Document:

Exhibit
      10.1

    NOVASTAR
      MORTGAGE, INC. as Sponsor,

     

    NOVASTAR
      MORTGAGE FUNDING CORPORATION 

    as
      Depositor,

     

    U.S.
      BANK
      NATIONAL ASSOCIATION 

    as
      Custodian

     

    and

     

    DEUTSCHE
      BANK NATIONAL TRUST COMPANY 

    as
      Trustee

     

    MORTGAGE
      LOAN PURCHASE AGREEMENT

     

    Dated
      as
      of May 1, 2007

     

    Fixed
      and
      Adjustable Rate Mortgage Loans

     

    NovaStar
      Mortgage Funding Trust, Series 2007-2

    NovaStar
      Home Equity Loan Asset-Backed Certificate, Series 2007-2 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

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

     

    WITNESSETH
      THAT:

     

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

     

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

     

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

     

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

     

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

     

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

     

    ARTICLE
      I

     

    DEFINITIONS

     

    Section
      1.01 Definitions.

     

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

     

    ARTICLE
      II

     

    SALE
      OF MORTGAGE LOANS AND RELATED PROVISIONS

     

    Section
      2.01 Sale
      of Initial Mortgage Loans and MI Policies.

     

    (a) The
      Sponsor hereby sells, and the Depositor hereby purchases on the Closing Date
      the
      Initial Mortgage Loans identified (and the related MI Policies) on the Mortgage
      Loan Schedule annexed hereto as Exhibit 1, the proceeds thereof and all rights
      under the Related Documents (including the related Mortgage Files). The Mortgage
      Loans consist of a group of conventional, residential first and second lien
      mortgage loans with fixed and adjustable interest rates (the “Group I Mortgage
      Loans”) and a group of conventional, residential first and second lien mortgage
      loans with fixed and adjustable interest rates (the “Group II Mortgage Loans”).
      The Mortgage Loans will have a Principal Balance as of the close of business
      on
      the Cut-off Date, after giving effect to any payments due on or before such
      date
      whether or not received, of approximately $1,179,863,820. The sale of the
      Initial Mortgage Loans will take place on the Closing Date, subject to and
      simultaneously with the deposit of the Initial Mortgage Loans and the Original
      Pre-Funded Amount and the Interest Coverage Amount into the Trust Fund, the
      authentication of the Certificates by the Trustee and the sale of the
      Underwritten Certificates pursuant to the Underwriting Agreement. The purchase
      price (the “Purchase
      Price”)
      for
      the Initial Mortgage Loans to be paid by the Depositor to the Sponsor on the
      Closing Date shall consist of the following:

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    (i)
      a
      payment in an amount equal to $1,332,065,308 representing the net proceeds
      of
      the sale of the Underwritten Certificates, which payment shall be paid to the
      Sponsor by wire transfer in immediately available funds on the Closing Date
      by
      or on behalf of the Depositor, or as otherwise agreed by the Depositor;
      and

     

    (ii)
      the
      Class C Certificates (including the net value represented by the Class I
      Certificates) and the Residual Certificates. 

     

    (b) [Reserved]

     

    (c) In
      connection with such conveyances by the Sponsor, the Sponsor shall on behalf
      of
      and at the direction of the Depositor deliver to, and deposit with the Custodian
      on behalf of the Trustee, on or before the Closing Date in the case of an
      Initial Mortgage Loan and four Business Days prior to the related Subsequent
      Transfer Date in the case of a Subsequent Mortgage Loan, the following documents
      or instruments with respect to each Mortgage Loan (the “Mortgage
      File”):

     

    (i)
      the
      original Mortgage Note endorsed to “Deutsche Bank National Trust Company, as
      Trustee of the NovaStar Mortgage Funding Trust, Series 2007-2, relating to
      the
      NovaStar Home Equity Loan Asset-Backed Certificates, Series
      2007-2”;

     

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

     

    (iii)
      unless the Mortgage Loan is registered on the MERS System, an original
      assignment (which may be included in one or more blanket assignments if
      permitted by applicable law) of the Mortgage endorsed to “Deutsche Bank National
      Trust Company, as Trustee of the NovaStar Mortgage Funding Trust, Series 2007-2,
      relating to the NovaStar Home Equity Loan Asset-Backed Certificates, Series
      2007-2,” and otherwise in recordable form;

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    If
      a
      defect in any Mortgage File is discovered which may materially and adversely
      affect the value of the related Mortgage Loan, or the interests of the Trustee
      (as pledgee of the Mortgage Loans), or the Certificateholders in such Mortgage
      Loan, including if any document required to be delivered to the Custodian has
      not been delivered (provided that a Mortgage File will not be deemed to contain
      a defect for an unrecorded assignment under clause (i) above for 180 days
      following submission of the assignment if the Sponsor has submitted such
      assignment for recording pursuant to the terms of the following paragraph),
      the
      Sponsor shall cure such defect, repurchase the related Mortgage Loan at the
      Repurchase Price or substitute an Eligible Substitute Mortgage Loan for the
      related Mortgage Loan upon the same terms and conditions set forth in Section
      3.01 hereof as to the Initial Mortgage Loans and the Subsequent Mortgage Loans
      and Section 2.02(c) hereof as to the Subsequent Mortgage Loans for breaches
      of
      representations and warranties.

     

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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    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 an Initial Mortgage Loan or, in the case of a Subsequent
      Mortgage Loan, prior to or on the related Subsequent Transfer Date, the Sponsor
      will deliver or cause to be delivered the originals of such documents to the
      Custodian, on behalf of the Trustee, promptly upon receipt thereof.

     

    In
      connection with the assignment of any Initial Mortgage Loan registered on the
      MERS System, promptly after the Closing Date, the Sponsor further agrees that
      it
      will cause, at the Sponsor’s own expense, the MERS System to indicate that such
      Initial Mortgage Loan has been assigned by the Sponsor to the Trustee in
      accordance with this Agreement for the benefit of the Certificateholders by
      including in such computer files (a) the applicable Trustee code in the field
      “Trustee” which identifies the Trustee and (b) the code “NovaStar 2007-2” (or
      its equivalent) in the field “Pool” which identifies the series of the
      Certificates issued in connection with such Mortgage Loans. The Custodian will
      certify in its final certification that the MERS System shows the Trustee on
      behalf of the Certificateholders as the beneficial owner of the Mortgage Loans
      registered on the MERS System.

     

    Effective
      on the Closing Date, the Depositor hereby acknowledges its acceptance of all
      right, title and interest to the Initial 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 Initial Mortgage Loans. No scheduled payments of principal due on or
      before the Cut-off Date and collected after the Cut-off Date shall belong to
      the
      Depositor pursuant to the terms of this Purchase Agreement. The Pooling and
      Servicing Agreement shall provide that any late payment charges collected in
      connection with a Mortgage Loan shall be paid to the Servicer as provided
      therein.

     

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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

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

     

    Section
      2.02 Conveyance
      of the Subsequent Mortgage Loans.

     

    (a) Subject
      to the conditions set forth in paragraph (b) below in consideration of the
      Trustee’s delivery on the related Subsequent Transfer Dates of all or a portion
      of the balance of funds in the Pre-Funding Account, the Sponsor shall on any
      Subsequent Transfer Date sell, transfer, assign, set over and convey, without
      recourse, to the Depositor, who shall then sell, transfer, assign, set over
      and
      convey, without recourse, to the Trustee, but subject to the other terms and
      provisions of this Purchase Agreement and the Pooling and Servicing Agreement,
      all of the right, title and interest of the Sponsor in and to (i) the Subsequent
      Mortgage Loans (and the related MI Policies) identified on the related Mortgage
      Loan Schedule attached to the related Subsequent Transfer Instrument delivered
      by the Sponsor on such Subsequent Transfer Date, (ii) principal due and interest
      accruing on the Subsequent Mortgage Loans after the related Subsequent Cut-off
      Date and (i) with respect to such Subsequent Mortgage Loans all items to be
      delivered pursuant to Section 2.01(c) above and the other items in the related
      Mortgage Files; provided, however, that the Sponsor reserves and retains all
      right, title and interest in and to principal received and interest accruing
      on
      the Subsequent Mortgage Loans prior to the related Subsequent Cut-off Date.
      The
      transfer by the Sponsor to the Depositor, and by the Depositor to the Trustee,
      of the Subsequent Mortgage Loans identified on each Mortgage Loan Schedule
      attached to the related Subsequent Transfer Instrument and the related MI
      Policies shall be absolute and is intended by the Trustee, the Depositor and
      the
      Sponsor to constitute and to be treated as a sale of the Subsequent Mortgage
      Loans by the Sponsor to the Depositor, and a sale of the Subsequent Mortgage
      Loans by the Depositor to the Trustee.

     

    The
      Subsequent Mortgage Loans presented for purchase will be designated as either
      Group I or Group II. Of the Original Pre-Funded Amount of $220,136,180, a
      maximum of $184,260,754 will be used to acquire Subsequent Mortgage Loans for
      inclusion in Group I and a maximum of $35,875,426 will be used to acquire
      Subsequent Mortgage Loans for inclusion in Group II, subject to the satisfaction
      of the conditions set forth herein. 

