute the Certificateholders from time to time as partners or members
        of an
        association; nor shall any Certificateholder be under any liability to any
        third
        person by reason of any action taken by the parties to this Agreement pursuant
        to any provision hereof.

      

      No
        Certificateholder shall have any right by virtue of any provision of this
        Agreement to institute any suit, action or proceeding in equity or at law
        upon
        or under or with respect to this Agreement, unless such Holder previously
        shall
        have given to the Trustee a written notice of default and of the continuance
        thereof, as hereinbefore provided, and unless also the Holders of Certificates
        entitled to at least 25% of the Voting Rights shall have made written request
        upon the Trustee to institute such action, suit or proceeding in its own
        name as
        Trustee hereunder and shall have offered to the Trustee such indemnity as
        it may
        reasonably require against the costs, expenses and liabilities to be incurred
        therein or thereby, and the Trustee for 15 days after its receipt of such
        notice, request and offer of indemnity, shall have neglected or refused to
        institute any such action, suit or proceeding. It is understood and intended,
        and expressly covenanted by each Certificateholder with every other
        Certificateholder and the Trustee, that no one or more Holders of Certificates
        shall have any right in any manner whatever by virtue of any provision of
        this
        Agreement to affect, disturb or prejudice the rights of the Holders of any
        other
        of such Certificates, or to obtain or seek to obtain priority over or preference
        to any other such Holder, which priority or preference is not otherwise provided
        for herein, or to enforce any right under this Agreement, except in the manner
        herein provided and for the equal, ratable and common benefit of all
        Certificateholders. For the protection and enforcement of the provisions
        of this
        Section 12.03 each and every Certificateholder and the Trustee shall be entitled
        to such relief as can be given either at law or in equity.

      

      Section
        12.04  Compliance
        with Regulation AB.

      

      Each
        of
        the parties hereto acknowledges and agrees that the purpose of Sections 3.17
        and
        3.18 of this Agreement is to facilitate compliance by the Sponsor and the
        Depositor with the provisions of Regulation AB, as such may be amended or
        clarified from time to time. Therefore, each of the parties agrees that (a)
        the
        obligations of the parties hereunder shall be interpreted in such a manner
        as to
        accomplish compliance with Regulation AB, (b) the parties’ obligations hereunder
        will be supplemented and modified as necessary to be consistent with any
        such
        amendments, interpretive advice or guidance, convention or consensus among
        active participants in the asset-backed securities markets, advice of counsel,
        or otherwise in respect of the requirements of Regulation AB and (c) the
        parties
        shall comply, to the extent practicable from a timing and information systems
        perspective, with requests made by the Sponsor or the Depositor for delivery
        of
        additional or different information as the Sponsor or the Depositor may
        determine in good faith is necessary to comply with the provisions of Regulation
        AB.

      

      
        
          
          

        

        
          93

          
            

          

        

        
          
          

        

      

      

      

      Section
        12.05  Governing
        Law; Jurisdiction.

      

      This
        Agreement shall be construed in accordance with the laws of the State of
        New
        York, and the obligations, rights and remedies of the parties hereunder shall
        be
        determined in accordance with such laws. With respect to any claim arising
        out
        of this Agreement, each party irrevocably submits to the exclusive jurisdiction
        of the courts of the State of New York and the United States District Court
        located in the Borough of Manhattan in The City of New York, and each party
        irrevocably waives any objection which it may have at any time to the laying
        of
        venue of any suit, action or proceeding arising out of or relating hereto
        brought in any such courts, irrevocably waives any claim that any such suit,
        action or proceeding brought in any such court has been brought in any
        inconvenient forum and further irrevocably waives the right to object, with
        respect to such claim, suit, action or proceeding brought in any such court,
        that such court does not have jurisdiction over such party, provided that
        service of process has been made by any lawful means.

      

      Section
        12.06  Notices.

      

      All
        demands, notices and communications hereunder shall be in writing and shall
        be
        deemed to have been duly given if personally delivered at or mailed by certified
        mail, return receipt requested, or sent by reputable overnight courier service
        to:

      

        
          	 	
                  (a)

                	
                  in
                    the case of the Depositor:

                

        

        

        NovaStar
          Mortgage Funding Corporation

        8140
          Ward
          Parkway

        Suite
          300

        Kansas
          City, Missouri 64114

        Attention:
          Matt Kaltenrieder

        

        (b)   in
          the
          case of the Servicer or the Sponsor:

        

        NovaStar
          Mortgage, Inc.

        8140
          Ward
          Parkway

        Suite
          300

        Kansas
          City, Missouri 64114

        Attention:
          Matt Kaltenrieder

        

        
          
            
            

          

          
            94

            
              

            

          

          
            
            

          

        

        

        

        
          	 	
                  (c)

                	
                  in
                    the case of Rating Agencies:

                

        

        

        Moody’s
          Investors Service Inc.

        99
          Church
          Street

        New
          York,
          New York 10007

        Attention:
          Rachel Peng

        

        Standard
          & Poor’s 

        26
          Broadway

        New
          York,
          New York 10004-1064

        Attention:
          Daniel Larkin 

        

        

        
          	 	
                  (d)

                	
                  in
                    the case of the Custodian:

                

        

        

        U.S.
          Bank
          National Association

        4527
          Metropolitan Court

        Suite
          C

        Frederick,
          MD 21704

        Attn:
          Robert D. Ruiz

        Tel:
          (301) 874-4533

        Fax:
          (301) 874-6055

        Attention:
          Structured Finance Trust Services 

        (NovaStar
          Mortgage Funding Trust, Series 2007-1)

        

        
          	 	
                  (e)

                	
                  in
                    the case of the Trustee:

                

        

        

        Deutsche
          Bank National Trust Company

        1761
          East
          St. Andrew Place 

        Santa
          Ana, CA 92705

        Attention:
          Trust Administration - NS0701

        

        

        provided,
          however, all reports, statements, certifications and information required
          to be
          provided to the Trustee pursuant to Section 3.18 shall be electronically
          forwarded to DBSec.Notifications@db.com

        

        
          	 	
                  (f)

                	
                  in
                    the case of The Royal Bank of Scotland plc, as Hedge
                    Counterparty:

                

        

        

        c/o
          RBS
          Financial Markets

        Level
          7,
          135 Bishopsgate

        London,
          EC2M 3UR

        
          	 	
                  Attention:

                	
                  Financial
                    Markets Legal

                

        

        
          	 	
                  Telephone:

                	
                  44
                    207 085 5000

                

        

        
          	 	
                  Facsimile:

                	
                  44
                    207 085 8411

                

        

        

        
          
            
            

          

          
            95

            
              

            

          

          
            
            

          

        

        

        

        With
          a copy to:

        

        c/o
          Greenwich Capital Markets, Inc.

        600
          Steamboat Road

        Greenwich,
          CT 06830

        
          	 	
                  Attention:

                	
                  Legal
                    Department - Derivatives
                    Documentation

                

        

        
          	 	
                  Telephone:

                	
                  203
                    618-2531/32

                

        

        
          	 	
                  Facsimile:

                	
                  203
                    618-2533/34

                

        

        

        (g)    in
          the
          case of Wachovia Bank, N.A., as Hedge Counterparty:

        

        Wachovia
          Bank, N.A.

        201
          South
          College Street, 6th Floor

        Charlotte,
          NC 28288-0601

        Attention:
          Collateral Management Group

        Tel:
          (704)
          383-1184

        Fax:
          (704)
          383-9026

        

        (h)    in
          the
          case of Deutsche Bank AG, as Hedge Counterparty:

        

        Deutsche
          Bank AG

        Taunusanlage
          12

        60262
          Frankfurt

        GERMANY

        Attention:
          Legal Department

        Telex
          No:
          411836 or 416731 or 41233

        Answerback: DBF-D

        

        (i) in
          the
          case of the Back-up Servicer:

        

        450
          American Street

        MS-
          SV3-A

        Simi
          Valley, CA 93065

        Attention:
          Portfolio Services

         

      

      or,
        as to
        each party, at such other address as shall be designated by such party in
        a
        written notice to each other party. Any notice required or permitted to be
        mailed to a Certificateholder shall be given by first class mail, postage
        prepaid, at the address of such Certificateholder as shown in the Certificate
        Register. Any notice so mailed within the time prescribed in this Agreement
        shall be conclusively presumed to have been duly given, whether or not the
        Certificateholder receives such notice. Any notice or other document required
        to
        be delivered or mailed by the Trustee to any Rating Agency shall be given
        on a
        reasonable efforts basis and only as a matter of courtesy and accommodation
        and
        the Trustee shall have no liability for failure to deliver such notice or
        document to any Rating Agency.

      

      Section
        12.07  Severability
        of Provisions.

      

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

      

      
        
          
          

        

        
          96

          
            

          

        

        
          
          

        

      

      

      

      Section
        12.08  Article
        and Section References.

      

      All
        article and section references used in this Agreement, unless otherwise
        provided, are to articles and sections in this Agreement.

      

      Section
        12.09  Further
        Assurances.

      

      Notwithstanding
        any other provision of this Agreement, the Trustee shall not have any obligation
        to consent to any amendment or modification of this Agreement unless they
        have
        been provided reasonable security or indemnity against their out-of-pocket
        expenses (including reasonable attorneys’ fees) to be incurred in connection
        therewith.

      

      Section
        12.10  Benefits
        of Agreement.

      

      Nothing
        in this Agreement or in the Certificates, expressed or implied, shall give
        to
        any Person, other than the Certificateholders, the Hedge Counterparties and
        the
        parties hereto and their successors hereunder, any benefit or any legal or
        equitable right, remedy or claim under this Agreement. For the avoidance
        of
        doubt, the parties agree that each of the Hedge Counterparties, prior to
        the
        Class I Termination Date, and the Servicing Rights Pledgee are intended and
        shall have all rights of a third-party beneficiary of this Agreement.

      

      Section
        12.11  Acts
        of Certificateholders.

      

      (a)
         Any
        request, demand, authorization, direction, notice, consent, waiver or other
        action provided by this Agreement to be given or taken by the Certificateholders
        may be embodied in and evidenced by one or more instruments of substantially
        similar tenor signed by such Certificateholders in person or by agent duly
        appointed in writing, and such action shall become effective when such
        instrument or instruments are delivered to the Trustee, the Sponsor and the
        Servicer. Such instrument or instruments (and the action embodied therein
        and
        evidenced thereby) are herein sometimes referred to as the “act” of the
        Certificateholders signing such instrument or instruments. Proof of execution
        of
        any such instrument or of a writing appointing any such agent shall be
        sufficient for any purpose of this Agreement and conclusive in favor of the
        Trustee and the Issuing Entity, if made in the manner provided in this Section
        12.11.

      

      (b)
         The
        fact
        and date of the execution by any Person of any such instrument or writing
        may be
        proved by the affidavit of a witness of such execution or by the certificate
        of
        a notary public or other officer authorized by law to take acknowledgments
        of
        deeds, certifying that the individual signing such instrument or writing
        acknowledged to him the execution thereof. Whenever such execution is by
        a
        signer acting in a capacity other than his or her individual capacity, such
        certificate or affidavit shall also constitute sufficient proof of his
        authority.

      

      
        
          
          

        

        
          97

          
            

          

        

        
          
          

        

      

      (c)
         Any
        request, demand, authorization, direction, notice, consent, waiver or other
        action by any Certificateholder shall bind every future Holder of such
        Certificate and the Holder of every Certificate issued upon the registration
        of
        transfer thereof or in exchange therefor or in lieu thereof, in respect of
        anything done, omitted or suffered to be done by the Trustee or the Issuing
        Entity in reliance thereon, whether or not notation of such action is made
        upon
        such Certificate.

      

      Section
        12.12  Confidentiality.

      

      The
        Trustee hereby agrees to hold and treat all Confidential Information (as
        defined
        below) provided to it in connection with the offering of the Certificates
        in
        confidence and in accordance with this Section 12.12, and will implement
        and
        maintain safeguards in accordance with the “Interagency Guidelines Establishing
        Standards for Safeguarding Customer Information” as required by Appendix B to 12
        CFR, Chapter I, Part 30, to further assure the confidentiality of such
        Confidential Information. Such Confidential Information will not, without
        the
        prior written consent of the Servicer, be disclosed or used by the Trustee
        or by
        its subsidiaries or, affiliates, or its or their directors, officers, employees,
        agents or controlling persons or agents or advisors (collectively, the
“Information
        Recipients”)
        other
        than for the purposes of (i) structuring the securitization transaction and
        the
        facilitating the issuance of the Certificates, or (ii) in connection with
        the
        performance of its required due diligence on the Mortgage Loans. Disclosure
        that
        is not in violation of the Right to Financial Privacy Act of 1978, as amended,
        the Gramm-Leach-Bliley Act of 1999, as amended, (the “G-L-B
        Act”)
        or
        other applicable law by the Trustee of any Confidential Information at the
        request of its outside auditors or governmental regulatory authorities in
        connection with an examination of the Trustee by any such authority or for
        the
        purposes specified in above shall not constitute a breach of its obligations
        under this Section 12.12, and shall not require the prior consent of the
        Servicer.

      

      As
        used
        herein, “Confidential Information” means non-public personal information (as
        defined in the G-L-B Act and its enabling regulations issued by the Federal
        Trade Commission) regarding obligors on the Mortgage Loans that is identified
        as
        such by the Servicer. Confidential Information shall not include information
        which (i) is or becomes generally available to the public other than as a
        result
        of disclosure by the Trustee or any of its Information Recipients; (ii) was
        available to the Trustee on a non-confidential basis from a person or entity
        other than the Servicer; (iii) is requested to be disclosed by a governmental
        authority or related governmental, administrative, or regulatory or
        self-regulatory agencies having or claiming authority to regulate or oversee
        any
        aspect of the Trustee’s business or that of its affiliates or is otherwise
        required by law or by legal or regulatory process to be disclosed;
        (iv) becomes available to the Trustee on a non-confidential basis from a
        person or entity other than the Servicer who, to the best knowledge of the
        Trustee, is not otherwise bound by a confidentiality agreement with the
        Servicer, and is not otherwise prohibited from transmitting the information
        to
        the Trustee; (v) the Servicer provides written permission to the Trustee
        to
        release, (vi) is independently developed by employees of the Trustee who
        did not
        have access to any or all of the otherwise Confidential Information or (vii)
        is
        disclosed to the Trustee’s auditors or counsel or is required to be disclosed to
        its lenders or rating agencies, to the extent required for the purpose of
        consummating the services it is to provide as set forth herein.

      

      
        
          
          

        

        
          98

          
            

          

        

        
          
          

        

      

      IN
        WITNESS WHEREOF, the Depositor, the Servicer, the Sponsor, Custodian and
        the
        Trustee have caused their names to be signed hereto by their respective officers
        thereunto duly authorized, all as of the day and year first above
        written.

       

      NOVASTAR
        MORTGAGE FUNDING CORPORATION,

      as
        Depositor

      

      By: 
        /s/
        Matt Kaltenrieder

      Name:
        Matt Kaltenrieder

      Title:
        Vice President

      

      

      NOVASTAR
        MORTGAGE, INC.,

      as
        Servicer and as Sponsor

      

      

      By: 
        /s/
        Matt Kaltenrieder

      Name:
        Matt Kaltenrieder

      Title:
        Vice President

      

      

      U.S.
        BANK
        NATIONAL ASSOCIATION,

      as
        Custodian

      

      

      By:  /s/
        Sheryl Johnson

      Name:
        Sheryl Johnson

      Title:
        Vice President

      

      

      DEUTSCHE
        BANK NATIONAL TRUST 

      COMPANY,

      as
        Trustee and as
        Trustee to NovaStar Mortgage 

      Supplemental
        Interest Trust, Series 2007-1

      

      

      By:  /s/
        Karlene Benvenuto

      Name:
        Karlene Benvenuto

      Title:
        Authorized Signer

      

      By: 
        /s/
        Ronaldo Reyes

      Name:
        Ronaldo Reyes

      Title:
        Vice President

      

      [Pooling
        and Servicing Agreement Signature Page]

      
        
          
          

        

        
          99

          
            

          

        

        
          
          

        

      

      

      
        	
                STATE
                  OF MISSOURI

              	
                )

              
	 	
                )
                  ss.:

              
	
                COUNTY
                  OF JACKSON

              	
                )

              

      

      

      

      On
        the
        28th day of February, 2007 before me, a notary public in and for said State,
        personally appeared Matt Kaltenrieder known to me (or proved to me on the
        basis
        of satisfactory evidence) to be a Vice President of NovaStar Mortgage Funding
        Corporation, a Delaware corporation that executed the within instrument,
        and
        also known to me (or proved to me on the basis of satisfactory evidence)
        to be
        the person who executed it on behalf of said corporation, and acknowledged
        to me
        that such corporation executed the within instrument.

       

      IN
        WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
        the
        day and year in this certificate first above written.

       

      

        
          	 	
                  /s/
                    Shawna M. Hart

                
	
                  Seal

                	
                  Notary
                    Public

                

        

      

       

       

      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

      

      
        	
                STATE
                  OF MISSOURI

              	
                )

              
	 	
                )
                  ss.:

              
	
                COUNTY
                  OF JACKSON

              	
                )

              

      

      

      

      On
        the
        28th day of February, 2007 before me, a notary public in and for said State,
        personally appeared Matt Kaltenrieder known to me (or proved to me on the
        basis
        of satisfactory evidence) to be a Vice President of NovaStar Mortgage, Inc.,
        a
        Virginia corporation that executed the within instrument, and also known
        to me
        (or proved to me on the basis of satisfactory evidence) to be the person
        who
        executed it on behalf of said corporation, and acknowledged to me that such
        corporation executed the within instrument.

       

      IN
        WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
        the
        day and year in this certificate first above written.

       

      

        
          	 	
                  /s/
                    Shawna M. Hart

                
	
                  Seal

                	
                  Notary
                    Public

                

        

      

       

      
        
          
          

        

        
          ii

          
            

          

        

        
          
          

        

      

      

      
        	
                STATE
                  OF MINNESOTA

              	
                )

              
	 	
                )
                  ss.:

              
	
                COUNTY
                  OF MARICOPA

              	
                )

              

      

      

      

      On
        the
        28th day of February, 2007 before me, a notary public in and for said State,
        personally appeared Sheryl Johnson known to me (or proved to me on the basis
        of
        satisfactory evidence) to be a Vice President of U.S. Bank National Association,
        a national banking association that executed the within instrument, and also
        known to me (or proved to me on the basis of satisfactory evidence) to be
        the
        person who executed it on behalf of said corporation, and acknowledged to
        me
        that such corporation executed the within instrument.

       

      IN
        WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
        the
        day and year in this certificate first above written.

       

      
        

          
            	 	
                    /s/
                      Monica Rodriguez

                  
	
                    Seal

                  	
                    Notary
                      Public

                  

          

        

         

      

      
        
          
          

        

        
          iii

          
            

          

        

        
          
          

        

      

      

      
        	
                STATE
                  OF CALIFORNIA

              	
                )

              
	 	
                )
                  ss.:

              
	
                COUNTY
                  OF ORANGE

              	
                )

              

      

      

      

      On
        the
        28th day of February, 2007 before me, a notary public in and for said State,
        personally appeared Karlene Benvenuto, known to me (or proved to me on the
        basis
        of satisfactory evidence) to be an Authorized Signer of Deutsche Bank National
        Trust Company that executed the within instrument, and also known to me (or
        proved to me on the basis of satisfactory evidence) to be the person who
        executed it on behalf of said association, and acknowledged to me that such
        corporation executed the within instrument.

       

      IN
        WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
        the
        day and year in this certificate first above written.

       

      
        
          

            
              	 	
                      /s/
                        Cindy Lai

                    
	
                      Seal

                    	
                      Notary
                        Public

                    

            

          

           

           

        

      

       

      
        
          
          

        

        
          iv

          
            

          

        

        
          
          

        

      

      

      
        	
                STATE
                  OF CALIFORNIA

              	
                )

              
	 	
                )
                  ss.:

              
	
                COUNTY
                  OF ORANGE

              	
                )

              

      

      

      

      On
        the
        28th day of February, 2007 before me, a notary public in and for said State,
        personally appeared Ronaldo Reyes, known to me (or proved to me on the basis
        of
        satisfactory evidence) to be a Vice President of Deutsche Bank National Trust
        Company that executed the within instrument, and also known to me (or proved
        to
        me on the basis of satisfactory evidence) to be the person who executed it
        on
        behalf of said association, and acknowledged to me that such corporation
        executed the within instrument.

       

      IN
        WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal
        the
        day and year in this certificate first above written.

       

      
        

          
            	 	
                    /s/
                      Cindy Lai

                  
	
                    Seal

                  	
                    Notary
                      Public

                  

          

        

         

      

    

    
      
        
        

      

      
        v

        
          

        

      

      
        
        

      

       

    

    

      APPENDIX
        A

      

      DEFINITIONS

      

      "1933
        Act":
        The
        Securities Act of 1933, as amended.

       

      "Account":
        The
        Collection Account, the Supplemental Interest Account, and the Distribution
        Account.

       

      "Accrual
        Period":
        With
        respect to each Distribution Date, (i) in the case of the LIBOR Certificates,
        the Cap Payments and the Swap Amount, the period commencing on the preceding
        Distribution Date (or in the case of the first Accrual Period, commencing
        on the
        Closing Date) and ending on the day preceding the applicable Distribution
        Date
        and (ii) in the case of the Class A-2A2 Certificates, the period commencing
        on
        the first day of the month prior to the month in which the Distribution Date
        occurs to and including the last day of such month

       

      "Adjustable
        Rate Mortgage Loan":
        A
        Mortgage Loan which provides at any period during the life of such loan for
        the
        adjustment of the Mortgage Rate payable in respect thereto. The Adjustable
        Rate
        Mortgage Loans are identified as such on the Mortgage Loan
        Schedule.

       

      "Adjustment
        Date":
        With
        respect to each Adjustable Rate Mortgage Loan, each adjustment date, on which
        the Mortgage Rate of such Mortgage Loan changes pursuant to the related Mortgage
        Note. 

       

      "Administrative
        Fee":
        With
        respect to each Distribution Date, the sum of the MI Premium, the Servicing
        Fee,
        the Back-up Servicing Fee, the Custodian Fee and the Trustee Fee with respect
        to
        such Distribution Date.

       

      "Administrative
        Fee Rate":
        As to
        each Distribution Date, the sum of (i) the Trustee Fee Rate, (ii) the Servicing
        Fee Rate, (iii) the Back-up Servicing Fee Rate, (iv) the Custodian Fee Rate
        and
        (v) the total MI Premiums due during the related Due Period, expressed as
        an
        annual percentage rate of the Pool Balance as of the beginning of that Due
        Period. 

       

      "Advance":
        As to
        any Mortgage Loan, any advance made by the Servicer in respect of any
        Distribution Date pursuant to Section 3.25.

       

      "Adverse
        REMIC Event":
        As
        defined in Section 10.01(f) hereof.

       

      "Affiliate":
        With
        respect to any Person, any other Person controlling, controlled by or under
        common control with such Person. For purposes of this definition, "control"
        means the power to direct the management and policies of a Person, directly
        or
        indirectly, whether through ownership of voting securities, by contract or
        otherwise and "controlling" and "controlled" shall have meanings correlative
        to
        the foregoing.

       

      "Agreement":
        This
        Pooling and Servicing Agreement and all amendments hereof and supplements
        hereto.

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      "Allocated
        Realized Loss Amount":
        With
        respect to any Distribution Date and any Class of Mezzanine Certificates,
        the
        Realized Losses allocated to such Class of Certificates on such Distribution
        Date.

       

      "Applicable
        Regulations":
        As to
        any Mortgage Loan, all federal and state laws, statutes, rules and regulations
        applicable thereto.

       

      "Appraised
        Value":
        The
        appraised value of a Mortgaged Property based upon the appraisal made at
        the
        time of the origination of the related Mortgage Loan. With respect to a Mortgage
        Loan the proceeds of which were used to refinance an existing Mortgage Loan,
        the
        appraised value of the Mortgaged Property based upon the appraisal with the
        lowest appraised value (as reviewed and approved by the Sponsor) obtained
        within
        12 months of the time of refinancing.

       

      "Assignment
        of Mortgage":
        An
        assignment of Mortgage, notice of transfer or equivalent instrument, in
        recordable form, which is sufficient under the laws of the jurisdiction wherein
        the related Mortgaged Property is located to reflect of record the sale of
        the
        Mortgage, which assignment, notice of transfer or equivalent instrument may
        be
        in the form of one or more blanket assignments covering Mortgages secured
        by
        Mortgaged Properties located in the same county, if permitted by
        law.

       

      "Assumed
        Final Maturity Date":
        As to
        each Class of Certificates, the Distribution Date in March 2037.

       

      "Available
        Funds":
        As to
        each Distribution Date, an amount equal to the amount on deposit in the
        Distribution Account, representing the sum of (i) the aggregate amount of
        scheduled payments on the related Mortgage Loans due on the related Due Date
        and
        received on or prior to the related Determination Date, (ii) miscellaneous
        fees
        and collections, including prepayment penalties with respect to the Mortgage
        Loans (but excluding late fees), (iii) any unscheduled payments and receipts,
        including Mortgagor prepayments on the related Mortgage Loans, received during
        the related Prepayment Period and proceeds of repurchases, and adjustments
        in
        the case of substitutions and terminations, Net Liquidation Proceeds and
        Insurance Proceeds, and Subsequent Recoveries, (iv) all Advances made and
        Compensating Interest paid for such Distribution Date in respect of the related
        Mortgage Loans, (v) on the Distribution Date following the termination pursuant
        to Section 11.01 herein, the Termination Price.

       

      "Available
        Funds Cap":
        For
        each Distribution Date, the percentage equivalent of a fraction (adjusted
        with
        respect to the LIBOR Certificates for the actual number of days elapsed in
        the
        related Accrual Period) the numerator of which is (a) an amount equal to
        (i) the
        aggregate Interest Remittance Formula Amount for the Group I and Group II
        Mortgage Loans, less (ii) the Administrative Fees, less (iii) the Class I
        Monthly Interest Distributable Amount, and less (iv) any unpaid Hedge
        Termination Payments that are not Defaulted Hedge Termination Payments, and
        the
        denominator of which is (b) the product of (i) 12 and (ii) the aggregate
        Principal Balance of the Mortgage Loans.

       

      
        
          
          

        

        
          Appendix
            A-2

          
            

          

        

        
          
          

        

      

      

        "Available
          Funds Cap Carryforward Amount":
          With
          respect to any Class of Class A Certificates and Mezzanine Certificates
          and any
          Distribution Date, the sum of (i) the positive excess, if any, of (x) the
          aggregate cumulative amount of Available Funds Cap Shortfall Amounts for
          such
          Class on all prior Distribution Dates over (y) the aggregate cumulative
          amount
          of Supplemental Interest Payments actually paid to the Holders of that
          Class on
          all prior Distribution Dates pursuant to those clauses of Section 4.04(c),
          which
          relate to payments to that Class, plus (ii) interest on the amount described
          in
          clause (i) at a rate equal to the related Formula Rate for such Class and
          Distribution Date.

         

        "Available
          Funds Cap Shortfall Amount":
          With
          respect to any Distribution Date and Class of Class A Certificates and
          Mezzanine
          Certificates the excess, if any, of (1) the interest due on such Class
          calculated using the Formula Rate applicable to such Class over (2) the
          interest
          due on such Class, calculated using the Pass-Through Rate applicable to
          such
          Class.

         

        "Back-up
          Servicer":
          Countrywide Home Loans Servicing LP, a Texas limited partnership.

         

        "Back-up
          Servicer Indemnification Agreement
          ": The
          Indemnification Agreement dated as of February 22, 2007, between the Sponsor
          and
          the Back-up Servicer.

         

        "Back-up
          Servicing Agreement":
          The
          Back-Up Servicing Agreement dated as of February 28, 2007, by and between
          the
          Back-up Servicer and the Trustee. 

         

        "Back-up
          Servicing Fee":
          With
          respect to the Mortgage Loans and any Distribution Date, the greater of
          (x) the
          product of (i) the Back-up Servicing Fee Rate divided by 12 and (ii) the
          Pool
          Balance as of the first day of the related Due Period and (y)
          $2,250.

         

        "Back-up
          Servicing Fee Rate":
          With
          respect to any Mortgage Loan, 0.01% per annum.

         

        "Balloon
          Mortgage Loan":
          A
          Mortgage Loan that provides for the payment of the unamortized principal
          balance
          of such Mortgage Loan in a single payment at the maturity of such Mortgage
          Loan
          that is substantially greater than the preceding monthly payment.

         

        "Balloon
          Payment":
          A
          payment of the unamortized principal balance of a Mortgage Loan in a single
          payment at the maturity of such Mortgage Loan that is substantially greater
          than
          the preceding Monthly Payment.

         

        "Bankruptcy
          Code":
          The
          Bankruptcy Reform Act of 1978 (Title 11 of the United States Code), as
          amended.

         

        "Base
          Prospectus":
          The
          base Prospectus, dated June 16, 2006 with respect to the Offered
          Certificates.

         

        "Basic
          Documents":
          This
          Agreement, the Purchase Agreement, the Underwriting Agreement, MI Policy,
          the
          Trustee Indemnification Agreement, the LPMI Provider Indemnification Agreement,
          the Back-up Servicer Indemnification Agreement, the Hedge Agreements, the
          Novation Agreements and the other documents and Certificates delivered
          in
          connection with any of the above.

         

      

      
        
          
          

        

        
          Appendix
            A-3

          
            

          

        

        
          
          

        

      

       

      "Book-Entry
        Certificates":
        Any of
        the Certificates that shall be registered in the name of the Depository or
        its
        nominee, the ownership of which is reflected on the books of the Depository
        or
        on the books of a Person maintaining an account with the Depository (directly,
        as a Depository Participant, or indirectly, as an indirect participant in
        accordance with the rules of the Depository and as described in Section 5.02
        hereof). On the Closing Date, the Class A, Class M and Class DSI Certificates
        shall be Book-Entry Certificates.

       

      "Business
        Day":
        Any
        day other than (i) a Saturday or a Sunday or (ii) a day on which banking
        institutions in the City of New York, or the State of Missouri or in the
        city in
        which the Corporate Trust Office of the Trustee are located, are required
        or
        authorized by law to be closed.

       

      "Cap
        Agreement":
        Any of
        the interest rate cap agreements between the Supplemental Interest Trust
        and a
        Cap Counterparty which are deemed to be assets of the Supplemental Interest
        Trust and not an asset of any one of the REMICs created hereunder.

       

      "Cap
        Amount":
        With
        regard to each Cap Agreement and each Distribution Date on or prior to the
        Class
        I Termination Date, the product of (i) the related fixed rate of interest,
        (ii)
        30 divided by 360 and (iii) the related notional amount. Each Cap Amount
        is
        subject to the verification and confirmation of the Cap Counterparty who
        is the
        calculation agent for the related Cap Agreement. 

       

      "Cap
        Contract Rights and Obligations":
        The
        rights of the Class A Certificates and Mezzanine Certificates to receive
        interest payments in excess of payments at the REMIC Pass-Through Rate on
        the
        Master REMIC Regular Interest corresponding to such Class of Certificates
        as set
        forth in Exhibit J and the obligations of the Class A Certificates and Mezzanine
        Certificates to make certain payments to the Holder of the Class CA Certificates
        to the extent that the amounts allocated at the REMIC Pass-Through Rate on
        the
        Master REMIC Regular Interest corresponding to such Class of Certificates
        exceed
        the amount of interest distributed on such Certificates.

       

      "Cap
        Counterparty":
        A
        Hedge Counterparty.

       

      "Cap
        Payment":
        With
        regard to each Cap Agreement and each Distribution Date on or prior to the
        Class
        I Termination Date, the excess, if any, of (a) the product of (i) the excess
        of
        LIBOR over the strike rate on the related Cap Agreement, (ii) the
        actual number of days elapsed in the related Accrual Period divided by 360
        and
        (iii) the related notional amount
        over (b)
        the Cap Amount for the related Cap Agreement (so
        long as such calculation results in a positive number). The
        Cap
        Payment is subject to the verification and confirmation of the Cap
        Counterparties who are calculation agents for the Cap Agreements. 

       

      "Cash
        Liquidation":
        As to
        any defaulted Mortgage Loan other than a Mortgage Loan as to which an REO
        Acquisition occurred, a determination by the Servicer that it has received
        all
        Liquidation Proceeds and other payments or cash recoveries which the Servicer
        reasonably and in good faith expects to be finally recoverable with respect
        to
        such Mortgage Loan.

       

      "Certificate":
        Any
        Regular Certificate, Class DSI Certificate or Class R Certificate.

       

      
        
          
          

        

        
          Appendix
            A-4

          
            

          

        

        
          
          

        

      

       

      "Certificateholder"
        or
        "Holder":
        The
        Person in whose name a Certificate is registered in the Certificate Register,
        except that a Disqualified Organization or non-U.S. Person shall not be a
        Holder
        of a Residual Certificate for any purpose hereof.

       

      "Certificate
        Margin":
        With
        respect to each Class and each Distribution Date prior to the Rate Step-Up
        Date:

       

      
        	
                Class

              	 	
                Rate

              
	
                A-1A

              	 	
                LIBOR
                  plus 0.13000%

              
	
                A-2A1

              	 	
                LIBOR
                  plus 0.10000%

              
	
                A-2B

              	 	
                LIBOR
                  plus 0.15000%

              
	
                A-2C

              	 	
                LIBOR
                  plus 0.18000%

              
	
                A-2D

              	 	
                LIBOR
                  plus 0.24000%

              
	
                M-1

              	 	
                LIBOR
                  plus 0.32000%

              
	
                M-2

              	 	
                LIBOR
                  plus 0.39000%

              
	
                M-3

              	 	
                LIBOR
                  plus 0.42000%

              
	
                M-4

              	 	
                LIBOR
                  plus 0.55000%

              
	
                M-5

              	 	
                LIBOR
                  plus 0.60000%

              
	
                M-6
                  (and M-6N)

              	 	
                LIBOR
                  plus 0.75000%

              
	
                M-7
                  (and M-7N)

              	 	
                LIBOR
                  plus 1.75000%

              
	
                M-8
                  (and M-8N)

              	 	
                LIBOR
                  plus 2.25000%

              
	
                M-9
                  (and M-9N)

              	 	
                LIBOR
                  plus 2.25000%

              
	
                M-10
                  (and M-10N)

              	 	
                LIBOR
                  plus 2.25000%

              
	
                M-11
                  (and M-11N)

              	 	
                LIBOR
                  plus 2.25000%

              

      

       

      
        
          
          

        

        
          Appendix
            A-5

          
            

          

        

        
          
          

        

      

       

      With
        respect to each Class and each Distribution Date on and after the Rate Step-Up
        Date:

       

      
        	
                Class

              	 	
                Rate

              
	
                A-1A

              	 	
                LIBOR
                  plus 0.26000%

              
	
                A-2A1

              	 	
                LIBOR
                  plus 0.20000%

              
	
                A-2B

              	 	
                LIBOR
                  plus 0.30000%

              
	
                A-2C

              	 	
                LIBOR
                  plus 0.36000%

              
	
                A-2D

              	 	
                LIBOR
                  plus 0.48000%

              
	
                M-1

              	 	
                LIBOR
                  plus 0.48000%

              
	
                M-2

              	 	
                LIBOR
                  plus 0.58500%

              
	
                M-3

              	 	
                LIBOR
                  plus 0.63000%

              
	
                M-4

              	 	
                LIBOR
                  plus 0.82500%

              
	
                M-5

              	 	
                LIBOR
                  plus 0.90000%

              
	
                M-6
                  (and M-6N)

              	 	
                LIBOR
                  plus 1.12500%

              
	
                M-7
                  (and M-7N)

              	 	
                LIBOR
                  plus 2.62500%

              
	
                M-8
                  (and M-8N)

              	 	
                LIBOR
                  plus 3.37500%

              
	
                M-9
                  (and M-9N)

              	 	
                LIBOR
                  plus 3.37500%

              
	
                M-10
                  (and M-10N)

              	 	
                LIBOR
                  plus 3.37500%

              
	
                M-11
                  (and M-11N)

              	 	
                LIBOR
                  plus 3.37500%

              

      

       

      "Certificate
        Owner":
        With
        respect to each Book-Entry Certificate, any beneficial owner
        thereof.

       

      "Certificate
        Principal Balance":
        With
        respect to any Class of Regular Certificates (other than the Class C
        Certificates and the Class I Certificates) immediately prior to any Distribution
        Date, an amount equal to the Initial Certificate Principal Balance thereof
        reduced by the sum of all amounts actually distributed in respect of principal
        of such Class and, in the case of a Mezzanine Certificate, Allocated Realized
        Loss Amounts applied with respect to that Class on all prior Distribution
        Dates.

       

      With
        respect to each Class of Reallocable Certificates and its corresponding Class
        of
        Class N Certificates, such Certificate Principal Balance shall be allocated
        between the two based upon the Percentage Interests previously subject to
        Reallocation (with such Certificate Principal Balances initially allocated
        entirely to the corresponding Class N Certificates). For all purposes of
        this
        Agreement other than as specifically provided herein or than as deemed necessary
        by the Trustee in connection with the Reallocation mechanics (e.g.,
        for
        purposes of determining the Principal Distribution Amounts, allocations of
        Realized Losses, and other rules relating to the calculations of distributions)
        the distinction between the Reallocable Certificates’ and the corresponding
        Class of Class N Certificates’ Certificate Principal Balances shall be
        disregarded, and they shall be considered to be the same.

       

      
        
          
          

        

        
          Appendix
            A-6

          
            

          

        

        
          
          

        

      

       

      The
        Class
        C Certificates, Class DSI Certificates and the Class I Certificates will
        not
        have a Certificate Principal Balance.

       

      "Certificate
        Register":
        The
        register maintained by the Certificate Registrar in which the Certificate
        Registrar shall provide for the registration of Certificates and of transfers
        and exchanges of Certificates.

       

      "Certificate
        Registrar":
        Initially, the Trustee, in its capacity as Certificate Registrar, or any
        successor to the Trustee in such capacity.

       

      "Class":
        Collectively, Certificates which have the same priority of payment and bear
        the
        same Class designation and the form of which is identical except for variation
        in the Percentage Interest evidenced thereby.

       

      "Class
        A Certificate":
        Any
        Group I Certificate or Group II Certificate.

       

      "Class
        A Principal Distribution Amount":
        For
        any Distribution Date, the sum of the Group I Certificate Principal Distribution
        Amount and the Group II Certificate Principal Distribution Amount for such
        Distribution Date.

       

      "Class
        A-1A Certificate":
        Any
        one of the Class A-1A Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-1, representing the right to distributions as set forth herein and therein
        and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        A-2A1 Certificate":
        Any
        one of the Class A-2A1 Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-2, representing the right to distributions as set forth herein and therein
        and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        A-2A2 Certificate":
        Any
        one of the Class A-2A2 Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-3, representing the right to distributions as set forth herein and therein
        and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        A-2B Certificate":
        Any
        one of the Class A-2B Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-4, representing the right to distributions as set forth herein and therein
        and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        A-2C Certificate":
        Any
        one of the Class A-2C Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-5, representing the right to distributions as set forth herein and therein
        and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        A-2D Certificate":
        Any
        one of the Class A-2D Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-6, representing the right to distributions as set forth herein and therein
        and
        evidencing a regular interest in the Master REMIC.

       

      
        
          
          

        

        
          Appendix
            A-7

          
            

          

        

        
          
          

        

      

       

      "Class
        C Certificate":
        Any
        Class CA Certificate or Class CB Certificate.

       

      "Class
        CA Certificate":
        Any
        one of the Class CA Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-21,
        representing the right to distributions as set forth herein and therein and
        evidencing one or more regular interests in the Master REMIC.

       

      "Class
        CA Interest Distributable Amount":
        For
        any Distribution Date, an
        amount, if any, equal to the interest payable on the Class CA-1 Master REMIC
        Regular Interest as described in Appendix J.

       

      "Class
        CB Certificate":
        Any
        one of the Class CB Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-22,
        representing the right to distributions as set forth herein and therein and
        evidencing one or more regular interests in the Master REMIC.

       

      "Class
        CB Certificate Schedule":
        As set
        forth in Appendix B.

       

      "Class
        CB Interest Distributable Amount":
        For
        any Distribution Date, an
        amount, if any, equal to the interest payable on the Class CB Master REMIC
        Regular Interest as described in Appendix J.

       

      "Class
        DSI Certificate":
        Any
        Class M-6 DSI Certificate, Class M-7 DSI Certificate, Class M-8 DSI Certificate,
        Class M-9 DSI Certificate, Class M-10 DSI Certificate or Class M-11 DSI
        Certificate.

       

      "Class
        I Certificates":
        Collectively, the Class I-1 Certificates, the Class I-2 Certificates and
        the
        Class I-3 Certificates.

       

      "Class
        I-1 Certificate":
        Any
        one of the Class I-1 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-18,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        I-2 Certificate":
        Any
        one of the Class I-2 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-19,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        I-3 Certificate":
        Any
        one of the Class I-3 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-20,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      
        
          
          

        

        
          Appendix
            A-8

          
            

          

        

        
          
          

        

      

      

        "Class
          I Monthly Interest Distributable Amount":
          For
          any Distribution Date, shall mean the sum of (i) the Class I-1 Monthly
          Interest
          Distributable Amount, (ii) the Class I-2 Monthly Interest Distributable
          Amount
          and (iii) the Class I-3 Monthly Interest Distributable Amount, each for
          such
          Distribution Date.

         

      

      "Class
        I-1 Monthly Interest Distributable Amount":
        For
        any
        Distribution Date
        commencing on the first Distribution Date through and including the Distribution
        Date in May 2008, an amount equal to the sum of the amounts described in
        clauses
        (I) through (VI) of the definition of Class I Monthly Interest Formula
        Amounts.

       

      For
        the Distribution Date in June 2008, an amount equal to the sum of the amounts
        described in clauses (III) through VI) of the definition of Class I Monthly
        Interest Formula Amounts.

       

      For
        the Distribution Dates in July 2008 through November 2008, an amount equal
        to
        the sum of the amounts described in clauses (IV) through (VI) of the definition
        of Class I Monthly Interest Formula Amounts.

       

      For
        the Distribution Date in December 2008, an amount equal to the sum of the
        amounts described in clauses (V) and (VI) of the definition of Class I Monthly
        Interest Formula Amounts.

       

      For
        the Distribution Date in January 2009 and each Distribution Date thereafter,
        the
        Class I-1 Monthly Interest Distributable Amount shall be zero.

       

      "Class
        I-2 Monthly Interest Distributable Amount":
        For
        any
        Distribution Date
        commencing on the first Distribution Date through and including the Distribution
        Date in May 2009, an amount equal to the sum of the amounts described in
        clauses
        (VII) through (XVIII) of the definition of Class I Monthly Interest Formula
        Amounts.

       

      For
        the Distribution Date in June 2009, an amount equal to the sum of the amounts
        described in clauses (IX) through (XVIII) of the definition of Class I Monthly
        Interest Formula Amounts.

       

      For
        the Distribution Date in July 2009, an amount equal to the sum of the amounts
        described in clauses (X) through (XVIII) of the definition of Class I Monthly
        Interest Formula Amounts.

       

      For
        the Distribution Dates in August 2009 through November 2009, an amount equal
        to
        the sum of the amounts described in clauses (XI) through (XVIII) of the
        definition of Class I Monthly Interest Formula Amounts.

       

      For
        the Distribution Date in December 2009, an amount equal to the sum of the
        amounts described in clauses (XIV) through (XVIII) of the definition of Class
        I
        Monthly Interest Formula Amounts.

       

      For
        the Distribution Date in January 2010 and each Distribution Date thereafter,
        the
        Class
        I-2 Monthly Interest Distributable Amount shall be zero.

       

      
        
          
          

        

        
          Appendix
            A-9

          
            

          

        

        
          
          

        

      

       

      "Class
        I-3 Monthly Interest Distributable Amount":
        For
        any
        Distribution Date
        commencing on the first Distribution Date through and including the Distribution
        Date in January 2010, an amount equal to the amount described in clause (XIX)
        of
        the definition of Class I Monthly Interest Formula Amounts.

       

      For
        the Distribution Date in February 2010 and each Distribution Date thereafter,
        the Class I-3 Monthly Interest Distributable Amount shall be zero.

       

      "Class
        I Monthly Interest Formula Amounts":
        For
        each Distribution Date
        up to and including the Distribution Date in January 2010, the following:
        

       

      (I)
        the product of (x) the excess, if any, of 5.09200% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $110,000,000; and

       

      (II)
        the product of (x) the excess, if any, of 5.12750% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $80,000,000; and

       

      (III)
        the product of (x) the excess, if any, of 5.01875% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $160,000,000; and

       

      (IV)
        the product of (x) 0.2330%
        (on a 30/360 basis) and (y) $80,000,000;
        and

       

      (V)
        the
        product of (x) the excess, if any, of 4.89750% (on a 30/360 basis) over LIBOR
        (on an actual/360 basis) and (y) $80,000,000; and

       

      (VI)
        the product of (x) the excess, if any, of 4.97700% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $130,000,000; and

       

      (VII)
        the product of (x) the excess, if any, of 4.98200% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $55,000,000; and

       

      (VIII)
        the product of (x) the excess, if any, of 4.91100% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $40,000,000; and

       

      (IX)
        the product of (x) the excess, if any, of 4.73700% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $40,000,000; and

       

      (X)
        the product of (x) the excess, if any, of 4.87000% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $40,000,000; and

       

      (XI)
        the product of (x) the excess, if any, of 4.98400% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $40,000,000; and

       

      (XII)
        the product of (x) the excess, if any, of 4.90350% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $40,000,000; and

       

      (XIII)
        the product of (x) the excess, if any, of 4.97500% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $20,000,000; and

       

      
        
          
          

        

        
          Appendix
            A-10

          
            

          

        

        
          
          

        

      

       

      (XIV)
        the product of (x) 0.3270%
        (on a 30/360 basis) and (y) $20,000,000;
        and

       

      (XV)
        the
        product of (x) the excess, if any, of 4.83100% (on a 30/360 basis) over LIBOR
        (on an actual/360 basis) and (y) $20,000,000; and

       

      (XVI)
        the product of (x) the excess, if any, of 4.72000% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $40,000,000; and

       

      (XVII)
        the product of (x) the excess, if any, of 4.85500% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $20,000,000; and

       

      (XVIII)
        the product of (x) the excess, if any, of 4.90500% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $30,000,000; and

       

      (XIX)
        the product of (x) the excess, if any, of 4.96375% (on a 30/360 basis) over
        LIBOR (on an actual/360 basis) and (y) $40,000,000.

       

      "Class
        I Termination Date":
        The
        Distribution Date occurring in January
        2010.

       

      "Class
        IV-Accrual Interest":
        As
        defined in Exhibit J hereof.

       

      "Class
        M Certificate":
        Any
        Class M-1 Certificate, Class M-2 Certificate, Class M-3 Certificate, Class
        M-4
        Certificate, Class M-5 Certificate, Class M-6 (and Class M-6N) Certificate,
        Class M-7 (and Class M-7N) Certificate, Class M-8 (and Class M-8N) Certificate,
        Class M-9 (and Class M-9N) Certificate, Class M-10 (and Class M-10N) Certificate
        or Class M-11 (and Class M-11N) Certificate.

       

      "Class
        M-1 Certificate":
        Any
        one of the Class M-1 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-7,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        M-1 Principal Distribution Amount":
        For
        any Distribution Date, an amount equal to the excess of (x) the sum of (i)
        the
        aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date) and (ii) the Certificate Principal Balance of the
        Class
        M-1 Certificates immediately prior to such Distribution Date over (y) the
        lesser
        of (A) the product of (i) 65.00% and (ii) the aggregate Principal Balance
        of the
        Mortgage Loans as of the last day of the related Due Period (after giving
        effect
        to scheduled payments of principal due during the related Due Period, to
        the
        extent received or advanced, and unscheduled collections of principal received
        during the related Prepayment Period) and (B) the aggregate Principal Balance
        of
        the Mortgage Loans as of the last day of the related Due Period (after giving
        effect to scheduled payments of principal due during the related Due Period,
        to
        the extent received or advanced, and unscheduled collections of principal
        received during the related Prepayment Period) minus $9,444,129.

       

      "Class
        M-2 Certificate":
        Any
        one of the Class M-2 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-8,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      
        
          
          

        

        
          Appendix
            A-11

          
            

          

        

        
          
          

        

      

       

      "Class
        M-2 Principal Distribution Amount":
        For
        any Distribution Date, an amount equal to the excess of (x) the sum of (i)
        the
        aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date), (ii) the Certificate Principal Balance of the Class
        M-1
        Certificates (after taking into account the payment of the Class M-1 Principal
        Distribution Amount on such Distribution Date), and (iii) the Certificate
        Principal Balance of the Class M-2 Certificates immediately prior to such
        Distribution Date over (y) the lesser of (A) the product of (i) 73.90% and
        (ii)
        the aggregate Principal Balance of the Mortgage Loans as of the last day
        of the
        related Due Period (after giving effect to scheduled payments of principal
        due
        during the related Due Period, to the extent received or advanced, and
        unscheduled collections of principal received during the related Prepayment
        Period) and (B) the aggregate Principal Balance of the Mortgage Loans as
        of the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) minus $9,444,129.

       

      "Class
        M-3 Certificate":
        Any
        one of the Class M-3 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-9,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        M-3 Principal Distribution Amount":
        For
        any Distribution Date, an amount equal to the excess of (x) the sum of (i)
        the
        aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date), (ii) the Certificate Principal Balance of the Class
        M-1
        Certificates (after taking into account the payment of the Class M-1 Principal
        Distribution Amount on such Distribution Date), (iii) the Certificate Principal
        Balance of the Class M-2 Certificates (after taking into account the payment
        of
        the Class M-2 Principal Distribution Amount on such Distribution Date) and
        (iv)
        the Certificate Principal Balance of the Class M-3 Certificates immediately
        prior to such Distribution Date over (y) the lesser of (A) the product of
        (i)
        76.70% and (ii) the aggregate Principal Balance of the Mortgage Loans as
        of the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) and (B) the aggregate Principal Balance of the Mortgage Loans as
        of the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) minus $9,444,129.

       

      "Class
        M-4 Certificate":
        Any
        one of the Class M-4 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-10,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        M-4 Principal Distribution Amount":
        For
        any Distribution Date, an amount equal to the excess of (x) the sum of (i)
        the
        aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date), (ii) the Certificate Principal Balance of the Class
        M-1
        Certificates (after taking into account the payment of the Class M-1 Principal
        Distribution Amount on such Distribution Date), (iii) the Certificate Principal
        Balance of the Class M-2 Certificates (after taking into account the payment
        of
        the Class M-2 Principal Distribution Amount on such Distribution Date), (iv)
        the
        Certificate Principal Balance of the Class M-3 Certificates (after taking
        into
        account the payment of the Class M-3 Principal Distribution Amount on such
        Distribution Date) and (v) the Certificate Principal Balance of the Class
        M-4
        Certificates immediately prior to such Distribution Date over (y) the lesser
        of
        (A) the product of (i) 80.70% and (ii) the aggregate Principal Balance of
        the
        Mortgage Loans as of the last day of the related Due Period (after giving
        effect
        to scheduled payments of principal due during the related Due Period, to
        the
        extent received or advanced, and unscheduled collections of principal received
        during the related Prepayment Period) and (B) the aggregate Principal Balance
        of
        the Mortgage Loans as of the last day of the related Due Period (after giving
        effect to scheduled payments of principal due during the related Due Period,
        to
        the extent received or advanced, and unscheduled collections of principal
        received during the related Prepayment Period) minus $9,444,129.

       

      
        
          
          

        

        
          Appendix
            A-12

          
            

          

        

        
          
          

        

      

       

      "Class
        M-5 Certificate":
        Any
        one of the Class M-5 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-11,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        M-5 Principal Distribution Amount":
        For
        any Distribution Date, an amount equal to the excess of (x) the sum of (i)
        the
        aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date), (ii) the Certificate Principal Balance of the Class
        M-1
        Certificates (after taking into account the payment of the Class M-1 Principal
        Distribution Amount on such Distribution Date), (iii) the Certificate Principal
        Balance of the Class M-2 Certificates (after taking into account the payment
        of
        the Class M-2 Principal Distribution Amount on such Distribution Date), (iv)
        the
        Certificate Principal Balance of the Class M-3 Certificates (after taking
        into
        account the payment of the Class M-3 Principal Distribution Amount on such
        Distribution Date), (v) the Certificate Principal Balance of the Class M-4
        Certificates (after taking into account the payment of the Class M-4 Principal
        Distribution Amount on such Distribution Date) and (vi) the Certificate
        Principal Balance of the Class M-5 Certificates immediately prior to such
        Distribution Date over (y) the lesser of (A) the product of (i) 84.10% and
        (ii)
        the aggregate Principal Balance of the Mortgage Loans as of the last day
        of the
        related Due Period (after giving effect to scheduled payments of principal
        due
        during the related Due Period, to the extent received or advanced, and
        unscheduled collections of principal received during the related Prepayment
        Period) and (B) the aggregate Principal Balance of the Mortgage Loans as
        of the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) minus $9,444,129.

       

      "Class
        M-6 Certificate":
        Any
        one of the Class M-6 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-12,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      
        
          
          

        

        
          Appendix
            A-13

          
            

          

        

        
          
          

        

      

       

      "Class
        M-6 DSI Certificates":
        Any
        one of the Class M-6 DSI Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-24, which are notional amount certificates based on the Certificate Principal
        Balance of the Class M-6N Certificates and which represent the right to receive
        certain distributions from the Supplemental Interest Trust. 

       

      "Class
        M-6N Certificates":
        Any
        one of the Class M-6N Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-30, representing the right to distributions as set forth herein and therein
        and evidencing a regular interest in the Master REMIC.

