Document:

Indenture

 Exhibit 4.1 
 INDENTURE 
 dated as of April 1, 2006 
 by and among 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1, 
 as Issuing Entity 
 and 
 JPMORGAN CHASE BANK, NATIONAL ASSOCIATION 
 as
Indenture Trustee 
 and 
 J.P.
MORGAN TRUST COMPANY, NATIONAL ASSOCIATION 
 as Co-Trustee 

 TABLE OF CONTENTS 
  

					
	ARTICLE I DEFINITIONS	  	2
			
	 Section 1.01.
	    	General Definitions	  	2
		
	ARTICLE II THE NOTES	  	2
			
	 Section 2.01.
	    	Forms Generally	  	2
	 Section 2.02.
	    	Form of Certificate of Authentication	  	2
	 Section 2.03.
	    	General Provisions with Respect to Principal and Interest Payment	  	2
	 Section 2.04.
	    	Denominations	  	3
	 Section 2.05.
	    	Execution, Authentication, Delivery and Dating	  	3
	 Section 2.06.
	    	Registration, Registration of Transfer and Exchange	  	4
	 Section 2.07.
	    	Mutilated, Destroyed, Lost or Stolen Notes	  	5
	 Section 2.08.
	    	Payments of Principal and Interest	  	6
	 Section 2.09.
	    	Statements	  	7
	 Section 2.10.
	    	Persons Deemed Owne	  	10
	 Section 2.11.
	    	Cancellation	  	10
	 Section 2.12.
	    	Authentication and Delivery of Notes	  	10
	 Section 2.13.
	    	Book-Entry Note	  	11
	 Section 2.14.
	    	Termination of Book Entry System	  	12
		
	ARTICLE III COVENANTS, REPRESENTATIONS AND WARRANTIES	  	13
			
	 Section 3.01.
	    	Payment of Notes	  	13
	 Section 3.02.
	    	Maintenance of Office or Agency	  	13
	 Section 3.03.
	    	Money for Note Payments to Be Held in Trust	  	13
	 Section 3.04.
	    	Existence of Issuing Entity	  	15
	 Section 3.05.
	    	Protection of Trust Estate	  	15
	 Section 3.06.
	    	[Reserved.]	  	16
	 Section 3.07.
	    	Performance of Obligations	  	16
	 Section 3.08.
	    	Investment Company Act	  	17
	 Section 3.09.
	    	Negative Covenants	  	17
	 Section 3.10.
	    	Annual Statement as to Compliance	  	18
	 Section 3.11.
	    	Restricted Payments	  	18
	 Section 3.12.
	    	Treatment of Notes as Debt for Tax Purposes	  	18
	 Section 3.13.
	    	Notice of Events of Default	  	18
	 Section 3.14.
	    	Further Instruments and Acts	  	19
	 Section 3.15.
	    	Representation and Warranties of the Issuing Entity	  	19
		
	ARTICLE IV SATISFACTION AND DISCHARGE	  	20
			
	 Section 4.01.
	    	Satisfaction and Discharge of Indenture	  	20
	 Section 4.02.
	    	Application of Trust Money	  	21

  

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	ARTICLE V DEFAULTS AND REMEDIES	  	22
			
	 Section 5.01.
	    	Event of Default	  	22
	 Section 5.02.
	    	Acceleration of Maturity; Rescission and Annulment	  	23
	 Section 5.03.
	    	Collection of Indebtedness and Suits for Enforcement by Indenture Trustee	  	24
	 Section 5.04.
	    	Remedies	  	24
	 Section 5.05.
	    	Indenture Trustee May File Proofs of Claim	  	25
	 Section 5.06.
	    	Indenture Trustee May Enforce Claims Without Possession of Notes	  	25
	 Section 5.07.
	    	Application of Money Collected	  	26
	 Section 5.08.
	    	Limitation on Suits	  	27
	 Section 5.09.
	    	Unconditional Rights of Noteholders to Receive Principal and Interest	  	28
	 Section 5.10.
	    	Restoration of Rights and Remedies	  	28
	 Section 5.11.
	    	Rights and Remedies Cumulative	  	28
	 Section 5.12.
	    	Delay or Omission Not Waiver	  	28
	 Section 5.13.
	    	Control by Noteholders	  	28
	 Section 5.14.
	    	Waiver of Past Defaults	  	29
	 Section 5.15.
	    	Undertaking for Costs	  	29
	 Section 5.16.
	    	Waiver of Stay or Extension Laws	  	30
	 Section 5.17.
	    	Sale of Trust Estate	  	30
	 Section 5.18.
	    	Action on Notes	  	31
	 Section 5.19.
	    	No Recourse	  	31
	 Section 5.20.
	    	Application of the Trust Indenture Act	  	32
		
	ARTICLE VI THE INDENTURE TRUSTEE	  	32
			
	 Section 6.01.
	    	Duties of Indenture Trustee	  	32
	 Section 6.02.
	    	Notice of Default	  	34
	 Section 6.03.
	    	Rights of Indenture Trustee	  	34
	 Section 6.04.
	    	Not Responsible for Recitals, Issuance of Notes or Mortgage Loans	  	35
	 Section 6.05.
	    	May Hold Notes	  	36
	 Section 6.06.
	    	Money Held in Trust	  	36
	 Section 6.07.
	    	Eligibility, Disqualification	  	36
	 Section 6.08.
	    	Indenture Trustee’s Capital and Surplus	  	36
	 Section 6.09.
	    	Resignation and Removal; Appointment of Successor	  	36
	 Section 6.10.
	    	Acceptance of Appointment by Successor Indenture Trustee	  	38
	 Section 6.11.
	    	Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee	  	38
	 Section 6.12.
	    	Preferential Collection of Claims Against Issuing Entity	  	38
	 Section 6.13.
	    	Co-Indenture Trustees and Separate Indenture Trustees	  	38
	 Section 6.14.
	    	Authenticating Agents	  	40
	 Section 6.15.
	    	Servicer to Pay Indenture Trustee’s Fees and Expenses; Indemnification	  	41
		
	ARTICLE VII NOTEHOLDERS’ LISTS AND REPORTS	  	41
			
	 Section 7.01.
	    	Note Registrar to Furnish Indenture Trustee Names and Addresses of Noteholders	  	41
	 Section 7.02.
	    	Preservation of Information: Communications to Noteholders. (a)	  	41
	Section 7.03.	    	Reports by Indenture Trustee	  	42

  

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	ARTICLE VIII ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES	  	43
			
	Section 8.01.	  	Accounts; Investment; Collection of Moneys	  	43
	Section 8.02.	  	Allocation of Realized Losses	  	49
	Section 8.03.	  	Withholding Taxes	  	49
	Section 8.04.	  	General Provisions Regarding the Payment Account and Mortgage Loans	  	50
	Section 8.05.	  	Releases of Deleted Mortgage Loans	  	51
	Section 8.06.	  	Reports by Indenture Trustee to Noteholders; Access to Certain Information	  	51
	Section 8.07.	  	Release of Trust Estate	  	52
	Section 8.08.	  	Amendment to Sale and Servicing Agreement	  	52
	Section 8.09.	  	Servicer as Agent	  	52
	Section 8.10.	  	Termination of Servicer	  	52
		
	ARTICLE IX SUPPLEMENTAL INDENTURES	  	53
			
	Section 9.01.	  	Supplemental Indentures Without Consent of Noteholders	  	53
	Section 9.02.	  	Supplemental Indentures with Consent of Noteholders	  	54
	Section 9.03.	  	Execution of Supplemental Indentures	  	55
	Section 9.04.	  	Effect of Supplemental Indentures	  	55
	Section 9.05.	  	Conformity With Trust Indenture Act	  	56
	Section 9.06.	  	Reference in Notes to Supplemental Indentures	  	56
	Section 9.07.	  	Amendments to Governing Documents	  	56
		
	ARTICLE X REDEMPTION OF NOTES	  	57
			
	Section 10.01.	  	Redemption of Notes	  	57
	Section 10.02.	  	Form of Redemption Notice	  	57
	Section 10.03.	  	Notes Payable on Optional Redemption	  	58
		
	ARTICLE XI MISCELLANEOUS	  	58
			
	Section 11.01.	  	Compliance Certificates and Opinions	  	58
	Section 11.02.	  	Form of Documents Delivered to Indenture Trustee	  	60
	Section 11.03.	  	Acts of Noteholders	  	60
	Section 11.04.	  	Notices, etc., to Indenture Trustee and Issuing Entity	  	61
	Section 11.05.	  	Notices and Reports to Noteholders; Waiver of Notices	  	62
	Section 11.06.	  	Rules by Indenture Trustee	  	63
	Section 11.07.	  	Conflict with Trust Indenture Act	  	63
	Section 11.08.	  	Effect of Headings and Table of Contents	  	63
	Section 11.09.	  	Successors and Assigns	  	63
	Section 11.10.	  	Separability	  	63
	Section 11.11.	  	Benefits of Indenture	  	63
	Section 11.12.	  	Legal Holidays	  	64
	Section 11.13.	  	Governing Law	  	64

  

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	 Section 11.14.
	    	Counterparts	  	64
	 Section 11.15.
	    	Recording of Indenture	  	64
	 Section 11.16.
	    	Issuing Entity Obligation	  	64
	 Section 11.17.
	    	No Petition	  	65
	 Section 11.18.
	    	Inspection	  	65

 APPENDICES, SCHEDULES AND EXHIBITS 
  

			
		
	 Appendix I
	  	Defined Terms
		
	 Schedule 1
	  	Mortgage Loan Schedule
		
	 Exhibit A
	  	Form of Note
		
	 Exhibit B
	  	Form of Investment Letter

  

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 CROSS-REFERENCE TABLE 
 Cross-reference sheet showing the location in the Indenture of the provisions inserted pursuant to Sections 310 through 318(a) inclusive of the Trust
Indenture Act of 1939.1 
  

			
	 Trust Indenture Act of 1939
	  	 Indenture Section

	 Section 310
	  	
	     (a) (1)
	  	6.07
	     (a) (2)
	  	6.08
	     (a) (3)
	  	6.13
	     (a) (4)
	  	Not Applicable
	     (a) (5)
	  	6.07
	     (b)
	  	6.07
	     (c)
	  	Not Applicable
	 Section 311
	  	
	     (a)
	  	6.12
	     (b)
	  	6.12
	     (c)
	  	Not Applicable
	 Section 312
	  	
	     (a)
	  	7.01(A), 7.02(a)
	     (b)
	  	7.02(b)
	     (c)
	  	7.02(c)
	 Section 313
	  	
	     (a)
	  	7.03
	     (b)
	  	7.03
	     (c)
	  	7.03
	     (d)
	  	7.03
	 Section 314
	  	
	     (a)(1)
	  	7.04
	     (a)(2)
	  	7.04
	     (a)(3)
	  	7.03, 7.04
	     (a)(4)
	  	3.10
	     (b)(1)
	  	2.12(b)
	     (b)(2)
	  	3.06
	     (c)(1)
	  	2.12,4.01, 11.01
	     (c)(2)
	  	2.12, 4.01, 11.01
	     (c)(3)
	  	4.01
	     (d)(1)
	  	11.01
	     (d)(2)
	  	11.01
	     (d)(3)
	  	11.01
	     (e)
	  	11. 01(b)
	 Section 315
	  	
	     (a)
	  	6.01(b)(ii), 6.01(c)(i)

	1	This Cross-Reference Table is not part of the Indenture. 

  

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	     (b)
	  	6.02
	     (c)
	  	6.01(a)
	     (d)(1)
	  	6.01(b), 6.01(c)
	     (d)(2)
	  	6.01(c)(iii)
	     (d)(3)
	  	6.01(c)(iv)
	     (e)
	  	5.15
	 Section 316
	  	
	     (a)
	  	5.13
	     (b)
	  	5.09
	     (c)
	  	10.02
	 Section 317
	  	
	     (a)(1)
	  	5.03
	     (a)(2)
	  	5.05
	     (b)
	  	3.03
	 Section 318
	  	
	     (a)
	  	11.07

  

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 This INDENTURE, dated as of April 1, 2006 (as amended or supplemented from time to time as permitted
hereby, this “Indenture”), is between NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1, a Delaware statutory trust (together with its permitted successors and assigns, the “Issuing Entity”), JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, a banking association organized under the laws of the United States, as Indenture Trustee (together with its permitted successors in the trusts hereunder, the “Indenture Trustee”) and J.P. MORGAN TRUST COMPANY,
NATIONAL ASSOCIATION, as co-trustee (the “Co-Trustee”). 
 Preliminary Statement 
 The Issuing Entity has duly authorized the execution and delivery of this Indenture to provide for its Asset-Backed Notes, Series 2006-1 (the
“Notes”), issuable as provided in this Indenture. All covenants and agreements made by the Issuing Entity herein are for the benefit and security of the Holders of the Notes and the Hedge Counterparties. The Issuing Entity is
entering into this Indenture, and the Indenture Trustee is accepting the trusts created hereby, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged. 
 All things necessary to make this Indenture a valid agreement of the Issuing Entity in accordance with its terms have been done. 
 Granting Clause 
 Subject to the terms
of this Indenture, the Issuing Entity hereby Grants to the Indenture Trustee at the Closing Date, as Indenture Trustee for the benefit of the Noteholders and the Hedge Counterparties, all of the Issuing Entity’s right, title and interest in and
to: (i) each Mortgage Loan identified on the Mortgage Loan Schedule, including the related Cut-off Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest and principal due
after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest in any insurance policies in respect of the Mortgage Loans;
(iv) its interest in the MI Policies; (v) the rights of the Issuing Entity under the Sale and Servicing Agreement with respect to the Mortgage Loans; (vi) its interest in the Swap Agreements and the Cap Agreements; (vii) all
funds on deposit from time to time in (a) the Collection Account and (b) the Payment Account; (viii) all other assets included or to be included in the Trust Fund; and (ix) all proceeds of any of the foregoing (collectively, the
“Collateral”). 
 The foregoing Grant is made in trust to secure the payment of principal of and interest on, and any other
amounts owing in respect of, the Notes, equally and ratably without prejudice, priority or distinction, and to secure compliance with the provisions of this Indenture, all as provided in this Indenture. 
 The Indenture Trustee, as Indenture Trustee on behalf of the holders of the Notes and the Hedge Counterparties, acknowledges the foregoing Grant, accepts
the trusts hereunder in good faith and without notice of any adverse claim or liens and agrees to perform its duties required in this Indenture as specifically set forth herein to the end that the interests of the holders of the related Notes may be
adequately and effectively protected. 
  

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 ARTICLE I 
 DEFINITIONS 
 Section 1.01. General Definitions. Except as otherwise specified or as the
context may otherwise require, the terms defined in Appendix I have the respective meanings set forth in such Appendix I for all purposes of this Indenture, and the definitions of such terms are applicable to the singular as well as to the plural
forms of such terms and to the masculine as well as to the feminine genders of such terms. Whenever reference is made herein to an Event of Default or a Default known to the Indenture Trustee or of which the Indenture Trustee has notice or
knowledge, such reference shall be construed to refer only to an Event of Default or Default of which the Indenture Trustee is deemed to have notice or knowledge pursuant to Section 6.01(d). All other terms used herein that are defined in the
Trust Indenture Act (as hereinafter defined), either directly or by reference therein, have the meanings assigned to them therein. 
 ARTICLE II 
 THE NOTES 
 Section 2.01. Forms Generally. The Notes shall be substantially in the form set forth as Exhibit A attached hereto. Each Note may have such letters, numbers or other marks of indemnification and
such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange on which the Notes may be listed, or as may, consistently herewith, be determined by the Issuing Entity, as evidenced by its execution
thereof. Any portion of the text of any Note may be set forth on the reverse thereof with an appropriate reference on the face of the Note. 
 The Definitive Notes may be produced in any manner determined by the Issuing Entity, as evidenced by its execution thereof. 
 Section 2.02. Form of Certificate of Authentication. The form of the Authenticating Agent’s certificate of authentication is as set forth on the signature page of the form of the Note attached hereto as Exhibit A.

 Section 2.03. General Provisions with Respect to Principal and Interest Payment. The Notes shall be designated generally as the
“NovaStar Mortgage Funding Trust, Series 2006-1, Asset-Backed Notes, Series 2006-1”. 
 The Notes shall be issued in the form
specified in Section 2.01 hereof. The Notes shall be issued in sixteen Classes, the Class A-1A Notes, Class A-2A Notes, Class A-2B Notes, Class A-2C Notes, Class A-2D Notes, Class M-1 Notes, Class M-2 Notes, Class M-3
Notes, Class M-4 Notes, Class M-5 Notes, Class M-6 Notes, Class M-7 Notes, Class M-8 Notes, Class M-9 Notes, Class M-10 Notes and Class M-11 Notes. The aggregate Original Class Note Balance of Notes that may be authenticated and delivered under the
Indenture is limited to $767,078,000 of Class A-1A Notes, $182,000,000 of Class A-2A Notes, $91,700,000 of Class A-2B Notes, 

  

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$71,400,000 of Class A-2C Notes, $32,621,000 of Class A-2D Notes, $78,300,000 of Class M-1 Notes, $21,600,000 of Class M-2 Notes, $18,900,000 of
Class M-3 Notes, $18,225,000 of Class M-4 Notes, $12,825,000 of Class M-5 Notes, $10,125,000 of Class M-6 Notes, $8,775,000 of Class M-7 Notes, $7,425,000 of Class M-8 Notes, $8,775,000 of Class M-9 Notes, $6,750,000 of Class M-10 Notes and
$6,750,000 of Class M-11 Notes except for the Notes authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, other Notes pursuant to Sections 2.06, 2.07, or 9.06 of this Indenture. 
 Subject to the provisions of Sections 3.01, 5.07, 5.09 and 8.01 of this Indenture, the principal of each Class of Notes shall be payable in installments
ending no later than the related Final Stated Maturity Date, unless the unpaid principal of such Notes become due and payable at an earlier date by declaration of acceleration or call for redemption or otherwise. 
 All payments made with respect to any Note shall be applied first to the interest then due and payable on such Note and then to the principal thereof.
All computations of interest accrued on any Note shall be made on the basis of a year of 360 days and the actual number of days elapsed in the related Interest Accrual Period. 
 Notwithstanding any of the foregoing provisions with respect to payments of principal of and interest on the Notes, if the Notes have become or been
declared due and payable following an Event of Default and such acceleration of maturity and its consequences have not been rescinded and annulled, then payments of principal of and interest on the Notes shall be made in accordance with
Section 5.07 hereof. 
 Section 2.04. Denominations. The Notes shall be issuable only as registered Notes in the denominations
equal to the Authorized Denominations. 
 Section 2.05. Execution, Authentication, Delivery and Dating. The Notes shall be executed on
behalf of the Issuing Entity by an Authorized Officer of the Owner Trustee, acting at the direction of the Certificateholders. The signature of such Authorized Officer of the Owner Trustee on the Notes may be manual or by facsimile. 
 Notes bearing the manual or facsimile signature of an individual who was at any time an Authorized Officer of the Owner Trustee shall bind the Issuing
Entity, notwithstanding that such individual has ceased to be an Authorized Officer of the Owner Trustee prior to the authentication and delivery of such Notes or was not an Authorized Officer of the Owner Trustee at the date of such Notes.

 At any time and from time to time after the execution and delivery of this Indenture, the Issuing Entity may deliver Notes executed on
behalf of the Issuing Entity to the Authenticating Agent for authentication, and the Authenticating Agent shall authenticate and deliver such Notes as provided in this Indenture and not otherwise. 
 Each Note authenticated on the Closing Date shall be dated the Closing Date. All other Notes that are authenticated after the Closing Date for any other
purpose hereunder shall be dated the date of their authentication. 
  

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 No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose,
unless there appears on such Note a certificate of authentication substantially in the form provided for in Section 2.02 hereof, executed by the Authenticating Agent by the manual signature of one of its Authorized Officers or employees, and
such certificate of authentication upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. 
 Section 2.06. Registration, Registration of Transfer and Exchange. The Issuing Entity shall cause to be kept a register (the “Note Register”) in which, subject to such reasonable regulations as
it may prescribe, the Issuing Entity shall provide for the registration of Notes and the registration of transfers of Notes. The Indenture Trustee is hereby initially appointed “Note Registrar” for the purpose of registering Notes
and transfers of Notes as herein provided. The Indenture Trustee shall remain the Note Registrar throughout the term hereof. Upon any resignation of the Indenture Trustee, the Servicer, on behalf of the Issuing Entity, shall promptly appoint a
successor or, in the absence of such appointment, the Servicer, on behalf of the Issuing Entity, shall assume the duties of Note Registrar. 
 If a Person other than the Indenture Trustee is appointed by the Issuing Entity as Note Registrar, the Issuing Entity will give the Indenture Trustee prompt written notice of the appointment of such Note Registrar and of the location, and
any change in the location, of the Note Register, and the Indenture Trustee shall have the right to inspect the Note Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely upon a
certificate executed on behalf of the Note Registrar by an Authorized Officer thereof as to the names and addresses of the Holders of the Notes and the principal amounts and number of such Notes. 
 Upon surrender for registration of transfer of any Note at the office or agency of the Issuing Entity to be maintained as provided in Section 3.02
hereof, the Owner Trustee on behalf of the Issuing Entity, shall execute, and the Authenticating Agent shall authenticate and deliver, in the name of the designated transferee or transferees; one or more new Notes of any authorized denominations and
of a like aggregate initial Class Note Balance. 
 At the option of the Holder, Notes may be exchanged for other Notes of any authorized
denominations, and of a like aggregate Class Note Balance, upon surrender of the Notes to be exchanged at the office or agency of the Issuing Entity to be maintained as provided in Section 3.02 hereof. Whenever any Notes are so surrendered for
exchange, the Owner Trustee shall execute, and the Authenticating Agent shall authenticate and deliver, the Notes that the Noteholder making the exchange is entitled to receive. 
 All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Issuing Entity, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Notes surrendered upon such registration of transfer or exchange. 
 Every
Note presented or surrendered for registration of transfer or exchange shall be duly endorsed, or be accompanied by a written instrument of transfer in the form included in Exhibit A attached hereto, duly executed by the Holder thereof
or its attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the 

  

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requirements of the Note Registrar, which requirements include membership or participation in the Securities Transfer Agent’s Medallion Program
(“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Exchange Act. 
 No service charge shall be made for any registration of transfer or exchange of Notes, but the Note Registrar may require payment of a sum sufficient to
cover any tax or other governmental charge as may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 2.07 or Section 9.06 hereof. 
 The Note Registrar shall not register the transfer of a Note unless the Note Registrar has received a representation letter from the transferee to the
effect that either (i) the transferee is not a Plan and is not, directly or indirectly, acquiring the Note or any interest therein on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with the assets of a Plan or
(ii) the acquisition and holding of the Note by the transferee qualifies for exemptive relief under a United States Department of Labor prohibited transaction class exemption (or, if the transferee is a Governmental Plan, will not result in a
violation of applicable law). Each Beneficial Owner of a Note which is a Book-Entry Note shall be deemed to make one of the foregoing representations. 
 No transfer, sale, pledge or other disposition of any Class M-9 Note, Class M-10 Note Class M-11 Note shall be made unless such disposition is exempt from the registration requirements of the Securities Act of 1933,
as amended (the “1933 Act”), and any applicable state securities laws or is made in accordance with the 1933 Act and laws. In the event of any such transfer, except with respect to the initial transfers of any Class M-9 Note, Class
M-10 Note Class M-11 Note by the Issuing Entity to NCFLLC or by the Issuing Entityr or NCFLLC to Greenwich Capital Financial Products, Inc., unless (i) such transfer is made in reliance upon Rule 144A under the 1933 Act and an investment
letter, in substantially the form attached hereto as Exhibit B, is delivered by the Transferee to the Indenture Trustee) or (ii) a written Opinion of Counsel (which may be in-house counsel) acceptable to and in form and substance reasonably
satisfactory to the Indenture Trustee and the Depositor is delivered to them stating that such transfer may be made pursuant to (x) the 1933 Act, or an exemption thereto, describing the applicable provision or exemption and the basis therefore,
and (y) the Investment Company Act of 1940, or an exemption thereto, describing the applicable provision or exemption and the basis therefore, which Opinion of Counsel shall not be an expense of the Indenture Trustee or the the Depositor. The
Holder of a Class M-9 Note, Class M-10 Note Class M-11 Note desiring to effect such transfer shall protect the Indenture Trustee and the Depositor against any liability that may result if the transfer is not so exempt or is not made in accordance
with such federal and state laws. 
 Section 2.07. Mutilated, Destroyed, Lost or Stolen Notes. If (1) any mutilated Note is
surrendered to the Note Registrar or the Note Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Note, and (2) there is delivered to the Issuing Entity, the Owner Trustee and the Note Registrar such
security or indemnity as may be required by the Issuing Entity, the Owner Trustee and the Note Registrar to save each of the Issuing Entity, the Owner Trustee and the Note Registrar harmless, then, in the absence of notice to the Note Registrar that
such Note has been acquired by a bona fide purchaser, the Owner Trustee on behalf of the 

  

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Issuing Entity, shall execute and upon its delivery of a Trust Request the Authenticating Agent shall authenticate and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Note, a new Note or Notes of the same tenor and aggregate initial principal amount bearing a number not contemporaneously outstanding. If, after the delivery of such new Note, a bona fide purchaser of
the original Note in lieu of which such new Note was issued presents for payment such original Note, the Issuing Entity, shall be entitled to recover such new Note from the person to whom it was delivered or any person taking therefrom, except a
bona fide purchaser, and the Issuing Entity, the Owner Trustee and the Note Registrar shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expenses incurred by the Issuing Entity,
the Owner Trustee or the Note Registrar in connection therewith. If any such mutilated, destroyed, lost, or stolen Note shall have become or shall be about to become due and payable, or shall have become subject to redemption in full, instead of
issuing a new Note, the Issuing Entity may pay such Note without surrender thereof, except that any mutilated Note shall be surrendered. 
 Upon the issuance of any new Note under this Section 2.07, the Note Registrar, may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable
expenses (including the fees and expenses of the Issuing Entity, the Indenture Trustee or the Note Registrar) connected therewith. 
 Every
new Note issued pursuant to this Section 2.07 in lieu of any destroyed, lost or stolen Note shall constitute an original contractual obligation of the Issuing Entity, whether or not the destroyed, lost or stolen Note shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder. 
 The provisions of this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

 Section 2.08. Payments of Principal and Interest. (a) Payments on Notes issued as Book-Entry Notes will be made by or on
behalf of the Indenture Trustee to the Clearing Agency or its nominee. Any installment of interest or principal payable on any Definitive Notes that is punctually paid or duly provided for by the Issuing Entity on the applicable Payment Date shall
be paid to the Person in whose name such Note (or one or more Predecessor Notes) is registered at the close of business on the Record Date for such Class of Notes and such Payment Date by either (i) wire transfer of immediately available funds
to the account of a Noteholder, if such Noteholder has provided the Indenture Trustee with wiring instructions in writing by five (5) Business Days prior to the related Record Date or has provided the Indenture Trustee with such instructions
for any previous Payment Date or (ii) check mailed to such Person’s address as it appears in the Note Register on such Record Date, except for the final installment of principal payable with respect to such Note, which shall be payable as
provided in subsection (b) of this Section 2.08. A fee may be charged by the Indenture Trustee to a Holder of Definitive Notes for any payment made by wire transfer. Any installment of interest or principal not punctually paid or duly
provided for shall be payable as soon as funds are available to the Indenture Trustee for payment thereof, or if Section 5.07 applies, pursuant to Section 5.07. 
  