     

    In
      the
      event such transactions shall be deemed not to be a sale, the Sponsor hereby
      grants to the Depositor as of each Subsequent Transfer Date a security interest
      in all of the Sponsor’s right, title and interest in, to and under the related
      Subsequent Mortgage Loans and such other property, to secure all of the
      Sponsor’s obligations hereunder, and this Purchase Agreement shall constitute a
      security agreement under applicable law, and in such event, the parties hereto
      acknowledge that the Custodian, in addition to holding the Subsequent Mortgage
      Loans and the related MI Policies on behalf of the Trustee for the benefit
      of
      the Certificateholders, holds the Subsequent Mortgage Loans and the related
      MI
      Policies as designee of the Depositor. The Sponsor agrees to take or cause
      to be
      taken such actions and to execute such documents, including without limitation
      the filing of all necessary UCC-1 financing statements filed in the Commonwealth
      of Virginia (which shall be submitted for filing as of the related Subsequent
      Transfer 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 a change in the state of incorporation of the Sponsor as
      are
      necessary to perfect and protect the interests of the Depositor and its
      assignees in the Subsequent Mortgage Loans.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    In
      the
      event such transactions shall be deemed not to be a sale, the Depositor hereby
      grants to the Trustee as of each Subsequent Transfer Date a security interest
      in
      all of the Depositor’s right, title and interest in, to and under the related
      Subsequent Mortgage Loans and such other property, to secure all of the
      Depositor’s obligations hereunder, and this Purchase Agreement shall constitute
      a security agreement under applicable law, and in such event, the parties hereto
      acknowledge that the Custodian, in addition to holding the Subsequent Mortgage
      Loans and the related MI Policies on behalf of the Trustee for the benefit
      of
      the Certificateholders, holds the Subsequent Mortgage Loans and the related
      MI
      Policies as designee of the Trustee. The Depositor agrees to take or cause
      to be
      taken such actions and to execute such documents, including without limitation,
      the filing of all necessary UCC-1 financing statements filed in the State of
      Delaware (which shall be submitted for filing as of the related Subsequent
      Transfer Date), any continuation statements with respect thereto and any
      amendments thereto required to reflect a change in the name or corporate
      structure of the Depositor or the filing of any additional UCC-1 financing
      statements due to a change in the state of incorporation of the Depositor as
      are
      necessary to perfect and protect the interests of the Trustee and its assignees
      in Subsequent Mortgage Loans.

     

    The
      related Mortgage File for each Subsequent Mortgage Loan shall be delivered
      to
      the Custodian, on behalf of the Trustee, prior to the related Subsequent
      Transfer Date.

     

    The
      Trustee on each Subsequent Transfer Date shall acknowledge by signing receipt
      thereof in the form of Exhibit 2(A), its acceptance of all right, title and
      interest to the related Subsequent Mortgage Loans and other property, existing
      on the Subsequent Transfer Date and thereafter created, conveyed to it pursuant
      to this Section 2.02.

     

    The
      Trustee, as trustee of the Trust Fund, shall be entitled to all scheduled
      principal payments due after each Subsequent Cut-off Date, all other payments
      of
      principal due and collected after each related Subsequent Cut-off Date, and
      all
      payments of interest on the Subsequent Mortgage Loans, minus that portion of
      any
      such payment which is allocable to the period prior to the related Subsequent
      Cut-off Date. No scheduled payments of principal due on or before the related
      Subsequent Cut-off Date and collected after the related Subsequent Cut-off
      Date
      shall belong to the Trust Fund pursuant to the terms of this Purchase
      Agreement.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    The
      purchase price distributed by the Trustee solely from the funds in the
      Pre-Funding Account, at the direction of the Servicer, shall be one-hundred
      percent (100%) of the aggregate Principal Balance of the Subsequent Mortgage
      Loans so transferred (as identified on the Mortgage Loan Schedule attached
      to
      the related Subsequent Transfer Instrument provided by the
      Sponsor).

     

    (b) The
      Sponsor shall transfer to the Depositor, who shall transfer to the Trustee,
      the
      Subsequent Mortgage Loans and the other property and rights related thereto
      described in Section 2.02(a) above, and the Trustee shall cause to be released
      funds from the related Pre-Funding Account, only upon the satisfaction of each
      of the following conditions on or prior to the related Subsequent Transfer
      Date:

     

    (i)
      the
      Sponsor shall have provided the Depositor, and the Depositor shall have provided
      the Trustee and the Custodian, with a timely Addition Notice, which notice
      shall
      be given no fewer than four Business Days prior to the related Subsequent
      Transfer Date and shall designate the Subsequent Mortgage Loans to be sold
      to
      the Depositor and then to the Trustee and the aggregate Principal Balances
      of
      such Subsequent Mortgage Loans as of the related Subsequent Cut-off Date and
      any
      other information reasonably requested by the Trustee or the Custodian with
      respect to the Subsequent Mortgage Loans;

     

    (ii)
      the
      Sponsor shall have executed, and the Depositor shall have executed and delivered
      to the Trustee and the Custodian for execution, a Subsequent Transfer Instrument
      substantially in the form of Exhibit 2(A) or 2(B), as applicable. Such
      Subsequent Transfer Instrument shall include a representation by the Depositor
      confirming the satisfaction of each condition precedent and representations
      specified in this Section 2.02(b), Section 2.02(c) and in the related Subsequent
      Transfer Instrument (upon which representations neither the Trustee nor the
      Custodian shall have any liability in relying). Such Subsequent Transfer
      Instrument shall also include a Mortgage Loan Schedule attached thereto listing
      the Subsequent Mortgage Loans;

     

    (iii)
      as
      of each Subsequent Transfer Date, as evidenced by delivery of the Sponsor’s
      Subsequent Transfer Instrument in the form of Exhibit 2(A) and the Depositor’s
      Subsequent Transfer Instrument is the form of Exhibit 2(B), neither the Sponsor
      nor the Depositor shall be insolvent or have been made insolvent by such
      transfers, nor shall they be aware of any pending insolvency;

     

    (iv)
      such
      sale and transfer (i) does not cause any REMIC created under the Pooling and
      Servicing Agreement to fail to qualify as a REMIC and (ii) is not a prohibited
      transaction within the meaning of Section 860F(a)(2) of the Code or a
      contribution resulting in a tax under Section 860G(d) of the Code, both as
      evidenced by an Opinion of Counsel provided for the Trustee at the expense
      of
      the Sponsor;

     

    (v)
      the
      Pre-Funding Period shall not have terminated; and

     

    (vi)
      the
      Sponsor shall have delivered to the Custodian, the Trustee, and the Rating
      Agencies Opinions of Counsel addressed to the Rating Agencies, the Trustee
      and
      the Custodian with respect to the transfers of the Subsequent Mortgage Loans
      substantially in the form of the Opinion of Counsel delivered to the Custodian,
      the Trustee and the Rating Agencies on the Closing Date (1) regarding certain
      corporate matters and (2) confirming the existence of a true sale which may
      be
      contained in such opinion delivered on the Closing Date.

     

    
      
        
        

      