       

      "Class
        M-6 Principal Distribution Amount":
        For
        any Distribution Date, an amount equal to the excess of (x) the sum of (i)
        the
        aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date), (ii) the Certificate Principal Balance of the Class
        M-1
        Certificates (after taking into account the payment of the Class M-1 Principal
        Distribution Amount on such Distribution Date), (iii) the Certificate Principal
        Balance of the Class M-2 Certificates (after taking into account the payment
        of
        the Class M-2 Principal Distribution Amount on such Distribution Date), (iv)
        the
        Certificate Principal Balance of the Class M-3 Certificates (after taking
        into
        account the payment of the Class M-3 Principal Distribution Amount on such
        Distribution Date), (v) the Certificate Principal Balance of the Class M-4
        Certificates (after taking into account the payment of the Class M-4 Principal
        Distribution Amount on such Distribution Date), (vi) the Certificate Principal
        Balance of the Class M-5 Certificates (after taking into account the payment
        of
        the Class M-5 Principal Distribution Amount on such Distribution Date) and
        (vii)
        the Certificate Principal Balance of the Class M-6 Certificates immediately
        prior to such Distribution Date over (y) the lesser of (A) the product of
        (i)
        86.20% and (ii) the aggregate Principal Balance of the Mortgage Loans as
        of the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) and (B) the aggregate Principal Balance of the Mortgage Loans as
        of the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) minus $9,444,129.

       

      "Class
        M-7 Certificate":
        Any
        one of the Class M-7 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-13,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        M-7 DSI Certificates":
        Any
        one of the Class M-7 DSI Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-25, which are notional amount certificates based on the Certificate Principal
        Balance of the Class M-7N Certificates and which represent the right to receive
        certain distributions from the Supplemental Interest Trust. 

       

      "Class
        M-7N Certificates":
        Any
        one of the Class M-7N Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-31, representing the right to distributions as set forth herein and therein
        and evidencing a regular interest in the Master REMIC.

       

      
        
          
          

        

        
          Appendix
            A-14

          
            

          

        

        
          
          

        

      

       

      "Class
        M-7 Principal Distribution Amount":
        For
        any Distribution Date, is an amount equal to the excess of (x) the sum of
        (i)
        the aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date(ii) the Certificate Principal Balance of the Class
        M-1
        Certificates (after taking into account the payment of the Class M-1 Principal
        Distribution Amount on such Distribution Date), (iii) the Certificate Principal
        Balance of the Class M-2 Certificates (after taking into account the payment
        of
        the Class M-2 Principal Distribution Amount on such Distribution Date), (iv)
        the
        Certificate Principal Balance of the Class M-3 Certificates (after taking
        into
        account the payment of the Class M-3 Principal Distribution Amount on such
        Distribution Date), (v) the Certificate Principal Balance of the Class M-4
        Certificates (after taking into account the payment of the Class M-4 Principal
        Distribution Amount on such Distribution Date), (vi) the Certificate Principal
        Balance of the Class M-5 Certificates (after taking into account the payment
        of
        the Class M-5 Principal Distribution Amount on such Distribution Date), (vii)
        the Certificate Principal Balance of the Class M-6 Certificates (after taking
        into account the payment of the Class M-6 Principal Distribution Amount on
        such
        Distribution Date) and (viii) the Certificate Principal Balance of the Class
        M-7
        Certificates immediately prior to that Distribution Date over (y) the lesser
        of
        (A) the product of (i) 88.50% and (ii) the aggregate Principal Balance of
        the
        Mortgage Loans as of the last day of the related Due Period (after giving
        effect
        to scheduled payments of principal due during the related Due Period, to
        the
        extent received or advanced, and unscheduled collections of principal received
        during the related Prepayment Period) and (B) the aggregate Principal Balance
        of
        the Mortgage Loans as of the last day of the related Due Period (after giving
        effect to scheduled payments of principal due during the related Due Period,
        to
        the extent received or advanced, and unscheduled collections of principal
        received during the related Prepayment Period) minus $9,444,129.

       

      "Class
        M-8 Certificate":
        Any
        one of the Class M-8 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-14,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        M-8 DSI Certificates":
        Any
        one of the Class M-8 DSI Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-26, which are notional amount certificates based on the Certificate Principal
        Balance of the Class M-8N Certificates and which represent the right to receive
        certain distributions from the Supplemental Interest Trust. 

       

      "Class
        M-8N Certificates":
        Any
        one of the Class M-8N Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-32, representing the right to distributions as set forth herein and therein
        and evidencing a regular interest in the Master REMIC.

       

      "Class
        M-8 Principal Distribution Amount":
        For
        any Distribution Date, is an amount equal to the excess of (x) the sum of
        (i)
        the aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date), (ii) the Certificate Principal Balance of the Class
        M-1
        Certificates (after taking into account the payment of the Class M-1 Principal
        Distribution Amount on such Distribution Date), (iii) the Certificate Principal
        Balance of the Class M-2 Certificates (after taking into account the payment
        of
        the Class M-2 Principal Distribution Amount on such Distribution Date), (iv)
        the
        Certificate Principal Balance of the Class M-3 Certificates (after taking
        into
        account the payment of the Class M-3 Principal Distribution Amount on such
        Distribution Date), (v) the Certificate Principal Balance of the Class M-4
        Certificates (after taking into account the payment of the Class M-4 Principal
        Distribution Amount on such Distribution Date), (vi) the Certificate Principal
        Balance of the Class M-5 Certificates (after taking into account the payment
        of
        the Class M-5 Principal Distribution Amount on such Distribution Date), (vii)
        the Certificate Principal Balance of the Class M-6 Certificates (after taking
        into account the payment of the Class M-6 Principal Distribution Amount on
        such
        Distribution Date), (viii) the Certificate Principal Balance of the Class
        M-7
        Certificates (after taking into account the payment of the Class M-7 Principal
        Distribution Amount on such Distribution Date) and (ix) the Certificate
        Principal Balance of the Class M-8 Certificates immediately prior to such
        Distribution Date over (y) the lesser of (A) the product of (i) 90.00% and
        (ii)
        the aggregate Principal Balance of the Mortgage Loans as of the last day
        of the
        related Due Period (after giving effect to scheduled payments of principal
        due
        during the related Due Period, to the extent received or advanced, and
        unscheduled collections of principal received during the related Prepayment
        Period) and (B) the aggregate Principal Balance of the Mortgage Loans as
        of the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) minus $9,444,129.

       

      
        
          
          

        

        
          Appendix
            A-15

          
            

          

        

        
          
          

        

      

       

      "Class
        M-9 Certificate":
        Any
        one of the Class M-9 Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-15,
        representing the right to distributions as set forth herein and therein and
        evidencing a regular interest in the Master REMIC.

       

      "Class
        M-9 DSI Certificates":
        Any
        one of the Class M-9 DSI Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-27, which are notional amount certificates based on the Certificate Principal
        Balance of the Class M-9N Certificates and which represent the right to receive
        certain distributions from the Supplemental Interest Trust. 

       

      "Class
        M-9N Certificates":
        Any
        one of the Class M-9N Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-33, representing the right to distributions as set forth herein and therein
        and evidencing a regular interest in the Master REMIC.

       

      "Class
        M-9 Principal Distribution Amount":
        For
        any Distribution Date, is an amount equal to the excess of (x) the sum of
        (i)
        the aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date), (ii) the Certificate Principal Balance of the Class
        M-1
        Certificates (after taking into account the payment of the Class M-1 Principal
        Distribution Amount on such Distribution Date), (iii) the Certificate Principal
        Balance of the Class M-2 Certificates (after taking into account the payment
        of
        the Class M-2 Principal Distribution Amount on such Distribution Date), (iv)
        the
        Certificate Principal Balance of the Class M-3 Certificates (after taking
        into
        account the payment of the Class M-3 Principal Distribution Amount on such
        Distribution Date), (v) the Certificate Principal Balance of the Class M-4
        Certificates (after taking into account the payment of the Class M-4 Principal
        Distribution Amount on such Distribution Date), (vi) the Certificate Principal
        Balance of the Class M-5 Certificates (after taking into account the payment
        of
        the Class M-5 Principal Distribution Amount on such Distribution Date), (vii)
        the Certificate Principal Balance of the Class M-6 Certificates (after taking
        into account the payment of the Class M-6 Principal Distribution Amount on
        such
        Distribution Date), (viii) the Certificate Principal Balance of the Class
        M-7
        Certificates (after taking into account the payment of the Class M-7 Principal
        Distribution Amount on such Distribution Date), (ix) the Certificate Principal
        Balance of the Class M-8 Certificates (after taking into account the payment
        of
        the Class M-8 Principal Distribution Amount on such Distribution Date) and
        (x)
        the Certificate Principal Balance of the Class M-9 Certificates immediately
        prior to such Distribution Date over (y) the lesser of (A) the product of
        (i)
        92.00% and (ii) the aggregate Principal Balance of the Mortgage Loans as
        of the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) and (B) the aggregate Principal Balance of the Mortgage Loans as
        of the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) minus $9,444,129.

       

      
        
          
          

        

        
          Appendix
            A-16

          
            

          

        

        
          
          

        

      

       

      "Class
        M-10 Certificate":
        Any
        one of the Class M-10 Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-16, representing the right to distributions as set forth herein and therein
        and evidencing a regular interest in the Master REMIC.

       

      "Class
        M-10 DSI Certificates":
        Any
        one of the Class M-10 DSI Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-28, which are notional amount certificates based on the Certificate Principal
        Balance of the Class M-10N Certificates and which represent the right to
        receive
        certain distributions from the Supplemental Interest Trust. 

       

      "Class
        M-10N Certificates":
        Any
        one of the Class M-10N Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-34, representing the right to distributions as set forth herein and therein
        and evidencing a regular interest in the Master REMIC.

       

      "Class
        M-10 Principal Distribution Amount":
        For
        any Distribution Date, is an amount equal to the excess of (x) the sum of
        (i)
        the aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date), (ii) the Certificate Principal Balance of the Class
        M-1
        Certificates (after taking into account the payment of the Class M-1 Principal
        Distribution Amount on such Distribution Date), (iii) the Certificate Principal
        Balance of the Class M-2 Certificates (after taking into account the payment
        of
        the Class M-2 Principal Distribution Amount on such Distribution Date), (iv)
        the
        Certificate Principal Balance of the Class M-3 Certificates (after taking
        into
        account the payment of the Class M-3 Principal Distribution Amount on such
        Distribution Date), (v) the Certificate Principal Balance of the Class M-4
        Certificates (after taking into account the payment of the Class M-4 Principal
        Distribution Amount on such Distribution Date), (vi) the Certificate Principal
        Balance of the Class M-5 Certificates (after taking into account the payment
        of
        the Class M-5 Principal Distribution Amount on such Distribution Date), (vii)
        the Certificate Principal Balance of the Class M-6 Certificates (after taking
        into account the payment of the Class M-6 Principal Distribution Amount on
        such
        Distribution Date), (viii) the Certificate Principal Balance of the Class
        M-7
        Certificates (after taking into account the payment of the Class M-7 Principal
        Distribution Amount on such Distribution Date), (ix) the Certificate Principal
        Balance of the Class M-8 Certificates (after taking into account the payment
        of
        the Class M-8 Principal Distribution Amount on such Distribution Date), (x)
        the
        Certificate Principal Balance of the Class M-9 Certificates (after taking
        into
        account the payment of the Class M-9 Principal Distribution Amount on such
        Distribution Date and (xi) the Certificate Principal Balance of the Class
        M-10
        Certificates immediately prior to such Distribution Date over (y) the lesser
        of
        (A) the product of (i) 93.40% and (ii) the aggregate Principal Balance of
        the
        Mortgage Loans as of the last day of the related Due Period (after giving
        effect
        to scheduled payments of principal due during the related Due Period, to
        the
        extent received or advanced, and unscheduled collections of principal received
        during the related Prepayment Period) and (B) the aggregate Principal Balance
        of
        the Mortgage Loans as of the last day of the related Due Period (after giving
        effect to scheduled payments of principal due during the related Due Period,
        to
        the extent received or advanced, and unscheduled collections of principal
        received during the related Prepayment Period) minus $9,444,129.

       

      
        
          
          

        

        
          Appendix
            A-17

          
            

          

        

        
          
          

        

      

       

      "Class
        M-11 Certificate":
        Any
        one of the Class M-11 Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-17, representing the right to distributions as set forth herein and therein
        and evidencing a regular interest in the Master REMIC.

       

      "Class
        M-11 DSI Certificates":
        Any
        one of the Class M-11 DSI Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-29, which are notional amount certificates based on the Certificate Principal
        Balance of the Class M-11N Certificates and which represent the right to
        receive
        certain distributions from the Supplemental Interest Trust.

       

      "Class
        M-11N Certificates":
        Any
        one of the Class M-11N Certificates executed, authenticated and delivered
        pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit
        A-35, representing the right to distributions as set forth herein and therein
        and evidencing a regular interest in the Master REMIC.

       

      "Class
        M-11 Principal Distribution Amount":
        For
        any Distribution Date, is an amount equal to the excess of (x) the sum of
        (i)
        the aggregate Certificate Principal Balance of the Class A Certificates (after
        taking into account the payment of the Class A Principal Distribution Amount
        on
        such Distribution Date), (ii) the Certificate Principal Balance of the Class
        M-1
        Certificates (after taking into account the payment of the Class M-1 Principal
        Distribution Amount on such Distribution Date), (iii) the Certificate Principal
        Balance of the Class M-2 Certificates (after taking into account the payment
        of
        the Class M-2 Principal Distribution Amount on such Distribution Date), (iv)
        the
        Certificate Principal Balance of the Class M-3 Certificates (after taking
        into
        account the payment of the Class M-3 Principal Distribution Amount on such
        Distribution Date), (v) the Certificate Principal Balance of the Class M-4
        Certificates (after taking into account the payment of the Class M-4 Principal
        Distribution Amount on such Distribution Date), (vi) the Certificate Principal
        Balance of the Class M-5 Certificates (after taking into account the payment
        of
        the Class M-5 Principal Distribution Amount on such Distribution Date), (vii)
        the Certificate Principal Balance of the Class M-6 Certificates (after taking
        into account the payment of the Class M-6 Principal Distribution Amount on
        such
        Distribution Date), (viii) the Certificate Principal Balance of the Class
        M-7
        Certificates (after taking into account the payment of the Class M-7 Principal
        Distribution Amount on such Distribution Date), (ix) the Certificate Principal
        Balance of the Class M-8 Certificates (after taking into account the payment
        of
        the Class M-8 Principal Distribution Amount on such Distribution Date), (x)
        the
        Certificate Principal Balance of the Class M-9 Certificates (after taking
        into
        account the payment of the Class M-9 Principal Distribution Amount on such
        Distribution Date, (xi) the Certificate Principal Balance of the Class M-10
        Certificates (after taking into account the payment of the Class M-10 Principal
        Distribution Amount on such Distribution Date, and (xii) the Certificate
        Principal Balance of the Class M-11 Certificates immediately prior to such
        Distribution Date over (y) the lesser of (A) the product of (i) 95.40% and
        (ii)
        the aggregate Principal Balance of the Mortgage Loans as of the last day
        of the
        related Due Period (after giving effect to scheduled payments of principal
        due
        during the related Due Period, to the extent received or advanced, and
        unscheduled collections of principal received during the related Prepayment
        Period) and (B) the aggregate Principal Balance of the Mortgage Loans as
        of the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) minus $9,444,129.

       

      
        
          
          

        

        
          Appendix
            A-18

          
            

          

        

        
          
          

        

      

       

      "Class
        N Certificate":
        Any
        Class M-6N Certificate, Class M-7N Certificate, Class M-8N Certificate, Class
        M-9N Certificate, Class M-10N Certificate or Class M-11N
        Certificate.

       

      "Class
        R Certificate":
        Any
        one of the Class R Certificates executed, authenticated and delivered pursuant
        to Section 5.01, substantially in the form annexed hereto as Exhibit A-23,
        representing the right to distributions as set forth herein, and evidencing
        the
        R-I Interest, the R-II Interest, the R-III Interest, the R-IV Interest, the
        R-V
        Interest and the R-VI Interest, each the sole "residual interest" in
        REMIC I, REMIC II, REMIC III, REMIC IV, REMIC V and the
        Master REMIC, respectively.

       

      "Close
        of Business":
        As
        used herein, with respect to any Business Day, 5:00 p.m. (New York
        time).

       

      "Closing
        Date":
        February 28, 2007.

       

      "Code":
        The
        Internal Revenue Code of 1986 as it may be amended from time to
        time.

       

      
        
          
          

        

        
          Appendix
            A-19

          
            

          

        

        
          
          

        

      

       

      "Collection
        Account":
        The
        account or accounts created and maintained by the Servicer pursuant to Section
        3.06(d) hereof, which must be an Eligible Account.

       

      "Commission":
        The
        Securities and Exchange Commission. 

       

      "Compensating
        Interest":
        With
        respect to any Determination Date, an amount equal to the lesser of (i) the
        aggregate amount of Prepayment Interest Shortfalls for the related Prepayment
        Period and (ii) the Servicing Fee for the related Distribution
        Date.

       

      "Corporate
        Trust Office":
        With
        respect to the Trustee, the Paying Agent and the Certificate Registrar, the
        corporate trust office at which at any particular time its corporation trust
        business shall be administered, which office at the date of execution of
        this
        Agreement is located at (i) solely for purposes of the transfer, exchange
        or
        surrender of Certificates, c/o DB Services Tennessee, 648 Grassmere Park
        Road,
        Nashville, TN 37211-3658, Attention: Transfer Unit and (ii) for all other
        purposes, Deutsche Bank National Trust Company, 1761 East St. Andrew Place,
        Santa Ana, CA 92705, Attention: Trust Administration - NS0701.

       

      "Corresponding
        Class of Master REMIC Certificates":
        As
        defined in Exhibit J hereof.

       

      "Corresponding
        Class of REMIC II Regular Interest":
        As
        defined in Exhibit J hereof.

       

      "Corresponding
        Class of REMIC V Regular Interests":
        As
        defined in Exhibit J hereof.

       

      "Corresponding
        Interest Rate":
        As set
        forth in the Swap/Cap Interest Rate Schedule.

       

      "Corresponding
        Interest Rate Strip":
        As set
        forth in the Class CB Certificate Schedule.

       

      "Corresponding
        Maturity Date":
        As set
        forth in the Swap/Cap Interest Rate Schedule.

       

      "Credit
        Enhancement Percentage":
        For
        any Distribution Date, is equal to (i) the sum of the aggregate Certificate
        Principal Balance of the Mezzanine Certificates and the Overcollateralization
        Amount, divided by (ii) the Pool Balance, in each case calculated prior to
        taking into account the distribution of the Principal Distribution Amount
        to the
        Holders of the Certificates then entitled to distributions of principal on
        such
        Distribution Date and prior to taking into account distributions of principal
        on
        the Mortgage Loans on such Distribution Date.

       

      "Crossover
        Date":
        The
        earlier to occur of (i) the Distribution Date after the Distribution Date
        on
        which the aggregate Certificate Principal Balance of the Class A Certificates
        is
        reduced to zero; and (ii) the later to occur of (x) the Distribution Date
        occurring in March 2010 and (y) the first Distribution Date on which the
        Credit
        Enhancement Percentage (calculated for this purpose only after taking into
        account distributions of principal on the Mortgage Loans but prior to the
        principal distributions to the Certificates) is greater than or equal to
        45.60%.

       

      "Cumulative
        Loss Percentage":
        As to
        any Distribution Date, the percentage equivalent of the fraction obtained
        by
        dividing (i) the aggregate amount of Realized Losses on the Mortgage Loans
        from
        the Cut-off Date through such Distribution Date by (ii) the aggregate Principal
        Balance of the Mortgage Loans as of the Cut-off Date.

       

      
        
          
          

        

        
          Appendix
            A-20

          
            

          

        

        
          
          

        

      

       

      "Current
        Interest":
        For
        any Distribution Date and each Class of Class A Certificates and Mezzanine
        Certificates the amount of interest accrued during the related Accrual Period
        at
        the related Pass-Through Rate on the Certificate Principal Balance of such
        Class
        immediately prior to such Distribution Date, in each case, reduced by any
        Net
        Prepayment Interest Shortfalls and any Relief Act Shortfalls allocated to
        that
        Class (allocated to each Certificate based on its respective entitlements
        to
        interest irrespective of any Net Prepayment Interest Shortfalls or Relief
        Act
        Shortfalls for that Distribution Date).

       

      "Custodian":
        U.S.
        Bank National Association, a national banking association, and any successor
        thereto.

       

      "Custodian
        Fee":
        With
        respect to each Distribution Date, the product of (i) $0.20 and (ii) the
        number
        of Mortgage Loans. 

       

      "Custodian
        Fee Rate":
        The
        percentage equivalent of a fraction, the numerator of which is (i) the product
        of (a) the Custodian Fee and (b) 12 and the denominator of which is (ii)
        the
        aggregate Principal Balance of the Mortgage Loans as of the beginning of
        the Due
        Period.

       

      "Cut-off
        Date":
        With
        respect to each Mortgage Loan the later of (i) February 1, 2007 and (ii)
        the
        date of origination of such Mortgage Loan.

       

      "Cut-off
        Date Aggregate Principal Balance":
        With
        respect to the Mortgage Pool, the aggregate of the Cut-off Date Principal
        Balances of the Mortgage Loans of $1,888,825,898 consisting of $1,040,880,343
        related to Group I and $847,945,555 related to Group II.

       

      "Cut-off
        Date Principal Balance":
        With
        respect to any Mortgage Loan, the unpaid Principal Balance thereof as of
        the
        Cut-off Date (or as of the applicable date of substitution with respect to
        an
        Eligible Substitute Mortgage Loan).

       

      "Debt
        Service Reduction":
        With
        respect to any Mortgage Loan, a reduction in the scheduled Monthly Payment
        for
        such Mortgage Loan by a court of competent jurisdiction in a proceeding under
        the Bankruptcy Code, except such a reduction resulting from a Deficient
        Valuation.

       

      "Defaulted
        Hedge Termination Payment":
        Any
        Hedge Termination Payment required to be made by the Supplemental Interest
        Trust
        to a Hedge Counterparty pursuant to a Hedge Agreement as a result of an "Event
        of Default" with respect to which the Hedge Counterparty is the "Defaulting
        Party" or a "Termination Event" (other than "Illegality" or "Tax Event")
        (each
        as defined in the Hedge Agreements) with respect to which a Hedge Counterparty
        is the sole "Affected Party."

       

      "Deficient
        Valuation":
        With
        respect to any Mortgage Loan, a valuation of the related Mortgaged Property
        by a
        court of competent jurisdiction in an amount less than the then outstanding
        principal balance of the Mortgage Loan, which valuation results from a
        proceeding initiated under the Bankruptcy Code.

       

      "Definitive
        Certificates":
        The
        Class C, Class I and Class R Certificates, and such other Classes of
        Certificates as become Definitive Certificates pursuant to Section 5.02(c)
        hereof.

       

      
        
          
          

        

        
          Appendix
            A-21

          
            

          

        

        
          
          

        

      

       

      "Deleted
        Mortgage Loan":
        A
        Mortgage Loan replaced or to be replaced by one or more Eligible Substitute
        Mortgage Loans.

       

      "30-Day
        Delinquency Percentage":
        As of
        the last day of any Due Period, the percentage equivalent of a fraction,
        (i) the
        numerator of which equals the aggregate Principal Balance of the Mortgage
        Loans
        that are 30 or more days contractually delinquent, in foreclosure or converted
        to REO Properties, and (ii) the denominator of which is the Pool Balance
        as of
        the last day of such Due Period.

       

      "60-Day
        Delinquency Percentage":
        As of
        the last day of any Due Period, the percentage equivalent of a fraction,
        (i) the
        numerator of which equals the aggregate Principal Balance of the Mortgage
        Loans
        that are 60 or more days contractually delinquent, in foreclosure or converted
        to REO Properties, and (ii) the denominator of which is the Pool Balance
        as of
        the last day of such Due Period.

       

      "90-Day
        Delinquency Percentage":
        As of
        the last day of any Due Period, the percentage equivalent of a fraction,
        (i) the
        numerator of which equals the aggregate Principal Balance of the Mortgage
        Loans
        that are 90 or more days contractually delinquent, in foreclosure or converted
        to REO Properties and (ii) the denominator of which is the Pool Balance as
        of
        the last day of such Due Period.

       

      "Delinquent":
        Any
        Mortgage Loan, the Monthly Payment due on a Due Date which is not made by
        the
        Close of Business on the next scheduled Due Date for such Mortgage
        Loan.

       

      "Depositor":
        NovaStar Mortgage Funding Corporation, a Delaware corporation, and its
        successors and assigns.

       

      "Depository":
        The
        initial Depository shall be The Depository Trust Company, whose nominee is
        Cede
& Co., or any other organization registered as a "clearing agency" pursuant
        to Section 17A of the Securities Exchange Act of 1934, as amended. The
        Depository shall initially be the registered Holder of the Book-Entry
        Certificates. The Depository shall at all times be a "clearing corporation"
        as
        defined in Section 8-102(a)(5) of the Uniform Commercial Code of the State
        of
        New York.

       

      "Depository
        Participant":
        A
        broker, dealer, bank or other financial institution or other person for whom
        from time to time a Depository effects book-entry transfers and pledges of
        securities deposited with the Depository.

       

      "Derivative
        Supplemental Interest Payment":
        With
        respect to each Distribution Date, and the Class M-6, Class M-7, Class M-8,
        Class M-9, Class M-10 and Class M-11 Certificates, the dollar amount of the
        excess of (i) the Supplemental Interest Amount Due for the Class M-6, Class
        M-7,
        Class M-8, Class M-9, Class M-10 or Class M-11 Certificates, as appropriate,
        over (ii) the Non-Derivative Supplemental Interest Payment for the Class
        M-6,
        Class M-7, Class M-8, Class M-9, Class M-10 or Class M-11 Certificates, as
        appropriate.

       

      "Determination
        Date":
        With
        respect to any Distribution Date, the 15th day of the calendar month in which
        such Distribution Date occurs or, if such 15th day is not a Business Day,
        the
        Business Day immediately preceding such 15th day.

       

      
        
          
          

        

        
          Appendix
            A-22

          
            

          

        

        
          
          

        

      

       

      "Determination
        Date Report":
        The
        meaning specified in Section 3.24 hereof.

       

      "Disqualified
        Organization":
        "Disqualified Organization" shall have the meaning set forth from time to
        time
        in the definition thereof at Section 860E(e)(5) of the Code and applicable
        to
        the Issuing Entity.

       

      "Distribution
        Account":
        The
        trust account or accounts created and maintained by the Trustee pursuant
        to
        Section 4.02 hereof, which must be an Eligible Account.

       

      "Distribution
        Date":
        The
        25th day of any calendar month, or if such 25th day is not a Business Day,
        the
        Business Day immediately following such 25th day, commencing in March
        2007.

       

      "Due
        Date":
        For
        any Distribution Date, the first day of the month of that Distribution
        Date.

       

      "Due
        Period":
        With
        respect to any Mortgage Loan and Due Date, the period commencing on the second
        day of the month preceding the month of such Distribution Date and ending
        on the
        related Due Date.

       

      "Eligible
        Account":
        An
        account that is either: (A) a segregated account or accounts maintained with
        an
        institution whose deposits are insured by the FDIC, the unsecured and
        uncollateralized long-term debt obligations of which institution shall be
        rated
        "AA" or higher by Standard & Poor's, "Aa2" or higher by Moody's and
        "AA"/"F-1+" or higher by Fitch and in the highest short-term rating category
        by
        each of the Rating Agencies, and which is (i) a federal savings and loan
        association duly organized, validly existing and in good standing under the
        federal banking laws, (ii) an institution duly organized, validly existing
        and
        in good standing under the applicable banking laws of any state, (iii) a
        national banking association duly organized, validly existing and in good
        standing under the federal banking laws, or (iv) a principal subsidiary of
        a
        bank holding company or (B) a segregated trust account or accounts maintained
        with the trust department of a federal or state chartered depository institution
        acceptable to each Rating Agency, having capital and surplus of not less
        than
        $100,000,000, acting in its fiduciary capacity. All Eligible Accounts held
        by
        the Trustee shall be non-interest bearing trust accounts. 

       

      "Eligible
        Investments":
        One or
        more of the following:

       

      (i) direct
        obligations of, and obligations fully guaranteed by, the United States of
        America, any of the Federal Home Mortgage Corporation, the Federal National
        Mortgage Association, the Federal Home Loan Banks or any agency or
        instrumentality of the United States of America the obligations of which
        are
        backed by the full faith and credit of the United States of
        America;

       

      (ii) (A)
        demand and time deposits in, Certificates of deposit of, banker's acceptances
        issued by or federal funds sold by any depository institution or trust company
        (including the Trustee or its agents acting in their respective commercial
        capacities) incorporated under the laws of the United States of America or
        any
        State thereof and subject to supervision and examination by federal and/or
        state
        authorities, so long as at the time of such investment or contractual commitment
        providing for such investment, such depository institution or trust company
        has
        a short-term unsecured debt rating in the highest available rating category
        of
        each of the Rating Agencies and provided that each such investment has an
        original maturity of no more than 365 days, and (B) any other demand or time
        deposit or deposit which is fully insured by the Federal Deposit Insurance
        Corporation;

       

      
        
          
          

        

        
          Appendix
            A-23

          
            

          

        

        
          
          

        

      

       

      (iii) repurchase
        obligations with a term not to exceed 30 days with respect to any security
        described in clause (i) above and entered into with a depository institution
        or
        trust company (acting as a principal) rated "A-1+" or higher by S&P, "A2" or
        higher by Moody's and "F-1+" or higher by Fitch; provided, however, that
        collateral transferred pursuant to such repurchase obligation must (A) be
        valued
        daily at current market price plus accrued interest, (B) pursuant to such
        valuation, equal, at all times, 105% of the cash transferred in exchange
        for
        such collateral and (C) be delivered in such a manner as to accomplish
        perfection of a security interest in the collateral by possession of
        certificated securities;

       

      (iv) securities
        bearing interest or sold at a discount issued by any corporation incorporated
        under the laws of the United States of America or any State thereof which
        has a
        long-term unsecured debt rating in the highest available rating category
        of each
        of the Rating Agencies at the time of such investment;

       

      (v) commercial
        paper having an original maturity of less than 365 days and issued by an
        institution having a short-term unsecured debt rating in the highest available
        rating category of each of the Rating Agencies at the time of such
        investment;

       

      (vi) a
        guaranteed investment contract approved by each of the Rating Agencies and
        issued by an insurance company or other corporation having a long-term unsecured
        debt rating in the highest available rating category of each of the Rating
        Agencies at the time of such investment; 

       

      (vii) money
        market funds having ratings in the highest available long-term rating category
        of each of the Rating Agencies at the time of such investment; any such money
        market funds which provide for demand withdrawals being conclusively deemed
        to
        satisfy any maturity requirement for Eligible Investments set forth in the
        Agreement; and

       

      (viii) money
        market deposit accounts, time deposits or savings deposits, in each case
        as
        defined in Regulation D of the Board of Governors of the Federal Reserve
        System
        and issued or offered by, any domestic office of any commercial bank organized
        under the laws of the United States of America or any State thereof which
        has a
        combined capital and surplus and undivided profits of not less than
        $250,000,000
        which
        are fully insured by FDIC, including the Bank Insurance Fund and the Savings
        Association Insurance Fund.

       

      provided,
        however,
        that
        each such instrument shall be acquired in an arm's-length transaction and
        no
        such instrument shall be an Eligible Investment if it represents, either
        (1) the
        right to receive only interest payments with respect to the underlying debt
        instrument or (2) the right to receive both principal and interest payments
        derived from obligations underlying such instrument and the principal and
        interest payments with respect to such instrument provide a yield to maturity
        greater than 120% of the yield to maturity at par of such underlying
        obligations; provided, further, however, that each such instrument acquired
        shall not be acquired at a price in excess of par. The Trustee may purchase
        from
        or sell to itself or an affiliate, as principal or agent, the Eligible
        Investments listed above.

       

      
        
          
          

        

        
          Appendix
            A-24

          
            

          

        

        
          
          

        

      

       

      "Eligible
        Substitute Mortgage Loan":
        A
        Mortgage Loan substituted by the Sponsor for a Deleted Mortgage Loan which
        must,
        on the date of such substitution, as confirmed in an Officers’ Certificate
        delivered to the Trustee, (i) have an outstanding principal balance, after
        deduction of the principal portion of the monthly payment due in the month
        of
        substitution (or in the case of a substitution of more than one Mortgage
        Loan
        for a Deleted Mortgage Loan, an aggregate outstanding principal balance,
        after
        such deduction), not in excess of the outstanding principal balance of the
        Deleted Mortgage Loan (the amount of any shortfall to be deposited by the
        Sponsor in the Collection Account in the month of substitution); (ii) comply
        in
        all material respects with each representation and warranty set forth in
        clauses, (ii) through (xcix) of Section 3.01(b) of the Purchase Agreement
        other
        than clauses (iii), (v)-(xiv), (xlii), (lv), (lvi)-(lviii), (lxxii), (lxxxix)
        and (xc); (iii) have a Mortgage Rate and, with respect to an Adjustable Rate
        Mortgage Loan, a Gross Margin no lower than and not more than 1% per annum
        higher than the Mortgage Rate and Gross Margin, respectively, of the Deleted
        Mortgage Loan as of the date of substitution; (iv) have a Loan-to-Value Ratio,
        at the time of substitution no higher than that of the Deleted Mortgage Loan
        at
        the time of substitution; (v) have a remaining term to stated maturity not
        greater than (and not more than one year less than) that of the Deleted Mortgage
        Loan; (vi) not be 30 days or more delinquent; (vii) not be a negative
        amortization loan; (viii) have a lien priority equal to or superior to the
        lien
        priority of the Deleted Mortgage Loan; and (ix) be a Qualified Replacement
        Mortgage.

       

      "ERISA":
        The
        Employee Retirement Income Security Act of 1974, as amended.

       

      "Excess
        Cashflow":
        For
        any Distribution Date, the excess of (a) the Interest Remittance Amount over
        (b)
        the sum of (x) the Monthly Interest Distributable Amounts for the Class A
        Certificates and the Mezzanine Certificates, (y) the Class I Monthly Interest
        Distributable Amount and (z) the Administrative Fees, each for such Distribution
        Date.

       

      "Extra
        Principal Distribution Amount":
        For
        any Distribution Date, the lesser of (x) the sum of (a) Excess Cashflow for
        such
        Distribution Date and (b) the amount remaining in the Supplemental Interest
        Trust after funding amounts in clause (i) under Section 4.04(c), for such
        Distribution Date, and (y) the Overcollateralization Deficiency Amount for
        such
        Distribution Date.

       

      "Expense
        Adjusted Mortgage Rate":
        With
        respect to any Mortgage Loan, as of any date of determination, a per annum
        rate
        of interest equal to the then applicable Mortgage Rate for such Mortgage
        Loan
        minus the Administrative Fee Rate.

       

      "Fannie
        Mae":
        Federal National Mortgage Association or any successor thereto.

       

      "FDIC":
        Federal Deposit Insurance Corporation or any successor thereto.

       

      "Fitch":
        Fitch
        Ratings, or its successors in interest.

       

      
        
          
          

        

        
          Appendix
            A-25

          
            

          

        

        
          
          

        

      

       

      "Fixed
        Rate Mortgage Loan":
        A
        first-lien or second-lien Mortgage Loan which provides for a fixed Mortgage
        Rate
        payable with respect thereto. The Fixed Rate Mortgage Loans are identified
        as
        such on the Mortgage Loan Schedule.

       

      "Foreclosure
        Profit":
        With
        respect to a Liquidated Mortgage Loan, the amount, if any, by which (i) the
        aggregate of its Net Liquidation Proceeds exceeds (ii) the related Principal
        Balance (plus accrued and unpaid interest thereon at the applicable Mortgage
        Rate from the date interest was last paid through the last day of the month
        of
        the date of receipt of the final Liquidation Proceeds) of such Liquidated
        Mortgage Loan immediately prior to the final recovery of its Liquidation
        Proceeds.

       

      "Formula
        Rate":
        For
        any Distribution Date and (a) any Class of LIBOR Certificates, the lesser
        of (i)
        LIBOR plus the related Certificate Margin and (ii) the applicable Maximum
        Rate,
        if any and (b) for the Class A-2A2 Certificates, 5.86000%

       

      "Freddie
        Mac":
        The
        Federal Home Loan Mortgage Corporation, or any successor thereto.

       

      "Gross
        Margin":
        With
        respect to each Adjustable Rate Mortgage Loan, the fixed percentage set forth
        in
        the related Mortgage Note that is added to the Index on each Adjustment Date
        in
        accordance with the terms of the related Mortgage Note used to determine
        the
        Mortgage Rate for such Mortgage Loan.

       

      "Group":
        Any of
        the Group I Mortgage Loans and the Group II Mortgage Loans.

       

      "Group
        I Allocation Percentage":
        For
        any Distribution Date, the percentage equivalent of a fraction, the numerator
        of
        which is (i) the Group I Principal Remittance Amount for such Distribution
        Date
        and the denominator of which is (ii) the Principal Remittance Amount for
        such
        Distribution Date.

       

      "Group
        I Certificate":
        Any
        Class A-1A Certificate.

       

      "Group
        I Certificate Principal Distribution Amount":
        For
        any Distribution Date, an amount equal to the excess of (x) the Certificate
        Principal Balance of the Class A-1A Certificates immediately prior to that
        Distribution Date over (y) the lesser of (A) the product of (i) 54.40% and
        (ii)
        the aggregate Principal Balance of the Group I Mortgage Loans as of the last
        day
        of the related Due Period (after giving effect to scheduled payments of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) and (B) the aggregate Principal Balance of the Group I Mortgage Loans
        as
        of the last day of the related Due Period (after giving effect to scheduled
        payments of principal due during the related Due Period, to the extent received
        or advanced, and unscheduled collections of principal received during the
        related Prepayment Period) minus $5,204,402.

       

      "Group
        I Class I Percentage":
        For
        any Distribution Date beginning on the first Distribution Date through and
        including the Distribution Date in January 2010, the percentage equivalent
        of
        the fraction (a) the numerator of which is the aggregate principal balance
        of
        the Group I Loans and (b) the denominator of which is the aggregate principal
        balance of the Mortgage Loans. For all Distribution Dates thereafter, 0.00%.
        The
        sum of the Group I Class I Percentage plus the Group II Class I Percentage
        shall
        equal 100%. 

       

      
        
          
          

        

        
          Appendix
            A-26

          
            

          

        

        
          
          

        

      

       

      "Group
        I Cross Collateralization Amount":
        For
        any Distribution Date, the portion of the Group I Interest Remittance Amount
        remaining after payment of (a) the Monthly Interest Distributable Amount
        on the
        Group I Certificates, (b) the Class I Monthly Interest Distributable Amount
        multiplied by the Group I Class I Percentage and (c) the related proportional
        amount of the Administrative Fees.

       

      "Group
        I Interest Remittance Amount":
        For
        any Distribution Date, the portion of the Interest Remittance Amount that
        was
        collected or advanced on the Group I Mortgage Loans.

       

      "Group
        I Mortgage Loans":
        The
        Mortgage Loans allocated to Group I.

       

      "Group
        I Pool Balance":
        The
        Pool Balance relating to the Group I Mortgage Loans.

       

      "Group
        I Principal Distribution Amount":
        With
        respect to any Distribution Date is the sum of (i) the Group I Principal
        Remittance Amount for such Distribution Date and (ii) the Extra Principal
        Distribution Amount for such Distribution Date multiplied by the Group I
        Allocation Percentage.

       

      "Group
        I Principal Remittance Amount":
        For
        any Distribution Date, the portion of the Principal Remittance Amount relating
        to the Group I Mortgage Loans.

       

      "Group
        II Allocation Percentage":
        For
        any Distribution Date, the percentage equivalent of a fraction, the numerator
        of
        which is (i) the Group II Principal Remittance Amount for such Distribution
        Date
        and the denominator of which is (ii) the Principal Remittance Amount for
        such
        Distribution Date.

       

      "Group
        II Certificate":
        Any of
        the Class A-2A1 Certificates, Class A-2A2 Certificates, Class A-2B Certificates,
        Class A-2C Certificates or Class A-2D Certificates.

       

      "Group
        II Certificate Principal Distribution Amount":
        For
        any Distribution Date, an amount equal to the excess of (x) the aggregate
        Certificate Principal Balance of the Group II Certificates immediately prior
        to
        that Distribution Date over (y) the lesser of (A) the product of (i) 54.40%
        and
        (ii) the aggregate Principal Balance of the Group II Mortgage Loans as of
        the
        last day of the related Due Period (after giving effect to scheduled payments
        of
        principal due during the related Due Period, to the extent received or advanced,
        and unscheduled collections of principal received during the related Prepayment
        Period) and (B) the aggregate Principal Balance of the Group II Mortgage
        Loans
        as of the last day of the related Due Period (after giving effect to scheduled
        payments of principal due during the related Due Period, to the extent received
        or advanced, and unscheduled collections of principal received during the
        related Prepayment Period) minus $4,239,728.

       

      "Group
        II Class I Percentage":
        For
        any Distribution Date beginning on the first Distribution Date through and
        including the Distribution Date in January 2010, the percentage equivalent
        of
        the fraction (a) the numerator of which is the aggregate Principal Balance
        of
        the Group II Loans and (b) the denominator of which is the aggregate Principal
        Balance of the Mortgage Loans. For all Distribution Dates thereafter, 0.000%.
        The sum of the Group I Class I Percentage plus the Group II Class I Percentage
        shall equal 100%. 

       

      
        
          
          

        

        
          Appendix
            A-27

          
            

          

        

        
          
          

        

      

       

      "Group
        II Cross Collateralization Amount":
        For
        any Distribution Date, the portion of the Group II Interest Remittance Amount
        remaining after payment of (a) the Monthly Interest Distributable Amounts
        on the
        Group II Certificates, (b) the Class I Monthly Distributable Amount multiplied
        by the Group II Class I Percentage and (c) the related proportional amount
        of
        the Administrative Fees.

       

      "Group
        II Interest Remittance Amount":
        For
        any Distribution Date, the portion of the Interest Remittance Amount that
        was
        collected or advanced on the Group II Mortgage Loans.

       

      "Group
        II Mortgage Loans:"
        The
        Mortgage Loans allocated to Group II.

       

      "Group
        II Principal Distribution Amount":
        With
        respect to any Distribution Date is the sum of (i) the Group II Principal
        Remittance Amount for such Distribution Date and (ii) the Extra Principal
        Distribution Amount for such Distribution Date multiplied by the Group II
        Allocation Percentage.

       

      "Group
        II Principal Remittance Amount":
        For
        any Distribution Date, the portion of the Principal Remittance Amount relating
        to the Group II Mortgage Loans.

       

      "Hedge
        Agreement":
        Any
        Cap Agreement or Swap Agreement.

       

      "Hedge
        Counterparty":
        The
        Royal Bank of Scotland plc, Deutsche Bank AG, New York Branch, or Wachovia
        Bank,
        National Association, as applicable, or any successor hedge counterparty
        to the
        Supplemental Interest Trust.

       

      "Hedge
        Termination Payment":
        Upon
        the designation of an "Early Termination Date" as defined in the Hedge
        Agreements, the payment to be made by the Supplemental Interest Trust to
        the
        respective Hedge Counterparty, or by the respective Hedge Counterparty to
        the
        Supplemental Interest Trust, as applicable, pursuant to the terms of the
        respective Hedge Agreement.

       

      "Holder":
        See
        "Certificateholder".

       

      "Indenture":
        An
        indenture relating to the issuance of net interest margin notes secured by
        the
        Class C
        Certificates.

       

      "Independent":
        When
        used with respect to any specified Person, any such Person who (a) is in
        fact
        independent of the Depositor, the Servicer and their respective Affiliates,
        (b)
        does not have any direct financial interest in or any material indirect
        financial interest in the Depositor or the Servicer or any Affiliate thereof,
        and (c) is not connected with the Depositor or the Servicer or any Affiliate
        thereof as an officer, employee, promoter, underwriter, trustee, partner,
        director or Person performing similar functions; provided, however, that
        a
        Person shall not fail to be Independent of the Depositor or the Servicer
        or any
        Affiliate thereof merely because such Person is the beneficial owner of 1%
        or
        less of any Class of securities issued by the Depositor or the Servicer or
        any
        Affiliate thereof, as the case may be.

       

      
        
          
          

        

        
          Appendix
            A-28

          
            

          

        

        
          
          

        

      

       

      "Index":
        With
        respect to each Adjustable Rate Mortgage Loan and with respect to each related
        Adjustment Date, the index as specified in the related Mortgage
        Note.

       

      "Initial
        Certificate Principal Balance":
        With
        respect to any Class of Regular Certificate (other than a Class C Certificate
        or
        Class I Certificate), the amount designated "Original Principal Balance"
        on the
        face thereof.

       

      "Insurance
        Proceeds":
        Proceeds paid by any insurer pursuant to any insurance policy covering a
        Mortgage Loan which are required to be remitted to the Servicer, including
        MI
        Insurance Proceeds in the case of Mortgage Loans covered under a MI Policy,
        or
        amounts required to be paid by the Servicer hereunder, net of any component
        thereof (i) covering any expenses incurred by or on behalf of the Servicer
        in
        connection with obtaining such proceeds, (ii) that is applied to the restoration
        or repair of the related Mortgaged Property or (iii) released to the Mortgagor
        in accordance with the Servicer's normal servicing procedures.

       

      "Interest
        Determination Date":
        With
        respect to each Accrual Period and the LIBOR Certificates, the second LIBOR
        Business Day preceding the commencement of such Accrual Period.

       

      "Interest
        Remittance Amount":
        With
        respect to any Distribution Date, that portion of the Available Funds for
        such
        Distribution Date allocable to interest (excluding Prepayment
        Charges).

       

      "Interest
        Remittance Formula Amount":
        As of
        any Distribution Date and any Group, an amount equal to (1) the product of
        (x)
        1/12 of the Weighted Average Mortgage Rate of the related Group as of the
        beginning of the prior Due Period and (y) the Pool Balance related to that
        Group
        as of the beginning of the prior Due Period minus (2) the aggregate amount
        of
        Relief Act Shortfalls and Net Prepayment Interest Shortfalls for such Group
        for
        the prior period.

       

      "Issuing
        Entity":
        NovaStar Mortgage Funding Trust, Series 2007-1, the New York common law trust
        created hereunder.

       

      "Lender
        Letter":
        The
        lender letter #LL03-00 dated April 11, 2000 for Fannie Mae Sellers.

       

      "LIBOR":
        With
        respect to any Accrual Period, the rate determined by the Trustee on the
        related
        Interest Determination Date (provided that, in the case of each interest
        rate
        Hedge Agreement, LIBOR will be determined by the applicable Hedge Counterparty)
        on the basis of the offered rates of the Reference Banks for one-month United
        States dollar deposits, as such rates appear on the Telerate Page 3750, as
        of
        11:00 a.m. (London time) on such Interest Determination Date. If such rate
        does
        not appear on Telerate Page 3750, the rate for that day will be determined
        on
        the basis of the rates at which deposits in United States dollars are offered
        by
        the Reference Banks at approximately 11:00 a.m., London time, on that day
        to
        prime banks in the London interbank market for a period equal to the relevant
        Accrual Period (commencing on the first day of such Accrual Period). The
        Trustee
        will request the principal London office of each of the Reference Banks to
        provide a quotation of its rate. If at least two such quotations are provided,
        the rate for that day will be the arithmetic mean of the quotations. If fewer
        than two quotations are provided as requested, the rate for that day will
        be the
        arithmetic mean of the rates quoted by major banks in New York City, selected
        by
        the Trustee, at approximately 11:00 a.m., New York City time, on that day
        for
        loans in United States dollars to leading European banks for a period equal
        to
        the relevant Accrual Period (commencing on the first day of such Accrual
        Period).

       

      
        
          
          

        

        
          Appendix
            A-29

          
            

          

        

        
          
          

        

      

       

      The
        establishment of LIBOR on each Interest Determination Date by the Trustee
        and
        the Trustee's calculation of the rate of interest applicable to the Certificates
        for the related Accrual Period shall (in the absence of manifest error) be
        final
        and binding.

       

      "LIBOR
        Business Day":
        Any
        day other than (i) a Saturday or a Sunday or (ii) a day on which banking
        institutions in the State of New York or in the city of London, England are
        required or authorized by law to be closed.

       

      "LIBOR
        Certificates":
        Collectively, the Class A-1A, Class A-2A1, Class A-2B, Class A-2C, Class
        A-2D
        and Class M Certificates.

       

      "Lifetime
        Rate Cap":
        With
        respect to each Adjustable Rate Mortgage Loan, the maximum Mortgage Rate,
        if
        any, permitted over the life of such Mortgage Loan under the terms of such
        Mortgage Note, as set forth on the Mortgage Loan Schedule.

       

      "Liquidated
        Mortgage Loan":
        With
        respect to any Distribution Date, any Mortgage Loan in respect of which the
        Servicer has determined, in accordance with the servicing procedures specified
        in Article III hereof, as of the end of the related Prepayment Period that
        substantially all Liquidation Proceeds which it reasonably expects to recover
        with respect to the disposition of the related Mortgaged Property or REO
        Property have been recovered.

       

      "Liquidation
        Expenses":
        Out-of-pocket expenses (exclusive of overhead) which are incurred by or on
        behalf of the Servicer in connection with the liquidation of any Mortgage
        Loan
        and not recovered under any insurance policy, such expenses, including, without
        limitation, legal fees and expenses, any unreimbursed amount expended respecting
        the related Mortgage Loan and any related and unreimbursed expenditures for
        real
        estate property taxes or for property restoration, preservation or insurance
        against casualty loss or damage.

       

      "Liquidation
        Proceeds":
        Proceeds (including Insurance Proceeds) received in connection with the
        liquidation of any Mortgage Loan or related REO Property.

       

      "Loan-to-Value
        Ratio":
        With
        respect to any Mortgage Loan, as of any date of determination, a fraction
        expressed as a percentage, the numerator of which is the then current principal
        amount of the Mortgage Loan, and the denominator of which is the lesser of
        the
        purchase price or the Appraised Value of the related Mortgaged
        Property.

       

      "Loan
        Year":
        With
        respect to any Mortgage Loan, the one year period commencing on the day
        succeeding the origination of such Mortgage Loan and ending on the anniversary
        date of such Mortgage Loan, and each annual period thereafter.

       

      "LPMI
        Indemnification Agreement
        ": The
        Indemnification Agreement dated as of February 22, 2007, between the Sponsor
        and
Mortgage
        Guaranty Insurance Corporation.

       

      
        
          
          

        

        
          Appendix
            A-30

          
            

          

        

        
          
          

        

      

       

      "Majority
        Certificateholders":
        The
        Holders of Certificates evidencing at least 51% of the Voting Rights. If
        any
        matter concerns fewer than all Classes of Certificates (as evidenced by an
        Opinion of Counsel) then the Majority Certificateholders shall be considered
        to
        be the Holders of Certificates evidencing at least 51% of each Class of affected
        Certificates.

       

      "Master
        REMIC":
        The
        REMIC established pursuant to Exhibit J hereof. The assets of the Master
        REMIC
        shall be the REMIC IV Regular Interests.

       

      "Master
        REMIC Regular Interests":
        As
        defined in Exhibit J hereof.

       

      "Maximum
        Collateral Amount":
        The
        sum of the Principal Balance as of the Cut-off Date of the Mortgage
        Loans.

       

      "Maximum
        Mortgage Rate":
        With
        respect to each Adjustable Rate Mortgage Loan, the percentage set forth in
        the
        related Mortgage Note as the maximum Mortgage Rate thereunder.

       

      "Maximum
        Rate":
        For
        the LIBOR Certificates, 11%.

       

      "MERS":
        Mortgage Electronic Registration Systems, Inc., a corporation organized and
        existing under the laws of the State of Delaware, or any successor
        thereto.

       

      "MERS
        System":
        The
        system of recording transfers of Mortgages electronically maintained by
        MERS.

       

      "Mezzanine
        Certificate":
        Any
        Class M-1 Certificate, Class M-2 Certificate, Class M-3 Certificate, Class
        M-4
        Certificate, Class M-5 Certificate, Class M-6 (and Class M-6N) Certificate,
        Class M-7 (and Class M-7N) Certificate, Class M-8 (and Class M-8N) Certificate,
        Class M-9 (and Class M-9N) Certificate, Class M-10 (and Class M-10N) Certificate
        or Class M-11 (and Class M-11N) Certificate.

       

      "MI
        Claim Payment Advance":
        As
        defined in Section 3.13(a) hereof.

       

      "MI
        Insurance Agreement":
        A
        private mortgage insurance agreement issued by the MI Insurer pursuant to
        which
        MI Policies are issued on individual Mortgage Loans.

       

      "MI
        Insurance Proceeds":
        Proceeds paid by the MI Insurer pursuant to an MI Policy. 

       

      "MI
        Insurer":
        Each of (i) PMI Mortgage Insurance Co., an Arizona mortgage insurance company,
        (ii) Radian Guaranty, Inc., a Pennsylvania mortgage insurance corporation
        and
        (iii) Mortgage Guaranty Insurance Corporation, a Wisconsin private mortgage
        insurance company and their successors and assigns.

       

      "MI
        Insurer Insolvency Event":
        (A)
        The determination by the applicable regulatory or supervisory agency having
        jurisdiction over the MI Insurer that such MI Insurer is insolvent or unable
        to
        pay its obligations as they mature, (B) following the failure of the MI Insurer
        to pay under the related MI Policy, the determination by the Servicer that
        such
        MI Insurer is insolvent or unable to pay its obligations as they become due,
        (C)
        the long-term rating on the claims paying ability of the MI Insurer shall
        be
        lowered by Moody's below A-2, if such MI Insurer is then rated by Moody's,
        or
        shall be lowered by S&P below AA, if such MI Insurer is then rated by
        S&P.

       

      
        
          
          

        

        
          Appendix
            A-31

          
            

          

        

        
          
          

        

      

       

      "MI
        Policy":
        A
        private mortgage insurance policy underwritten by the MI Insurer with respect
        to
        an individual Mortgage Loan, issued pursuant to the MI Insurance Agreement.
        

       

      "MI
        Premium":
        The
        primary mortgage insurance premium for each MI Policy, payable annually to
        an MI
        Insurer, as specified in the MI Insurance Agreement, and with respect to
        each
        monthly premium payment, 1/12 of the annual premium.

       

      "MIN":
        The
        Mortgage Identification Number for Mortgage Loans registered with MERS on
        the
        MERS System.

       

      "Minimum
        Mortgage Rate":
        With
        respect to each Adjustable Rate Mortgage Loan, the percentage set forth in
        the
        related Mortgage Note as the minimum Mortgage Rate thereunder.