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 Payments on Certificates will be made by or on behalf of the Indenture Trustee to or at the direction of
the Person in whose name such Certificate is registered by either (i) wire transfer of immediately available funds to the account directed by a Certificateholder, if such Certificateholder (A) is NovaStar Mortgage Inc. or its affiliate and
(B) has provided the Indenture Trustee with wiring instructions in writing by five (5) Business Days prior to the related payment Date or has provided the Indenture Trustee with such instructions for any previous Payment Date or
(ii) check mailed to such Person’s address as it appears in the Certificate Register on such Record Date. A fee may be charged by the Indenture Trustee to a Certificateholder for any payment made by wire transfer. The Indenture Trustee
shall be entitled to rely on information provided by the Owner Trustee as Certificate Registrar as to all matters related to the Certificate Registrar and the Certificates. 
 (b) All reductions in the Class Note Balance of a Note (or one or more Predecessor Notes) effected by payments of installments of
principal made on any Payment Date shall be binding upon all Holders of such Note and of any Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, whether or not such payment is noted on such Note. The
final installment of principal of each Note shall be payable only upon presentation and surrender thereof on or after the Payment Date therefor at the designated office of the Indenture Trustee located within the United States of America pursuant to
Section 3.02. 
 Whenever the Indenture Trustee expects that the entire unpaid Class Note Balance of any Note will become due and
payable on the next Payment Date, other than pursuant to a redemption pursuant to Article X, it shall, no later than two (2) Business Days prior to such Payment Date, mail to each Person in whose name a Note to be so retired is registered at
the close of business on such otherwise applicable Record Date a notice to the effect that: 
 (i) the Indenture Trustee
expects that funds sufficient to pay such final installment will be available in the Payment Account on such Payment Date; and 
 (ii) if such funds are available, (a) such final installment will be payable on such Payment Date, but only upon presentation and surrender of such Note at the office or agency of the Note Registrar maintained for such purpose pursuant
to Section 3.02 (the address of which shall be set forth in such notice) and (b) no interest shall accrue on such Note after such Payment Date. 
 Notices in connection with redemptions of Notes shall be mailed to Noteholders in accordance with Section 10.02 hereof. 
 (c) Subject to the foregoing provisions of this Section 2.08, each Note delivered under this Indenture upon registration of transfer
of or in exchange for or in lieu of any other Note shall carry the rights to unpaid principal and interest that were carried by such other Note. Any checks mailed pursuant to paragraph (a) of this Section 2.08 and returned undelivered
shall be held in accordance with Section 3.03 hereof. 
 Section 2.09. Statements. 
 On each Payment Date, based solely on information provided to it by the Servicer in its Determination Date Report, the Indenture Trustee shall prepare and make available
to each 

  

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Noteholder, the Swap Counterparties, the Cap Counterparties, the Servicer and the Rating Agencies, a statement (the “Indenture Trustee Remittance
Report”) as to the payments made on such Payment Date: 
 (i) the amount of the payment made on such Payment Date to the
Holders of each Class of Notes, separately identified, allocable to principal and the amount of the payment made to the Holders of the Class C Certificates allocable to Prepayment Charges; 
 (ii) the amount of the payment made on such Payment Date to the Holders of each Class of Notes allocable to interest, separately
identified; 
 (iii) the payments made to the Certificateholders 
 (iv) the Pool Balance of the Group I Mortgage Loans and the Group II Mortgage Loans at the Close of Business at the end of the related Due
Period; 
 (v) the number, aggregate principal balance, and weighted average Mortgage Rate of the Mortgage Loans as of the
related Determination Date; 
 (vi) the number and aggregate unpaid principal balance of Mortgage Loans (identified by Group)
that (A) were Delinquent (exclusive of Mortgage Loans in bankruptcy or foreclosure and REO Properties) (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days (B) as to which foreclosure proceedings have been commenced
and that (i) are not Delinquent, and (ii) are Delinquent (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days, (C) are related to a REO Property and that (i) are not Delinquent and (ii) are Delinquent
(1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days and (D) are related to a Mortgagor that was subject to a bankruptcy proceeding and that (i) are not Delinquent and (ii) are Delinquent (1) 30 to 59 days,
(2) 60 to 89 days and (3) 90 or more days, in each case on a contractual and bankruptcy legal basis; 
 (vii) the
aggregate amount of Principal Prepayments made during the related Prepayment Period; 
 (viii) the aggregate amount of
Realized Losses incurred during the related Prepayment Period and the cumulative amount of Realized Losses; 
 (ix) the Class
Note Balance of each class of the Class A Notes and each class of the Class M Notes, after giving effect to the payments made on such Payment Date; 
 (x) the Unpaid Interest Shortfall Amount, if any, with respect to each class of the Class A Notes and each class of the Class M Notes for such Payment Date; 
  

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 (xi) the aggregate amount of any Prepayment Interest Shortfalls for such Payment Date, to
the extent not covered by payments by the Servicer pursuant to Section 5.27 of the Sale and Servicing Agreement; 
 (xii)
the Credit Enhancement Percentage for such Payment Date; 
 (xiii) the Available Funds Cap Shortfall amount for each class of
the Class A Notes and each class of the Class M Notes if any, for such Payment Date; 
 (xiv) the difference between
(x) the sum of (i) the aggregate notional amount of the Swap Agreements and (ii) the aggregate notional amount of the Cap Agreements and (y) the aggregate Class Note Balance of the Class A Notes and Class M Notes on such
Payment Date; 
 (xv) the Required Overcollateralization Amount for such Payment Date; 
 (xvi) the Net Monthly Excess Cashflow for such Payment Date; 
 (xvii) the aggregate amount of Scheduled Principal Payments made during the related Due Period; 
 (xviii) the aggregate amount of Principal Prepayments made during the related Due Period in which the related Mortgagor paid the related
Mortgage Loan in full; 
 (xix) the aggregate amount of Principal Prepayments in part made during the related Prepayment
Period; 
 (xx) the number and the aggregate principal balance of all Liquidated Mortgage Loans for the related Prepayment
Period; 
 (xxi) the aggregate amount of Net Liquidation Proceeds received during the related Prepayment Period; and

 (xxii) the dollar amount of claims made, amounts paid by the MI Insurer in respect of claims made, and premiums due and
paid under the MI Policy, solely to the extent provided by the Servicer. 
 In the case of information furnished pursuant to subclauses (i) and
(ii) above, the amounts shall be expressed in a separate section of the report as a dollar amount for each Class for each $1,000 original dollar amount as of the Closing Date. 
 The Indenture Trustee may, in the absence of manifest error, conclusively rely upon the Determination Date Report of the Servicer in its preparation of the statement to Noteholders pursuant to this Section 2.09.

  

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 Within a reasonable period of time after the end of each calendar year, the Indenture Trustee shall, upon written
request, furnish to each Person who at any time during the calendar year was a Noteholder, if requested in writing by such Person, such information as is reasonably necessary to provide to such Person a statement containing the information set forth
in subclauses (i) and (ii) above, aggregated for such calendar year or applicable portion thereof during which such Person was a Noteholder. Such obligation of the Indenture Trustee shall have been previously deemed to have been satisfied
to the extent that substantially comparable information shall be made available by the Indenture Trustee to Noteholders. 
 On each Payment Date, the
Indenture Trustee shall make available to the Certificateholders a copy of the reports made available to the Noteholders in respect of such Payment Date with such other information as the Indenture Trustee deems necessary or appropriate. 

Within a reasonable period of time after the end of each calendar year, the Indenture Trustee shall deliver to each Person who at any time during the calendar year
was a Certificateholder, if requested in writing by such Person, such information as is reasonably necessary to provide to such Person a statement containing the information provided pursuant to the previous paragraph aggregated for such calendar
year or applicable portion thereof during which such Person was a Certificateholder. Such obligation of the Indenture Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall have been previously
made available to Certificateholders by the Indenture Trustee. 
 Section 2.10. Persons Deemed Owner. Prior to due presentment for
registration of transfer of any Note, any agent on behalf of the Issuing Entity including but not limited to the Indenture Trustee, may treat the Person in whose name any Note is registered as the owner of such Note (a) on the applicable Record
Date for the purpose of receiving payments of the principal of and interest on such Note and (b) on any other date for all other purposes whatsoever, and none of the Issuing Entity, the Indenture Trustee or any other agent of the Issuing
Entity, shall be affected by notice to the contrary. 
 Section 2.11. Cancellation. All Notes surrendered for payment, registration of
transfer, exchange or redemption shall, if surrendered to any Person other than the Note Registrar, be delivered to the Note Registrar and shall be promptly canceled by it. The Owner Trustee, on behalf of the Issuing Entity, shall deliver to the
Note Registrar for cancellation any Note previously authenticated and delivered hereunder which the Owner Trustee, on behalf of the Issuing Entity may have acquired in any manner whatsoever, and all Notes so delivered shall be promptly canceled by
the Note Registrar. No Notes shall be authenticated in lieu of or in exchange for any Notes canceled as provided in this Section 2.11, except as expressly permitted by this Indenture. All canceled Notes held by the Note Registrar shall be held
by the Note Registrar in accordance with its standard retention policy. 
 Section 2.12. Authentication and Delivery of Notes. The
initial Notes shall be executed by an Authorized Officer of the Owner Trustee, on behalf of the Issuing Entity; and delivered to the Authenticating Agent for authentication, and thereupon the same shall be authenticated and delivered by the
Authenticating Agent on the Closing Date, upon receipt by the Authenticating Agent of all of the following: 
 (a) A Trust
Request authorizing the execution, authentication and delivery of the Notes and specifying the Class Note Balance and the Percentage Interest of such Notes to be authenticated and delivered. 
  

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 (b) An Officer’s Certificate of the Issuing Entity complying with the requirements
of Section 11.01 and stating that: 
 (i) the Issuing Entity is not in Default under this Indenture and the issuance of
the Notes will not result in any breach of any of the terms, conditions or provisions of, or constitute a default under, the Issuing Entity’s Certificate of Trust or any indenture, mortgage, deed of trust or other agreement or instrument to
which the Issuing Entity is a party or by which it is bound, or any order of any court or administrative agency entered in any proceeding to which the Issuing Entity is a party or by which it may be bound or to which it may be subject, and that all
conditions precedent provided in this Indenture relating to the authentication and delivery of the Notes have been complied with; 
 (ii) the Issuing Entity is the owner of each Mortgage Loan, free and clear of any lien, security interest or charge, has not assigned any interest or participation in any such Mortgage Loan (or, if any such interest or participation has
been assigned, it has been released), and has the right to Grant each such Mortgage Loan to the Indenture Trustee; 
 (iii)
the information set forth in the Mortgage Loan Schedule attached as Schedule 1 to this Indenture is correct; 
 (iv) the
Issuing Entity has Granted to the Indenture Trustee all of its right, title and interest in each Mortgage Loan; and 
 (v) as
of the Closing Date, no lien in favor of the United States described in Section 6321 of the Code, or lien in favor of the Pension Benefit Guaranty Corporation described in Section 4068(a) of the ERISA, has been filed as described in
subsections 6323(f) and 6323(g) of the Code upon any property belonging to the Issuing Entity. 
 (c) An executed counterpart
of the Sale and Servicing Agreement. 
 (d) An executed counterpart of each of the Hedge Agreements. 
 (e) An executed counterpart of the Trust Agreement. 
 (f) A copy of a letter from each of the Rating Agencies that it has assigned the ratings to each Class of the Notes as set forth in the
Prospectus Supplement. 
 (g) Evidence of the establishment of the Accounts. 
 Section 2.13. Book-Entry Note. The Notes will be issued initially as one or more certificates in the name of Cede & Co., as nominee for
the Clearing Agency maintaining book-entry records with respect to ownership and transfer of such Notes, and registration of the Notes may not be transferred by the Note Registrar except upon the termination of the book-entry 

  

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system as described in Section 2.14. In such case, the Note Registrar shall deal with the Clearing Agency as representative of the Beneficial Owners of
such Notes for purposes of exercising the rights of Noteholders hereunder. Each payment of principal of and interest on a Book-Entry Note shall be paid to the Clearing Agency, which shall credit the amount of such payments to the accounts of its
Clearing Agency Participants in accordance with its normal procedures. Each Clearing Agency Participant shall be responsible for disbursing such payments to the Beneficial Owners of the Book-Entry Notes that it represents and to each indirect
participating brokerage firm (a “brokerage firm” or “indirect participating firm”) for which it acts as agent. Each brokerage firm shall be responsible for disbursing funds to the Beneficial Owners of the Book-Entry
Notes that it represents. All such credits and disbursements are to be made by the Clearing Agency and the Clearing Agency Participants in accordance with the provisions of the Notes. None of the Indenture Trustee, the Note Registrar, if any, or the
Issuing Entity shall have any responsibility therefor except as otherwise provided by applicable law. Requests and directions from, and votes of, such representatives shall not be deemed to be inconsistent if they are made with respect to different
Beneficial Owners. 
 Section 2.14. Termination of Book Entry System. (a) The book-entry system through the Clearing Agency with
respect to the Book-Entry Notes may be terminated upon the happening of any of the following: 
 (i) The Clearing Agency
advises the Indenture Trustee that the Clearing Agency is no longer willing or able to discharge properly its responsibilities as nominee and depository with respect to the Notes and a qualified successor Clearing Agency satisfactory to the Servicer
is not located; or 
 (ii) After the occurrence of an Event of Default (at which time the Indenture Trustee shall promptly
notify the Clearing Agency of such Event of Default and instruct the Clearing Agency to forward such notice to the Beneficial Owners), the Beneficial Owners representing in the aggregate more than 50% of the Class Note Balance of the Book-Entry
Notes advise the Indenture Trustee in writing, through the related Clearing Agency Participants and the Clearing Agency, that the continuation of a book-entry system through the Clearing Agency to the exclusion of any Definitive Notes being issued
to any person other than the Clearing Agency or its nominee is no longer in the best interests of the Beneficial Owners. 
 (b) Upon the occurrence of any event described in subsection (a) of this Section 2.14, the Indenture Trustee shall instruct the Clearing Agency to notify all Beneficial Owners, of the occurrence of such event and of the
availability of Definitive Notes to Beneficial Owners requesting the same, in an aggregate outstanding Class Note Balance representing the interest of each, making such adjustments and allowances as it may find necessary or appropriate as to accrued
interest and previous calls for redemption. Definitive Notes shall be issued only upon surrender to the Indenture Trustee of the global Note by the Clearing Agency, accompanied by registration instructions for the Definitive Notes. Neither the
Issuing Entity nor the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions. Upon issuance of the Definitive Notes, all references
herein to obligations imposed upon or to be performed by the Clearing Agency shall cease to be applicable and the provisions relating to Definitive Notes shall be applicable. 
  

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 ARTICLE III 
 COVENANTS, REPRESENTATIONS AND WARRANTIES 
 Section 3.01. Payment of Notes. The Issuing Entity
will pay or cause to be duly and punctually paid the principal of, and interest on, the Notes in accordance with the terms of the Notes and this Indenture. The Notes shall be non-recourse obligations of the Issuing Entity and shall be limited in
right of payment to amounts available from the Trust Estate as provided in this Indenture and the Issuing Entity shall not otherwise be liable for payments on the Notes. No person shall be personally liable for any amounts payable under the Notes.
If any other provision of this Indenture conflicts or is deemed to conflict with the provisions of this Section 3.01, the provisions of this Section 3.01 shall control. 
 Section 3.02. Maintenance of Office or Agency. The Indenture Trustee will always maintain an office at a location in the United States of America
where Notes may be surrendered for registration of transfer or exchange, which as of the Closing Date shall be located at 2001 Bryan Street, 9th Floor, Dallas, Texas, 75201, Attention: Worldwide Securities Services/Structured Finance Services
-NovaStar 2006-1. Notices and demands to or upon the Issuing Entity in respect of the Notes and this Indenture may be delivered at the Corporate Trust Office of the Indenture Trustee. 
 Section 3.03. Money for Note Payments to Be Held in Trust. All payments of amounts due and payable with respect to any Notes that are to be made
from amounts withdrawn from the Payment Account pursuant to Sections 5.07 or 8.01 hereof shall be made on behalf of the Issuing Entity by the Indenture Trustee, and no amounts so withdrawn from the Payment Account for payments on the Notes shall be
paid over to the Issuing Entity under any circumstances except as provided in this Section 3.03 or in Sections 5.07 or 8.01 hereof. 
 With respect to Definitive Notes, if the Issuing Entity shall have a Note Registrar that is not also the Indenture Trustee, such Note Registrar shall furnish, no later than the fifth (5th) calendar day after each Record Date, a list,
in such form as such Indenture Trustee may reasonably require, of the names and addresses of the Holders of Notes and of the number of Individual Notes held by each such Holder. 
 Whenever the Issuing Entity shall have a Paying Agent other than the Indenture Trustee, the Servicer, on behalf of the Issuing Entity, will, on or before
the Business Day next preceding each Payment Date, direct the Indenture Trustee to distribute from the Payment Account to such Paying Agent on such Payment Date an aggregate sum sufficient to pay the amounts then becoming due (to the extent funds
are then available for such purpose in the Payment Account), such sum to be held in trust for the benefit of the Persons entitled thereto. Any moneys deposited with a Paying Agent in excess of an amount sufficient to pay the amounts then becoming
due on the Notes with respect to which such deposit was made shall, upon Trust 

  

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Order, be paid over by such Paying Agent to the Indenture Trustee for application in accordance with Article VIII hereof. 
 Any Paying Agent, other than the Indenture Trustee, may be appointed by Trust Order and at the expense of the Issuing Entity. The Issuing Entity shall
not appoint any Paying Agent (other than the Indenture Trustee) that is not, at the time of such appointment, a depository institution or trust company whose obligations would be Eligible Investments pursuant to clause (iii) of the definition
of the term “Eligible Investments”. The Servicer, on behalf of the Issuing Entity, will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee and the Owner Trustee, on behalf of the
Issuing Entity, an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this Section 3.03, that such Paying Agent
will: 
 (a) allocate all sums received for payment to the Holders of Notes on each Payment Date among such Holders in the
proportion specified in the applicable Indenture Trustee’s Remittance Report, in each case to the extent permitted by applicable law; 
 (b) hold all sums held by it for the payment of amounts due with respect to the Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as
herein provided and pay such sums to such Persons as herein provided; 
 (c) if such Paying Agent is not the Indenture
Trustee, immediately resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of the Notes if at any time the Paying Agent ceases to meet the standards set forth above required to be met by a
Paying Agent at the time of its appointment; 
 (d) if such Paying Agent is not the Indenture Trustee, give the Indenture
Trustee notice of any Default by the Issuing Entity (or any other obligor upon the Notes) in the making of any payment required to be made with respect to any Notes for which it is acting as Paying Agent; 
 (e) if such Paying Agent is not the Indenture Trustee, at any time during the continuance of any Default by the Issuing Entity (or any
other obligor upon the Notes), upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent; and 
 (f) comply with all requirements of the Code, and all regulations thereunder, with respect to withholding from any payments made by it on
any Notes or pursuant to the Hedge Agreements of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith; provided, however, that with respect to withholding
and reporting requirements applicable to original issue discount (if any) on any of the Notes, the Servicer, on behalf of the Issuing Entity, has provided the calculations pertaining thereto to the Indenture Trustee and the Paying Agent. 

The Issuing Entity may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or any other purpose, by Trust Order
direct any Paying Agent, if other 

  

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than the Indenture Trustee, to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee in the
same trusts as such sums were held by such Paying Agent; and upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money. 
 Any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Note and remaining unclaimed
for two and one-half years after such amount has become due and payable to the Holder of such Note (or if earlier, three months before the date on which such amount would escheat to a governmental entity under applicable law) shall be discharged
from such trust and paid to the Issuing Entity; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Issuing Entity for payment thereof (but only to the extent of the amounts so paid to the Issuing
Entity), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease. The Indenture Trustee may, but shall have no obligation to (and shall have no liability for failing to), adopt and
employ, at the expense of the Issuing Entity, any reasonable means of notification of such repayment (including, but not limited to, mailing notice of such repayment to Holders whose Notes have been called but have not been surrendered for
redemption or whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or an), Paying Agent, at the last address of record for each such Holder). 
 Section 3.04. Existence of Issuing Entity. (a) Subject to paragraphs (b) and (c) of this Section 3.04, the Issuing Entity will
keep in full effect its existence, rights and franchises as a statutory trust under the laws of the State of Delaware or under the laws of any other state of the United States of America, and will obtain and preserve its qualification to do business
in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the Notes and the other Basic Documents. 
 (b) Subject to Section 3.09(g) hereof, any entity into which the Issuing Entity may be merged or with which it may be consolidated,
or any entity resulting from any merger or consolidation to which the Issuing Entity shall be a party, shall be the successor issuing entity under this Indenture without the execution or filing of any paper, instrument or further act to be done on
the part of the parties hereto, anything in any agreement relating to such merger or consolidation, by which any such Issuing Entity may seek to retain certain powers, rights and privileges therefore obtaining for any period of time following such
merger or consolidation to the contrary notwithstanding (other than Section 3.09(g)). 
 (c) Upon any consolidation or
merger of or other succession to the Issuing Entity in accordance with this Section 3.04, the Person formed by or surviving such consolidation or merger (if other than the Issuing Entity) may exercise every right and power of, and shall have
all of the obligations of, the Issuing Entity under this Indenture with the same effect as if such Person had been named as the issuing entity herein. 
 Section 3.05. Protection of Trust Estate. (a) The Issuing Entity will, from time to time, execute and deliver all such supplements and amendments hereto and all such financing statements, continuation
statements, instruments of further assurance and other instruments, and will take such other action as may be necessary or advisable to: 
 (i) Grant more effectively all or any portion of the Trust Estate as made by this Indenture; 
  

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 (ii) maintain or preserve the lien of this Indenture or carry out more effectively the
purposes hereof; 
 (iii) perfect, publish notice of or protect the validity of any Grant made or to be made by this
Indenture; 
 (iv) enforce any of the Mortgage Loans or the Sale and Servicing Agreement; or 
 (v) preserve and defend title to the Trust Estate and the rights of the Indenture Trustee, the Hedge Counterparties and the Noteholders in
the Mortgage Loans and the other property held as part of the Trust Estate against the claims of all Persons and parties. 
 (b) The Indenture Trustee shall not remove any portion of the Trust Estate that consists of money or is evidenced by an instrument, certificate or other writing from the jurisdiction in which it was held at the Closing Date or cause or
permit ownership or the pledge of any portion of the Trust Estate that consists of book-entry securities to be recorded on the books of a Person located in a different jurisdiction from the jurisdiction in which such ownership or pledge was recorded
at such time unless the Indenture Trustee shall have first received an Opinion of Counsel to the effect that the lien and security interest created by this Indenture with respect to such property will continue to be maintained after giving effect to
such action or actions. 
 Section 3.06. [Reserved.] 
 Section 3.07. Performance of Obligations. (a) The Issuing Entity shall punctually perform and observe all of its obligations under this Indenture and the other Basic Documents. 
 (b) The Issuing Entity shall not take any action and will use its Best Efforts not to permit any action to be taken by others that would
release any Person from any of such Person’s covenants or obligations under any of the Mortgage Files or under any instrument included in the Trust Estate, or that would result in the amendment, hypothecation, subordination, termination or
discharge of, or impair the validity or effectiveness of, any of the documents or instruments contained in the Mortgage Files, except as expressly permitted in this Indenture, the other Basic Documents or such document included in the Mortgage File
or other instrument or unless such action will not adversely affect the interests of the Noteholders. 
 (c) If the Servicer
or the Owner Trustee, on behalf of the Issuing Entity, shall have actual knowledge of the occurrence of a Servicing Default, the Servicer or the Owner Trustee, as applicable, shall promptly notify the Indenture Trustee, the Hedge Counterparties and
the Rating Agencies thereof, and, in the case of the Servicer, shall specify in such notice the action, if any, the Servicer is taking with respect to such default. 
  