      
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    The
      obligation of the Trustee to distribute funds from the Pre-Funding Account
      for
      the purchase of a Subsequent Mortgage Loan on any Subsequent Transfer Date
      is
      subject to the following conditions: (1) each such Subsequent Mortgage Loan
      shall satisfy the representations and warranties specified in the related
      Subsequent Transfer Instrument and this Purchase Agreement; (2) the Sponsor
      shall not select such Subsequent Mortgage Loans in a manner that it reasonably
      believes is adverse to the interests of the Majority Certificateholders; (3)
      the
      Sponsor shall have delivered certain Opinions of Counsel required pursuant
      to
      Section 2.02(b)(iv) and (vi) hereof; (4) as of the related Subsequent Cut-off
      Date, the Subsequent Mortgage Loans shall satisfy the following criteria: (i)
      each Subsequent Mortgage Loan shall not be 60 or more days contractually
      delinquent as of the related Subsequent Cut-off Date; (ii) the remaining stated
      term to maturity of each Subsequent Mortgage Loan shall not exceed 360 months;
      (iii) no less than approximately 95.00% of the Subsequent Mortgage Loans are
      secured by first liens on the related Mortgaged Property; (iv) each Subsequent
      Mortgage Loan shall have an outstanding Principal Balance of at least $10,000;
      (v) each Subsequent Mortgage Loan shall be underwritten in accordance with
      the
      Underwriting Guidelines or shall have been underwritten in accordance with
      the
      underwriting guidelines in place at the time of such Subsequent Mortgage Loan’s
      origination; (vi) each Subsequent Mortgage Loan shall have a Loan-to-Value
      Ratio
      or a combined Loan-to-Value Ratio of no more than 100%; (vii) each Subsequent
      Mortgage Loan shall have a stated maturity of no later than September 1, 2037;
      (viii) no Subsequent Mortgage Loan shall permit negative amortization; (ix)
      each
      Subsequent Mortgage Loan shall have a Mortgage Rate of at least 4.00%; (x)
      a
      minimum of 55% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date
      Principal Balance) shall have an adjustable Mortgage Rate; (xi) the weighted
      average Loan-to-Value Ratio of the Subsequent Mortgage Loans (by Subsequent
      Cut-off Date Principal Balance) shall be no more than 81.25%; (xii) no less
      than
      5% of the Subsequent Mortgage Loans shall either (A) have a Loan-to Value Ratio
      of no more than 60% or (B) have a Loan-to-Value Ratio of greater than 60% and
      be
      covered by an MI Policy which will insure losses to the extent that the
      uninsured exposure of the related Subsequent Mortgage Loan is reduced to an
      amount equal to 55%, 50% or 51% of the lesser of the appraised value or purchase
      price, as the case may be, of the related Mortgaged Property, in each case,
      at
      the time of the effective date of the MI Policy; (xiii) the Subsequent Mortgage
      Loans (by Subsequent Cut-off Date Principal Balance) shall have a weighted
      average coupon of at least 8.95%; (xiv) pursuant to the Underwriting Guidelines,
      no fewer than 50% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date
      Principal Balance) shall be ALT-A and M1 credit risks, no more than 30% of
      the
      Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall
      be M2 credit risks, and no more than 15% of the Subsequent Mortgage Loans (by
      Subsequent Cut-off Date Principal Balance) shall be M3 and M4 credit risks;
      (xv)
      the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance)
      shall have a weighted average FICO score issued by a consumer credit rating
      agency of at least 605; (xvi) at least 85% of such Subsequent Mortgage Loans
      (by
      Subsequent Cut-off Date Principal Balance) shall be loans for primary
      residences; (xvii) no more than 60% of the Subsequent Mortgage Loans (by
      Subsequent Cut-off Date Principal Balance) shall have stated loan documentation,
      and no more than 15% of the Subsequent Mortgage Loans (by Subsequent Cut-off
      Date Principal Balance shall have no loan documentation; (xviii) at least 60%
      of
      the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance)
      shall be loans for single family residences; (xix) no more than 85% of the
      Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall
      be loans that are the subject of cash-out refinances; (xx) the Rating Agencies
      shall have confirmed either in writing or verbally to the transfer of the
      Subsequent Mortgage Loans; and (xxi) at least 30% of the Subsequent Mortgage
      Loans shall have prepayment penalties.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    The
      sale
      by the Depositor of the Subsequent Mortgage Loans is subject to the Sponsor
      receiving a written or verbal confirmation from each of the Rating Agencies
      that
      states that the addition of such Subsequent Mortgage Loans will not cause the
      Rating Agencies to downgrade any of their ratings on the Offered
      Certificates.

     

    Notwithstanding
      the foregoing, Subsequent Mortgage Loans with characteristics varying from
      those
      set forth above may be purchased funds from the Pre-Funding Account on a
      Subsequent Transfer Date, if (i) the Trustee is provided with written
      confirmation that the aggregate credit risk of such Subsequent Mortgage Loans
      is
      similar to that of the Initial Mortgage Loans and (ii) the Sponsor receives
      and
      provides to the Trustee a written confirmation from each of the Rating Agencies
      that states that the addition of such Subsequent Mortgage Loans will not cause
      the Rating Agencies to downgrade any of their ratings of the Offered
      Certificates.

     

    (c) Within
      five Business Days after the end of the Pre-Funding Period, the Sponsor shall
      deliver to the Rating Agencies, the Trustee and the Custodian a copy of the
      updated Mortgage Loan Schedule including the Subsequent Mortgage Loans in
      electronic format.

     

    Section
      2.03 Pre-Funding
      Account.

     

    (a) No
      later
      than the Closing Date, the Trustee will establish and maintain the Pre-Funding
      Account pursuant to the Pooling and Servicing Agreement. On the Closing Date,
      the Sponsor will deposit in the Pre-Funding Account the Original Pre-Funded
      Amount from the net proceeds of the sale of the Offered
      Certificates.

     

    Section
      2.04 Interest
      Coverage Account

     

    (a) The
      Trustee will establish and maintain, pursuant to the Pooling and Servicing
      Agreement the Interest Coverage Account. On the Closing Date, the Sponsor will
      deposit in the Interest Coverage Account the Interest Coverage Amount from
      the
      net proceeds of the sale of the Underwritten Certificates.

     

    ARTICLE
      III

     

    REPRESENTATIONS
      AND WARRANTIES; 

    REMEDIES
      FOR BREACH

     

    Section
      3.01 Sponsor
      Representations and Warranties.

     

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

     

    
      
        
        

      

      
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    (a) As
      to the
      Sponsor:

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    (b) As
      to
      each Initial Mortgage Loan as of the Closing Date and with respect to each
      Subsequent Mortgage Loan as of the Subsequent Transfer Date, except as otherwise
      expressly stated:

     

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

     

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

     

    
      
        
        

      

      
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    (iii)
      No
      more than 3.60% and 6.44% of the Initial Mortgage Loans in Group I and the
      Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal
      Balance) were secured by condominium units; and no more than 11.49% and 22.65%
      of the Initial Mortgage Loans in Group I and the Initial Mortgage Loans in
      Group
      II, respectively, (by Cut-off Date Principal Balance) were secured by properties
      in planned unit developments;

     

    (iv)
      As
      of the Cut-off Date, the remaining term of each Group I Initial Mortgage Loan
      is
      not more than 360 months and not less than 113 months and the remaining term
      of
      each Group II Initial Mortgage Loan is not more than 360 months and not less
      than 53 months;

     

    (v)
      No
      more than 88.55% and 39.33% of the Initial Mortgage Loans in Group I and Initial
      Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance)
      have been the subject of cash-out refinances;

     

    (vi)
      No
      more than 6.55% and 2.08% of the Initial Mortgage Loans in Group I and Initial
      Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance),
      have been the subject of rate and term (no cash-out) refinances;

     

    (vii)
      No
      fewer than 4.9% and 58.59% of the Initial Mortgage Loans in Group I and Initial
      Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance)
      are purchase money loans;

     

    (viii)
      No
      more than 6.12% and 17.69% of the Initial Mortgage Loans in Group I and Initial
      Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance)
      are secured by Mortgaged Properties located in the State of California; no
      more
      than 19.89% and 25.26% of the Initial Mortgage Loans in Group I and Initial
      Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance)
      are secured by Mortgaged Properties located in the State of Florida; no more
      than 5.01% and 3.25% of the Initial Mortgage Loans in Group I and Initial
      Mortgage Loans in Group II (by Cut-off Date Principal Balance) are secured
      by
      Mortgaged Properties located in the State of Virginia; no more than 3.70% and
      2.91% of the Initial Mortgage Loans in Group I and Initial Mortgage Loans in
      Group II (by Cut-off Date Principal Balance) are secured by Mortgaged Properties
      located in the State of New Jersey; no more than 5.02% and 4.32% of the Initial
      Mortgage Loans in Group I and Initial Mortgage Loans in Group II (by Cut-off
      Date Principal Balance) are secured by Mortgaged Properties located in the
      State
      of Maryland; no more than 2.59% and 2.75% of the Initial Mortgage Loans in
      Group
      I and Initial Mortgage Loans in Group II (by Cut-off Date Principal Balance)
      are
      secured by Mortgaged Properties located in the State of New York; no more than
      4.88% and 4.63% of the Initial Mortgage Loans in Group I and Initial Mortgage
      Loans in Group II, respectively, (by Cut-off Date Principal Balance) are located
      in any other state;

     

    (ix)
      The
      outstanding Principal Balances of the Initial Mortgage Loans in Group I (by
      Cut-off Date Principal Balance) ranged from $858 to $603,250, the average
      outstanding Principal Balance of the Initial Mortgage Loans in Group I is
      approximately $143,012; the outstanding Principal Balances of the Initial
      Mortgage Loans in Group II (by Cut-off Date Principal Balance) ranged from
      $11,021 to $1,200,000, the average outstanding Principal Balance of the Mortgage
      Loans in Group II is approximately $214,170;

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (x)
      Approximately 98.36% and 94.64% of the Initial Mortgage Loans in Group I and
      Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal
      Balance) were secured by a first lien on a parcel of real property improved
      by a
      detached single family residence; no more than 4.61% and 2.56% of the Initial
      Mortgage Loans in Group I and Initial Mortgage Loans in Group II, respectively,
      (by Cut-off Date Principal Balance) were secured by a first lien on a parcel
      of
      real estate improved by a multi-unit residence;

     

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

     

    (xii)
      The
      Mortgage Rates borne by the adjustable rate Mortgage Loans in Group I as of
      the
      Closing Date range from 5.100% per annum to 12.650% per annum, and the weighted
      average Mortgage Rate (by Cut-off Date Principal Balance) of the adjustable
      rate
      Initial Mortgage Loans in Group I was 9.214% per annum; the Mortgage Rates
      borne
      by fixed rate Initial Mortgage Loans in Group I as of the Closing Date range
      from 5.250% per annum to 13.875% per annum, and the weighted average Mortgage
      Rate (by Cut-off Date Principal Balance) of the fixed rate Initial Mortgage
      Loans in Group I was 8.861% per annum; the Mortgage Rates borne by adjustable
      rate Initial Mortgage Loans in Group II as of the Closing Date range from 5.875%
      per annum to 12.650% per annum, and the weighted average Mortgage Rate (by
      Cut-off Date Principal Balance) of the adjustable rate Initial Mortgage Loans
      in
      Group III was 9.095% per annum; the Mortgage Rates borne by fixed rate Initial
      Mortgage Loans in Group II as of the Closing Date range from 5.400% per annum
      to
      14.200% per annum, and the weighted average Mortgage Rate (by Cut-off Date
      Principal Balance) of the fixed rate Initial Mortgage Loans in Group II was
      9.728% per annum; 