       

      "MOM
        Loan":
        With
        respect to any Mortgage Loan, MERS acting as the mortgagee of such Mortgage
        Loan, solely as nominee for the originator of such Mortgage Loan and its
        successors and assigns, at the origination thereof.

       

      "Monthly
        Interest Distributable Amount":
        For
        any Distribution Date and any Class of Class A Certificates and Mezzanine
        Certificates, the sum of (1) the Unpaid Interest Shortfall Amount for that
        Class
        and Distribution Date and (2) the Current Interest for that Class and
        Distribution Date. In the event of a shortfall in the full amount necessary
        to
        pay both the Unpaid Interest Shortfall Amount and the Current Interest for
        a
        Class, the money will first be applied to the Unpaid Interest Shortfall Amount
        and then to the Current Interest.

       

      "Monthly
        Payment":
        With
        respect to any Mortgage Loan (including any REO Property) and any Due Date,
        the
        payment of principal and interest due thereon in accordance with the
        amortization schedule at the time applicable thereto (after adjustment, if
        any,
        for partial Principal Prepayments and for Deficient Valuations occurring
        prior
        to such Due Date but before any adjustment to such amortization schedule
        by
        reason of any bankruptcy, other than a Deficient Valuation, or similar
        proceeding or any moratorium or similar waiver or grace period).

       

      "Moody's":
        Moody's Investors Service, Inc. or its successor in interest.

       

      "Mortgage":
        The
        mortgage, deed of trust or other instrument creating a first lien on an estate
        or fee simple interest in real property securing a Mortgage Note.

       

      "Mortgage
        File":
        The
        mortgage documents listed in Section 2.01 pertaining to a particular Mortgage
        Loan and any additional documents required to be added to the Mortgage File
        pursuant to this Agreement.

       

      "Mortgage
        Loan":
        The
        Mortgage Loans which are described (with complete statistical information
        included) in the Prospectus Supplement and which are included in the Trust
        Fund
        on the Closing Date.

       

      
        
          
          

        

        
          Appendix
            A-32

          
            

          

        

        
          
          

        

      

       

      "Mortgage
        Loan Schedule":
        With
        respect to any date, the schedule of Mortgage Loans subject to this Agreement
        on
        such date. The schedule of Mortgage Loans as of the Cut-off Date is the schedule
        set forth in Exhibit B hereto, sets forth as to each Mortgage Loan:

       

      (i) the
        loan
        number and name of the Mortgagor;

       

      (ii) the
        street address, city, state and zip code of the Mortgaged Property;

       

      (iii) the
        Mortgage Rate at origination;

       

      (iv) with
        respect to an Adjustable Rate Mortgage Loan, the Maximum Rate and the Minimum
        Rate;

       

      (v) the
        maturity date;

       

      (vi) the
        original Principal Balance;

       

      (vii) the
        first
        due date;

       

      (viii) the
        type
        of Mortgaged Property;

       

      (ix) the
        Monthly Payment in effect as of the Cut-off Date;

       

      (x) the
        Principal Balance as of the Cut-off Date;

       

      (xi) with
        respect to an Adjustable Rate Mortgage Loan, the Index, the Gross Margin;
        the
        Lifetime Rate Cap and the Periodic Rate Cap;

       

      (xii) with
        respect to an Adjustable Rate Mortgage Loan, the first Adjustment Date and
        next
        Adjustment Date, if any;

       

      (xiii) with
        respect to an Adjustable Rate Mortgage Loan, the Adjustment Date frequency
        and
        Distribution Date frequency;

       

      (xiv) the
        occupancy status;

       

      (xv) the
        purpose of the Mortgage Loan;

       

      (xvi) the
        Appraised Value of the Mortgaged Property;

       

      (xvii) the
        original term to maturity;

       

      (xviii) the
        paid-through date of the Mortgage Loan;

       

      (xix) the
        Loan-to-Value Ratio;

       

      (xx) whether
        the Mortgage Loan is an Adjustable Rate Mortgage Loan or a Fixed Rate Mortgage
        Loan;

       

      
        
          
          

        

        
          Appendix
            A-33

          
            

          

        

        
          
          

        

      

       

      (xxi) whether
        or not the Mortgage Loan was underwritten pursuant to a limited documentation
        program;

       

      (xxii) whether
        the Mortgage Loan is covered by an MI Policy;

       

      (xxiii) if
        the
        Mortgage Loan is registered with MERS on the MERS System, the MIN;
        and

       

      (xxiv) whether
        the Mortgage Loan is in Group I or Group II.

       

      The
        Mortgage Loan Schedule shall set forth the total of the amounts described
        under
        (x) above for all of the Mortgage Loans.

       

      "Mortgage
        Loans":
        At any
        time, collectively, all Mortgage Loans that have been transferred and conveyed
        to the Issuing Entity, in each case together with the Related Documents,
        and
        that remain subject to the terms of the Agreement. As applicable, a "Mortgage
        Loan" shall be deemed to refer to the related REO Property.

       

      "Mortgage
        Note":
        The
        original executed note or other evidence of indebtedness evidencing the
        indebtedness of a Mortgagor under a Mortgage Loan.

       

      "Mortgage
        Rate":
        With
        respect to any Mortgage Loan, the annual rate at which interest accrues on
        such
        Mortgage Loan.

       

      "Mortgage
        Pool":
        The
        pool of Mortgage Loans, identified on Exhibit B from time to time, and any
        REO
        Properties acquired in respect thereof.

       

      "Mortgaged
        Property":
        The
        underlying property, including real property and improvements thereon, securing
        a Mortgage Loan.

       

      "Mortgagor":
        The
        obligor on a Mortgage Note.

       

      "Net
        Liquidation Proceeds":
        With
        respect to any Liquidated Mortgage Loan, Liquidation Proceeds net of Liquidation
        Expenses.

       

      "Net
        Mortgage Rate":
        With
        respect to any Mortgage Loan and any day, the related Mortgage Rate less
        the
        Administrative Fee Rate.

       

      "Net
        Prepayment Interest Shortfall":
        On any
        Distribution Date, the excess, if any of (i) any Prepayment Interest Shortfall
        and (ii) Compensating Interest for such Distribution Date.

       

      "Net
        WAC":
        With
        respect to any Distribution Date, the weighted average of the Net Mortgage
        Rates
        on the Mortgage Loans (weighted by the Principal Balances of the Mortgage
        Loans
        as of the first day of the related Due Period (after giving effect to scheduled
        payments of principal due prior to such date, to the extent received or
        advanced, and unscheduled collections of principal received prior to such
        date)).

       

      
        
          
          

        

        
          Appendix
            A-34

          
            

          

        

        
          
          

        

      

       

      "NCFC":
        NovaStar Certificates Financing Corporation, a Delaware corporation, and
        its
        successors and assigns.

       

      "NCFLLC":
        NovaStar Certificates Financing LLC, a Delaware limited liability company,
        and
        its successors and assigns.

       

      "NFI":
        NovaStar Financial, Inc., a Maryland corporation, and its successors and
        assigns.

       

      "NIM
        Note":
        Any of
        the notes (i) issued pursuant to a structured net interest margin transaction
        sponsored by NovaStar Financial, Inc. or its Affiliates and (ii) evidencing
        debt
        of the trust formed pursuant to such transaction. For the avoidance of doubt,
        any subordinate equity interests (or subordinate certificates issued evidencing
        an equity interest) in such trust shall not be considered NIM
        Notes.

       

      "Non-Derivative
        Supplemental Interest Payment":
        With
        respect to each Distribution Date, and the Class M-6, Class M-7, Class M-8,
        Class M-9, Class M-10 and Class M-11 Certificates, the dollar amount of the
        Supplemental Interest Payment which would be distributed to each such Class
        on
        such Distribution Date pursuant to Section 4.04(c)(iii) hereof if the amount
        received by the Supplemental Interest Trust from each Hedge Counterparty
        on such
        Distribution Date had been zero (i.e.,
        disregarding all amounts actually received from each Hedge
        Counterparty).

       

      "Non-REMIC
        Accounts":
        The
        Supplemental Interest Account held by the Supplemental Interest
        Trust.

       

      "Nonrecoverable
        Advance":
        With
        respect to any Mortgage Loan:

       

      (x)
        any
        Advance or Servicing Advance (i) which was previously made or is proposed
        to be
        made by the Servicer; and (ii) which, in the good faith judgment of the
        Servicer, will not or, in the case of a proposed Advance or Servicing Advance,
        would not, be ultimately recoverable by the Servicer from Liquidation Proceeds,
        Repurchase Price or future payments on such Mortgage Loan; and

       

      (y)
        the
        amount, if any, by which an MI Claim Payment Advance made or to be made by
        the
        Servicer exceeds, or would exceed, the amount actually received, or expected
        to
        be received as MI Insurance Proceeds from the related MI Insurer on account
        of
        the related claim; provided,
        however
        that if
        an MI Insurer Insolvency Event occurs after the MI Claim Payment Advance
        has
        been made by the Servicer and before the full amount thereof has been reimbursed
        to the Servicer from the related MI Insurance Proceeds, then any remaining,
        unreimbursed amount shall be considered a Nonrecoverable Advance as of the
        date
        of the MI Insurer Insolvency Event.

       

      "Novation
        Agreements":
        The
        Novation Agreement, dated as of February 28, 2007, among NovaStar Mortgage,
        Inc., the Supplemental Interest Trust and Wachovia Bank, National Association,
        the Novation Agreement, dated as of February 28, 2007, among The Royal Bank
        of
        Scotland plc, the Supplemental Interest Trust and NovaStar Mortgage, Inc.
        and
        the Novation Agreement, dated as of February 28, 2007, among Deutsche Bank
        AG,
        New York Branch, the Supplemental Interest Trust and NovaStar Mortgage,
        Inc.

       

      
        
          
          

        

        
          Appendix
            A-35

          
            

          

        

        
          
          

        

      

       

      "Offered
        Certificates":
        Collectively, the Class A Certificates and the Class M-1 Certificates, Class
        M-2
        Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5
        Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
        Certificates and Class M-9 Certificates.

       

      "Officers’
        Certificate":
        A
        Certificate signed by the Chairman of the Board, the Vice Chairman of the
        Board,
        the President or any vice president (however denominated), and by the Treasurer,
        the Secretary, or any assistant treasurer or assistant secretary of the
        applicable Person.

       

      "Opinion
        of Counsel":
        A
        written opinion of counsel, who may, without limitation, be a salaried counsel
        for the Depositor or the Servicer, in form and substance acceptable to the
        Trustee, except that any opinion of counsel relating to (a) the qualification
        of
        any REMIC as a REMIC or (b) compliance with the REMIC Provisions must be
        an
        opinion of Independent counsel.

       

      "Optional
        Termination Date":
        The
        first Distribution Date on which the Servicer may terminate the Trust Fund
        pursuant to Section 11.01.

       

      "Original
        Value":
        Except
        in the case of a refinanced Mortgage Loan, the lesser of the Appraised Value
        or
        sales price of the Mortgaged Property at the time a Mortgage Loan is closed,
        and
        for a refinanced Mortgage Loan, the Original Value is the value of such property
        set forth in an appraisal acceptable to the Servicer.

       

      "Ownership
        Interest":
        As to
        any Certificate, any ownership or security interest in such Certificate,
        including any interest in such Certificate as the Holder thereof and any
        other
        interest therein, whether direct or indirect, legal or beneficial, as owner
        or
        as pledgee.

       

      "Overcollateralization
        Amount":
        For
        any Distribution Date, is equal to (a) the Pool Balance, after giving effect
        to
        distributions of principal on the Mortgage Loans, minus (b) the aggregate
        Certificate Principal Balance of the Class A Certificates and Mezzanine
        Certificates, after giving effect to principal distributions to be made on
        the
        Class A Certificates and Mezzanine Certificates on such Distribution
        Date.

       

      "Overcollateralization
        Deficiency Amount":
        With
        respect to any Distribution Date equals the amount, if any, by which the
        Required Overcollateralization Amount exceeds the Overcollateralization Amount
        on such Distribution Date (after giving effect to distributions in respect
        of
        the Group I Principal Remittance Amount and the Group II Principal Remittance
        Amount on such Distribution Date).

       

      "Overcollateralization
        Release Amount":
        With
        respect to any Distribution Date, the lesser of (x) the Principal Remittance
        Amount for such Distribution Date and (y) the excess, if any, of (i) the
        Overcollateralization Amount for such Distribution Date (assuming that 100%
        of
        the Principal Remittance Amount is applied as a principal payment on such
        Distribution Date) over (ii) the Required Overcollateralization Amount for
        such
        Distribution Date.

       

      "Pass-Through
        Rate":
        For
        any Distribution Date and any Class of Class A Certificates and Class M
        Certificates, the lesser of (1) the Formula Rate for such Class for such
        Distribution Date and (2) the related Available Funds Cap for such Distribution
        Date.

       

      
        
          
          

        

        
          Appendix
            A-36

          
            

          

        

        
          
          

        

      

       

      "Paying
        Agent":
        Any
        paying agent appointed pursuant to Section 5.05.

       

      "Percentage
        Interest":
        With
        respect to any Class A Certificate or Class M Certificate, a fraction, expressed
        as a percentage, the numerator of which is the Initial Certificate Principal
        Balance represented by such Certificate and the denominator of which is the
        Initial Certificate Principal Balance of the related Class. With respect
        to a
        Class I Certificate, Class C Certificate, Class DSI Certificate or Residual
        Certificate, the portion of the Class evidenced thereby, expressed as a
        percentage, as stated on the face of such Certificate; provided, however,
        that
        the sum of all such percentages for each such Class totals 100%.

       

      "Periodic
        Rate Cap":
        With
        respect to each Adjustable Rate Mortgage Loan and any Adjustment Date therefor,
        the fixed percentage set forth in the related Mortgage Note, which is the
        maximum amount by which the Mortgage Rate for such Mortgage Loan may increase
        or
        decrease (without regard to the Maximum Mortgage Rate or the Minimum Mortgage
        Rate) on such Adjustment Date from the Mortgage Rate in effect immediately
        prior
        to such Adjustment Date.

       

      "Permitted
        Transferee":
        Any
        transferee of a Residual Certificate other than a Disqualified Organization
        or a
        non-U.S. Person.

       

      "Person":
        Any
        individual, corporation, limited liability company, partnership, joint venture,
        association, joint stock company, trust, unincorporated organization or
        government or any agency or political subdivision thereof.

       

      "Plan":
        Either
        (i)
        an employee benefit plan (as defined in section 3(3) of ERISA) that is subject
        to the provisions of Title I of ERISA or (ii) a plan (as defined in section
        4975(e)(1) of the Code) that is subject to Section 4975 of the
        Code.

       

      "Plan
        Assets":
        As
        defined in Section 5.02(d) hereof.

       

      "Pool
        Balance":
        As of
        any date of determination, the aggregate Principal Balance of the related
        Mortgage Loans as of such date.

       

      "Prepayment
        Assumption":
        As
        defined in the Prospectus Supplement.

       

      "Prepayment
        Charge":
        With
        respect to any Mortgage Loan, the charges or premiums, if any, due in connection
        with a full or partial Principal Prepayment of such Mortgage Loan in accordance
        with the terms thereof.

       

      "Prepayment
        Interest Shortfall":
        As to
        any Distribution Date and any Mortgage Loan (other than a Mortgage Loan relating
        to an REO Property) that was the subject of (a) a Principal Prepayment in
        full
        during the portion of the related Prepayment Period in the prior calendar
        month
        an amount equal to the excess of interest accrued during the prior calendar
        month at the Mortgage Rate (net of the Servicing Fee) on the Principal Balance
        of such Mortgage Loan over the amount of interest (adjusted to the Mortgage
        Rate
        (net of the Servicing Fee)) paid by the Mortgagor for such Prepayment Period
        to
        the date of such Principal Prepayment in full or (b) a partial Principal
        Prepayment during the prior calendar month, an amount equal to interest accrued
        during the related prior calendar month at the Mortgage Rate (net of the
        Servicing Fee) on the amount of such partial Principal Prepayment.

       

      
        
          
          

        

        
          Appendix
            A-37

          
            

          

        

        
          
          

        

      

       

      "Prepayment
        Period":
        For
        any Distribution Date, the period commencing on the day after the Determination
        Date in the month preceding the month in which such Distribution Date occurs
        (or, in the case of the first Distribution Date, from February 1, 2007) and
        ending on the Determination Date of the calendar month in which such
        Distribution Date occurs.

       

      "Principal
        Balance":
        With
        respect to any Mortgage Loan or related REO Property, at any given time,
        (i) the
        Principal Balance of the Mortgage Loan as of the Cut-off Date minus (ii)
        the sum
        of (a) the principal portion of the Monthly Payments due with respect to
        such
        Mortgage Loan or REO Property during each Due Period ending prior to the
        most
        recent Distribution Date which were received or with respect to which an
        Advance
        was made, and (b) all Principal Prepayments with respect to such Mortgage
        Loan
        or REO Property, and all Insurance Proceeds, Liquidation Proceeds and REO
        Proceeds, to the extent applied by the Servicer as recoveries of principal
        in
        accordance with Section 3.13 hereof with respect to such Mortgage Loan or
        REO
        Property, and (c) the principal portion of any Realized Loss with respect
        thereto for any previous Distribution Date.

       

      "Principal
        Prepayment":
        Any
        payment of principal made by the Mortgagor on a Mortgage Loan which is received
        in advance of its scheduled Due Date and which is not accompanied by an amount
        of interest representing the full amount of scheduled interest due on any
        Due
        Date in any month or months subsequent to the month of prepayment.

       

      "Principal
        Remittance Amount":
        With
        respect to any Distribution Date, the sum of (i) each scheduled payment of
        principal collected or advanced on the Mortgage Loans by the Servicer that
        were
        due during the related Due Period, (ii) the principal portion of all partial
        and
        full Principal Prepayments of the Mortgage Loans applied by the Servicer
        during
        the related Prepayment Period, (iii) the principal portion of all related
        Net
        Liquidation Proceeds and Insurance Proceeds received during such Prepayment
        Period, (iv) that portion of the Repurchase Price, representing principal
        of any
        repurchased Mortgage Loan, deposited to the Collection Account during such
        Prepayment Period, (v) the principal portion of any related Substitution
        Adjustment Amounts deposited in the Collection Account during such Prepayment
        Period, (vi) on the Distribution Date on which the Trust Fund is to be
        terminated pursuant to Section 11.01, that portion of the Termination Price,
        in
        respect of principal and (viii) Subsequent Recoveries to pay certain
        Certificates amounts in respect of Realized Losses allocated to such
        Certificates.

       

      "Prospectus":
        The
        Prospectus Supplement together with the Base Prospectus attached thereto
        with
        respect to the Offered Certificates. 

       

      "Prospectus
        Supplement":
        That
        certain Prospectus Supplement dated February 23, 2007 relating to the public
        offering of the Offered Certificates.

       

      "PTCE
        95-60":
        U.S. Department of Labor Prohibited Transaction Class Exemption
        95-60.

       

      
        
          
          

        

        
          Appendix
            A-38

          
            

          

        

        
          
          

        

      

       

      "Purchase
        Agreement":
        The
        agreement, dated as of February 1, 2007, between the Sponsor, the Depositor,
        the
        Trustee and the Custodian, regarding the transfer of the Mortgage Loans by
        the
        Sponsor to or at the direction of the Depositor.

       

      "Qualified
        Liquidation":
        The
        meaning set forth from time to time in the definition thereof at Section
        860F(a)(4) of the Code and applicable to the Issuing Entity.

       

      "Qualified
        Mortgage":
        The
        meaning set forth from time to time in the definition thereof at Section
        860G(a)(3) of the Code and applicable to the Issuing Entity.

       

      "Qualified
        Replacement Mortgage":
        A
        Mortgage Loan substituted for another pursuant to Section 3.01 of the Purchase
        Agreement and that satisfies all of the criteria set forth from time to time
        in
        the definition thereof at Section 860G(a)(4) of the Code and applicable to
        the
        Issuing Entity, all as evidenced by an Officers’ Certificate of the Sponsor
        delivered to the Trustee prior to any such substitution.

       

      "Qualified
        Underwriting":
        Any
        public offering or private placement of securities with respect to which
        an
        entity that has received an Underwriter Exemption is (i) the sole underwriter,
        (ii) the manager or co-manager of the underwriting syndicate or (iii) a selling
        or placement agent.

       

      "Rate
        Step-up Date":
        The
        first Distribution Date to occur after the Optional Termination
        Date.

       

      "Rating
        Agency":
        Any
        nationally recognized statistical rating organization, or its successor,
        that
        rated the Class A Certificates and Mezzanine Certificates at the request
        of the
        Depositor at the time of the initial issuance of the Class A Certificates
        and
        Mezzanine Certificates. Initially such rating agencies shall consist of Moody's
        and Standard & Poor's. If such organization or a successor is no longer in
        existence, "Rating Agency" shall be such nationally recognized statistical
        rating organization, or other comparable Person, designated by the Depositor,
        notice of which designation shall be given to the Trustee. References herein
        to
        the highest short-term unsecured rating category of a Rating Agency shall
        mean
        "A-1" or better in the case of Standard & Poor's, "P-1" or better in the
        case of Moody's, "F-1+" or better in the case of Fitch and in the case of
        any
        other Rating Agency shall mean such equivalent rating. References herein
        to the
        highest long-term rating category of a Rating Agency shall mean "AAA" in
        the
        case of Standard & Poor's, "Aaa" in the case of Moody's and "AAA" in the
        case of Fitch, and in the case of any other Rating Agency, such equivalent
        rating.

       

      "Realized
        Loss":
        With
        respect to each Mortgage Loan (or REO Property) as to which a Cash Liquidation
        or REO Disposition has occurred, an amount (not less than zero) equal to
        (i) the
        Principal Balance of the Mortgage Loan (or REO Property) as of the date of
        Cash
        Liquidation or REO Disposition, plus (ii) interest (and REO Imputed Interest,
        if
        any) at the Net Mortgage Rate from the Due Date as to which interest was
        last
        paid or advanced to Certificateholders up to the last day of the month in
        which
        the Cash Liquidation (or REO Disposition) occurred on the Principal Balance
        of
        such Mortgage Loan (or REO Property) outstanding during each Due Period that
        such interest was not paid or advanced, minus (iii) Net Liquidation Proceeds,
        if
        any, received with respect to such Cash Liquidation (or REO Disposition),
        minus
        the portion thereof reimbursable to the Servicer or any Subservicer with
        respect
        to related Advances or expenses as to which the Servicer or Subservicer is
        entitled to reimbursement thereunder but which have not been previously
        reimbursed. With respect to each Mortgage Loan which has become the subject
        of a
        Deficient Valuation, the difference between the Principal Balance of the
        Mortgage Loan outstanding immediately prior to such Deficient Valuation and
        the
        Principal Balance of the Mortgage Loan as reduced by the Deficient Valuation.
        With respect to each Mortgage Loan which has become the object of a Debt
        Service
        Reduction, the amount of such Debt Service Reduction.

       

      
        
          
          

        

        
          Appendix
            A-39

          
            

          

        

        
          
          

        

      

       

      "Reallocable
        Certificates":
        The
        Class M-6, Class M-7 Class M-8, Class M-9, Class M-10 and Class M-11
        Certificates.

       

      "Reallocate",
        "Reallocation",
        etc.:
        The act of reallocating distributions from a Class DSI Certificate and its
        corresponding Class N Certificate to the corresponding Class of Reallocable
        Certificates, as described in Section 4.04(e) hereof. 

       

      "Record
        Date":
        For as
        long as there are no definitive certificates (and excluding the Class A-2A2
        Certificates), with respect to each Distribution Date, the Close of Business
        on
        the Business Day immediately preceding that Distribution Date. If definitive
        certificates have been issued, and for the Class A-2A2 Certificates, the
        Record
        Date is the last business day of the month prior to the related Distribution
        Date.

       

      "Reference
        Banks":
        Deutsche Bank, Barclays Bank PLC, The Bank of Tokyo-Mitsubishi, LTD. and
        National Westminster Bank PLC and their successors in interest; provided
        that if
        any of the foregoing banks are not suitable to serve as a Reference Bank,
        then
        any leading banks selected by the Trustee (after consultation with the
        Depositor) which are engaged in transactions in Eurodollar deposits in the
        international Eurocurrency market (i) with an established place of business
        in
        London, (ii) not controlling, under the control of or under common control
        with
        the Sponsor or any Affiliate thereof, (iii) whose quotations appear on the
        Reuters Screen LIBOR Page on the relevant Interest Determination Date and
        (iv)
        which have been designated as such by the Trustee.

       

      "Regular
        Certificate":
        Any of
        the Class A Certificates, Mezzanine Certificates, Class I Certificates or
        Class
        C Certificates.

       

      "Regulation
        AB":
        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 Commission
        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
        Commission, or as may be provided by the Commission or its staff from time
        to
        time.

       

      "Related
        Documents":
        With
        respect to each Mortgage Loan, the documents specified in Section 2.01 hereof
        and any documents required to be added to such documents pursuant to this
        Agreement or the Purchase Agreement.

       

      "Relief
        Act":
        The
        Servicemembers Civil Relief Act, as amended.

       

      
        
          
          

        

        
          Appendix
            A-40

          
            

          

        

        
          
          

        

      

       

      "Relief
        Act Shortfall":
        As to
        any Distribution Date and any Mortgage Loan (other than a Mortgage Loan relating
        to an REO Property), any shortfalls relating to the Relief Act or similar
        legislation or regulations.

       

      "REMIC":
        A
        "real estate mortgage investment conduit" within the meaning of Section 860D
        of
        the Code.

       

      "REMIC
        Available Funds Cap":
        The
        weighted average of the pass-through rates on the Class IV-Accrual, Class
        IV-A1A, Class IV-A2A, Class IV-A2B, Class IV-A2C, Class IV-A2D, Class IV-M1,
        Class IV-M2, Class IV-M3, Class IV-M4, Class IV-M5, Class IV-M6, Class IV-M7,
        Class IV-M8, Class IV-M9, Class IV-M10, Class IV-M11, Class IV-M12, Class
        IV-M13
        and Class IV-CA Interests.

       

      "REMIC
        III Net WAC":
        The
        weighted average of the pass-through rates on the Class II-A, Class II-B,
        Class
        II-C, Class II-D, Class II-E, Class II-F, Class II-G, Class II-H, Class II-K,
        Class II-L, Class II-M, Class II-O, Class II-Q, Class II-S and Class II-J
        Interests.

       

      "REMIC
        Pass-Through Rate":
        As
        defined in Exhibit J hereof. 

       

      "REMIC I
        Pass-Through Rate":
        As to
        each of the respective REMIC I Regular Interests, the applicable
        "REMIC I Pass-Through Rate" set forth in Exhibit J hereof.

       

      "REMIC II
        Pass-Through Rate":
        As to
        each of the respective REMIC II Regular Interests, the applicable
        "REMIC II Pass-Through Rate" set forth in Exhibit J hereof.

       

      "REMIC III
        Pass-Through Rate":
        As to
        each of the respective REMIC III Regular Interests, the applicable
        "REMIC III Pass-Through Rate" set forth in Exhibit J hereof.

       

      "REMIC IV
        Pass-Through Rate":
        As to
        each of the respective REMIC IV Regular Interests, the applicable "REMIC
        IV
        Pass-Through Rate set forth in Exhibit J hereof.

       

      "REMIC V
        Pass-Through Rate":
        As to
        each of the respective REMIC V Regular Interests, the applicable "REMIC V
        Pass-Through Rate set forth in Exhibit J hereof.

       

      "REMIC
        Provisions":
        Provisions of the federal income tax law relating to real estate mortgage
        investment conduits which appear at Section 860A through 860G of Subchapter
        M of
        Chapter 1 of the Code, and related provisions, and regulations and rulings
        promulgated thereunder, as the foregoing may be in effect from time to
        time.

       

      "REMIC
        Regular Interests":
        The
        REMIC I Regular Interests, the REMIC II Regular Interests, the REMIC III
        Regular
        Interests, the REMIC IV Regular Interests, the REMIC V Regular Interests
        and the
        Master REMIC Regular Interests.

       

      "REMIC I
        Regular Interests":
        As
        defined in Exhibit J hereof.

       

      "REMIC II
        Regular Interests":
        As
        defined in Exhibit J hereof.

       

      "REMIC III
        Regular Interests":
        As
        defined in Exhibit J hereof.

       

      
        
          
          

        

        
          Appendix
            A-41

          
            

          

        

        
          
          

        

      

       

      "REMIC IV
        Regular Interests":
        As
        defined in Exhibit J hereof.

       

      "REMIC V
        Regular Interests":
        As
        defined in Exhibit J hereof.

       

      "REO
        Acquisition":
        The
        acquisition by the Servicer on behalf of the Trustee for the benefit of the
        Certificateholders of any REO Property pursuant to Section 3.13
        hereof.

       

      "REO
        Disposition":
        As to
        any REO Property, a determination by the Servicer that it has received
        substantially all Insurance Proceeds, Liquidation Proceeds, REO Proceeds
        and
        other payments and recoveries (including proceeds of a final sale) which
        the
        Servicer expects to be finally recoverable from the sale or other disposition
        of
        the REO Property.

       

      "REO
        Imputed Interest":
        As to
        any REO Property, for any period, an amount equivalent to interest (at the
        Net
        Mortgage Rate that would have been applicable to the related Mortgage Loan
        had
        it been outstanding) on the unpaid Principal Balance of the Mortgage Loan
        as of
        the date of acquisition thereof for such period as such balance is reduced
        pursuant to Section 3.13 hereof by any income from the REO Property treated
        as a
        recovery of principal.

       

      "REO
        Proceeds":
        Proceeds, net of expenses, received in respect of any REO Property (including,
        without limitation, proceeds from the rental of the related Mortgaged Property),
        which proceeds are required to be deposited into the Collection Account within
        two days of receipt by the Servicer.

       

      "REO
        Property":
        A
        Mortgaged Property that is acquired by the Issuing Entity by foreclosure
        or by
        deed in lieu of foreclosure.

       

      "Repurchase
        Event":
        With
        respect to any Mortgage Loan, either (i) a discovery that, as of the Closing
        Date the related Mortgage was not a valid lien on the related Mortgaged Property
        subject only to (A) the lien of real property taxes and assessments not yet
        due
        and payable, (B) covenants, conditions, and restrictions, rights of way,
        easements and other matters of public record as of the date of recording
        of such
        Mortgage and such other permissible title exceptions as are permitted and
        (C)
        other matters to which like properties are commonly subject which do not
        materially adversely affect the value, use, enjoyment or marketability of
        the
        related Mortgaged Property or (ii) with respect to any Mortgage Loan as to
        which
        the Sponsor delivers an affidavit certifying that the original Mortgage Note
        has
        been lost or destroyed, a subsequent default on such Mortgage Loan if the
        enforcement thereof or of the related Mortgage is materially and adversely
        affected by the absence of such original Mortgage Note.

       

      "Repurchase
        Price":
        With
        respect to any Mortgage Loan (i) required to be repurchased on any date by
        the
        Sponsor pursuant to the Purchase Agreement or (ii) permitted to be purchased
        by
        the Servicer pursuant to Article III hereof, an amount equal to the sum,
        without
        duplication, of (i) 100% of the Principal Balance thereof (without reduction
        for
        any amounts charged off) and (ii) unpaid accrued interest at the Mortgage
        Rate
        on the outstanding principal balance thereof from the Due Date to which interest
        was last paid by the Mortgagor (or with respect to which an Advance was last
        made by the Servicer) to the first day of the month following the month of
        purchase plus (iii) the amount of any unreimbursed Servicing Advances or
        unreimbursed Advances made with respect to such Mortgage Loan plus (iv) any
        other amounts owed to the Servicer or the Subservicer pursuant to Section
        3.07
        hereof and not included in clause (iii) of this definition plus (v) any costs
        and damages incurred by the Trust Fund in connection with any violation by
        any
        Mortgage Loan of any predatory or abusive lending law or breach of
        representations and warranties regarding licensing or any predatory or abusive
        lending law.

       

      
        
          
          

        

        
          Appendix
            A-42

          
            

          

        

        
          
          

        

      

       

      "Request
        for Release":
        A
        request for release in substantially the form of Exhibit E hereto.

       

      "Required
        Overcollateralization Amount":
        For
        any Distribution Date, an amount equal to: 

       

      (i) prior
        to
        the Crossover Date, 2.30% of the aggregate Principal Balance of the Mortgage
        Loans as of the Cut-off Date.

       

      (ii) on
        or
        after the Crossover Date, the greater of:

       

      (a) 0.50%
        of
        the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date;
        and

       

      (b) 4.60%
        of
        the current aggregate Principal Balance of the Mortgage Loans as of the end
        of
        the related Due Period (after giving effect to Principal Prepayments in the
        related Prepayment Period).

       

      On
        any
        Distribution Date on which a Trigger Event is in effect, the Required
        Overcollateralization Amount will be equal to the Required Overcollateralization
        Amount as of the preceding Distribution Date. 

       

      "Residual
        Certificate":
        The
        Class R Certificates representing beneficial ownership of the Class R-I,
        Class R-II, Class R-III, Class R-IV and Class R-V
        Interests.

       

      "Residual
        Interest":
        The
        sole Class of "residual interests" in a REMIC within the meaning of Section
        860G(a)(2) of the Code.

       

      "Responsible
        Officer":
        With
        respect to the Trustee, any officer working in the Corporate Trust Office
        with
        direct responsibility for the administration of this Agreement and also,
        with
        respect to a particular matter, any other officer to whom such matter is
        referred because of such officer's knowledge of and familiarity with the
        particular subject.

       

      "Rolling
        60-Day Delinquency Percentage":
        For
        any Distribution Date, the average of the 60-Day Delinquency Percentages
        for the
        Mortgage Loans as of the last day of each of the three (or 1 and 2 in the
        case
        of the first two Distribution Dates, as applicable) most recently ended Due
        Periods.

       

      "Rolling
        90-Day Delinquency Percentage":
        For
        any Distribution Date, the average of the 90-Day Delinquency Percentages
        for the
        Mortgage Loans as of the last day of each of the three (or 1 and 2 in the
        case
        of the first two Distribution Dates, as applicable) most recently ended Due
        Periods.

       

      
        
          
          

        

        
          Appendix
            A-43

          
            

          

        

        
          
          

        

      

       

      "Scheduled
        Principal Payment":
        Any
        scheduled payment of principal made on a scheduled Due Date.

       

      "Servicer":
        NovaStar Mortgage, Inc., a Virginia corporation, and its successors and
        assigns.

       

      "Servicer
        Remittance Date":
        The
        third Business Day prior to each Distribution Date.

       

      "Servicer
        Reporting Date":
        As
        defined in Section 3.24 hereof.

       

      "Servicing
        Account":
        The
        separate trust account created and maintained by the Servicer or each
        Subservicer with respect to the Mortgage Loans or REO Property, which shall
        be
        an Eligible Account, for collection of taxes, assessments, insurance premiums
        and comparable items as described in Section 3.08 hereof.

       

      "Servicing
        Advances":
        All
        customary, reasonable and necessary "out of pocket" costs and expenses incurred
        in connection with a default, delinquency or other unanticipated event in
        the
        performance by the Servicer of its servicing obligations, including, without
        duplication, but not limited to, the cost of (i) the preservation, restoration
        and protection of a Mortgaged Property, (ii) any enforcement or judicial
        proceedings, including foreclosures, (iii) the management and liquidation
        of any
        REO Property, (iv) compliance with the obligations under Section 3.13 hereof,
        and (v) expenses incurred in connection with any Mortgage Loan being registered
        on the MERS System.

       

      "Servicing
        Criteria":
        The
        criteria set forth in paragraph (d) of Item 1122 of Regulation AB, as such
        may
        be amended from time to time.

       

      "Servicing
        Default":
        The
        meaning assigned in Section 7.01 hereof.

      

        "Servicing
          Fee":
          With
          respect to the Mortgage Loans and any Distribution Date, the product of
          (i) the
          Servicing Fee Rate divided by 12 and (ii) the Pool Balance as of the first
          day
          of the related Due Period provided,
          that if
          the Back-up Servicer becomes the successor servicer, the Servicing Fee
          shall be
          as provided in the Back-up Servicing Agreement.

         

      

      "Servicing
        Fee Rate":
        With
        respect to any Mortgage Loan, 0.50% per annum.

       

      "Servicing
        Function Participant":
        Any
        sub-servicer, subcontractor or any other Person, other than the Servicer
        and the
        Trustee, that is performing activities addressed by the Servicing Criteria,
        unless such Person’s activities relate only to 5% or less of the Mortgage
        Loans.

       

      "Servicing
        Officer":
        Any
        officer of the Servicer involved in, or responsible for, the administration
        and
        servicing of the Mortgage Loans whose name and specimen signature appear
        on a
        list of servicing officers furnished to the Trustee by the Servicer or a
        Subservicer, as such list may be amended from time to time.

      

        "Servicing
          Rights Owner":
          NovaStar Mortgage, Inc., or its transferee or assignee, in its capacity
          as owner
          of the servicing rights with respect to the Mortgage Loans. The Backup
          Servicer
          shall not be considered to be the "Servicing Rights Owner" either before
          or
          after the date on which it becomes the successor
          Servicer.

      

      
        
          
          

        

        
          Appendix
            A-44

          
            

          

        

        
          
          

        

      

       

      "Servicing
        Rights Pledgee":
        The entity designated by the Servicing Rights Owner pursuant to Section
        3.28.

       

      "Servicing
        Transfer Costs":
        Reasonable and necessary costs and expenses incurred, by or on behalf of
        the
        Trustee or successor Servicer in connection with the transfer of servicing
        in
        the event of termination of the Servicer as servicer hereunder and the resulting
        transfer to the successor Servicer.

       

      "Sponsor":
        NovaStar Mortgage, Inc., a Virginia corporation, and its successors and
        assigns.

       

      "Standard
        & Poor's"
        or
        "S&P":
        Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies,
        Inc., or its successor in interest.

       

      "Startup
        Day":
        As
        defined in Section 10.01(a) hereof.

       

      "Subsequent
        Recovery":
        With
        respect to any Mortgage Loan that had previously been the subject of a Realized
        Loss, any principal amount subsequently received in connection with such
        Mortgage Loan.

       

      "Subservicer":
        Any
        Person with which the Servicer has entered into a Subservicing Agreement
        and
        which meets the qualifications of a Subservicer pursuant to Section 3.02
        hereof.

       

      "Subservicing
        Account":
        An
        account established by a Subservicer which meets the requirements set forth
        in
        Section 3.06(e) and is otherwise acceptable to the Servicer.

       

      "Subservicing
        Agreement":
        The
        written contract between the Servicer and a Subservicer relating to servicing
        and administration of certain Mortgage Loans as provided in Section 3.02
        hereof.

       

      "Subservicing
        Fee":
        With
        respect to each Mortgage Loan and any Distribution Date, the portion of the
        Servicing Fee paid to a Subservicer.

       

      "Substitution
        Adjustment Amount":
        As
        defined in Section 2.03 hereof.

       

      "Supplemental
        Interest Account":
        An
        account established by the Trustee pursuant to Section 4.04 hereof, which
        must
        be an Eligible Account.

       

      "Supplemental
        Interest Amount Due":
        With
        respect to any Class of Class A Certificates and Mezzanine Certificates and
        any
        Distribution Date, the sum of (x) the Available Funds Cap Shortfall Amount
        for
        such Class of Certificates and such Distribution Date and (y) the Available
        Funds Cap Carryforward Amount for such Class and Distribution Date.

       

      "Supplemental
        Interest Payment":
        With
        respect to any Distribution Date and any Class of Class A or Mezzanine
        Certificates, the lesser of (x) the Supplemental Interest Amount Due for
        that
        Class and (y) the amounts on deposit and available for distribution to that
        Class from the Supplemental Interest Trust on that Distribution
        Date.

       

      
        
          
          

        

        
          Appendix
            A-45

          
            

          

        

        
          
          

        

      

       

      "Supplemental
        Interest Trust":
        The
        supplemental interest trust established and maintained pursuant to Section
        4.04
        and designated as such.

       

      "Swap
        Agreement":
        Any of the eighteen interest rate Swap Agreements between the Supplemental
        Interest Trust and a Swap Counterparty which are deemed to be assets of the
        Supplemental Interest Trust and not an asset of any one of the REMICs created
        hereunder.

       

      "Swap
        Amount":
        The calculation of the Swap Amount is subject to the verification and
        confirmation of the Swap Counterparties who are calculation agents for the
        Swap
        Agreements. With regard to each Swap Agreement, Swap Amount shall mean, on
        each
        Distribution Date on or prior to the Class I Termination Date, the excess
        of (x)
        the product of (i) the related fixed rate of interest, (ii) 30 divided by
        360
        and (iii) the related notional amount over (y) the product of (i) LIBOR,
        (ii)
        the actual number of days elapsed in the related Accrual Period divided by
        360
        and (iii) the related notional amount, (so long as such calculation results in a
        positive number).

       

      "Swap
        Counterparty":
        A
        Hedge Counterparty.

       

      "Swap/Cap
        Interest Rate Schedule":
        As set
        forth in Appendix B.

       

      "Tax
        Matters Person":
        The
        tax matters person appointed pursuant to Section 10.01(e) hereof.

       

      "Tax
        Returns":
        The
        federal income tax return on Internal Revenue Service Form 1066, U.S. Real
        Estate Mortgage Investment Conduit (REMIC) Income Tax Return, including Schedule
        Q thereto, Quarterly Notice to Residual Interest Holders of REMIC Taxable
        Income
        or Net Loss Allocation, or any successor forms, to be filed by the Trustee,
        on
        behalf of each REMIC, together with any and all other information reports,
        forms
        or returns that may be required to be furnished to the Certificateholders
        or
        filed with the Internal Revenue Service or any other governmental taxing
        authority under any applicable provisions of federal, state or local tax
        laws.

       

      "Telerate
        Page 3750":
        The
        display page currently so designated on the Moneyline Telerate Service (or
        such
        other page as may replace that page on that service for the purpose of
        displaying comparable rates or prices).

       

      "Termination
        Price":
        As
        defined in Section 11.01(a) of the Pooling and Servicing Agreement.

       

      "Treasury
        Regulations":
        Regulations, including proposed or temporary Regulations, promulgated under
        the
        Code. References herein to specific provisions of proposed or temporary
        regulations shall include analogous provisions of final Treasury Regulations
        or
        other successor Treasury Regulations.

       

      "Trigger
        Event":
        A
        Trigger Event is in effect with respect to any Distribution Date, on or after
        the Crossover Date, if either (i) the Rolling 60-Day Delinquency Percentage
        (calculated on a contractual basis) exceeds 37.28% of the current Credit
        Enhancement Percentage, or (ii) the Cumulative Loss Percentage for such
        Distribution Date is greater than the applicable percentage set forth below
        with
        respect to such Distribution Date:

       

      
        
          
          

        

        
          Appendix
            A-46

          
            

          

        

        
          
          

        

      

       

      
        	
                Distribution
                  Date Occurring In:

              	 	
                Percentage
                  (%)

              	 
	
                March
                  2009

              	 	 	
                1.15

              	
                %

              
	
                April
                  2009

              	 	 	
                1.26

              	
                %

              
	
                May
                  2009

              	 	 	
                1.38

              	
                %

              
	
                June
                  2009

              	 	 	
                1.49

              	
                %

              
	
                July
                  2009

              	 	 	
                1.60

              	
                %

              
	
                August
                  2009

              	 	 	
                1.71

              	
                %

              
	
                September
                  2009

              	 	 	
                1.83

              	
                %

              
	
                October
                  2009

              	 	 	
                1.94

              	
                %

              
	
                November
                  2009

              	 	 	
                2.05

              	
                %

              
	
                December
                  2009

              	 	 	
                2.16

              	
                %

              
	
                January
                  2010

              	 	 	
                2.28

              	
                %

              
	
                February
                  2010

              	 	 	
                2.39

              	
                %

              
	
                March
                  2010

              	 	 	
                2.50

              	
                %

              
	
                April
                  2010

              	 	 	
                2.62

              	
                %

              
	
                May
                  2010

              	 	 	
                2.74

              	
                %

              
	
                June
                  2010

              	 	 	
                2.86

              	
                %

              
	
                July
                  2010

              	 	 	
                2.98

              	
                %

              
	
                August
                  2010

              	 	 	
                3.10

              	
                %

              
	
                September
                  2010

              	 	 	
                3.23

              	
                %

              
	
                October
                  2010

              	 	 	
                3.35

              	
                %

              
	
                November
                  2010

              	 	 	
                3.47

              	
                %

              
	
                December
                  2010

              	 	 	
                3.59

              	
                %

              
	
                January
                  2011

              	 	 	
                3.71

              	
                %

              
	
                February
                  2011

              	 	 	
                3.83

              	
                %

              
	
                March
                  2011

              	 	 	
                3.95

              	
                %

              
	
                April
                  2011

              	 	 	
                4.05

              	
                %

              
	
                May
                  2011

              	 	 	
                4.14

              	
                %

              
	
                June
                  2011

              	 	 	
                4.24

              	
                %

              
	
                July
                  2011

              	 	 	
                4.33

              	
                %

              
	
                August
                  2011

              	 	 	
                4.43

              	
                %

              
	
                September
                  2011

              	 	 	
                4.53

              	
                %

              
	
                October
                  2011

              	 	 	
                4.62

              	
                %

              
	
                November
                  2011

              	 	 	
                4.72

              	
                %

              
	
                December
                  2011

              	 	 	
                4.81

              	
                %

              
	
                January
                  2012

              	 	 	
                4.91

              	
                %

              
	
                February
                  2012

              	 	 	
                5.00

              	
                %

              
	
                March
                  2012

              	 	 	
                5.10

              	
                %

              
	
                April
                  2012

              	 	 	
                5.15

              	
                %

              
	
                May
                  2012

              	 	 	
                5.21

              	
                %

              
	
                June
                  2012

              	 	 	
                5.26

              	
                %

              
	
                July
                  2012 

              	 	 	
                5.32

              	
                %

              
	
                August
                  2012

              	 	 	
                5.37

              	
                %

              
	
                September
                  2012

              	 	 	
                5.43

              	
                %

              
	
                October
                  2012

              	 	 	
                5.48

              	
                %

              
	
                November
                  2012

              	 	 	
                5.53

              	
                %

              
	
                December
                  2012 

              	 	 	
                5.59

              	
                %

              
	
                January
                  2013

              	 	 	
                5.64

              	
                %

              
	
                February
                  2013

              	 	 	
                5.70

              	
                %

              
	
                March
                  2013 and thereafter

              	 	 	
                5.75

              	
                %

              

      

       

      
        
          
          

        

        
          Appendix
            A-47

          
            

          

        

        
          
          

        

      

       

      "Trust
        Fund":
        All of
        the assets of the Issuing Entity, which is the trust created hereunder
        consisting of the REMIC I, REMIC II, REMIC III, REMIC IV,
        REMIC V, the Master REMIC and the Supplemental Interest Trust.

       

      "Trustee":
        Deutsche Bank National Trust Company, a national banking association organized
        under the laws of the United States, and its successors and assigns or any
        successor trustee appointed pursuant to the terms of the Agreement.

       

      "Trustee
        Fee":
        With
        respect to each Distribution Date, the product of (i) the Trustee Fee Rate
        divided by 12 and (ii) the Principal Balance of the Mortgage Loans as of
        the
        first day of the related Due Period.

       

      "Trustee
        Fee Rate":
        0.0025% per annum.

       

      "Trustee
        Indemnification Agreement":
        The
        Indemnification Agreement dated as of February 22, 2007, between the Sponsor
        and
        the Trustee.

       

      "Underwriter
        Exemption":
        An
        individual prohibited transaction exemption, issued by the U.S. Department
        of
        Labor, which is described in PTE 2000-58, 65 Fed. Reg. 67,765 (Nov. 13,
        2000).

       

      "Underwriters":
        Deutsche Bank Securities Inc., Greenwich Capital Markets, Inc. and Wachovia
        Capital Markets, LLC, and their successors and assigns.

       

      "Underwriting
        Agreement":
        The
        Underwriting Agreement dated February 23, 2007 among the Underwriters, the
        Depositor and the Sponsor with respect to the offer and sale of the Underwritten
        Certificates, as the same may be amended from time to time.

       

      "Underwriting
        Guidelines":
        The
        underwriting guidelines set forth in the Prospectus Supplement under the
        heading
        "Description of the Mortgage Pool—Underwriting Standards for Mortgage
        Loans".

       

      "Underwritten
        Certificates"
        Collectively, the Class A Certificates and the Class M-1 Certificates, Class
        M-2
        Certificates, Class M-3 Certificates, Class M-4 Certificates and Class M-5
        Certificates.

       

      "United
        States Person"
        or
        "U.S.
        Person":
        A
        citizen or resident of the United States, a corporation, partnership or other
        entity treated as a corporation or partnership for federal income tax purposes
        (other than a partnership that is not treated as a U.S. Person pursuant to
        any
        applicable Treasury regulations) created or organized in, or under the laws
        of,
        the United States, any state thereof or the District of Columbia, or an estate
        the income of which from sources without the United States is includible
        in
        gross income for United States federal income tax purposes regardless of
        its
        connection with the conduct of a trade or business within the United States,
        or
        a trust if a court within the United States is able to exercise primary
        supervision over the administration of the trust and one or more United States
        persons have authority to control all substantial decisions of the trust.
        

       

      
        
          
          

        

        
          Appendix
            A-48

          
            

          

        

        
          
          

        

      

       

      "Unpaid
        Interest Shortfall Amount":
        With
        respect to each Class of Class A Certificates and Mezzanine Certificates
        and (i)
        the first Distribution Date, zero, and (ii) any Distribution Date after the
        first Distribution Date, the sum of (a) the Unpaid Interest Shortfall Amount
        for
        that Class as of the prior Distribution Date, (b) the excess of the amount
        of
        the Current Interest due with respect to that Class on the prior Distribution
        Date over the amount actually distributed to the Holders of that Class on
        account of the Current Interest on the prior Distribution Date and (c) interest
        on the sum of (a) and (b) to the extent permitted by law, at the Pass-Through
        Rate for such Class for the related Accrual Period.

       

      "Voting
        Rights":
        The
        portion of the voting rights of all of the Certificates which is allocated
        to
        any Certificate. At all times the Class A Certificates and the Mezzanine
        Certificates shall have 97% of the Voting Rights (allocated among the Holders
        of
        the Class A Certificates and the Mezzanine Certificates in proportion to
        the
        then outstanding Certificate Principal Balances of their respective
        Certificates), the Class CA Certificates shall have 1% of the Voting Rights,
        the
        Class I Certificates shall have 1% of the Voting Rights and the Class R
        Certificates shall have 1% of the Voting Rights. The Voting Rights allocated
        to
        any Class of Certificates (other than the Class CA Certificates, Class I
        Certificates and the Class R Certificates) shall be allocated among all Holders
        of each such Class in proportion to the outstanding Certificate Principal
        Balance of such Certificates and the Voting Rights allocated to the Class
        CA
        Certificates, Class I Certificates and the Class R Certificates shall be
        allocated among all Holders of each such Class in proportion to such Holders'
        respective Percentage Interest; provided, however that when none of the Regular
        Certificates are outstanding, 100% of the Voting Rights shall be allocated
        among
        Holders of the Class R Certificates in accordance with such Holders' respective
        Percentage Interests in the Certificates of such Class. The Class DSI and
        Class
        CB Certificates do not have Voting Rights. The Voting Rights shall be allocated
        between each of the Class M-6 and Class M-6N, the Class M-7 and Class M-7N,
        the
        Class M-8 and Class M-8N, Class M-9 and Class M-9N, Class M-10 and Class
        M-10N
        and Class M-11 and Class M-11N Certificates on the basis of their respective
        Certificate Principal Balances. 

       

      "Weighted
        Average Mortgage Rate":
        With
        respect to any Distribution Date, the weighted average of the Mortgage Rates
        of
        the Mortgage Loans (weighted by the Principal Balances of the Mortgage Loans
        as
        of the first day of the related Due Period (after giving effect to scheduled
        payments of principal due prior to such date, to the extent received or
        advanced, and unscheduled collections of principal received prior to such
        date)).