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 (d) Upon any termination of the Servicer’s rights and powers pursuant to the Sale
and Servicing Agreement, the Indenture Trustee shall promptly notify the Rating Agencies and the Hedge Counterparties. As soon as any successor Servicer is appointed, the Indenture Trustee shall notify the Rating Agencies, specifying in such notice
the name and address of such successor Servicer. 
 Section 3.08. Investment Company Act. The Issuing Entity shall at all times
conduct its operations so as not to be subject to, or shall comply with, the requirements of the Investment Company Act of 1940, as amended (or any successor statute), and the rules and regulations thereunder. 
 Section 3.09. Negative Covenants. The Issuing Entity shall not: 
 (a) sell, transfer, exchange or otherwise dispose of any portion of the Trust Estate, except as expressly permitted by this Indenture and
the other Basic Documents; 
 (b) claim any credit on, or make any deduction from, the principal of, or interest on, any of
the Notes (other than amounts properly withheld from such payments under the Code) or assert any claim against any present or former Noteholder by reason of the payment of any taxes levied or assessed upon any portion of the Trust Estate;

 (c) engage in any business or activity other than as permitted by the Trust Agreement or other than in connection with, or
relating to, the issuance of the Notes pursuant to this Indenture, or amend the Trust Agreement, as in effect on the Closing Date, other than in accordance with Section 12.01 of the Trust Agreement; 
 (d) incur, issue, assume or otherwise become liable for any indebtedness other than the Notes; 
 (e) incur, assume, guaranty or agree to indemnify any Person with respect to any indebtedness of any Person, except for such indebtedness
as may be incurred by the Issuing Entity in connection with the issuance of the Notes pursuant to this Indenture; 
 (f)
subject to Article X of the Trust Agreement, dissolve or liquidate in whole or in part (until the Notes are paid in full); 
 (g) (i) permit the validity or effectiveness of this Indenture or any Grant to be impaired, or permit the lien of this Indenture to be impaired, amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be
released from any covenants or obligations under this Indenture, except as may be expressly permitted hereby, (ii) permit any lien, charge, security interest, mortgage or other encumbrance (other than the lien of this Indenture) to be created
on or extend to or otherwise arise upon or burden the Trust Estate or any pall thereof or any interest therein or the proceeds thereof; or (iii) permit the lien of this Indenture not to constitute a valid perfected first priority (other than
with respect to any such tax, mechanics’ or other lien) security interest in the Trust Estate; or 
  

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 (h) take any other action that should reasonably be expected to, or fail to take any
action if such failure should reasonably be expected to, cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes. 
 Section 3.10. Annual Statement as to Compliance. On or before March 15, 2007, and each March 15 thereafter, the Servicer, on behalf of the Issuing Entity, shall deliver to the Indenture Trustee and
the Sponsor a written statement, signed by an Authorized Officer of the Servicer, on behalf of the Issuing Entity, stating that: 
 (i) a review of the fulfillment by the Issuing Entity during such year of its obligations under this Indenture has been made under such Authorized Officer’s supervision; and 
 (ii) to the best of such Authorized Officer’s knowledge, based on such review, the Issuing Entity has complied with all conditions
and covenants under this Indenture throughout such year, or, if there has been a Default in the fulfillment of any such covenant or condition, specifying each such Default known to such Authorized Officer and the nature and status thereof.

 Section 3.11. Restricted Payments. The Issuing Entity shall not, directly or indirectly, (i) pay any dividend or make any
payment (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to the Owner Trustee or any owner of a beneficial interest in the Issuing Entity or otherwise with respect to any ownership or equity
interest or security in or of the Issuing Entity or to the Servicer, (ii) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or security or (iii) set aside or otherwise segregate any amounts for
any such purpose; provided, however, that the Issuing Entity may make, or cause to be made, payments to the Servicer, the Indenture Trustee, the Owner Trustee, the Hedge Counterparties, the Noteholders and the Certificateholders as contemplated by,
and to the extent funds are available for such purpose under this Indenture and the other Basic Documents and the Issuing Entity will not, directly or indirectly, make or cause to be made payments to or payments from the Payment Account except in
accordance with this Indenture. 
 Section 3.12. Treatment of Notes as Debt for Tax Purposes. For purposes of federal, state and local
income, single business and franchise taxes, the Issuing Entity will treat the Notes, other than the Notes held by the Depositor or its owner, as indebtedness, and hereby instructs the Indenture Trustee, Paying Agent and the Servicer, on behalf of
the Issuing Entity to treat the Notes, other than the Notes held by the Depositor or its owner, as indebtedness for all applicable tax reporting purposes. 
 Section 3.13. Notice of Events of Default. The Servicer, on behalf of the Issuing Entity, shall give the Indenture Trustee, the Rating Agencies, the Hedge Counterparties and the Sponsor prompt written notice of
each Event of Default hereunder of which it has knowledge, each default on the part of the Servicer of its obligations under the Sale and Servicing Agreement and each default on the part of the Sponsor of its obligations under the Sale and Servicing
Agreement. 
  

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 Section 3.14. Further Instruments and Acts. Upon written request of the Indenture Trustee, the
Owner Trustee, on behalf of the Issuing Entity, will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. 
 Section 3.15. Representation and Warranties of the Issuing Entity. 
 (a) The Issuing Entity represents and warrants to the Indenture Trustee, the Hedge Counterparties, the Depositor, the Sponsor and the
Servicer that the Issuing Entity is duly authorized under applicable law and the Trust Agreement to create and issue the Notes, to execute and deliver this Indenture, the Hedge Agreements, the Sale and Servicing Agreement, the other documents
referred to herein to which it is a party and all instruments included in the Collateral which it has executed and delivered, and that all Issuing Entity action and governmental consents, authorizations and approvals necessary or required therefor
have been duly and effectively taken or obtained. The Notes, when issued, will be, and this Indenture and such other documents are, valid and legally binding obligations of the Issuing Entity enforceable in accordance with their terms, except as may
be limited by bankruptcy, insolvency, reorganization, moratorium, liquidation, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights in general and by general principles of equity, regardless of whether such
enforceability shall be considered in a proceeding in equity or in law. 
 (b) The Issuing Entity represents and warrants
that, immediately prior to its Grant of the Collateral provided for herein, it had good title to, and was the sole owner of, the Mortgage Loans, free and clear of any pledge, lien, encumbrance or security interest. 
 (c) The Issuing Entity represents and warrants that the Indenture Trustee has a valid and enforceable first priority security interest in
the Mortgage Loans, subject only to exceptions permitted hereby. 
 (d) The Issuing Entity represents and warrants it is not
required to be registered as an “investment company” under the 1940 Act. 
 (e) This Indenture creates a valid and
continuing security interest (as defined in the applicable UCC) in the Mortgage Loans and Hedge Agreements in favor of the Indenture Trustee, which security interest is prior to all other Liens, and is enforceable as such as against creditors of and
purchasers from the Issuing Entity. 
 (f) Other than the security interest granted to the Indenture Trustee pursuant to this
Indenture, the Issuing Entity has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Mortgage Loans. The Issuing Entity has not authorized the filing of and is not aware of any financing statements against
the Issuing Entity that includes a description of collateral covering the Mortgage Loans and the Hedge Agreements other than any financing statement relating to the security interest granted to the Indenture Trustee hereunder or that has been
terminated. The Issuing Entity is not aware of any judgment or tax lien filings against the Issuing Entity. 
  

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 (g) The Issuing Entity owns and has good and marketable title to the Mortgage Loans and
the Hedge Agreements free and clear of any Lien, claim or encumbrance of any Person. 
 (h) The Issuing Entity has caused or
will have caused, within ten days, the filing of all appropriate financing statements in the proper filing office in the appropriate jurisdiction under applicable law in order to perfect the security interest in the Mortgage Loans and the Hedge
Agreements granted to the Indenture Trustee hereunder. The Custodian on behalf of the Issuing Entity has in its possession all original copies of the mortgage notes that constitute or evidence the Mortgage Loans. The mortgage notes that constitute
or evidence the Mortgage Loans do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Indenture Trustee. All financing statements filed or to be filed against the
Issuing Entity in favor of the Indenture Trustee (or any subsequent assignee, without limitation) in connection herewith describing the Mortgage Loans contain a statement to the following effect: “A purchase of or security interest in, any
collateral described in this financing statement will violate the rights of the Indenture Trustee.” 
 (i) The mortgage
notes evidencing the Mortgage Loans constitute instruments, and the derivative evidenced by each of the Hedge Agreements constitutes general intangibles, within the meaning of the applicable UCC. 
 (j) The Issuing Entity shall, to the extent consistent with this Indenture, take such additional reasonable actions as may be necessary to
ensure that, if this Indenture were deemed to create a security interest in the Mortgage Loans and the other assets of the Collateral, such security interest would be a perfected security interest of first priority under applicable law and will be
maintained as such throughout the life of this Indenture. 
 The foregoing representations and warranties may not be waived and shall survive
the issuance of the Notes. 
 ARTICLE IV 
 SATISFACTION AND DISCHARGE 
 Section 4.01. Satisfaction and Discharge of Indenture. Whenever
the following conditions shall have been satisfied: 
 (a) either; 
 (i) all Notes theretofore authenticated and delivered (other than (x) Notes that have been destroyed, lost or stolen and that have
been replaced or paid as provided in Section 2.07 hereof, and (y) Notes for whose payment money has theretofore been deposited in trust and thereafter repaid to the Issuing Entity, as provided in Section 3.03 hereof) have been
delivered to the Note Registrar for cancellation; or 
  

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 (ii) all Notes not theretofore delivered to the Note Registrar for cancellation,
(a) have become due and payable, or (b) will become due and payable at the Final Stated Maturity Date within one (1) year, or (c) are to be called for redemption pursuant to Section 10.01 hereof within one (1) year
under irrevocable arrangements satisfactory to the Indenture Trustee for the giving of notice of redemption by the Indenture Trustee in the name, and at the expense, of the Sponsor, 
 and the Sponsor, in the case of clause ii(c), or Servicer, in the case of clauses (ii)(a) or (ii)(b) above, has irrevocably deposited or caused to be deposited with the Indenture Trustee, in trust for such purpose, an
amount sufficient to pay and discharge the entire unpaid Class Note Balance of such Notes not theretofore delivered to the Indenture Trustee for cancellation, for principal and interest to the Final Stated Maturity Date or to the applicable
Redemption Date, as the case may be, and in the case of Notes that were not paid at the Final Stated Maturity Date of their entire unpaid Class Note Balance, for all overdue principal and all interest payable on such Notes to the next succeeding
Payment Date therefor; 
 (b) the Servicer, on behalf of the Issuing Entity, has paid or caused to be paid all other sums
payable hereunder by the Issuing Entity; 
 (c) the Servicer, on behalf of the Issuing Entity, has delivered to the Indenture
Trustee an Officer’s Certificate and an Opinion of Counsel and, if the Servicer determines that TIA Section 314(c)(3) requires it, a certificate from a firm of certified public accountants, each stating that all conditions precedent herein
providing for the satisfaction and discharge of this Indenture have been complied with, 
 then, upon a Trust Request, this Indenture and the lien, rights
and interests created hereby and thereby shall cease to be of further effect, and the Indenture Trustee and each co-trustee and separate trustee, if any, then acting as such hereunder shall, at the expense of the Issuing Entity, execute and deliver
all such instruments as may be necessary to acknowledge the satisfaction and discharge of this Indenture and shall pay, or assign or transfer and deliver, to the Issuing Entity or upon Trust Order all cash, securities and other property held by it
as part of the Trust Estate remaining after satisfaction of the conditions set forth in paragraphs (a) and (b) above. 
 Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Indenture Trustee and any Paying Agent to the Issuing Entity and the Holders of Notes under Section 3.03 hereof, the obligations of the Indenture
Trustee to the Holders of Notes under Section 4.02 hereof and the provisions of Section 2.07 hereof with respect to lost, stolen, destroyed or mutilated Notes, registration of transfers of Notes and rights to receive payments of principal
of and interest on the Notes, and the obligations of the Servicer to the Indenture Trustee under Section 7.06 of the Sale and Servicing Agreement shall survive. 
 Section 4.02. Application of Trust Money. All money deposited with the Indenture Trustee pursuant to Sections 3.03 and 4.01 hereof shall be held in trust and applied by it, in accordance with the provisions of
the Notes and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Persons entitled thereto, of the principal and interest for whose payment such money has been deposited with
the Indenture Trustee. 
  

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 ARTICLE V 
 DEFAULTS AND REMEDIES 
 Section 5.01. Event of Default. “Event of Default”,
wherever used herein, means, with respect to Notes issued hereunder, any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): 
 (a) if the Issuing Entity shall fail to distribute or cause to be paid to the Indenture Trustee, for the benefit of the holders of the Notes, (x) on any Payment Date, any Interest Payment Amount due and payable on such Payment Date and
such failure continues for three Business Days or (y) on the applicable Final Stated Maturity Date for each class of Notes, any remaining Available Funds Cap Shortfall and any remaining Deferred Interest for such Class, as applicable;

 (b) if the Issuing Entity shall fail to distribute or cause to be paid to the Indenture Trustee, for the benefit of the
holders of the Notes, (x) on any Payment Date (other than the Final Stated Maturity Date), an amount equal to the related Principal Distribution Amount due on the Notes on such Payment Date, to the extent that, after application in the order
specified in Section 8.01 hereof, sufficient funds are on deposit in the Collection Account and such failure continues for three Business Days or (y) on the Final Stated Maturity Date for any Class of Notes, the aggregate Class Note
Balance of the related Class of Notes; 
 (c) if the Issuing Entity shall breach or default in the due observance of any one
or more of the covenants hereof and such breach or default continues unremedied for a period of 30 Business Days; 
 (d) if
the Issuing Entity shall consent to the appointment of a custodian, receiver, trustee or liquidator (or other similar official) of itself, or of a substantial part of its property, or shall admit in writing, its inability to pay its debts generally
as they come due, or a court of competent jurisdiction shall determine that the Issuing Entity is generally not paying its debts as they come due, or the Issuing Entity shall make a general assignment for the benefit of creditors; 
 (e) if the Issuing Entity shall file a voluntary petition in bankruptcy or a voluntary petition or an answer seeking reorganization in a
proceeding under any bankruptcy laws (as now or hereafter in effect) or an answer admitting the material allegation of a petition filed against the Issuing Entity in any, such proceeding, or the Issuing Entity shall, by voluntary petition, answer or
consent, seek relief under the provisions of any now existing or future bankruptcy or other similar law providing for the reorganization or winding-up of debtors, or providing for an agreement, composition, extension or adjustment with its
creditors; 
 (f) if an order, judgment or decree shall be entered in any proceeding by any court of competent jurisdiction
appointing, without the consent (express or legally implied) of the Issuing Entity, a custodian, receiver, trustee or liquidator (or other similar official) of the 

  

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Issuing Entity or any substantial part of its property, or sequestering any substantial part of its respective property, and any such order, judgment or
decree or appointment or sequestration shall remain in force undismissed, unstayed or unvacated for a period of ninety (90) days after the date of entry thereof; or 
 (g) if a petition against the Issuing Entity in a proceeding under applicable bankruptcy laws or other insolvency laws, as now or
hereafter in effect, shall be filed and shall not be stayed, withdrawn or dismissed within ninety (90) days thereafter, or if, under the provisions of any law providing for reorganization or winding-up of debtors which may apply to the Issuing
Entity, any court of competent jurisdiction shall assume jurisdiction, custody or control of the Issuing Entity or any substantial part of its property, and such jurisdiction, custody or control shall remain in force unrelinquished, unstayed or
unterminated for a period of ninety (90) days. 
 Section 5.02. Acceleration of Maturity; Rescission and Annulment. If an Event
of Default occurs and is continuing, then and in every such case, the Indenture Trustee may, and at the direction of Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes, shall, declare all the Notes to be
immediately due and payable by a notice in writing to the Issuing Entity (and to the Indenture Trustee if given by Noteholders), and upon any such declaration such Notes, in an amount equal to the entire unpaid Class Note Balance of such Notes,
together with accrued and unpaid interest thereon to the date of such acceleration, shall become immediately due and payable. 
 At any time
after such a declaration of acceleration of maturity of the Notes has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter provided in this Article V, the Holders of Notes
representing more than 50% of the Class Note Balance of the Outstanding Notes, by written notice to the Issuing Entity, the Indenture Trustee and the Hedge Counterparties, may rescind and annul such declaration and its consequences if: 

(a) the Issuing Entity has paid or deposited with the Indenture Trustee a sum sufficient to pay: 
 (i) all payments of principal of, and interest on, all Outstanding Notes and all other amounts that would then be due hereunder or upon
such Notes if the Event of Default giving rise to such acceleration had not occurred; 
 (ii) any Hedge Termination Payment
other than a Defaulted Hedge Termination Payment; and 
 (iii) all sums paid or advanced by the Indenture Trustee hereunder
and the reasonable compensation, expenses, disbursements, indemnities and advances of the Indenture Trustee, its agents (including but not limited to the Custodian) and counsel; and 
 (b) all Events of Default, other than the nonpayment of the principal of Notes that have become due solely by such acceleration, have been
cured or waived as provided in Section 5.14 hereof. 
  

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 No such rescission shall affect any subsequent Default or impair any right consequent thereon.

 Section 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee. Subject to the provisions of
Section 3.01 hereof and the following sentence, if an Event of Default occurs and is continuing, the Indenture Trustee may, and shall at the written direction of the Holders of Notes representing at least 50% of the Class Note Balance of the
Outstanding Notes, proceed to protect and enforce its rights and the rights of the Noteholders by any Proceedings the Indenture Trustee deems appropriate to protect and enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Indenture or in aid of the exercise of any power granted herein, or enforce any other proper remedy. Any Proceedings brought by the Indenture Trustee; on behalf of the Noteholders, or any Noteholder against the Issuing Entity shall
be limited to the preservation, enforcement and foreclosure of the liens; assignments, rights and security interests under the Indenture and no attachment, execution or other unit or process shall be sought, issued or levied upon any assets,
properties or funds of the Issuing Entity, other than the Trust Estate relative to the Notes in respect of which such Event of Default has occurred. If there is a foreclosure of any such liens, assignments, rights and security interests under this
Indenture, by private power of sale or otherwise, no judgment for any deficiency upon the indebtedness represented by the Notes may be sought or obtained by the Indenture Trustee or any Noteholder against the Issuing Entity. The Indenture Trustee
shall be entitled to recover the costs and expenses expended by it pursuant to this Article V including reasonable compensation, expenses, or disbursements incurred of the Indenture Trustee, its agents and counsel from the Trust Estate. 

Section 5.04. Remedies. If an Event of Default shall have occurred and be continuing and the Notes been declared due and payable and such
declaration and its consequences have not been rescinded and annulled, the Indenture Trustee (subject to Section 5.17 hereof, to the extent applicable) shall, for the benefit of the Noteholders, do one or more of the following: 
 (a) institute Proceedings for the collection of all amounts then payable on the Notes, or under this Indenture, whether by declaration or
otherwise, enforce any judgment obtained, and collect from the Issuing Entity moneys adjudged due, subject in all cases to the provisions of Sections 3.01 and 5.03 hereof; 
 (b) in accordance with Section 5.17 hereof, sell the Trust Estate or any portion thereof or rights or interest therein, at one or
more public or private Sales called and conducted in any manner permitted by law; 
 (c) institute Proceedings from time to
time for the complete or partial foreclosure of this Indenture with respect to the Trust Estate; 
 (d) exercise any remedies
of a secured party under the Uniform Commercial Code and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee or the Holders of the Notes hereunder; and 
 (e) refrain from selling the Trust Estate and apply all funds on deposit in each of the Accounts pursuant to Section 5.07 hereof.

  

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 Section 5.05. Indenture Trustee May File Proofs of Claim. In case of the pendency of any
receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, composition or other judicial Proceeding relative to the Issuing Entity or any other obligor upon any of the Notes or the property of the Issuing Entity or of such other
obligor or their creditors, the Indenture Trustee irrespective of whether the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand on the
Issuing Entity for the payment of any overdue principal or interest shall be entitled and empowered, by intervention in such Proceeding or otherwise to: 
 (a) file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Notes and file such other papers or documents as may be necessary or advisable in order to have the claims
of the Indenture Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel), the Noteholders allowed in such Proceeding, and 
 (b) collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any
receiver, assignee, trustee, liquidator, or sequestrator (or other similar official) in any such Proceeding is hereby authorized by each Noteholder to make such payments to the Indenture Trustee and, in the event that the Indenture Trustee shall
consent to the making of such payments directly to the Noteholders, to pay to the Indenture Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee, its agents and counsel.

 Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan of reorganization, arrangement, adjustment or composition affecting any of the Notes or the rights of any Holder thereof, or to authorize the Indenture Trustee to vote in respect of the claim of any Noteholder in any such
Proceeding. 
 Section 5.06. Indenture Trustee May Enforce Claims Without Possession of Notes. All rights of action and claims under
this Indenture or any of the Notes may be prosecuted and enforced by the Indenture Trustee without the possession of any of the Notes or the production thereof in any Proceeding relating thereto, and any such Proceeding instituted by the Indenture
Trustee, at the written direction of the Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the
ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered after payment of amounts required to be paid pursuant to paragraph (i) of Section 5.07 hereof. 
  