     

    (xiii)
      Approximately 46.68% and 54.26% of the Initial Mortgage Loans in Group I and
      the
      Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal
      Balance) have a Loan-to-Value Ratio in excess of 80%; no Group I Mortgage Loan
      or Group II Mortgage Loan in the Mortgage Pool had a Loan-to-Value Ratio or
      combined Loan-to-Value Ratio at origination in excess of 100%; and the weighted
      average Loan-to-Value Ratio (by Cut-off Date Principal Balance) of the Initial
      Mortgage Loans in Group I and the Initial Mortgage Loans in Group II was equal
      to 79.17% and 84.53%, respectively (by Cut-off Date Principal Balance). For
      any
      Group I Mortgage Loan or Group II Mortgage Loan in the Mortgage Pool, if such
      loan has had a material modification since origination, the Loan-to-Value Ratio
      as of such modification does not exceed 100%, and any Initial Mortgage Loan
      seasoned more than 12 months does not have a Loan-to-Value Ratio in excess
      of
      100% as of the Cut-Off Date;

     

    
      
        
        

      

      
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    (xiv)
      Approximately 98.36% and 94.64% of the Initial Mortgage Loans in Group I and
      the
      Initial Mortgage Loans in Group II, respectively (by Cut-off Date Principal
      Balance), are secured by first liens on the related Mortgaged Property; and
      approximately 1.64% and 5.36% (by Cut-off Date Principal Balance) of the Initial
      Mortgage Loans in Group I and the Initial Mortgage Loans in Group II are secured
      by second liens on the related Mortgaged Property;

     

    (xv)
      As
      of the Cut-off Date, the weighted average Loan-to-Value Ratio of the Initial
      Mortgage Loans secured by first liens in Group I is approximately 78.94%; the
      weighted average combined Loan-to-Value Ratio of the Initial Mortgage Loans
      secured by first and second liens in Group I is approximately 79.87%; the
      weighted average Loan-to-Value Ratio of the Initial Mortgage Loans secured
      by
      first liens in Group II is approximately 83.70%; the weighted average combined
      Loan-to-Value Ratio of the Initial Mortgage Loans secured by first and second
      liens in Group II is approximately 88.75%; the weighted average combined
      Loan-to-Value Ratio of all of the Initial Mortgage Loans in Group I and Group
      II
      is approximately 82.45%; and the gross weighted average coupon of the Initial
      Mortgage Loans is approximately 9.044%;

     

    (xvi)
      There is no valid offset, right of rescission, defense, claim or counterclaim
      of
      any obligor under any Mortgage Note or Mortgage, including the obligation of
      the
      Mortgagor to pay the unpaid principal of or interest on such Mortgage Note,
      and
      any applicable right of rescission has expired, nor will the operation of any
      of
      the terms of such Mortgage Note or Mortgage, or the exercise of any right
      thereunder, render either the Mortgage Note or the Mortgage unenforceable,
      in
      whole or in part, or subject to any right of rescission, set-off, recoupment,
      counterclaim or defense, including, without limitation, the defense of usury,
      and no such right of rescission, set-off, recoupment, counterclaim or defense
      has been asserted with respect thereto. To the best of Sponsor’s knowledge,
      except for approximately 0.09% of the Mortgage Loans, no Mortgagor of the
      applicable Mortgage is or since the date of origination has been a debtor in
      any
      state or federal bankruptcy or insolvency proceeding and no Mortgaged Property
      has been subject to any such proceeding. With regard to the Mortgage Loans
      that
      involve a Mortgagor who is a debtor in a state or federal bankruptcy or
      insolvency proceeding, each such Mortgagor is, as of the Cut-Off Date, current
      under the related bankruptcy plan;

     

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

     

    (xviii)
      As of the Closing Date in the case of an Initial Mortgage Loan or as of the
      related Subsequent Transfer Date in the case of a Subsequent Mortgage Loan,
      each
      Mortgaged Property is free of material damage and is in good repair and there
      is
      no proceeding pending or threatened for the total or partial condemnation of
      any
      Mortgage Property;

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    (xli)
      [Reserved.]

     

    (xlii)
      (a) Except with respect to no more than 0.25% and 1.12% of the Initial Mortgage
      Loans in Group I and the Initial Mortgage Loans in Group II, respectively,
      none
      of the payments of principal of or interest on or in respect of any Initial
      Mortgage Loans (by Cut-off Date Principal Balance) shall be 30 days or more
      but
      less than 60 days past due as of the Cut-off Date; and 0% and 0% of the Initial
      Mortgage Loans in Group I and the Initial Mortgage Loans in Group II,
      respectively, was 60 days or more past due as of the Cut-off Date; (b) except
      as
      set forth in clause (a) above, all payments required to be made by the Mortgagor
      under the terms of the Mortgage Note have been made and credited; and (c) to
      the
      Sponsor’s knowledge, there was no delinquent recording, tax or assessment lien
      against the property subject to any Mortgage, except where such lien was being
      contested in good faith and a stay had been granted against levying on the
      property;

     

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

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    (li)
      [Reserved]

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

    (lvii)
      On
      the basis of a representation by the Mortgagor at the time of origination of
      the
      Mortgage Loans, at least 92.29% and 93.62% of the Initial Mortgage Loans in
      Group I and Initial Mortgage Loans in Group II, respectively, (by Cut-off Date
      Principal Balance) will be secured by Mortgages on owner-occupied primary
      residence properties;

     

    (lviii)
      Approximately 24.97%, and 34.33% of the Initial Mortgage Loans in Group I and
      the Initial Mortgage Loans in Group II, respectively, (by Cut-off Date Principal
      Balance) provide for a balloon payment and each Mortgage Note with respect
      to
      each such Mortgage Loan requires monthly payments of principal based on either
      a
      40 year or 30 year amortization schedules and have scheduled maturity dates
      of
      30 years or 15 years, respectively, from the due date of the first monthly
      payment;

     

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

     

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

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    (lxi)
      [Reserved].

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

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

     

    (lxxii)
      Approximately 63.8% of the Initial Mortgage Loans are subject to prepayment
      penalty charges as of the Cut-off Date;

     

    (lxxiii)
      [Reserved.]

     

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

     

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

     

    (lxxvi)
      [Reserved.]

     

    (lxxvii)
      [Reserved.]

     

    (lxxviii)
      [Reserved.]

     

    (lxxix)
      With respect to Mortgaged Properties located in the continental United States
      and Puerto Rico, no Group I Mortgage Loan secured by a single-family residence
      has a Principal Balance at origination in excess of $472,500; no Group I
      Mortgage Loan secured by a two-family residence has a Principal Balance at
      origination in excess of $511,000; no Group I Mortgage Loan secured by a
      three-family residence has a Principal Balance at origination in excess of
      $603,250; and no Group I Mortgage Loan secured by a four-family residence has
      a
      Principal Balance at origination in excess of $416,000; with respect to
      Mortgaged Properties located in Alaska, Guam, Hawaii and the Virgin Islands,
      no
      Group II Mortgage Loan secured by a single-family residence has a Principal
      Balance at origination in excess of $1,128,000; no Group II Mortgage Loan
      secured by a two-family residence has a Principal Balance at origination in
      excess of $630,000; no Group II Mortgage Loan secured by a three-family
      residence has a Principal Balance at origination in excess of $667,800; and
      no
      Group II Mortgage Loan secured by a four-family residence has a Principal
      Balance at origination in excess of $131,325;

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

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

     

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

     

    (lxxxii)
      None of the Mortgage Loans are negative amortization loans;

     

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

     

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

     

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

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    (lxxxix)
      Approximately 14.59% of the Initial Mortgage Loans (by Cut-off Date Principal
      Balance) with a Loan-to-Value Ratio greater than 60% are covered by an MI Policy
      issued by an MI Insurer;

     

    (xc)
      Approximately 13.34% of the Initial Mortgage Loans that are identified on
      Exhibit 1 hereto are covered by a MI Policy issued by an MI
      Insurer;

     

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

     

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

     

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

     

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

     

    (xcv)
      [Reserved.]

     

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

     

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

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        26

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

    
      
        
        

      

      
        28

        
          

        

      

      
        
        

      

    

     

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

     

    Section
      3.02 Depositor
      Representations and Warranties.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        29

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      IV

     

    SPONSOR’S
      COVENANTS

     

    Section
      4.01 Covenants
      of the Sponsor.

     

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

     

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

     

    Section
      4.02 Payment
      of Expenses.

     

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

     

    
      
        
        

      

      
        30

        
          

        

      

      
        
        

      

    

     

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

     

    ARTICLE
      V

     

    CONDITIONS
      TO INITIAL MORTGAGE LOAN PURCHASE

     

    Section
      5.01 Conditions
      of Depositor’s Obligations.