      
        
          
          

        

        
          Appendix
            A-49

          
            

          

        

         

      

      APPENDIX
        B

       

      Swap/Cap
        Interest Rate Schedule

      

        
          	
                  Corresponding
                    REMIC III

                  Regular
                    Interest

                   

                	
                  Corresponding
                    

                  Interest
                    Rate

                	
                  Corresponding

                  Maturity
                    Date

                
	
                  All
                    A Interests

                	
                  5.09200%

                	
                  May
                    2008

                
	
                  All
                    B Interests

                	
                  5.12750%

                	
                  May
                    2008

                
	
                  All
                    C Interests

                	
                  5.01875%

                	
                  June
                    2008

                
	
                  All
                    D Interests

                	
                  0.2330%

                	
                  November
                    2008

                
	
                  All
                    E Interests

                	
                  4.89750%

                	
                  December
                    2008

                
	
                  All
                    F Interests

                	
                  4.97700%

                	
                  December
                    2008

                
	
                  All
                    G Interests

                	
                  4.98200%

                	
                  May
                    2009

                
	
                  All
                    H Interests

                	
                  4.91100%

                	
                  May
                    2009

                
	
                  All
                    K Interests

                	
                  4.73700%

                	
                  June
                    2009

                
	
                  All
                    L Interests

                	
                  4.87000%

                	
                  June
                    2009

                
	
                  All
                    M Interests

                	
                  4.98400%

                	
                  July
                    2009

                
	
                  All
                    O Interests

                	
                  4.90350%

                	
                  November
                    2009

                
	
                  All
                    Q Interests

                	
                  4.97500%

                	
                  November
                    2009

                
	
                  All
                    S Interests

                	
                  0.3270%

                	
                  November
                    2009

                
	
                  All
                    T Interests

                	
                  4.83100%

                	
                  December
                    2009

                
	
                  All
                    U Interests

                	
                  4.72000%

                	
                  December
                    2009

                
	
                  All
                    V Interests

                	
                  4.85500%

                	
                  December
                    2009

                
	
                  All
                    W Interests

                	
                  4.90500%

                	
                  December
                    2009

                
	
                  All
                    X Interests

                	
                  4.96375%

                	
                  January
                    2010

                

        

      

       

      
        
          
          

        

        
          Appendix
            B-1

          
            

          

        

         

      

      Class
        CB Certificate Schedule

      

        
          	
                  Distribution
                    Date

                	
                  Corresponding
                    Interest Rate Strip (%)

                
	
                  March
                    2007

                	
                  0.00

                
	
                  April
                    2007

                	
                  0.00

                
	
                  May
                    2007

                	
                  0.00

                
	
                  June
                    2007

                	
                  0.00

                
	
                  July
                    2007

                	
                  0.00

                
	
                  August
                    2007

                	
                  0.00

                
	
                  September
                    2007

                	
                  0.00

                
	
                  October
                    2007

                	
                  0.00

                
	
                  November
                    2007

                	
                  0.00

                
	
                  December
                    2007

                	
                  0.00

                
	
                  January
                    2008

                	
                  0.00

                
	
                  February
                    2008

                	
                  0.00

                
	
                  March
                    2008

                	
                  0.12

                
	
                  April
                    2008

                	
                  0.12

                
	
                  May
                    2008

                	
                  0.12

                
	
                  June
                    2008

                	
                  0.13

                
	
                  July
                    2008

                	
                  0.13

                
	
                  August
                    2008

                	
                  0.14

                
	
                  September
                    2008

                	
                  0.21

                
	
                  October
                    2008

                	
                  0.21

                
	
                  November
                    2008

                	
                  0.22

                
	
                  December
                    2008

                	
                  0.23

                
	
                  January
                    2009

                	
                  0.24

                
	
                  February
                    2009

                	
                  0.26

                
	
                  March
                    2009

                	
                  0.29

                
	
                  April
                    2009

                	
                  0.31

                
	
                  May
                    2009

                	
                  0.34

                
	
                  June
                    2009

                	
                  0.36

                
	
                  July
                    2009

                	
                  0.38

                
	
                  August
                    2009

                	
                  0.40

                
	
                  September
                    2009

                	
                  0.37

                
	
                  October
                    2009

                	
                  0.39

                
	
                  November
                    2009

                	
                  0.40

                
	
                  December
                    2009

                	
                  0.42

                
	
                  January
                    2010

                	
                  0.44

                
	
                  February
                    2010

                	
                  0.46

                
	
                  March
                    2010

                	
                  0.41

                
	
                  April
                    2010

                	
                  0.43

                
	
                  May
                    2010

                	
                  0.45

                
	
                  June
                    2010

                	
                  0.48

                
	
                  July
                    2010

                	
                  0.50

                
	
                  August
                    2010

                	
                  0.52

                
	
                  September
                    2010

                	
                  0.44

                
	
                  October
                    2010

                	
                  0.46

                
	
                  November
                    2010

                	
                  0.48

                
	
                  December
                    2010

                	
                  0.50

                
	
                  January
                    2011

                	
                  0.52

                

        

         

        
          
             

          

          
            Appendix
              B-2

            
              

            

          

          
             

          

        

         

        
          	
                  February
                    2011

                	
                  0.54

                
	
                  March
                    2011

                	
                  0.45

                
	
                  April
                    2011

                	
                  0.47

                
	
                  May
                    2011

                	
                  0.48

                
	
                  June
                    2011

                	
                  0.50

                
	
                  July
                    2011

                	
                  0.52

                
	
                  August
                    2011

                	
                  0.54

                
	
                  September
                    2011

                	
                  0.42

                
	
                  October
                    2011

                	
                  0.56

                
	
                  November
                    2011

                	
                  0.45

                
	
                  December
                    2011

                	
                  0.47

                
	
                  January
                    2012

                	
                  0.48

                
	
                  February
                    2012

                	
                  0.50

                
	
                  March
                    2012

                	
                  0.39

                
	
                  April
                    2012

                	
                  0.40

                
	
                  May
                    2012

                	
                  0.41

                
	
                  June
                    2012

                	
                  0.43

                
	
                  July
                    2012

                	
                  0.44

                
	
                  August
                    2012

                	
                  0.46

                
	
                  September
                    2012

                	
                  0.35

                
	
                  October
                    2012

                	
                  0.36

                
	
                  November
                    2012

                	
                  0.37

                
	
                  December
                    2012

                	
                  0.38

                
	
                  January
                    2013

                	
                  0.40

                
	
                  February
                    2013

                	
                  0.41

                
	
                  March
                    2013

                	
                  0.28

                
	
                  April
                    2013

                	
                  0.29

                
	
                  May
                    2013

                	
                  0.30

                
	
                  June
                    2013

                	
                  0.31

                
	
                  July
                    2013

                	
                  0.32

                
	
                  August
                    2013

                	
                  0.33

                
	
                  September
                    2013

                	
                  0.20

                
	
                  October
                    2013

                	
                  0.20

                
	
                  November
                    2013

                	
                  0.21

                
	
                  December
                    2013

                	
                  0.22

                
	
                  January
                    2014

                	
                  0.22

                
	
                  February
                    2014

                	
                  0.23

                
	
                  March
                    2014

                	
                  0.04

                
	
                  April
                    2014

                	
                  0.04

                
	
                  May
                    2014

                	
                  0.04

                
	
                  June
                    2014

                	
                  0.04

                
	
                  July
                    2014

                	
                  0.04

                
	
                  August
                    2014

                	
                  0.04

                
	
                  September
                    2014

                	
                  0.04

                
	
                  October
                    2014

                	
                  0.04

                
	
                  November
                    2014

                	
                  0.05

                
	
                  December
                    2014

                	
                  0.05

                
	
                  January
                    2015

                	
                  0.05

                
	
                  February
                    2015

                	
                  0.05

                
	
                  March
                    2015

                	
                  0.05

                
	
                  April
                    2015

                	
                  0.05

                

        

         

        
          
             

          

          
            Appendix
              B-3

            
              

            

          

          
             

          

        

         

        
          	
                  May
                    2015

                	
                  0.05

                
	
                  June
                    2015

                	
                  0.05

                
	
                  July
                    2015

                	
                  0.06

                
	
                  August
                    2015

                	
                  0.06

                
	
                  September
                    2015

                	
                  0.06

                
	
                  October
                    2015

                	
                  0.06

                
	
                  November
                    2015

                	
                  0.06

                
	
                  December
                    2015

                	
                  0.06

                
	
                  January
                    2016

                	
                  0.06

                
	
                  February
                    2016

                	
                  0.06

                
	
                  March
                    2016

                	
                  0.06

                
	
                  April
                    2016

                	
                  0.06

                
	
                  May
                    2016

                	
                  0.06

                
	
                  June
                    2016

                	
                  0.07

                
	
                  July
                    2016

                	
                  0.07

                
	
                  August
                    2016

                	
                  0.07

                
	
                  September
                    2016

                	
                  0.07

                
	
                  October
                    2016

                	
                  0.07

                
	
                  November
                    2016

                	
                  0.07

                
	
                  December
                    2016

                	
                  0.07

                
	
                  January
                    2017

                	
                  0.07

                
	
                  February
                    2017

                	
                  0.08

                

        

       

       

      
        
          
          

        

        
          Appendix
            B-4

          
            

          

        

        
          
          

        

      

       

      Exhibit
        A-1

    

     

    Form
      of Class A-1A Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      A-1A CERTIFICATE

     

    Comprised
      of a Certificate Representing

    Certain
      Interests Relating to a Pool of

    Mortgage
      Loans 

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.)

     

    
      	
              No.:
                A-1A

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AA1

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $803,560,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.130000%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Group I Mortgage Loan identified on the Mortgage Loan Schedule attached
      as Exhibit B to that certain Pooling and Servicing Agreement dated as of
      February 1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar
      Mortgage Funding Corporation, as the depositor (the "Depositor"), Deutsche
      Bank
      National Trust Company, as trustee (the "Trustee"), U.S. Bank National
      Association, as the custodian (the "Custodian"), and NovaStar Mortgage, Inc.
      as
      servicer (the "Servicer") and as sponsor (the "Sponsor"), including the related
      Cut-off Date Principal Balance, all interest accruing thereon on and after
      the
      Cut-off Date and all collections in respect of interest and principal due after
      the Cut-off Date; (ii) property which secured each such Mortgage Loan and which
      has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the
      Depositor's interest in any insurance policies in respect of such Mortgage
      Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the
      Depositor under the Purchase Agreement and (vi) all other assets included or
      to
      be included in the Trust Fund. Such assignment includes all interest and
      principal due to the Depositor or the Servicer after the Cut-off Date with
      respect to the Mortgage Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class A-1A Certificates on February 28, 2007
      which aggregate amount was $803,560,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class A-1A Certificates. Therefore,
      the actual outstanding principal amount of this Certificate, on any date
      subsequent to March 26, 2007 (the first Distribution Date) will be less than
      the
      Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class A-1A
      Certificates (the "Class A-1A Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-2A1 Certificates, Class A-2A2 Certificates, Class A-2B Certificates, Class
      A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2
      Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-1-2

        
          

        

      

       

    

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class A-1A Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class A-1A Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class A-1A Certificates. The Percentage Interest of each
      Class A-1A Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class A-1A Certificate by $803,560,000.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-1-3

        
          

        

      

       

    

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-1-4

        
          

        

      

      
        
        

      

    

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      A-1A Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class A-1A Certificates are exchangeable for
      new
      Class A-1A Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-1-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                

              Title:

            
	 	 
	
               By:  

            	 

              

              Name:
                

              Title:

            

    

     

     

    
      	
              Trustee
                Authentication

            	 	 	 
	 	 	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 	 	 

    

     

    
      
        	
                By:

              	 

                

                Name:

                Title:

              	 	 
	 	
                 

              	 	 
	
                By:

              	
                 

                
                  

                

                Name:

                Title:

              	 	 

      

    

    
      

        
          
            
            

          

          
            A-1-6

            
              

            

          

           

        

      

    

     

    Exhibit
      A-2

     

    Form
      of Class A-2A1 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      A-2A1 CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    
      	
              No.:
                A-2A1

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AB9

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $262,665,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.10000%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Group II Mortgage Loan identified on the Mortgage Loan Schedule
      attached as Exhibit B to that certain Pooling and Servicing Agreement dated
      as
      of February 1, 2007 (the "Pooling and Servicing Agreement") by and among
      NovaStar Mortgage Funding Corporation, as the depositor (the "Depositor"),
      Deutsche Bank National Trust Company, as trustee (the "Trustee"), U.S. Bank
      National Association, as the custodian (the "Custodian"), and NovaStar Mortgage,
      Inc. as servicer (the "Servicer") and as sponsor (the "Sponsor"), including
      the
      related Cut-off Date Principal Balance, all interest accruing thereon on and
      after the Cut-off Date and all collections in respect of interest and principal
      due after the Cut-off Date; (ii) property which secured each such Mortgage
      Loan
      and which has been acquired by foreclosure or deed in lieu of foreclosure;
      (iii)
      the Depositor's interest in any insurance policies in respect of such Mortgage
      Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the
      Depositor under the Purchase Agreement and (vi) all other assets included or
      to
      be included in the Trust Fund. Such assignment includes all interest and
      principal due to the Depositor or the Servicer after the Cut-off Date with
      respect to the Mortgage Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class A-2A1 Certificates on February 28, 2007
      which aggregate amount was $262,665,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class A-2A Certificates. Therefore,
      the actual outstanding principal amount of this Certificate, on any date
      subsequent to March 26, 2007 (the first Distribution Date) will be less than
      the
      Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class A-2A1
      Certificates (the "Class A-2A1 Certificates") and issued under and subject
      to
      the terms, provisions and conditions of the Pooling and Servicing Agreement,
      to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A2 Certificates, Class A-2B Certificates, Class
      A-2C
      Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2
      Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-2-2

        
          

        

      

       

    

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class A-2A1 Certificates as of the close
      of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class A-2A1 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class A-2A1 Certificates. The Percentage Interest of each
      Class A-2A1 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class A-2A1 Certificate by $262,665,000.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-2-3

        
          

        

      

       

    

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-2-4

        
          

        

      

       

    

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      A-2A1 Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class A-2A1 Certificates are exchangeable for
      new
      Class A-2A1 Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-2-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:
                

              Title:

            

    

     

    
      	
              Trustee
                Authentication

            	 	 
	 	 	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 	 
	 	 	 	 
	
              By:

            	 

              

              Name:

              Title:

            	 	 

    

    
      
        
        

      

      
        A-2-6

        
          

        

      

       

    

    Exhibit
      A-3

     

    Form
      of Class A-2A2 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      A-2A2 CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    
      	
              No.:
                A-2A2

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AS2

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $100,000,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              5.86000%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Group II Mortgage Loan identified on the Mortgage Loan Schedule
      attached as Exhibit B to that certain Pooling and Servicing Agreement dated
      as
      of February 1, 2007 (the "Pooling and Servicing Agreement") by and among
      NovaStar Mortgage Funding Corporation, as the depositor (the "Depositor"),
      Deutsche Bank National Trust Company, as trustee (the "Trustee"), U.S. Bank
      National Association, as the custodian (the "Custodian"), and NovaStar Mortgage,
      Inc. as servicer (the "Servicer") and as sponsor (the "Sponsor"), including
      the
      related Cut-off Date Principal Balance, all interest accruing thereon on and
      after the Cut-off Date and all collections in respect of interest and principal
      due after the Cut-off Date; (ii) property which secured each such Mortgage
      Loan
      and which has been acquired by foreclosure or deed in lieu of foreclosure;
      (iii)
      the Depositor's interest in any insurance policies in respect of such Mortgage
      Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the
      Depositor under the Purchase Agreement and (vi) all other assets included or
      to
      be included in the Trust Fund. Such assignment includes all interest and
      principal due to the Depositor or the Servicer after the Cut-off Date with
      respect to the Mortgage Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class A-2A2 Certificates on February 28, 2007
      which aggregate amount was $100,000,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class A-2A2 Certificates.
      Therefore, the actual outstanding principal amount of this Certificate, on
      any
      date subsequent to March 26, 2007 (the first Distribution Date) will be less
      than the Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class A-2A2
      Certificates (the "Class A-2A2 Certificates") and issued under and subject
      to
      the terms, provisions and conditions of the Pooling and Servicing Agreement,
      to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2B Certificates, Class
      A-2C
      Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2
      Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-3-2

        
          

        

      

       

    

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class A-2A2 Certificates as of the close
      of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class A-2A2 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class A-2A2 Certificates. The Percentage Interest of each
      Class A-2A2 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class A-2A2 Certificate by $100,000,000.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-3-3

        
          

        

      

      
        
        

      

    

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-3-4

        
          

        

      

       

    

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      A-2A2 Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class A-2A2 Certificates are exchangeable for
      new
      Class A-2A2 Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-3-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:
	 	Title:

    

     

    
      	
              Trustee
                Authentication

            	 	 
	 	 	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 	 
	 	 	 	 
	
              By:

            	 

              

              Name:

              Title:

            	 	 

    

     

    
      
        
        

      

      
        A-3-6

        
          

        

      

       

    

    Exhibit
      A-4

    

    Form
      of Class A-2B Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      A-2B CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    
      	
              No.:
                A-2B

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AC7

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $131,454,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.15000%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Group II Mortgage Loan identified on the Mortgage Loan Schedule
      attached as Exhibit B to that certain Pooling and Servicing Agreement dated
      as
      of February 1, 2007 (the "Pooling and Servicing Agreement") by and among
      NovaStar Mortgage Funding Corporation, as the depositor (the "Depositor"),
      Deutsche Bank National Trust Company, as trustee (the "Trustee"), U.S. Bank
      National Association, as the custodian (the "Custodian"), and NovaStar Mortgage,
      Inc. as servicer (the "Servicer") and as sponsor (the "Sponsor"), including
      the
      related Cut-off Date Principal Balance, all interest accruing thereon on and
      after the Cut-off Date and all collections in respect of interest and principal
      due after the Cut-off Date; (ii) property which secured each such Mortgage
      Loan
      and which has been acquired by foreclosure or deed in lieu of foreclosure;
      (iii)
      the Depositor's interest in any insurance policies in respect of such Mortgage
      Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the
      Depositor under the Purchase Agreement and (vi) all other assets included or
      to
      be included in the Trust Fund. Such assignment includes all interest and
      principal due to the Depositor or the Servicer after the Cut-off Date with
      respect to the Mortgage Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class A-2B Certificates on February 28, 2007
      which aggregate amount was $131,454,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class A-2B Certificates. Therefore,
      the actual outstanding principal amount of this Certificate, on any date
      subsequent to March 26, 2007 (the first Distribution Date) will be less than
      the
      Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class A-2B
      Certificates (the "Class A-2B Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2
      Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-4-2

        
          

        

      

       

    

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class A-2B Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class A-2B Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class A-2B Certificates. The Percentage Interest of each
      Class A-2B Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class A-2B Certificate by $131,454,000.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-4-3

        
          

        

      

       

    

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-4-4

        
          

        

      

       

    

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      A-2B Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class A-2B Certificates are exchangeable for
      new
      Class A-2B Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-4-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:

	 	Title:

    

     

    
      	
              Trustee
                Authentication

            	 	 
	 	 	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 	 
	 	 	 	 
	
              By:

            	 

              

              Name:

              Title:

            	 	 

    

    
      
        
        

      

      
        A-4-6

        
          

        

      

       

    

    Exhibit
      A-5

     

    Form
      of Class A-2C Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      A-2C CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee, or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    
      	
              No.:
                A-2C

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AD5

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $125,575,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.18000%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Group II Mortgage Loan identified on the Mortgage Loan Schedule
      attached as Exhibit B to that certain Pooling and Servicing Agreement dated
      as
      of February 1, 2007 (the "Pooling and Servicing Agreement") by and among
      NovaStar Mortgage Funding Corporation, as the depositor (the "Depositor"),
      Deutsche Bank National Trust Company, as trustee (the "Trustee"), U.S. Bank
      National Association, as the custodian (the "Custodian"), and NovaStar Mortgage,
      Inc. as servicer (the "Servicer") and as sponsor (the "Sponsor"), including
      the
      related Cut-off Date Principal Balance, all interest accruing thereon on and
      after the Cut-off Date and all collections in respect of interest and principal
      due after the Cut-off Date; (ii) property which secured each such Mortgage
      Loan
      and which has been acquired by foreclosure or deed in lieu of foreclosure;
      (iii)
      the Depositor's interest in any insurance policies in respect of such Mortgage
      Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the
      Depositor under the Purchase Agreement and (vi) all other assets included or
      to
      be included in the Trust Fund. Such assignment includes all interest and
      principal due to the Depositor or the Servicer after the Cut-off Date with
      respect to the Mortgage Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class A-2C Certificates on February 28, 2007
      which aggregate amount was $125,575,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class A-2C Certificates. Therefore,
      the actual outstanding principal amount of this Certificate, on any date
      subsequent to March 26, 2007 (the first Distribution Date) will be less than
      the
      Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class A-2C
      Certificates (the "Class A-2C Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2
      Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-5-2

        
          

        

      

       

    

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class A-2C Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class A-2C Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class A-2C Certificates. The Percentage Interest of each
      Class A-2C Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class A-2C Certificate by $125,575,000.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-5-3

        
          

        

      

       

    

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-5-4

        
          

        

      

       

    

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      A-2C Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class A-2C Certificates are exchangeable for
      new
      Class A-2C Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-5-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:

	 	Title:

    

     

    
      	
              Trustee
                Authentication

            	 	 
	 	 	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 	 
	 	 	 	 
	
              By:

            	 

              

              Name:

              Title:

            	 	 

    

    
       

      
        
        

      

      
        A-5-6

        
          

        

      

      
        
        

      

    

    Exhibit
      A-6

     

    Form
      of Class A-2D Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      A-2D CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    
      	
              No.:
                A-2D

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AE3

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $34,920,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.24000%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Group II Mortgage Loan identified on the Mortgage Loan Schedule
      attached as Exhibit B to that certain Pooling and Servicing Agreement dated
      as
      of February 1, 2007 (the "Pooling and Servicing Agreement") by and among
      NovaStar Mortgage Funding Corporation, as the depositor (the "Depositor"),
      Deutsche Bank National Trust Company, as trustee (the "Trustee"), U.S. Bank
      National Association, as the custodian (the "Custodian"), and NovaStar Mortgage,
      Inc. as servicer (the "Servicer") and as sponsor (the "Sponsor"), including
      the
      related Cut-off Date Principal Balance, all interest accruing thereon on and
      after the Cut-off Date and all collections in respect of interest and principal
      due after the Cut-off Date; (ii) property which secured each such Mortgage
      Loan
      and which has been acquired by foreclosure or deed in lieu of foreclosure;
      (iii)
      the Depositor's interest in any insurance policies in respect of such Mortgage
      Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the
      Depositor under the Purchase Agreement and (vi) all other assets included or
      to
      be included in the Trust Fund. Such assignment includes all interest and
      principal due to the Depositor or the Servicer after the Cut-off Date with
      respect to the Mortgage Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class A-2D Certificates on February 28, 2007
      which aggregate amount was $34,920,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class A-2D Certificates. Therefore,
      the actual outstanding principal amount of this Certificate, on any date
      subsequent to March 26, 2007 (the first Distribution Date) will be less than
      the
      Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class A-2D
      Certificates (the "Class A-2D Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class M-1 Certificates, Class M-2
      Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-6-2

        
          

        

      

       

    

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class A-2D Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class A-2D Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class A-2D Certificates. The Percentage Interest of each
      Class A-2D Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class A-2D Certificate by $34,920,000.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-6-3

        
          

        

      

       

    

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-6-4

        
          

        

      

       

    

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      A-2D Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class A-2D Certificates are exchangeable for
      new
      Class A-2D Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-6-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:

	 	Title:

    

     

    
      	
              Trustee
                Authentication

            	 	 
	 	 	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 	 
	 	 	 	 
	
              By:

            	 

              

              Name:

              Title:

            	 	 

    

    
      
        
        

      

      
        A-6-6

        
          

        

      

       

    

    Exhibit
      A-7

     

    Form
      of Class M-1 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-1
      CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans 

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.)

     

    
      	
              No.:
                M-1

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AF0

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $100,108,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.32000%

            	 	 

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation as the depositor, (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of the Mortgage Loans; (iv) all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-1 Certificates on February 28, 2007
      which aggregate amount was $100,108,000. The owner hereof is entitled to
      principal payments on each Distribution Date, as hereinafter described, which
      will fully amortize such Original Principal Amount over the period from the
      date
      of initial delivery hereof to the final Distribution Date of the Class M-1
      Certificates. Therefore, the actual outstanding principal amount of this
      Certificate, on any date subsequent to March 26, 2007 (the first Distribution
      Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-1
      Certificates (the "Class M-1 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-2
      Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-7-2

        
          

        

      

       

    

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-1 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to receive the distribution described in Article
      IV of the Pooling and Servicing Agreement relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-1 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-1 Certificates. The Percentage Interest of each
      Class M-1 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-1 Certificate by $100,108,000.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-7-3

        
          

        

      

       

    

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-7-4

        
          

        

      

       

    

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-1 Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-1 Certificates are exchangeable for
      new
      Class M-1 Certificates of authorized denominations evidencing the same aggregate
      principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-7-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:

	 	Title:

    

     

    
      	
              Trustee
                Authentication

            	 	 
	 	 	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 	 
	 	 	 	 
	
              By:

            	 

              

              Name:

              Title:

            	 	 

    

     

    
      
        
        

      

      
        A-7-6

        
          

        

      

       

    

    Exhibit
      A-8

    Form
      of Class M-2 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-2
      CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans 

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.)

     

    
      	
              No.:
                M-2

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AG8

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $84,053,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.39000%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (I) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of the Mortgage Loans; (iv) all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-2 Certificates on February 28, 2007
      which aggregate amount was $84,053,000. The owner hereof is entitled to
      principal payments on each Distribution Date, as hereinafter described, which
      will fully amortize such Original Principal Amount over the period from the
      date
      of initial delivery hereof to the final Distribution Date of the Class M-2
      Certificates. Therefore, the actual outstanding principal amount of this
      Certificate, on any date subsequent to March 26, 2007 (the first Distribution
      Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-2
      Certificates (the "Class M-2 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-8-2

        
          

        

      

       

    

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-2 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to receive the distribution described in Article
      IV of the Pooling and Servicing Agreement relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-2 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-2 Certificates. The Percentage Interest of each
      Class M-2 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-2 Certificate by $84,053,000.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-8-3

        
          

        

      

       

    

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-8-4

        
          

        

      

       

    

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-2 Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-2 Certificates are exchangeable for
      new
      Class M-2 Certificates of authorized denominations evidencing the same aggregate
      principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-8-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:

	 	Title:

    

     

    
      	
              Trustee
                Authentication

            	 	 
	 	 	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 	 
	 	 	 	 
	
              By:

            	 

              

              Name:

              Title:

            	 	 

    

     

    
      
        
        

      

      
        A-8-6

        
          

        

      

       

    

     

    Exhibit
      A-9

     

    Form
      of Class M-3 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-3
      CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans 

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.)

     

    
      	
              No.:
                M-3

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AH6

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $26,444,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.42000%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of the Mortgage Loans; (iv) all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-3 Certificates on February 28, 2007
      which aggregate amount was $26,444,000. The owner hereof is entitled to
      principal payments on each Distribution Date, as hereinafter described, which
      will fully amortize such Original Principal Amount over the period from the
      date
      of initial delivery hereof to the final Distribution Date of the Class M-3
      Certificates. Therefore, the actual outstanding principal amount of this
      Certificate, on any date subsequent to March 26, 2007 (the first Distribution
      Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-3
      Certificates (the "Class M-3 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-4 Certificates, Class M-5
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificate, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-9-2

        
          

        

      

      
        
        

      

    

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-3 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to receive the distribution described in Article
      IV of the Pooling and Servicing Agreement relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-3 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-3 Certificates. The Percentage Interest of each
      Class M-3 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-3 Certificate by $26,444,000.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-9-3

        
          

        

      

      
        
        

      

    

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-9-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-3 Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-3 Certificates are exchangeable for
      new
      Class M-3 Certificates of authorized denominations evidencing the same aggregate
      principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-9-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

              Title:

            

    

    
       

      Trustee
        Authentication

       

    

    
      	 	 	 	 
	DEUTSCHE
              BANK NATIONAL TRUST COMPANY, not in its individual capacity, but solely
              in
              its capacity as Trustee	 	 	 
	 	 	 	 
	 	 	 	 
	By: 
              	 	 	 
	
              
                

              

              Name:
                

              Title:

            	 	 	
            

    

     

    
      
        
        

      

      
        A-9-6

        
          

        

      

      
        
        

      

    

     

    Exhibit
      A-10

     

    Form
      of Class M-4 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-4
      CERTIFICATE

     

    Comprised
      of a Certificate Representing

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    
      	
              No.:
                M-4

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AJ2

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $37,777,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.55000%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-4 Certificates on February 28, 2007
      which aggregate amount was $0. The Original Principal Amount hereof may be
      increased by Reallocations from the Class M-4N Certificates, but will not exceed
      $37,777,000. The owner hereof is entitled to principal payments on each
      Distribution Date, which will fully amortize such Original Principal Amount
      over
      the period from the date of initial delivery hereof to the final Distribution
      Date of the Class M-4 Certificates. Therefore, the actual outstanding principal
      amount of this Certificate, on any date subsequent to March 26, 2007 (the first
      Distribution Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-4
      Certificates (the "Class M-4 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-5
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    
      
        
        

      

      
        A-10-2

        
          

        

      

      
        
        

      

    

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-4 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-4 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-4 Certificates. The Percentage Interest of each
      Class M-4 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-4 Certificate by the aggregate Original Principal Balances of all Class
      M-4 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-10-3

        
          

        

      

      
        
        

      

       

    

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-10-4

        
          

        

      

      
        
        

      

       

    

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-4 Certificates are issuable only as registered Certificates in denominations,
      post Reallocation, of $25,000 Original Principal Amount and integral multiples
      of $1,000. As provided in the Pooling and Servicing Agreement and subject to
      certain limitations therein set forth, Class M-4 Certificates are exchangeable
      for new Class M-4 Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-10-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

              Title:

            

    

    
       

      Trustee
        Authentication

    

    
       

      
        	
                DEUTSCHE
                  BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                  solely in
                  its capacity as Trustee

              	 	 	 
	 	 	 	 
	 	 	 	 
	By: 
                	 	 	 
	
                
                  

                

                Name:
                  

                Title:

              	 	 	
              

      

       

      
        
          
          

        

        
          A-10-6

          
            

          

        

        
          
          

        

      

       

    

    Exhibit
      A-11

     

    Form
      of Class M-5 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE

    CLASS
      M-5
      CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    
      	
              No.:
                M-5

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AK9

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $32,110,000

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.60000%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-5 Certificates on February 28, 2007
      which aggregate amount was $0. The Original Principal Amount hereof may be
      increased by Reallocations from the Class M-5N Certificates, but will not exceed
      $32,110,000. The owner hereof is entitled to principal payments on each
      Distribution Date, which will fully amortize such Original Principal Amount
      over
      the period from the date of initial delivery hereof to the final Distribution
      Date of the Class M-5 Certificates. Therefore, the actual outstanding principal
      amount of this Certificate, on any date subsequent to March 26, 2007 (the first
      Distribution Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-5
      Certificates (the "Class M-5 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    
      
        
        

      

      
        A-11-2

        
          

        

      

      
        
        

      

    

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-5 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-5 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-5 Certificates. The Percentage Interest of each
      Class M-5 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-5 Certificate by the aggregate Original Principal Balances of all Class
      M-5 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-11-3

        
          

        

      

      
        
        

      

    

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-11-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-5 Certificates are issuable only as registered Certificates in denominations,
      post Reallocation, of $25,000 Original Principal Amount and integral multiples
      of $1,000. As provided in the Pooling and Servicing Agreement and subject to
      certain limitations therein set forth, Class M-5 Certificates are exchangeable
      for new Class M-5 Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-11-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

              Title:

            

    

    
      
         

        Trustee
          Authentication

      

      
         

        
          	
                  DEUTSCHE
                    BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                    but solely in
                    its capacity as Trustee

                	 	 	 
	 	 	 	 
	 	 	 	 
	By: 
                  	 	 	 
	
                  
                    

                  

                  Name:
                    

                  Title:

                	 	 	
                

        

        

          
            
              
              

            

            
              A-11-6

              
                

              

            

             

          

        

         

      

    

    Exhibit
      A-12

     

    Form
      of Class M-6 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-6
      CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    EXCEPT
      AS
      PERMITTED IN THE POOLING AND SERVICING AGREEMENT, NO TRANSFER OF THIS
      CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN
      (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
      OF
      1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF
      ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE
      CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT TO SECTION 4975 OF THE
      CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN
      DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN
      WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      	
              No.:
                M-6

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AL7

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $0

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 0.75000%

            	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-6 Certificates on February 28, 2007
      which aggregate amount was $0. The Original Principal Amount hereof may be
      increased by Reallocations from the Class M-6N Certificates, but will not exceed
      $19,833,000. The owner hereof is entitled to principal payments on each
      Distribution Date, which will fully amortize such Original Principal Amount
      over
      the period from the date of initial delivery hereof to the final Distribution
      Date of the Class M-6 Certificates. Therefore, the actual outstanding principal
      amount of this Certificate, on any date subsequent to March 26, 2007 (the first
      Distribution Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    
      
        
        

      

      
        A-12-2

        
          

        

      

      
        
        

      

    

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-6
      Certificates (the "Class M-6 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-7 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-6 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-6 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-6 Certificates. The Percentage Interest of each
      Class M-6 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-6 Certificate by the aggregate Original Principal Balances of all Class
      M-6 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-12-3

        
          

        

      

      
        
        

      

    

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-12-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-6 Certificates are issuable only as registered Certificates in denominations,
      post Reallocation, of $25,000 Original Principal Amount and integral multiples
      of $1,000. As provided in the Pooling and Servicing Agreement and subject to
      certain limitations therein set forth, Class M-6 Certificates are exchangeable
      for new Class M-6 Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-12-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

              Title:

            

    

     

    
      
        Trustee
          Authentication

         

      

      
        	
                DEUTSCHE
                  BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                  solely in
                  its capacity as Trustee

              	 	 	 
	 	 	 	 
	 	 	 	 
	By: 
                	 	 	 
	
                
                  

                

                Name:
                  

                Title:

              	 	 	
              

      

      

        
          
            
            

          

          
            A-12-6

            
              

            

          

           

        

      

       

    

    Exhibit
      A-13

     

    Form
      of Class M-7 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE

    CLASS
      M-7
      CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    EXCEPT
      AS
      PERMITTED IN THE POOLING AND SERVICING AGREEMENT, NO TRANSFER OF THIS
      CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN
      (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
      OF
      1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF
      ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE
      CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT TO SECTION 4975 OF THE
      CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN
      DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN
      WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      	
              No.:
                M-7

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AM5

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $0

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 1.75000%

            	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-7 Certificates on February 28, 2007
      which aggregate amount was $0. The Original Principal Amount hereof may be
      increased by Reallocations from the Class M-7N Certificates, but will not exceed
      $21,721,000. The owner hereof is entitled to principal payments on each
      Distribution Date, which will fully amortize such Original Principal Amount
      over
      the period from the date of initial delivery hereof to the final Distribution
      Date of the Class M-7 Certificates. Therefore, the actual outstanding principal
      amount of this Certificate, on any date subsequent to March 26, 2007 (the first
      Distribution Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    
      
        
        

      

      
        A-13-2

        
          

        

      

      
        
        

      

    

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-7
      Certificates (the "Class M-7 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-8
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-7 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-7 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-7 Certificates. The Percentage Interest of each
      Class M-7 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-7 Certificate by the aggregate Original Principal Balances of all Class
      M-7 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-13-3

        
          

        

      

      
        
        

      

    

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-13-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-7 Certificates are issuable only as registered Certificates in denominations,
      post Reallocation, of $25,000 Original Principal Amount and integral multiples
      of $1,000. As provided in the Pooling and Servicing Agreement and subject to
      certain limitations therein set forth, Class M-7 Certificates are exchangeable
      for new Class M-7 Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-13-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

              Title:

            

    

    
       

      Trustee
        Authentication

    

    
       

      
        	
                DEUTSCHE
                  BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                  solely in
                  its capacity as Trustee

              	 	 	 
	 	 	 	 
	 	 	 	 
	By: 
                	 	 	 
	
                
                  

                

                Name:
                  

                Title:

              	 	 	
              

      

    

    
      
        
        

      

      
        A-13-6

        
          

        

      

       

    

    Exhibit
      A-14

     

    Form
      of Class M-8 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE

    CLASS
      M-8
      CERTIFICATE

     

    Comprised
      of a Certificate Representing

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    EXCEPT
      AS
      PERMITTED IN THE POOLING AND SERVICING AGREEMENT, NO TRANSFER OF THIS
      CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN
      (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
      OF
      1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF
      ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE
      CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT TO SECTION 4975 OF THE
      CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN
      DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN
      WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      	
              No.:
                M-8

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AN3

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $0

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 2.25000%

            	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-8 Certificates on February 28, 2007
      which aggregate amount was $0. The Original Principal Amount hereof may be
      increased by Reallocations from the Class M-8N Certificates, but will not exceed
      $14,166,000. The owner hereof is entitled to principal payments on each
      Distribution Date, which will fully amortize such Original Principal Amount
      over
      the period from the date of initial delivery hereof to the final Distribution
      Date of the Class M-8 Certificates. Therefore, the actual outstanding principal
      amount of this Certificate, on any date subsequent to March 26, 2007 (the first
      Distribution Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    
      
        
        

      

      
        A-14-2

        
          

        

      

      
        
        

      

    

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-8
      Certificates (the "Class M-8 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-8 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-8 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-8 Certificates. The Percentage Interest of each
      Class M-8 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-8 Certificate by the aggregate Original Principal Balances of all Class
      M-8 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-14-3

        
          

        

      

      
        
        

      

    

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-14-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-8 Certificates are issuable only as registered Certificates in denominations,
      post Reallocation, of $25,000 Original Principal Amount and integral multiples
      of $1,000. As provided in the Pooling and Servicing Agreement and subject to
      certain limitations therein set forth, Class M-8 Certificates are exchangeable
      for new Class M-8 Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-14-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

              Title:

            

    

     

    
      
        Trustee
          Authentication

      

      
         

        
          	
                  DEUTSCHE
                    BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                    but solely in
                    its capacity as Trustee

                	 	 	 
	 	 	 	 
	 	 	 	 
	By: 
                  	 	 	 
	
                  
                    

                  

                  Name:
                    

                  Title:

                	 	 	
                

        

      

    

    
      
        
        

      

      
        A-14-6

        
          

        

      

       

    

    Exhibit
      A-15

     

    Form
      of Class M-9 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE

    CLASS
      M-9
      CERTIFICATE

     

    Comprised
      of a Certificate Representing

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    EXCEPT
      AS
      PERMITTED IN THE POOLING AND SERVICING AGREEMENT, NO TRANSFER OF THIS
      CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN
      (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
      OF
      1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF
      ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE
      CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT TO SECTION 4975 OF THE
      CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN
      DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN
      WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      	
              No.:
                M-9

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971AP8

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $0

            	 	
              Registered
                Owner:

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 2.25000%

            	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-9 Certificates on February 28, 2007
      which aggregate amount was $0. The Original Principal Amount hereof may be
      increased by Reallocations from the Class M-9N Certificates, but will not exceed
      $18,888,000. The owner hereof is entitled to principal payments on each
      Distribution Date, which will fully amortize such Original Principal Amount
      over
      the period from the date of initial delivery hereof to the final Distribution
      Date of the Class M-9 Certificates. Therefore, the actual outstanding principal
      amount of this Certificate, on any date subsequent to March 26, 2007 (the first
      Distribution Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    
      
        
        

      

      
        A-15-2

        
          

        

      

      
        
        

      

    

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-9
      Certificates (the "Class M-9 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-10 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-9 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-9 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-9 Certificates. The Percentage Interest of each
      Class M-9 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-9 Certificate by the aggregate Original Principal Balances of all Class
      M-9 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-15-3

        
          

        

      

      
        
        

      

    

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-15-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-9 Certificates are issuable only as registered Certificates in denominations,
      post Reallocation, of $25,000 Original Principal Amount and integral multiples
      of $1,000. As provided in the Pooling and Servicing Agreement and subject to
      certain limitations therein set forth, Class M-9 Certificates are exchangeable
      for new Class M-9 Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-15-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

              Title:

            

    

     

    
      
        
          Trustee
            Authentication

        

        
           

          
            	
                    DEUTSCHE
                      BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                      but solely in
                      its capacity as Trustee

                  	 	 	 
	 	 	 	 
	 	 	 	 
	By: 
                    	 	 	 
	
                    
                      

                    

                    Name:
                      

                    Title:

                  	 	 	
                  

          

        

      

    

     

    
      
        
        

      

      
        A-15-6

        
          

        

      

       

    

    Exhibit
      A-16

     

    Form
      of Class M-10 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-10 CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    EXCEPT
      AS
      PERMITTED IN THE POOLING AND SERVICING AGREEMENT, NO TRANSFER OF THIS
      CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN
      (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
      OF
      1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF
      ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE
      CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT TO SECTION 4975 OF THE
      CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN
      DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN
      WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      	
              No.:
                M-10

            	 	
              Date:
                February 28, 2007

            	 	
              CUSIP:
                669971BH5

            
	 	 	 	 	 
	
              Original
                Principal Balance:

              $0

            	 	
              Registered
                Owner: 

              CEDE
                & CO.

            	 	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 	 	 
	
              Percentage
                Interest: 100%

            	 	
              Pass-Through
                Rate: 

              LIBOR
                + 2.25000%

            	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-10 Certificates on February 28, 2007
      which aggregate amount was $0. The Original Principal Amount hereof may be
      increased by Reallocations form the Class M-10N Certificates, but will not
      exceed $13,222,000. The owner hereof is entitled to principal payments on each
      Distribution Date, which will fully amortize such Original Principal Amount
      over
      the period from the date of initial delivery hereof to the final Distribution
      Date of the Class M-10 Certificates. Therefore, the actual outstanding principal
      amount of this Certificate, on any date subsequent to March 26, 2007 (the first
      Distribution Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    
      
        
        

      

      
        A-16-2

        
          

        

      

      
        
        

      

    

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-10
      Certificates (the "Class M-10 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-11
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-10 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-10 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-10 Certificates. The Percentage Interest of each
      Class M-10 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-10 Certificate by the aggregate Original Principal Balances of all
      Class
      M-10 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-16-3

        
          

        

      

      
        
        

      

    

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-16-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-10 Certificates are issuable only as registered Certificates in denominations,
      post Reallocation, of $25,000 Original Principal Amount and integral multiples
      of $1,000. As provided in the Pooling and Servicing Agreement and subject to
      certain limitations therein set forth, Class M-10 Certificates are exchangeable
      for new Class M-10 Certificates of authorized denominations evidencing the
      same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-16-5

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:
                

              Title:

            

    

    
       

      
        
          
            Trustee
              Authentication

          

          
             

            
              	
                      DEUTSCHE
                        BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                        but solely in
                        its capacity as Trustee

                    	 	 	 
	 	 	 	 
	 	 	 	 
	By: 
                      	 	 	 
	
                      
                        

                      

                      Name:
                        

                      Title:

                    	 	 	
                    

            

          

        

      

    

     

    
      
        
        

      

      
        A-16-6

        
          

        

      

       

    

     

    Exhibit
      A-17

     

    Form
      of Class M-11 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE

    CLASS
      M-11 CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    EXCEPT
      AS
      PERMITTED IN THE POOLING AND SERVICING AGREEMENT, NO TRANSFER OF THIS
      CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN
      (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT
      OF
      1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF
      ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE
      CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT TO SECTION 4975 OF THE
      CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN
      DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN
      WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-11

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BL6

            
	 	 	 
	
              Original
                Principal Balance:

              $0

            	
              Registered
                Owner: 

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Pass-Through
                Rate: 

              LIBOR
                + 2.25000%

            	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-11 Certificates on February 28, 2007
      which aggregate amount was $0. The Original Principal Amount hereof may be
      increased by Reallocations form the Class M-11N Certificates, but will not
      exceed $18,888,000. The owner hereof is entitled to principal payments on each
      Distribution Date, which will fully amortize such Original Principal Amount
      over
      the period from the date of initial delivery hereof to the final Distribution
      Date of the Class M-11 Certificates. Therefore, the actual outstanding principal
      amount of this Certificate, on any date subsequent to March 26, 2007 (the first
      Distribution Date) will be less than the Original Principal Amount set forth
      above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    
      
        
        

      

      
        A-17-2

        
          

        

      

      
        
        

      

    

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-11
      Certificates (the "Class M-11 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-6 DSI Certificates, Class M-7 DSI Certificates, Class
      M-8
      DSI Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates,
      Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-11 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-11 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class M-11 Certificates. The Percentage Interest of each
      Class M-11 Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-11 Certificate by the aggregate Original Principal Balances of all
      Class
      M-11 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-17-3

        
          

        

      

      
        
        

      

    

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-17-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-11 Certificates are issuable only as registered Certificates in denominations,
      post Reallocation, of $25,000 Original Principal Amount and integral multiples
      of $1,000. As provided in the Pooling and Servicing Agreement and subject to
      certain limitations therein set forth, Class M-11 Certificates are exchangeable
      for new Class M-11 Certificates of authorized denominations evidencing the
      same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-17-5

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:
              
              Title:

            
	 	
            
	
              Trustee
                Authentication

            	 
	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 
	
               

               

            	 
	
              By:
                

            	 
	
              
                

              

              Name:
                

              Title:

            	 

    

     

    
      
        
        

      

      
        A-17-6

        
          

        

      

       

    

    Exhibit
      A-18

     

    Form
      of Class I-1 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      I-1
      CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans 

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.)

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW OF ANY STATE. THIS
      CERTIFICATE IS NOT TRANSFERABLE. 

     

    
      	
              No.:
                I-1

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BP7

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Registered
                Owner:

              NovaStar
                Mortgage Supplemental Interest Trust, Series 2007-1

            	
              Final
                Scheduled Distribution Date: December 25,
                2008

            

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of the Mortgage Loans; (iv) all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    THIS
      CERTIFICATE IS AN INTEREST ONLY CERTIFICATE. THE HOLDER OF THIS CERTIFICATE
      SHALL NOT BE ENTITLED TO ANY DISTRIBUTIONS OF PRINCIPAL WITH RESPECT TO THE
      MORTGAGE LOANS.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class I-1
      Certificates (the "Class I-1 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-9N Certificates, Class
      M-10N
      Certificates, Class M-11N Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    Terms
      capitalized herein and not otherwise defined herein shall have the respective
      meanings set forth in the Pooling and Servicing Agreement.

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class I-1 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to receive the distribution described in Article
      IV of the Pooling and Servicing Agreement relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    
      
        
        

      

      
        A-18-2

        
          

        

      

      
        
        

      

    

     

    Each
      owner of record of a Class I-1 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class I-1 Certificates. 

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-18-3

        
          

        

      

      
        
        

      

    

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class I-1 Certificates are exchangeable for
      new
      Class I-1 Certificates of authorized denominations evidencing the same aggregate
      principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-18-4

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              
Name:
              
	 	
              Title:

            
	 	 
	
              Trustee
                Authentication

            	 
	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 
	
               

               

            	 
	
              By:
                

            	 
	
              
                

              

              Name:
                

              Title:

            	 

    

     

    
      
        
        

      

      
        A-18-5

        
          

        

      

       

    

    Exhibit
      A-19

     

    Form
      of Class I-2 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      I-2
      CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans 

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.)

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW OF ANY STATE. THIS
      CERTIFICATE IS NOT TRANSFERABLE. 

     

    
      	
              No.:
                I-2

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BQ5

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Registered
                Owner:

              NovaStar
                Mortgage Supplemental Interest Trust, Series 2007-1

            	
              Final
                Scheduled Distribution Date: December 25,
                2009

            

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of the Mortgage Loans; (iv) all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    THIS
      CERTIFICATE IS AN INTEREST ONLY CERTIFICATE. THE HOLDER OF THIS CERTIFICATE
      SHALL NOT BE ENTITLED TO ANY DISTRIBUTIONS OF PRINCIPAL WITH RESPECT TO THE
      MORTGAGE LOANS.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class I-2
      Certificates (the "Class I-2 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-9N Certificates, Class
      M-10N
      Certificates, Class M-11N Certificates, Class I-1 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    Terms
      capitalized herein and not otherwise defined herein shall have the respective
      meanings set forth in the Pooling and Servicing Agreement.

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class I-2 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to receive the distribution described in Article
      IV of the Pooling and Servicing Agreement relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    
      
        
        

      

      
        A-19-2

        
          

        

      

      
        
        

      

    

     

    Each
      owner of record of a Class I-2 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class I-2 Certificates. 

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-19-3

        
          

        

      

      
        
        

      

    

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class I-2 Certificates are exchangeable for
      new
      Class I-2 Certificates of authorized denominations evidencing the same aggregate
      principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-19-4

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

               

               

            
	 	
              By:
                  

              
                

              

              Name:
                

              Title:

            
	 	 
	 	 
	
              Trustee
                Authentication

            	 
	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 
	
               

               

            	 
	
              By:

              
                

                Name:
                  

                Title:

              

            	 

    

    

    
      
        
        

      

      
        A-19-5

        
          

        

      

       

    

    Exhibit
      A-20

     

    Form
      of Class I-3 Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      I-3
      CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans 

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.)

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW OF ANY STATE. THIS
      CERTIFICATE IS NOT TRANSFERABLE. 

     

    
      	
              No.:
                I-3

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BR3

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Registered
                Owner:

              NovaStar
                Mortgage Supplemental Interest Trust, Series 2007-1

            	
              Final
                Scheduled Distribution Date: January 25,
                2010

            

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of the Mortgage Loans; (iv) all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT CONDUIT"
      ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    THIS
      CERTIFICATE IS AN INTEREST ONLY CERTIFICATE. THE HOLDER OF THIS CERTIFICATE
      SHALL NOT BE ENTITLED TO ANY DISTRIBUTIONS OF PRINCIPAL WITH RESPECT TO THE
      MORTGAGE LOANS.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class I-3
      Certificates (the "Class I-3 Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-9N Certificates, Class
      M-10N
      Certificates, Class M-11N Certificates, Class I-1 Certificates, Class I-2
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    Terms
      capitalized herein and not otherwise defined herein shall have the respective
      meanings set forth in the Pooling and Servicing Agreement.

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class I-3 Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to receive the distribution described in Article
      IV of the Pooling and Servicing Agreement relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    
      
        
        

      

      
        A-20-2

        
          

        

      

      
        
        

      

    

     

    Each
      owner of record of a Class I-3 Certificate will be entitled to receive such
      owner's Percentage Interest in the amounts distributed on such Distribution
      Date
      to the owners of the Class I-3 Certificates. 

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-20-3

        
          

        

      

      
        
        

      

    

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class I-3 Certificates are exchangeable for
      new
      Class I-3 Certificates of authorized denominations evidencing the same aggregate
      principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-20-4

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 	
               

               

            
	 	
              By: 

              
                

              

              Name:

              Title:

            
	 	 
	
              Trustee
                Authentication

            	 
	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

               

               

            	 
	
              By:

              
                

              

              Name:
                

              Title:

            	 

    

     

    
      
        
        

      

      
        A-20-5

        
          

        

      

       

    

    Exhibit
      A-21

     

    Form
      of Class CA Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      CA
      CERTIFICATES

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans 

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.)

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT
      TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      	
              No.:
                CA

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BM4

            
	 	 	 
	
              Notional
                Amount:

              $1,888,825,898

            	
              Registered
                Owner:

              Newport
                Funding Corp.

            	
              Final
                Scheduled Distribution 
Date: March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of the Mortgage Loans; (iv) all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Each
      owner of record of a Class CA Certificate will be entitled to certain
      distributions, as described under Article IV of the Pooling and Servicing
      Agreement.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      ONE
      OR MORE CLASSES OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT
      CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
      AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
      COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE
      CODE.

     

    DISTRIBUTIONS
      ON THIS CERTIFICATE WILL BE MADE TO THE OWNER HEREOF FOLLOWING THE PRIOR FUNDING
      OF AMOUNTS OWED TO CERTAIN HEDGE COUNTERPARTIES, AND FOLLOWING THE FUNDING
      OF
      SUPPLEMENTAL INTEREST PAYMENTS TO CERTAIN OTHER CLASSES OF
      CERTIFICATES.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class CA
      Certificates (the "Class CA Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-9N Certificates, Class
      M-10N
      Certificates, Class M-11N Certificates, Class I-1 Certificates, Class I-2
      Certificates, Class I-3 Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-21-2

        
          

        

      

      
        
        

      

    

     

    Terms
      capitalized herein and not otherwise defined herein shall have the respective
      meanings set forth in the Pooling and Servicing Agreement.

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class CA Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to receive payments in respect of interest,
      principal, if any, and the Prepayment Charges relating to such Distribution
      Date, all as described in Article IV of the Pooling and Servicing Agreement.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-21-3

        
          

        

      

      
        
        

      

    

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    
      
        
        

      

      
        A-21-4

        
          

        

      

      
        
        

      

    

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class CA Certificates are exchangeable for new
      Class CA Certificates of authorized denominations evidencing the same aggregate
      principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-21-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not
                in its individual capacity, but solely in its capacity as
                Trustee

            
	 	
               

               

            
	 	
              By:

              
                

              

              Name:

              Title:

            
	 	 
	
              Trustee
                Authentication

            	 
	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, 
not
                in its individual capacity, but solely in its capacity as
                Trustee

            	 
	
               

               

            	 
	
              By:

              
                

              

              Name:
                

              Title:

            	 

    

     

    
      
        
        

      

      
        A-21-6

        
          

        

      

       

    

    Exhibit
      A-22

     

    Form
      of Class CB Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      CB
      CERTIFICATES

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans 

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.)

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT
      TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      	
              No.:
                CB

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BN2

            
	 	 	 
	
              Notional
                Amount:

              $1,888,825,898

            	
              Registered
                Owner: 

              Newport
                Funding Corp.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of the Mortgage Loans; (iv) all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    Each
      owner of record of a Class CB Certificate will be entitled to certain
      distributions, as described under Article IV of the Pooling and Servicing
      Agreement.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      ONE
      OR MORE CLASSES OF "REGULAR INTERESTS" IN A "REAL ESTATE MORTGAGE INVESTMENT
      CONDUIT" ("REMIC") AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
      AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING
      COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE
      CODE.

     

    DISTRIBUTIONS
      ON THIS CERTIFICATE WILL BE MADE TO THE OWNER HEREOF FOLLOWING THE PRIOR FUNDING
      OF AMOUNTS OWED TO CERTAIN HEDGE COUNTERPARTIES, AND FOLLOWING THE FUNDING
      OF
      SUPPLEMENTAL INTEREST PAYMENTS TO CERTAIN OTHER CLASSES OF
      CERTIFICATES.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    
      
        
        

      

      
        A-22-2

        
          

        

      

      
        
        

      

    

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class CB
      Certificates (the "Class CB Certificates") and issued under and subject to
      the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-9N Certificates, Class
      M-10N
      Certificates, Class M-11N Certificates, Class I-1 Certificates, Class I-2
      Certificates, Class I-3 Certificates, Class CA Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    Terms
      capitalized herein and not otherwise defined herein shall have the respective
      meanings set forth in the Pooling and Servicing Agreement.

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class CB Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to receive payments in respect of interest,
      principal, if any, and the Prepayment Charges relating to such Distribution
      Date, all as described in Article IV of the Pooling and Servicing Agreement.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    
      
        
        

      

      
        A-22-3

        
          

        

      

      
        
        

      

    

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    
      
        
        

      

      
        A-22-4

        
          

        

      

      
        
        

      

    

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class CB Certificates are exchangeable for new
      Class CB Certificates of authorized denominations evidencing the same aggregate
      principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-22-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not
                in its individual capacity, but solely in its capacity as
                Trustee

            
	 	
               

               

            
	 	
              By:

              
                

              

              Name:
                

              Title:

            
	 	 
	
              Trustee
                Authentication

            	 
	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, 

              not
                in its individual capacity, but solely in its capacity as
                Trustee

            	 
	
               

               

            	 
	
              By:

              
                

              

              Name:
                

              Title:

            	 

    

     

    
      
        
        

      

      
        A-22-6

        
          

        

      

       

    

    Exhibit
      A-23

    

    Form
      of Class R Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      R
      CERTIFICATES

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans 

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans held
      in
      the Trust Fund.)

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAW OF ANY STATE. ANY
      RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH
      REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES
      NOT
      REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS
      OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT
      TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      	
              No.:
                R

            	
              Date:
                February 28, 2007

            	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Registered
                Owner: 

              Wachovia
                Bank N.A.