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 Section 5.07. Application of Money Collected. If the Notes have been declared due and payable
following an Event of Default and such declaration and its consequences have not been rescinded and annulled, any money collected by the Indenture Trustee with respect to each Class of Notes pursuant to this Article V or otherwise and any other
monies that may then be held or thereafter received by the Indenture Trustee as security for such Class of Notes shall be applied in the following order, at the date or dates fixed by the Indenture Trustee and, in case of the payment of the entire
amount due on account of principal of, and interest on, such Class of Notes, upon presentation and surrender thereof: 
 (i)
first, to the Indenture Trustee, any unpaid Indenture Trustee Fees then due and any amounts in respect of indemnification then due under Section 7.06 of the Sale and Servicing Agreement to the extent not already paid by the Servicer
pursuant to Section 7.06 of the Sale and Servicing Agreement, in an amount not to exceed $100,000 in any calendar year, and any Owner Trustee Fees then due to the extent not already paid pursuant to Section 9.01 of the Trust Agreement and
to the Owner Trustee, any amounts in respect of indemnification then due under Section 9.02 of the Trust Agreement to the extent not already paid pursuant to Section 9.02 of the Trust Agreement, in an amount not to exceed $50,000 in any
calendar year; 
 (ii) second, any Hedge Termination Payments (which shall include with respect to this Section only
for the avoidance of doubt, any unpaid Net Swap Payment and any unpaid Cap Payment) due to a Hedge Counterparty other than Defaulted Hedge Termination Payments; 
 (iii) third, (a) from money collected with respect to the Group I Mortgage loans, any Accrued Note Interest to the
Class A-1A Notes, and (b) from money collected on the Group II Mortgage loans, any Accrued Note Interest pro rata to the Class A-2 Notes provided, that if after making such payments Accrued Note Interest is owed on the Class A
Notes, then any remaining amount of money relating to the other group of mortgage loans after making payments on the related class of Class A Notes will be available to pay Accrued Note Interest to the other classes of Class A Notes;

 (iv) fourth, concurrently, (a) from remaining money collected with respect to the Group I Mortgage loans, to
the Class A-1A Notes as a payment of principal in reduction of the related Class Note Balance until it has been reduced to zero; and from money collected with respect to the Group II Mortgage Loans, pro rata, to the classes of Class A-2
Notes based on their current Class Note Balances until their respective Class Note Balances have been reduced to zero provided, that if after making such payments principal is owed on the Class A Notes, then any remaining amount of money
relating to the other group of Mortgage Loans after making payments on the related classes of Class A Notes will be available to pay principal to the other classes of Class A Notes; 
 (v) fifth, any Accrued Note Interest to the classes of Class M Notes, sequentially, in ascending numerical order; 
 (vi) sixth, to the classes of Class M Notes, sequentially, in ascending numerical order to the extent of any remaining Class Note
Balance; 
 (vii) seventh, concurrently, any Available Funds Cap Shortfall to the classes of Class A Notes, pro
rata, based on Class Note Balance; 
 (viii) eighth, any Available Funds Cap Shortfall (other than Available Funds Cap
Shortfalls relating to Allocated Realized Losses) to the classes of Class M Notes, sequentially, in ascending numerical order; 
 (ix) ninth, any Deferred Interest to the classes of Class M Notes, sequentially, in ascending numerical order; 
  

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 (x) tenth, any Available Funds Cap Shortfall relating to Allocated Realized Losses
to the classes of Class M Notes, sequentially, in ascending numerical order; 
 (xi) eleventh, any amounts due to the
Indenture Trustee to the extent not paid pursuant to Section 5.07(i) hereof and any amounts due to the Owner Trustee under Article IX of the Trust Agreement or the other Basic Documents to the extent not already paid pursuant to
Section 5.07(i) or Section 9.02 of the Trust Agreement; 
 (xii) twelfth, to the Servicer, the amount of any
reimbursement of indemnification owed to it by the Issuing Entity pursuant to Section 7.03 of the Sale and Servicing Agreement; 
 (xiii) thirteenth, any Defaulted Hedge Termination Payment due to the Hedge Counterparties; 
 (xiv)
fourteenth, to the Hedge Counterparties, pro rata, the indemnity provided for in Part 5 of the Hedge Agreement; and 
 (xv) fifteenth, any remainder to the Certificates. 
 All payments in paragraph (i) above, shall be made from money
collected with respect to the Group I Mortgage Loans and the Group II Mortgage Loans, pro rata based on the aggregate amount of money collected with respect to such Group and available to make the related payment and all payments to the Hedge
Counterparties in paragraph (xii) above, shall be made from money collected with respect to the Group I Mortgage Loans and the Group II Mortgage Loans, pro rata. 
 Section 5.08. Limitation on Suits. No Holder of a Note shall have any right to institute any Proceedings, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless: 
 (a) such Holder has previously given written notice to the Indenture Trustee of
a continuing Event of Default; 
 (b) the Holders of Notes representing not less than 25% of the Class Note Balance of the
Outstanding Notes shall have made written request to the Indenture Trustee to institute Proceedings in respect of such Event of Default in its own name as Indenture Trustee hereunder; 
 (c) such Holder or Holders have offered to the Indenture Trustee indemnity satisfactory to it in full against the costs, expenses and
liabilities to be incurred in compliance with such request; 
 (d) the Indenture Trustee, for sixty (60) days after its
receipt of such notice, request and offer of indemnity, has failed to institute any such Proceeding; 
  

 27 

 (e) no direction inconsistent with such written request has been given to the Indenture
Trustee during such sixty (60) day period by the Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes; and 
 (f) In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Notes, each representing less than 50% of the Class Note Balance of the
Outstanding Notes, the Indenture Trustee shall take the action prescribed by the group representing a greater percentage of the Class Note Balance of the Outstanding Notes. 
 Section 5.09. Unconditional Rights of Noteholders to Receive Principal and Interest. Subject to the provisions in this Indenture (including
Sections 3.01 and 5.03 hereof) limiting the right to recover amounts due on a Note to recovery from amounts in the portion of the Trust Estate relating to such Note, the Holder of any Note shall have the right, to the extent permitted by applicable
law, which right is absolute and unconditional, to receive payment of each installment of interest on such Note on the respective Payment Date for such installments of interest, to receive payment of each installment of principal of such Note when
due (or, in the case of any Note called for redemption, on the date fixed for such redemption) and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. 
 Section 5.10. Restoration of Rights and Remedies. If the Indenture Trustee or any Noteholder has instituted any Proceeding to enforce any right or
remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason, or has been determined to be adverse to the Indenture Trustee or to such Noteholder, then and in every such case the Indenture Trustee and the
Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Noteholders shall continue as
though no such Proceeding had been instituted. 
 Section 5.11. Rights and Remedies Cumulative. No right or remedy herein conferred
upon or reserved to the Indenture Trustee or to the Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy
given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of a, right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or
remedy. 
 Section 5.12. Delay or Omission Not Waiver. No delay or omission of the Indenture Trustee or of any Holder of any Note to
exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article V or by law to the
Indenture Trustee or to the Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Noteholders, as the case may be. 
 Section 5.13. Control by Noteholders. The Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes on the
applicable Record Date shall 

  

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have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee or exercising any trust or
power conferred on the Indenture Trustee; provided that: 
 (a) such written direction shall not be in conflict with any rule
of law or with this Indenture; 
 (b) any direction to the Indenture Trustee to undertake a Sale of the Trust Estate shall be
by the Holders of Notes representing the percentage of the Class Note Balance of the Outstanding Notes specified in Section 5.17(b)(i) hereof, unless Section 5.17(b)(ii) hereof is applicable; and 
 (c) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction;
provided, however, that, subject to Section 6.01 hereof, the Indenture Trustee need not take any action that it determines might involve it in liability or be unjustly prejudicial to the Noteholders not consenting. 
 Section 5.14. Waiver of Past Defaults. The Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding Notes on the
applicable Record Date may on behalf of the Holders of all the Notes, waive any past Default hereunder and its consequences, except a Default: 
 (a) in the payment of principal or any installment of interest on any Note; or 
 (b) in
respect of a covenant or provision hereof that under Section 9.02 hereof cannot be modified or amended without the consent of the Holder of each Outstanding Note affected. 
 Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereon. 
 Section
5.15. Undertaking for Costs. All parties to this Indenture agree, and each Holder of any Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right
or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and
that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 5.15 shall not apply to any suit instituted by the Indenture Trustee to any suit instituted by any Noteholder, or Class of Noteholders, holding in the aggregate Notes representing more than 10% of the Class
Note Balance of the Outstanding Notes, or to any suit instituted by any Noteholder for the enforcement of the payment of any Interest Payment Amount or Base Principal Distribution Amount on any Note on or after the related Payment Date or for the
enforcement of the payment of principal of any Note on or after the Final Stated Maturity Date (or, in the case of any Note called for redemption, on or after the applicable Redemption Date). 
  

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 Section 5.16. Waiver of Stay or Extension Laws. The Issuing Entity covenants (to the extent that
it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension of law wherever enacted, now or at any time hereafter in force, that may affect
the covenants in, or the performance of, this Indenture; and the Issuing Entity (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. 
 Section 5.17. Sale of Trust Estate. (a) The power to effect any sale (a “Sale”) of any portion of the Trust Estate pursuant to Section 5.04 hereof shall not be exhausted by any one or
more Sales as to any portion of the Trust Estate remaining unsold, but shall continue unimpaired until the entire Trust Estate shall have been sold or all amounts payable on the Notes and under this Indenture with respect thereto shall have been
paid. The Indenture Trustee may, from time to time postpone any public Sale by public announcement made at the time and place of such Sale. 
 (b) To the extent permitted by law, the Indenture Trustee shall not in any private Sale sell or otherwise dispose of the Trust Estate, or any portion thereof, unless: 
 (i) the Holders of Notes representing more than 50% of the Class Note Balance of the Notes of the Class or Classes then Outstanding
consents to or directs the Indenture Trustee in writing to make such Sale; or 
 (ii) the proceeds of such Sale would be not
less than the entire amount that would be payable to the Holders of the Notes, in full payment thereof in accordance with Section 5.07 hereof, on the Payment Date next succeeding the date of such Sale. 
 (c) Unless the Holders of all Outstanding Notes have otherwise consented or directed the Indenture Trustee, at any public Sale of all or
any portion of the Trust Estate at which a minimum bid equal to or greater than the amount described in paragraph (b)(ii) of this Section 5.17 has not been established by the Indenture Trustee and no Person bids an amount equal to or greater
than such amount, the Indenture Trustee, acting in its capacity as Indenture Trustee (i) on behalf of the Noteholders, shall prevent such Sale in order to preserve the Trust Estate on behalf of the Noteholders. 
 (d) In connection with a Sale of all or any portion of the Trust Estate: 
 (i) any Holder or Holders of Notes may bid for and purchase the property offered for Sale, and upon compliance with the terms of sale may
hold, retain and possess and dispose of such property, without further accountability, and may, in paying the purchase money therefor, deliver any Outstanding Notes or claims for interest thereon in lieu of cash up to the amount that shall, upon
payment of the net proceeds of such Sale, be payable thereon, and such Notes, in case the amounts so payable thereon shall be less than the amount due thereon, shall be returned to the Holders thereof after being appropriately stamped to show such
partial payment; 
  

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 (ii) the Indenture Trustee may bid for and acquire the property offered for Sale in
connection with any public Sale thereof, and, in lieu of paying cash therefor, may make settlement for the purchase price by crediting the gross Sale price against the sum of (a) the amount that would be payable to the Holders of the Notes as a
result of such Sale in accordance with Section 5.07 hereof on the Payment Date next succeeding the date of such Sale and (b) the expenses of the Sale and of any Proceedings in connection therewith which are reimbursable to it, without
being required to produce the Notes in order to complete any such Sale or in order for the net Sale price to be credited against such Notes, and any property so acquired by the Indenture Trustee shall be held and dealt with by it in accordance with
the provisions of this Indenture; 
 (iii) the Indenture Trustee shall execute and deliver an appropriate instrument of
conveyance transferring its interest in any portion of the Trust Estate in connection with a Sale thereof; 
 (iv) the
Indenture Trustee is hereby irrevocably appointed the agent and attorney in-fact of the Issuing Entity to transfer and convey its interest in any portion of the Trust Estate in connection with a Sale thereof, and to take all action necessary to
effect such Sale; and 
 (v) no purchaser or transferee at such a Sale shall be bound to ascertain the Indenture
Trustee’s authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. 
 (e) The Indenture Trustee shall have the right to rely on the opinion of an independent investment bank, obtained at other than its own expense for the purposes of making the determination in Section 5.17(b) above. 
 (f) The Indenture Trustee shall have the right to utilize an agent, at other than its own expense, for purposes of conducting a sale
hereunder. 
 Section 5.18. Action on Notes. The Indenture Trustee’s right to seek and recover judgment under this Indenture
shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Holders of Notes shall be
impaired by the recovery of any judgment by the Indenture Trustee against the Issuing Entity or by the levy of any execution under such judgment upon any portion of the Trust Estate. Any money or property collected by the Indenture Trustee shall be
applied in accordance with Section 5.07 hereof. 
 Section 5.19. No Recourse. The Trust Estate Granted to the Indenture Trustee
as security for the Notes serves as security only for the Notes and the Hedge Counterparties. The Noteholders shall have no recourse against the Owner Trustee, the Indenture Trustee, the Note Registrar, the Authenticating Agent, the Depositor, the
Sponsor, the Servicer or any of their respective Affiliates, or to the assets of any of the foregoing entities. 
  

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 Section 5.20. Application of the Trust Indenture Act. Pursuant to Section 316(a) of the TIA,
all provisions automatically provided for in Section 316(a) are hereby expressly excluded. 
 ARTICLE VI 
 THE INDENTURE TRUSTEE 
 Section 6.01.
Duties of Indenture Trustee. (a) If an Event of Default has occurred and is continuing of which a Responsible Officer of the Indenture Trustee has actual knowledge, the Indenture Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs. 
 (b) Except during the continuance of an Event of Default of which a Responsible Officer of the Indenture Trustee has actual knowledge:

 (i) the Indenture Trustee need perform only those duties that are expressly set forth in this Indenture and no others and
no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and 
 (ii) in the
absence of bad faith on its part, the Indenture Trustee may request and conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates, opinions, resolutions, statements, reports,
instruments or other documents furnished to the Indenture Trustee and conforming, on their faces, to the requirements of this Indenture. The Indenture Trustee shall, however, examine such certificates and opinions to determine whether they conform
on their face to the requirements of this Indenture. 
 (c) The Indenture Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful misconduct, except that: 
 (i) The duties and
obligations of the Indenture Trustee shall be determined solely by the express provisions of this Indenture, the Indenture Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this
Indenture, no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee and, in the absence of bad faith on the part of the Indenture Trustee, the Indenture Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any certificates, opinions or other documents (including, but not limited to, any reports or statements furnished by the Servicer) reasonably believed by the Indenture Trustee to
be genuine and to have been furnished by the proper party to the Indenture Trustee and which on their face, do not contradict the requirements of this Indenture; 
  

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 (ii) this paragraph (c) does not limit the effect of paragraph (a) of this
Section 6.01; 
 (iii) the Indenture Trustee shall not be liable for any error of judgment made in good faith by a
Responsible Officer, unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; 
 (iv)
the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction of the Noteholders (including directions pursuant to Sections 5.13 or 5.17 hereof) or exercising any trust or
power or remedy conferred upon the Indenture Trustee under this Indenture; and 
 (v) The Indenture Trustee shall not be
charged with knowledge of any failure by the Servicer to comply with any of its obligations under the Sale and Servicing Agreement or any breach of representations or warranties under the Sale and Servicing Agreement or any Event of Default under
the Sale and Servicing Agreement unless a Responsible Officer of the Indenture Trustee obtains actual knowledge of such failure or breach or the Indenture Trustee receives written notice of such failure or breach from the Servicer. 
 (d) [Reserved.] 
 (e) No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or
powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it under this Indenture or the other Basic Documents. 
 (f) Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to the provisions of this
Section 6.01 and to the provisions of the TIA (except where expressly excluded). 
 (g) Notwithstanding any
extinguishment of all right, title and interest of the Issuing Entity in and to the Trust Estate following an Event of Default and a consequent declaration of acceleration of the maturity of the Notes, whether such extinguishment occurs through a
Sale of the Trust Estate to another Person, the acquisition of the Trust Estate by the Indenture Trustee or otherwise, the rights, powers and duties of the Indenture Trustee with respect to the Trust Estate (or the proceeds thereof), the Noteholders
and the rights of Noteholders shall continue to be governed by the terms of this Indenture. 
 (h) Subject to the other
provisions of this Indenture and without limiting the generality of this Section 6.01, the Indenture Trustee shall have no duty (a) to see to any recording, filing, or depositing of this Indenture or any agreement referred to herein or any
financing statement or continuation statement evidencing a security interest, or to see to the maintenance of any such recording, filing or depositing or to any rerecording, refiling or redepositing of any thereof, (b) to see to any insurance,
(c) to see to the payment or discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Trust Estate from funds available in 

  

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the Payment Account, (d) to confirm or verify the contents of any reports or certificates of the Servicer delivered to the Indenture Trustee pursuant to
this Indenture believed by the Indenture trustee to be genuine and to have been signed or presented by the proper party or parties or (e) to make payments on or otherwise maintain the MI Policies. 
 Section 6.02. Notice of Default. Immediately after the occurrence of any Default known to a Responsible Officer of the Indenture Trustee, the
Indenture Trustee shall provide written notice to the Sponsor of each such Default and, within ninety (90) days after the occurrence of any Default known to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall transmit by
mail to all Holders of Notes notice of each such Default, unless such Default shall have been cured or waived; provided, however, that in no event shall the Indenture Trustee provide notice, or fail to provide notice of a Default of
which a Responsible Officer of the Indenture Trustee has actual knowledge in a manner contrary to the requirements of the Trust Indenture Act. Concurrently with the mailing of any such notice to the Holders of the Notes, the Indenture Trustee shall
transmit by mail a copy of such notice to the Rating Agencies and the Hedge Counterparties. 
 Section 6.03. Rights of Indenture
Trustee. (a) Except as otherwise provided in Section 6.01 hereof, the Indenture Trustee may rely on, and be protected in acting or refraining to act upon any document believed by it to be genuine and to have been signed or presented by
the proper Person. The Indenture Trustee need not investigate any fact or matter stated in any such document. 
 (b) Before
the Indenture Trustee acts or refrains from acting, it may require an Officer’s Certificate or an Opinion of Counsel reasonably satisfactory in form and substance to the Indenture Trustee. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on any such Officer’s Certificate or Opinion of Counsel. 
 (c) The Indenture Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. 
 (d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or
within its rights or powers. 
 (e) The Indenture Trustee shall be under no obligation to exercise any of the trusts or powers
vested in it by this Indenture or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Noteholders, pursuant to the provisions of this Indenture, unless such Noteholders
shall have offered to the Indenture Trustee reasonable security or indemnity satisfactory to it against the costs, expenses and liabilities which may be incurred therein or thereby; nothing contained herein shall, however, relieve the Indenture
Trustee of the obligation, upon the occurrence of an Event of Default of which a Responsible Officer of the Indenture Trustee shall have actual knowledge (which has not been cured), to exercise such of the rights and powers vested in it by this
Indenture, and to use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs. 
  

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 (f) The Indenture Trustee shall not be bound to make any investigation into the facts of
the matters stated in any resolution, certificate, statement, instrument, opinion, report notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do so by the Noteholders and provided further that
payment within a reasonable time to the Indenture Trustee of the costs, expenses or liabilities likely to be incurred by it in tile making of such investigation is, in the opinion of the Indenture Trustee, reasonably assured to the Indenture Trustee
by the security afforded to it by the terms of this Indenture or such other security or indemnity as the Indenture Trustee may reasonably require as a condition to taking any such action. 
 (g) The right of the Indenture Trustee to perform any discretionary act enumerated in this Indenture shall not be construed as a duty, and
the Indenture Trustee shall not be answerable for anything other than its negligence or willful misconduct in the performance of such act. 
 (h) The Indenture Trustee may consult with counsel and may rely on, and be protected in acting or refraining to act upon resulting advice or Opinions of Counsel. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on any such advice or Opinions of Counsel. 
 (i) The Indenture
Trustee shall not be required to give any bond or surety in respect of the execution of the Issuing Entity created hereby or the powers granted hereunder. 
 Section 6.04. Not Responsible for Recitals, Issuance of Notes or Mortgage Loans. The recitals contained herein and in the Notes, except, with respect to the Indenture Trustee, the certificates of authentication
on the Notes, shall be taken as the statements of the Issuing Entity, and the Owner Trustee, the Indenture Trustee and the Authenticating Agent assume no responsibility for their correctness. The Owner Trustee and the Indenture Trustee make no
representations with respect to the Trust Estate or as to the validity or sufficiency of this Indenture or of the Notes. Neither the Indenture Trustee nor the Owner Trustee shall be accountable for the use or application by the Issuing Entity of the
Notes or the proceeds thereof or any money paid to the Issuing Entity or upon a Trust Order pursuant to the provisions hereof. 
 The
Indenture Trustee shall at no time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Mortgage or any Mortgage Loan, or the recordability, sufficiency, perfection and priority of any mortgage
or the maintenance of any such perfection and priority or for or with respect to the sufficiency of the Trust Estate or its ability to generate the payments to be paid to Noteholders under this Indenture, including, without limitation: the
existence, condition and ownership of any Mortgaged Property; the existence and enforceability of any hazard insurance or primary mortgage insurance thereon; the validity of the assignment of any Mortgage Loan to the Indenture Trustee or of any
intervening assignment; the completeness of any Mortgage Loan; the performance or enforcement of any Mortgage Loan; the compliance by the Depositor, the Sponsor, Issuing Entity or Servicer with any warranty or representation made under this
Indenture, the Sale and Servicing Agreement or in any related document or the accuracy of any such warranty or representation; any investment of monies by or at the direction of the Sponsor or the Servicer or any loss resulting therefrom; the acts
or omissions of any of the Sponsor, the Servicer or any Mortgagor; any action of the 

  

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Servicer taken in the name of the Indenture Trustee; the failure of the Servicer to act or perform any duties acquired of it as agent of the Indenture
Trustee hereunder; or any action by the Indenture Trustee taken at the instruction of the Servicer. The Indenture Trustee shall have no responsibility for filing any financing or continuation statement in any public office at any time or otherwise
to perfect or maintain the perfection of any security interest or lien granted to it hereunder. 
 Section 6.05. May Hold Notes. The
Indenture Trustee, any Agent, or any other agent of the Issuing Entity, in its individual or any other capacity, may become the owner or pledgee of Notes and, subject to Sections 6.07, 6.09 and 6.12 hereof, may otherwise deal with the Issuing Entity
or any Affiliate of the Issuing Entity with the same rights it would have if it were not Indenture Trustee, Agent or such other agent. 
 Section 6.06. Money Held in Trust. Money held by the Indenture Trustee in trust hereunder need not be segregated from other funds except to the extent required by this Indenture or by law. The Indenture Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise agreed with the Issuing Entity and except to the extent of income or other gain on investments that are obligations of the Indenture Trustee, in its commercial
capacity, and income or other gain actually received by the Indenture Trustee on investments, which are obligations of others. 
 Section
6.07. Eligibility, Disqualification. Irrespective of whether this Indenture is qualified under the TIA, this Indenture shall always have an indenture trustee who satisfies the requirements of TIA Sections 310(a)(1) and 310(a)(5). The
Indenture Trustee shall always have a combined capital and surplus as stated in Section 6.08 hereof. The Indenture Trustee shall be subject to TIA Section 310(b). 
 Section 6.08. Indenture Trustee’s Capital and Surplus. The Indenture Trustee shall at all times (a)(i) have a combined capital and surplus of
at least $50,000,000, and it or its parent shall have a long-term debt rating of Baa3 or better by Moody’s, BBB or better by Standard & Poor’s and BBB or F-2 or better by Fitch and shall also have a short term rating of A-1 or
better by Standard & Poor’s; provided, however, that the Indenture Trustee’s separate capital and surplus shall at all times be at least the amount required by TIA Section 310(a)(2). If the Indenture Trustee publishes annual
reports of condition of the type described in TIA Section 310(a)(1), its combined capital and surplus for purposes of this Section 6.08 shall be as set forth in the latest such report. The Indenture Trustee shall at all times be a
corporation or association organized or doing business under the laws of a state or of the United States; authorized to exercise corporate powers and subject to supervision or examination by federal or state authority. If at any time the Indenture
Trustee shall cease to be eligible in accordance with the provisions of this Section 6.08 and TIA Section 310(a)(2), it shall resign immediately in the manner and with the effect hereinafter specified in this Article VI. 
 Section 6.09. Resignation and Removal; Appointment of Successor. (a) No resignation or removal of the Indenture Trustee and no appointment of
a successor Indenture Trustee pursuant to this Article VI shall become effective until the acceptance of appointment by the successor Indenture Trustee under Section 6.10 hereof. 
  

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 (b) The Indenture Trustee may resign at any time by giving written notice thereof to the
Issuing Entity and each Rating Agency. If an instrument of acceptance by a successor Indenture Trustee shall not have been delivered to the Indenture Trustee within thirty (30) days after the giving of such notice of resignation, the resigning
Indenture Trustee may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee. 
 (c) The Indenture Trustee may be removed at any time by Act of the Holders representing more than 50% of the Class Note Balance of the Outstanding Notes, by written notice delivered to the Indenture Trustee and to the Issuing Entity.

 (d) If at any time: 
 (i) the Indenture Trustee shall have a conflicting interest prohibited by Section 6.07 hereof and shall fail to resign or eliminate such conflicting interest in accordance with Section 6.07 hereof after
written request therefor by the Issuing Entity or by any Noteholder; or 
 (ii) the Indenture Trustee shall cease to be
eligible under Section 6.08 hereof or shall become incapable of acting or shall be adjudged bankrupt or insolvent, or a receiver of the Indenture Trustee or of its property shall be appointed, or any public officer shall take charge or control
of the Indenture Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation; 
 then, in any such case,
(x) the Owner Trustee, on behalf of the Issuing Entity, by a Trust Order, may remove the Indenture Trustee, and the Owner Trustee, on behalf of the Issuing Entity, by a Trust Order, shall join with the Indenture Trustee in the execution,
delivery and performance of all instruments and agreements necessary or proper to appoint a successor Indenture Trustee to vest in such successor Indenture Trustee any property, title, right or power deemed necessary or desirable, subject to the
other provisions of this Indenture; provided, however, if the Owner Trustee, on behalf of the Issuing Entity, does not join in such appointment within thirty (30) days after the receipt by it of a request to do so, (either by reason of
resignation or removal) or in case an Event of Default has occurred and is continuing, the Indenture Trustee may petition a court of competent jurisdiction to make such appointment, or (y) subject to Section 5.15 hereof, and, in the case
of a conflicting interest as described in clause (i) above, unless the Indenture Trustee’s duty to resign has been stayed as provided in TIA Section 310(b), any Noteholder who has been a bona fide Holder of a Note for at least six
(6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee. 
 (e) If the Indenture Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of the
Indenture Trustee for any cause, the Servicer, on behalf of the Issuing Entity, by a Trust Order, shall promptly, appoint a successor Indenture Trustee reasonably acceptable to the Sponsor. 
 (f) The Servicer, on behalf of the Issuing Entity, shall give notice of each resignation and each removal of the Indenture Trustee and
each appointment of a successor Indenture Trustee to the Holders of Notes and the Hedge Counterparties. Each notice shall include the name of the successor Indenture Trustee and the address of its Corporate Trust Office. 
  