     

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

     

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

     

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

     

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

     

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

     

    ARTICLE
      VI

     

    INDEMNIFICATION
      BY THE SPONSOR 

    WITH
      RESPECT TO THE MORTGAGE LOANS

     

    Section
      6.01 Indemnification
      With Respect to the Mortgage Loans.

     

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

     

    Section
      6.02 Limitation
      on Liability of the Sponsor.

     

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

     

    
      
        
        

      

      
        31

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      VII

     

    TERMINATION

     

    Section
      7.01 Termination.

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        32

        
          

        

      

      
        
        

      

    

     

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

     

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

     

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

     

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

     

    ARTICLE
      VIII

     

    MISCELLANEOUS
      PROVISIONS

     

    Section
      8.01 Amendment.

     

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

     

    Section
      8.02 Governing
      Law.

     

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

     

    
      
        
        

      

      
        33

        
          

        

      

      
        
        

      

    

     

    Section
      8.03 Notices.

     

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

     

    
      	 	
              (i)

            	
              if
                to the Sponsor:

            

    

     

    NovaStar
      Mortgage, Inc. 

    8140
      Ward
      Parkway 

    Suite
      300

    Kansas
      City, Missouri 64114

    Attention:
      Matt Kaltenrieder

     

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

     

    
      	 	
              (ii)

            	
              if
                to the Depositor:

            

    

     

    NovaStar
      Mortgage Funding Corporation

    8140
      Ward
      Parkway

    Suite
      300

    Kansas
      City, Missouri 64114

    Attention:
      Matt Kaltenrieder

     

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

     

    
      	 	
              (iii)

            	
              if
                to the Custodian:

            

    

     

    U.S.
      Bank
      National Association

     4527
      Metropolitan Court, Suite C

    Frederick,
      Maryland 21704

    Attention:
      Robert D. Ruiz

     

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

     

    
      	 	
              (iv)

            	
              if
                to the Trustee:

            

    

     

    Deutsche
      Bank National Trust Company 

    1761
      East
      St. Andrew Place 

    Santa
      Ana, CA 92705

    Attention:
      Trust Administration - NS0702

     

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

     

    Section
      8.04 Severability
      of Provisions.

     

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

     

    
      
        
        

      

      
        34

        
          

        

      

      
        
        

      

    

     

    Section
      8.05 Relationship
      of Parties.

     

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

     

    Section
      8.06 Counterparts.

     

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

     

    Section
      8.07 Further
      Agreements.

     

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

     

    Section
      8.08 Intention
      of the Parties.

     

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

     

    
      
        
        

      

      
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    Section
      8.09 Successors
      and Assigns; Assignment of Purchase Agreement.

     

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

     

    Section
      8.10 Survival.

     

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

     

    Section
      8.11 Liability
      of the Trustee. 

     

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

     

    [Signature
      page to follow]

     

    
      
        
        

      

      
        36

        
          

        

      

      
        
        

      

    

     

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

     

    
      	 	 	 
	 	
              NOVASTAR
                MORTGAGE, INC. 

              as
                Sponsor

            
	 
 	 
 	 
 
	 	By:  	/s/ Matt
              Kaltenrieder
	 	
              
                

              

              
                Name: Matt
                  Kaltenrieder

              

            
	 	Title: Vice
              President

    

     

    
      	 	 	 
	 	
              NOVASTAR
                MORTGAGE FUNDING 

              CORPORATION
                

              as
                Depositor

            
	 
 	 
 	 
 
	 	By:  	/s/ Matt
              Kaltenrieder
	 	
              
 Name: Matt
              Kaltenrieder 
	 	
              Title: Vice
                President

            

    

     

    
      	 	 	 
	 	
              U.S.
                BANK NATIONAL ASSOCIATION, 

              as
                Custodian

            
	 
 	 
 	 
 
	 	By:  	/s/ Sheryl
              Johnson
	 	
              

              Name:
                Sheryl Johnson

            
	 	
              Title:
                Vice President

            

    

     

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, 

              not
                in its individual capacity, 

              but
                solely as Trustee

            
	 
 	 
 	 
 
	 	By:  	/s/ Ronaldo
              Reyes
	 	
              

              Name:
                Ronaldo Reyes

            
	 	Title:
              Vice President

    

     

    
      	 	 	 
	 	By:  	/s/ Manuel
              Rivas
	 	
              

              Name:
                Manuel Rivas

            
	 	
              Title:
                Authorized Signer

            

    

     

    
      
        
        

      

      
        37

        
          

        

      

      
        
        

      

    

     

    
      	 	 	 
	 	
              NOVASTAR
                FINANCIAL, INC., solely with respect to Section 3.01(b)

            
	 
 	 
 	 
 
	 	By:  	/s/ Matt
              Kaltenrieder
	 	
              

              Name: Matt
                Kaltenrieder

            
	 	
              Title: Vice
                President

            

    

     

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

     

    
      
        
        

      

      
        38

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      1

     

    INITIAL
      MORTGAGE LOAN SCHEDULE

     

    [Provided
      to Depositor and to Trustee at the Closing]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      2(A)

     

    SPONSOR’S
      SUBSEQUENT TRANSFER INSTRUMENT

     

    Pursuant
      to this Sponsor’s Subsequent Transfer Instrument (the “Sponsor’s
      Instrument”),
      dated
      as of _________ __, 200_, between NovaStar Mortgage, Inc. as sponsor (the
“Sponsor”),
      and
      NovaStar Mortgage Funding Corporation, as depositor (the “Depositor”),
      and
      pursuant to the Mortgage Loan Purchase Agreement, dated as of May 1, 2007 (the
      “Purchase
      Agreement”),
      among
      the Sponsor, the Depositor, U.S. Bank National Association, as Custodian (the
      “Custodian”)
      and
      Deutsche Bank National Trust Company, as Trustee (the “Trustee”),
      the
      Sponsor and the Depositor agree to the sale by the Sponsor and the purchase
      by
      the Depositor of the subsequent Mortgage Loans listed on the attached Mortgage
      Loan Schedule (the “Subsequent
      Mortgage Loans”)
      and
      the related MI Policies.

     

    Capitalized
      terms used and not defined herein have their respective meanings as set forth
      in
      the definitions contained in the Pooling and Servicing Agreement, dated as
      of
      May 1, 2007 (the “Pooling
      and Servicing Agreement”),
      between the Trustee, the Custodian, the Depositor and the Sponsor/Servicer
      which
      definitions are incorporated by reference herein. All other capitalized terms
      used herein shall have the meanings specified herein.

     

    Section
      1. Conveyance
      of Subsequent Mortgage Loans.

     

    (a) The
      Sponsor does hereby sell, transfer, assign, set over and convey to the
      Depositor, without recourse, all of its right, title and interest in and to
      the
      Subsequent Mortgage Loans and the related MI Policies, all scheduled payments
      of
      principal and interest on the Subsequent Mortgage Loans due after the Subsequent
      Cut-off Date, and all other payments of principal and interest on the Subsequent
      Mortgage Loans collected after the Subsequent Cut-off Date (minus that portion
      of any such payment which is allocable to the period prior to the Subsequent
      Cut-off Date); provided, however, that no scheduled payments of principal and
      interest due on or before the Subsequent Cut-off Date and collected after the
      Subsequent Cut-off Date shall belong to the Depositor pursuant to the terms
      of
      this Sponsor’s Instrument. The Sponsor, contemporaneously with the delivery of
      this Sponsor’s Instrument, has delivered or caused to be delivered to the
      Custodian, at the direction of the Depositor, each item set forth in Section
      2.02(b) of the Purchase Agreement with respect to such Subsequent Mortgage
      Loans
      and the related MI Policies. The transfer to the Depositor by the Sponsor of
      the
      Subsequent Mortgage Loans identified on the attached Mortgage Loan Schedule
      shall be absolute and is intended by the Sponsor, the Depositor, the Custodian,
      the Trustee and the Certificateholders to constitute and to be treated as a
      sale
      by the Sponsor.

     

    The
      parties hereto intend that the transactions set forth herein constitute a sale
      by the Sponsor to the Depositor on the Subsequent Transfer Date of all the
      Sponsor’s right, title and interest in and to the Subsequent Mortgage Loans and
      the related MI Policies, and other property as and to the extent described
      above. In the event the transactions set forth herein shall be deemed not to
      be
      a sale, the Sponsor hereby grants to the Depositor as of the Subsequent Transfer
      Date a security interest in all of the Sponsor’s right, title and interest in,
      to and under the Subsequent Mortgage Loans, and such other property, to secure
      all of the Sponsor’s obligations hereunder, and this Purchase Agreement shall
      constitute a security agreement under applicable law, and in such event, the
      parties hereto acknowledge that the Custodian, in addition to holding the
      Subsequent Mortgage Loans and the related MI Policies on behalf of the Trustee
      for the benefit of the Certificateholders, holds the Subsequent Mortgage Loans
      and the related MI Policies as designee and agent of the Depositor. The Sponsor
      agrees to take or cause to be taken such actions and to execute such documents,
      including without limitation the filing of all necessary UCC-1 financing
      statements filed in the State of Maryland (which shall be submitted for filing
      as of the Subsequent Transfer 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 Depositor
      and its assignees in each Subsequent Mortgage Loan, the related MI Policies
      and
      the proceeds thereof.