            	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of the Mortgage Loans; (iv) all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    Each
      owner of record of a Class R Certificate will be entitled to certain
      distributions as described in Exhibit K of the Pooling and Servicing
      Agreement.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS "RESIDUAL
      INTERESTS" IN SIX "REAL ESTATE MORTGAGE INVESTMENT CONDUITS" ("REMICs") AS
      THOSE
      TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL
      REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), ASSUMING COMPLIANCE WITH THE
      REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    TRANSFER
      OF THIS CLASS R CERTIFICATE IS RESTRICTED AS SET FORTH IN THE POOLING AND
      SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS R CERTIFICATE MAY BE MADE TO
      A
      "DISQUALIFIED ORGANIZATION" AS DEFINED IN SECTION 860E(5) OF THE INTERNAL
      REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). SUCH TERM INCLUDES THE UNITED
      STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT,
      ANY
      INTERNATIONAL ORGANIZATION, ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE
      FOREGOING (OTHER THAN CERTAIN TAXABLE INSTRUMENTALITIES), ANY COOPERATIVE
      ORGANIZATION FURNISHING ELECTRIC ENERGY OR PROVIDING THEREOF SERVICE TO PERSONS
      IN RURAL AREAS, OR ANY ORGANIZATION (OTHER THAN A FARMERS' COOPERATIVE) THAT
      IS
      EXEMPT FROM FEDERAL INCOME TAX UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX
      ON
      UNRELATED BUSINESS INCOME. NO TRANSFER OF THIS CLASS R CERTIFICATE WILL BE
      REGISTERED BY THE TRUSTEE UNLESS THE PROPOSED TRANSFEREE HAS DELIVERED AN
      AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE PROPOSED TRANSFEREE IS NOT
      A
      DISQUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE CLASS R CERTIFICATE FOR
      THE
      ACCOUNT OF A DISQUALIFIED ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT REQUIRED
      OF EACH PROPOSED TRANSFEREE IS ON FILE AND AVAILABLE FROM THE
      TRUSTEE.

     

    
      
        
        

      

      
        A-23-2

        
          

        

      

      
        
        

      

    

     

    A
      TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE TO A
      SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT ACTING
      FOR THE TRANSFEREE. A PASS-THRU ENTITY THAT HOLDS THIS CLASS R CERTIFICATE
      AND
      THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY TAXABLE YEAR
      GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE PRODUCT
      OF
      (A) THE AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF THIS
      CERTIFICATE OWNED THROUGH SUCH PASS-THRU ENTITY BY SUCH DISQUALIFIED
      ORGANIZATION AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS.
      FOR
      PURPOSES OF THE PRECEDING SENTENCE, THE TERM "PASS-THRU" ENTITY INCLUDES
      REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST
      FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER
      T, CHAPTER 1 OF THE CODE APPLIES AND, EXCEPT AS PROVIDED IN REGULATIONS,
      NOMINEES.

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class R
      Certificates (the "Class R Certificates") and issued under and subject to the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-9N Certificates, Class
      M-10N
      Certificates, Class M-11N Certificates, Class I-1 Certificates, Class I-2
      Certificates, Class I-3 Certificates, Class CA Certificates, and Class CB
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-23-3

        
          

        

      

      
        
        

      

    

     

    Terms
      capitalized herein and not otherwise defined herein shall have the respective
      meanings set forth in the Pooling and Servicing Agreement.

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class R Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to receive the distribution described in Article
      IV of the Pooling and Servicing Agreement relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-23-4

        
          

        

      

      
        
        

      

    

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class R Certificates are exchangeable for new
      Class R Certificates of authorized denominations evidencing the same aggregate
      principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-23-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

               

               

            
	 	
              By:

              
                

              

              Name:
                

              Title:

            
	 	 
	
              Trustee
                Authentication

            	 
	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 
	
               

               

            	 
	
              By:

              
                

              

              Name:
                

              Title:

            	 

    

     

    
      
        
        

      

      
        A-23-6

        
          

        

      

       

    

    Exhibit
      A-24

     

    Form
      of Class M-6 DSI Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-6
      DSI CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans The Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT
      TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-6 DSI

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971AY9

            
	 	 	 
	
              Notional
                Amount:

              $19,833,000

            	
              Registered
                Owner: 

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 
Date: March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    Each
      owner of record of a Class M-6 DSI Certificate will be entitled to certain
      distributions, as described under Article IV of the Pooling and Servicing
      Agreement.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-6
      DSI Certificates (the "Class M-6 DSI Certificates") and issued under and subject
      to the terms, provisions and conditions of the Pooling and Servicing Agreement,
      to which the owner of this Certificate, by virtue of acceptance hereof assents,
      and is bound. Also issued under the Pooling and Servicing Agreement are the
      Class A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates,
      Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates,
      Class
      M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-7 DSI Certificates, Class M-8
      DSI
      Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    
      
        
        

      

      
        A-24-2

        
          

        

      

      
        
        

      

    

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-6 DSI Certificates as of the close
      of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    
      
        
        

      

      
        A-24-3

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-24-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-6 DSI Certificates are exchangeable
      for
      new Class M-6 DSI Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-24-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 	
               

               

            
	 	
              By:

              
                

              

              Name:
                

              Title:

            
	 	 
	
              Trustee
                Authentication

            	 
	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 
	
               

               

            	 
	
              By:

              
                

              

              Name:

              Title:

            	 

    

    
      
        
        

      

      
        A-24-6

        
          

        

      

       

    

    Exhibit
      A-25

     

    Form
      of Class M-7 DSI Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-7
      DSI CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans The Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT
      TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-7 DSI

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BA0

            
	 	 	 
	
              Notional
                Amount:

              $21,721,000

            	
              Registered
                Owner: 

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    Each
      owner of record of a Class M-7 DSI Certificate will be entitled to certain
      distributions, as described under Article IV of the Pooling and Servicing
      Agreement.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-7
      DSI Certificates (the "Class M-7 DSI Certificates") and issued under and subject
      to the terms, provisions and conditions of the Pooling and Servicing Agreement,
      to which the owner of this Certificate, by virtue of acceptance hereof assents,
      and is bound. Also issued under the Pooling and Servicing Agreement are the
      Class A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates,
      Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates,
      Class
      M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-8
      DSI
      Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    
      
        
        

      

      
        A-25-2

        
          

        

      

      
        
        

      

    

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-7 DSI Certificates as of the close
      of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    
      
        
        

      

      
        A-25-3

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-25-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-7 DSI Certificates are exchangeable
      for
      new Class M-7 DSI Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-25-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 	
               

               

            
	 	
              By:

              
                

              

              Name:
                

              Title:

            
	 	 
	
              Trustee
                Authentication

            	 
	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 
	
               

               

            	 
	
              By:

              
                

              

              Name:
                

              Title:

            	 

    

     

    
      
        
        

      

      
        A-25-6

        
          

        

      

       

    

    Exhibit
      A-26

     

    Form
      of Class M-8 DSI Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-8
      DSI CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans The Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation ("DTC"), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE "1933 ACT"), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA")) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE")) THAT IS SUBJECT
      TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-8 DSI

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BC6

            
	 	 	 
	
              Notional
                Amount:

              $14,166,000

            	
              Registered
                Owner:

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the "Pooling and Servicing Agreement") by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the "Depositor"), Deutsche Bank National
      Trust Company, as trustee (the "Trustee"), U.S. Bank National Association,
      as
      the custodian (the "Custodian"), and NovaStar Mortgage, Inc. as servicer (the
      "Servicer") and as sponsor (the "Sponsor"), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor's
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    Each
      owner of record of a Class M-8 DSI Certificate will be entitled to certain
      distributions, as described under Article IV of the Pooling and Servicing
      Agreement.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-8
      DSI Certificates (the "Class M-8 DSI Certificates") and issued under and subject
      to the terms, provisions and conditions of the Pooling and Servicing Agreement,
      to which the owner of this Certificate, by virtue of acceptance hereof assents,
      and is bound. Also issued under the Pooling and Servicing Agreement are the
      Class A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates,
      Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates,
      Class
      M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      "Certificates". Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    
      
        
        

      

      
        A-26-2

        
          

        

      

      
        
        

      

    

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a "Distribution Date") commencing
      March 26, 2007, the owners of the Class M-8 DSI Certificates as of the close
      of
      business on the business day immediately preceding such Distribution Date (the
      "Record Date") will be entitled to the distribution described in Article IV
      of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    
      
        
        

      

      
        A-26-3

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-26-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-8 DSI Certificates are exchangeable
      for
      new Class M-8 DSI Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

    
      
        
        

      

      
        A-26-5

        
          

        

      

       

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

     

    
      	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 	
               

               

            
	 	
              By:

              
                

              

              Name:
                

              Title:

            
	 	 
	
              Trustee
                Authentication

            	 
	 	 
	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            	 
	
               

               

            	 
	
              By:

              
                

              

              Name:
                

              Title:

            	 

    

    
      
        
        

      

      
        A-26-6

        
          

        

      

       

    

    Exhibit
      A-27

     

    Form
      of Class M-9 DSI Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-9
      DSI CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans The Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation (“DTC”), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-9 DSI

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BE2

            
	 	 	 
	
              Notional
                Amount:

              $18,888,000

            	
              Registered
                Owner:

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the “Depositor”), Deutsche Bank National
      Trust Company, as trustee (the “Trustee”), U.S. Bank National Association, as
      the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the
“Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    Each
      owner of record of a Class M-9 DSI Certificate will be entitled to certain
      distributions, as described under Article IV of the Pooling and Servicing
      Agreement.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-9
      DSI Certificates (the “Class M-9 DSI Certificates”) and issued under and subject
      to the terms, provisions and conditions of the Pooling and Servicing Agreement,
      to which the owner of this Certificate, by virtue of acceptance hereof assents,
      and is bound. Also issued under the Pooling and Servicing Agreement are the
      Class A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates,
      Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates,
      Class
      M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-10 DSI Certificates, Class
      M-11 DSI Certificates, Class M-6N Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      “Certificates”. Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    
      
        
        

      

      
        A-27-2

        
          

        

      

      
        
        

      

    

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a “Distribution Date”) commencing
      March 26, 2007, the owners of the Class M-9 DSI Certificates as of the close
      of
      business on the business day immediately preceding such Distribution Date (the
      “Record Date”) will be entitled to the distribution described in Article IV of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    
      
        
        

      

      
        A-27-3

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-27-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-9 DSI Certificates are exchangeable
      for
      new Class M-9 DSI Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-27-5

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                solely in
                its capacity as Trustee

            
	 
 	 
 	 
 
	 	By:  	
            
	 	
              
Name:
	 	Title: 

    

     

    
      	
              Trustee
                Authentication

               

              
                DEUTSCHE
                  BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                  solely in
                  its capacity as Trustee 

              

            	 	 	 
	
               

               

            	 	 	 
	By: 	 	 	 	 
	 	
              
Name:	 	 	
            
	 	
              Title:

            	 	 	
            

    

     

    
      
        
        

      

      
        A-27-6

        
          

        

      

      
        
        

      

    

    Exhibit
      A-28

     

    Form
      of Class M-10 DSI Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE

    CLASS
      M-10 DSI CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans The Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation (“DTC”), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-10 DSI

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BG7

            
	 	 	 
	
              Notional
                Amount:

              $13,222,000

            	
              Registered
                Owner:

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the “Depositor”), Deutsche Bank National
      Trust Company, as trustee (the “Trustee”), U.S. Bank National Association, as
      the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the
“Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    Each
      owner of record of a Class M-10 DSI Certificate will be entitled to certain
      distributions, as described under Article IV of the Pooling and Servicing
      Agreement.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-10
      DSI Certificates (the “Class M-10 DSI Certificates”) and issued under and
      subject to the terms, provisions and conditions of the Pooling and Servicing
      Agreement, to which the owner of this Certificate, by virtue of acceptance
      hereof assents, and is bound. Also issued under the Pooling and Servicing
      Agreement are the Class A-1A Certificates, Class A-2A1 Certificates, Class
      A-2A2
      Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D
      Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3
      Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6
      Certificates, Class M-7 Certificates, Class M-8 Certificates, Class M-9
      Certificates, Class M-10 Certificates, Class M-11 Certificates, Class M-6 DSI
      Certificates, Class M-7 DSI Certificates, Class M-8 DSI Certificates, Class
      M-9
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-9N Certificates, Class
      M-10N
      Certificates, Class M-11N Certificates, Class I-1 Certificates, Class I-2
      Certificates, Class I-3 Certificates, Class CA Certificates, Class CB
      Certificates, and Class R Certificates, and all such Certificates are
      collectively referred to as the “Certificates”. Terms capitalized herein and not
      otherwise defined herein shall have the respective meanings set forth in the
      Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-28-2

        
          

        

      

      
        
        

      

    

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a “Distribution Date”) commencing
      March 26, 2007, the owners of the Class M-10 DSI Certificates as of the close
      of
      business on the business day immediately preceding such Distribution Date (the
      “Record Date”) will be entitled to the distribution described in Article IV of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    
      
        
        

      

      
        A-28-3

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-28-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-10 DSI Certificates are exchangeable
      for
      new Class M-10 DSI Certificates of authorized denominations evidencing the
      same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-28-5

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      
        	 	 	 
	 	
                DEUTSCHE
                  BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                  solely in
                  its capacity as Trustee

              
	 
 	 
 	 
 
	 	By:  	
              
	 	
                
Name:
	 	Title: 

      

       

      
        	
                Trustee
                  Authentication

                 

                
                  DEUTSCHE
                    BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                    but solely in
                    its capacity as Trustee

                

              	 	 	 
	
                  

                 

              	 	 	 
	By: 	 	 	 	 
	 	
                
Name:	 	 	
              
	 	
                Title:

              	 	 	
              

      

       

      
        
          
          

        

        
          A-28-6

          
            

          

        

        
          
          

        

      

    

     

    Exhibit
      A-29

     

    Form
      of Class M-11 DSI Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-11 DSI CERTIFICATE

     

    Comprised
      of a Certificate Representing

    Certain
      Interests Relating to a Pool of 

    Mortgage
      Loans The Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation (“DTC”), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-11 DSI

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BK8

            
	 	 	 
	
              Notional
                Amount:

              $18,888,000

            	
              Registered
                Owner:

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	 	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the “Depositor”), Deutsche Bank National
      Trust Company, as trustee (the “Trustee”), U.S. Bank National Association, as
      the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the
“Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    Each
      owner of record of a Class M-11 DSI Certificate will be entitled to certain
      distributions, as described under Article IV of the Pooling and Servicing
      Agreement.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-11
      DSI Certificates (the “Class M-11 DSI Certificates”) and issued under and
      subject to the terms, provisions and conditions of the Pooling and Servicing
      Agreement, to which the owner of this Certificate, by virtue of acceptance
      hereof assents, and is bound. Also issued under the Pooling and Servicing
      Agreement are the Class A-1A Certificates, Class A-2A1 Certificates, Class
      A-2A2
      Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D
      Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3
      Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6
      Certificates, Class M-7 Certificates, Class M-8 Certificates, Class M-9
      Certificates, Class M-10 Certificates, Class M-11 Certificates, Class M-6 DSI
      Certificates, Class M-7 DSI Certificates, Class M-8 DSI Certificates, Class
      M-9
      DSI Certificates, Class M-10 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-9N Certificates, Class
      M-10N
      Certificates, Class M-11N Certificates, Class I-1 Certificates, Class I-2
      Certificates, Class I-3 Certificates, Class CA Certificates, Class CB
      Certificates, and Class R Certificates, and all such Certificates are
      collectively referred to as the “Certificates”. Terms capitalized herein and not
      otherwise defined herein shall have the respective meanings set forth in the
      Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-29-2

        
          

        

      

      
        
        

      

    

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a “Distribution Date”) commencing
      March 26, 2007, the owners of the Class M-11 DSI Certificates as of the close
      of
      business on the business day immediately preceding such Distribution Date (the
      “Record Date”) will be entitled to the distribution described in Article IV of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    
      
        
        

      

      
        A-29-3

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    
      
        
        

      

      
        A-29-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-11 DSI Certificates are exchangeable
      for
      new Class M-11 DSI Certificates of authorized denominations evidencing the
      same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-29-5

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      
        	 	 	 
	 	
                DEUTSCHE
                  BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                  solely in
                  its capacity as Trustee

              
	 
 	 
 	 
 
	 	By:  	
              
	 	
                
Name:
	 	Title: 

      

       

      
        	
                Trustee
                  Authentication

                 

                
                  DEUTSCHE
                    BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                    but solely in
                    its capacity as Trustee

                

              	 	 	 
	
                  

                 

              	 	 	 
	By: 	 	 	 	 
	 	
                
Name:	 	 	
              
	 	
                Title:

              	 	 	
              

      

       

      
        
          
          

        

        
          A-29-6

          
            

          

        

        
          
          

        

      

    

     

    Exhibit
      A-30

     

    Form
      of Class M-6N Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE

    CLASS
      M-6N CERTIFICATE

     

    Comprised
      of a Certificate Representing

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation (“DTC”), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-6N

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971AX1

            
	 	 	 
	
              Original
                Principal Balance:

              $19,833,000

            	
              Registered
                Owner: 

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Pass-Through
                Rate: 

              LIBOR
                + 0.75000%

            	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the “Depositor”), Deutsche Bank National
      Trust Company, as trustee (the “Trustee”), U.S. Bank National Association, as
      the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the
“Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-6 Certificates on February 28, 2007
      which aggregate amount was $19,833,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class M-6 Certificates. Therefore,
      the actual outstanding principal amount of this Certificate, on any date
      subsequent to March 26, 2007 (the first Distribution Date) will be less than
      the
      Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT”
(“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    
      
        
        

      

      
        A-30-2

        
          

        

      

      
        
        

      

    

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-6N
      Certificates (the “Class M-6N Certificates”) and issued under and subject to the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-7N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      “Certificates”. Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a “Distribution Date”) commencing
      March 26, 2007, the owners of the Class M-6N Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      “Record Date”) will be entitled to the distribution described in Article IV of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register. 

     

    Each
      owner of record of a Class M-6 Certificate will be entitled to receive such
      owner’s Percentage Interest in the amounts distributed on such Distribution Date
      to the owners of the Class M-6N Certificates. The Percentage Interest of each
      Class M-6N Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-6N Certificate by $19,833,000, less any portion thereof previously
      Reallocated to the Class M-6 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-30-3

        
          

        

      

      
        
        

      

    

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-30-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-6N Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-6N Certificates are exchangeable for
      new
      Class M-6N Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-30-5

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      
        	 	 	 
	 	
                DEUTSCHE
                  BANK NATIONAL TRUST COMPANY, not in its individual capacity, but
                  solely in
                  its capacity as Trustee

              
	 
 	 
 	 
 
	 	By:  	
              
	 	
                
Name:
	 	Title: 

      

       

      
        	
                Trustee
                  Authentication

                 

                
                  DEUTSCHE
                    BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                    but solely in
                    its capacity as Trustee

                

              	 	 	 
	
                  

                 

              	 	 	 
	By: 	 	 	 	 
	 	
                
Name:	 	 	
              
	 	
                Title:

              	 	 	
              

      

    

     

    
      
        
        

      

      
        A-30-6

        
          

        

      

      
        
        

      

       

    

    Exhibit
      A-31

     

    Form
      of Class M-7N Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-7N CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation (“DTC”), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-7N

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971AZ6

            
	 	 	 
	
              Original
                Principal Balance:

              $21,721,000

            	
              Registered
                Owner: 

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Pass-Through
                Rate: 

              LIBOR
                + 1.75000%

            	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the “Depositor”), Deutsche Bank National
      Trust Company, as trustee (the “Trustee”), U.S. Bank National Association, as
      the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the
“Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-7 Certificates on February 28, 2007
      which aggregate amount was $27,721,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class M-7 Certificates. Therefore,
      the actual outstanding principal amount of this Certificate, on any date
      subsequent to March 26, 2007 (the first Distribution Date) will be less than
      the
      Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT”
(“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    
      
        
        

      

      
        A-31-2

        
          

        

      

      
        
        

      

    

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-7N
      Certificates (the “Class M-7N Certificates”) and issued under and subject to the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-8N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      “Certificates”. Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a “Distribution Date”) commencing
      March 26, 2007, the owners of the Class M-7N Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      “Record Date”) will be entitled to the distribution described in Article IV of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-7 Certificate will be entitled to receive such
      owner’s Percentage Interest in the amounts distributed on such Distribution Date
      to the owners of the Class M-7 N Certificates. The Percentage Interest of each
      Class M-7N Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-7N Certificate by $27,721,000, less any portion thereof previously
      Reallocated to the Class M-7 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-31-3

        
          

        

      

      
        
        

      

    

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-31-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-7N Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-7N Certificates are exchangeable for
      new
      Class M-7N Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-31-5

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      
        
          	 	 	 
	 	
                  DEUTSCHE
                    BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                    but solely in
                    its capacity as Trustee

                
	 
 	 
 	 
 
	 	By:  	
                
	 	
                  
Name:
	 	Title: 

        

         

        
          	
                  Trustee
                    Authentication

                   

                  
                    DEUTSCHE
                      BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                      but solely in
                      its capacity as Trustee

                  

                	 	 	 
	
                    

                   

                	 	 	 
	By: 	 	 	 	 
	 	
                  
Name:	 	 	
                
	 	
                  Title:

                	 	 	
                

        

      

    

     

    
      
        
        

      

      
        A-31-6

        
          

        

      

      
        
        

      

    

     

    Exhibit
      A-32

     

    Form
      of Class M-8N Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-8N CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation (“DTC”), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-8N

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BB8

            
	 	 	 
	
              Original
                Principal Balance:

              $14,166,000

            	
              Registered
                Owner: 

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Pass-Through
                Rate: 

              LIBOR
                + 2.25000%

            	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the “Depositor”), Deutsche Bank National
      Trust Company, as trustee (the “Trustee”), U.S. Bank National Association, as
      the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the
“Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-8N Certificates on February 28, 2007
      which aggregate amount was $14,166,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class M-8N Certificates. Therefore,
      the actual outstanding principal amount of this Certificate, on any date
      subsequent to March 26, 2007 (the first Distribution Date) will be less than
      the
      Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT”
(“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    
      
        
        

      

      
        A-32-2

        
          

        

      

      
        
        

      

    

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-8N
      Certificates (the “Class M-8N Certificates”) and issued under and subject to the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-9N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      “Certificates”. Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a “Distribution Date”) commencing
      March 26, 2007, the owners of the Class M-8N Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      “Record Date”) will be entitled to the distribution described in Article IV of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-8N Certificate will be entitled to receive such
      owner’s Percentage Interest in the amounts distributed on such Distribution Date
      to the owners of the Class M-8N Certificates. The Percentage Interest of each
      Class M-8N Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-8N Certificate by $14,166,000, less any portion thereof previously
      Reallocated to the Class M-8 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-32-3

        
          

        

      

      
        
        

      

    

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-32-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-8N Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-8N Certificates are exchangeable for
      new
      Class M-8N Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-32-5

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      
        
          
            	 	 	 
	 	
                    DEUTSCHE
                      BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                      but solely in
                      its capacity as Trustee

                  
	 
 	 
 	 
 
	 	By:  	
                  
	 	
                    
Name:
	 	Title: 

          

           

          
            	
                    Trustee
                      Authentication

                     

                    
                      DEUTSCHE
                        BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                        but solely in
                        its capacity as Trustee

                    

                  	 	 	 
	
                      

                     

                  	 	 	 
	By: 	 	 	 	 
	 	
                    
Name:	 	 	
                  
	 	
                    Title:

                  	 	 	
                  

          

        

      

       

      
        
          
          

        

        
          A-32-6

          
            

          

        

        
          
          

        

      

    

    Exhibit
      A-33

     

    Form
      of Class M-9N Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-9N CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation (“DTC”), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-9N

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BD4

            
	 	 	 
	
              Original
                Principal Balance:

              $18,888,000

            	
              Registered
                Owner: 

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Pass-Through
                Rate: 

              LIBOR
                + 2.25000%

            	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the “Depositor”), Deutsche Bank National
      Trust Company, as trustee (the “Trustee”), U.S. Bank National Association, as
      the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the
“Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-9N Certificates on February 28, 2007
      which aggregate amount was $18,888,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class M-9N Certificates. Therefore,
      the actual outstanding principal amount of this Certificate, on any date
      subsequent to March 26, 2007 (the first Distribution Date) will be less than
      the
      Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT”
(“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    
      
        
        

      

      
        A-33-2

        
          

        

      

      
        
        

      

    

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-9N
      Certificates (the “Class M-9N Certificates”) and issued under and subject to the
      terms, provisions and conditions of the Pooling and Servicing Agreement, to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-10N Certificates, Class
      M-11N Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      “Certificates”. Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing Agreement.
      

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a “Distribution Date”) commencing
      March 26, 2007, the owners of the Class M-9N Certificates as of the close of
      business on the business day immediately preceding such Distribution Date (the
      “Record Date”) will be entitled to the distribution described in Article IV of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-9N Certificate will be entitled to receive such
      owner’s Percentage Interest in the amounts distributed on such Distribution Date
      to the owners of the Class M-9N Certificates. The Percentage Interest of each
      Class M-9N Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-9N Certificate by $18,888,000, less any portion thereof previously
      Reallocated to the Class M-9 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-33-3

        
          

        

      

      
        
        

      

    

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-33-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-9N Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-9N Certificates are exchangeable for
      new
      Class M-9N Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-33-5

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      
        
          
            	 	 	 
	 	
                    DEUTSCHE
                      BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                      but solely in
                      its capacity as Trustee

                  
	 
 	 
 	 
 
	 	By:  	
                  
	 	
                    
Name:
	 	Title: 

          

           

          
            	
                    Trustee
                      Authentication

                     

                    
                      
                        DEUTSCHE
                          BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                          but solely in
                          its capacity as Trustee

                      

                    

                  	 	 	 
	
                      

                     

                  	 	 	 
	By: 	 	 	 	 
	 	
                    
Name:	 	 	
                  
	 	
                    Title:

                  	 	 	
                  

          

        

      

       

    

    xxxxx

    

    
      
        
        

      

      
        A-33-6

        
          

        

      

      
        
        

      

    

    Exhibit
      A-34

     

    Form
      of Class M-10N Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-10N CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation (“DTC”), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-10N

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BF9

            
	 	 	 
	
              Original
                Principal Balance:

              $13,222,000

            	
              Registered
                Owner: 

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution 

              Date:
                March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Pass-Through
                Rate: 

              LIBOR
                + 2.25000%

            	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the “Depositor”), Deutsche Bank National
      Trust Company, as trustee (the “Trustee”), U.S. Bank National Association, as
      the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the
“Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-10N Certificates on February 28, 2007
      which aggregate amount was $13,222,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class M-10N Certificates.
      Therefore, the actual outstanding principal amount of this Certificate, on
      any
      date subsequent to March 26, 2007 (the first Distribution Date) will be less
      than the Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT”
(“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    
      
        
        

      

      
        A-34-2

        
          

        

      

      
        
        

      

    

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-10N
      Certificates (the “Class M-10N Certificates”) and issued under and subject to
      the terms, provisions and conditions of the Pooling and Servicing Agreement,
      to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-9N Certificates, Class
      M-11N
      Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      “Certificates”. Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a “Distribution Date”) commencing
      March 26, 2007, the owners of the Class M-10N Certificates as of the close
      of
      business on the business day immediately preceding such Distribution Date (the
      “Record Date”) will be entitled to the distribution described in Article IV of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-10N Certificate will be entitled to receive such
      owner’s Percentage Interest in the amounts distributed on such Distribution Date
      to the owners of the Class M-10N Certificates. The Percentage Interest of each
      Class M-10N Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-10N Certificate by $13,222,000, less any portion thereof previously
      Reallocated to the Class M-10 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-34-3

        
          

        

      

      
        
        

      

    

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-34-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-10N Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-10N Certificates are exchangeable for
      new
      Class M-10N Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-34-5

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      
        
          
            
              	 	 	 
	 	
                      
                        DEUTSCHE
                          BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                          but solely in
                          its capacity as Trustee

                      

                    
	 
 	 
 	 
 
	 	By:  	
                    
	 	
                      
Name:
	 	Title: 

            

             

            
              	
                      Trustee
                        Authentication

                       

                      
                        
                          
                            DEUTSCHE
                              BANK NATIONAL TRUST COMPANY, not in its individual
                              capacity, but solely in
                              its capacity as Trustee

                          

                        

                      

                    	 	 	 
	
                        

                       

                    	 	 	 
	By: 	 	 	 	 
	 	
                      
Name:	 	 	
                    
	 	
                      Title:

                    	 	 	
                    

            

          

        

         

        
          
            
            

          

          
            A-34-6

            
              

            

          

          
            
            

          

        

      

    

     

    Exhibit
      A-35

     

    Form
      of Class M-11N Certificate

     

    NOVASTAR
      MORTGAGE FUNDING TRUST, SERIES 2007-1 

    HOME
      EQUITY LOAN ASSET-BACKED CERTIFICATE 

    CLASS
      M-11N CERTIFICATE

     

    Comprised
      of a Certificate Representing 

    Certain
      Interests Relating to a Pool of Mortgage Loans

    The
      Mortgage Loans are Serviced by

     

    NOVASTAR
      MORTGAGE, INC., as Servicer

     

    Unless
      this certificate is presented by an authorized representative of The Depository
      Trust Company, a New York corporation (“DTC”), to the Issuing Entity or its
      agent for registration of transfer, exchange, or payment, and any certificate
      issued is registered in the name of Cede & Co. or in such other name as is
      requested by an authorized representative of DTC (and any payment is made to
      Cede & Co. or to such other entity as is requested by an authorized
      representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE
      OR
      OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
      hereof, Cede & Co., has an interest herein.

     

    (This
      certificate does not represent an interest in, or an obligation of, nor are
      the
      underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc.,
      NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar
      Capital, Inc., the Trustee or any of their subsidiaries and affiliates. This
      certificate is comprised of a Certificate representing a fractional ownership
      interest in distributions in certain Accounts created pursuant to the Pooling
      and Servicing Agreement and certain other rights relating thereto and is payable
      only from amounts received by the Trustee relating to the Mortgage Loans and
      other assets held in the Trust Fund.) 

     

    THIS
      CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
      1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE
      WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION
      WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE
      WITH
      THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT.

     

    NO
      TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN
      EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT
      INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE
      PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1)
      OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO
      SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY,
      ON
      BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR
      ANY
      INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              No.:
                M-11N

            	
              Date:
                February 28, 2007

            	
              CUSIP:
                669971BJ1

            
	 	 	 
	
              Original
                Principal Balance:

              $18,888,000

            	
              Registered
                Owner: 

              CEDE
                & CO.

            	
              Final
                Scheduled Distribution Date: March 25, 2037

            
	 	 	 
	
              Percentage
                Interest: 100%

            	
              Pass-Through
                Rate: 

              LIBOR
                + 2.25000%

            	 

    

    

    The
      registered owner named above is the registered owner of a fractional interest
      in
      (i) each Mortgage Loan identified on the Mortgage Loan Schedule attached as
      Exhibit B to that certain Pooling and Servicing Agreement dated as of February
      1, 2007 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
      Funding Corporation, as the depositor (the “Depositor”), Deutsche Bank National
      Trust Company, as trustee (the “Trustee”), U.S. Bank National Association, as
      the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the
“Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date
      Principal Balance, all interest accruing thereon on and after the Cut-off Date
      and all collections in respect of interest and principal due after the Cut-off
      Date; (ii) property which secured each such Mortgage Loan and which has been
      acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s
      interest in any insurance policies in respect of such Mortgage Loans; (iv)
      all
      proceeds of any of the foregoing; (v) the rights of the Depositor under the
      Purchase Agreement and (vi) all other assets included or to be included in
      the
      Trust Fund. Such assignment includes all interest and principal due to the
      Depositor or the Servicer after the Cut-off Date with respect to the Mortgage
      Loans.

     

    The
      Original Principal Amount set forth above is equal to the product of (i) the
      Percentage Interest represented by this Certificate and (ii) the aggregate
      Original Principal Amount of the Class M-11N Certificates on February 28, 2007
      which aggregate amount was $18,888,000. The owner hereof is entitled to
      principal payments on each Distribution Date, which will fully amortize such
      Original Principal Amount over the period from the date of initial delivery
      hereof to the final Distribution Date of the Class M-11N Certificates.
      Therefore, the actual outstanding principal amount of this Certificate, on
      any
      date subsequent to March 26, 2007 (the first Distribution Date) will be less
      than the Original Principal Amount set forth above.

     

    In
      order
      to receive the final distribution hereon, the owner hereof is required to
      present this Certificate to the Trustee. The Pooling and Servicing Agreement
      provides that, in any event, upon the making of the final distribution due
      on
      this Certificate, this Certificate shall be deemed cancelled for all purposes
      under the Pooling and Servicing Agreement.

     

    SOLELY
      FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN
      A
      CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT”
(“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF
      THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE
      WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE.

     

    THIS
      CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
      HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY
      (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES).

     

    
      
        
        

      

      
        A-35-2

        
          

        

      

      
        
        

      

    

     

    NEITHER
      THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
      DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
      OR
      ANY OTHER GOVERNMENTAL AGENCY.

     

    This
      Certificate is one of a Class of duly-authorized Certificates designated as
      NovaStar Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class M-11N
      Certificates (the “Class M-11N Certificates”) and issued under and subject to
      the terms, provisions and conditions of the Pooling and Servicing Agreement,
      to
      which the owner of this Certificate, by virtue of acceptance hereof assents,
      and
      is bound. Also issued under the Pooling and Servicing Agreement are the Class
      A-1A Certificates, Class A-2A1 Certificates, Class A-2A2 Certificates, Class
      A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class
      M-1
      Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4
      Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
      Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10
      Certificates, Class M-11 Certificates, Class M-6 DSI Certificates, Class M-7
      DSI
      Certificates, Class M-8 DSI Certificates, Class M-9 DSI Certificates, Class
      M-10
      DSI Certificates, Class M-11 DSI Certificates, Class M-6N Certificates, Class
      M-7N Certificates, Class M-8N Certificates, Class M-9N Certificates, Class
      M-10N
      Certificates, Class I-1 Certificates, Class I-2 Certificates, Class I-3
      Certificates, Class CA Certificates, Class CB Certificates, and Class R
      Certificates, and all such Certificates are collectively referred to as the
      “Certificates”. Terms capitalized herein and not otherwise defined herein shall
      have the respective meanings set forth in the Pooling and Servicing
      Agreement.

     

    On
      the
      25th day of each month, or, if such day is not a Business Day, then the next
      succeeding Business Day (each such day being a “Distribution Date”) commencing
      March 26, 2007, the owners of the Class M-11N Certificates as of the close
      of
      business on the business day immediately preceding such Distribution Date (the
      “Record Date”) will be entitled to the distribution described in Article IV of
      the Pooling and Servicing Agreement, relating to such Distribution Date.
      Distributions will be made in immediately available funds to such owners, by
      wire transfer or by check mailed to the address of the person entitled thereto
      as it appears on the Certificate Register.

     

    Each
      owner of record of a Class M-11N Certificate will be entitled to receive such
      owner’s Percentage Interest in the amounts distributed on such Distribution Date
      to the owners of the Class M-11N Certificates. The Percentage Interest of each
      Class M-11N Certificate as of any date of determination will be equal to the
      percentage obtained by dividing the Original Principal Amount set forth on
      such
      Class M-11N Certificate by $18,888,000, less any portion thereof previously
      Reallocated to the Class M-11 Certificates.

     

    The
      Trustee is required to duly and punctually pay distributions with respect to
      this Certificate in accordance with the terms hereof and the Pooling and
      Servicing Agreement. Amounts properly withheld under the Code or applicable
      to
      any owner shall be considered as having been paid by the Trustee to such owner
      for all purposes of the Pooling and Servicing Agreement.

     

    
      
        
        

      

      
        A-35-3

        
          

        

      

      
        
        

      

    

     

    The
      Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and
      Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer
      to
      enter into Sub-Servicing Agreements with certain institutions eligible for
      appointment as Sub-Servicers for the servicing and administration of certain
      Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer
      from any of its obligations under the Pooling and Servicing
      Agreement.

     

    This
      Certificate does not represent a deposit or other obligation of, or an interest
      in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar
      Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc.,
      NovaStar Financial Inc., the Trustee, or any of their subsidiaries and
      affiliates and are not insured or guaranteed by the Federal Deposit Insurance
      Corporation, the Government National Mortgage Association, or any other
      governmental agency. This Certificate is limited in right of payment to certain
      collections and recoveries relating to the Mortgage Loans and amounts on deposit
      in the Accounts (except as otherwise provided in the Pooling and Servicing
      Agreement) all as more specifically set forth hereinabove and in the Pooling
      and
      Servicing Agreement.

     

    No
      owner
      shall have any right to institute any proceeding, judicial or otherwise, with
      respect to the Pooling and Servicing Agreement for the appointment of a receiver
      or trustee, or for any other remedy under the Pooling and Servicing Agreement
      except in compliance with the terms thereof.

     

    Notwithstanding
      any other provisions in the Pooling and Servicing Agreement, the owner of any
      Certificate shall have the right which is absolute and unconditional to receive
      distributions to the extent provided in the Pooling and Servicing Agreement
      with
      respect to such Certificate or to institute suit for the enforcement of any
      such
      distribution, and such right shall not be impaired without the consent of such
      owner.

     

    The
      Pooling and Servicing Agreement will terminate upon notice to the Trustee upon
      the earliest of (i) the Distribution Date on which the Certificate Principal
      Balances of the Regular Certificates have been reduced to zero, (ii) the final
      payment or other liquidation of the last Mortgage Loan held by the Issuing
      Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as
      described below, (iv) the Distribution Date in March 2037 and (v) at any time
      when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC
      III, REMIC IV and REMIC V is effected pursuant to the Pooling and Servicing
      Agreement. In addition, under certain circumstances relating to the
      qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC
      III,
      REMIC IV or REMIC V as a REMIC under the Code, the Mortgage Loans may be sold,
      thereby affecting the early retirement of the Certificates. Notwithstanding
      the
      foregoing, in no event shall the Issuing Entity hereby continue beyond the
      expiration of 21 years from the death of the last survivor of the descendants
      of
      Joseph P. Kennedy, the late ambassador of the United States to the Court of
      St.
      James, living on the date of the Pooling and Servicing Agreement.

     

    The
      Servicer may, at its option, terminate the Pooling and Servicing Agreement
      on
      any date on which the aggregate of the Principal Balances of the Mortgage Loans
      on such date is equal to or less than 10% of the Maximum Collateral Amount,
      by
      purchasing, on the next succeeding Distribution Date, all of the outstanding
      Mortgage Loans and REO Properties at a price equal to the greater of the
      Principal Balance of the Mortgage Loans and REO Properties or the market value
      of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid
      interest thereon at the weighted average of the Mortgage Rates through the
      end
      of the Due Period preceding the final Distribution Date plus unreimbursed
      Servicing Advances, Advances, any unpaid Servicing Fees allocable to such
      Mortgage Loans and REO Properties and any accrued and unpaid Available Funds
      Cap
      Shortfall Amount and Available Funds Cap Carryforward Amount (without
      duplication of amounts already paid) and any unpaid amount due the Trustee,
      the
      Hedge Counterparties and the Custodian under the Pooling and Servicing
      Agreement.

     

    
      
        
        

      

      
        A-35-4

        
          

        

      

      
        
        

      

    

     

    The
      Trustee shall give written notice of termination of the Pooling and Servicing
      Agreement to each owner in the manner set forth therein.

     

    As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth and referred to on the face hereof, the transfer
      of this Certificate is registerable in the Certificate Register upon surrender
      of this Certificate for registration of transfer at the office designated as
      the
      location of the Certificate Register, and thereupon one or more new certificates
      of like class, tenor and Percentage Interest will be issued to the designated
      transferee or transferees.

     

    The
      Trustee is required to furnish certain information on each Distribution Date
      to
      the owner of this Certificate, as more fully described in the Pooling and
      Servicing Agreement.

     

    The
      Class
      M-11N Certificates are issuable only as registered Certificates in denominations
      of $25,000 Original Principal Amount and integral multiples of $1,000. As
      provided in the Pooling and Servicing Agreement and subject to certain
      limitations therein set forth, Class M-11N Certificates are exchangeable for
      new
      Class M-11N Certificates of authorized denominations evidencing the same
      aggregate principal amount.

     

    The
      Trustee and any agent thereof may treat the person in whose name this
      Certificate is registered as the owner hereof for all purposes, and none of
      the
      Trustee or any such agent shall be affected by notice to the
      contrary.

     

    
      
        
        

      

      
        A-35-5

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed
      on
      behalf of the Issuing Entity.

    
      
        
          
            	 	 	 
	 	
                    
                      
                        DEUTSCHE
                          BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                          but solely in
                          its capacity as Trustee

                      

                    

                  
	 
 	 
 	 
 
	 	By:  	
                  
	 	
                    
Name:
	 	Title: 

          

           

          
            	
                    Trustee
                      Authentication

                     

                    
                      
                        
                          DEUTSCHE
                            BANK NATIONAL TRUST COMPANY, not in its individual capacity,
                            but solely in
                            its capacity as Trustee

                        

                      

                    

                  	 	 	 
	
                      

                     

                  	 	 	 
	By: 	 	 	 	 
	 	
                    
Name:	 	 	
                  
	 	
                    Title:

                  	 	 	
                  

          

        

      

    

     

    
      
        
        

      

      
        A-35-6

        
          

        

      

      
        
        

      

    

     

    Exhibit
      B

     

    Mortgage
      Loan Schedule

     

    [See
      Exhibit 1 to the Purchase Agreement]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      C

     

    [Reserved]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      D

     

    [Reserved]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Exhibit
      E

     

    Request
      for Release

     

    [date]  

     

    
      	
              To:

            	
              U.S.
                Bank National Association, as Custodian 

            

      	 	
              and
                Deutsche Bank National Trust
                Company,

            

    

    
      	 	
              as
                Trustee

            

    

     

    
      	 	
              Re:

            	
              Pooling
                and Servicing Agreement, dated as of February 1, 2007 

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

              

            

    

     

    In
      connection with the administration of the pool of Mortgage Loans held by you
      as
      Custodian, we request the release, and acknowledge receipt, of the (Mortgage
      File/[specify document]) for the Mortgage Loan described below, for the reason
      indicated.

     

    Mortgagor’s
      Name, Address & Zip Code:

     

    Mortgage
      Loan Number:

     

    Reason
      for Requesting Documents (check one)

    

      
        	
                ____
                  1.

              	
                Mortgage
                  Loan Paid in Full

                (Servicer
                  hereby certifies that all amounts received in connection therewith
                  have
                  been credited to the Collection Account and remitted to the Trustee
                  for
                  deposit into the Distribution Account pursuant to the Pooling and
                  Servicing Agreement.)

              
	 	 
	
                ____
                  2.

              	
                Mortgage
                  Loan Liquidated

                (Servicer
                  hereby certifies that all proceeds of foreclosure, insurance or
                  other
                  liquidation have been finally received and credited to the Collection
                  Account and remitted to the Trustee for deposit into the Distribution
                  Account pursuant to the Pooling and Servicing
                  Agreement.)

              
	 	 
	
                ____
                  3.

              	
                Mortgage
                  Loan in Foreclosure

              
	 	 
	
                ____
                  4.

              	
                Mortgage
                  Loan Purchased Pursuant to Section 11.01 of the Pooling and Servicing
                  Agreement.

              
	 	 
	
                ____
                  5.

              	
                Mortgage
                  Loan Repurchased or Substituted pursuant to Article II or III of
                  the
                  Pooling and Servicing Agreement (Sponsor hereby certifies that
                  the
                  repurchase price or Substitution Adjustment has been credited to
                  the
                  Collection Account and that the substituted mortgage loan is a
                  Qualified
                  Substitute Mortgage Loan.)

              
	 	 
	
                ____
                  6.

              	
                Other
                  

                (explain)
                  ___________________________________________________

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    If
      box 1
      or 2 above is checked, and if all or part of the Mortgage File was previously
      released to us, please release to us our previous receipt on file with you,
      as
      well as any additional documents in your possession relating to the above
      specified Mortgage Loan.

     

    If
      box 3,
      4, 5 or 6 above is checked, upon our return of all of the above documents to
      you
      as Custodian, please acknowledge your receipt by signing in the space indicated
      below, and returning this form.

    
      
        
          
            
              	 	 	 
	 	
                      
                        
                          NovaStar
                            Mortgage, Inc., 

                          as
                            [Servicer][Sponsor]

                        

                      

                    
	 
 	 
 	 
 
	 	By:  	
                    
	 	
                      
Name:
	 	Title: 

            

             

            
              	
                      
                        Documents
                          returned to Custodian:

                         

                      

                      
                        
                          
                            
                              U.S.
                                Bank National Association, 

                              as
                                Custodian

                            

                          

                        

                      

                    	 	 	 
	  	 	 	 
	By: 	 	 	 	 
	 	
                      
Name:	 	 	
                    
	 	
                      Title:

                    	 	 	
                    
	 	 	 	 	 
	Date:	 	 	 	 

            

          

        

      

    

     

    
      
        
        

      

      
        E-2

        
          

        

      

      
        
        

      

    

     

    Exhibit
      F-1

     

    Form
      of Initial Certification

     

    [Date]

     

    NovaStar
      Mortgage, Inc. 

    8140
      Ward
      Parkway, Suite 300 

    Kansas
      City, Missouri 64114 

    Attention:
      Chris Miller, Senior Vice President

     

    NovaStar
      Mortgage Funding Corporation 

    8140
      Ward
      Parkway, Suite 300 

    Kansas
      City, Missouri 64114 

    Attention:
      Chris Miller, Senior Vice President

     

    Deutsche
      Bank National Trust Company

    1761
      East
      St. Andrew Place

    Santa
      Ana, California 92705

    Attention:
      Trust Administration - NS0701

     

    
      	 	
              Re:

            	
              Pooling
                and Servicing Agreement, dated as of February 1, 2007 (the “Agreement”),
                among NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation,
                U.S.
                Bank National Association (the “Custodian”)and Deutsche Bank National
                Trust Company (the “Trustee”), relating to the NovaStar Mortgage Funding
                Trust,
                Series 2007-1 Home Equity Loan Asset-Backed
                Certificates

            

    

     

    Gentlemen:

     

    In
      accordance with Section 2.02 of the above-captioned Agreement, and Section
      2.01(c) of the Mortgage Loan Purchase Agreement, dated as of February 1, 2007
      (the “Purchase Agreement” and, together with the Agreement, the “Agreements”),
      among NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, the
      Custodian, the Trustee and U.S. Bank National Association, the undersigned,
      as
      Custodian, on behalf of the Trustee, hereby certifies that as to each Mortgage
      Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid
      in
      full or listed on the attachment hereto) it has reviewed the Mortgage File
      and
      the Mortgage Loan Schedule and has determined that: (i) all documents required
      to be included in the Mortgage File are in its possession; (ii) such documents
      have been reviewed by it and appear regular on their face and relate to such
      Mortgage Loan; and (iii) based on examination by it, and only as to such
      documents, the information set forth in items (i) - (vii) of the definition
      or
      description of “Mortgage Loan Schedule” is correct.

     

    The
      Custodian, on behalf of the Trustee, has made no independent examination of
      any
      documents contained in each Mortgage File beyond the review specifically
      required in the above-referenced Agreements. The Custodian, on behalf of the
      Trustee, makes no representation that any documents specified in clause (vi)
      of
      Section 2.01(c) of the Purchase Agreement should be included in any Mortgage
      File. The Custodian, on behalf of the Trustee, makes no representations as
      to
      and shall not be responsible to verify: (i) the validity, legality, sufficiency,
      enforceability, due authorization, recordability or genuineness of any of the
      documents contained in each Mortgage File of any of the Mortgage Loans
      identified on the Mortgage Loan Schedule, (ii) the collectability, insurability,
      effectiveness or suitability of any such Mortgage Loan, or (iii) the existence
      of any assumption, modification, written assurance or substitution agreement
      with respect to any Mortgage File if no such documents appear in the Mortgage
      File delivered to the Custodian, on behalf of the Trustee.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Capitalized
      words and phrases used herein shall have the respective meanings assigned to
      them in the above-captioned Agreement.

    
      	 	 	 
	 	
              U.S.
                BANK NATIONAL ASSOCIATION, not in its 

              individual
                capacity but solely as Custodian

            
	 
 	 
 	 
 
	 	By:  	
            
	 	
              
Name:

	 	Title:

    

     

    
      
        
        

      

      
        F-1-2

        
          

        

      

      
        
        

      

    

    Exhibit
      F-2

     

    Form
      of Final Certification

     

    [Date]

     

    NovaStar
      Mortgage, Inc. 

    8140
      Ward
      Parkway, Suite 300 

    Kansas
      City, Missouri 64114 

    Attention:
      Chris Miller, Senior Vice President

     

    NovaStar
      Mortgage Funding Corporation 

    8140
      Ward
      Parkway, Suite 300 

    Kansas
      City, Missouri 64114 

    Attention:
      Chris Miller, Senior Vice President

     

    Deutsche
      Bank National Trust Company

    1761
      East
      St. Andrew Place

    Santa
      Ana, California 92705

    Attention:
      Trust Administration - NS0701

     

    
      	 	
              Re:
                

            	
              Pooling
                and Servicing Agreement, dated as of February 1, 2007 (the “Agreement”),
                among NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation,
                U.S.
                Bank National Association (the “Custodian”) and Deutsche Bank National
                Trust Company (the “Trustee”) relating to the NovaStar Mortgage Funding
                Trust, Series
                2007-1 Home Equity Loan Asset-Backed
                Certificates

            

    

     

    Gentlemen:

     

    In
      accordance with Section 2.02 of the above-captioned Agreement, and
      Section 2.01(c) of the Mortgage Loan Purchase Agreement, dated as of
      February 1, 2007 (the “Purchase Agreement” and, together with the Agreement, the
“Agreements”), among NovaStar Mortgage, Inc., NovaStar Mortgage Funding
      Corporation, the Custodian and the Trustee, the undersigned, as Custodian,
      on
      behalf of the Trustee, hereby certifies that as to each Mortgage Loan listed
      in
      the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed
      on the attachment hereto) it has received the documents set forth in
      Section 2.01(c) of the Purchase Agreement.

     

    The
      Custodian, on behalf of the Trustee, has made no independent examination of
      any
      documents contained in each Mortgage File beyond the review specifically
      required in the Agreements. The Custodian, on behalf of the Trustee, makes
      no
      representation that any documents specified in clause (vi) of Section 2.01(c)
      should be included in any Mortgage File. The Custodian, on behalf of the
      Trustee, makes no representations as to and shall not be responsible to verify:
      (i) the validity, legality, sufficiency, enforceability, due authorization,
      recordability or genuineness of any of the documents contained in each Mortgage
      File of any of the Mortgage Loans identified on the Mortgage Loan Schedule,
      (ii)
      the collectability, insurability, effectiveness or suitability of any such
      Mortgage Loan or (iii) the existence of any assumption, modification, written
      assurance or substitution agreement with respect to any Mortgage File if no
      such
      documents appear in the Mortgage File delivered to the Custodian, on behalf
      of
      the Trustee.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Capitalized
      words and phrases used herein shall have the respective meanings assigned to
      them in the above-captioned Agreement.

    
      	 	 	 
	 	
              U.S.
                BANK NATIONAL ASSOCIATION, not in its 

              individual
                capacity but solely as Custodian

            
	 
 	 
 	 
 
	 	By:  	
            
	 	
              
Name:

	 	
              Title:

            

    

     

    
      
        
        

      

      
        F-2-2

        
          

        

      

      
        
        

      

    

    Exhibit
      G

     

    Form
      of Investment Letter

     

    NovaStar
      Mortgage, Inc.

    8140
      Ward
      Parkway, Suite 300 

    Kansas
      City, Missouri 64114 

    Attention:
      Chris Miller, Senior Vice President

     

    Deutsche
      Bank National Trust Company

    c/o
      DB
      Services Tennessee

    648
      Grassmere Park Road

    Nashville,
      Tennessee 37211-3658

    Attention:
      Transfer Unit

     

    Ladies
      and Gentlemen:

     

    The
      undersigned (the “Transferee”) has agreed to purchase from ________ (the
“Transferor”) the following certificates:

     

    Class   Number

     

    __

     

    __

     

    __

     

    __

     

    __

     

    I. The
      Transferee is (check one):

    

      
        	
                __

              	
                (i)
                  An insurance company, as defined in Section 2(13) of the Securities
                  Act of
                  1933, as amended (the “Securities Act”), (ii) an investment company
                  registered under the Investment Company Act of 1940, as amended
                  (the
                  “Investment Company Act”), (iii) a business development company as defined
                  in Section 2(a)(48) of the Securities Act, (iv) a Small Business
                  Investment Company licensed by the U.S. Small Business Administration
                  under Section 301(c) or (d) of the Small Business Investment Act
                  of 1958,
                  as amended, (v) a plan established and maintained by a state, its
                  political subdivisions, or any agency or instrumentality of a state
                  or its
                  political subdivisions, for the benefit of its employees, (vi)
                  a business
                  development company as defined in Section 202(a)(22) of the
                  Investment Advisors Act of 1940, as amended, (vii) an organization
                  described in Section 501(c)(3) of the Internal Revenue Code, corporation
                  (other than a bank as defined in Section 3(a)(2) of the Securities
                  Act or
                  a savings and loan association or other institution referenced
                  in Section
                  3(a)(2) of the Securities Act or a foreign bank or savings and
                  loan
                  association or equivalent institution), partnership, or Massachusetts
                  or
                  similar business trust; or (viii) an investment advisor registered
                  under
                  the Investment Advisors Act of 1940, as amended, which, for each
                  of (i)
                  through (viii), owns and invests on a discretionary basis at least
                  $100
                  million in securities other than securities of issuers affiliated
                  with the
                  Transferee, securities issued or guaranteed by the United States
                  or a
                  person controlled or supervised by and acting as an instrumentality
                  of the
                  government of the United States pursuant to authority granted by
                  the
                  Congress of the United States, bank deposit notes and certificates
                  of
                  deposit, loan participations, repurchase agreements, securities
                  owned but
                  subject to a repurchase agreement, and currency, interest rate
                  and
                  commodity swaps (collectively, “Excluded
                  Securities”);

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      
        	
                __

              	
                a
                  dealer registered pursuant to Section 15 of the Securities Exchange
                  Act of
                  1934, as amended (the “Exchange Act”) that in the aggregate owns and
                  invests on a discretionary basis at least $10 million of securities
                  other
                  than Excluded Securities and securities constituting the whole
                  or part of
                  an unsold allotment to, or subscription by, Transferee as a participant
                  in
                  a public offering;

              
	 	 
	
                __

              	
                an
                  investment company registered under the Investment Company Act
                  that is
                  part of a family of investment companies (as defined in Rule 144A
                  of the
                  Securities and Exchange Commission) which own in the aggregate
                  at least
                  $100 million in securities other than Excluded Securities and securities
                  of issuers that are part of such family of investment
                  companies;

              
	 	 
	
                __

              	
                an
                  entity, all of the equity owners of which are entities described
                  in this
                  Paragraph A(I);

              
	 	 
	
                __

              	
                a
                  bank as defined in Section 3(a)(2) of the Securities Act, any savings
                  and
                  loan association or other institution as referenced in Section
                  3(a)(5)(A)
                  of the Securities Act, or any foreign bank or savings and loan
                  association
                  or equivalent institution that in the aggregate owns and invests
                  on a
                  discretionary basis at least $100 million in securities other than
                  Excluded Securities and has an audited net worth of at least $25
                  million
                  as demonstrated in its latest annual financial statements, as of
                  a date
                  not more than 16 months preceding the date of transfer of the Certificates
                  to the Transferee in the case of a U.S. Bank or savings and loan
                  association, and not more than 18 months preceding such date in
                  the case
                  of a foreign bank or savings association or equivalent
                  institution.