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 Section 6.10. Acceptance of Appointment by Successor Indenture Trustee. Every successor Indenture
Trustee appointed hereunder shall execute, acknowledge and deliver to the Issuing Entity and the retiring Indenture Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Indenture Trustee shall
become effective and such successor Indenture Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Indenture Trustee. Notwithstanding the foregoing, upon a Trust
Request of the Owner Trustee, on behalf of the Issuing Entity, or the successor Indenture Trustee, such retiring Indenture Trustee shall, upon payment of its charges and any fees, expenses or other amounts owing the Indenture trustee, execute and
deliver an instrument transferring to such successor Indenture Trustee all the rights, powers and trusts of the retiring Indenture Trustee, and shall duly assign, transfer and deliver to such successor Indenture Trustee all property and money held
by such retiring Indenture Trustee hereunder. Upon a written request of any such successor Indenture Trustee, the Owner Trustee, on behalf of the Issuing Entity, shall execute and deliver any and all instruments for more fully and certainly vesting
in and confirming to such successor Indenture Trustee all such rights, powers and trusts. 
 No successor Indenture Trustee shall accept its
appointment unless at the time of such acceptance such successor Indenture Trustee shall be qualified and eligible under this Article VI. 
 Section 6.11. Merger, Conversion, Consolidation or Succession to Business of Indenture Trustee. Any corporation or banking association into which the Indenture Trustee may be merged or converted or with which it may be consolidated,
or any corporation or banking association resulting from any merger, conversion or consolidation to which the Indenture Trustee shall be a party, or any corporation or banking association succeeding to all or substantially all of the corporate trust
business of the Indenture Trustee, shall be the successor of the Indenture Trustee hereunder, provided, that such corporation or banking association shall be otherwise qualified and eligible under this Article VI, without the execution or filing of
any paper or any further act on the part of any of the parties hereto. In case any Notes have been authenticated, but not delivered, by the Indenture Trustee then in office, any successor by merger, conversion or consolidation to such authenticating
Indenture Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Indenture Trustee had authenticated such Notes. 
 Section 6.12. Preferential Collection of Claims Against Issuing Entity. The Indenture Trustee (and any co-trustee or separate trustee) shall be
subject to TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b), and an Indenture Trustee (and any co-trustee or separate trustee) who has resigned or been removed shall be subject to TIA Section 311(a)
to the extent indicated. 
 Section 6.13. Co-Indenture Trustees and Separate Indenture Trustees. At any time or times, for the purpose
of meeting the legal requirements of the TIA or of any jurisdiction in which any of the Trust Estate may at the time be located, the Indenture Trustee shall have power and shall execute and deliver all instruments necessary to appoint one or more
Persons approved 

  

 38 

 
by the Indenture Trustee either to act as co-trustee, jointly with the Indenture Trustee, of all or any part of the Trust Estate, or to act as separate
trustee of any such property, in either case with such powers as may be provided in the instrument of appointment, and to vest in such Person or Persons in the capacity aforesaid, any property, title, right or power deemed necessary or desirable,
subject to the other provisions of this Section 6.13. All fees and expenses of any co-trustee or separate trustee shall be payable by the Issuing Entity. The Indenture Trustee hereby appoints J.P. Morgan Trust Company, National Association as
Co-Trustee hereunder solely for the purpose of holding the MI Policies. The Servicer shall retain physical possession of such MI Policies as agent to the Co-Trustee. 
 Should any written instrument from the Issuing Entity be required by any co-trustee or separate trustee so appointed for more fully confirming to such co-trustee or separate trustee such property, title, right or
power, any and all such instruments shall, on written request, be executed, acknowledged and delivered by the Owner Trustee, on behalf of the Issuing Entity. 
 Every co-trustee or separate trustee shall, to the extent permitted by law, but to such extent only, be appointed subject to the following terms: 
 (a) The Notes shall be authenticated and delivered and all rights, powers, duties and obligations hereunder in respect of the custody of
securities, cash and other personal property held by, or required to be deposited or pledged with, the Indenture Trustee hereunder, shall be exercised, solely by the Indenture Trustee. 
 (b) As required by TIA Section 310(a)(3), the rights, powers, duties and obligations hereby conferred or imposed upon the Indenture
Trustee in respect of any property covered by such appointment shall be conferred or imposed upon and exercised or performed by the Indenture Trustee or by the Indenture Trustee and such co-trustee or separate trustee jointly, as shall be provided
in the instrument appointing such co-trustee or separate trustee, except to the extent that under any law of any jurisdiction in which any particular act is to be performed, the Indenture Trustee shall be incompetent or unqualified to perform such
act, in which event such rights, powers, duties and obligations shall be exercised and performed by such co-trustee or separate trustee. 
 (c) The Indenture Trustee at any time may accept the resignation of or remove any co-trustee or separate trustee appointed under this Section 6.13. A successor to any co-trustee or separate trustee so resigned or
removed may be appointed in the manner provided in this Section 6.13. 
 (d) The Indenture Trustee shall not be liable by
reason of any act or omission of a co-trustee or separate trustee appointed by the Indenture Trustee with due care. No co-trustee or separate trustee hereunder shall be personally liable by reason of any act or omission of the Indenture Trustee, or
any other such trustee hereunder. 
 (e) Any Act of Noteholders delivered to the Indenture Trustee shall be deemed to have
been delivered to each such co-trustee and separate trustee. 
 (f) Any co-trustee or separate trustee appointed hereunder
shall be afforded the same rights, protections and immunities as the Indenture Trustee. 
  

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 Section 6.14. Authenticating Agents. The Owner Trustee, acting at the direction of the
Certificateholders, shall appoint an Authenticating Agent with power to act on the Issuing Entity’s behalf, subject to the direction of the Certificateholders, in the authentication and delivery of the Notes designated for such authentication
and, containing provisions therein for such authentication (unless the Owner Trustee, acting at the direction of the Certificateholders, has made other arrangements, satisfactory to the Indenture Trustee and such Authenticating Agent, for notation
on the Notes of the authority of an Authenticating Agent appointed after the initial authentication and delivery of such Notes) in connection with transfers and exchanges under Section 2.06 hereof, as fully to all intents and purposes as though
the Authenticating Agent had been expressly authorized by Section 2.06 hereof to authenticate and deliver Notes. For all purposes of this Indenture (other than in connection with the authentication and delivery of Notes pursuant to Sections
2.05 and 2.12 hereof in connection with their initial issuance), the authentication and delivery of Notes by the Authenticating Agent pursuant to this Section 6.14 shall be deemed to be the authentication and delivery of Notes “by the
Indenture Trustee.” Such Authenticating Agent shall at all times be a Person that both meets the requirements of Section 6.07 hereof for the Indenture Trustee hereunder and has an office for presentation of Notes in the United States of
America. The Indenture Trustee, shall initially be the Authenticating Agent and shall be the Note Registrar as provided in Section 2.06 hereof. The office from which the Indenture Trustee shall perform its duties as Note Registrar and
Authenticating Agent shall be its Corporate Trust Office. Any Authenticating Agent appointed pursuant to the terms of this Section 6.14 or pursuant to the terms of any supplemental indenture shall deliver to the Indenture Trustee as a condition
precedent to the effectiveness of such appointment an instrument accepting the trusts, duties and responsibilities of Authenticating Agent and of Note Registrar or co-Note Registrar and indemnifying the Indenture Trustee for and holding the
Indenture Trustee harmless against, any loss, liability or expense (including reasonable attorneys’ fees) incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance, administration of the Issuing
Entity or exercise of authority by such Authenticating Agent, Note Registrar or co-Note Registrar. 
 Any corporation or banking association
into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation or banking association resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party,
or any corporation or banking association succeeding to the corporate trust business of any Authenticating Agent, shall be the successor of the Authenticating Agent hereunder, if such successor corporation is otherwise eligible under this
Section 6.14, without the execution or filing of any further act on the part of the parties hereto or the Authenticating Agent or such successor corporation or banking association. 
 Any Authenticating Agent may at any time resign by giving written notice of resignation to the Issuing Entity. The Owner Trustee, acting at the direction
of the Certificateholders, may at any time terminate the agency of any Authenticating Agent by giving written notice of termination to such Authenticating Agent and the Indenture Trustee. Upon receiving such a notice of resignation or upon such a
termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.14, the Owner Trustee, acting at the direction of the Certificateholders, shall promptly appoint a successor Authenticating Agent,
shall give written notice of such appointment to the Indenture Trustee, and shall mail notice of such appointment to all Holders of Notes. 
  

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 The Indenture Trustee agrees, subject to Section 6.01(e) hereof to pay to any Authenticating Agent
from time to time reasonable compensation for its services and the Indenture Trustee shall be entitled to be reimbursed for such payments pursuant to Section 6.16 hereof. The provisions of Sections 2.09, 6.04 and 6.05 hereof shall be applicable
to any Authenticating Agent. 
 Section 6.15. Servicer to Pay Indenture Trustee’s Fees and Expenses; Indemnification. 

The Indenture Trustee shall have the right to payment from the Servicer of all amounts as set forth in Section 7.06 of the Sale and Servicing
Agreement. 
 ARTICLE VII 
 NOTEHOLDERS’ LISTS AND REPORTS 
 Section 7.01. Note Registrar to Furnish Indenture Trustee Names and Addresses of
Noteholders. (a) The Note Registrar shall furnish or cause to be furnished to the Indenture Trustee (i) semiannually, not less than forty-five (45) days nor more than sixty (60) days after the Payment Date occurring closest
to six (6) months after the Closing Date and each Payment Date occurring at six (6) month intervals thereafter, all information in the possession or control of the Note Registrar, in such form as the Indenture Trustee may reasonably
require, as to names and addresses of the Noteholders, and (ii) at such other times, as the Indenture Trustee may request in writing, within thirty (30) days after receipt by the Note Registrar of any such request, a list of similar form
and content as of a date not more than ten (10) days prior to the time such list is furnished; provided, however, that so long as the Indenture Trustee is the Note Registrar, no such list shall be required to be furnished. 
 (b) In addition to furnishing to the Indenture Trustee the Noteholder lists, if any, required under paragraph (a) of this
Section 7.01, the Note Registrar shall also furnish all Noteholder lists, if any, required under Section 3.03 hereof at the times required by such Section 3.03. 
 Section 7.02. Preservation of Information: Communications to Noteholders. (a) The Indenture Trustee shall preserve, in as current a form as
is reasonably practicable, the names and addresses of the Holders of Notes contained in the most recent list, if any, furnished to the Indenture Trustee as provided in Section 7.01 hereof and the names and addresses of the Holders of Notes
received by the Indenture Trustee in its capacity as Note Registrar. The Indenture Trustee may destroy any list furnished to it as provided in Section 7.01 hereof upon receipt of a new list so furnished. 
 (b) Noteholders may communicate pursuant to TIA Section 312(b) with other Noteholders with respect to their rights under this
Indenture or under the Notes. To the extent that the Notes are Book Entry, upon the request of such Noteholders, the Indenture Trustee will obtain for such Noteholders at such Noteholders’ expense, the names and addresses of the Clearing Agency
Participants needed to allow such Noteholders to communicate. 
  

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 (c) The Issuing Entity, the Indenture Trustee and the Note Registrar shall have the
protection of TIA Section 312(c). 
 Section 7.03. Reports by Indenture Trustee. 
 (a) Within sixty (60) days after December 31 of each year (the “reporting date”), commencing December 31, 2006,
(i) the Indenture Trustee shall, if required by TIA Section 313(a), mail to all Noteholders described in TIA Section 313(c) a brief report dated as of such reporting date that complies with TIA Section 313(a); (ii) the
Indenture Trustee shall, to the extent not set forth in the Indenture Trustee’s Remittance Report pursuant to Section 2.09 hereof, and, the Indenture Trustee shall also mail to Holders of Notes described in TIA Section 313(c) any
reports required by TIA Section 313(b)(1). For purposes of the information required to be included in any such reports pursuant to TIA Sections 313(a)(2), 313(b)(1) (if applicable), or 313(b)(2), the principal amount of indenture securities
outstanding on the date as of which such information is provided shall be the Class Note Balance of the then Outstanding Notes covered by the report. 
 A copy of each report at the time of its mailing to Noteholders will be filed by the Indenture Trustee with the Commission and each stock exchange, if any, on which the Notes are listed. The Issuing Entity will notify
the Indenture Trustee if and when the Notes are listed on any stock exchange. 
 (b) If required under Regulation AB, the
Indenture Trustee will: 
 (i) deliver to the Depositor and the Servicer, a report, of the preceding calendar year, on its
assessment of compliance with the minimum servicing criteria during the preceding calendar year, including disclosure of any material instance of non-compliance identified by the Indenture Trustee, as required by Rule 13a-18 and 15d-18 of the
Exchange Act and Item 1122 of Regulation AB under the Securities Act. The applicable items with respect to this assessment of compliance are set forth on Exhibit H to the Sale and Servicing Agreement. 
 (ii) cause a firm of registered public accountants that is qualified and independent within the meaning of Rule 2-01 of Regulation S-X
under the Securities Act to deliver to the Depositor and the Servicer an attestation report that satisfies the requirements of Rule 13a-18 or Rule 15d-18 under the Exchange Act, as applicable, on the assessment of compliance with servicing criteria
with respect to the prior calendar year. Such attestation report will be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act. The firm may render other services to the Indenture Trustee,
but the firm must be qualified and independent within the meaning of Rule 2-01 of Regulation S-X under the Securities Act. 
 (iii) The reports referred to in this Section 7.03(b) will be delivered on or before March 15 of each year in which a Form 10-K is required to be filed, beginning March 15, 2007. 
 (c) The Indenture Trustee will furnish to the Depositor and the Servicer, in writing, the necessary disclosure, if any, describing the
legal proceedings required to be 

  

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disclosed under Item 1117 of Regulation AB with respect to the Indenture Trustee, for inclusion in reports, so long as such reports are required to be
filed, pursuant to the Exchange Act. 
 ARTICLE VIII 
 ACCOUNTS, PAYMENTS OF INTEREST AND PRINCIPAL, AND RELEASES 
 Section 8.01. Accounts; Investment;
Collection of Moneys. (a) The Issuing Entity hereby directs the Indenture Trustee to establish, on or before the Closing Date, an Eligible Account that shall be the “Payment Account” for the Notes. The Indenture Trustee shall
promptly upon receipt, deposit in the Payment Account and retain therein the Interest Remittance Amount and the Principal Remittance Amount remitted on each Servicer Remittance Date to the Indenture Trustee by the Servicer and any other funds from
any deposits to be made by the Servicer pursuant to the Sale and Servicing Agreement. 
 All amounts that are deposited from time to time in
the Payment Account are subject to withdrawal by the Indenture Trustee for the purposes set forth in Section 8.01 hereof. All funds withdrawn from the Payment Account pursuant to this Section 8.01 for the purpose of making payments to the
Holders of Notes shall be applied in accordance with this Section 8.01 and Section 3.03 hereof. 
 Any Net Swap Payment received
from the Swap Counterparties shall be allocated by the Indenture Trustee into two amounts relating to Group I and Group II, pro rata based upon the principal balances of the Group I Mortgage Loans and the Group II Mortgage Loans, respectively, with
respect to the related Payment Date, as set forth on Schedule 2 hereto. These two amounts are referred to herein as the “Group I Swap Payment” and the “Group II Swap Payment.” Similarly, any payment to be made to
the Swap Counterparties pursuant to Section 8.01(b)(i) below shall be allocated between Group I and Group II pro rata, based on principal balances of the Group I Mortgage Loans and the Group II Mortgage Loans, respectively, with respect to the
related Payment Date; provided that, if there are insufficient funds in either group to pay the Swap Counterparties pursuant to Section 8.01(b) below, then the remaining amount that would have been payable on such Payment Date shall be paid
from amounts relating to the other group. The amount to be paid or received by the Issuing Entity that relates to Group I is referred to as the “Group I Swap Payment” and the amount to be paid or received by the Issuing Entity that
relates to Group II is referred to as the “Group II Swap Payment.” 
 Any Cap Payment received from the Cap Counterparty
shall be allocated by the Indenture Trustee into two amounts relating to Group I and Group II, pro rata based upon the principal balances of the Group I Mortgage Loans and the Group II Mortgage Loans, respectively, with respect to the related
Payment Date, as set forth on Schedule 3 hereto. These two amounts are referred to herein as the “Group I Cap Payment” and the “Group II Cap Payment.” Similarly, any payment to be made to the Cap Counterparty
pursuant to Section 8.01(b)(i) below shall be allocated between Group I and Group II pro rata, based on the principal balances of the Group I Mortgage Loans and the Group II Mortgage Loans, respectively, with respect to the related Payment
Date; provided that, if there are insufficient funds in either group 

  

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to pay the Cap Counterparty pursuant to Section 8.01(b) below, then the remaining amount that would have been payable on such Payment Date shall be paid
from amounts relating to the other group. The amount to be paid or received by the Issuing Entity that relates to Group I is referred to as the “Group I Cap Payment” and the amount to be paid or received by the Issuing Entity that
relates to Group II is referred to as the “Group II Cap Payment.” 
 (b) On each Payment Date, the Indenture
Trustee will apply the Available Funds to pay the Custodian Fees, the Owner Trustee Fees and the Indenture Trustee Fees for such Payment Date and pay any Prepayment Charges received to the Class C Certificateholder. On each Payment Date, funds will
be applied in the following order of priority: 
 (i) From remaining Available Funds, to the Hedge Counterparties all Net Swap
Payments and Cap Amounts plus any termination payments due to a Hedge Counterparty other than Defaulted Hedge Termination Payments paid from the Available Funds, 
 (ii) Concurrently, 
 (x) from the Distributable Interest Amount related to the Group I Mortgage Loans, to the Class A-1A Notes, its Accrued Note Interest, and any unpaid Accrued Note Interest from prior Payment Dates; and 
 (y) from the Distributable Interest Amount related to the Group II Mortgage Loans, concurrently to the Class A-2A, Class A-2B,
Class A-2C and Class A-2D Notes, their Accrued Note Interest and any unpaid Accrued Note Interest from prior Payment Dates allocated pro rata based on their entitlement to those amounts, 
 provided, that if the Distributable Interest Amount for either Group of Mortgage Loans is insufficient to make the related payments set
forth in clause (x) or (y) above, as applicable, any Distributable Interest Amount relating to the other group of Mortgage Loans remaining after making the related payments set forth in clause (x) or (y) above, as applicable,
will be available to cover that shortfall; and 
 (iii) from any remaining Distributable Interest Amount, to the Class M
Notes, sequentially, in ascending numerical order, the Accrued Note Interest for each such class. 
 (c) The Principal
Distribution Amount will be paid from the amount on deposit in the Payment Account (after making the payments set forth in paragraph (b) above) on each Payment Date as follows: 
 A. On each Payment Date (a) prior to the Crossover Date or (b) with respect to which a Trigger Event is in effect, the Principal Distribution
Amount will be applied in the following order of priority; 
 (i) first, concurrently, with equal priority of payment,

  

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 (a) payable from the Group I Principal Distribution Amount, to the Class A-1A Notes, until its
Class Note Balance has been reduced to zero; and 
 (b) payable from the Group II Principal Distribution Amount, to the Class A-2A,
Class A-2B, Class A-2C and Class A-2D Notes, sequentially, in that order, until their respective Class Note Balances have been reduced to zero; 
 (ii) second, 
 (a) if the
Class Note Balances of the Class A-1A Notes have been reduced to zero, then sequentially to the Class A-2A, Class A-2B, Class A-2C and Class A-2D Notes, in that order as described above, the amount of any remaining Group I
Principal Distribution Amount until the Class Note Balances of the Class A-2 Notes have been reduced to zero; 
 (b) if the Class Note
Balances of the Class A-2A, Class A-2B, Class A-2C and Class A-2D Notes have been reduced to zero, then to the Class A-1A Notes, the amount of any remaining Group II Principal Distribution Amount until the Class Note Balance
of the Class A-1A Notes has been reduced to zero; and 
 (iii) to the Class M Notes, sequentially, in ascending numerical
order, until their respective Adjusted Class Note Balances have been reduced to zero. 
 B. On each Payment Date (a) on or after the
Crossover Date and (b) with respect to which a Trigger Event is not in effect, the Principal Distribution Amount will be applied in the following order of priority in each case to the extent remaining: 
 (i) first, concurrently, with equal priority of payment: 
 (a) to the Class A-1A Notes, the lesser of the Group I Principal Distribution Amount and the Group I Senior Principal Distribution Amount, until its Class Note Balance has been reduced to zero; and 
 (b) sequentially, to the Class A-2A, Class A-2B, Class A-2C and Class A-2D Notes, in that order, the lesser of the Group II Principal
Distribution Amount and the Group II Senior Principal Distribution Amount, until their respective Class Note Balances have been reduced to zero; 
 (ii) second, 
 (a) if the Group I Principal Distribution Amount was insufficient to pay the Group I Senior
Principal Distribution Amount, then payable from the remaining Group II Principal Distribution Amount, to the Class A-1A Notes, the unpaid portion of the Group I Senior Principal Distribution Amount; 
  

 45 

 (b) if the Group II Principal Distribution Amount was insufficient to pay the Group II Senior Principal
Distribution Amount, then payable from the remaining Group I Principal Distribution Amount, to the Class A-2A, Class A-2B, Class A-2C and Class A-2D Notes, the unpaid portion of the Group II Senior Principal Distribution Amount;

 provided, further, that if on any Payment Date the aggregate principal balance of the outstanding Group II
mortgage loans is equal to or less than the aggregate Class Note Balance of the Group II Notes, then the Group II Principal Distribution Amount will be distributed to the classes of Group II Notes pro rata, based on their respective current Class
Note Balances until their Class Note Balances have been reduced to zero; 
 (iii) sequentially, to the Class M-1 Notes and the
Class M-2 Notes, in that order, the Class M-1/M-2 Principal Distribution Amount, until their Adjusted Class Note Balances have been reduced to zero, 
 (iv) to the Class M-3 Notes, the Class M-3 Principal Distribution Amount, until their Adjusted Class Note Balance has been reduced to zero, 
 (v) to the Class M-4 Notes, the Class M-4 Principal Distribution Amount, until their Adjusted Class Note Balance has been reduced to zero,

 (vi) to the Class M-5 Notes, the Class M-5 Principal Distribution Amount, until their Adjusted Class Note Balance has been
reduced to zero, 
 (vii) to the Class M-6 Notes, the Class M-6 Principal Distribution Amount, until their Adjusted Class Note
Balance has been reduced to zero, 
 (viii) to the Class M-7 Notes, the Class M-7 Principal Distribution Amount, until their
Adjusted Class Note Balance has been reduced to zero, 
 (ix) to the Class M-8 Notes, the Class M-8 Principal Distribution
Amount until their Adjusted Class Note Balance has been reduced to zero, 
 (x) to the Class M-9 Notes, the Class M-9
Principal Distribution Amount until their Adjusted Class Note Balance has been reduced to zero, 
 (xi) to the Class M-10
Notes, the Class M-10 Principal Distribution Amount until their Adjusted Class Note Balance has been reduced to zero, and 
 (xii) to the Class M-11 Notes, the Class M-11 Principal Distribution Amount until their Adjusted Class Note Balance has been reduced to zero. 
 (d) For any Payment Date, any Net Monthly Excess Cashflow to the extent not applied as part of the Extra Principal Distribution Amount will be paid as follows: 
 (i) to the classes of Class M Notes, any Allocated Realized Losses, sequentially in ascending numerical order; 
  

 46 

 (ii) to the classes of Class M Notes, any Unpaid Interest Shortfall Amounts, sequentially
in ascending numerical order; 
 (iii) to the classes of Class A Notes and Class M Notes, pro rata based on their
respective Class Note Balances in the case of the Class A Notes or the Adjusted Class Note Balances in the case of the Class M Notes, any Available Funds Cap Shortfalls (other than Available Funds Cap Shortfalls relating to Allocated Realized
Losses); 
 (iv) to the classes of Class M Notes, any Deferred Interest, sequentially in numerical order; 
 (v) to the classes of Class M Notes, any Available Funds Cap Shortfalls relating to Allocated Realized Losses, sequentially in numerical
order; 
 (vi) to the Servicer, the amount of any reimbursement of indemnification owed to it by the Issuing Entity pursuant
to Section 7.03 of the Sale and Servicing Agreement; 
 (vii) to the Hedge Counterparties, pro rata, any Defaulted
Hedge Termination Payments; 
 (viii) to the Hedge Counterparties, pro rata, the indemnity provided for in Part 5 of
the Hedge Agreement; and 
 (ix) to the trust certificates, any remaining amounts. 
 (e) The aggregate, cumulative amount of principal payments made to the holders of any Class of Notes shall not exceed the Original Class
Note Balance of the related Class. 
 (f) [Reserved.] 
 (g) So long as no Default or Event of Default shall have occurred and be continuing, amounts held in the Accounts, other than the Payment
Account, shall at the written direction of the Servicer be invested in Eligible Investments, which Eligible Investments shall mature no later than the Business Day preceding the immediately following Payment Date; provided, however, that the
Indenture Trustee shall have no obligation to invest funds deposited into the Accounts later than 12:00 p.m. (New York time) on the day of receipt. Absent written direction, all such amounts shall be held uninvested. Amounts in the Payment Account
shall be invested in Eligible Investments at the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by the Indenture Trustee uninvested. 
 All income or other gains, if any, from investment of moneys deposited in the Collection Account and the Payment Account shall be for the benefit of the
Servicer, and on or after each Payment Date, any such amounts may be released from such Accounts and paid to the Servicer, as part of its compensation hereunder. Any loss resulting from such investment of moneys deposited in the Collection Account
or the Payment Account, respectively, shall be reimbursed immediately as incurred to the related Account by the Servicer. Subject to Section 6.01 hereof 

  