     

    
      
        
        

      

      
        EX
          2(A)-
          1

        
          

        

      

      
        
        

      

    

     

    (b) The
      expenses and costs relating to the delivery of the Subsequent Mortgage Loans,
      this Sponsor’s Instrument and such other items required under the Mortgage Loan
      Purchase Agreement shall be borne by the Sponsor.

     

    (c) Additional
      terms of the sale are set forth on Attachment A hereto.

     

    Section
      2. Representations
      and Warranties; Conditions Precedent.

     

    (a) The
      Sponsor hereby affirms the representations and warranties set forth in Section
      3.01 of the Purchase Agreement that relate to the Sponsor and the Subsequent
      Mortgage Loans as of the date hereof. The Sponsor hereby confirms that each
      of
      the conditions set forth in Section 2.02(b) of the Purchase Agreement are
      satisfied as of the date hereof and further represents and warrants that each
      Subsequent Mortgage Loan complies with the requirements of this Sponsor’s
      Instrument and Section 2.02(c) of the Purchase Agreement.

     

    (b) The
      Sponsor is solvent, is able to pay its debts as they become due and has capital
      sufficient to carry on its business and its obligations hereunder; it will
      not
      be rendered insolvent by the execution and delivery of this Sponsor’s Instrument
      or by the performance of its obligations hereunder nor is it aware of any
      pending insolvency; no petition of bankruptcy (or similar insolvency proceeding)
      has been filed by or against the Sponsor prior to the date hereof.

     

    (c) All
      terms
      and conditions of the Purchase Agreement are hereby ratified and confirmed;
      provided, however, that in the event of any conflict the provisions of this
      Sponsor’s Instrument shall control over the conflicting provisions of the
      Purchase Agreement.

     

    Section
      3. Recordation
      of the Sponsor’s Instrument.

     

    To
      the
      extent permitted by applicable law, this Sponsor’s Instrument, or a memorandum
      thereof if permitted under applicable law, is subject to recordation in all
      appropriate public offices for real property records in all of 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, but only when
      accompanied by an Opinion of Counsel to the effect that such recordation
      materially and beneficially affects the interests of the Certificateholders
      or
      is necessary for the administration or servicing of the Mortgage
      Loans.

     

    
      
        
        

      

      
        EX
          2(A)-
          2

        
          

        

      

      
        
        

      

    

     

    Section
      4. Governing
      Law.

     

    This
      Sponsor’s Instrument 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, without giving effect to
      principles of conflicts of law.

     

    Section
      5. Counterparts.

     

    This
      Sponsor’s Instrument may be executed in one or more counterparts and by the
      different parties hereto on separate counterparts, each of which, when so
      executed, shall be deemed to be an original; such counterparts, together, shall
      constitute one and the same instrument.

     

    Section
      6. Successors
      and Assigns.

     

    This
      Sponsor’s Instrument shall inure to the benefit of and be binding upon the
      Sponsor and the Depositor and their respective successors and assigns. The
      Custodian and the Trustee shall be express third party beneficiaries
      hereto.

     

    
      
        
        

      

      
        EX
          2(A)-
          3

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties hereto have executed and delivered this Sponsor’s
      Instrument as of the day and year first written above.

     

    
      	 	 	 
	 	
              NOVASTAR
                MORTGAGE, INC., 

              as
                Sponsor

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

            
	 	Title:
              

    

     

    
      	 	 	 
	 	
              NOVASTAR
                MORTGAGE FUNDING 

              CORPORATION,
                

              as
                Depositor

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

            
	 	Title:

    

     

    [Signature
      page to Sponsor’s Subsequent Transfer Instrument]

    
      
        
        

      

      
        EX
          2(A)-
          4

        
          

        

      

      
        
        

      

    

     

    NOVASTAR
      HOME EQUITY LOAN ASSET-BACKED CERTIFICATES, SERIES 2007-2

     

    ATTACHMENT
      A TO SPONSOR’S SUBSEQUENT TRANSFER INSTRUMENT

     

    __________
      __, 200_

     

    A. Profile
      of Subsequent Mortgage Loans:

     

    1. Subsequent
      Cut-off Date: _________ __, 200_

     

    2. Subsequent
      Transfer Date: ________ __, 200_

     

    3. Aggregate
      Principal Balance of the Subsequent Mortgage Loans as of the Subsequent Cut-off
      Date: $_____________

     

    4. Purchase
      Price: 100.00%

     

    B. As
      to all
      the Subsequent Mortgage Loans the subject of this Instrument:

     

    
      
        
          	 	
                  I.

                	 	 	
                  Longest
                    stated term to maturity:

                	 	 	
                  ____
                    

                	 months
	 	
                  II.

                	 	 	
                  Minimum
                    Mortgage Rate:

                	 	 	
                  ____

                	
                  %

                
	 	
                  III.
                    

                	 	 	
                  Maximum
                    Mortgage Rate:

                	 	 	
                  ____

                	
                  %

                
	 	
                  IV.

                	 	 	
                  WAC
                    of all Mortgage Loans:

                	 	 	
                  ____

                	
                  %

                
	 	
                  V.

                	 	 	
                  WAM
                    of all Mortgage Loans:

                	 	 	
                  ____

                	
                  %

                
	 	
                  VI.

                	 	 	
                  Largest
                    Principal Balance:

                	 	
                  $

                	
                  ______

                	 
	 	
                  VII.

                	 	 	
                  Non-owner
                    occupied Mortgaged Properties:

                	 	 	
                  ____

                	
                  %

                
	 	
                  VIII.

                	 	 	
                  California
                    zip code concentration:

                	 	 	
                  ____

                	
                  %

                
	 	
                  IX.

                	 	 	
                  Condominiums:

                	 	 	
                  ____

                	
                  %

                
	 	
                  X.

                	 	 	
                  Single-family:

                	 	 	
                  ____

                	
                  %

                
	 	
                  XI.

                	 	 	
                  Weighted
                    average term since origination:

                	 	 	
                  ___
                    

                	 month
	 	
                  XII.

                	 	 	
                  Mortgage
                    Loans Covered by MI Policies:

                	 	 	
                  ____

                	
                  %

                

        

      

       

    

    
      
        
        

      

      
        EX
          2(A)-
          5

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      2(B)

     

    DEPOSITOR’S
      SUBSEQUENT TRANSFER INSTRUMENT

     

    Pursuant
      to this Depositor’s Subsequent Transfer Instrument (the “Depositor’s
      Instrument”), dated as of _________ __, 200_, between NovaStar Mortgage Funding
      Corporation, as depositor (the “Depositor”)
      and
      Deutsche Bank National Trust Company, as trustee (the “Trustee”),
      and
      pursuant to the Mortgage Loan Purchase Agreement, dated as of November 1, 2006
      (the “Purchase
      Agreement”),
      among
      NovaStar Mortgage, Inc., as sponsor (the “Sponsor”),
      the
      Depositor, U.S. Bank National Association, as Custodian (“Custodian”)
      and
      the Trustee, the Depositor and the Trustee agree to the sale by the Depositor
      and the purchase by the Trustee of the subsequent Mortgage Loans listed on
      the
      attached Mortgage Loan Schedule (the “Subsequent
      Mortgage Loans”)
      and
      the related MI Policies, and the pledge of the Subsequent Mortgage Loans by
      the
      Trustee.

     

    Capitalized
      terms used and not defined herein have their respective meanings as set forth
      in
      the definitions contained in the Pooling and Servicing Agreement, dated as
      of
      May 1, 2007 (the “Pooling
      and Servicing Agreement”),
      between the Custodian, the Trustee, the Depositor and the Servicer which
      definitions are incorporated by reference herein. All other capitalized terms
      used herein shall have the meanings specified herein.

     

    Section
      1. Conveyance
      of Subsequent Mortgage Loans.

     

    (a) The
      Depositor does hereby sell, transfer, assign, set over and convey to the
      Trustee, without recourse, (i) all of its right, title and interest in and
      to
      the Subsequent Mortgage Loans and the related MI Policies, all scheduled
      payments of principal and interest on the Subsequent Mortgage Loans due after
      the Subsequent Cut-off Date, and all other payments of principal and interest
      on
      the Subsequent Mortgage Loans collected after the Subsequent Cut-off Date (minus
      that portion of any such payment which is allocable to the period prior to
      the
      Subsequent Cut-off Date); provided, however, that no scheduled payments of
      principal and interest due on or before the Subsequent Cut-off Date and
      collected after the Subsequent Cut-off Date shall belong to the Trustee pursuant
      to the terms of this Depositor’s Instrument and (ii) all of its right, title and
      interest in and to the Sponsor’s Subsequent Transfer Instrument, dated as of
      ______ __, 200_ (the “Sponsor’s Instrument”), between the Sponsor and the
      Depositor. The Depositor, contemporaneously with the delivery of this
      Depositor’s Instrument, has delivered or caused to be delivered to the Custodian
      each item set forth in Section 2.02(b) of the Purchase Agreement with respect
      to
      such Subsequent Mortgage Loans. The transfer to the Trustee by the Depositor
      of
      the Subsequent Mortgage Loans identified on the attached Mortgage Loan Schedule
      and the related MI Policies shall be absolute and is intended by the Depositor,
      the Trustee, the Custodian and the Certificateholders to constitute and to
      be
      treated as a sale by the Depositor.