              

      

    

     

    II. The
      Transferee is acquiring such Certificates solely for its own account, for the
      account of one or more others, all of which are “Qualified Institutional Buyers”
within the meaning of Rule 144A, or in its capacity as a dealer registered
      pursuant to Section 15 of the Exchange Act acting in a riskless principal
      transaction on behalf of a “Qualified Institutional Buyer”. The Transferee is
      not acquiring such Certificates with a view to or for the resale, distribution,
      subdivision or fractionalization thereof which would require registration of
      the
      Certificates under the Securities Act.

     

    
      
        
        

      

      
        G-2

        
          

        

      

      
        
        

      

    

     

    III. The
      Transferee represents that it is not (i) an employee benefit plan (as defined
      in
      section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
      (“ERISA”)) that is subject to the provisions of Title I of ERISA, or (ii) a plan
      (as defined in section 4975(e)(1) of the Internal Revenue Code of 1986, as
      amended (the “Code”)) that is subject to Section 4975 of the Code, and is not
      acting, directly or indirectly, on behalf of a plan described in (i) or (ii)
      or
      acquiring the Certificates with assets of any such plan.

    
      	 	 	 	 
	 	 	
              Very
                truly yours,

            
	 	 	 	 
	 	 	By:
	
            
	
            	 	 	
              

            
	 	 	Title:
	
            
	 	 	 	
              
 

    

    Dated:
      __________

    

    
      
        
        

      

      
        G-3

        
          

        

      

      
        
        

      

    

    Exhibit
      H

     

    Form
      of
      Residual Certificate Transfer Affidavit

     

    AFFIDAVIT
      PURSUANT TO SECTION 860E OF THE INTERNAL REVENUE CODE OF 1986, AS
      AMENDED

     

    [NAME
      OF
      OFFICER], being first duly sworn, deposes and says:

     

    1. That
      he
      is [Title of Officer] of [Name of Investor] (the “Investor”), a [savings
      institution] [corporation] duly organized and existing under the laws of [the
      State of ______] [the United States], on behalf of which he makes this affidavit
      and agreement.

     

    2. That
      the
      Investor (i) is not and will not be a “disqualified organization” as of [date of
      transfer] within the meaning of Section 860E(e)(5) of the Internal Revenue
      Code
      of 1986 (the “Code”), (ii) will endeavor to remain other than a disqualified
      organization for so long as it retains its ownership interest in the Class
      R
      Certificates, and (iii) is acquiring the Class R Certificates for its own
      account or for the account of another investor from which it has received an
      affidavit and agreement in substantially the same form as this affidavit and
      agreement. For this purpose, a “disqualified organization” means the United
      States, any state or political subdivision thereof, any agency or
      instrumentality of any of the foregoing (other than an instrumentality all
      of
      the activities of which are subject to tax and, except for the Federal Home
      Loan
      Mortgage Corporation, a majority of whose board of directors is not selected
      by
      any such governmental entity) or any foreign government, international
      organization or any agency or instrumentality of such foreign government or
      organization, any rural electric or telephone cooperative, or any organization
      (other than certain farmers’ cooperatives) that generally is exempt from federal
      income tax unless such organization is subject to the tax on unrelated business
      taxable income.

     

    3. That
      the
      Investor has historically paid its debts as they came due and will continue
      to
      pay its debts as they come due in the future.

     

    4. That
      the
      Investor has no present knowledge or expectation that it will be unable to
      pay
      any United States taxes owed by it or that it will become insolvent or subject
      to a bankruptcy proceeding for so long as any of the Class R Certificates remain
      outstanding.

     

    5. That
      the
      Investor has been advised of, and understands that as the holder of a
      noneconomic residual interest it may incur tax liabilities in excess of any
      cash
      flows generated by the interest. That the Investor intends to pay such taxes
      associated with holding the Class R Certificates as they become
      due.

     

    6. That
      the
      Investor will not cause income from the Class R Certificates to be attributable
      to a foreign permanent establishment or fixed base (within the meaning of an
      applicable income tax treaty) of the Investor or another U.S.
      taxpayer.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7. 1 [A.
      Formula Test] That the Investor agrees that the present value of the anticipated
      tax liabilities associated with holding the Class R Certificates does not exceed
      the sum of the present value of any consideration given to the Investor to
      acquire the Class R Certificates, the present value of the expected future
      distributions on the Class R Certificates, and the present value of the
      anticipated tax savings associated with holding the interest as the REMIC
      generates losses. That the Investor agrees that it complied with U.S. Treasury
      Regulations Section 1.860E-1(c)(8) in making such representation.

     

    That
      the
      Investor agrees that it is not a foreign permanent establishment or fixed base
      (within the meaning of an applicable income tax treaty) of the Transferor or
      another U.S. taxpayer.

     

    [B.
      Asset
      Test] That the Investor, at the time of the transfer, and at the close of the
      Investor’s two fiscal years preceding the year of the transfer, had gross assets
      for financial reporting purposes in excess of $100 million and net assets in
      excess of $10 million (excluding any obligation of a person related to the
      Investor within the meaning of U.S. Treasury Regulations Section
      1.860E-1(c)(6)(ii) or any other asset if a principle purpose for holding or
      acquiring the other asset was to permit the Investor to satisfy the above stated
      minimum asset requirements).

     

    That
      the
      Investor is an “eligible corporation,” as defined in U.S. Treasury Regulations
      Section 1.860E-1(c)(6)(i). That the Investor agrees, in connection with any
      subsequent transfer of its ownership interest in the Class R Certificates,
      to
      transfer its ownership interest only to another “eligible corporation,” as
      defined in U.S. Treasury Regulations Section 1.860E-1(c)(6)(i), and to honor
      the
      restrictions on subsequent transfers of the Class R Certificates by transferring
      its ownership interest only in a transaction that satisfies the requirements
      of
      U.S. Treasury Regulations Section 1.860E-1(c)(4)(i), (ii) (iii) and U.S.
      Treasury Regulations Section 1.860E-1(c)(5).

     

    That
      the
      Investor determined the consideration paid to it to acquire the Class R
      Certificates in good faith and based on reasonable market assumptions
      (including, but not limited to, borrowing and investment rates, prepayment
      and
      loss assumptions, expense and reinvestment assumptions, tax rates and other
      factors specific to the Investor).

     

    8. That
      the
      Investor is a citizen or resident of the United States, a corporation,
      partnership or other entity created or organized in, or under the laws of,
      the
      United States or any political subdivision thereof, or an estate or trust whose
      income from sources without the United States is includable in gross income
      for
      United States federal income tax purposes regardless of its connection with
      the
      conduct of a trade or business within the United States.

     

    9. That
      the
      Investor’s Taxpayer Identification Number is ____________.

     

    10. That
      the
      Investor has reviewed the restrictions set forth on the face of the Class R
      Certificates and the provisions of Section 5.02(d) of the Pooling and Servicing
      Agreement under which the Class R Certificates were issued, which authorize
      the
      Trustee to deliver payments to a person other than the Investor and negotiate
      a
      mandatory sale by the Trustee in the event that the Investor holds such
      Certificates in violation of Section 5.02(d). That the Investor expressly agrees
      to be bound by and to comply with all the provisions of Section 5.02(d) of
      the
      Pooling and Servicing Agreement and the restrictions on the face of the Class
      R
      Certificates.

    
       

      
        
1
        Insert
        either section 7A or 7B.

    

     

    
      
        
        

      

      
        H-2

        
          

        

      

      
        
        

      

    

     

    11. That
      the
      Investor will, in connection with any transfer that it makes of the Class R
      Certificates, deliver to the Trustee a certificate, in form and substance
      satisfactory to the Trustee, that is in substantially the same form as Exhibit
      I
      attached to the Pooling and Servicing Agreement and that contains the same
      representations set forth therein.

     

    12. That
      the
      Investor will not transfer any of its interest in the Class R Certificates
      unless (i) it has received from any subsequent transferee an affidavit in
      substantially the same form as this affidavit containing the same
      representations set forth herein, and (ii) as of the time of the transfer,
      it
      does not have actual knowledge that such affidavit is false. That the Investor
      will cause such affidavit to be delivered to the Trustee upon receipt. That
      the
      Investor is aware that the Trustee will not register the transfer of any Class
      R
      Certificates unless and until such affidavit is received.

     

    13. That
      the
      Investor consents to any additional restrictions or arrangements that shall
      be
      deemed necessary upon advice of counsel to constitute a reasonable arrangement
      to ensure that the Class R Certificates will only be owned, directly or
      indirectly, by an investor that is not a disqualified organization.

     

    14. That
      the
      Investor understands and agrees that any breach of any of the representations
      included herein shall render the transfer to the Investor contemplated hereby
      null and void.

     

    
      
        
        

      

      
        H-3

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Investor has caused this instrument to be executed on
      its
      behalf, pursuant to the authority of its Board of Directors, by its [Title
      of
      Officer] and its corporate seal to be hereunto attached, attested by its
      [Assistant] Secretary, this _ day of .

     

    [NAME
      OF
      INVESTOR]

     

    By:
      ____________________________

     

    [Name
      of
      Officer]

     

    [Title
      of
      Officer]

     

    [Corporate
      Seal]

     

    ATTEST:

     

    [Assistant]
      Secretary

     

    Personally
      appeared before me the above named [Name of Officer], known or proved to me
      to
      be the same person who executed the foregoing instrument and to be the [Title
      of
      Officer] of the Investor, and acknowledged to me that he executed the same
      as
      his free act and deed and the free act and deed of the Investor.

    
 

    
      
        
        

      

      
        H-4

        
          

        

      

      
        
        

      

       

    

    Exhibit
      I

     

    Transferor’s
      Certificate

     

    
      
        	 	
                To:

              	
                Deutsche
                  Bank National Trust Company

                  c/o
                    DB Services Tennessee

                    648
                      Grassmere Park Road

                    Nashville,
                      Tennessee 37211-3658

                    Attention:
                      Transfer Unit

                

              

      

       

    

    Re: The
      Pooling and Servicing Agreement, dated as of February 1, 2007, among NovaStar
      Mortgage Funding Corporation, as Depositor, NovaStar Mortgage, Inc., as Servicer
      and as Sponsor, U.S. Bank National Association, as Custodian, Deutsche Bank
      National Trust Company,
      as trustee           

     

    Ladies
      and Gentlemen:

     

    This
      letter is delivered to you in connection with the transfer by NovaStar Mortgage,
      Inc. (the “Sponsor”) to ______________________ (the “Purchaser”) of a ___%
      Percentage Interest of NovaStar Mortgage Funding Trust, Series 2007-1, NovaStar
      Home Equity Loan Asset-Backed Certificates, Series 2007-1, Class R (the
“Certificates”), pursuant to Section 5.02(d) of the Pooling and Servicing
      Agreement (the “Pooling and Servicing Agreement”), dated as of February 1, 2007
      among NovaStar Mortgage Funding Corporation, as Depositor (the “Depositor”),
      NovaStar Mortgage, Inc., as Servicer and Sponsor (the “Servicer and Sponsor”),
      U.S. Bank National Association, as Custodian (the “Custodian”), Deutsche Bank
      National Trust Company, as trustee (the “Trustee”). All terms used herein and
      not otherwise defined shall have the meanings set forth in the Pooling and
      Servicing Agreement. The Sponsor hereby certifies, represents and warrants
      to,
      and covenants with, the Depositor and the Trustee that:

     

    1.
      No
      purpose of the Sponsor relating to the transfer of the Certificates by the
      Sponsor to the Purchaser is or will be to impede the assessment or collection
      of
      any tax.

     

    2.
      The
      Sponsor has conducted a reasonable investigation of the financial condition
      of
      the Purchaser and, as a result of such investigation, has concluded that the
      Purchaser has historically paid its debts as they came due and will continue
      to
      pay its debts as they come due in the future.

     

    3.
      The
      Sponsor has received, and understands that the Purchaser has delivered to the
      Trustee and the Depositor, a Residual Certificate Transfer Affidavit in the
      form
      attached to the Pooling and Servicing Agreement as Exhibit H. The Sponsor does
      not know or believe that any representation contained therein is
      false.

     

    4.
      The
      Sponsor does not know or have reason to know that the Purchaser (i) will be
      unwilling or unable to pay taxes due on its share of the Certificates or (ii)
      will not honor the restrictions on subsequent transfers of the Certificates
      set
      forth in section 5.02(d) of the Pooling and Servicing Agreement and in the
      Residual Certificate Transfer Affidavit.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    5.
      The
      Sponsor has no actual knowledge that the proposed Transferee is not both a
      United States Person and a Permitted Transferee.

     

    Very
      truly yours,

     

    (Sponsor)    

     

    By:     

     

    Name:

     

    Title:

     

    
      
        
        

      

      
        I-2

        
          

        

      

      
        
        

      

    

    Exhibit
      J

     

    Designation
      Under REMIC Provisions

     

    [Please
      See Attached]

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      Exhibit
        J

       

    

    Novastar
      2007-1

     

    Designation
      Under REMIC Provisions

     

    (a) The
      Trustee shall elect that each of REMIC I, REMIC II, REMIC III, REMIC IV, REMIC
      V
      and the Master REMIC be treated as a REMIC under Section 860D of the Code.
      Any
      inconsistencies or ambiguities in this Agreement or in the administration of
      this Agreement shall be resolved in a manner that preserves the validity of
      such
      REMIC elections.

     

    (b) The
      designation of REMIC interests shall be as follows:

     

    (i)REMIC
      I
      will consist of all of the assets of the Trust (other than the Supplemental
      Interest Account, the Swap Agreements, the Cap Agreements, the Novation
      Agreements and the Supplemental Interest Trust), including the Mortgage Loans,
      the Accounts, any REO Property and any proceeds of the foregoing. REMIC I will
      be evidenced by the "REMIC I Regular Interests" as set forth in (c) below,
      which
      will be uncertificated and will represent the "regular interests" in REMIC
      I.
      The Class R-I Interest will represent the sole class of residual interest in
      REMIC I;

     

    (ii)REMIC
      II
      will consist of the REMIC I Regular Interests and will be evidenced by the
      "REMIC II Regular Interests" as set forth in (d) below, which will be
      uncertificated and will represent the "regular interests" in REMIC II. The
      Class
      R-II Interest will represent the sole class of residual interest in REMIC
      II;

     

    (iii)REMIC
      III
      will consist of the REMIC II Regular Interests and will be evidenced by the
      "REMIC III Regular Interests" as set forth in (e) below, which will be
      uncertificated and will represent the "regular interests" in REMIC III. The
      Class R-III Interest will represent the sole class of residual interest in
      REMIC
      III;

     

    (iv)REMIC
      IV
      will consist of the REMIC III Regular Interests and will be evidenced by the
      "REMIC IV Regular Interests" as set forth in (f) below, which will be
      uncertificated and will represent the "regular interests" in REMIC IV. The
      Class
      R-IV Interest will represent the sole class of residual interest in REMIC
      IV;

     

    (v)REMIC
      V
      will consist of the REMIC IV Regular Interests and will be evidenced by the
      "REMIC V Regular Interests" as set forth in (g) below, which will be
      uncertificated and will represent the "regular interests" in REMIC V. The Class
      R-V Interest will represent the sole class of residual interest in REMIC V;
      and

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

     

    (vi)The
      Master REMIC will consist of the REMIC V Regular Interests and will be
      evidenced, as set forth in (h) below, by (i) the following Certificates, in
      each
      case, other than its respective Cap Contract Rights and Obligations: the Class
      A-1A, the Class A-2A1, the Class 1-2A2, the Class A-2B, the Class A-2C, the
      Class A-2D, the Class M-1, the Class M-2, the Class M-3, the Class M-4, the
      Class M-5, the Class M-6, the Class M-7, the Class M-8, the Class M-9, the
      Class
      M-10, and the Class M-11, and (ii) the following Certificates: the Class I-1,
      the Class I-2, the Class I-3, the Class CA and the Class CB Certificates which,
      in the case of each Class referenced in (i) and (ii), will represent one or
      more
      "regular interests" in the Master REMIC. The Class R-VI Interest will represent
      the sole class of residual interest in the Master REMIC.

     

    (vi)The
      Class
      R Certificates will represent the beneficial ownership of the Class R-I, Class
      R-II, Class R-III, Class R-IV, Class R-V and Class R-VI Interests. The Class
      R
      Certificates will not have a principal balance and will not bear
      interest.

     

    (vii)The
      Trustee will hold the REMIC I Regular Interests, REMIC II Regular Interests,
      REMIC III Regular Interests, REMIC IV Regular Interests and REMIC V Regular
      Interests.

     

    (c) The
      REMIC
      I Regular Interests shall have the following principal balances and REMIC I
      Pass-Through Rates as set forth in the table below: 

     

    
      	
               

              REMIC
                I Interests 

            	
              Initial

              Principal
                Balances

            	
              REMIC
                I

              Pass-Through
                Rates

            
	
              I-A

            	
              $110,000,000

            	
              (1)

            
	
              I-B

            	
              $80,000,000

            	
              (1)

            
	
              I-C

            	
              $160,000,000

            	
              (1)

            
	
              I-D

            	
              $80,000,000

            	
              (1)

            
	
              I-E

            	
              $80,000,000

            	
              (1)

            
	
              I-F

            	
              $130,000,000

            	
              (1)

            
	
              I-G

            	
              $55,000,000

            	
              (1)

            
	
              I-H

            	
              $40,000,000

            	
              (1)

            
	
              I-K

            	
              $40,000,000

            	
              (1)

            
	
              I-L

            	
              $40,000,000

            	
              (1)

            
	
              I-M

            	
              $40,000,000

            	
              (1)

            
	
              I-O

            	
              $40,000,000

            	
              (1)

            
	
              I-Q

            	
              $20,000,000

            	
              (1)

            
	
              I-S

            	
              $20,000,000

            	
              (1)

            
	
              I-T

            	
              $20,000,000

            	
              (1)

            
	
              I-U

            	
              $40,000,000

            	
              (1)

            
	
              I-V

            	
              $20,000,000

            	
              (1)

            
	
              I-W

            	
              $30,000,000

            	
              (1)

            
	
              I-X

            	
              $40,000,000

            	
              (1)

            
	
              I-J

            	
              $803,825,798

            	
              (1)

            
	
              I-P

            	
              $100

            	
              (2)

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    

     

    (1)   The
      pass-through rate for these REMIC I Regular Interests will be the Net WAC of
      the
      Mortgage Loans.

     

    (2)   The
      Class
      I-P Interest is entitled to distributions of all Prepayment
      Charges.

     

    On
      each
      Distribution Date, all Realized Losses, prepayments and payments of scheduled
      principal with respect to the Mortgage Loans shall be allocated in the following
      order: (i) first, to the Class I-J Interest until such class is paid in full
      or
      eliminated by such losses; (I) second, to the Class I-A Interest until such
      class is paid in full or eliminated by such losses; (iii) third, to the Class
      I-B Interest until such class is paid in full or eliminated by such losses;
      (iv)
      fourth, to the Class I-C Interest until such class is paid in full or eliminated
      by such losses; (v) fifth, to the Class I-D Interest until such class is paid
      in
      full or eliminated by such losses; (vi) sixth, to the Class I-E Interest until
      such class is paid in full or eliminated by such losses; (vii) seventh, to
      the
      Class I-F Interest until such class is paid in full or eliminated by such
      losses; (viii)
      eighth, to the Class I-G Interest until such class is paid in full or eliminated
      by such losses; (ix) ninth, to the Class I-H Interest until such class is paid
      in full or eliminated by such losses; (x) tenth, to the Class I-K Interest
      until
      such class is paid in full or eliminated by such losses; (xi) eleventh, to
      the
      Class I-L Interest until such class is paid in full or eliminated by such
      losses; (xii) twelfth, to the Class I-M Interest until such class is paid in
      full or eliminated by such losses; (xiii) thirteenth, to the Class I-O Interest
      until such class is paid in full or eliminated by such losses; (xiv) fourteenth,
      to the Class I-Q Interest until such class is paid in full or eliminated by
      such
      losses, (xv) fifteenth, to the Class I-S Interest until such class is paid
      in
      full or eliminated by such losses; (xvi) sixteenth, to the Class I-T Interest
      until such class is paid in full or eliminated by such losses; (xvii)
      seventeenth, to the Class I-U Interest until such class is paid in full or
      eliminated by such losses; (xviii) eighteenth, to the Class I-V Interest until
      such class is paid in full or eliminated by such losses; (xix) nineteenth,
      to
      the Class I-W Interest until such class is paid in full or eliminated by such
      losses, (xx) twentieth, to the Class I-X Interest until such class is paid
      in
      full or eliminated by such losses; and (xxi) twenty-first, to the Class I-P
      Interest until such class is paid in full or eliminated by such losses.

     

    (d) The
      REMIC
      II Regular Interests shall have the following principal balances and REMIC
      II
      Pass-Through Rates set forth in the table below:

     

    
      	
              REMIC
                II Interests

            	
              Corresponding
                Class of 

              REMIC
                I Regular Interest

            	
              Initial
                

              Principal
                

              Balances

            	
              REMIC
                II 

              Pass-

              Through
                

              Rates

            
	
              II-A1

            	
              I-A

            	
              (1)

            	
              (2)

            
	
              II-A2

            	
              I-A

            	
              (3)

            	
              (4)

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
              REMIC
                II Interests

            	
              Corresponding
                Class of 

              REMIC
                I Regular Interest

            	
              Initial
                

              Principal
                

              Balances

            	
              REMIC
                II 

              Pass-

              Through
                

              Rates

            
	
              II-A3

            	
              I-A

            	
              (5)

            	
              (6)

            
	
              II-B1

            	
              I-B

            	
              (1)

            	
              (2)

            
	
              II-B2

            	
              I-B

            	
              (3)

            	
              (4)

            
	
              II-B3

            	
              I-B

            	
              (5)

            	
              (6)

            
	
              II-C1

            	
              I-C

            	
              (1)

            	
              (2)

            
	
              II-C2

            	
              I-C

            	
              (3)

            	
              (4)

            
	
              II-C3

            	
              I-C

            	
              (5)

            	
              (6)

            
	
              II-D1

            	
              I-D

            	
              (1)

            	
              (2)

            
	
              II-D2

            	
              I-D

            	
              (3)

            	
              (4)

            
	
              II-D3

            	
              I-D

            	
              (5)

            	
              (6)

            
	
              II-E1

            	
              I-E

            	
              (1)

            	
              (2)

            
	
              II-E2

            	
              I-E

            	
              (3)

            	
              (4)

            
	
              II-E3

            	
              I-E

            	
              (5)

            	
              (6)

            
	
              II-F1

            	
              I-F

            	
              (1)

            	
              (2)

            
	
              II-F2

            	
              I-F

            	
              (3)

            	
              (4)

            
	
              II-F3

            	
              I-F

            	
              (5)

            	
              (6)

            
	
              II-G1

            	
              I-G

            	
              (1)

            	
              (2)

            
	
              II-G2

            	
              I-G

            	
              (3)

            	
              (4)

            
	
              II-G3

            	
              I-G

            	
              (5)

            	
              (6)

            
	
              II-H1

            	
              I-H

            	
              (1)

            	
              (2)

            
	
              II-H2

            	
              I-H

            	
              (3)

            	
              (4)

            
	
              II-H3

            	
              I-H

            	
              (5)

            	
              (6)

            
	
              II-K1

            	
              I-K

            	
              (1)

            	
              (2)

            
	
              II-K2

            	
              I-K

            	
              (3)

            	
              (4)

            
	
              II-K3

            	
              I-K

            	
              (5)

            	
              (6)

            
	
              II-L1

            	
              I-L

            	
              (1)

            	
              (2)

            
	
              II-L2

            	
              I-L

            	
              (3)

            	
              (4)

            
	
              II-L3

            	
              I-L

            	
              (5)

            	
              (6)

            
	
              II-M1

            	
              I-M

            	
              (1)

            	
              (2)

            
	
              II-M2

            	
              I-M

            	
              (3)

            	
              (4)

            
	
              II-M3

            	
              I-M

            	
              (5)

            	
              (6)

            
	
              II-O1

            	
              I-O

            	
              (1)

            	
              (2)

            
	
              II-O2

            	
              I-O

            	
              (3)

            	
              (4)

            
	
              II-O3

            	
              I-O

            	
              (5)

            	
              (6)

            
	
              II-Q1

            	
              I-Q

            	
              (1)

            	
              (2)

            
	
              II-Q2

            	
              I-Q

            	
              (3)

            	
              (4)

            
	
              II-Q3

            	
              I-Q

            	
              (5)

            	
              (6)

            
	
              II-S1

            	
              I-S

            	
              (1)

            	
              (2)

            
	
              II-S2

            	
              I-S

            	
              (3)

            	
              (4)

            
	
              II-S3

            	
              I-S

            	
              (5)

            	
              (6)

            
	
              II-T1

            	
              I-T

            	
              (1)

            	
              (2)

            

    

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    
      	
              REMIC
                II Interests

            	
              Corresponding
                Class of 

              REMIC
                I Regular Interest

            	
              Initial
                

              Principal
                

              Balances

            	
              REMIC
                II 

              Pass-

              Through
                

              Rates

            
	
              II-T2

            	
              I-T

            	
              (3)

            	
              (4)

            
	
              II-T3

            	
              I-T

            	
              (5)

            	
              (6)

            
	
              II-U1

            	
              I-U

            	
              (1)

            	
              (2)

            
	
              II-U2

            	
              I-U

            	
              (3)

            	
              (4)

            
	
              II-U3

            	
              I-U

            	
              (5)

            	
              (6)

            
	
              II-V1

            	
              I-V

            	
              (1)

            	
              (2)

            
	
              II-V2

            	
              I-V

            	
              (3)

            	
              (4)

            
	
              II-V3

            	
              I-V

            	
              (5)

            	
              (6)

            
	
              II-W1

            	
              I-W

            	
              (1)

            	
              (2)

            
	
              II-W2

            	
              I-W

            	
              (3)

            	
              (4)

            
	
              II-W3

            	
              I-W

            	
              (5)

            	
              (6)

            
	
              II-X1

            	
              I-X

            	
              (1)

            	
              (2)

            
	
              II-X2

            	
              I-X

            	
              (3)

            	
              (4)

            
	
              II-X3

            	
              I-X

            	
              (5)

            	
              (6)

            
	
              II-J

            	
              I-J

            	
              (7)

            	
              (8)

            
	
              II-P

            	
              I-P

            	
              $100

            	
              (9)

            

    

    

    
      	
              (1)

            	
              These
                REMIC II Regular Interests will have an initial principal balance
                equal to
                the product of (i) the initial principal balance of the Corresponding
                Class of REMIC I Regular Interest and (ii) two divided by three.
                

            

    

     

    
      	
              (2)

            	
              The
                pass-through rate for these REMIC II Regular Interests will be as
                follows:
                (i) commencing on the first Distribution Date through and including
                the
                Corresponding Maturity Date from the Swap/Cap Interest Rate Schedule,
                1.5
                multiplied by (REMIC II Net WAC minus the Corresponding Interest
                Rate from
                the Swap/Cap Interest Rate Schedule) and (ii) for all Distribution
                Dates
                thereafter, REMIC II Net WAC.

            

    

     

    
      	
              (3)

            	
              These
                REMIC II Regular Interests will have an initial principal balance
                equal to
                the initial principal balance of the Corresponding Class of REMIC
                I
                Regular Interest divided by three.

            

    

     

    
      	
              (4)

            	
              The
                pass-through rate for these REMIC II Regular Interests will be as
                follows:
                (i) commencing on the first Distribution Date through and including
                the
                Corresponding Maturity Date from the Swap/Cap Interest Rate Schedule,
                3
                multiplied by 1-month LIBOR, subject to a cap of 3 multiplied by
                the
                Corresponding Interest Rate from the Swap/Cap Interest Rate Schedule
                and
                (ii) for all Distribution Dates thereafter, REMIC II Net
                WAC.

            

    

     

    
      	
              (5)

            	
              These
                REMIC II Regular Interests will have a notional principal balance
                equal to
                the principal balance of the Corresponding Class of REMIC I Regular
                Interest.

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

     

    
      	
              (6)

            	
              The
                pass-through rate for these REMIC II Regular Interests will be as
                follows:
                (i) commencing on the first Distribution Date through and including
                the
                Corresponding Maturity Date from the Swap/Cap Interest Rate Schedule,
                the
                Corresponding Interest Rate from the Swap/Cap Interest Rate Schedule
                minus
                1-Month LIBOR, subject to a floor of zero and (ii) for all Distribution
                Dates thereafter, zero.

            

    

     

    
      	
              (7)

            	
              This
                REMIC II Regular Interest will have a principal balance equal to
                the
                principal balance of the Corresponding Class of REMIC I Regular
                Interest.

            

    

     

    
      	
              (8)

            	
              The
                pass-through rate for this REMIC II Regular Interest will be equal
                to the
                REMIC II Net WAC.

            

    

     

    
      	
              (9)

            	
              The
                Class II-P Interest is entitled to all distributions on the Class
                I-P
                Interest.

            

    

     

    On
      each
      Distribution Date, all Realized Losses, prepayments and payments of scheduled
      principal generated with respect to the Mortgage Loans shall be allocated in
      the
      following order, in each case until such classes are paid in full or eliminated
      by such losses: (i) first, to the Class II-J Interest; (ii) second, pro rata,
      to
      the Class II-A1 and Class II-A2 Interests; (iii) third, pro rata, to the Class
      II-B1 and Class II-B2 Interests; (iv) fourth, pro rata, to the Class II-C1
      and
      Class II-C2 Interests; (v) fifth, pro rata, to the Class II-D1 and Class II-D2
      Interests; (vi) sixth, pro rata, to the Class II-E1 and Class II-E2 Interests;
      (vii) seventh, pro rata, to the Class II-F1 and Class II-F2 Interests; (viii)
      eighth, pro rata to the Class II-G1 and Class II-G2 Interests; (ix) ninth,
      pro
      rata, to the Class II-H1 and Class II-H2 Interests; (x) tenth, pro rata, to
      the
      Class II-K1 and Class II-K2 Interests; (xi) eleventh, pro rata, to the Class
      II-L1 and Class II-L2 Interests; (xii) twelfth, pro rata, to the Class II-M1
      and
      Class II-M2 Interests; (xiii) thirteenth, pro rata, to the Class II-O1 and
      Class
      II-O2 Interests; (xiv) fourteenth, pro rata, to the Class II-Q1 and Class II-Q2
      Interests, (xv) fifteenth, pro rata, to the Class II-S1 and Class II-S2
      Interests, (xvi) sixteenth, pro rata, to the Class II-T1 and Class II-T2
      Interests; (xvii) seventeenth, pro rata, to the Class II-U1 and Class II-U2
      Interests; (xviii) eighteenth, pro rata, to the Class II-V1 and Class II-V2
      Interests; (xix) nineteenth, pro rata, to the Class II-W1 and Class II-W2
      Interests, (xx) twentieth, pro rata, to the Class II-X1 and Class II-X2
      Interests, and (xvi) sixteenth, to the Class II-P Interest.

     

    (e) The
      REMIC
      III Regular Interests shall have the following principal balances and REMIC
      III
      Pass-Through Rates set forth in the table below:

     

    
      	
              REMIC
                III

              Interest

            	
              Initial
                Principal

              Balance

            	
              REMIC
                III Pass-Through Rate

            	
              Corresponding
                Class of REMIC IV Regular Interest

            
	
              III-Accrual

            	
              50%
                of the sum of the Pool Balance

            	
              (1)

            	
              N/A

            
	
              III-A1A

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-A1A

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	
              III-A2A1

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-A2A1

            
	
              III-A2A2

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-A2A2

            
	
              III-A2B

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-A2B

            
	
              III-A2C

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-A2C

            
	
              III-A2D

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-A2D

            
	
              III-M1

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M1

            
	
              III-M2

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M2

            
	
              III-M3

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M3

            
	
              III-M4

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M4

            
	
              III-M5

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M5

            
	
              III-M6

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M6

            
	
              III-M7

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M7

            
	
              III-M8

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M8

            
	
              III-M9

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M9

            
	
              III-M10

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M10

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	
              III-M11

            	
              50%
                of the Corresponding Class Balance

            	
              (1)

            	
              IV-M11

            
	
              III-CA

            	
              50%
                of the Corresponding Class Balance (Overcollateralization
                Amount)

            	
              (1)

            	
              IV-CA2/
                Overcollateralization Amount

            
	
              III-P

            	
              $100

            	
              (2)

            	
              IV-CA3

            
	
              III-I1

            	
              (3)

            	
              (3)

            	
              IV-I1

            
	
              III-I2

            	
              (4)

            	
              (4)

            	
              IV-I2

            
	
              III-I3

            	
              (5)

            	
              (5)

            	
              IV-I3

            

    

    

    
      	
              (1)

            	
              The
                pass-through rate for these REMIC III Regular Interests will be the
                weighted average of the pass-through rates of the Class II-A1, Class
                II-A2, Class II-B1, Class II-B2, Class II-C1, Class II-C2, Class
                II-D1,
                Class II-D2, Class II-E1, Class II-E2, Class II-F1, Class II-F2,
                Class
                II-G1, Class II-G2, Class II-H1, Class II-H2, Class II-K1, Class
                II-K2,
                Class II-L1, Class II-L2, Class II-M1, Class II-M2, Class II-O1,
                Class
                II-O2, Class II-Q1, Class II-Q2, Class II-S1, Class II-S2, Class
                II-T1,
                Class II-T2, Class II-U1, Class II-U2, Class II-V1, Class II-V2,
                Class
                II-W1, Class II-W2, Class II-X1, Class II-X2 and Class II-J
                Interests.

            

    

     

    
      	
              (2)

            	
              The
                Class III-P Interest is entitled to all distributions on the Class
                II-P
                Interest.

            

    

     

    
      	
              (3)

            	
              The
                Class III-I1 Interest will be an interest only regular interest and
                will
                be entitled to receive on each Distribution Date the sum of the amounts
                distributable on the Class II-A3, Class II-B3, Class II-C3, Class
                II-D3,
                Class II-E3, and Class II-F3 Interests on such Distribution
                Date.

            

    

     

    
      	
              (4)

            	
              The
                Class III-I2 Interest will be an interest only regular interest and
                will
                be entitled to receive on each Distribution Date the sum of the amounts
                distributable on the Class II-G3, Class II-H3, Class II-K3, Class
                II-L3,
                Class II-M3, Class II-O3, Class II-Q3, Class II-S3, Class II-T3,
                Class
                II-U3, Class II-V3, and Class II-W3 Interests on such Distribution
                Date.

            

    

     

    
      	
              (5)

            	
              The
                Class III-I3 Interest will be an interest only regular interest and
                will
                be entitled to receive on each Distribution Date the sum of the amounts
                distributable on the Class II-X3 Interest on such Distribution
                Date.

            

    

     

    On
      each
      Distribution Date, 50% of the increase in the Over-collateralization Amount
      will
      be payable as a reduction of the principal balances of the Class III-A1A, Class
      III-A2A1, Class III-A2A2, Class III-A2B, Class III-A2C, Class III-A2D, Class
      III-M1, Class III-M2, Class III-M3, Class III-M4, Class III-M5, Class III-M6,
      Class III-M7, Class III-M8, Class III-M9, Class III-M10, Class III-M11, and
      Class III-CA Interests (in the order and relative amount of such reduction
      to
      the principal balance of each class's Corresponding Class of Master REMIC
      Certificates) and will be accrued and added to the principal balances of the
      Class III-Accrual Interest. On each Distribution Date, the increase in the
      principal balance of the Class III-Accrual Interest may not exceed interest
      accruals for such Distribution Date for the respective Class III-Accrual
      Interests. In the event that (i) 50% of the increase in the related
      Overcollateralization Amount exceeds (ii) interest accruals on the related
      Class
      III-Accrual Interest for such Distribution Date, the excess for such
      Distribution Date (accumulated with all such excesses for all prior Distribution
      Dates) will be added to any increase in the Overcollateralization Amount for
      purposes of determining the amount of interest accrual on the related Class
      III-Accrual Interest payable as principal on the related Class III-Accrual
      Interest on the next Distribution Date pursuant to the first sentence of this
      paragraph.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    

     

    All
      payments of scheduled principal and prepayments of principal shall be allocated
      as follows: (i) first, 50% to the Class III-Accrual Interest and (ii) second,
      50% to the Class III-A1A, Class III-A2A1, Class III-A2A2, Class III-A2B, Class
      III-A2C, Class III-A2D, Class III-M1, Class III-M2, Class III-M3, Class III-M4,
      Class III-M5, Class III-M6, Class III-M7, Class III-M8, Class III-M9, Class
      III-M10, Class III-M11, and Class III-CA Interests (to each such Class in an
      amount equal to 1/2 of the principal paid in reduction of the principal balance
      of the Corresponding Class of Master REMIC Certificates) until paid in full.
      Notwithstanding the above, principal payments allocated to the Class CA
      Certificates that result in the reduction of the Overcollateralization Amount
      shall be allocated 50% to the Class III-Accrual Interest and 50% to the Class
      III-CA Interest until such classes are paid in full. Realized Losses shall
      be
      applied so that after all distributions have been made on each Distribution
      Date
      the principal balances of the Class III-A1A, Class III-A2A1, Class III-A2A2,
      Class III-A2B, Class III-A2C, Class III-A2D, Class III-M1, Class III-M2, Class
      III-M3, Class III-M4, Class III-M5, Class III-M6, Class III-M7, Class III-M8,
      Class III-M9, Class III-M10, and Class III-M11 Interests are each equal to
      50%
      of the principal balance of its Corresponding Class of Master REMIC Certificates
      and the Class III-Accrual Interest is equal to 50% of the sum of the Pool
      Balance.

     

    (f) The
      REMIC
      IV Regular Interests shall have the following principal balances, REMIC IV
      Pass-Through Rates and Corresponding Classes of REMIC V Certificates, as set
      forth in the table below:

     

    
      	
              REMIC
                IV Interest

            	
              Initial
                

              Principal

              Balance

            	
              REMIC
                IV

              Pass-Through

              Rate

            	
              Corresponding
                Class of 

              REMIC
                V Regular Interest

            
	
              IV-A1A

            	
              $803,560,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-A1A

            
	
              IV-A2A1

            	
              $262,665,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-A2A1

            
	
              IV-A2A2

            	
              $100,000,000

            	
              LIBOR
                + Certificate Margin (1)

            	
              V-A2A2

            
	
              IV-A2B

            	
              $131,454,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-A2B

            
	
              IV-A2C

            	
              $125,575,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-A2C

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
              IV-A2D

            	
              $39,920,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-A2D

            
	
              IV-M1

            	
              $100,108,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M1

            
	
              IV-M2

            	
              $84,053,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M2

            
	
              IV-M3

            	
              $26,444,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M3

            
	
              IV-M4

            	
              $37,777,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M4

            
	
              IV-M5

            	
              $32,110,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M5

            
	
              IV-M6

            	
              $19,833,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M6

            
	
              IV-M7

            	
              $21,721,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M7

            
	
              IV-M8

            	
              $14,166,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M8

            
	
              IV-M9

            	
              $18,888,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M9

            
	
              IV-M10

            	
              $13,222,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M10

            
	
              IV-M11

            	
              $18,888,000

            	
              the
                lesser of (i) 11% and (ii) LIBOR + Certificate Margin (1)

            	
              V-M11

            
	
              IV-CA1

            	
              (2)

            	
              (2)

            	
              V-CA
                and V-CB

            
	
              IV-CA2

            	
              $43,442,995

            	
              (3)

            	
              V-CA
                (Overcollateralization Amount)

            
	
              IV-CA3

            	
              $100

            	
              (4)

            	
              V-CA

              (Prepayment
                Premuims)

            
	
              IV-I1

            	
              (5)

            	
              (5)

            	
              V-I1

            
	
              IV
                I2

            	
              (6)

            	
              (6)

            	
              V-I2

            
	
              IV
                I3

            	
              (7)

            	
              (7)

            	
              V-I3

            

    

     

    
      	
              (1)

            	
              Subject
                to the REMIC Available Funds Cap.

            

    

     

    
      	
              (2)

            	
              The
                Class IV-CA1 Interest will be an interest only regular interest.
                The Class
                IV-CA1 Interest will bear interest on its notional principal balance.
                The
                Class IV-CA1 Interest will have a notional principal balance equal
                to the
                Pool Balance. The REMIC IV Pass-Through Rate for the Class IV-CA1
                Interest
                will be the excess of: (I) the weighted average of the pass-through
                rates
                on the REMIC IV Regular Interests (other than the Class IV-I1, Class
                IV-I2
                and Class IV-I3 Interests) over (II) the product of: (A) two and
                (B) the
                weighted average pass-through rate of the REMIC IV Regular Interests
                (other than the Class IV-I1, Class IV-I2 and Class IV-I3 Interests)
                where
                the Class IV-Accrual Interest and the Class IV-CA Interest are subject
                to
                a cap equal to zero, and the remaining classes are subject to a cap
                equal
                to the REMIC V Pass-Through Rates on their respective Corresponding
                Class
                of REMIC V Regular Interests.

            

    

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    

     

    
      	
              (3)

            	
              The
                Class IV-CA2 Interest will not be entitled to any payments of
                interest.

            

    

     

    
      	
              (4)

            	
              The
                Class IV-CA3 Interest is entitled to all distributions on the Class
                III-P
                Interest.

            

    

     

    
      	
              (5)

            	
              The
                Class IV-I1 Interest will be an interest only regular interest and
                will be
                entitled to receive on each Distribution Date all distributions on
                the
                Class III-I1 Interest.

            

    

     

    
      	
              (6)

            	
              The
                Class IV-I2 Interest will be an interest only regular interest and
                will be
                entitled to receive on each Distribution Date all distributions on
                the
                Class III-I2 Interest.

            

    

     

    
      	
              (7)

            	
              The
                Class IV-I3 Interest will be an interest only regular interest and
                will be
                entitled to receive on each Distribution Date all distributions on
                the
                Class III-I3 Interest.

            

    

     

    On
      each
      Distribution Date, all Realized Losses, prepayments and payments of scheduled
      principal generated with respect to the Mortgage Loans shall be allocated to
      each REMIC IV Regular Interest and reduce the principal balance thereof in
      the
      order and relative amount of such reduction to the principal balance of each
      class's Corresponding Class of REMIC V Certificates.

     

    (g) The
      REMIC
      V Regular Interests shall have the following principal balances, REMIC V
      Pass-Through Rates and Corresponding Classes of Master REMIC Certificates,
      as
      set forth in the table below:

     

    
      	
              REMIC
                V Interest

            	
              Initial
                

              Principal

              Balance

            	
              REMIC
                V

              Pass-Through

              Rate

            	
              Corresponding
                Class of Master REMIC Certificates

            
	
              V-A1A

            	
              $803,560,000

            	
              (1)

            	
              A-1A

            
	
              V-A2A1

            	
              $262,665,000

            	
              (1)

            	
              A-2A1

            
	
              V-A2A2

            	
              $100,000,000

            	
              (1)

            	
              A-2A2

            
	
              V-A2B

            	
              $131,454,000

            	
              (1)

            	
              A-2B

            
	
              V-A2C

            	
              $125,575,000

            	
              (1)

            	
              A-2C

            
	
              V-A2D

            	
              $34,920,000

            	
              (1)

            	
              A-2D

            
	
              V-M1

            	
              $100,108,000

            	
              (1)

            	
              M-1

            
	
              V-M2

            	
              $84,053,000

            	
              (1)

            	
              M-2

            
	
              V-M3

            	
              $26,444,000

            	
              (1)

            	
              M-3

            
	
              V-M4

            	
              $37,777,000

            	
              (1)

            	
              M-4

            
	
              V-M5

            	
              $32,110,000

            	
              (1)

            	
              M-5

            
	
              V-M6

            	
              $19,833,000

            	
              (1)

            	
              M-6

            
	
              V-M7

            	
              $21,721,000

            	
              (1)

            	
              M-7

            
	
              V-M8

            	
              $14,166,000

            	
              (1)

            	
              M-8

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
              V-M9

            	
              $18,888,000

            	
              (1)

            	
              M-9

            
	
              V-M10

            	
              $13,222,000

            	
              (1)

            	
              M-10

            
	
              V-M11

            	
              $18,888,000

            	
              (1)

            	
              M-11

            
	
              V-CA1
                

            	
              (2)

            	
              (1)

            	
              CA
                and CB

            
	
              V-CA2
                

            	
              $43,442,995

            	
              (1)

            	
              CA
                (Overcollateralization Amount)

            
	
              V-CA3

            	
              $100

            	
              (1)

            	
              CA

              (Prepayment
                Premiums)

            
	
              V-I1

            	
              (2)

            	
              (1)

            	
              I-1

            
	
              V
                I2

            	
              (2)

            	
              (1)

            	
              I-2

            
	
              V
                I3

            	
              (2)

            	
              (1)

            	
              I-3

            

    

     

    (1) These
      REMIC V Regular Interests are entitled to all distributions on their respective
      Corresponding Class of REMIC IV Regular Interest.

     

    (2) These
      REMIC V Regular Interests will have a notional principal balance equal to the
      notional principal balance on their respective Corresponding Class of REMIC
      IV
      Regular Interest.

     

    On
      each
      Distribution Date, all Realized Losses, prepayments and payments of scheduled
      principal generated with respect to the Mortgage Loans shall be allocated to
      each REMIC V Regular Interest and reduce the principal balance thereof in the
      order and relative amount of such reduction to the principal balance of each
      class's Corresponding Class of Master REMIC Certificates.

     

    (h) The
      following table sets forth characteristics of the Certificates, each of which
      (other than the Class R Certificates and, with respect to the Class A
      Certificates and Class M Certificates, other than its corresponding Cap Contract
      Rights) is hereby designated as a "regular interest" in the Master
      REMIC:

     

    
      	
              Class
                of Certificates

            	
              Initial
                Certificate

              Principal

              Balance

            	
              REMIC

              Pass-Through

              Rate

            	
              Corresponding
                Class of REMIC V Regular Interest

            
	
              Class
                A-1A

            	
              $803,560,000

            	
              (1)

            	
              V-A1A

            
	
              Class
                A-2A1

            	
              $262,665,000

            	
              (1)

            	
              V-A2A1

            
	
              Class
                A-2A2

            	
              $100,000,000

            	
              (1)

            	
              V-A2A2

            
	
              Class
                A-2B

            	
              $131,454,000

            	
              (1)

            	
              V-A2B

            
	
              Class
                A-2C

            	
              $125,575,000

            	
              (1)

            	
              V-A2C

            
	
              Class
                A-2D

            	
              $34,920,000

            	
              (1)

            	
              V-A2D

            
	
              Class
                M-1

            	
              $100,108,000

            	
              (1)

            	
              V-M1

            
	
              Class
                M-2

            	
              $84,053,000

            	
              (1)

            	
              V-M2

            
	
              Class
                M-3

            	
              $26,444,000

            	
              (1)

            	
              V-M3

            
	
              Class
                M-4

            	
              $37,777,000

            	
              (1)

            	
              V-M4

            
	
              Class
                M-5

            	
              $32,110,000

            	
              (1)

            	
              V-M5

            
	
              Class
                M-6

            	
              $19,833,000

            	
              (1)

            	
              V-M6

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
              Class
                M-7

            	
              $21,721,000

            	
              (1)

            	
              V-M7

            
	
              Class
                M-8

            	
              $14,166,000

            	
              (1)

            	
              V-M8

            
	
              Class
                M-9

            	
              $118,888,000

            	
              (1)

            	
              V-M9

            
	
              Class
                M-10

            	
              $13,222,000

            	
              (1)

            	
              V-M10

            
	
              Class
                M-11

            	
              $18,888,000

            	
              (1)

            	
              V-M11

            
	
              Class
                CA-1 (2)

            	
              (3)

            	
              (4)

            	
              V-CA1

            
	
              Class
                CA-2 (2)

            	
              (5)

            	
              (1)

            	
              V-CA2

            
	
              Class
                CA-3 (2)

            	
              $100

            	
              (1)

            	
              V-CA3

            
	
              Class
                CB

            	
              (3)

            	
              (6)

            	
              V-CA1

            
	
              Class
                I-1

            	
              (7)

            	
              (7)

            	
              V-I1

            
	
              Class
                I-2

            	
              (8)

            	
              (8)

            	
              V-I2

            
	
              Class
                I-3

            	
              (9)

            	
              (9)

            	
              V-I3

            
	
              Class
                R

            	
              (10)

            	
              (10)

            	 

    

    

    
      	
              (1)

            	
              These
                Master REMIC Regular Interests are entitled to all distributions
                on their
                respective Corresponding Class of REMIC V Regular
                Interest.

            

    

     

    
      	
              (2)

            	
              The
                Class CA Certificates will represent three regular interests in the
                Master
                REMIC, the Class CA-1, Class CA-2 and Class CA-3
                Interest.

            

    

     

    
      	
              (3)

            	
              These
                Master REMIC Regular Interests will have a notional principal balance
                equal to the notional principal balance on their respective Corresponding
                Class of REMIC V Regular Interest. 

            

    

     

    
      	
              (4)

            	
              For
                each Distribution Date, the REMIC Pass-Through Rate for Class CA-1
                Interest will equal the excess, if any, of (i) the REMIC V Pass-Through
                Rate on the Class V-CA1 Interest over (ii) the Corresponding Interest
                Rate
                Strip from the Class CB Certificate Schedule.

            

    

     

    
      	
              (5)

            	
              The
                Class CA-2 Interest will have a principal balance equal to the principal
                balance on its Corresponding Class of REMIC V Regular
                Interest.

            

    

     

    
      	
              (6)

            	
              For
                each Distribution Date, the REMIC Pass-Through Rate for the Class
                CB
                Certificate will equal the lesser of (i) the REMIC V Pass-Through
                Rate on
                the Class V-CA1 Interest and (ii) the Corresponding Interest Rate
                Strip
                from the Class CB Certificate
                Schedule.

            

    

     

    
      	
              (7)

            	
              The
                Class I-1 Certificates will be an interest only regular interest
                and will
                be entitled to receive on each Distribution Date all distributions
                on the
                Class V-I1 Interest.

            

    

     

    
      	
              (8)

            	
              The
                Class I-2 Certificates will be an interest only regular interest
                and will
                be entitled to receive on each Distribution Date all distributions
                on the
                Class V-I2 Interest.

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

     

    
      	
              (9)

            	
              The
                Class I-3 Certificates will be an interest only regular interest
                and will
                be entitled to receive on each Distribution Date all distributions
                on the
                Class V-I3 Interest.

            

    

     

    
      	
              (10)

            	
              The
                Class R Certificates will represent the beneficial ownership of the
                R-I,
                R-II, R-III, R-IV, R-V and R-VI Interests. On each Distribution Date,
                available funds, if any, remaining in any of the REMICs after payments
                of
                interest and principal, as designated above, will be distributed
                to the
                Class R Certificate. It is expected that there shall not be any
                distributions on the Class R
                Certificate.

            

    

     

    (i) For
      federal income tax purposes, the "latest possible maturity date" for each of
      the
      REMIC I Regular Interests, REMIC II Regular Interests, REMIC III Regular
      Interests (other than the Class III-I1, Class III-I2, Class III-I3 Interests),
      REMIC IV Regular Interests (other than the Class IV-I1, Class IV-I2, Class
      IV-I3
      Interests), REMIC V Regular Interests (other than the Class V-I1, Class V-I2,
      and Class V-I3 Interests) and Master REMIC Regular Interests (other than the
      Class I1, Class I2 and Class I3 Certificates) is hereby set to be the
      Distribution Date of March 25, 2037. The "latest possible maturity date" for
      the
      Class IV-I1 Interest, the Class V-I1 Interest and the Class I1 Certificates
      is
      hereby set to be the Distribution Date of December 2008. The "latest possible
      maturity date" for the Class IV-I2 Interest, the Class V-I2 Interest and the
      Class I2 Certificates is hereby set to be the Distribution Date of December
      2009. The "latest possible maturity date" for the Class IV-I3 Interest, the
      Class V-I3 Interest and the Class I3 Certificates is hereby set to be the
      Distribution Date of January 2010.

     

    (j) NovaStar
      Financial Inc. ("NFI") is hereby designated as the "Tax Interests Registrar"
      for
      the purposes of maintaining a register of the tax ownership of all
      uncertificated Master REMIC Regular Interests. NFI, in such capacity, shall
      maintain a book-entry register reflecting such tax ownership and shall transfer
      tax ownership of such uncertificated Master REMIC Regular Interests at the
      request of the then-registered owner. The Tax Interests Registrar shall request
      such documentation in connection with any such transfer as it shall deem
      appropriate.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

     

    Exhibit
      K

    

    Form
      of Advance Facility Notice

     

    [date]

     

    Deutsche
      Bank National Trust Company

    1761
      East
      St. Andrew Place

    Santa
      Ana, California 92705

    Attention:
      Trust Administration - NS0701

     

    
      	 	
              Re:

            	
              Advance
                Facility Notice

            

    

     

    Ladies
      and Gentlemen: Reference is hereby made to that certain Pooling
      and Servicing Agreement, dated as of February 1, 2007, by and among NovaStar
      Mortgage Funding Corporation (the “Depositor”), NovaStar Mortgage, Inc., as
      sponsor and servicer
      (the “Sponsor” or “Servicer”), U.S. Bank National Association, as custodian (the
“Custodian”) and Deutsche Bank National Trust Company, as trustee (the
“Trustee”) (the “Agreement”). Capitalized
      terms used herein but not defined herein shall have the meanings given to such
      terms in the Agreement.