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and the preceding sentence, the Servicer shall not in any way be held liable by reason of any insufficiency in the Accounts. 
 The Indenture Trustee shall not in any way be held liable by reason of any insufficiency in any Account held by the Indenture Trustee resulting from any
investment loss on any Eligible Investment included therein (except in its capacity as obligor solely to the extent that the Indenture Trustee is the obligor and has defaulted thereon). 
 In order to comply with its duties under the U.S.A. Patriot Act of 2001, the Indenture Trustee may obtain and verify certain information and
documentation from the other party to this Indenture including, but not limited to, such party’s name, address, and other identifying information. 
 (h) Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other
intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture. The Indenture Trustee shall hold all such money and property received by it as part of the Trust Estate and shall apply it as
provided in this Indenture. 
 (i) In the event that a Swap Counterparty or Cap Counterparty elects to post collateral as
provided in the related Swap Agreement or Cap Agreement, the Indenture Trustee shall establish and maintain an Eligible Account with respect to the related Swap Agreement or Cap Agreement (each, a “Hedge Collateral Account”) for the
benefit of such Swap Counterparty or Cap Counterparty, as applicable, and the Noteholders, as their interests may appear, into which such collateral shall be deposited. The Indenture Trustee may or shall (as indicated) make withdrawals from the
related Hedge Collateral Account for the purposes of (i) entering into a substitute swap agreement or cap agreement, (ii) funding the amount of any payment due to be made by such Swap Counterparty or Cap Counterparty under the related Swap
Agreement or Cap Agreement, as applicable, following the failure by such Swap Counterparty or Cap Counterparty to make that payment or (iii) as permitted pursuant to the related Swap Agreement, Cap Agreement or this Agreement. The Indenture
Trustee shall make withdrawals from the related Hedge Collateral Account and transfer the collateral (i) as required of the Indenture Trustee pursuant to the related Swap Agreement or Cap Agreement or (ii) if the circumstances which
required the posting of collateral no longer exist; and to the extent necessary to perform such obligation, the Indenture Trustee is required to liquidate any investments held in such Hedge Collateral Account. In the event that additional collateral
is required to be posted by a Swap Counterparty or Cap Counterparty under the related Swap Agreement or Cap Agreement, as applicable, the Indenture Trustee, solely at the direction of the Sponsor, shall promptly make a demand on such Swap
Counterparty or Cap Counterparty to post such additional collateral. To the extent cash makes up all or any portion of the collateral in a Hedge Collateral Account, such cash shall be invested in Eligible Investments in accordance with the related
Swap Agreement or Cap Agreement. Such funds shall be invested at the written direction of the Servicer, or if the Servicer does not provide such written instructions such funds shall be retained by the Indenture Trustee uninvested. Any and all
interest generated by such investment shall be transferred to the related Swap Counterparty or Cap Counterparty as provided in the related Swap Agreement or Cap Agreement, as applicable, or where unspecified, on each Payment Date. In connection with

  

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the maintenance and administration of a Hedge Collateral Account, the Indenture Trustee may request and rely on written instructions from the Servicer, which
the Servicer hereby agrees to provide, with respect to the maintenance and administration of such account. For the avoidance of doubt, the Indenture Trustee shall not have any right to apply any amounts or assets in any Hedge Collateral Account
except in accordance with the enforcement and realization of its security interest pursuant to the related Swap Agreement or Cap Agreement or otherwise in accordance with the related Swap Agreement or Cap Agreement. 
 (j) The Indenture Trustee may designate an agent to maintain any Hedge Collateral Account, provided that the following conditions are
satisfied: (i) the agent’s long-term unsubordinated debt is rated at least “BBB+” by S&P and at least “Baa1” by Moody’s and (ii) the total assets of the agent shall exceed $25,000,000. Under such
circumstances, all references to the Indenture Trustee in this subsection (f) shall be to the Indenture Trustee’s agent appointed pursuant to this paragraph. 
 Section 8.02. Allocation of Realized Losses. 
 (a) All Realized Losses on the Mortgage
Loans will be allocated on each Payment Date, sequentially as follows: first to Net Monthly Excess CashFlow and second in reduction of the Overcollateralization Amount. Following the reduction of the Overcollateralization Amount to zero, all
allocable Realized Losses will be allocated in reverse sequential order, first to the Class M-11 Notes, second to the Class M-10 Notes, third to the Class M-9 Notes, fourth to the Class M-8 Notes, fifth to the Class M-7 Notes, sixth to the Class M-6
Notes, seventh to the Class M-5 Notes, eighth to the Class M-4 Notes, ninth to the Class M-3 Notes, tenth to the Class M-2 Notes, eleventh to the Class M-1 Notes. Although losses will be allocated to the Class M Notes, the Class Note Balances
thereof will not be written down. However, the interest that accrues on the portion of the Class Note Balance equal to the related Allocated Loss Amount will be deferred and will only be paid to the extent funds are available therefor in the
priority described herein. 
 (b) Subsequent Recoveries will count as additional Liquidation Proceeds and be paid on the
related Payment Date pursuant to Section 8.01(c) hereof. 
 Section 8.03. Withholding Taxes. In the event that any withholding
tax is imposed under federal, state, or local law on the Issuing Entity’s payment (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to such Certificateholder in accordance with this
Section 6.02. The Indenture Trustee, on behalf of the Owner Trustee, is hereby authorized and directed to retain in the Payment Account from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax
that is legally owed by the Issuing Entity (but such authorization shall not prevent the Indenture Trustee from contesting any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such
proceedings). The Depositor will provide the Indenture Trustee with a statement indicating the amount of any such withholding tax. The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to
such Certificateholder at the time it is withheld by the Indenture Trustee and remitted by the Indenture Trustee to the appropriate taxing authority from the Payment Account. If there is a possibility that withholding tax is payable with respect to
a 

  

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distribution (such as a distribution to a Certificateholder who is a Non-U.S. Person), the Indenture Trustee may in its sole discretion withhold such amounts
in accordance with this paragraph. In the event that a Certificateholder wishes to apply for a refund of any such withholding tax, the Owner Trustee and the Indenture Trustee shall reasonably cooperate with such Certificateholder in making such
claim so long as such Certificateholder agrees in writing to reimburse the Owner Trustee for any out-of-pocket expenses incurred. 
 Section
8.04. General Provisions Regarding the Payment Account and Mortgage Loans. (a) The Payment Account shall relate solely to the Notes, Eligible Investments and other property securing the Notes and the obligations of the Hedge Agreements.
Funds and other property in the Payment Account shall not be commingled with any other moneys or property of the Issuing Entity or any Affiliate thereof. Notwithstanding the foregoing, the Indenture Trustee may hold any funds or other property
received or held by it as part of a Payment Account in collective accounts maintained by it in the normal course of its business and containing funds or property held by it for other Persons (which may include the Issuing Entity or an Affiliate);
provided, that such accounts are under the sole control of the Indenture Trustee and the Indenture Trustee maintains adequate records indicating the ownership of all such funds or property and the portions thereof held for credit to the Payment
Account. 
 (b) If any amounts are needed for payment from the Payment Account and sufficient uninvested funds are not
available therein to make such payment, the Indenture Trustee shall cause to be sold or otherwise converted to cash, to the extent available, a sufficient amount of the investments in the Payment Account. 
 (c) The Indenture Trustee shall, at all times while any Notes are Outstanding, maintain in its possession, or in the possession of an
agent whose actions with respect to such items are under the sole control of the Indenture Trustee, all certificates or other instruments, if any, evidencing any investment of funds in the Payment Account. The Indenture Trustee shall relinquish
possession of such items, or direct its agent to do so, only for purposes of collecting the final payment receivable on such investment or certificate or, in connection with the sale of any investment held in the Payment Account, against delivery of
the amount receivable in connection with any sale. 
 (d) The Servicer shall not direct the Indenture Trustee to invest any
part of the Trust Estate in Eligible Investments that constitute uncertificated securities (as defined in Section 8-102 of the Uniform Commercial Code, as enacted in the relevant jurisdiction) unless it has delivered an Opinion of Counsel
addressed to the Indenture Trustee and reasonably satisfactory in form and substance to the Indenture Trustee setting forth, with respect to each type of security for which authority to invest is being sought, the procedures that must be followed to
maintain the lien and security interest created by this Indenture with respect to the Trust Estate. 
 (e) With respect to any
portion of the Trust Estate invested in Eligible Investments, the Indenture Trustee acknowledges and agrees that: 
 (i) any
Eligible Investment that is held in a deposit account shall be held solely in an Eligible Account; and each such Eligible Account shall be subject to the sole and exclusive dominion, custody and control of the Indenture Trustee; and, without 

  

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limitation on the foregoing, the Indenture Trustee shall have sole signature authority with respect thereto; 
 (ii) any Eligible Investment that constitutes Physical Property shall be delivered to the Indenture Trustee in accordance with paragraph
(a) and/or (b) of the definition of “Delivery,” as applicable, and shall be held, pending maturity or disposition, solely by the Indenture Trustee or a securities intermediary (as such term is defined in Section 8-102(a)(14)
of the Uniform Commercial Code) acting solely for the Indenture Trustee; and 
 (iii) any Eligible Investment that is a
book-entry security held through the Federal Reserve System pursuant to federal book-entry regulations shall be delivered in accordance with paragraph (c) of the definition of “Delivery” and shall be maintained by the Indenture
Trustee, pending maturity or disposition, through continued book-entry registration of such Eligible Investment as described in such paragraph. 
 Section 8.05. Releases of Deleted Mortgage Loans. Upon notice or discovery by a Responsible Officer of the Indenture Trustee that any of the representations or warranties of the Sponsor set forth in Section 4.01 of the Sale and
Servicing Agreement was materially incorrect or otherwise misleading with respect to any Mortgage Loan as of the time made, the Indenture Trustee shall direct the Sponsor to either cure, repurchase or substitute for such Mortgage Loan as provided in
Section 4.02 of the Sale and Servicing Agreement. Upon any purchase of or substitution for a Deleted Mortgage Loan by the Sponsor in accordance with Section 2.06 or Section 4.02 of the Sale and Servicing Agreement, the Custodian shall
deliver the Mortgage File relating to such Deleted Mortgage Loan to the Sponsor, and the Issuing Entity and the Indenture Trustee and the Custodian shall execute such instruments of transfer as are necessary to convey title to such Deleted Mortgage
Loan to the Sponsor from the lien of this Indenture. Nothing in this Section 8.05 should be construed to obligate the Indenture Trustee to actively monitor the correctness or accuracy of the representations and warranties of the Sponsor.

 Section 8.06. Reports by Indenture Trustee to Noteholders; Access to Certain Information. On each Payment Date, the Indenture
Trustee, shall make available the written reports required by the first paragraph of Section 2.09 to Noteholders of record as of the related Record Date (including the Clearing Agency, if any) and the Hedge Counterparties. The Indenture Trustee
will make available the Indenture Trustee’s Remittance Report (and, at its option, any additional files containing the same information in an alternative format) to any interested person via the Indenture Trustee’s internet website. The
Indenture Trustee’s internet website shall initially be located at https://www.jpmorgan.com/sfr and assistance in using the website can be obtained by calling the Indenture Trustee’s investor relations desk at 1-877-722-1095. The Indenture
Trustee shall have the right to alter the manner in which it provides its Indenture Trustee’s Remittance Reports to Noteholders and the Hedge Counterparties upon notice to Noteholders and the Hedge Counterparties in the manner in which such
Indenture Trustee’s Remittance Reports are then being provided. 
 The Indenture Trustee shall make available at its Corporate Trust
Office, during normal business hours, for review by any Noteholder or designees of the Issuing Entity, originals or copies of the following items: (a) the Indenture and any amendments thereto, (b) all Indenture 

  

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Trustee’s Remittance Reports and other reports delivered since the Closing Date pursuant to Section 2.09 hereof, (c) any Officers’
Certificates delivered to the Indenture Trustee since the Closing Date as described in the Indenture and (d) any Accountants’ reports delivered to the Indenture Trustee since the Closing Date as required under the Sale and Servicing
Agreement. Copies of any and all of the foregoing items will be available from the Indenture Trustee upon written request to the Indenture Trustee’s Corporate Trust Office; however, the Indenture Trustee will be permitted to require payment of
a sum sufficient to cover the reasonable costs and expenses of providing such copies and shall not be required to provide such copies without reasonable assurances that such sum will be paid. 
 Section 8.07. Release of Trust Estate. The Indenture Trustee or the Custodian shall, at such time as there are no Notes Outstanding and no amounts
are owing to the Hedge Counterparties, as confirmed to the Indenture Trustee in writing, shall release all of the Trust Estate to the Issuing Entity (other than any cash held for the payment of the Notes pursuant to Section 3.03 or 4.02 hereof
and amounts due to the Indenture Trustee hereunder). 
 Section 8.08. Amendment to Sale and Servicing Agreement. The Indenture Trustee
may, without the consent of any Holder or any Hedge Counterparty, enter into or consent to any amendment or supplement to the Sale and Servicing Agreement for the purpose of increasing the obligations or duties of any party other than the Indenture
Trustee, the Hedge Counterparties or the Holders of the Notes. The Indenture Trustee shall not enter into or consent to any such supplement or amendment unless the Indenture Trustee receives (i) an Opinion of Counsel that the position of the
Holders would not be materially adversely affected or written confirmation of satisfaction of the Rating Agency Condition has been delivered to it and (ii) an Opinion of Counsel experienced in federal income tax matters that such amendment or
supplement will not prevent the Notes from being characterized as debt for United States federal income tax purposes and will not cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes. The Indenture Trustee
may in its discretion decline to enter into any such supplement or amendment if its own rights, duties or immunities would be adversely affected. Prior to entering into any supplement or amendment an Opinion of Counsel, accompanied by copies of any
instruments involved, shall be delivered to the Indenture Trustee (upon which it may conclusively rely) to the effect that such amendment or supplement is permitted and authorized by this Indenture and/or the Sale and Servicing Agreement, setting
forth the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with. 
 Section 8.09. Servicer as Agent. In order to facilitate the servicing of the Mortgage Loans by the Servicer of such Mortgage Loans, the Servicer
of the Mortgage Loans has been appointed by the Issuing Entity to retain, in accordance with the provisions of the Sale and Servicing Agreement and this Indenture, all Servicer Remittance Amounts on such Mortgage Loans prior to their deposit into
the Payment Account on or prior to the related Servicer Remittance Date. 
 Section 8.10. Termination of Servicer. In the event of the
occurrence of a Servicing Default specified in Section 8.01 of the Sale and Servicing Agreement, the Indenture Trustee may, and, upon the request of the Holders of Notes representing more than 50% of the Class Note Balance of the Outstanding
Notes, shall (or as otherwise provided in the Sale and Servicing 

  

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Agreement), terminate the Servicer as provided in Section 7.01 of the Sale and Servicing Agreement. If the Indenture Trustee terminates the Servicer,
the Indenture Trustee as successor servicer shall, pursuant to Section 8.02 of the Sale and Servicing Agreement, assume the duties of the Servicer or the Indenture Trustee shall appoint or petition a court and appoint a successor servicer
acceptable to the Rating Agencies and meeting the requirements set forth in the Sale and Servicing Agreement and shall provide notice to the Hedge Counterparties of such appointment. 
 ARTICLE IX 
 SUPPLEMENTAL INDENTURES 
 Section 9.01. Supplemental Indentures Without Consent of Noteholders. Without the consent of the Holders of any Notes or the Hedge Counterparties,
the Issuing Entity and the Indenture Trustee, at any time and from time to time, may enter into one or more indenture supplemental hereto, in form satisfactory to the Indenture Trustee, for any of the following purposes: 
 (a) to correct or amplify the description of any property at any time subject to the lien of this Indenture, or better to assure, convey
and confirm unto the Indenture Trustee any property subject or required to be subjected to the lien of this Indenture, or to subject to the lien of this Indenture additional property; 
 (b) to add to the conditions, limitations and restrictions on the authorized amount, terms and purposes of the issuance, authentication
and delivery of any Notes, as herein set forth, additional conditions, limitations and restrictions thereafter to be observed; 
 (c) to evidence the succession of another Person to the Issuing Entity to the extent permitted herein, and the assumption by any such successor of the covenants of the Issuing Entity herein and in the Notes contained; 
 (d) to add to the covenants of the Issuing Entity, for the benefit of the Holders of all Notes, or to surrender any right or power herein
conferred upon the Issuing Entity; 
 (e) to cure any ambiguity, to correct or supplement any provision herein that may be
defective or inconsistent with any other provision herein, or to amend any other provisions with respect to matters or questions arising under this Indenture, which shall not be inconsistent with the provisions of this Indenture; 
 (f) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of
this Indenture under the TIA or under any similar federal statute hereafter enacted, and to add to this Indenture such other provisions as may be expressly required by the TIA; 
 provided that such action shall not adversely affect in any material respect the interests of the Holders of the Notes or the Certificateholders or the Hedge Counterparties (unless the consent of 

  

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the Hedge Counterparties is obtained) and will not prevent the Notes from being characterized as debt for United States federal income tax purposes or cause
the Issuing Entity to be subject to an entity-level tax for federal income tax purposes; provided, that the amendment shall be deemed not to adversely affect in any material respect the interests of the Holders of the Notes and will not
prevent the Notes from being characterized as debt for United States federal income tax purposes or cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes if the Person requesting the amendment obtains either
(i) an Opinion of Counsel delivered to, but not at the expense of, the Indenture Trustee, to such effect or (ii) written confirmation of the satisfaction of the Rating Agency Condition. 
 Section 9.02. Supplemental Indentures with Consent of Noteholders. With the consent of Holders of Notes representing not less than a majority of
the Class Note Balance of all Outstanding Notes of the Classes affected thereby by Act of said Holders delivered to the Issuing Entity and the Indenture Trustee and the consent of the Hedge Counterparties (if the respective Hedge Agreements are
still outstanding, unless an Opinion of Counsel is delivered to the Indenture Trustee to the effect that the respective Hedge Agreement is not materially affected by such supplemental indenture), the Issuing Entity and the Indenture Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the
Notes under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby: 
 (a) change any Payment Date or the Final Stated Maturity Date of the Notes or, with respect to the Notes, reduce the Class Note Balance
thereof or the Interest Rate thereon, change the earliest date on which any Note may be redeemed at the option of the Sponsor, change payment where, or the coin or currency in which, any Note or any interest thereon is payable, or impair the right
to institute suit for the enforcement of the payment of any installment of interest due on any Note on or after the Final Stated Maturity Date thereof or for the enforcement of the payment of the entire remaining unpaid principal amount of any Note
on or after the Final Stated Maturity Date (or, in the case of redemption, on or after the applicable Redemption Date); 
 (b)
reduce the percentage of the Class Note Balance of the Outstanding Notes, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with
provisions of this Indenture or Defaults hereunder and their consequences provided for in this Indenture; 
 (c) modify any of
the provisions of this Section 9.02 or Sections 5.13 or 5.17(b) hereof, except to increase any percentage specified therein or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Note affected thereby; 
 (d) modify or alter the provisions of the proviso to the definition of
the term “Outstanding;” 
  

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 (e) permit the creation of any lien other than the lien of this Indenture with respect to
any part of the Trust Estate or terminate the lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Note of the security afforded by the lien of this Indenture; or 
 (f) modify any of the provisions of this Indenture in such manner as to affect the calculation of the Interest Payment Amount or Principal
Distribution Amount for any Payment Date (including the calculation of any of the individual components of such amounts) or to affect rights of the Holders of the Notes to the benefits of any provisions for the redemption of Notes contained herein.

 The Indenture Trustee may in its discretion determine whether or not any Notes would be affected by any supplemental indenture and any
such determination shall be conclusive upon the Holders of all Notes, whether theretofore or thereafter authenticated and delivered hereunder. The Indenture Trustee shall not be liable for any such determination made in good faith. 
 It shall not be necessary for any Act of Noteholders under this Section 9.02 to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof. 
 Promptly after the execution by the Issuing Entity and the
Indenture Trustee of any supplemental indenture pursuant to this Section 9.02 or Section 9.01, the Indenture Trustee shall mail to the Holders of the Notes and the Servicer shall mail to the Hedge Counterparties to which such supplemental
indenture relates a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Indenture Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of
any such supplemental indenture. 
 Section 9.03. Execution of Supplemental Indentures. In executing, or accepting the additional
trusts created by, any supplemental indenture permitted by this Article IX or the modifications thereby of the trusts created by this Indenture, the Indenture Trustee shall be entitled to receive, and shall be fully protected in relying upon,
(i) an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture and such supplemental indenture does not adversely affect the interests of the Noteholders in any material respect;
(ii) an Opinion of Counsel experienced in federal income tax matters stating that the execution of such supplemental indenture will not prevent the Notes from being characterized as debt for United States federal income tax purposes or cause
the Issuing Entity to be subject to an entity-level tax for federal income tax purposes; or (iii) written confirmation of satisfaction of the Rating Agency Condition. The Indenture Trustee may, but shall not be obligated to, enter into any such
supplemental indenture that affects the Indenture Trustee’s own rights, duties or immunities under this Indenture or otherwise. The Servicer, on behalf of the Issuing Entity, shall cause executed copies of any supplemental indentures to be
delivered to the Rating Agencies. 
 Section 9.04. Effect of Supplemental Indentures. Upon the execution of any supplemental indenture
under this Article IX, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; 

  

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and every Holder of Notes to which such supplemental indenture relates that have theretofore been or thereafter are authenticated and delivered hereunder
shall be bound thereby. 
 Section 9.05. Conformity With Trust Indenture Act. Every supplemental indenture executed pursuant to this
Article IX shall conform to the requirements of the TIA as then in effect so long as this Indenture shall then be qualified under the TIA. 
 Section 9.06. Reference in Notes to Supplemental Indentures. Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article IX may, and if required by the Indenture Trustee shall, bear a
notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Owner Trustee, acting at the direction of the Certificateholders, shall so determine, new Notes so modified as to conform, in the
opinion of the Indenture Trustee and the Owner Trustee, acting at the direction of the Certificateholders, to any such supplemental indenture may be prepared by the Servicer and executed by the Owner Trustee, acting at the direction of the
Certificateholders, on behalf of the Issuing Entity, and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Notes. 
 Section 9.07. Amendments to Governing Documents. The Indenture Trustee shall, upon a Trust Request, consent to any proposed amendment to the Issuing Entity’s governing documents, or an amendment to or waiver of any provision of
any other document relating to the Issuing Entity’s governing documents, such consent to be given without the necessity of obtaining the consent of the Holders of any Notes upon receipt by the Indenture Trustee of: 
 (a) an Officer’s Certificate, to which such proposed amendment or waiver shall be attached, stating that such attached copy is a true
copy of the proposed amendment or waiver and that all conditions precedent to such consent specified in this Section 9.07 have been satisfied; and 
 (b) written confirmation of the satisfaction of the Rating Agency Condition with respect to such proposed amendment. 
 Notwithstanding the foregoing, the Indenture Trustee may decline to consent to a proposed waiver or amendment that adversely affects its own rights, duties or immunities under this Indenture or otherwise. 

Nothing in this Section 9.07 shall be construed to require that any Person obtain the consent of the Indenture Trustee to any amendment or waiver
or any provision of any document where the making of such amendment or the giving of such waiver without obtaining the consent of the Indenture Trustee is not prohibited by this Indenture or by the terms of the document that is the subject of the
proposed amendment or waiver. 
  

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 ARTICLE X 
 REDEMPTION OF NOTES 
 Section 10.01. Redemption of Notes. (a) The Sponsor may, at its
sole cost and expense, terminate this Indenture and all the Notes then Outstanding may be redeemed in whole, but not in part, on any Redemption Date on and after the related Clean-Up Call Date at the related Termination Price. 
 (b) Any such purchase or redemption shall be accomplished by deposit by the Sponsor into the Payment Account of the related Termination
Price on the Servicer Remittance Date preceding the Redemption Date. The amounts on deposit therein shall be paid by the Indenture Trustee on such Redemption Date in accordance with the priority set forth in Section 8.01 hereof. 
 (c) [Reserved]. 
 (d) Upon the redemption of the Notes, the Mortgage Loans in the Trust Estate shall be released and delivered to the Depositor. 
 (e) Upon receipt of the written notice from the Sponsor of its election to redeem the Notes pursuant to Section 10.01 (a) hereof (which shall be provided to the Indenture Trustee at least twenty-five
(25) days prior to the Redemption Date and shall state that the Sponsor has determined that the conditions to redemption at the option of the Sponsor have been satisfied and setting forth information as may be required to accomplish such
redemption), the Indenture Trustee shall prepare and deliver to the Issuing Entity, the Sponsor and the Servicer, no later than the related Redemption Date, an Indenture Trustee’s Remittance Report. 
 Section 10.02. Form of Redemption Notice. Notice of redemption shall be given by the Indenture Trustee in the name of and at the expense of the
Issuing Entity by first class mail, postage prepaid, mailed not less than ten days prior to the Redemption Date to each Holder of Notes to be redeemed and the Hedge Counterparties, such Holders being determined as of the Record Date for such Payment
Date. 
 All notices of redemption shall state: 
 (a) the Redemption Date; 
 (b) the price at which the Notes of the related Class or Classes
will be redeemed; and 
 (c) the fact of payment in full on such Notes, the place where such Notes are to be surrendered for
final payment (which shall be the office or agency of the Issuing Entity to be maintained as provided in Section 3.02 hereof), and that no interest shall accrue on such Note for any period after the date fixed for redemption. 
  