     

    The
      parties hereto intend that the transactions set forth herein constitute a sale
      by the Depositor to the Trustee on the Subsequent Transfer Date of all the
      Depositor’s right, title and interest in and to the Subsequent Mortgage Loans
      and the related MI Policies, 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 as of the Subsequent Transfer
      Date a security interest in all of the Depositor’s right, title and interest in,
      to and under the Subsequent Mortgage Loans, and such other property, to secure
      all of the Depositor’s obligations hereunder, and this Depositor’s Instrument
      shall constitute a security agreement under applicable law, and in such event,
      the parties hereto acknowledge that the Custodian on behalf of the Trustee,
      in
      addition to holding the Subsequent Mortgage Loans and the related MI Policies
      for the benefit of the Certificateholders, holds the Subsequent Mortgage Loans
      and the related MI Policies as designee and agent of the Trustee. The Depositor
      agrees to take or cause to be taken such actions and to execute such documents,
      including without limitation the filing of all necessary UCC-1 financing
      statements filed in the State of Delaware (which shall be submitted for filing
      as of the Subsequent Transfer Date), any continuation statements with respect
      thereto and any amendments thereto required to reflect a change in the name
      or
      corporate structure of the Depositor or the filing of any additional UCC-1
      financing statements due to the change in the state of incorporation of the
      Depositor as are necessary to perfect and protect the interests of the Trustee
      and its assignees in each Subsequent Mortgage Loan, the related MI Policies
      and
      the proceeds thereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (b) The
      expenses and costs relating to the delivery of the Subsequent Mortgage Loans,
      this Depositor’s Instrument and such other items required under the Purchase
      Agreement shall be borne by the Depositor.

     

    Section
      2. Representations
      and Warranties; Conditions Precedent.

     

    (a) The
      Depositor hereby affirms the representations and warranties set forth in Section
      3.02 of the Purchase Agreement that relate to the Depositor as of the date
      hereof. The Depositor hereby confirms that each condition precedent and
      Subsequent Mortgage Loan requirement set forth in Section 2.02(b) and 2.02(c)
      of
      the Purchase Agreement and in this Depositor Instrument are satisfied as of
      the
      date hereof.

     

    (b) The
      Depositor is solvent, is able to pay its debts as they become due and has
      capital sufficient to carry on its business and its obligations hereunder;
      it
      will not be rendered insolvent by the execution and delivery of this Depositor’s
      Instrument or by the performance of its obligations hereunder nor is it aware
      of
      any pending insolvency; no petition of bankruptcy (or similar insolvency
      proceeding) has been filed by or against the Depositor prior to the date
      hereof.

     

    (c) All
      terms
      and conditions of the Purchase Agreement are hereby ratified and confirmed
      by
      the Depositor; provided, however, that in the event of any conflict the
      provisions of this Depositor’s Instrument shall control over the conflicting
      provisions of the Mortgage Loan Purchase Agreement.

     

    Section
      3. Recordation
      of Instrument.

     

    To
      the
      extent permitted by applicable law, this Depositor’s Instrument, or a memorandum
      thereof if permitted under applicable law, is subject to recordation in all
      appropriate public offices for real property records in all of 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, but only when
      accompanied by an Opinion of Counsel to the effect that such recordation
      materially and beneficially affects the interests of the Certificateholders
      or
      is necessary for the administration or servicing of the Mortgage
      Loans.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      4. Governing
      Law.

     

    This
      Depositor’s Instrument 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, without giving
      effect to principles of conflicts of law.

     

    Section
      5. Counterparts.

     

    This
      Depositor’s Instrument may be executed in one or more counterparts and by the
      different parties hereto on separate counterparts, each of which, when so
      executed, shall be deemed to be an original; such counterparts, together, shall
      constitute one and the same instrument.

     

    Section
      6. Successors
      and Assigns.

     

    This
      Depositor’s instrument shall inure to the benefit of and be binding upon the
      Depositor, the Custodian and the Trustee and their respective successors and
      assigns. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF, the parties hereto have executed and delivered this Depositor’s
      Instrument as of the day and year first written above.

     

    
      	 	 	 
	 	
              NOVASTAR
                MORTGAGE FUNDING 

              CORPORATION,
                

              as
                Depositor

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              

              Name:

            
	 	Title: 

    

     

    
      	 	 	 
	 	
              DEUTSCHE
                BANK NATIONAL TRUST COMPANY, not in its individual capacity but
                

              solely
                as Trustee

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:

	 	Title:

    

     

    
      	 	 	 
	 	
              U.S.
                BANK NATIONAL ASSOCIATION,

              as
                Custodian

            
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name: 
	 	Title: 

    

     

    [Signature
      page to Depositor’s Subsequent Transfer Instrument 1 of 2]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

      	 Agreed
              to and Acknowledged by:	 	 	 
	 	 	 	 
	
              NOVASTAR
                MORTGAGE, INC. 

              as
                Sponsor

            	 	 	 
	 	 	 	 
	By: 	 	 	 
	
              
                

              

              Name: Matt
                Kaltenrieder 

            	 	 	
            
	
              Title: Vice
                President

            	 	 	 

    

     

    [Signature
      page to Depositor’s Subsequent Transfer Instrument 2 of 2]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    NOVASTAR
      HOME EQUITY LOAN ASSET-BACKED CERTIFICATES, SERIES 2007-2

     

    ATTACHMENT
      A TO DEPOSITOR'S SUBSEQUENT TRANSFER INSTRUMENT

     

    __________
      __, 200_

     

    A. 
Profile
      of Subsequent Mortgage Loans:

     

    1. Subsequent
      Cut-off Date: _________ __, 200_

     

    2. Subsequent
      Transfer Date: ________ __, 200_

     

    3. Aggregate
      Principal Balance of the Subsequent Mortgage Loans as of the Subsequent Cut-off
      Date: $_____________

     

    4. Purchase
      Price: 100.00%

     

    B. 
As
      to all
      the Subsequent Mortgage Loans the subject of this Instrument:

    
 

    
      
        	 	
                I.

              	 	 	
                Longest
                  stated term to maturity:

              	 	 	
                ____
                  

              	 months
	 	
                II.

              	 	 	
                Minimum
                  Mortgage Rate:

              	 	 	
                ____

              	
                %

              
	 	
                III.
                  

              	 	 	
                Maximum
                  Mortgage Rate:

              	 	 	
                ____

              	
                %

              
	 	
                IV.

              	 	 	
                WAC
                  of all Mortgage Loans:

              	 	 	
                ____

              	
                %

              
	 	
                V.

              	 	 	
                WAM
                  of all Mortgage Loans:

              	 	 	
                ____

              	
                %

              
	 	
                VI.

              	 	 	
                Largest
                  Principal Balance:

              	 	
                $

              	
                ______

              	 
	 	
                VII.

              	 	 	
                Non-owner
                  occupied Mortgaged Properties:

              	 	 	
                ____

              	
                %

              
	 	
                VIII.

              	 	 	
                California
                  zip code concentration:

              	 	 	
                ____

              	
                %

              
	 	
                IX.

              	 	 	
                Condominiums:

              	 	 	
                ____

              	
                %

              
	 	
                X.

              	 	 	
                Single-family:

              	 	 	
                ____

              	
                %

              
	 	
                XI.

              	 	 	
                Weighted
                  average term since origination:

              	 	 	
                ___
                  

              	 month
	 	
                XII.

              	 	 	
                Mortgage
                  Loans Covered by MI Policies:

              	 	 	
                ____

              	
                %

              

      

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF CONTENTS

     

    
      
        	 	 	 	 	Page(s) 
	
                ARTICLE
                  I DEFINITIONS

              	 	
                1

              
	
                Section
                  1.01

              	 	
                Definitions

              	 	
                1

              
	
                ARTICLE
                  II SALE
                  OF MORTGAGE LOANS AND RELATED PROVISIONS

              	 	
                1

              
	
                Section
                  2.01

              	 	
                Sale
                  of Initial Mortgage Loans and MI Policies

              	 	
                1

              
	
                Section
                  2.02

              	 	
                Conveyance
                  of the Subsequent Mortgage Loans

              	 	
                5

              
	
                Section
                  2.03

              	 	
                Pre-Funding
                  Account

              	 	
                9

              
	
                Section
                  2.04

              	 	
                Interest
                  Coverage Account

              	 	
                9

              
	
                ARTICLE
                  III REPRESENTATIONS
                  AND WARRANTIES; REMEDIES FOR BREACH

              	 	
                9

              
	
                Section
                  3.01

              	 	
                Sponsor
                  Representations and Warranties

              	 	
                9

              
	
                Section
                  3.02

              	 	
                Depositor
                  Representations and Warranties

              	 	
                29

              
	
                ARTICLE
                  IV SPONSOR’S
                  COVENANTS

              	 	
                30

              
	
                Section
                  4.01

              	 	
                Covenants
                  of the Sponsor

              	 	
                30

              
	
                Section
                  4.02

              	 	
                Payment
                  of Expenses

              	 	
                30

              
	
                ARTICLE
                  V CONDITIONS
                  TO INITIAL MORTGAGE LOAN PURCHASE

              	 	
                31

              
	