     

    Pursuant
      to Section 3.27(a) of the Agreement, the undersigned hereby notify you as
      follows:

     

    
      	 	
              (i)

            	
              The
                Servicer has entered into an Advance
                Facility.

            

    

     

    
      	 	
              (ii)

            	
              The
                Advancing Person with respect to the Advance Facility is
                [_______].

            

    

     

    
      	 	
              (iii)

            	
              The
                Servicer’s Assignee with respect to the Advance Facility is
                [_______].

            

    

     

    
      	 	
              (iv)

            	
              Pursuant
                to the Advance Facility, the Servicer’s Assignee will grant one or more
                Loans to the Servicer as borrower, and the Servicer as borrower will
                use
                the proceeds thereof to fund, or be reimbursed for, one or more Advances
                and/or Servicing Advances made by it pursuant to the
                Agreement.

            

    

     

    
      	 	
              (v)

            	
              [_______],
                as the Servicer’s Assignee, has the right to make withdrawals from the
                Collection Account subject to Section 3.27(b) of the Agreement to
                reimburse previously unreimbursed Advances and/or Servicing Advances
                pursuant to Section 3.07 of the
                Agreement.

            

    

     

    [Remainder
      of Page Intentionally Left Blank]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    
      	 	 	 	 
	 	 	Very truly yours,
	 	 	 
	 	 	
              NOVASTAR
                MORTGAGE INC.
as Servicer

            
	 	 	 	 
	
            	 	
              
                By:

              

            	 
	
            	 	 	
              

              Name:

            
	
            	 	 	
              Title:

            
	 	 	 	 
	 	 	
              [__________________]

            
	 	 	as Advancing Person
	 	 	 	 
	 	 	
              By:

            	 
	 	 	 	
              

              Name:

            
	 	 	 	
              Title:

            

    

     

    The
      undersigned hereby acknowledges receipt of this notice pursuant to Section
      3.27(a) of the Agreement.

     

    
      	
              DEUTSCHE
                BANK NATIONAL TRUST 
COMPANY, not
                in its individual capacity but 
solely as
                Trustee 

            	 	 	 
	
               

               

            	 	 	 	 
	By:  	
            	 	 	 
	 	
              

              Name:

            	 	 	
            
	 	Title:
	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      L

     

    SERVICING
      CRITERIA TO BE ADDRESSED IN 

    ASSESSMENT
      OF COMPLIANCE

    

    Where
      there are multiple checks for criteria the attesting party will identify in
      their management assertion that they are attesting only to the portion of the
      payment chain they are responsible for in the related transaction
      agreements.

     

    Key:
      X - obligation

     

    
      	
              Reg
                AB Reference

            	 	
              Servicing
                Criteria 

            	 	
              Servicer

            	 	
              Trustee
                

            	 	
              Custodian

            
	 	 	
              General
                Servicing Considerations

            	 	 	 	 	 	 
	
              1122(d)(1)(i)

            	 	
              Policies
                and procedures are instituted
                to monitor any performance
                or other triggers and events
                of default in accordance with the
                transaction agreements.

            	 	
              X

            	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(1)(ii)

            	 	
              If
                any material servicing activities are
                outsourced to third parties, policies
                and procedures are instituted
                to monitor the third party's
                performance and compliance with
                such servicing activities.

            	 	
              If
                applicable

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(1)(iii)

            	 	
              Any
                requirements in the transaction agreements
                to maintain a back-up servicer
                for the Pool Assets are maintained.

            	 	
              If
                become contractually obligated

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(1)(iv)

            	 	
              A
                fidelity bond and errors and omissions
                policy is in effect on the party
                participating in the servicing function
                throughout the reporting period
                in the amount of coverage required
                by and otherwise in accordance
                with the terms of the transaction
                agreements.

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
              Cash
                Collection and Administration

            	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(2)(i)

            	 	
              Payments
                on pool assets are deposited
                into the appropriate custodial
                bank accounts and related bank
                clearing accounts no more than two
                business days following receipt, or
                such other number of days specified
                in the transaction agreements.

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(2)(ii)

            	 	
              Disbursements
                made via wire transfer
                on behalf of an obligor or to an
                investor are made only by authorized
                personnel

            	 	
              X

            	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(2)(iii)

            	 	
              Advances
                of funds or guarantees regarding
                collections, cash flows or payments,
                and any interest or other
                fees charged for such advances,
                are made, reviewed and approved
                as specified in the transaction
                agreements.

            	 	
              X

            	 	 	 	 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
              Reg
                AB Reference

            	 	
              Servicing
                Criteria 

            	 	
              Servicer

            	 	
              Trustee
                

            	 	
              Custodian

            

    

    
      	
              1122(d)(2)(iv)

            	 	
              The
                related accounts for the transaction, such as cash reserve accounts
                or
                accounts established as a form of over collateralization, are separately
                maintained (e.g., with respect to commingling of cash) as set forth
                in the
                transaction agreements.

            	 	
              X

            	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(2)(v)

            	 	
              Each
                custodial account is maintained
                at a federally insured depository
                institution as set forth in the
                transaction agreements. For purposes
                of this criterion, "federally insured
                depository institution" with respect
                to a foreign financial institution
                means a foreign financial institution
                that meets the requirements
                of Rule 13k-1(b)(1) of the
                Securities Exchange Act.

            	 	
              X

            	 	
              X*

            	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(2)(vi)

            	 	
              Unissued
                checks are safeguarded so as
                to prevent unauthorized access

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(2)(vii)

            	 	
              Reconciliations
                are prepared on a monthly basis for all asset-backed securities related
                bank accounts, including custodial accounts and related bank clearing
                accounts. These reconciliations are (A) mathematically accurate;
                (B)
                prepared within 30 calendar days after the bank statement cutoff
                date, or
                such other number of days specified in the transaction agreements;
                (C)
                reviewed and approved by someone other than the person who prepared
                the
                reconciliation; and (D) contain explanations for reconciling items.
                These
                reconciling items are resolved within 90 calendar days of their original
                identification, or such other number of days specified in the transaction
                agreements.

            	 	
              X

            	 	
              X

            	 	 

    

     

      *
        The
        Trustee need only provide if it is determined that any account maintained
        by the
        Trustee is a custodial account for purposes of the Servicing Criteria. This
        item
        is subject to further clarification from the SEC.

       

      
        
          
          

        

        
          L-2

          
            

          

        

        
          
          

        

         

      

      
        	
                Reg
                  AB Reference

              	 	
                Servicing
                  Criteria 

              	 	
                Servicer

              	 	
                Trustee
                  

              	 	
                Custodian

              

      

    

    
      	 	 	
              Investor
                Remittances and Reporting

            	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(3)(i)

            	 	
              Reports
                to investors, including those to be filed with the Commission, are
                maintained in accordance with the transaction agreements and applicable
                Commission requirements. Specifically, such reports (A) are prepared
                in
                accordance with timeframes and other terms set forth in the transaction
                agreements; (B) provide information calculated in accordance with
                the
                terms specified in the transaction agreements; (C) are filed with
                the
                Commission as required by its rules and regulations; and (D) agree
                with
                investors' or the trustee's records as to the total unpaid principal
                balance and number of Pool Assets serviced by the
                Servicer.

            	 	
              X

            	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(3)(ii)

            	 	
              Amounts
                due to investors are allocated
                and remitted in accordance with
                timeframes, payment priority
                and other terms set forth in the
                transaction agreements.

            	 	
              X

            	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(3)(iii)

            	 	
              Disbursements
                made to an investor are
                posted within two business days to
                the Servicer's investor records, or such
                other number of days specified in
                the transaction agreements.

            	 	
              X

            	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(3)(iv)

            	 	
              Amounts
                remitted to investors per the
                investor reports agree with cancelled
                checks, or other form of payment,
                or custodial bank statements.

            	 	
              X

            	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
              Pool
                Asset Administration

            	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(i)

            	 	
              Collateral
                or security on pool assets is
                maintained as required by the transaction
                agreements or related pool
                asset documents.

            	 	
              X

            	 	 	 	
              X

            
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(ii)

            	 	
              Pool
                assets and related documents are
                safeguarded as required by the transaction
                agreements

            	 	 	 	 	 	
              X

            
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(iii)

            	 	
              Any
                additions, removals or substitutions
                to the asset pool are made,
                reviewed and approved in accordance
                with any conditions or requirements
                in the transaction agreements.

            	 	
              X

            	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(iv)

            	 	
              Payments
                on pool assets, including any
                payoffs, made in accordance with
                the related pool asset documents
                are posted to the Servicer's
                obligor records maintained
                no more than two business
                days after receipt, or such other
                number of days specified in the
                transaction agreements, and allocated
                to principal, interest or other
                items (e.g., escrow) in accordance
                with the related pool asset
                documents.

            	 	
              X

            	 	 	 	 

    

     

    
      
        
        

      

      
        L-3

        
          

        

      

      
        
        

      

    

     

    
      	
              Reg
                AB Reference

            	 	
              Servicing
                Criteria 

            	 	
              Servicer

            	 	
              Trustee
                

            	 	
              Custodian

            

    

    
      	
              1122(d)(4)(v)

            	 	
              The
                Servicer's records regarding the pool
                assets agree with the Servicer's records
                with respect to an obligor's unpaid
                principal balance.

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(vi)

            	 	
              Changes
                with respect to the terms or status
                of an obligor's pool assets (e.g.,
                loan modifications or reagings) are
                made, reviewed and approved
                by authorized personnel in accordance
                with the transaction agreements
                and related pool asset documents.

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(vii)

            	 	
              Loss
                mitigation or recovery actions (e.g.,
                forbearance plans, modifications
                and deeds in lieu of foreclosure,
                foreclosures and repossessions,
                as applicable) are initiated,
                conducted and concluded in
                accordance with the timeframes or
                other requirements established by the
                transaction agreements.

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(viii)

            	 	
              Records
                documenting collection efforts
                are maintained during the period
                a pool asset is delinquent in accordance
                with the transaction agreements.
                Such records are maintained
                on at least a monthly basis,
                or such other period specified in
                the transaction agreements, and describe
                the entity's activities in monitoring
                delinquent pool assets including,
                for example, phone calls, letters
                and payment rescheduling plans
                in cases where delinquency is deemed
                temporary (e.g., illness or unemployment).

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(ix)

            	 	
              Adjustments
                to interest rates or rates of return for pool assets with variable
                rates
                are computed based on the related pool asset documents.

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(x)

            	 	
              Regarding
                any funds held in trust for an obligor (such as escrow accounts):
                (A) such
                funds are analyzed, in accordance with the obligor's pool asset documents,
                on at least an annual basis, or such other period specified in the
                transaction agreements; (B) interest on such funds is paid, or credited,
                to obligors in accordance with applicable pool asset documents and
                state
                laws; and (C) such funds are returned to the obligor within 30 calendar
                days of full repayment of the related pool assets, or such other
                number of
                days specified in the transaction agreements.

            	 	
              X

            	 	 	 	 

    

     

    
      
        
        

      

      
        L-4

        
          

        

      

      
        
        

      

    

     

    
      	
              Reg
                AB Reference

            	 	
              Servicing
                Criteria 

            	 	
              Servicer

            	 	
              Trustee
                

            	 	
              Custodian

            

    

    
      	
              1122(d)(4)(xi)

            	 	
              Payments
                made on behalf of an obligor (such as tax or insurance payments)
                are made
                on or before the related penalty or expiration dates, as indicated
                on the
                appropriate bills or notices for such payments, provided that such
                support
                has been received by the servicer at least 30 calendar days prior
                to these
                dates, or such other number of days specified in the transaction
                agreements.

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(xii)

            	 	
              Any
                late payment penalties in connection with any payment to be made
                on behalf
                of an obligor are paid from the Servicer's funds and not charged
                to the
                obligor, unless the late payment was due to the obligor's error or
                omission.

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(xiii)

            	 	
              Disbursements
                made on behalf of an obligor are posted within two business days
                to the
                obligor's records maintained by the servicer, or such other number
                of days
                specified in the transaction agreements.

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(xiv)

            	 	
              Delinquencies,
                charge-offs and uncollectible accounts are recognized and recorded
                in
                accordance with the transaction agreements.

            	 	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	
              1122(d)(4)(xv)

            	 	
              Any
                external enhancement or other support, identified in Item 1114(a)(1)
                through (3) or Item 1115 of Regulation AB, is maintained as set forth
                in
                the transaction agreements.

            	 	
              X

            	 	 	 	 

    

     

    
      
        
        

      

      
        L-5

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      M

     

    FORM
      10-D, FORM 8-K AND FORM 10-K

    REPORTING
      RESPONSIBILITY

     

    As
      to
      each item described below, the entity indicated as the Responsible Party shall
      be primarily responsible for reporting the information to the party identified
      as responsible for preparing the Securities Exchange Act Reports pursuant to
      Section 3.18 of the Pooling and Servicing Agreement.

     

    Under
      Item 1 of Form 10-D: a) items marked "4.03 statement" are required to be
      included in the periodic reports prepared by the Trustee under Section 4.03
      of
      the Pooling and Servicing Agreement, provided by the Trustee based on
      information received from the Servicer; and b) items marked "Form 10-D report"
      are required to be in the Form 10-D report but not the 4.03 statement, provided
      by the party indicated. Information under all other Items of Form 10-D is to
      be
      included in the Form 10-D report. All such information and any other Items
      of
      Form 8-K and Form 10-K set forth in this exhibit shall be sent to the Trustee
      and the Depositor.

    
       

      
        	
                Form
                  

              	
                Item
                  

              	
                Description
                  

              	
                Servicer

              	
                Trustee
                  

              	 	
                Depositor
                  

              	
                Sponsor

              	
                Custodian

              
	
                10-D

              	
                Must
                  be filed within 15 days of the payment date for the asset-backed
                  securities.

              	 	 	 
	 	
                1

              	
                Payment
                  and Pool Performance Information

              	 	 	 	 	 	 
	
                Item
                  1121(a) - payment and Pool Performance Information

              	 	 	 	 	 	 
	
                (1)
                  Any applicable record dates, accrual dates, determination dates
                  for
                  calculating payments and actual payment dates for the payment
                  period.

              	 	
                X

                 

                (4.03
                  Statement)

              	 	 	 	 
	
                (2)
                  Cash flows received and the sources thereof for payments, fees
                  and
                  expenses.

              	
                X

              	
                X

                 

                (4.03
                  Statement)

              	 	 	 	 

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

        
          	
                  Form

                	
                  Item

                	
                  Description

                	
                  Servicer

                	
                  Trustee

                	 	
                  Depositor

                	
                  Sponsor

                	
                  Custodian

                
	 	 	
                  (3)
                    Calculated amounts and payment of the flow of funds for the period
                    itemized by type and priority of payment, including:

                   

                	
                  X

                	
                  X

                   

                  (4.03
                    Statement)

                	 	 	 	 
	
                  (i)
                    Fees or expenses accrued and paid, with an identification of
                    the general
                    purpose of such fees and the party receiving such fees or
                    expenses.

                   

                	
                  X

                	
                  X

                   

                  (4.03
                    Statement)

                	 	 	 	 
	
                  (ii)
                    Payments accrued or paid with respect to enhancement or other
                    support
                    identified in Item 1114 of Regulation AB (such as insurance premiums
                    or
                    other enhancement maintenance fees), with an identification of
                    the general
                    purpose of such payments and the party receiving such
                    payments.

                	
                  X

                	
                  X

                   

                  (4.03
                    Statement)

                	 	 	 	 

        

      

       

      
        
          
          

        

        
          M-2

          
            

          

        

        
          
          

        

      

       

      
        
          	
                  Form

                	
                  Item

                	
                  Description

                	
                  Servicer

                	
                  Trustee

                	
                   

                	
                  Depositor

                	
                  Sponsor

                	
                  Custodian

                
	 	 	
                  (iii)
                    Principal, interest and other payments accrued and paid on the
                    asset-backed securities by type and by class or series and any
                    principal
                    or interest shortfalls or carryovers.

                	 	
                  X

                   

                  (4.03
                    Statement)

                	 	 	 	 
	 	 	 	 	 	 	 
	
                   

                	
                  (iv)
                    The amount of excess cash flow or excess spread and the disposition
                    of
                    excess cash flow.

                	
                  X

                   

                  (4.03
                    Statement)

                	 	 	 	 
	 	 	 	 	 	 	 	 
	 	
                   

                	(4)
                  Beginning and ending principal balances of the asset-backed
                  securities.	
                  X

                   

                  (4.03
                    Statement)

                	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  (5)
                    Interest rates applicable to the pool assets and the asset-backed
                    securities, as applicable. Consider providing interest rate information
                    for pool assets in appropriate distributional groups or incremental
                    ranges.

                	
                  X

                	
                  X

                   

                  (4.03
                    Statement)

                	 	 	 	 

        

      

       

      
        
          
          

        

        
          M-3

          
            

          

        

        
          
          

        

         

        
          
            	
                    Form

                  	
                    Item

                  	
                    Description

                  	
                    Servicer

                  	
                    Trustee

                  	
                     

                  	
                    Depositor

                  	
                    Sponsor

                  	
                    Custodian

                  
	 	 	
                    (6)
                      Beginning and ending balances of transaction accounts, such
                      as reserve
                      accounts, and material account activity during the period.

                  	
                    X

                  	
                    X

                     

                    (4.03
                      Statement)

                  	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                    (7)
                      Any amounts drawn on any credit enhancement or other support
                      identified in
                      Item 1114 of Regulation AB, as applicable, and the amount of
                      coverage
                      remaining under any such enhancement, if known and
                      applicable.

                  	 	
                    X

                     

                    (4.03
                      Statement)

                  	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                    (8)
                      Number and amount of pool assets at the beginning and ending
                      of each
                      period, and updated pool composition information, such as weighted
                      average
                      coupon, weighted average remaining term, pool factors and prepayment
                      amounts.

                  	
                    X

                  	
                    X

                     

                    (4.03
                      Statement)

                  	 	
                    Updated
                      pool composition information fields to be as specified by Depositor
                      from
                      time to time

                  	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                    (9)
                      Delinquency and loss information for the period.

                  	
                    X

                  	
                    X

                     

                    (4.03
                      Statement)

                  	 	 	 	 

          

        

      

       

      
        
          
          

        

        
          M-4

          
            

          

        

        
          
          

        

      

       

      
        
          	
                  Form

                	
                  Item

                	
                  Description

                	
                  Servicer

                	
                  Trustee

                	
                   

                	
                  Depositor

                	
                  Sponsor

                	
                  Custodian

                
	 	 	
                  In
                    addition, describe any material changes to the information specified
                    in
                    Item 1100(b)(5) of Regulation AB regarding the pool assets.
                    (methodology)

                	
                  X

                	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  (10)
                    Information on the amount, terms and general purpose of any advances
                    made
                    or reimbursed during the period, including the general use of
                    funds
                    advanced and the general source of funds for
                    reimbursements.

                	
                  X

                	
                  X

                   

                  (4.03
                    Statement)

                	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  (11)
                    Any material modifications, extensions or waivers to pool asset
                    terms,
                    fees, penalties or payments during the payment period or that
                    have
                    cumulatively become material over time.

                	
                  X

                	 	 	
                  X

                	
                  X

                	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  (12)
                    Material breaches of pool asset representations or warranties
                    or
                    transaction covenants.

                	
                  X

                	 	 	
                  X

                	
                  X

                	 

 

      

      
        
          
          

        

        
          M-5

          
            

          

        

        
          
          

        

      

       

      
        
          	
                  Form

                	
                  Item

                	
                  Description

                	
                  Servicer

                	
                  Trustee

                	
                   

                	
                  Depositor

                	
                  Sponsor

                	
                  Custodian

                
	 	 	
                  (13)
                    Information on ratio, coverage or other tests used for determining
                    any
                    early amortization, liquidation or other performance trigger
                    and whether
                    the trigger was met.

                	
                  X

                	
                  X

                   

                  (4.03
                    Statement)

                	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  (14)
                    Information regarding any new issuance of asset-backed securities
                    backed
                    by the same asset pool,

                	 	 	 	
                  X

                	
                  X

                	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Information
                    regarding any pool asset changes (other than in connection with
                    a pool
                    asset converting into cash in accordance with its terms), such
                    as
                    additions or removals in connection with a prefunding or revolving
                    period
                    and pool asset substitutions and repurchases (and purchase rates,
                    if
                    applicable), and cash flows available for future purchases, such
                    as the
                    balances of any prefunding or revolving accounts, if
                    applicable.

                	
                  X

                	 	 	
                  X

                	 	 

 

      

      
        
          
          

        

        
          M-6

          
            

          

        

        
          
          

        

      

       

      
        	
                Form

              	
                Item

              	
                Description

              	
                Servicer

              	
                Trustee

              	
                 

              	
                Depositor

              	
                Sponsor

              	
                Custodian

              

      

      
        	 	 	Disclose
                any material changes in the solicitation, credit-granting, underwriting,
                origination, acquisition or pool selection criteria or procedures,
                as
                applicable, used to originate, acquire or select the new pool
                assets.	 	 	 	X	X	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Item
                  1121(b) - Pre-Funding or Revolving Period Information 

                 

                Updated
                  pool information as required under Item 1121(b).

              	 	 	 	
                X

              	 	 
	 	 	 	 	 	 	 	 	 
	 	
                2

              	
                Legal
                  Proceedings

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Item
                  1117 - Legal proceedings pending against the following entities,
                  or their
                  respective property, that is material to Certificateholders, including
                  proceedings known to be contemplated by governmental
                  authorities:

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Sponsor
                  

              	 	 	 	 	
                X

              	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Depositor

              	 	 	 	
                X

              	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Issuing
                  entity

              	 	 	 	
                X

              	 	 

      

       

      
        
          
          

        

        
          M-7

          
            

          

        

        
          
          

        

      

      

        	
                Form

              	
                Item

              	
                Description

              	
                Servicer

              	
                Trustee

              	
                 

              	
                Depositor

              	
                Sponsor

              	
                Custodian

              

      

      
        	 	 	
                Servicer,
                  other Servicer servicing 20% or more of pool assets at time of
                  report,
                  other material servicers

              	
                X

              	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Trustee

              	 	
                X

              	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Custodian

              	 	 	 	 	 	
                X

              
	 	 	 	 	 	 	 	 	 
	 	
                3

              	
                Sales
                  of Securities and Use of Proceeds

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Information
                  from Item 2(a) of Part II of Form 10-Q: 

                 

                With
                  respect to any sale of securities by the sponsor, depositor or
                  issuing
                  entity, that are backed by the same asset pool or are otherwise
                  issued by
                  the issuing entity, whether or not registered, provide the sales
                  and use
                  of proceeds information in Item 701 of Regulation S-K. Pricing
                  information
                  can be omitted if securities were not registered.

              	 	 	 	
                X

              	 	 
	 	 	 	 	 	 	 	 	 
	 	
                4

              	
                Defaults
                  Upon

                Senior
                  Securities

              	 	 	 	 	 	 

      

       

      
        
          
          

        

        
          M-8

          
            

          

        

        
          
          

        

      

      

        	
                Form

              	
                Item

              	
                Description

              	
                Servicer

              	
                Trustee

              	
                 

              	
                Depositor

              	
                Sponsor

              	
                Custodian

              

      

      
        	 	 	Information
                from Item 3 of Part II of Form 10-Q: 
                Report
                  the occurrence of any Event of Default (after expiration of any
                  grace
                  period and provision of any required notice)

              	 	 	 	X	X	 
	 	 	 	 	 	 	 	 	 
	 	
                5

              	
                Submission
                  of Matters to a Vote of Certificateholders

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Information
                  from Item 4 of Part II of Form 10-Q

              	
                X
                  (to the extent initiated by the Servicer)

              	
                X
                  (to the extent initiated by the Trustee)

              	 	
                X
                  (to the extent initiated by the Depositor)

              	
                X
                  (to the extent initiated by the Sponsor)

              	 
	 	 	 	 	 	 	 	 	 
	 	
                6

              	
                Significant
                  Obligors of Pool Assets

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Item
                  1112(b) - Significant Obligor Financial Information*

              	 	 	 	
                X

              	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                *This
                  information need only be reported on the Form 10-D for the payment
                  period
                  in which updated information is required pursuant to the
                  Item.

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	
                7

              	
                Significant
                  Enhancement Provider Information

              	 	 	 	 	 	 

      

       

      
        
          
          

        

        
          M-9

          
            

          

        

        
          
          

        

      

      

        	
                Form

              	
                Item

              	
                Description

              	
                Servicer

              	
                Trustee

              	
                 

              	
                Depositor

              	
                Sponsor

              	
                Custodian

              

      

      
        	 	 	 	 	 	 	 	 	 
	 	 	Item
                1114(b)(2) - Credit Enhancement Provider Financial
                Information*	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Determining
                  applicable disclosure threshold

              	 	 	 	 	
                X

              	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Requesting
                  required financial information or effecting incorporation by
                  reference

              	 	 	 	 	
                X

              	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Item
                  1115(b) - Derivative Counterparty Financial
                  Information*

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Determining
                  current maximum probable exposure

              	 	 	 	 	
                X

              	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Determining
                  current significance percentage

              	 	 	 	 	
                X

              	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Requesting
                  required financial information or effecting incorporation by
                  reference

              	 	 	 	 	
                X

              	 
	 	 	 	 	 	 	 	 	 
	 	 	
                *This
                  information need only be reported on the Form 10-D for the payment
                  period
                  in which updated information is required pursuant to the
                  Items.

              	 	 	 	 	 	 

      

       

      
        
          
          

        

        
          M-10

          
            

          

        

        
          
          

        

      

       

      
        
          	
                  Form

                	
                  Item

                	
                  Description

                	
                  Servicer

                	
                  Trustee

                	
                   

                	
                  Depositor

                	
                  Sponsor

                	
                  Custodian

                
	 	
                  8

                	
                  Other
                    Information

                	 	 	 	 	 	 
	 	 	 	 
	 	 	
                  Disclose
                    any information required to be reported on Form 8-K during the
                    period
                    covered by the Form 10-D but not reported

                	
                  The
                    Responsible Party for the applicable Form 8-K item as indicated
                    below.

                
	 	 	 	 	 	 	 	 	 
	 	
                  9

                	
                  Exhibits

                	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Payment
                    Report

                	 	
                  X

                	 	 	 	 
	 	 	
                  Exhibits
                    required by Item 601 of Regulation S-K, such as material
                    agreements

                	 	 	 	
                  X

                	 	 
	 	 	 	 	 	 	 	 	 
	
                  8-K

                	
                  Must
                    be filed within four business days of an event reportable on
                    Form
                    8-K.

                	 	 	 

        

      

       

      
        
          
          

        

        
          M-11

          
            

          

        

        
          
          

        

      

      

      
        	
                Form

              	
                Item

              	
                Description

              	
                Servicer

              	
                Trustee

              	
                 

              	
                Depositor

              	
                Sponsor

              	
                Custodian

              
	 	
                1.01

              	
                Entry
                  into a Material Definitive Agreement

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Disclosure
                  is required regarding entry into or amendment of any definitive
                  agreement
                  that is material to the securitization, even if depositor is not
                  a
                  party.

                 

                Examples:
                  servicing agreement, custodial agreement.

                 

                Note:
                  disclosure not required as to definitive agreements that are fully
                  disclosed in the prospectus

              	
                X

              	
                X
                  (as applicable, if known)

              	 	
                X

              	
                X

              	 
	 	 	 	 	 	 	 	 	 
	 	
                1.02

              	
                Termination
                  of a Material Definitive Agreement

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Disclosure
                  is required regarding termination of any definitive agreement that
                  is
                  material to the securitization (other than expiration in accordance
                  with
                  its terms), even if depositor is not a party. 

                 

                Examples:
                  servicing agreement, custodial agreement.

              	
                X

              	 	 	
                X

              	
                X

              	 

      

       

      
        
          
          

        

        
          M-12

          
            

          

        

        
          
          

        

      

    

    
       

      
        
          	
                  Form

                	
                  Item

                	
                  Description

                	
                  Servicer

                	
                  Trustee

                	
                   

                	
                  Depositor

                	
                  Sponsor

                	
                  Custodian

                
	 	
                  1.03

                	
                  Bankruptcy
                    or Receivership

                	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Disclosure
                    is required regarding the bankruptcy or receivership, if known
                    to the
                    Depositor, Trustee, Sponsor or Servicer, with respect to any
                    of the
                    following: 

                   

                  Sponsor,
                    Depositor, Servicer, affiliated Servicer, other Servicer servicing
                    20% or
                    more of pool assets at time of report, other material servicers,
                    Trustee,
                    Trustee, significant obligor, credit enhancer (10% or more),
                    derivatives
                    counterparty, custodian

                	
                  X

                	
                  X

                	 	
                  X

                	
                  X

                	 

        

         

        
          
            
            

          

          
            M-13

            
              

            

          

          
            
            

          

        

      

       

      
        	
                Form

              	
                Item

              	
                Description

              	
                Servicer

              	
                Trustee

              	
                 

              	
                Depositor

              	
                Sponsor

              	
                Custodian

              

      

      
        	 	 	 	 	 	 	 	 	 
	 	
                2.04

              	
                Triggering
                  Events that Accelerate or Increase a Direct Financial Obligation
                  or an
                  Obligation under an Off-Balance Sheet Arrangement

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Includes
                  an early amortization, performance trigger or other event, including
                  event
                  of default, that would materially alter the payment priority/payment
                  of
                  cash flows/amortization schedule.

                 

                Disclosure
                  will be made of events other than waterfall triggers which are
                  disclosed
                  in the 4.03 statement

              	
                N/A

              	
                N/A

              	
                N/A

              	
                N/A

              	
                N/A

              	
                N/A

              

      

      
        	 	 	 	 	 	 	 	 	 
	 	
                3.03

              	
                Material
                  Modification to Rights of Certificateholders

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Disclosure
                  is required of any material modification to documents defining
                  the rights
                  of Certificateholders, including the Pooling and Servicing
                  Agreement

              	
                X

              	
                X
                  (if known)

              	 	
                X

              	
                X

              	 
	 	 	 	 	 	 	 	 	 
	 	
                5.03

              	
                Amendments
                  to Articles of Incorporation or Bylaws; Change in Fiscal
                  Year

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Disclosure
                  is required of any amendment “to the governing documents of the issuing
                  entity”

              	 	 	 	
                X

              	 	 

      

       

      
        
          
          

        

        
          M-14

          
            

          

        

        
          
          

        

      

      

        	
                Form

              	
                Item

              	
                Description

              	
                Servicer

              	
                Trustee

              	
                 

              	
                Depositor

              	
                Sponsor

              	
                Custodian

              

      

      
        	 	
                5.06

              	
                Change
                  in Shell Company Status

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                [Not
                  applicable to ABS issuers]

              	 	 	 	
                X

              	 	 
	 	 	 	 	 	 	 	 	 
	 	
                6.01

              	
                ABS
                  Informational and Computational Material

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                [Not
                  included in reports to be filed under Section 3.19]

              	 	 	 	
                X

              	 	 
	 	 	 	 	 	 	 	 	 
	 	
                6.02

              	
                Change
                  of Servicer or Trustee

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Requires
                  disclosure of any removal, replacement, substitution or addition
                  of any
                  servicer, affiliated servicer, other servicer servicing 10% or
                  more of
                  pool assets at time of report, other material servicers, or
                  trustee.

              	
                X

              	 	 	
                X

              	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Reg
                  AB disclosure about any new servicer is also required.

              	
                X

              	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Reg
                  AB disclosure about any new trustee is also required.

              	 	
                X
                  (by new trustee)

              	 	 	 	 

      

       

      
        
          
          

        

        
          M-15

          
            

          

        

        
          
          

        

      

      

        	
                Form

              	
                Item

              	
                Description

              	
                Servicer

              	
                Trustee

              	
                 

              	
                Depositor

              	
                Sponsor

              	
                Custodian

              

      

      
        	 	
                6.03

              	
                Change
                  in Credit Enhancement or Other External Support

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Covers
                  termination of any enhancement in manner other than by its terms,
                  the
                  addition of an enhancement, or a material change in the enhancement
                  provided. Applies to external credit enhancements as well as
                  derivatives.

              	 	 	 	
                X

              	
                X

              	 
	 	 	 	 	 	 	 	 	 
	 	 	
                Reg
                  AB disclosure about any new enhancement provider is also
                  required.

              	 	 	 	
                X

              	 	 
	 	 	 	 	 	 	 	 	 
	 	
                6.04

              	
                Failure
                  to Make a Required Payment

              	 	
                X

              	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	
                6.05

              	
                Securities
                  Act Updating Disclosure

              	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                If
                  any material pool characteristic differs by 5% or more at the time
                  of
                  issuance of the securities from the description in the final prospectus,
                  provide updated Reg AB disclosure about the actual asset
                  pool.

              	 	 	 	
                X

              	 	 

      

       

      
        
          
          

        

        
          M-16

          
            

          

        

        
          
          

        

        

          
            	
                    Form

                  	
                    Item

                  	
                    Description

                  	
                    Servicer

                  	
                    Trustee

                  	
                     

                  	
                    Depositor

                  	
                    Sponsor

                  	
                    Custodian

                  
	 	 	
                    If
                      there are any new servicers or originators required to be disclosed
                      under
                      Regulation AB as a result of the foregoing, provide the information
                      called
                      for in Items 1108 and 1110 respectively.

                  	 	 	 	
                    X

                  	 	 
	 	 	 	 	 	 	 	 	 
	 	
                    7.01

                  	
                    7.01
                      Regulation FD Disclosure

                  	
                    X

                  	 	 	
                    X

                  	
                    X

                  	 
	 	 	 	 	 	 	 	 	 
	 	
                    8.01

                  	
                    Other
                      Events

                  	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                    Any
                      event, with respect to which information is not otherwise called
                      for in
                      Form 8-K, that the registrant deems of importance to
                      Certificateholders.

                  	 	 	 	
                    X

                  	
                    X

                  	 
	 	 	 	 
	 	
                    9.01

                  	
                    Financial
                      Statements and Exhibits

                  	
                    The
                      Responsible Party applicable to reportable event.

                  
	 	 	 	 	 
	
                    10-K

                  	
                    Must
                      be filed within 90 days of the fiscal year end for the
                      registrant.

                  	 	 	 
	 	 	 	 	 	 	 	 	 
	 	
                    9B

                  	
                    Other
                      Information

                  	 	 	 	 	 	 
	 	 	 	 
	 	 	
                    Disclose
                      any information required to be reported on Form 8-K during
                      the fourth
                      quarter covered by the Form 10-K but not reported

                  	
                    The
                      Responsible Party for the applicable Form 8-K Item as indicated
                      above.

                  

          

        

         

        
          
            
            

          

          
            M-17

            
              

            

          

          
            
            

          

        

      

       

      
        
          	
                  Form

                	
                  Item

                	
                  Description

                	
                  Servicer

                	
                  Trustee

                	
                   

                	
                  Depositor

                	
                  Sponsor

                	
                  Custodian

                
	 	
                  15

                	
                  Exhibits
                    and Financial Statement Schedules

                	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Item
                    1112(b) - Significant Obligor Financial Information

                	 	 	 	
                  X

                	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Item
                    1114(b)(2) - Credit Enhancement Provider Financial
                    Information

                	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Determining
                    applicable disclosure threshold

                	 	 	 	 	
                  X

                	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Requesting
                    required financial information or effecting incorporation by
                    reference

                	 	 	 	 	
                  X

                	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Item
                    1115(b) - Derivative Counterparty Financial
                    Information

                	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Determining
                    current maximum probable exposure

                	 	 	 	 	
                  X

                	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Determining
                    current significance percentage

                	 	 	 	 	
                  X

                	 

        

      

       

      
        
          
          

        

        
          M-18

          
            

          

        

        
          
          

        

      

       

      
        
          	
                  Form

                	
                  Item

                	
                  Description

                	
                  Servicer

                	
                  Trustee

                	
                   

                	
                  Depositor

                	
                  Sponsor

                	
                  Custodian

                
	 	 	
                  Requesting
                    required financial information or effecting incorporation by
                    reference

                	 	 	 	 	
                  X

                	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Item
                    1117 - Legal proceedings pending against the following entities,
                    or their
                    respective property, that is material to Certificateholders,
                    including
                    proceedings known to be contemplated by governmental
                    authorities:

                	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Sponsor
                    

                	 	 	 	 	
                  X

                	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Depositor

                	 	 	 	
                  X

                	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Issuing
                    entity

                	 	 	 	
                  X

                	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Servicer,
                    affiliated Servicer, other Servicer servicing 20% or more of
                    pool assets
                    at time of report, other material servicers

                	
                  X

                	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Trustee

                	 	
                  X

                	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
                  Custodian

                	 	 	 	 	 	
                  X

                
	 	 	 	 	 	 	 	 	 
	 	 	
                  Item
                    1119 - Affiliations and relationships between the following entities,
                    or
                    their respective affiliates, that are material to
                    Certificateholders:

                	 	 	 	 	 	 

        

      

       

      
        
          
          

        

        
          M-19

          
            

          

        

        
          
          

        

      

       

    

    
      	
              Form

            	
              Item

            	
              Description

            	
              Servicer

            	
              Trustee

            	
               

            	
              Depositor

            	
              Sponsor

            	
              Custodian

            
	 	 	
              Sponsor
                

            	 	 	 	 	
              X

            	 
	 	 	 	 	 	 	 	 	 
	 	 	
              Depositor

            	 	 	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
              Servicer,
                affiliated Servicer, other Servicer servicing 20% or more of pool
                assets
                at time of report, other material servicers

            	
              X

            	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
              Trustee

            	 	
              X
                (as to affiliations only)

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
              Custodian

            	 	 	 	 	 	
              X
                (as to affiliations only)

            
	 	 	 	 	 	 	 	 	 
	 	 	
              Credit
                Enhancer/Support Provider

            	 	 	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
              Significant
                Obligor

            	 	 	 	
              X

            	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
              Item
                1122 - Assessment of Compliance with Servicing
                Criteria

            	
              X

            	
              X

            	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	
              Item
                1123 - Servicer Compliance Statement

            	
              X

            	 	 	 	 	 

    

    
      
        
        

      

      
        M-20

        
          

        

      

       

    

    EXHIBIT
      N-1

     

    FORM
      OF
      CERTIFICATION TO BE PROVIDED 

    BY
      THE
      DEPOSITOR WITH FORM 10-K

     

    Re:
      NovaStar Mortgage Funding Trust, Series 2007-1 (the "Issuing Entity")
      Asset-Backed Certificates, Series 2007-1

     

    I,
      [identify the certifying individual], certify, that:

     

    
      	1.  	
              I
                have reviewed this report on Form 10-K, and all reports on Form 10-D
                required to be filed in respect of the period covered by this report
                on
                Form 10-K of NovaStar Mortgage Funding Trust, Series 2007-1, Asset
                Backed
                Certificates, Series 2007-1 (the "Exchange Act periodic
                reports");

            

    

     

    
      	2.  	
              Based
                on my knowledge, the Exchange Act periodic reports, taken as a whole,
                do
                not contain any untrue statement of a material fact or omit to state
                a
                material fact necessary to make the statements made, in light of
                the
                circumstances under which such statements were made, not misleading
                with
                respect to the period covered by this
                report;

            

    

     

    
      	3.  	
              Based
                on my knowledge, all of the payment, servicing and other information
                required to be provided under Form 10-D for the period covered by
                this
                report is included in the Exchange Act periodic reports;
                

            

    

     

    
      	4.  	
              Based
                on my knowledge and the servicer compliance statement required in
                this
                report under Item 1123 of Regulation AB, and except as disclosed
                in the
                Exchange Act periodic reports, the servicer has fulfilled its obligations
                under the pooling and servicing agreement;
                and

            

    

     

    
      	5.  	
              All
                of the reports on assessment of compliance with servicing criteria
                for
                asset-backed securities and their related attestation reports on
                assessment of compliance with servicing criteria for asset-backed
                securities required to be included in this report in accordance with
                Item
                1122 of Regulation AB and Exchange Act Rules 13a-18 and 15d-18 have
                been
                included as an exhibit to this report, except as otherwise disclosed
                in
                this report. Any material instances of noncompliance described in
                such
                reports have been disclosed in this report on From 10-K.
                

            

    

     

    In
      giving
      the certifications above, I have reasonably relied on information provided
      to me
      by the following unaffiliated parties: [___________].

    
      	 	 	 
	 	NOVASTAR
              MORTGAGE
              FUNDING CORPORATION
	 
 	 
 	 
 
	 	By:  	 
	 	
              
                

              

              Name:

              
                Title:

                Date:

              

            

    

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    EXHIBIT
      N-2

     

    FORM
      OF
      CERTIFICATION TO BE PROVIDED TO THE

    DEPOSITOR
      BY THE [TRUSTEE][SERVICER]

     

    Re: NovaStar
      Mortgage Funding Trust, Series 2007-1 (the "Issuing Entity") Asset-Backed
      Certificates, Series 2007-1

     

    Reference
      is made to the Pooling and Servicing Agreement, dated as of February 1, 2007
      (the "Servicer Agreement"), by and among Deutsche Bank National Trust Company
      (the "Trustee"), NovaStar Mortgage Funding Corporation, as depositor (the
      "Depositor"), NovaStar Mortgage, Inc., as sponsor and servicer (the "Sponsor"
      and the "Servicer", respectively) and U.S. Bank National Association, as
      custodian (the "Custodian"). The [Trustee][Servicer] hereby certifies to the
      Depositor and its officers, directors and affiliates, and with the knowledge
      and
      intent that they will rely upon this certification, that:

     

    
      	
            	(i)	
              The
                [Trustee][Servicer] has reviewed the annual report on Form 10-K for
                the
                fiscal year [ ], and all reports on Form 10-D containing distribution
                reports filed in respect of periods included in the year covered
                by that
                annual report, relating to the above-referenced issuing
                entity;

            

    

     

    
      	
            	(ii)	
              Subject
                to paragraph (iv), the distribution information [prepared and provided
                by
                the Trustee, as to the Trustee] in the distribution reports contained
                in
                all monthly Form 10-D's included in the year covered by the annual
                report
                on Form 10-K for the calendar year [___], taken as a whole, does
                not
                contain any untrue statement of a material fact or omit to state
                a
                material fact required by the Servicing Agreement to be included
                therein
                and necessary to make the statements made, in light of the circumstances
                under which such statements were made, not misleading as of the last
                day
                of the period covered by that annual
                report;

            

    

     

    
      	
            	(iii)	
              The
                distribution information required to be provided by the
                [Trustee][Servicer] under the Servicing Agreement is included in
                these
                reports; and

            

    

     

    
      	
            	(iv)	
              In
                compiling the distribution information and making the foregoing
                certifications, the Trustee has relied upon information furnished
                to it by
                the Servicer under the Servicing Agreement or any Subservicer or
                subcontractor. The Trustee shall have no responsibility or liability
                for
                any inaccuracy in such reports resulting from information so provided
                by
                the Servicer or any Subservicer or
                subcontractor.

            

    

     

    
      	 	 	 
	 	[DEUTSCHE
              BANK
              NATIONAL TRUST COMPANY, not in its individual capacity but solely as
              Trustee][NOVASTAR MORTGAGE, INC., as Servicer]
	 
 	 
 	 
 
	 	By:  	 
	 	
               

              Name:

            	
              

            
	 	Title:	
              
 
	 	
              
 

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    EXHIBIT
      O

     

    OFFICER'S
      CERTIFICATE REGARDING 

    ANNUAL
      STATEMENT OF COMPLIANCE

     

    NovaStar
      Mortgage Funding Trust, Series 2007-1

     

    Asset-Backed
      Certificates, Series 2007-1

     

    I,
      _____________________, hereby certify that I am a duly appointed
      __________________________ of NovaStar Mortgage, Inc. (the "Servicer"), and
      further certify as follows:

     

    
      	1.  	
              This
                certification is being made pursuant to the terms of the Pooling
                and
                Servicing Agreement, dated as of February 1, 2007 (the "Servicing
                Agreement"), by and among Deutsche Bank National Trust Company (the
                "Trustee"), NovaStar Mortgage Funding Corporation, as depositor (the
                "Depositor"), NovaStar Mortgage, Inc., as sponsor and servicer (the
                "Sponsor" and the "Servicer", respectively) and U.S. Bank National
                Association, as custodian (the
                "Custodian").

            

    

     

    
      	2.  	
              I
                have reviewed the activities of the Servicer during the preceding
                calendar
                year and the Servicer's performance under the Servicing Agreement
                has been
                made under my supervision and to the best of my knowledge, based
                on such
                review, the Servicer has fulfilled all of its obligations under the
                Servicing Agreement in all material respects throughout the
                year.

            

    

     

    Capitalized
      terms not otherwise defined herein have the meanings set forth in the Servicing
      Agreement.

     

    Date:
      

     

    
      
        

      

    

    Name:
      

    Title:
      

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    EXHIBIT
      P

     

    FORM
      OF
LIMITED
      POWER OF ATTORNEY

    

    KNOW
      ALL
      MEN BY THESE PRESENTS, that Deutsche Bank National Trust Company, a national
      banking association organized and existing under the laws of the United States,
      having its principal place of business at 1761 East St. Andrew Place, Santa
      Ana,
      California, 92705, as Trustee (the "Trustee") pursuant to that Pooling and
      Servicing Agreement dated as of February 1, 2007 (the "Agreement") among
      NovaStar Mortgage Funding Corporation, as depositor, NovaStar Mortgage, Inc.,
      as
      servicer and sponsor, U.S. Bank National Association, as custodian and Deutsche
      Bank National Trust Company, as trustee, hereby constitutes and appoints the
      Servicer, by and through the Servicer's officers, the Trustee's true and lawful
      Attorney-in-Fact, in the Trustee's name, place and stead and for the Trustee's
      benefit, in connection with all mortgage loans serviced by the Servicer pursuant
      to the Agreement solely for the purpose of performing such acts and executing
      such documents in the name of the Trustee necessary and appropriate to
      effectuate the following enumerated transactions in respect of any of the
      mortgages or deeds of trust (the "Mortgages" and the "Deeds of Trust"
      respectively) and promissory notes secured thereby (the "Mortgage Notes") for
      which the undersigned is acting as Trustee for various certificateholders
      (whether the undersigned is named therein as mortgagee or beneficiary or has
      become mortgagee by virtue of endorsement of the Mortgage Note secured by any
      such Mortgage or Deed of Trust) and for which NovaStar Mortgage, Inc. is acting
      as the Servicer.

    

    This
      Appointment shall apply only to the following enumerated transactions and
      nothing herein or in the Agreement shall be construed to the
      contrary:

    

      
        	
                1.

              	
                The
                  modification or re-recording of a Mortgage or Deed of Trust, where
                  said
                  modification or re-recording is solely for the purpose of correcting
                  the
                  Mortgage or Deed of Trust to conform same to the original intent
                  of the
                  parties thereto or to correct title errors discovered after such
                  title
                  insurance was issued; provided that (i) said modification or
                  re-recording, in either instance, does not adversely affect the
                  lien of
                  the Mortgage or Deed of Trust as insured and (ii) otherwise conforms
                  to the provisions of the Agreement.

              

      

      
        	 	 

        	
                2.

              	
                The
                  subordination of the lien of a Mortgage or Deed of Trust to an
                  easement in
                  favor of a public utility company of a government agency or unit
                  with
                  powers of eminent domain; this section shall include, without limitation,
                  the execution of partial satisfactions/releases, partial reconveyances
                  or
                  the execution or requests to trustees to accomplish
                  same.

              

      

      
        	 	 

        	
                3.

              	
                The
                  conveyance of the properties to the mortgage insurer, or the closing
                  of
                  the title to the property to be acquired as real estate owned,
                  or
                  conveyance of title to real estate
                  owned.

              

      

      
        	 	 

        	
                4.

              	
                The
                  completion of loan assumption
                  agreements.

              

      

      
        	 	 

        	
                5.

              	
                The
                  full satisfaction/release of a Mortgage or Deed of Trust or full
                  conveyance upon payment and discharge of all sums secured thereby,
                  including, without limitation, cancellation of the related Mortgage
                  Note.

              

      

      
        	 	 

        	
                6.

              	
                The
                  assignment of any Mortgage or Deed of Trust and the related Mortgage
                  Note,
                  in connection with the repurchase of the mortgage loan secured
                  and
                  evidenced thereby.

              

      

      
        	 	 

        	
                7.

              	
                The
                  full assignment of a Mortgage or Deed of Trust upon payment and
                  discharge
                  of all sums secured thereby in conjunction with the refinancing
                  thereof,
                  including, without limitation, the assignment of the related Mortgage
                  Note.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      
        	
                8.

              	
                With
                  respect to a Mortgage or Deed of Trust, the foreclosure, the taking
                  of a
                  deed in lieu of foreclosure, or the completion of judicial or non-judicial
                  foreclosure or termination, cancellation or rescission of any such
                  foreclosure, including, without limitation, any and all of the
                  following
                  acts:

              

      

       

    

    
      	 	
              a.

            	
              the
                substitution of trustee(s) serving under a Deed of Trust, in accordance
                with state law and the Deed of
                Trust;

            

    

    

    
      	 	
              b.

            	
              the
                preparation and issuance of statements of breach or
                non-performance;

            

    

    

    
      	 	
              c.

            	
              the
                preparation and filing of notices of default and/or notices of
                sale;

            

    

    

    
      	 	
              d.

            	
              the
                cancellation/rescission of notices of default and/or notices of
                sale;

            

    

    

    
      	 	
              e.

            	
              the
                taking of deed in lieu of foreclosure;
                and

            

    

    

    
      	 	
              f.

            	
              the
                preparation and execution of such other documents and performance
                of such
                other actions as may be necessary under the terms of the Mortgage,
                Deed of
                Trust or state law to expeditiously complete said transactions in
                paragraphs 8.a. through 8.e. above.

            

    

     

    
      
        	
                9.

              	
                With
                  respect to the sale of property acquired through a foreclosure
                  or deed-in
                  lieu of foreclosure, including, without limitation, the execution
                  of the
                  following documentation:

              

      

    

     

    
      	 	
              a.

            	
              listing
                agreements;

            

    

     

    
      	 	
              b.

            	
              purchase
                and sale agreements;

            

    

     

    
      	 	
              c.

            	
              grant/warranty/quit
                claim deeds or any other deed causing the transfer of title of the
                property to a party contracted to purchase
                same;

            

    

     

    
      	 	
              d.

            	
              escrow
                instructions; and

            

    

     

    
      	 	
              e.

            	
              any
                and all documents necessary to effect the transfer of
                property.

            

    

     

    
      
        	
                10.

              	
                The
                  modification or amendment of escrow agreements established for
                  repairs to
                  the mortgaged property or reserves for replacement of personal
                  property.

              

      

       

    

    The
      undersigned gives said Attorney-in-Fact full power and authority to execute
      such
      instruments and to do and perform all and every act and thing necessary and
      proper to carry into effect the power or powers granted by or under this Limited
      Power of Attorney as fully as the undersigned might or could do, and hereby
      does
      ratify and confirm to all that said Attorney-in-Fact shall be effective as
      of
      [DATE].

    

    This
      appointment is to be construed and interpreted as a limited power of attorney.
      The enumeration of specific items, rights, acts or powers herein is not intended
      to, nor does it give rise to, and it is not to be construed as a general power
      of attorney.

     

    Nothing
      contained herein shall (i) limit in any manner any indemnification provided
      by the Servicer to the Trustee under the Agreement, or (ii) be construed to
      grant the Servicer the power to initiate or defend any suit, litigation or
      proceeding in the name of Deutsche Bank National Trust Company except as
      specifically provided for herein. If the Servicer receives any notice of suit,
      litigation or proceeding in the name of Deutsche Bank National Trust Company,
      then the Servicer shall promptly forward a copy of same to the
      Trustee.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    This
      limited power of attorney is not intended to extend the powers granted to the
      Servicer under the Agreement or to allow the Servicer to take any action with
      respect to Mortgages, Deeds of Trust or Mortgage Notes not authorized by the
      Agreement.

    

    The
      Servicer hereby agrees to indemnify and hold the Trustee and its directors,
      officers, employees and agents harmless from and against any and all
      liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
      costs, expenses or disbursements of any kind or nature whatsoever incurred
      by
      reason or result of or in connection with the exercise by the Servicer of the
      powers granted to it hereunder. The foregoing indemnity shall survive the
      termination of this Limited Power of Attorney and the Agreement or the earlier
      resignation or removal of the Trustee under the Agreement.

    

    This
      Limited Power of Attorney is entered into and shall be governed by the laws
      of
      the State of New York, without regard to conflicts of law principles of such
      state.

    

    Third
      parties without actual notice may rely upon the exercise of the power granted
      under this Limited Power of Attorney; and may be satisfied that this Limited
      Power of Attorney shall continue in full force and effect and has not been
      revoked unless an instrument of revocation has been made in writing by the
      undersigned.

    

    IN
      WITNESS WHEREOF, Deutsche Bank National Trust Company, as Trustee has caused
      its
      corporate seal to be hereto affixed and these presents to be signed and
      acknowledged in its name and behalf by a duly elected and authorized signatory
      this [___] day of [______] 20[__].

    
      	 	 	 
	 	Deutsche
              Bank
              National Trust Company, as Trustee
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

              Title:

            

    

     

    Acknowledged
      and Agreed 

    NovaStar
      Mortgage, Inc., as Servicer

     

    
      	 	 	 	 
	
              By:

            	 	 	 
	
              
                

              

              Name:

              Title:

            	 	 	
            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    STATE
      OF
      CALIFORNIA

    COUNTY
      OF
      ____________

     

    On
      ________________, _____, before me, the undersigned, a Notary Public in and
      for
      said state, personally appeared ________________________________ of Deutsche
      Bank National Trust Company, as Trustee, personally known to me to be the person
      whose name is subscribed to the within instrument and acknowledged to me that
      he/she executed that same in his/her authorized capacity, and that by his/her
      signature on the instrument the entity upon behalf of which the person acted
      and
      executed the instrument.