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 Failure to give notice of redemption, or any defect therein, to any Holder of any Note selected for
redemption shall not impair or affect the validity of the redemption of any other Note. 
 Section 10.03. Notes Payable on Optional
Redemption. Notice of redemption having been given as provided in Section 10.02 hereof, the Notes to be redeemed shall, on the applicable Redemption Date, become due and payable and (unless the Issuing Entity shall default in such payment)
no interest shall accrue on such Notes for any period after such Redemption Date; provided, however, that if such payment is not made on the Redemption Date, the Class Note Balance shall, until paid, bear interest from the Redemption Date at the
applicable Interest Rate. 
 ARTICLE XI 
 MISCELLANEOUS 
 Section 11.01. Compliance Certificates and Opinions. (a) Upon any
application or request by any Person to the Indenture Trustee to take any action under any provision of this Indenture, such Person shall furnish to the Indenture Trustee an Officer’s Certificate stating that all conditions precedent, if any,
provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel, if requested by the Indenture Trustee, stating that in the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional
certificate or opinion need be furnished. 
 (b) Every certificate, opinion or letter with respect to compliance with a
condition or covenant provided for in this Indenture, including one furnished pursuant to specific requirements of this Indenture relating to a particular application or request (other than certificates provided pursuant to TIA
Section 314(a)(4)) shall include and shall be deemed to include (regardless of whether specifically stated therein) the following: 
 (i) a statement that each individual signing such certificate, opinion or letter has read such covenant or condition and the definitions herein relating thereto; 
 (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in
such certificate, opinion or letter are based; 
 (iii) a statement that, in the opinion of each such individual, he has made
such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and 
 (iv) a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with. 
  

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 (c) (i) Other than with respect to the release of any Liquidated Mortgage Loans, Mortgage
Loans that are purchased pursuant to Section 4.02 or Section 5.15 of the Sale and Servicing Agreement, or in connection with the Optional Redemption contemplated by Article X hereof, prior to the deposit of any Collateral or other property
or securities with the Indenture Trustee that is to be made the basis for the release of any Collateral or other property or securities subject to the lien of this Indenture, the Issuing Entity shall, in addition to any obligation imposed in
Section 11.01(a) or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such deposit) to
the Issuing Entity of the Collateral or other property or securities to be so deposited. 
 (ii) Whenever the Issuing Entity
is required to furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (i) above, the Issuing Entity shall also deliver to the Indenture
Trustee a certificate of a firm of independent public accountants as to the same matters, if the fair value to the Issuing Entity of the property to be so deposited and of all other such property (other than Liquidated Mortgage Loans, Mortgage Loans
that are sold pursuant to Section 4.02 or Section 5.15 of the Sale and Servicing Agreement, or Mortgage Loans to be sold in connection with the Optional Redemption contemplated by Article X hereof) made the basis of any such withdrawal or
release since the commencement of the then-current fiscal year of the Issuing Entity, as set forth in the certificates delivered pursuant to clause (i) above and this clause (ii), is 10% or more of the aggregate outstanding Class Note Balances
of the Notes, but such a certificate need not be furnished with respect to any property so deposited, if the fair value thereof to the Issuing Entity as set forth in the related Officer’s Certificate is less than $25,000 or less than 1% percent
of the aggregate outstanding Class Note Balances of the Notes. 
 (iii) Other than with respect to the release of any
Liquidated Mortgage Loans, Mortgage Loans that are purchased pursuant to Section 4.02 or Section 5.15 of the Sale and Servicing Agreement, or in connection with the Optional Redemption contemplated by Article X hereof, whenever any
property or securities are to be released from the lien of this Indenture, the Issuing Entity shall also furnish to the Indenture Trustee an Officer’s Certificate certifying or stating the opinion of each person signing such certificate as to
the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the
provisions hereof. 
 (iv) Whenever the Issuing Entity is required to furnish to the Indenture Trustee an Officer’s
Certificate certifying or stating the opinion of any signer thereof as to the matters described in clause (iii) above, the Issuing Entity shall also furnish to the Indenture Trustee an a certificate of a firm of independent public accountants
as to the same matters if the fair value of the property or securities and of all other property or securities (other than Liquidated Mortgage Loans, Mortgage Loans that are sold pursuant to Section 4.02 or Section 5.15 of the Sale and
Servicing Agreement, or Mortgage Loans to be sold in connection with the Optional Redemption contemplated by Article X hereof) released from the lien of this Indenture since the commencement of the then current calendar year, as set forth in the
certificates required by clause (iii) above and this clause (iv), equals 10% or more of the aggregate outstanding Class Note Balances of the Notes, but such certificate need not be furnished in the case of any release 

  

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of property or securities if the fair value thereof as set forth in the related Officer’s Certificate is less than $25,000 or less than 1 percent of the
then aggregate outstanding Class Note Balances of the Notes. 
 Section 11.02. Form of Documents Delivered to Indenture Trustee. In
any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters
in one or several documents. 
 Any certificate or opinion of the Issuing Entity may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any Opinion of Counsel may be based on the written opinion of other counsel, in which event such Opinion of Counsel shall be accompanied by a copy of such other counsel’s opinion and shall include a statement to
the effect that such counsel believes that such counsel and the Indenture Trustee may reasonably rely upon the opinion of such other counsel. 
 Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one
instrument. 
 Wherever in this Indenture, in connection with any application or certificate or report to the indenture Trustee, it is
provided that the Issuing Entity shall deliver any document as a condition of the reporting of such application, or as evidence of the Issuing Entity’s compliance with any term hereof, it is intended that the truth and accuracy, at the time of
the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuing Entity to have
such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee’s right to rely upon the truth and accuracy of any statement or opinion contained in
any such document as provided in Section 6.01(b)(ii) hereof. 
 Whenever in this Indenture it is provided that the absence of the
occurrence and continuation of a Default or Event of Default is a condition precedent to the taking of any action by the Indenture Trustee at the request or direction of the Issuing Entity, then, notwithstanding that the satisfaction of such
condition is a condition precedent to the Issuing Entity’s right to make such request or direction, the Indenture Trustee shall be protected in acting in accordance with such request or direction if it does not have knowledge of the occurrence
and continuation of such Default or Event of Default as provided in Section 6.01 (d) hereof. 
 Section 11.03. Acts of
Noteholders. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Noteholders may be embodied in and evidenced by one or more instruments of
substantially 

  

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similar tenor signed by such Noteholders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action
shall become effective when such instrument or instruments are delivered to the Indenture Trustee, and, where it is hereby expressly required, to the Issuing Entity. Such instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the “Act” of the Noteholders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Section 6.01 hereof) conclusive in favor of the Indenture Trustee and the Issuing Entity, if made in the manner provided in this Section 11.03. 
 (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such
execution or by the certificate of any notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Whenever such
execution is by an officer of a corporation or a member of a partnership on behalf of such corporation or partnership, such certificate or affidavit shall also constitute sufficient proof of his authority. 
 (c) The ownership of Notes shall be proved by the Note Register. 
 (d) Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Notes shall bind the
Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuing Entity in reliance thereon; whether
or not notation of such action is made upon such Notes. 
 Section 11.04. Notices, etc., to Indenture Trustee and Issuing Entity. Any
request, demands authorization, direction, notice, consent, waiver or Act of Noteholders or other documents provided or permitted by this Indenture to be made upon, given or furnished to, or filed with: 
 (a) the Indenture Trustee by any Noteholder, the Co-Trustee or by the Issuing Entity shall be made in writing and given, furnished or
filed and received by the Indenture Trustee at its Corporate Trust Office; or 
 (b) the Issuing Entity by the Indenture
Trustee, the Co-Trustee or by any Noteholder shall be sufficient for every purpose hereunder (except as provided in Section 5.01 (c) and (d)) hereof if in writing and mailed, first-class postage prepaid, to the Issuing Entity addressed to
it at NovaStar Mortgage Funding Trust, Series 2006-1, c/o Wilmington Trust Company, Rodney Square North, 1100 North Market Street, Wilmington, Delaware 19890-0001, Attention: Corporate Trust Administration, facsimile number: (302) 636-4140
(with copies to NovaStar Certificates Financing Corporation, 8140 Ward Parkway, Suite 300, Kansas City, MO 64114, Attn: Matt Kaltenrieder, facsimile number: (816) 237-7515), or at any other address previously furnished in writing to the
Indenture Trustee by the Issuing Entity. 
 (c) the Co-Trustee by the Indenture Trustee, the Issuing Entity or by any
Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class 

  

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postage prepaid, to the Co-Trustee addressed to it at J.P. Morgan Trust Company, National Association, ITS - Global Debt, 560 Mission Street, 13th Floor, San
Francisco, CA 94105, Attn: James Myers, V.P. (NovaStar Mortgage Funding Trust, Series 2006-1). 
 (d) the Sponsor by the
Indenture Trustee, the Co-Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage paid, to NovaStar Mortgage Inc., 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114,
Attention: Matt Kaltenrieder or at any other address previously furnished in writing to the Indenture Trustee by the Sponsor; or 
 (e) the Servicer by the Indenture Trustee, the Co-Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in writing and mailed, first-class, postage paid, to NovaStar Mortgage Inc., 8140 Ward Parkway, Suite 300,
Kansas City, Missouri 64114, Attention: Matt Kaltenrieder or at any other address previously furnished in writing to the Indenture Trustee by the Servicer; or 
 (f) the Depositor by the Indenture Trustee, the Co-Trustee or by any Noteholder shall be sufficient for every purpose hereunder if in
writing and mailed, first-class, postage paid, to NovaStar Certificates Financing Corporation, 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114, Attention: Matt Kaltenrieder or at any other address previously furnished in writing to the
Indenture Trustee by the Depositor; or 
 (g) in the case of The Royal Bank of Scotland plc, as Swap Counterparty: c/o RBS
Financial Markets, Level 7, 280 Bishopsgate, London, EC2M 3UR, Attention: Financial Markets Legal, Telephone: 44 207 085 5000, Facsimile: 44 207 085 8411; With a copy to: 600 Steamboat Road, Greenwich, CT 06830, Attention: Legal Department –
Derivatives Documentation, Telephone: 203 618-2531/32, Facsimile: 203 618-2533/34; in the case of Wachovia Bank, N.A., as Swap Counterparty and as Cap Counterparty: Wachovia Bank, N.A., 301 South College Street, DC-8, Charlotte, NC 28202-06000,
Attention: Bruce M. Young, Tel: (704) 383-8778, Fax: (704) 383-0575; in the case of Deutsche Bank AG, as Swap Counterparty and as Cap Counterparty: Deutsche Bank AG, Taunusanlage 12, 60262 Frankfurt, GERMANY, Attention: Legal Department,
Telex No: 411836 or 416731 or 41233, Answerback: DBF-Dor at any other address previously furnished in writing to the Indenture Trustee by the Hedge Counterparties. 
 Notices required to be given to the Rating Agencies by the Issuing Entity or the Indenture Trustee shall be in writing, personally delivered or mailed first-class postage pre-paid, to (i Moody’s Investors Service
Inc., 99 Church Street, New York, New York 10007, Attention: Shachar Gonen, (ii) Standard & Poor’s, 26 Broadway, New York, New York 10004-1064, Attention: Julia Clements and (iii) Fitch Ratings, One State Street Plaza, 30th
Floor, New York, New York 10004, Attention: Michele Patterson, Tel: (212) 908-0779; or as to each of the foregoing, at such other address as shall be designed by written notice to the other parties. 
 Section 11.05. Notices and Reports to Noteholders; Waiver of Notices. Where this Indenture provides for notice to Noteholders of any event or the
mailing of any report to Noteholders, such notice or report shall be sufficiently given (unless otherwise herein expressly provided) if mailed, first-class postage prepaid, to each Noteholder affected by such event or to 

  

 62 

 
whole such report is required to be mailed, at the address of such Noteholder as it appears on the Note Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice or the mailing of such report. In any case where a notice or report to Noteholders is mailed in the manner provided above, neither the failure to mail such notice or report,
nor any defect in any notice or report so mailed, to any particular Noteholder shall affect the sufficiency of such notice or report with respect to other Noteholders, and any notice or report that is mailed in the manner herein provided shall be
conclusively presumed to have been duly given or provided. 
 Where this Indenture provides for notice in any manner, such notice may be
waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Noteholders shall be filed with the Indenture Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. 
 In case, by reason of the suspension
of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event to Noteholders when such notice is required to be given pursuant to any provision of this Indenture, then any
manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice. 
 Section 11.06. Rules by Indenture Trustee. The Indenture Trustee may (but is not obligated to) make reasonable rules for any meeting of Noteholders. 
 Section 11.07. Conflict with Trust Indenture Act. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions
of the TIA, such required provision shall control. 
 Section 11.08. Effect of Headings and Table of Contents. The Article and Section
headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof. 
 Section 11.09.
Successors and Assigns. All covenants and agreements in this Indenture by the Issuing Entity shall bind its successors and assigns, whether so expressed or not. 
 Section 11.10. Separability. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby. 
 Section 11.11. Benefits of Indenture. Nothing in this Indenture or in the Notes,
expressed or implied, shall give to any Person, other than the parties hereto and the Hedge Counterparties and their successors hereunder, any separate trustee or co-trustee appointed under Section 6.14 hereof and the Noteholders, any benefit
or any legal or equitable right, remedy or claim under this Indenture. For the avoidance of doubt, the parties agree that each of the Hedge Counterparties (if the Hedge Agreements are still outstanding) is intended and shall have all rights of a
third-party beneficiary of this Indenture. 
  

 63 

 Section 11.12. Legal Holidays. In any case where the date of any Payment Date, Redemption Date or
any other date on which principal of or interest on any Note is proposed to be paid shall not be a Business Day, then (notwithstanding any other provision of the Notes or this Indenture) payment need not be made on such date, but may be made on the
next succeeding Business Day, with the same force and effect as if made on the nominal date of any such Payment Date, Redemption Date or other date for the payment of principal of or interest on any Note and no interest shall accrue for the period
from and after any such nominal date, provided such payment is made in full on such next succeeding Business Day. 
 Section 11.13.
Governing Law. IN VIEW OF THE FACT THAT NOTEHOLDERS ARE EXPECTED TO RESIDE IN MANY STATES AND OUTSIDE THE UNITED STATES AND THE DESIRE TO ESTABLISH WITH CERTAINTY THAT THIS INDENTURE WILL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAW OF A STATE HAVING A WELL-DEVELOPED BODY OF COMMERCIAL AND FINANCIAL LAW RELEVANT TO TRANSACTIONS OF THE TYPE CONTEMPLATED HEREIN, THIS INDENTURE AND EACH NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED THEREIN, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

 Section 11.14. Counterparts. This instrument may be executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. 
 Section 11.15. Recording
of Indenture. This Indenture is subject to recording in any appropriate public recording offices, such recording to be effected by the Servicer, on behalf of the Issuing Entity, and at its expense in compliance with any Opinion of Counsel
delivered pursuant to Sections 2.12 (c) or 3.06 hereof. 
 Section 11.16. Issuing Entity Obligation. (a) No recourse, may be
taken, directly or indirectly, with respect to the obligations of the Issuing Entity, the Owner Trustee or the Indenture Trustee on the Notes or under this Indenture or any certificate or other writing delivered in connection herewith or therewith,
against (i) the Indenture Trustee (except as expressly stated herein regarding performance of its own obligations) Owner Trustee in its individual capacity, (ii) any manner of a beneficial interest in the Issuing Entity or (iii) any
partner, owner, beneficiary, agent, officer, director, employee or agent of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the Issuing Entity, the Owner Trustee or the Indenture Trustee
or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed (it being understood that the Indenture Trustee and the Owner Trustee have no such
obligations in their individual capacity) and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay
any installment or call owing to such entity. For all purposes of this Indenture, in the performance of any duties or 

  

 64 

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

Section 11.17. No Petition. The Indenture Trustee, by entering into this Indenture, and each Noteholder and Beneficial Owner, by accepting a
Note, hereby covenant and agree that they will not at any time institute against the Depositor or the Issuing Entity, or join in any institution against the Depositor or the Issuing Entity of, any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes, this Indenture or any of the Basic Documents. In addition, the Indenture
Trustee will, if directed in writing by the Majority Noteholders and indemnity is provided as set forth herein, on behalf of the Holders of the Notes, (a) file a written objection to any motion or the Sponsor with the Depositor or other
proceeding seeking the substantive consolidation of the Sponsor with the Issuing Entity, (b) file an appropriate memorandum of points and authorities or other brief in support of such objection, or (c) endeavor to establish at the hearing
on such objection that the substantive consolidation of such entities would be materially prejudicial to the Noteholders. 
 This
Section 11.17 will survive for one year and one day following the termination of this Indenture. 
 Section 11.18. Inspection.
The Issuing Entity agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee, during the Issuing Entity’s normal business hours, to examine all of books of account, records, reports and other papers of
the Issuing Entity, to make copies and extracts therefrom, to cause such books to be audited by Independent Accountants selected by the Indenture Trustee, and to discuss its affairs, finances and accounts with its officers, employees and Independent
Accountants (and by this provision the Issuing Entity hereby authorizes its Accountants to discuss with such representatives such affairs, finances and accounts), all at such reasonable times and as often as may be reasonably requested. Any expense
incident to the exercise by the Indenture Trustee of any right under this Section 11.18 shall be borne by the Issuing Entity. 
  

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 [Remainder of Page Intentionally Left Blank] 
  

 66 

 IN WITNESS WHEREOF, the Issuing Entity and the Indenture Trustee have caused this Indenture to be duly
executed by their respective officers thereunto duly authorized, all as of the day and year first above written. 
  

			
	 NOVASTAR MORTGAGE FUNDING
 TRUST, SERIES 2006-1

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

		 	 Title:

	
	JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as Indenture Trustee
		
	By:	 	  
		 	 Name:

		 	 Title:

	
	J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION,
as Co-Trustee
		
	By:	 	  
		 	 Name:

		 	 Title:

 [Signature page to Indenture] 
  

 67 

 APPENDIX I 
 DEFINED TERMS 
 “Accepted Servicing Practices”: The Servicer’s normal servicing
practices, to the extent consistent with the mortgage servicing practices of prudent mortgage lending institutions which service, for their own account, mortgage loans of the same type as the Mortgage Loans in the jurisdictions in which the related
Mortgaged Properties are located. 
 “Account”: Any of the Collection Account or the Payment Account. 
 “Accountant”: A Person engaged in the practice of accounting who (except when the Indenture provides that an Accountant must be
Independent) may be employed by or affiliated with the Issuing Entity or an Affiliate of the Issuing Entity. 
 “Accrued Note
Interest”: As to any Payment Date and each Class of Notes, the amount of interest accrued during the related Interest Accrual Period on the related Class Note Balance immediately prior to such Payment Date at the related Note Rate, as
reduced by any Net Prepayment Interest Shortfalls and any shortfalls resulting from the application of the Servicemembers Civil Relief Act (or any similar state statutes) allocated to such class, provided, however, that in the case of any Class M
Note, such amount shall be reduced by the amount described in clause (a) in the definition of Deferred Interest allocated to such class. 
 “Act”: With respect to any Noteholder, as defined in Section 11.03 of the Indenture. 
 “Accrual
Period”: With respect to each Payment Date, the period commencing on the preceding Payment Date (or in the case of the first Accrual Period, commencing on the Closing Date) and ending on the day preceding the applicable Payment Date.

 “Adjustable Rate Mortgage Loan”: A Mortgage Loan which provides at any period during the life of such loan for the
adjustment of the Mortgage Rate payable in respect thereto. The Adjustable Rate Mortgage Loans are identified as such on the Mortgage Loan Schedule. 
 “Adjusted Class Note Balance”: For any class of Notes and any Payment Date, the Class Note Balance of that class minus any Allocated Realized Loss for such class, in each case, immediately prior to
that Payment Date. 
 “Adjustment Date”: With respect to each Adjustable Rate Mortgage Loan, each Due Date, on which the
Mortgage Rate of such Mortgage Loan changes pursuant to the related Mortgage Note. 
 “Administrative Fee”: With respect to
each Payment Date, the sum of the MI Premium, the Servicing Fee, the Custodian Fee and the Trustee Fee with respect to such Payment Date. 

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

“Agent”: Any Note Registrar or Authenticating Agent. 
 “Aggregate Net Swap Payments”: The sum of the Net Swap Payments calculated with respect to each of the three Swap Providers. 
 “Allocated Realized Loss”: With respect to any class of Class M Notes, the portion of the Applied Realized Loss previously allocated to
that class of Notes. 
 “Applicable Margins”: The margins for each Class of Notes is set forth below: 
  

							
	 	  	Margins	 
	 Class
	  	(1)	 	 	(2)	 
	 A-1A
	  	0.16	%	 	0.32	%
	 A-2A
	  	0.06	%	 	0.12	%
	 A-2B
	  	0.11	%	 	0.22	%
	 A-2C
	  	0.16	%	 	0.32	%
	 A-2D
	  	0.27	%	 	0.54	%
	 M-1
	  	0.30	%	 	0.45	%
	 M-2
	  	0.35	%	 	0.525	%
	 M-3
	  	0.41	%	 	0.615	%
	 M-4
	  	0.44	%	 	0.66	%
	 M-5
	  	0.53	%	 	0.795	%
	 M-6
	  	1.00	%	 	1.50	%
	 M-7
	  	1.12	%	 	1.68	%
	 M-8
	  	1.95	%	 	2.925	%
	 M-9
	  	2.50	%	 	3.75	%
	 M-10
	  	2.50	%	 	3.75	%
	 M-11
	  	2.50	%	 	3.75	%

  

	(1)	For the Interest Accrual Period for each Payment Date on or prior to the first possible Clean Up Call Date. 

  

	(2)	For each other Interest Accrual Period. 

 “Applied
Realized Loss”: With respect to any Payment Date, the excess of the Realized Losses for the related Collection Period over the sum of Net Monthly Excess Cashflow and the Overcollateralization Amount. 
 “Appraised Value”: As to any Mortgaged Property, the appraised value of the Mortgaged Property based upon the appraisal made in
connection with the origination of the Mortgage Loan and, in the case of a Mortgaged Property that was purchased with the proceeds of 

  

 A-2 

 
the Mortgage Loan or within twelve months preceding the origination of the Mortgage Loan, the sales price of the Mortgaged Property, if such sales price is
less than such appraised value. 
 “Assignment of Mortgage”: With respect to each Mortgage Loan, an assignment of the
Mortgage, notice of transfer or equivalent instrument sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect of record the conveyance of the Mortgage to the Indenture Trustee, for the benefit of
the Noteholders. 
 “Authenticating Agent”: The Person, if any, appointed as Authenticating Agent by the Owner Trustee on
behalf of the Issuing Entity, acting at the direction of the Certificateholders, pursuant to Section 6.14 of the Indenture, until any successor Authenticating Agent for the Notes is named, and thereafter “Authenticating Agent” shall
mean such successor. The initial Authenticating Agent shall be the Indenture Trustee. Any Authenticating Agent other than the Indenture Trustee shall sign an instrument under which it agrees to be bound by all of the terms of this Indenture
applicable to the Authenticating Agent. 
 “Authorized Denominations”: Each Class of Notes is issuable only in the minimum
Percentage Interest corresponding to a minimum denomination of $25,000 and integral multiples of $1,000 in excess thereof; provided, however, that one Note of each Class is issuable in a denomination equal to any such multiple plus an
additional amount such that the aggregate denomination of all Notes of such Class shall be equal to the Original Class Note Balance of such Class, and further provided that the underwriter will only sell offered notes to initial investors in minimum
total investment amounts of $100,000. 
 “Authorized Officer”: With respect to (i) the Indenture Trustee, any
Responsible Officer, (ii) the Owner Trustee, the president, any vice president, any assistant vice president, the secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer, any financial services officer or
any other officer of the Owner Trustee customarily performing functions similar to those performed by the above officers and (iii) any other Person, the chairman, chief operating officer, president or any vice president of such Person.

 “Available Funds”: As for any Payment Date, the sum of the following amounts: (i) the Servicer Remittance Amount
(net of Prepayment Charges), (ii) the proceeds from repurchases of Mortgage Loans, (iii) any Net Swap Payment or any Cap Payment received from the Hedge Counterparties and (iv) all proceeds received with respect to any optional
termination pursuant to Section 10.01 of the Indenture. 
 “Available Funds Cap Rate”: For any Payment Date and any
Class of Notes, (i) the product of (a) the portion of Available Funds on such Payment Date attributable to interest received or advanced on the Mortgage Loans less the Administrative Fees, and any aggregate Net Swap Payments and Cap Amount
due the Hedge Counterparties multiplied by (b) 360 divided by the actual number of days in the Interest Accrual Period, divided by (ii) the aggregate Adjusted Class Note Balance of all Classes of Notes immediately preceding such Payment
Date. 
 “Available Funds Cap Shortfall”: With respect to any Payment Date and any Class of Notes or Allocated Realized Loss
Amount, the sum of (i) the excess of (a) the amount of interest that would have accrued on such Class or Allocated Realized Loss Amount based on the 

  

 A-3 

 
related Formula Rate (without regard to the Available Funds Cap Rate) over (b) the amount of interest accrued on such Class or Allocated Realized Loss
Amount based on the related Available Funds Cap Rate and (ii) the unpaid portion of any Available Funds Cap Shortfall from the prior Payment Date together with accrued interest on such unpaid portion at the related Formula Rate (without regard
to the Available Funds Cap Rate). 
 “Balloon Mortgage Loan”: A Mortgage Loan that provides for the payment of the
unamortized Principal Balance of such Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is greater than the preceding Monthly Payment. 
 “Balloon Payment”: A payment of the unamortized Principal Balance of a Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is greater than the preceding Monthly Payment.

 “Bankruptcy Code”: The Bankruptcy Reform Act of 1978 (Title 11 of the United States Code), as amended. 
 “Basic Documents”: The Indenture, the Trust Agreement, the Sale and Servicing Agreement, the Cap Agreements and the Swap Agreements.

 “Beneficial Owner”: With respect to a Book-Entry Note, the Person who is the beneficial owner of such Note as reflected
on the books of the Clearing Agency for the Notes or on the books of a Person maintaining an account with such Clearing Agency (as either a Direct Participant or an Indirect Participant, in accordance with the rules of such Clearing Agency).