                Section
                  5.01

              	 	
                Conditions
                  of Depositor’s Obligations

              	 	
                31

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

              	 	
                31

              
	
                Section
                  6.01

              	 	
                Indemnification
                  With Respect to the Mortgage Loans

              	 	
                31

              
	
                Section
                  6.02

              	 	
                Limitation
                  on Liability of the Sponsor

              	 	
                31

              
	
                ARTICLE
                  VII  TERMINATION

              	 	
                32

              
	
                Section
                  7.01

              	 	
                Termination

              	 	
                32

              
	
                ARTICLE
                  VIII  MISCELLANEOUS
                  PROVISIONS

              	 	
                33

              
	
                Section
                  8.01

              	 	
                Amendment

              	 	
                33

              
	
                Section
                  8.02

              	 	
                Governing
                  Law

              	 	
                33

              
	
                Section
                  8.03

              	 	
                Notices

              	 	
                34

              
	
                Section
                  8.04

              	 	
                Severability
                  of Provisions

              	 	
                34

              
	
                Section
                  8.05

              	 	
                Relationship
                  of Parties

              	 	
                35

              
	
                Section
                  8.06

              	 	
                Counterparts

              	 	
                35

              
	
                Section
                  8.07

              	 	
                Further
                  Agreements

              	 	
                35

              
	
                Section
                  8.08

              	 	
                Intention
                  of the Parties

              	 	
                35

              
	
                Section
                  8.09

              	 	
                Successors
                  and Assigns; Assignment of Purchase Agreement

              	 	
                36

              
	
                Section
                  8.10

              	 	
                Survival

              	 	
                36

              
	
                Section
                  8.11

              	 	
                Liability
                  of the Trustee

              	 	
                36

              
	 	 	 	 	 
	
                EXHIBIT
                  1

              	 	
                Mortgage
                  Loan Schedule

              	 	 
	
                EXHIBIT
                  2(A)

              	 	
                Sponsor's
                  Subsequent Transfer Instrument

              	 	 
	
                EXHIBIT
                  2(B)

              	 	
                Depositor's
                  Subsequent Transfer InstrumentExhibit
      10.2

    ISDA®

    International
      Swaps and Derivatives Association, Inc.

    

    NOVATION
      AGREEMENT

    

    dated
      as
      of June 1, 2007 among:

    

    THE
      ROYAL
      BANK OF SCOTLAND PLC.
      (the
      "Remaining
      Party"),
      

    NOVASTAR
      MORTGAGE, INC. (the "Transferor")
      

    

    AND

    

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

     

    The
      Remaining Party and the Transferor are parties to a 1992 ISDA Master dated
      as of
      July 19, 2006 (the “Old
      Agreement”).
      The
      Remaining Party and the Transferor originally entered into certain transactions
      (each an "Old
      Transaction")
      under
      the Old Agreement, each evidenced by a Confirmation (an "Old
      Confirmation")
      with
      reference number IRG16181489, IRG16181493, IRG16188578, IRG16189509
      respectively, attached hereto as Exhibit I. 

    

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

    

    With
      effect from and including June 1, 2007 (the "Novation Date")
      the
      Transferor wishes to transfer by novation to the Transferee, and the Transferee
      wishes to accept the transfer by novation of, all the rights, liabilities,
      duties and obligations of the Transferor under and in respect of each Old
      Transaction, with the exception of the Excluded Rights and Obligations referred
      to below, with the effect that the Remaining Party and the Transferee enter
      into
      a new transaction (each a "New
      Transaction")
      between them having terms identical to those of each Old Transaction, subject
      to
      the same exceptions and as more particularly described below. For the avoidance
      of doubt, the first transaction period being novated in each Old Transaction
      is
      the full period ending on the Fixed Rate Payer Payment Date in March
      2007.

    

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

    

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

    

    Accordingly,
      the parties agree as follows: —

     

    1. Definitions.

    

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

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2. Transfer,
      Release, Discharge and Undertakings. 

    

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

    

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

            

    

    

    
      	
            	(b)	
              in
                respect of each New Transaction, the Remaining Party and the Transferee
                each undertake liabilities and obligations towards the other and
                acquire
                rights against each other identical in their terms to each corresponding
                Old Transaction (and, for the avoidance of doubt, as if the Transferee
                were the Transferor and with the Remaining Party remaining the Remaining
                Party, save for the Excluded Rights and Obligations and any other
                rights,
                liabilities or obligations of the Remaining Party or the Transferor
                with
                respect to payments or other obligations due and payable or due to
                be
                performed prior to the Novation Date). For the sake of clarity, all
                references to Independent Amounts shall be deemed deleted from the
                Confirmations for each New
                Transaction;

            

    

    

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

            

    

    

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

            

    

    

    3.  Representations
      and Warranties.

    

    
      	
            	(a)	
              On
                the date of this Novation
                Agreement:

            

    

    

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

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    
 

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

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

            

    

    

    
      	
            	(b)	
              The
                Transferor makes no representation or warranty and does not assume
                any
                responsibility with respect to the legality, validity, effectiveness,
                adequacy or enforceability of any New Transaction or the New Agreement
                or
                any documents relating thereto and assumes no responsibility for
                the
                condition, financial or otherwise, of the Remaining Party, the Transferee
                or any other person or for the performance and observance by the
                Remaining
                Party, the Transferee or any other person of any of its obligations
                under
                any New Transaction or the New Agreement or any document relating
                thereto
                and any and all such conditions and warranties, whether express or
                implied
                by law or otherwise, are hereby
                excluded.

            

    

    

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    4. Counterparts.
      

    

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

    

    5. Costs
      and Expenses. 

    

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

    

    
      
        6.
          Amendments. 

      

    

    

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

    

    
      	
              7.

            	
              (a)

            	
              Governing
                Law. 

            

    

    

    This
      Novation Agreement will be governed by and construed in accordance with the
      laws
      of the State of New York without reference to the conflict of laws provisions
      thereof.

    

    
      	 	
              (b)

            	
              Jurisdiction.
                

            

    

    

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

     

    
      	 	(c) 	 Not
              Acting in Individual Capacity. 

    

     

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

            

    

    

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

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

     

    
      	 	
              (d)

            	
              Pooling
                and Servicing Agreement.

            

    

     

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

     

    
      	 	
              (e)

            	
              Agency
                Role of Greenwich Capital Markets, Inc.
                In
                connection with this Novation Agreement, Greenwich Capital Markets,
                Inc.
                has acted as agent on behalf of the Remaining Party. Greenwich Capital
                Markets, Inc. has not guaranteed and is not otherwise responsible
                for the
                obligations of the Remaining Party under this
                Agreement.

            

    

    

    
      	 	
              (f)

            	
              Calculation
                

            

    

    

    
      	 	 	
              Promptly
                after each Reset Date, but
                in no event later than three New York Business Days prior to each
                related
                Distribution Date, the
                Calculation Agent shall deliver the reset notice in writing via mail
                or
                facsimile to the Trustee at the address provided in the notices portion
                of
                the New Agreement. 

            

    

    

    
      	 	
              (g)

            	
              Account
                Details

            

    

    

    
      	 	
              Remaining
                Party: 

            	
               The
                Royal Bank of Scotland 

            

      	 	 	
               Bank: JPMorgan Chase Bank

               ABA No.: 021000021

               Account No.: 400930153

               Attention: Financial Markets Fixed Income and
                Interest Rate Derivative Operations, London

               SWIFT Code: SWIFT RBOSGB2RTCM with JPMorgan Chase
                Bank, New York CHASUS33

            

      	 	 	 

      	 	Transferee:	
               Deutsche Bank National Trust Company

              ABA # 021001033

              Acct # 01419663

              Acct Name NYLTD Funds Control - Stars West

              Ref: Trust Administration -
                NS0702

            

    

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

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

    

    
      	 THE
              ROYAL
              BANK OF SCOTLAND PLC	 	 	 NOVASTAR
              MORTGAGE, INC.
	 	 	 	 
	 By: Greenwich Capital Markets, Inc.,
              its agent	 	 	 
	 	 	 	 
	 	 	 	 
	By: 
              /s/ Deborah Pfeifer	 	 	By: 
              /s/ David L. Farris 
	
              
                
Name:
                Deborah Pfeifer 

            	 	 	
              
                
Name:
                David L. Farris

            
	
              Title:
                Vice
                President 

            	 	 	
              Title:
                Vice
                President

            

    

       

    NOVASTAR
      MORTGAGE SUPPLEMENTAL INTEREST TRUST, SERIES 2007-2

    

    By:
      Deutsche Bank National Trust Company, as 

    Trustee
      under the Pooling and Servicing 

    Agreement,
      acting not in its individual capacity,

    but
      solely in its capacity as Trustee to NovaStar

    Mortgage
      Supplemental Interest Trust, Series 2007-2

    

    
      	 	 	 	 
	By:
              /s/ Ronaldo Reyes	 	 	
            
	
              
                
Name:
                Ronaldo Reyes

            	 	 	
            
	
              Title:
                Vice
                President 

            	 	 	 

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    

    Exhibit
      I

    

    [Old
      Hedge Confirmations attached behind this page]

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