    

    WITNESS
      my hand and official seal.

    (SEAL)

    

    ____________________________________

    Notary
      Public, State of California

    
      
        
        

      

      
        
        

        
          

        

      

       

    

    EXHIBIT
      Q

     

    FORM
      OF REALLOCATION NOTICE

     

    
      	
              To:

            	
              Deutsche
                Bank National Trust Company

            

    

    1761
      East
      St. Andrew Place

    Santa
      Ana, California 92705

    Attention:
      Trust Administration - NS0701

     

    NovaStar
      Mortgage Funding Corporation, as depositor (the "Depositor")
      under
      the Pooling and Servicing Agreement, dated as of February 1, 2007 (the
      "Pooling
      and Servicing Agreement")
      by and
      among the Depositor, NovaStar Mortgage, Inc., as Servicer and as Sponsor, U.S.
      Bank National Association, as Custodian and Deutsche Bank National Trust
      Company, as Trustee, relating to NovaStar Mortgage Funding Trust, Series 2007-1
      (the "Trust")
      does
      hereby:

     

    
      	·  	
              certify
                that it and/or its Affiliates (as identified to the Trustee) is the
                beneficial owner of at least ___% Percentage Interest in each of
                the Class
                DSI Certificates and Class N Certificates relating to the following
                Class:
                [M-10 or M-11]; and

            

    

     

    
      	·  	
              direct
                the Trustee to allocate all future distributions on ___% Percentage
                Interest of such Class DSI and Class N Certificates relating to the
                following Class: [M-10 or M-11] to the ___
                Class.

            

    

     

    The
      Depositor hereby indemnifies the Trustee for any losses to which the Trustee
      may
      be exposed as a result of following the directions of the Depositor set forth
      herein.

     

    Capitalized
      terms used herein and not otherwise defined herein have the meanings set forth
      in the Pooling and Servicing Agreement.

    
      	 	 	 
	 	NOVASTAR
              MORTGAGE
              FUNDING CORPORATION
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name: _____________________________________

              Title: ______________________________________

              Date:_______________________________________EXHIBIT
      10.27

    

    FIFTH
      AMENDMENT TO PURCHASE AND SALE AGREEMENT

    

      TRINITY
        BAY,
        REDFISH
        REEF,
        FISHERS
        REEF,
        NORTH
        POINT
        BOLIVAR
        FIELDS

      IN
        GALVESTON
        AND
        CHAMBERS
        COUNTIES,
        TEXAS

       

    

    THIS
      FIFTH AMENDMENT TO PURCHASE AND SALE AGREEMENT
      (the
“Fifth Amendment”) is dated effective as of April 12, 2007, and is made by and
      between Masters
      Resources, LLC,
      and
Masters
      Oil & Gas, LLC,
      both
      Texas limited liability companies having their respective principal places
      of
      business at 9801 Westheimer, Suite 1070, Houston, Texas 77042 (collectively,
      “Masters”), and Tekoil
      and Gas Gulf Coast, LLC,
      a
      Delaware limited liability company, having its principal place of business
      at
      5036 Dr. Phillips Blvd., Suite 232, Orlando, Florida 32819 (“Buyer”) (Masters
      and Buyer are sometimes called collectively the “parties” and individually
“party”).

    

    RECITALS

    

    On
      November 13, 2006, Masters and Tekoil and Gas Corporation, a Delaware
      corporation (“Original Buyer”), executed and delivered a Purchase and Sale
      Agreement, dated effective as of October 1, 2006, covering the “Assets”
described therein. On December 29, 2006, Masters and Original Buyer executed
      and
      delivered that certain First Amendment to Purchase and Sale Agreement also
      covering the Assets. On February 8, 2007, the parties contemporaneously executed
      and delivered that certain Second Amendment and that certain Assignment and
      Assumption Agreement (the “Assignment”) by and between Buyer and Original Buyer.
      On March 1, 2007, Masters and Buyer executed and delivered that certain Third
      Amendment to Purchase and Sale Agreement also covering the Assets. On March
      22,
      2007 Masters and Buyer executed and delivered that certain Fourth Amendment
      to
      Purchase and Sale Agreement also covering the Assets (the Purchase and Sale
      Agreement, the First Amendment to Purchase and Sale Agreement, the Second
      Amendment to the Purchase and Sale Agreement, the Third Amendment to the
      Purchase and Sale Agreement and the Fourth Amendment to the Purchase and Sale
      Agreement are herein collectively referred to as the “Original Agreement”). The
      parties now desire to amend the Original Agreement in certain respects.
      Accordingly, the parties agree as set out in this Fifth Amendment. (Unless
      otherwise noted, defined terms used in this Fifth Amendment shall have the
      meanings ascribed to them in the Original Agreement). 

    

    I. AMENDMENTS

    

    A. The
      opening paragraph of Section 2.1 of the Original Agreement is deleted and the
       following
      is inserted in lieu thereof:

    

    “2.1 Purchase
      Price

     

    The
      Purchase Price for the Assets will be Forty Million and No/100 Dollars
      ($40,000,000.00), plus
      4,000,000
      shares of common stock of Original Buyer1 (the
      “Common Stock”), plus
      the
      reservation at Closing by Masters of the overriding royalty interests described
      in this Section 2.1 hereinbelow. Masters will accept at Closing a promissory
      note by Original Buyer, in the form attached hereto as Exhibit
      A,
      in the
      original principal amount of Ten Million and No/100 Dollars ($10,000,000.00)
      (the “Note”), representing ($10,000,000.00) of the ($40,000,000.00) monetary
      portion of the Purchase Price described above. The Note shall be secured by
      a
      Pledge and Security Agreement covering the membership interest of Old Buyer
      in
      Buyer, in the form attached hereto as Exhibit
      B.

    

    The
      Note
      shall be convertible at the election of Masters into up to three million shares
      of common stock of Original Buyer (the “Conversion Stock”) at a conversion price
      of $3.33 per share, subject to the provisions of Section 2.1(B)
      hereof.

     

      
        

      

    

    
      
        	1	
                Both
                  parties acknowledge that all references to “Buyer” in Section 2.1 (B) of
                  the Original Agreement shall be amended to “Original
                  Buyer.”

              

      

       

    

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    The
      One
      Million and No/100 Dollar ($1,000,000.00) set aside provided for in the
      separately executed Erskine Indemnity Agreement between Masters and Buyer shall
      at any time due thereunder be, at Buyer’s sole discretion, immediately applied
      against amounts due under the Note at the time of Buyer’s request, and
      any
      other amounts due Buyer under such Indemnity Agreement may, at Buyer's sole
      discretion, be set off against amounts due under the Note. If the Erskine
      dispute is not settled to the reasonable satisfaction of Buyer by the time
      the
      Note is to be satisfied, Two Million Dollars ($2,000,000) of the obligations
      due
      under the Note shall be suspended (and no default or interest accrual shal
      occur
      onder the Note as a result thereof) pending resolution of such dispute to the
      reasonable satisfaction of Buyer or application of the One Million dollar
      ($1,000,000) set aside and the additional One Million dollar ($1,000,000) offset
      amount against such Two Million Dollar ($2,000,000) Note balance as further
      provided in the Indemnity Agreement."

    

    B.
       The
      reference in the first line of Section 2.1(B) to 500,000 shares is deleted
      and
      replaced with “4,000,000 shares and the Note (which may be converted into the
      Conversion Stock as aforesaid)” and the second line of Section 2.1(B) is amended
      by inserting between the words “”shares” and “shall” the following
      phrase:

    

    “(together
      with the Note and any shares of Conversion Stock into which any portion of
      the
      Note is converted as described above)”

    

    C.
       The
      following is inserted as subsection (D) in Section 2.1 of the Original
      Agreement:

    

    “(D) At
      Closing Masters shall reserve an additional overriding royalty interest (the
      “Additional ORRI”) for a three (3) year period from the date of Closing, after
      which the Additional ORRI will expire. The Additional ORRI shall be equal to
      2%
      of 100% of the production from:

    

    (1) those
      of
      the Wells shown as “proved undeveloped reserves” and “proved non-producing
      reserves” and “proved developed producing” in the Reserve Report; and

    

    (2) any
      present or future well completed in and producing from any zone or formation
      not
      presently producing or capable of producing and not documented in the Reserve
      Reports.”

    

    D. Section
      8.1 of the Original Agreement is deleted and the following is inserted in lieu
       thereof:

    

    
      
        “8.1
          Date,
          Time and Place of Closing

      

    

    

    Unless
      the parties agree otherwise in writing and subject to the provisions in this
      Agreement, the completion of the transaction contemplated by this Agreement
      (the
“Closing”) will be held on or
      before
      April
      25, 2007, at 10:00 a.m. Central Standard Time (or such earlier date or time
      as
      the parties may agree). The Closing will be held at the offices of Masters
      as
      set forth in the opening paragraph of this Agreement (or such other place as
      the
      parties may agree). In the event that the Closing does not occur before the
      close of business at 5:00 p.m. on April 25, 2007, Masters shall have the right
      to terminate this Agreement and to retain the Deposit.”

    

    E. That
      certain Subscription Agreement dated December 29, 2006 and executed by and
      between Masters and Original Buyer is superseded entirely by a certain Amended
      and Restated Subscription Agreement between Masters and Original Buyer of even
      date herewith substantially in the form attached hereto as Exhibit
      C.

    

    F.
      The
      Registration Rights Agreement executed December 29, 2006 by and between Masters
      and Original Buyer in connection with the Subscription Agreement, is subject
      to
      the amendments made herein and the Common Stock and the Conversion Stock
      described herein shall constitute the “Registrable Securities”
thereunder.

    

    G.
      The
      following is inserted in Exhibit “A” of the Original Agreement: 

    

    “Lease
      No. TX-0894-0001

     
      Lessor: State of Texas M-105666

     
      Lease Date: 10/4/2005

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    Recording
      Information: Recorded in the Official Public Records of Chambers and Galveston
      Counties, Texas, in Chambers County under File No. 05 826 621 and in Galveston
      County under File No. 2006001465, covering approximately 320 acres being the
      NE/2 of State Tract 199, East Bay.

    

    Lease
      No.
      TX-0894-0002

    Lessor:
      State of Texas M-105667

    Lease
      Date: 10/4/2005

     

    Recording
      Information: Recorded in the Official Public Records of Chambers and Galveston
      Counties, Texas, in Chambers County under File No. 05 826 615 and in Galveston
      County under File No. 2006001464, covering approximately 320 acres being the
      SW/2 of State Tract 199, East Bay.

    

    Lease
      No.
      TX-0894-0003

    Lessor:
      State of Texas M-106331

    Lease
      Date: 4/4/2006

     

    Recording
      Information: Recorded in the Official Public Records of Chambers County, Texas
      under File No. _____________, covering approximately 160 acres being the È/2 of
      the NE/2 of State Tract 226, Galveston Bay.”

    

    H.
      The
      following is inserted in Exhibit “B” of the Original Agreement: 

    

    “State
      Tract No. 199 No. 1 Well located in Chambers/Galveston Counties,
      Texas.

    Masters
      Resources, LLC Working Interest:

    WI
      before
      Contract Depth of Initial Well: 6.667%

    WI
      after
      contract depth of Initial Well: 5.00%.”

    

    I.
      The
      following is inserted in Exhibit “C” of the Original Agreement: 

    

    “Joint
      Operating Agreement dated May 1, 2006 by and between Davis Petroleum Corp.
      (“Operator”) and Masters Resources, LLC, et. al. covering the Dolphin Prospect,
      being 800 acres in State Tracts 199 and 226 and the associated Area of Mutual
      Interest.”

    

    J.
      The
      following is inserted in Schedule 3.1 (H) of the Original Agreement.

    

    “Joint
      Operating Agreement dated May 1, 2006 by and between Davis Petroleum Corp.
      (“Operator”) and Masters Resources, LLC, et. al. covering the Dolphin Prospect,
      being 800 acres in State Tracts 199 and 226 and the associated Area of Mutual
      Interest.”

    

    K.
      The
      reference to the Dolphin Prospect in Schedule 1.2 (A) of the Original Agreement
      is deleted in its entirety from Schedule 1.2 (A). 

    

    II. MISCELLANEOUS

    

    A. To
      the
      extent any provision of the Original Agreement, conflicts with any provision
      of
      this Fifth Amendment, the provisions of this Fifth Amendment shall control
      and
      be used to determine the obligations of the Parties.

    

    B. The
      parties ratify confirm and adopt the Original Agreement as amended and
      supplemented by this Fifth Amendment.

    

    C. Facsimile
      delivery of this Fifth Amendment signed by each party to the other shall be
      binding and effective the same as if an original signed copy has been delivered
      by each party to the other. This Fifth Amendment may be executed in multiple
      counterparts, each of which shall be considered an original and all of which
      together shall constitute one and the same document.

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    

    

    [SIGNATURE
      PAGE FOLLOWS]

     

    
      
        
        

      

      
        4

        
          

        

      

       

    

    

    IN
      WITNESS WHEREOF,
      the
      parties hereto have executed this Second Amendment as of April 12,
      2007.

    

    

    TEKOIL
      AND GAS GULF COAST, LLC

    

    By: Tekoil
      & Gas Corporation,

           
      Its Sole Member

     

    By: /s/
      Mark
      S. Western

    
      
        

      

    

    Name:
      Mark Western

    Title: President

     

    
      	 MASTERS RESOURCES,
              LLC:	 	 MASTERS OIL & GAS,
              LLC:
	 	 	 
	 	 	 
	
               By: /s/
                Richard M. Lee

              
                

              

              Name: Richard
                H. Lee

              Title: Manager

            	 	
               By: /s/
                Richard M. Lee 

              
                

              

              Name:
                Richard H. Lee
Title: Manager

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

       

    

    EXHIBIT
      A
 

    

    

    PROMISSORY
      NOTE

    

    PAYABLE
      TO MASTERS

    
      
        
        

      

      
        6

        
          

        

      

       

    

    THIS
      SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “ACT”), OR ANY APPLICABLE STATE LAW, AND MAY NOT BE SOLD, DISTRIBUTED,
      ASSIGNED, OFFERED, PLEDGED OR OTHERWISE TRANSFERRED UNLESS (A) THERE IS AN
      EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
      LAWS COVERING ANY SUCH TRANSACTION OR (B) SUCH TRANSACTION IS EXEMPT FROM
      REGISTRATION AND, IF REQUESTED BY THE MAKER, THE MAKER HAS RECEIVED AN OPINION
      OF COUNSEL SATISFACTORY TO THE MAKER THAT THE TRANSFER IS EXEMPT FROM THE
      REGISTRATION PROVISIONS UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES
      LAWS.

    

    THIS
      NOTE
      IS SUBJECT TO THE PROVISIONS OF A SUBSCRIPTION AGREEMENT, INCLUDING THEREIN
      CERTAIN RESTRICTIONS ON TRANSFER. A COMPLETE AND CORRECT COPY OF SUCH AGREEMENT
      IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL
      BE
      FURNISHED UPON WRITTEN REQUEST AND WITHOUT CHARGE

    

    CONVERTIBLE

    PROMISSORY
      NOTE

    

    
      	$10,000,000.00 	 	
              ______________
                __,
                2007

            

    

    FOR
      VALUE
      RECEIVED, the undersigned, TEKOIL & GAS CORPORATION, a Delaware corporation
      (“Maker”), promises to pay to the order of MASTERS RESOURCES, LLC and MASTERS
      OIL & GAS, LLC, both Texas limited liability companies, an individual
      referred to collectively as “Payee” or “Holder”), at the office of Payee at 9801
      Westheimer, Suite 1070, Houston, Texas 77042, or at such other place as Holder
      may designate to Maker in writing from time to time, the principal sum of TEN
      MILLION AND NO/100THS DOLLARS ($10,000,000.00), in lawful money of the United
      States. Amounts payable hereunder shall be paid, at Payee’s option as specified
      by Payee in writing from time to time, either by (i) check delivered to the
      office of Payee or (ii) wire transfer of immediately available funds to an
      account specified by Payee in writing from time to time. This Note is referred
      to in and issued pursuant to that certain Subscription Agreement, dated as
      of
      April ___, 2007, by and between Payee and Maker (as amended from time to time,
      the “Agreement”). 

    

    This
      Note
      shall be convertible into shares of common stock of Maker (“Common Stock”) at
      the option of Holder at the “Conversion Rate” described below of obligation owed
      hereunder for each share of Common Stock, as further provided below. The
      Conversion Rate shall be one (1) share of Common Shares per $3.33 in amount
      due
      under the Note.

    

    To
      convert all of any portion of this Note, the Holder must (a) complete and
      manually sign the irrevocable conversion notice attached hereto (or complete
      and
      manually sign a facsimile of such notice) and deliver such notice to the
      Company, (b) if this Note is in certificated form, surrender such Note to the
      Company, (c) furnish appropriate endorsements and transfer documents if required
      by the Company and (d) pay any transfer or similar tax, if required. The date
      on
      which the Holder satisfies all such requirements shall be deemed to be the
      date
      on which this Note shall have been surrendered for conversion.

    

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

       

    

    Commencing
      with the thirty first (31st) day following the date hereof, the unpaid principal
      balance of this Note shall accrue interest at the rate of six percent (6%)
      simple interest, per annum. On the sixtieth (60th) day following the date hereof
      (the “Maturity Date”), the entire unpaid principal balance, together with
      accrued but unpaid interest, if any, shall be immediately due and payable in
      full. If such day is not a business day, such payment shall be made on the
      next
      succeeding day which is a business day and interest shall continue to accrue
      thereon until paid. As used herein, “business day” means a day, other than a
      Saturday, Sunday or legal holiday, on which commercial banks in Houston, Texas
      are open for the general transaction of business.

    

    The
      indebtedness evidenced hereby may be prepaid in whole or in part, at any time
      and from time to time, without premium or penalty. Any such prepayments shall
      be
      credited first to any accrued and unpaid interest and then to the outstanding
      principal balance hereof.

    

    The
      failure of Maker to pay any principal, interest or any other sums required
      hereunder when due under this Note shall constitute a default. If a default
      shall occur hereunder and such default shall continue for fifteen (15) business
      days after notice thereof is delivered by Holder to Maker, then, and in such
      event, the entire outstanding principal balance of the indebtedness evidenced
      hereby, together with any other sums advanced hereunder and/or under any other
      instrument or document now or hereafter evidencing, securing or in any way
      relating to the indebtedness evidenced hereby, shall, at the option of Holder
      become due and payable regardless of the stipulated date of maturity. Upon
      the
      occurrence of a default as set forth herein, which default is not cured
      following the giving of any applicable notice and within any applicable cure
      period set forth herein, at the option of Holder the outstanding principal
      balance hereof shall bear interest thereafter until paid at an annual rate
      (the
“Default Rate”) equal to the lesser of (i) ten percent (10%) per annum, or (ii)
      the maximum rate of interest allowed to be charged under applicable law (the
      “Maximum Rate”), regardless of whether or not there has been an acceleration of
      the payment of principal as set forth herein. 

    

    This
      Note
      is secured by a certain Pledge and Security Agreement dated as of the date
      hereof relating to membership interests in Tekoil and Gas Gulf Coast, LLC,
      a
      Delaware limited liability company, owned by Maker.

    

    In
      the
      event this Note is placed in the hands of an attorney for collection, or if
      Holder incurs any costs incident to the collection of the indebtedness evidenced
      hereby, Maker and any endorsers hereof agree to pay to Holder an amount equal
      to
      all such costs, including, without limitation, all reasonable attorneys’ fees
      and all court costs.

    

    Presentment
      for payment, demand, protest and notice of demand, protest and nonpayment are
      hereby waived by Maker and all other parties hereto. No failure to accelerate
      the indebtedness evidenced hereby by reason of a default hereunder, acceptance
      of a past-due installment or other indulgences granted from time to time, shall
      be construed as a novation of this Note or as a waiver of such right of
      acceleration or of the right of Holder thereafter to insist upon strict
      compliance with the terms of this Note or to prevent the exercise of such right
      of acceleration or any other right granted hereunder or by applicable law.
      No
      extension of the time for payment of the indebtedness evidenced hereby or any
      installment due hereunder, made by agreement with any person now or hereafter
      liable for payment of the indebtedness evidenced hereby, shall operate to
      release, discharge, modify, change or affect the original liability of Maker
      hereunder or that of any other person now or hereafter liable for payment of
      the
      indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
      otherwise in writing. This Note may not be changed orally, but only by an
      agreement in writing signed by the party against whom enforcement of any waiver,
      change, modification or discharge is sought.

    

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    All
      agreements herein made are expressly limited so that in no event whatsoever,
      whether by reason of advancement of proceeds hereof, acceleration of maturity
      of
      the unpaid balance hereof or otherwise, shall the amount paid or agreed to
      be
      paid to Holder for the use of the money advanced or to be advanced hereunder
      exceed the Maximum Rate. If, from any circumstances whatsoever, the fulfillment
      of any provision of this Note or any other agreement or instrument now or
      hereafter evidencing, securing or in any way relating to the indebtedness
      evidenced hereby shall involve the payment of interest in excess of the Maximum
      Rate, then, ipso facto,
      the
      obligation to pay interest hereunder shall be reduced to the Maximum Rate;
      and
      if from any circumstance whatsoever, Holder shall ever receive interest, the
      amount of which would exceed the amount collectible at the Maximum Rate, such
      amount as would be excessive interest shall be applied to the reduction of
      the
      principal balance remaining unpaid hereunder and not to the payment of interest.
      This provision shall control every other provision in any and all other
      agreements and instruments existing or hereafter arising between Maker and
      Holder with respect to the indebtedness evidenced hereby.

    

    This
      Note
      is intended as a contract under and shall be construed and enforceable in
      accordance with the laws of the State of Texas, and shall be enforceable in
      a
      court of competent jurisdiction in the State of Texas, regardless of in which
      state this Note is being executed.

    

    HOLDER
      AND MAKER HEREBY KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COUNSEL WAIVE
      TRIAL BY JURY IN ANY ACTIONS, PROCEEDINGS, CLAIMS OR COUNTER-CLAIMS, WHETHER
      IN
      CONTRACT OR TORT OR OTHERWISE, AT LAW OR IN EQUITY, ARISING OUT OF OR IN ANY
      WAY
      RELATING TO THIS NOTE.

    

    As
      used
      herein, the terms “Maker” and “Holder” shall be deemed to include their
      respective successors, legal representatives and assigns, whether by voluntary
      action of the parties or by operation of law.

     

    
      	 	 	
               MAKER:

               

              
                TEKOIL
                  & GAS CORPORATION

                a
                  Delaware corporation

              

            
	 	 
	 	 
	
            	By:  	 
	 	
              

              Mark
                Western

              Chief
                Executive Officer

            

      
        
          
          

        

        
          9

          
            

          

        

         

      

    

     

    EXHIBIT
      A TO PROMISSORY NOTE

    

    CONVERSION
      NOTICE

    

    To:         
      Tekoil
      & Gas
      Corporation
               
5036
      Dr.
      Phillips Boulevard

                   
       Suite 232

                    
      Orlando,
      Florida 32819

    

    The
      undersigned hereby elects to:

    

    Convert
      $_________ in
      amount
      due for ______________ (conversion amount divided by Conversion Rate) shares
      of
      Common Stock of Tekoil & Gas Corporation, pursuant to the terms of the
      attached Promissory Note and reduction of the amount due undersigned under
      Promissory Note by the number of shares of Common Stock indicated above
      multiplied by the Conversion Rate.

     

    The
      Holder reaffirms all covenants, representations and warranties made by it in
      a
      certain Amended and Restated Subscription Agreement dated as of April _____,
      2007, and agrees that all such covenants, representations and warranties shall
      be deemed to be have been re-made as of the date hereof.

    
      	 	 	 
	
              Date:_______________________  

            	HOLDER:
	 
 	 
 	 
 
	
            	By:  	
            
	 	
              

              Name:

              Address:

            

    

     

    Name
      in
      which shares should be registered:
      _______________________________________

    
      
        
        

      

      
        10

        
          

        

      

       

    

    EXHIBIT
      B TO FIFTH AMENDMENT

    

    PLEDGE
      AND SECURITY AGREEMENT

    (Pledge
      of Membership Interest)

    

    This
      PLEDGE
      AND SECURITY AGREEMENT
      (the
“Agreement”), is executed to be effective as of April ___, 2007 (the “Effective
      Date”), by and between TEKOIL
      & GAS CORPORATION
      a
      Delaware corporation (“Pledgor”), and MASTERS
      RESOURCES, LLC
      and
MASTERS
      OIL & GAS, LLC,
      both
      Texas limited liability companies (collectively, “Secured Party”).

    

    WHEREAS,
      Tekoil
& Gas Gulf Coast, LLC, a Delaware limited liability company (the “Company”),
      has executed a Convertible Promissory Note of even date herewith, in the
      original principal amount of Ten Million and No/100 Dollars ($10,000,000.00)
      payable to the order of Secured Party (the “Note”);

    

    WHEREAS,
      the
      Board of Directors of Pledgor has determined that Pledgor’s execution, delivery
      and performance of this Agreement may reasonably be expected to benefit Pledgor,
      directly or indirectly, and are in the best interests of Pledgor;

    

    WHEREAS,
      to
      secure Company’s obligations under the Note, Pledgor has agreed to pledge and
      grant to Secured Party a security interest in and to the Pledged Membership
      Interest (as hereinafter defined), as provided herein; 

    

    NOW,
      THEREFORE,
      for
      good and valuable consideration, the sufficiency of which is hereby
      acknowledged, the parties hereto agree as follows:

    

    1.  Grant
      of Security Interest.
      As
      collateral security for the full and timely payment, performance and observance
      of the Obligations (as defined in Section 2(a) below), Pledgor hereby pledges
      and grants to Secured Party a security interest in and to, and assigns,
      transfers, pledges and conveys to Secured Party, all of Pledgor’s right, title
      and interest in and to the following described collateral (collectively, the
      “Collateral”), now owned or hereafter acquired, wherever located, howsoever
      arising or created, and whether now existing or hereafter arising, existing
      or
      created, as security for the Obligations:

    

    (a) All
      of
      Pledgor’s right, title and interest now or hereafter accruing under the First
      Amended and Restated Operating Agreement of Tekoil & Gas Gulf Coast, LLC, as
      amended (the “Operating Agreement”), with respect to any interest now owned or
      hereafter acquired or owned by Pledgor in the Company, and including, without
      limitation, all distributions, proceeds, fees, preferences, payments or other
      benefits, which Pledgor now is or may hereafter become entitled to receive
      with
      respect to such interests in the Company (collectively, the “Pledged Membership
      Interest”);

    

    (b) All
      of
      Pledgor’s distribution rights, income rights, liquidation interest, accounts,
      contract rights, general intangibles, notes, instruments, drafts and documents
      relating to the Pledged Membership Interest; and

    

    (c) All
      substitutions, replacements, products, proceeds, income and profits arising
      from
      any of the foregoing.  

     

    2. Definitions.

    

    (a) The
      term
“Obligations” as used herein shall mean (i) the payment of the Note, together
      with interest on any and all amounts due thereunder as provided therein, (ii)
      all costs of collection and enforcement in connection with the Note including,
      without limitation, reasonable attorneys’ fees, and (iii) all other amounts
      payable by the Company or Pledgor to Secured Party described in this Agreement
      or in the instruments or understandings evidencing or securing the
      Note.

    

    (b) Subject
      to the further express definitions set forth herein, all terms used herein
      which
      are defined in Article 9 of the Texas Business and Commerce Code (the “Code”),
      shall have the same meaning herein as in the Code.

    

    3. Pledgor’s
      Representations and Warranties.
      Pledgor
      warrants and agrees with Secured Party that:

    

    3.01. Payment.
      Pledgor
      will not sell or otherwise dispose of any of the Collateral without the express
      written permission of Secured Party. There does not exist any certificate that
      represents the Pledged Membership Interests as such interests are
      uncertificated. 

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    

    3.02. Information.
      The
      address of Pledgor is the address set forth beside Pledgor’s signature on this
      Agreement. Pledgor shall notify Secured Party ten (10) days in advance of any
      change in Pledgor’s address.

    

    3.03. Other
      Liens.
      Except
      as evidenced hereby or executed in connection herewith, there is no certificate
      of title, financing statement or other writing showing any lien on, or security
      interest in, the Collateral. Pledgor is the lawful owner and holder of the
      Collateral and has full power and lawful authority to grant to Secured Party
      a
      security interest in the Collateral as provided in this Agreement. Pledgor
      will
      defend the Collateral against the claims and demands of all third
      persons.

    

    3.04. Covenants
      Concerning the Collateral.
      Pledgor
      shall not sell, transfer, mortgage or otherwise encumber any Collateral in
      any
      manner without first obtaining the written consent of Secured Party, which
      consent may be withheld in Secured Party’s sole and absolute discretion. Any
      written consent to any such sale, mortgage, transfer or encumbrance shall not
      be
      construed to be a waiver of this provision in respect of any subsequent proposed
      sale, mortgage, transfer or encumbrance. 

    

    3.05. Further
      Assurances.
      Pledgor
      will do, make, procure, execute and deliver all acts, things, writings and
      assurances as Secured Party may at any time reasonably request to perfect,
      protect, assure or enforce its interest, rights and remedies created by or
      arising in connection with this Agreement, including the execution of financing
      statements.

    

    3.06. Time
      of the Essence.
      Pledgor
      agrees that in performing any act under this Agreement, time shall be of the
      essence and Secured Party’s acceptance of partial or delinquent payments under
      the Notes by the Company, or failure of Secured Party to exercise any right
      or
      remedy, shall not be a waiver of any obligation of Pledgor or right of Secured
      Party or constitute a waiver of any similar or dissimilar default subsequently
      occurring.

    

    4. Event
      of Default.
      Pledgor
      shall be in “Default” under this Agreement if Pledgor defaults in the
      performance of any obligation, covenant, representation or warranty contained
      in
      this Agreement, a default occurs in payment of or otherwise under and terms
      or
      provisions of the Note, or any party (other than Secured Party) to any agreement
      executed in connection with or securing the Note, including, without limitation,
      any guaranty, any security agreement, and any agreement relating to the
      modification, renewal, extension or rearrangement of the Note, fails to perform
      any obligation, covenant, representation or warranty contained
      therein.

    

    5. Rights
      of Secured Party.

    

    5.01. Remedies
      After Default.
      

    

    (a)
      If
      any Default shall have occurred and is continuing, Secured Party, at its option,
      without demand, presentment, notice of acceleration, intention to accelerate
      or
      other notice (which are fully waived) may:

    

    (1)
      exercise all the rights of a secured party under the Code.

    

    (2)
      sell
      all of the Collateral or any part thereof at public or private sale or at any
      broker’s board or on any securities exchange, for cash, at such price or prices
      as Secured Party may reasonably deem satisfactory. Upon Secured Party’s demand,
      Pledgor will take all steps necessary to prepare the Collateral for and
      otherwise assist in any proposed disposition of the Collateral. Any holder
      of
      the indebtedness secured hereby may be the purchaser of any or all of the
      Collateral so sold at any public sale (or, if the Collateral is of a type
      customarily sold in a recognized market or is of a type which is the subject
      of
      widely distributed standard price quotations, at any private sale) and
      thereafter hold the same absolutely, free from any right or claim of whatsoever
      kind. Any holder of the Collateral shall have the right to offset the amount
      of
      its bid against an equal amount of the secured indebtedness held by such
      holder.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    

    Pledgor
      agrees that, because of the Securities Act of 1933, as amended, or any other
      laws or regulations, and for other reasons, there may be legal and/or practical
      restrictions or limitations affecting Secured Party in any attempts to dispose
      of certain portions of the Collateral and for the enforcement of its rights.
      For
      these reasons, Secured Party is hereby authorized by Pledgor, but not obligated,
      upon the occurrence and during the continuation of a Default, to sell all or
      any
      part of the Collateral at private sale, subject to investment letter or in
      any
      other manner which will not require the Collateral, or any part thereof, to
      be
      registered in accordance with the Securities Act of 1933, as amended, or the
      rules and regulations promulgated thereunder, or any other laws, at a reasonable
      price at such private sale or other distribution in the manner mentioned above.
      Pledgor understands that Secured Party may in its discretion approach a limited
      number of potential purchasers and that a sale under such circumstances may
      yield a lower price for the Collateral, or any part or party thereof, than
      would
      otherwise be obtainable if such Collateral were either afforded to a larger
      number or potential purchasers, or registered or sold in the open market.
      Pledgor agrees that such private sale shall be deemed to have been made in
      a
      commercially reasonable manner, and that Secured Party has no obligation to
      delay the sale of any Collateral to permit the issuer thereof to register it
      for
      public sale under any applicable federal or state securities laws.

    

    Secured
      Party is authorized, in connection with any such sale (i) to restrict the
      prospective bidders on or purchasers of any of the Collateral to a limited
      number of sophisticated investors who will represent and agree that they are
      purchasing for their own account for investment and not with a view to the
      distribution or sale of any of such Collateral and (ii) to impose such other
      limitations or conditions in connection with any such sale as Secured Party
      reasonably deems necessary in order to comply with applicable law. Pledgor
      covenants and agrees that it will execute and deliver such documents and take
      such other action as Secured Party reasonably deems necessary in order that
      any
      such sale may be made in compliance with applicable law. Upon any such sale,
      Secured Party shall have the right to deliver, assign and transfer to the
      purchaser thereof the Collateral so sold. Each purchaser at any such sale shall
      hold the Collateral so sold absolutely, free from any claim or right of Pledgor
      of whatsoever kind, including any equity or right of redemption of Pledgor.
      Pledgor, to the extent permitted by applicable law, hereby specifically waives
      all rights of redemption, stay or appraisal which it has or may have under
      any
      law now existing or hereafter enacted.

    

    Pledgor
      agrees that ten (10) days written notice from Secured Party to Pledgor of
      Secured Party’s intention to make any such public or private sale or sale at a
      broker’s board or on a securities exchange shall constitute “reasonable
      notification” within the meaning of the Code. Such notice shall (1) in case of a
      public sale, state the time and place fixed for such sale, (2) in case of sale
      at a broker’s board or on a securities exchange, state the board or exchange at
      which such a sale is to be made and the day on which the Collateral, or the
      portion thereof so being sold, will first be offered to sale at such board
      or
      exchange and (3) in the case of a private sale, state the day after which such
      sale may be consummated. Any such public sale shall be held at such time or
      times within ordinary business hours and at such place or places as Secured
      Party may fix in the notice of such sale. At any such sale, the Collateral
      may
      be sold in one lot as an entirety or in separate parcels, as Secured Party
      may
      reasonably determine. Secured Party shall not be obligated to make any such
      sale
      pursuant to any such notice. Secured Party may, upon written notice to Pledgor,
      adjourn any public or private sale or cause the same to be adjourned from time
      to time by announcement at the time and place fixed for the sale, and such
      sale
      may be made at any time or place to which the same may be so
      adjourned.

    

    Secured
      Party, instead of exercising the power of sale herein conferred upon it, may
      proceed by a suit or suits at law or in equity to foreclose the security
      interests and sell the Collateral, or any portion thereof, under a judgment
      or
      decree of a court or courts of competent jurisdiction.

    

    (b)
      Without limiting the foregoing, or imposing upon Secured Party any obligations
      or duties not required by applicable law, Pledgor acknowledges and agrees that,
      in foreclosing upon any of the Collateral, or exercising any other rights or
      remedies provided Secured Party hereunder or under applicable law, Secured
      Party
      may, but shall not be required to: (1) qualify or restrict prospective
      purchasers of the Collateral by requiring evidence of sophistication and/or
      creditworthiness, and requiring the execution and delivery of confidentiality
      agreements or other documents and agreements as a condition to such prospective
      purchasers’ receipt of information regarding the Collateral or participation in
      any public or private foreclosure sale process; (2) provide to prospective
      purchasers the Operating Agreement and business and financial information
      regarding the Company available in the files of Secured Party at the time of
      commencing the foreclosure process, without the requirement that Secured Party
      obtain, or seek to obtain, any updated business or financial information, or
      verify, or certify to prospective purchasers, the accuracy of any such business
      or financial information; (3) sell at foreclosure all, or a portion but not
      all,
      of the rights, titles and interests of Pledgor in the Company; it being further
      specifically acknowledged by Pledgor that limitations or potential limitations
      on the transfer of certain Collateral under the Regulations or other applicable
      agreements or law may limit Secured Party’s right or ability to foreclose upon
      or sell certain rights, titles and interests of Pledgor in the Company; (4)
      offer for sale, and sell, the Pledged Membership Interests either with, or
      without, first employing an appraiser, investment banker, or broker with respect
      to the evaluation of Collateral, the solicitation of purchasers for Collateral,
      or the manner of sale of Collateral.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    (c)
      Secured Party shall have all rights, remedies and recourse granted in the Note,
      this Agreement or existing at common law or equity (including specifically
      those
      granted by the Code), and such rights and remedies (1) shall be cumulative
      and
      concurrent, (2) may be pursued separately, successively or concurrently against
      Pledgor and any party obligated to pay or perform the Obligations, any of the
      Collateral, or any other security for any of the Obligations, at the sole
      discretion of Secured Party, and (3) may be exercised as often as occasion
      therefor shall arise, it being agreed by Pledgor that the exercise or failure
      to
      exercise any such rights or remedies shall in no event be construed as a waiver
      or release thereof or of any other right, remedy or recourse.

    

    (d)
      Notwithstanding a foreclosure upon any of the Collateral or exercise of any
      other remedy by Secured Party in connection with a Default, Pledgor shall not
      be
      subrogated thereby to any rights of Secured Party against the Collateral or
      any
      other security for any of the Obligations. Pledgor shall not be deemed to be
      the
      owner of any interest in any of the Obligations until all of the Obligations
      have been paid to Secured Party and are fully performed and
      discharged.

    

    (e)
      All
      recitals in any instrument of assignment or any other instrument executed by
      Secured Party incident to the sale, transfer, assignment or other disposition
      or
      utilization of the Collateral or any part thereof hereunder shall be rebuttably
      presumptive evidence of the matters stated therein and all prerequisites of
      such
      sale or other action contained in such recitals shall be presumed to have been
      performed or to have occurred.

    

    (f)
      Notwithstanding anything to the contrary contained herein, Pledgor shall retain
      all voting rights with respect to the Pledged Membership Interest, including
      after a Default has occurred hereunder.

    

    5.02. No
      Waiver.
      Pledgor
      may remedy any Default and the Secured Party may waive any Default without
      waiving any other Default. The remedies of Secured Party are cumulative, and
      the
      exercise or partial exercise of any one or more of the remedies provided for
      herein shall not be construed as a waiver of any of the other remedies of
      Secured Party. No delay of Secured Party in exercising any power or right shall
      operate as a waiver thereof. Secured Party’s failure to assert a security
      interest on all or any portion of the Collateral at any time, does not waive
      any
      security interest, any right of Secured Party to assert any security interest
      or
      any other right, power or remedy of Secured Party with respect to the Collateral
      as to which Secured Party has failed to assert a security interest or any other
      Collateral.

    

    5.03. Assignment.
      This
      Agreement, the Obligations or Secured Party’s rights hereunder may not be
      assigned by Secured Party without the prior written consent of Pledgor.

    

    6. Additional
      Agreements.

    

    6.01. Miscellaneous.
      “Secured Party” and “Pledgor” as used in this Agreement include the heirs,
      successors, legal representatives, receivers and assigns of those parties.
      The
      divisions of this Agreement into sections and subsections and the titles thereto
      have been made for convenience only and shall be given no substantive meaning
      or
      significance whatever in construing the terms and provisions of this
      Agreement.

    

    6.02. Choice
      of Law.
      UNLESS
      EXPRESSLY PROVIDED ELSEWHERE IN THIS AGREEMENT, THIS AGREEMENT SHALL BE GOVERNED
      BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
      TEXAS.

    

    6.03. Illegality.
      If any
      provision of this Agreement is rendered or declared invalid, illegal or
      ineffective by reason of any existing or subsequently enacted legislation or
      by
      decree of a court of competent jurisdiction, such legislation or decree shall
      not impair, invalidate or nullify the remainder of this Agreement which shall
      remain in full force and effect.

    

    6.04. Amendments.
      No
      modification, variation or amendment of or to this Agreement shall be effective
      unless in writing signed by Pledgor and Secured Party.

    

    6.05. Notice.
      Any
      notice or demand to Pledgor or Secured Party hereunder or in connection herewith
      may be given and shall conclusively be deemed and considered to have been given
      and received upon the deposit thereof in the mail, in writing, duly stamped
      and
      mailed by certified mail, return receipt requested and addressed to the address
      set forth on this Agreement, or at such other address as Pledgor or Secured
      Party may designate to the other in writing.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    6.06. Counterparts.
      This
      Assignment may be executed simultaneously or in counterparts, each of which
      shall be deemed an original, but all of which together shall constitute one
      and
      the same agreement.

    

    [REMAINDER
      OF PAGE INTENTIONALLY BLANK]

    
      
        
        

      

      
        15

        
          

        

      

       

    

    IN
      WITNESS WHEREOF,
      Pledgor
      and Secured Party have executed this Agreement on the dates set forth below
      their signatures, to be effective as of the Effective Date.

    
      	 	 	 	 
	 	 	 	 
	Address
              for
              Notice:	 	 	PLEDGOR:
	 	 	 	 
	
              
 	 	 	
              TEKOIL
                & GAS CORPORATION, 

              a
                Delaware corporation

            
	
              
 	 	 	 
	
              
 	 	 	
              By:

              
                

              

              Mark
                Western, Chief Executive Officer

            
	 	 	 	 
	
            	 	 	Date:
	 	 	 	
              
                
 

            
	 	 	 	 
	Address for Notice:	 	 	SECURED PARTY:
	 	 	 	 
	
              
 	 	 	
              MASTERS
                RESOURCES, LLC, 

              a
                Texas limited liability
                company

            
	
              
 	 	 	 
	
              
 	 	 	
              By:

              
                

              

              Name:

              
                

              

              Title:

              
                
 

            
	 	 	 	
              Date: 

              
                
 

            
	 	 	 	 
	
              
 	 	 	
              MASTERS
                OIL & GAS, LLC, 

              a
                Texas limited liability
                company

            
	
              
 	 	 	 
	
              
 	 	 	
              By:

              
                

              

              Name: 

              
                

              

              Title: 

              
                

              

               

              Date: 

              
                
 

            

    

        

    
      
        
        

      

      
        16

        
          

        

      

       

    

    EXHIBIT
      C TO FIFTH AMENDMENT

    

    TEKOIL
      & GAS CORPORATION

     

    AMENDED
      AND RESTATED

    SUBSCRIPTION
      AGREEMENT

     

    This
      Agreement supersedes and replaces a certain Subscription Agreement executed
      by
      the parties hereto as of December 29, 2006.

     

    THE
      COMMON STOCK HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
      AMENDED (THE “SECURITIES ACT”) OR UNDER THE PROVISIONS OF ANY APPLICABLE STATE
      SECURITIES LAWS. THE COMMON STOCK MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
      HYPOTHECATED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL
      SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
      OR
      UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.

     

    1.  Subscription.
      Subscriber (as identified on the signature page attached hereto) hereby
      subscribes for and agrees to be issued Four Million (4,000,000) shares of Common
      Stock (the “Common
      Stock”)
      of
      Tekoil & Gas Corporation, a Delaware corporation (the “Company”),
      a
      Promissory Note (the “Note”)
      in the
      amount of Ten Million Dollars ($10,000,000), which Note may be converted to
      up
      to Three Million shares (3,000,000) shares of common stock of the Company (the
      “Conversion
      Stock”)
      at a
      conversion price of $3.33 per share , all as consideration under the “PSA”
described below. The Common Stock, the Note and the Conversion Stock are
      referred to together as the “Securities”.

     

    2.  Consideration.
      The
      Securities constitute a portion of the consideration payable by the Company
      to
      Subscriber under a certain Purchase and Sale Agreement dated November ___,
      2006,
      and as amended December 29, 2006, in connection with the acquisition and sale
      of
      certain assets described therein, as amended through the date hereof (referred
      to together as the “PSA”).
      Capitalized terms used herein and not otherwise defined have the meanings
      ascribed to them in the PSA.

     

    3.  Subscriber's
      Representations and Warranties.
      Subscriber represents, warrants, acknowledges and agrees that:

     

    (a)  Subscriber
      is a resident of the state indicated on the signature page hereof, is legally
      competent to execute this Subscription Agreement, and:

     

    (i)  if
      Subscriber is an individual, has his or her principal residence in such
      state;

     

    (ii)  if
      Subscriber is a corporation, partnership, trust, limited liability company
      or
      other form of business organization, has its principal office in such state;
      or

     

    (iii)  if
      Subscriber is a corporation, partnership, trust, limited liability company
      or
      other form of business organization, Subscriber has not been organized for
      the
      specific purpose of acquiring the Common Stock.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (b)  Subscriber
      has not been offered the Securities by any form of general solicitation or
      general advertising, including but not limited to any advertisement, article,
      notice or other communication published in any newspaper, magazine, or similar
      media or broadcast over television or radio, or any seminar or meeting whose
      attendees have been invited by any general solicitation or general
      advertising.

     

    (c)  Subscriber
      has had access during the course of this transaction and prior to the issuance
      of the Securities to all information necessary to enable Subscriber to evaluate
      the merits and risks of a prospective investment in the Company (including,
      without limitation, the periodic and other reports filed by the Company with
      the
      U.S. Securities and Exchange Commission (the “SEC”) under the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”)), and Subscriber has had
      the opportunity to ask questions of and receive answers from the officers and
      directors of the Company, or a person or persons acting on its behalf,
      concerning the terms and conditions of the offering and all questions raised
      by
      Subscriber have been answered to the full satisfaction of
      Subscriber.

     

    (d)  There
      are
      substantial restrictions on the transferability of the Securities and,
      accordingly, Subscriber will need to bear the economic risk of the investment
      in
      the Securities for an indefinite period of time and will not be readily able
      to
      liquidate the investment in case of an emergency.

     

    (e)  Subscriber
      understands that the Company has a limited financial or operating history,
      each
      of the Securities is a speculative investment which involves a high degree
      of
      financial risk, and there is no assurance of any economic, income or tax benefit
      from such investment.

     

    (f)  In
      making
      this investment, Subscriber is relying solely upon the advice of Subscriber's
      personal tax advisors, and not the Company nor its advisers and counsel, with
      respect to the tax aspects of an investment in the Securities.

     

    (g)  If
      Subscriber is a corporation, partnership, trust, limited liability company,
      employee benefit plan or other entity, Subscriber is authorized and qualified
      to
      become a stockholder of the Company and the person signing this Subscription
      Agreement on behalf of such entity has been duly authorized by such entity
      to do
      so.

     

    (h)  No
      representations or warranties have been made to Subscriber by the Company or
      any
      officer, employee, agent or affiliate of the Company (other than those set
      forth
      in the PSA), and Subscriber's investment decision has been based solely upon
      Subscriber's independent evaluation and due diligence, if any, of the
      Company.

     

    (i)  Subscriber
      is experienced in evaluating and investing in early stage companies such as
      the
      Company. Subscriber is experienced in business matters and regards himself,
      herself or itself as a sophisticated investor able to evaluate investment and
      financial information and to choose independent professional advisors to assist
      in such evaluation and, either alone or with such advisers, has such knowledge
      and experience in financial and business matters that Subscriber is capable
      of
      evaluating the merits and risks of an investment in the Securities and has
      the
      capacity to protect Subscriber’s own interests in connection with Subscriber’s
      proposed investment in the Securities.

     

    (j)  Subscriber’s
      aggregate commitments to investments that are not readily marketable are not
      disproportionate to Subscriber’s net worth and an investment in the Securities
      will not cause such aggregate commitment to become excessive. Subscriber has
      adequate means of providing for Subscriber’s current needs and possible personal
      and family contingencies. Subscriber will not be readily able to liquidate
      the
      investment in the case of an emergency, and Subscriber has no need for liquidity
      in this investment in the Company.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    (k)  Subscriber
      has a preexisting business or personal relationship with the Company or with
      one
      or more of its officers or directors. Except for Subscriber’s intention to
      distribute the shares (or cause them to be issued directly) to its members,
      pro-rata, on condition that they make the representations, warranties and
      agreements herein provided in favor of Company, Subscriber is acquiring the
      Securities solely for Subscriber’s own account for investment (and not for the
      account of any other person), and not with a view to, or for, any resale,
      distribution, fractionalization or other transfer thereof, and Subscriber has
      no
      present plans to enter into any contract, undertaking, agreement or arrangement
      for any such resale, distribution, fractionalization or transfer.

     

    4.  Representations
      and Warranties Concerning Suitability and Accredited Investor
      Status.
      Subscriber hereby represents and warrants to the Company that Subscriber is
      an
“Accredited Investor” (as defined under Regulation D as promulgated and
      amended by the SEC pursuant to the Securities Act) on the basis of the
      representations made by Subscriber to the Company below. Subscriber hereby
      represents and warrants and agrees that:

     

    (a)  Subscriber
      has such knowledge and experience in financial and business matters as to be
      capable of evaluating the merits and risks of an investment in the Company
      and
      has obtained sufficient information from the Company to evaluate the merits
      and
      risks of an investment in the Company.

     

    (b)  Subscriber
      has determined that the Securities are a suitable investment for Subscriber.
      Subscriber is able to bear the economic risk of the investment in the Company
      (including a complete loss thereof) and has adequate financial or other means
      for providing for Subscriber's current needs and contingencies and has no need
      for liquidity in this investment.

     

    5.  Fees
      and Expenses.
      Subscriber shall pay for all its own fees and expenses in connection with this
      subscription, including without limitation legal fees and fees of its advisors
      and counsel, if any.

     

    6.  Restrictions.
      The
      Subscriber will not at any time make any disposition of any of the Securities
      except in accordance with applicable federal and state securities laws and
      the
      legend set forth below. The certificates for the Securities, the Note and the
      Conversion Stock to be issued to the undersigned will bear a legend in
      substantially the following form:

     

    THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE. SUCH SECURITIES
      MAY
      NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
      STATEMENT UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES
      LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
      IS
      NOT REQUIRED UNDER THE SECURITIES ACT OF 1933 OR SUCH LAWS.

     

    In
      the
      event the Common Stock or Conversion Stock may be publicly resold under the
      Registration Rights Agreement or otherwise under applicable securities laws,
      Subscriber agrees that it will not publicly resell more than 250,000 shares
      thereof per calendar week. In addition, during the period that the Note is
      outstanding, subject to the limitations of the preceding sentence, which may
      be
      waived by the Company in its sole discretion, no public re-sales of the Common
      Stock may occur unless and until all Conversion Shares have been issued in
      satisfaction of the Note. Subscriber agrees that a legend reflecting the
      foregoing and reasonable transfer restrictions consistent therewith may be
      placed on the Common Stock and Conversion Stock.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    7.  Miscellaneous.
      The
      terms and conditions contained in this Subscription Agreement (together with
      the
      PSA and a certain Registration Rights Agreement executed by the Company and
      Subscriber of even date herewith) constitute the entire agreement between the
      parties with respect to the subject matter hereof and supersede all previous
      agreements and understandings, whether oral or written, between the parties
      hereto with respect to the subject matter hereof. This Subscription Agreement
      shall be construed in accordance with and governed by the laws of the State
      of
      Delaware. This Subscription Agreement may be amended only by a writing executed
      by the Company and Subscriber.

     

    IN
      WITNESS WHEREOF,
      Subscriber has executed this Subscription Agreement on the date indicated on
      the
      signature page hereof.

     

    [SIGNATURES
      ON NEXT PAGE]

    
      
        
        

      

      
        20

        
          

        

      

       

    

    The
      undersigned Subscriber confirms and certifies that Subscriber has read this
      entire Subscription Agreement and understands the provisions hereof, and that
      the undersigned has executed this Subscription Agreement as of the date set
      forth below.

     

    DATED:
      April ____, 2007

     

    Which
      will be held by Subscriber(s) in the following manner, if
      applicable:

    

    
      
        	 	(     ) 	Community Property	(     ) 	Joint Tenants with Right of
                Survivorship
	 	(     ) 	Tenants in Common	(     ) 	Separate Property
	 	(     )
                	
                Other:
                  (e.g.
                  individual, corporation, partnership, limited liability company,
                  trust,
                  investment company). Please indicate:___________________.

                 

              

      

    

    Subscriber
      Signature(s)

    
      	 	 	 	 
	MASTERS RESOURCES, LLC	 	 	MASTERS OIL & GAS,
              LLC
	 	 	 	 
	 	 	 	 
	
              

            	 	 	
              

            
	 	 	 	 
	
              

              Name
                and Title of Signatory if Subscriber is an
                entity

            	 	 	 
	 	 	 	 
	 	 	 	 
	
              
Signature	 	 	
              
Signature
              of Joint Subscriber
	 	 	 	 
	 	 	 	 
	
              
Social
              Security or Tax ID Number 	 	 	
              
Social
              Security or Tax ID Number of Joint
              Subscriber
	 	 	 	 
	 	 	 	 
	
              
Address	 	 	
              
Address
              of Joint Subscriber
	 	 	 	 
	 	 	 	 
	Reviewed and Advised By (if
              any): 	 	 	Accepted By:
	 	 	 	 
	
              
Subscriber’s
              Professional Advisor	 	 	
              TEKOIL
                & GAS CORPORATION,

              a
                Delaware corporation

            
	 	 	 	 
	 	 	 	 
	
              
Name	 	 	
              
Signature
	 	 	 	 
	 	 	 	 
	
              
Address 	 	 	
              
Name/Title

    

    

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

        

    Note: 

     

    In
      the
      case of subscription by,

     

    
      	·  	
              Joint
                Tenants
                with Rights of Survivorship or Tenants
                in Common,
                all tenants must execute this
                subscription,

            

    

     

    
      	·  	
              Husband
                and Wife,
                as community property, one signature only is
                required.

            

    

     

    
      	·  	
              A
                Trust,
                the Trustee must sign and a copy of the Trust Agreement should be
                provided.

            

    

     

    
      	·  	
              A
                Partnership,
                a
                copy of the Statement of Partnership or the Partnership Agreement
                should
                be provided, and execution must be by the number of partners required
                therein to bind the Partnership.

            

    

     

    
      	·  	
              A
                Corporation,
                a
                resolution of the Board of Directors authorizing the subscription
                and
                certified by the Secretary should be
                included.

            

    

     

    
      
        
        

      

      
        22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00121-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00121-of-00352.parquet"}]]