 “Best Efforts”: Efforts determined to be in good faith and reasonably diligent by the Person performing such efforts,
specifically the Issuing Entity or the Servicer or any other agent of the Issuing Entity, as the case may be, in its reasonable discretion. Such efforts do not require the Issuing Entity or the Servicer or any other agent of the Issuing Entity, as
the case may be, to enter into any litigation, arbitration or other legal or quasi-legal proceeding, nor do they require the Issuing Entity or the Servicer or any other agent of the Issuing Entity, as the case may be, to advance or expend fees or
sums of money in addition to those specifically set forth in the Indenture and the Sale and Servicing Agreement. 
 “Book-Entry
Notes”: Any Notes registered in the name of the Clearing Agency or its nominee, ownership of which is reflected on the books of the Clearing Agency or on the books of a person maintaining an account with such Clearing Agency (as either a
Direct Participant or an Indirect Participant in accordance with the rules of such Clearing Agency). 
 “Business Day”: Any
day other than (i) a Saturday or Sunday or (ii) a day that is either a legal holiday or a day on which banking institutions in the State of New York, the State of Missouri or in the city in which the corporate trust office of the Indenture
Trustee, Owner Trustee or Custodian are located, or the state in which the Indenture Trustee’s office from which payments will be made to Noteholders, are authorized or obligated by law, regulation or executive order to be closed. 

 

 A-4 

 “Cap Agreement”: Any of the four interest rate Cap Agreements between the Issuing Entity
and the Cap Counterparty listed below. 
  

											
	 Hedge Counterparty
	  	Notional
Amount ($)	  	Fixed
Rate	 	 	Strike
Rate	 	 	Maturity Date
	 Wachovia Bank, N.A.
	  	80,000,000	  	0.2690	%	 	4.900	%	 	December 2007
	 Wachovia Bank, N.A.
	  	80,000,000	  	0.2375	%	 	4.800	%	 	January 2008
	 Wachovia Bank, N.A.
	  	20,000,000	  	0.3850	%	 	4.900	%	 	December 2008
	 Wachovia Bank, N.A.
	  	20,000,000	  	0.3450	%	 	4.800	%	 	January 2009

 “Cap Amount”: The Cap Amount is subject to the verification and confirmation of
the Cap Counterparties who are calculation agents for the Cap Agreements. Cap Amount shall mean, on each Payment Date on or prior to the date the related Cap Agreement is retired, the product of (i) the related fixed rate of interest,
(ii) 30 divided by 360 and (iii) the related effective notional amount. 
 “Cap Counterparty”: Wachovia Bank, N.A.

 “Cap Payment”: As to any Payment Date and Cap Agreement, a payment by the Cap Counterparty to the Issuing Entity equal to
the product of (i) the excess, if any, of LIBOR over the related strike price, (ii) the actual number of days elapsed in the related Accrual Period divided by 360 and (iii) the related effective notional amount. 
 “CERCLA”: The Comprehensive Environmental Response, Compensation and Liability Act of 1980. 
 “Certificateholder” or “Holder”: A Person in whose name a Trust Certificate and Class C Certificate is registered.

 “Certificates”: Each Trust Certificate and Class C Certificate issued pursuant to the Trust Agreement. 
 “Class A Notes”: The Class A-1 Notes and Class A-2 Notes. 
 “Class A-2 Notes”: The Class A-2A Notes, Class A-2B Notes, Class A-2C Notes and Class A-2D Notes. 
 “Class A Principal Allocation Percentage”: As to any Payment Date, the percentage equivalent of a fraction, determined as follows:
(i) in the case of the Class A-1A Notes, the numerator of which is (x) the portion of the Principal Remittance Amount for such Payment Date that is attributable to principal received or advanced on the Group I Mortgage Loans and the
denominator of which is (y) the Principal Remittance Amount for such Payment Date; and (ii) in the case of the Class A-2 Notes, the numerator of which is (x) the portion of the Principal Remittance Amount for such Payment Date
that is attributable to principal received or advanced on the Group II Mortgage Loans and the denominator of which is (y) the Principal Remittance Amount for such Payment Date 
 “Class A Principal Distribution Amount”: For any Payment Date is the sum of the Group I Senior Principal Distribution Amount and the
Group II Senior Principal Distribution Amount for such Payment Date. 
  

 A-5 

 “Class C Certificate”: A certificate entitling the Certificateholder to (i) receive
payments from Net Monthly Excess Cashflow, (ii) receive all collected Prepayment Charges, (iii) the Overcollateralization Amount and representing a. beneficial interest of the Certificateholder in the Issuing Entity substantially in the
form of Exhibit E to the Trust Agreement. 
 “Class M Notes”: The Class M-1 Notes, Class M-2 Notes, Class M-3
Notes, Class M-4 Notes, Class M-5 Notes, Class M-6 Notes, Class M-7 Notes, Class M-8 Notes, Class M-9 Notes, Class M-10 Notes and Class M-11 Notes. 
 “Class M-1/M-2 Principal Distribution Amount”: As to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance of the Class A Notes (after taking into account
the payment of the Class A Principal Distribution Amount on such Payment Date) and (B) the aggregate Adjusted Class Note Balance of the Class M-1 Notes and Class M-2 Notes immediately prior to such Payment Date, over (y) the lesser
of: (A) the product of (i) 84.40% (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent
received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after
giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), over 0.50% of the aggregate scheduled Principal
Balance of the Mortgage Loans as of the Cut-Off Date. 
 “Class M-3 Principal Distribution Amount”: As to any Payment Date,
an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the
Class Note Balance of the Class M-1 Notes and Class M-2 Notes (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Payment Date), and (C) the Adjusted Class Note Balance of the Class M-3 Notes
immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) 87.20% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to
scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of
the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related
Prepayment Period), over 0.50% of the aggregate scheduled Principal Balance of the Mortgage Loans as of the Cut-Off Date. 
 “Class
M-4 Principal Distribution Amount”: As to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance of the Class A Notes (after taking into account the payment of the
Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes and Class M-2 Notes (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such
Payment Date), (C) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal Distribution Amount on such 

  

 A-6 

 
Payment Date), and (D) the Adjusted Class Note Balance of the Class M-4 Notes immediately prior to such Payment Date, over (y) the lesser of:
(A) the product of (i) 89.90% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent
received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after
giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), over 0.50% of the aggregate scheduled Principal
Balance of the Mortgage Loans as of the Cut-Off Date. 
 “Class M-5 Principal Distribution Amount”: As to any Payment Date,
an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the
Adjusted Class Note Balance of the Class M-1 Notes and the Class M-2 Notes (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-3
Notes (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal
Distribution Amount on such Payment Date), and (E) the Adjusted Class Note Balance of the Class M-5 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) 91.80% and (ii) the aggregate
Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period,
to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), over 0.50% of the aggregate scheduled Principal Balance of the Mortgage Loans as of the Cut-Off Date. 
 “Class M-6 Principal Distribution Amount”: As to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the
aggregate Class Note Balance of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes and Class M-2
Notes (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal
Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Payment Date), (E) the Adjusted Class Note
Balance of the Class M-5 Notes (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Payment Date), and (F) the Adjusted Class Note Balance of the Class M-6 Notes immediately prior to such Payment Date,
over (y) the lesser of: (A) the product of (i) 93.30% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due
Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if 

  

 A-7 

 
any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during
the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), over 0.50% of the aggregate scheduled Principal Balance of the Mortgage Loans as of the Cut-Off
Date. 
 “Class M-7 Principal Distribution Amount”: As to any Payment Date, an amount equal to the excess of: (x) the
sum of: (A) the aggregate Class Note Balance of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1
Notes and Class M-2 Notes (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the
Class M-3 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Payment Date), (E) the
Adjusted Class Note Balance of the Class M-5 Notes (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Payment Date), (F) the Adjusted Class Note Balance of the Class M-6 Notes (after taking into
account the payment of the Class M-6 Principal Distribution Amount on such Payment Date) and (G) the Adjusted Class Note Balance of the Class M-7 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of
(i) 94.60% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to
scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), over 0.50% of the aggregate scheduled Principal Balance of the
Mortgage Loans as of the Cut-Off Date. 
 “Class M-8 Principal Distribution Amount”: As to any Payment Date, an amount equal
to the excess of: (x) the sum of: (A) the aggregate Class Note Balance of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class
Note Balance of the Class M-1 Notes and Class M-2 Notes (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-3 Notes (after taking
into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on
such Payment Date), (E) the Adjusted Class Note Balance of the Class M-5 Notes (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Payment Date), (F) the Adjusted Class Note Balance of the Class
M-6 Notes (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Payment Date), (G) the Adjusted Class Note Balance of the Class M-7 Notes (after taking into account the payment of the Class M-7 Principal
Distribution Amount on such Payment Date) and (H) the Adjusted Class Note Balance of the Class M-8 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) 95.70% and (ii) the aggregate
Principal Balance of the Mortgage Loans on the last 

  

 A-8 

 
day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to
scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), over 0.50% of the aggregate scheduled Principal Balance of the
Mortgage Loans as of the Cut-Off Date. 
 “Class M-9 Principal Distribution Amount”: As to any Payment Date, an amount equal
to the excess of: (x) the sum of: (A) the aggregate Class Note Balance of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class
Note Balance of the Class M-1 Notes and Class M-2 Notes (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-3 Notes (after taking
into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on
such Payment Date), (E) the Adjusted Class Note Balance of the Class M-5 Notes (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Payment Date), (F) the Adjusted Class Note Balance of the Class
M-6 Notes (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Payment Date), (G) the Adjusted Class Note Balance of the Class M-7 Notes (after taking into account the payment of the Class M-7 Principal
Distribution Amount on such Payment Date), (H) the Adjusted Class Note Balance of the Class M-8 Notes (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Payment Date), and (I) the Adjusted Class
Note Balance of the Class M-9 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) 97.00% and (ii) the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due
Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), and (B) the excess, if any, of the
aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal
received during the related Prepayment Period), over 0.50% of the aggregate scheduled Principal Balance of the Mortgage Loans as of the Cut-Off Date. 
 “Class M-10 Principal Distribution Amount”: As to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the aggregate Class Note Balance of the Class A Notes (after
taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes and Class M-2 Notes (after taking into account the payment of the Class M-1/M-2
Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Payment Date), (D) the Adjusted
Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Payment Date), (E) the Adjusted Class Note Balance of the Class M-5 Notes (after taking into account the
payment of the Class M-5 Principal Distribution Amount on such Payment Date), (F) the 

  

 A-9 

 
Adjusted Class Note Balance of the Class M-6 Notes (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Payment
Date), (G) the Adjusted Class Note Balance of the Class M-7 Notes (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Payment Date), (H) the Adjusted Class Note Balance of the Class M-8 Notes
(after taking into account the payment of the Class M-8 Principal Distribution Amount on such Payment Date), (I) the Adjusted Class Note Balance of the Class M-9 Notes (after taking into account the payment of the Class M-9 Principal
Distribution Amount on such Payment Date) and (J) the Adjusted Class Note Balance of the Class M-10 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) 98.00% and (ii) the aggregate
Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period,
to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period), over 0.50% of the aggregate scheduled Principal Balance of the Mortgage Loans as of the Cut-Off Date. 
 “Class M-11 Principal Distribution Amount”: As to any Payment Date, an amount equal to the excess of: (x) the sum of: (A) the
aggregate Class Note Balance of the Class A Notes (after taking into account the payment of the Class A Principal Distribution Amount on such Payment Date), (B) the Adjusted Class Note Balance of the Class M-1 Notes and Class M-2
Notes (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Payment Date), (C) the Adjusted Class Note Balance of the Class M-3 Notes (after taking into account the payment of the Class M-3 Principal
Distribution Amount on such Payment Date), (D) the Adjusted Class Note Balance of the Class M-4 Notes (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Payment Date), (E) the Adjusted Class Note
Balance of the Class M-5 Notes (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Payment Date), (F) the Adjusted Class Note Balance of the Class M-6 Notes (after taking into account the payment of the
Class M-6 Principal Distribution Amount on such Payment Date), (G) the Adjusted Class Note Balance of the Class M-7 Notes (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Payment Date), (H) the
Adjusted Class Note Balance of the Class M-8 Notes (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Payment Date), (I) the Adjusted Class Note Balance of the Class M-9 Notes (after taking into
account the payment of the Class M-9 Principal Distribution Amount on such Payment Date), (J) the Adjusted Class Note Balance of the Class M-10 Notes (after taking into account the payment of the Class M-10 Principal Distribution Amount on such
Payment Date) and (K) the Adjusted Class Note Balance of the Class M-11 Notes immediately prior to such Payment Date, over (y) the lesser of: (A) the product of (i) 99.00% and (ii) the aggregate Principal Balance of the
Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related
Prepayment Period), and (B) the excess, if any, of the aggregate Principal Balance of the Mortgage Loans on the last day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent
received or advanced, and unscheduled 

  

 A-10 

 
collections of principal received during the related Prepayment Period), over 0.50% of the aggregate scheduled Principal Balance of the Mortgage Loans as of
the Cut-Off Date. 
 “Class Note Balance”: As of any date of determination, the Original Class Note Balance of any Class of
Notes, minus the sum of all amounts applied in reduction of such amount on all prior Payment Dates. 
 “Clean-Up Call Date”:
Any Payment Date when the outstanding Principal Balance of the Mortgage Loans is less than or equal to 10% of the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date. 
 “Clearing Agency”: An organization registered as a “clearing agency” pursuant to Section 17A of the Securities Exchange
Act of 1934, as amended, and the regulations of the Commission thereunder and shall initially be The Depository Trust Company of New York, the nominee for which is Cede & Co. 
 “Clearing Agency Participants”: The entities for whom the Clearing Agency will maintain book-entry records of ownership and transfer of
Book-Entry Notes, which may include securities brokers and dealers, banks and trust companies and clearing corporations and certain other organizations. 
 “Closing Date”: April 28, 2006. 
 “Code”: The Internal Revenue Code
of 1986 as it may be amended from time to time. 
 “Collection Account”: The Eligible Account established and maintained by
the Servicer pursuant to Section 5.06(d) of the Sale and Servicing Agreement. 
 “Collection Period”: With respect to
each Payment Date, the calendar month preceding the related Payment Date. 
 “Commission”: The United States Securities and
Exchange Commission. 
 “Compensating Interest”: An amount equal to the lesser of (a) the aggregate of the Prepayment
Interest Shortfalls for the related Payment Date resulting from principal prepayments in full during the related Prepayment Period and (b) the aggregate Servicing Fee with respect to the related Due Period. 
 “Corporate Trust Office”: With respect to (y) the Indenture Trustee, the principal office of the Indenture Trustee at which at any
particular time its corporate trust business shall be principally administered, which office at the date of the execution of the Basic Documents is located at: (i) solely for purposes of the transfer, exchange or surrender of Notes, 2001 Bryan
Street, 10th Floor, Dallas, Texas 75201, Attention: Worldwide Securities Services/Structured Finance Services - NovaStar Mortgage Funding Trust, Series 2006-1 and (ii) for all other purposes, 4 New York Plaza, 6th Floor, New York, New York
10004-2477, Attention: Worldwide Securities Services/Structured Finance Services - NovaStar Mortgage Funding Trust, Series 2006-1 where it conducts its trust administration services; and (z) the Owner Trustee, the 

  

 A-11 

 
office of the Owner Trustee at which at any particular time its corporate trust business shall be administered, which office at the date of the execution of
the Basic Documents is located at Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001, facsimile number: (302) 636-4140, Attention: Corporate Trust Administration. 
 “Credit Enhancement Percentage”: For any Class of Notes on any Payment Date, the percentage obtained by dividing (x) the aggregate
Class Note Balance of the Class or Classes subordinate thereto and the Overcollateralization Amount (taking into account distributions of the Principal Distribution Amount for such Payment Date) by (y) the Pool Balance as of the last day of the
related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period). 
 “Crossover Date”: The earlier of (A) the Payment Date after which the aggregate Class Note Balance of the Class A Notes has
been reduced to zero and (B) the later to occur of: 
 (x) the Payment Date occurring in May 2009, and 
 (y) the first Payment Date on which the Senior Credit Enhancement Percentage (calculated for this purpose after giving effect to payments or other
recoveries on the Mortgage Loans during the related Due Period, but before giving effect to payments on any of the notes on such Payment Date) is greater than or equal to 30.40%. 
 “Curtailment”: With respect to a Mortgage Loan, any payment of principal received in advance of its Monthly Payment and which is not
accompanied by an amount as to interest representing scheduled interest due on any date or dates in any month or months subsequent to the month of prepayment. 
 “Custodian”: U.S. Bank National Association, a national banking association, and any successor thereto. 
 “Custodian Fee”: With respect to each Payment Date, the product of (i) $0.20 and (ii) the number of Mortgage Loans. 
 “Custodian Fee Rate”: The percentage equivalent expressed as a fraction, the numerator of which is (i) the product of (a) the
Custodian Fee and (b) 12 and the denominator of which is (ii) the aggregate Principal Balance of the Mortgage Loans as of the beginning of the Due Period (after giving effect to scheduled payments due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period). 
 “Custodian’s Mortgage File”: The documents delivered to the Custodian, pursuant to Section 2.05 of the Sale and Servicing Agreement. 
 “Cut-Off Date”: The close of business on April 1, 2006. 
 “Cut-Off Date
Principal Balance”: As to any Mortgage Loan, the unpaid Principal Balance of such Mortgage Loan as of the Cut-Off Date as specified in the amortization 

  

 A-12 

 
schedule at the time relating thereto (before any adjustment to such amortization schedule by reason of any moratorium or similar waiver or grace period) and
after giving effect to any previous Curtailments and Liquidation Proceeds allocable to principal (other than with respect to any Liquidated Mortgage Loan), irrespective of any delinquency in payment by the related Mortgagor. 
 “60-Day Delinquency Percentage”: As of the last day of any Due Period, the percentage equivalent of a fraction, (i) the numerator
of which equals the aggregate Principal Balance of the Mortgage Loans that are 60 or more days contractually delinquent, in bankruptcy, in foreclosure or converted to REO Properties, and (ii) the denominator of which is the Pool Balance as of the
last day of such Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period). 
 “Debt Service Reduction”: With respect to any Mortgage Loan, a reduction in the scheduled Monthly Payment on the related Mortgage Loan
by a court of competent jurisdiction in a proceeding under the Bankruptcy Code, except such a reduction constituting a Deficient Valuation or any reduction that results in a permanent forgiveness of principal. 
 “Default”: Any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default. 
 “Defaulted Hedge Termination Payment”: Any termination payment required to be made by the Issuing Entity to a Hedge Counterparty
pursuant to a Hedge Agreement as a result of an “Event of Default” with respect to which the Hedge Counterparty is the “Defaulting Party” or a “Termination Event” (other than “Illegality” or “Tax
Event”) (each as defined in the Hedge Agreements) with respect to which a Hedge Counterparty is the sole “Affected Party.” 
 “Deferred Interest”: For any class of Class M Notes and any Payment Date, the sum of (a) the aggregate amount of interest accrued at the applicable Note Rate during the related Interest Accrual Period on the related
Allocated Realized Loss, (b) any amounts described in clause (a) for such class for prior Payment Dates that remain unpaid, and (c) interest accrued for the Interest Accrual Period related to such Payment Date on the amount in clause
(b) at the Note Rate applicable to such class. 
 “Deficient Valuation”: With respect to any Mortgage Loan, a valuation
of the related Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding Principal Balance of the Mortgage Loan, or that results in a permanent forgiveness of principal, which valuation in either case
results from a proceeding initiated under the Bankruptcy Code. 
 “Definitive Notes”: Notes other than Book-Entry Notes.

 “Deleted Mortgage Loan”: A Mortgage Loan replaced or to be replaced by one or more Qualified Substitute Mortgage Loans.

  

 A-13 

 “Delinquency Advance”: The aggregate of the advances required to be made by the Servicer
on any Servicer Remittance Date pursuant to Section 5.25 of the Sale and Servicing Agreement, the amount of any such advances being equal to the sum of: 
 (i) with respect to each Mortgage Loan, other than an REO Property, that was Delinquent as of the close of business on the last day of the Due Period preceding the related Servicer Remittance Date, the aggregate
amount of Monthly Payments (with interest thereon calculated at the Mortgage Interest Rate (or at such lower rate as may be in effect for such Mortgage Loan pursuant to application of the Relief Act, any Deficient Valuation and/or any Debt Service
Reduction), net of the related Servicing Fee) due during the related Due Period, and 
 (ii) with respect to each REO Property which was
acquired during or prior to the related Collection Period and as to which an REO Disposition did not occur during the related Collection Period, an amount equal to the excess, if any, of (i) interest on the Principal Balance of the related
Mortgage Loan at the Mortgage Interest Rate (or at such lower rate as may be in effect for such Mortgage Loan pursuant to application of the Relief Act, any Deficient Valuation and/or any Debt Service Reduction) for such Mortgage Loan net of the
related Servicing Fee, for the most recently ended Due Period over (ii) the Net REO Proceeds transferred to the Payment Account for such Payment Date; 
 provided, however, that in each such case such advance has not been determined by the Servicer to be a Nonrecoverable Advance. For purposes of the preceding sentence, the Monthly Payment on each Balloon Mortgage Loan with a
delinquent Balloon Payment is equal to the assumed monthly payment that would have been due on the related Due Date based on the original principal amortization schedule for such Balloon Mortgage Loan. 
 “90-Day Delinquency Percentage”: As of the last day of any Due Period, the percentage equivalent of a fraction, (i) the numerator
of which equals the aggregate Principal Balance of the Mortgage Loans that are 90 or more days contractually delinquent, in bankruptcy, in foreclosure or converted to REO Properties and (ii) the denominator of which is the Pool Balance as of
the last day of such Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period). 
 “Delinquent”: A Mortgage Loan is “delinquent” if any payment due thereon is not made by the close of business on the day such
payment is scheduled to be due. A Mortgage Loan is “30 days delinquent” if such payment has not been received by the close of business on the corresponding day of the month immediately succeeding the month in which such payment was due,
or, if there is no such corresponding day (e.g., as when a 30-day month follows a 31-day month in which a payment was due on the 31st day of such month) then on the last day of such immediately succeeding month. Similarly for “60 days
delinquent,” “90 days delinquent” and so on. 
 “Delivery”: When used with respect to Eligible Investments
means: 
 (a) with respect to bankers’ acceptances, commercial paper, negotiable certificates of deposit and other obligations that
constitute “instruments” within the meaning of 

  

 A-14 

 
Section 9-102(a)(47) of the Uniform Commercial Code and are susceptible of physical delivery (except with respect to Eligible Investments consisting of
certificated securities (as defined in Section 8-102(a)(4) of the Uniform Commercial Code)), physical delivery to the Custodian endorsed to the Indenture Trustee or endorsed in blank; 
 (b) with respect to a certificated security (as defined in Section 8-102(a)(4) of the Uniform Commercial Code) (i) delivery of such
certificated security, not containing any evidence of a right or interest inconsistent with the Indenture Trustee’s interest therein, endorsed to, or registered in the name of, the Indenture Trustee or endorsed in blank to a securities
intermediary (as defined in Section 8-102(a)(14) of the Uniform Commercial Code) and the making by such securities intermediary of appropriate entries in its records identifying such certificated securities as credited to the securities account
(as defined in Section 8-501(a) of the Uniform Commercial Code) of the Indenture Trustee, or (ii) by delivery thereof to a “clearing corporation” (as defined in Section 8-102(5) of the Uniform Commercial Code) and the making
by such clearing corporation of appropriate entries in its records crediting the securities account of a securities intermediary by the amount of such certificated security and the making by such securities intermediary of appropriate entries in its
records identifying such certificated securities as credited to the securities account of the Indenture Trustee (all Eligible Investments described in subsections (a) and (b), and “Physical Property”); and, in any event, any such
Physical Property in registered form shall be registered in the name of the Indenture Trustee or its nominee; and such additional or alternative procedures as may hereafter become appropriate to effect the complete transfer of ownership of any such
Eligible Investments to the Indenture Trustee or its nominee, consistent with then applicable law or regulations or the interpretation thereof; and 
 (c) with respect to any security issued by the U.S. Treasury, Fannie Mae or Freddie Mac that is a book-entry security held through the Federal Reserve System pursuant to federal book-entry regulations, the following procedures, all in
accordance with applicable law, including applicable federal regulations and Articles 8 and 9 of the Uniform Commercial Code: the making by a Federal Reserve Bank of an appropriate entry crediting such Eligible Investment to an account of a
securities intermediary that is also a “participant” pursuant to applicable federal regulations; the making by such securities intermediary of appropriate entries in its records crediting such book-entry security held through the Federal
Reserve System pursuant to federal book-entry regulations and Articles 8 and 9 of the Uniform Commercial Code to the securities account of the Indenture Trustee; and such additional or alternative procedures as may hereafter become appropriate to
effect complete transfer of ownership of any such Eligible Investments to the Indenture Trustee or its nominee, consistent with then applicable law or regulations or the interpretation thereof. 
 “Depositor”: NovaStar Certificates Financing Corporation, a Delaware corporation. 
 “Determination Date”: With respect to any Payment Date, the 15th day of the calendar month in which such Payment Date occurs or, if such
15th day is not a Business Day, the Business Day immediately preceding such 15th day. 
  

 A-15 

 “Determination Date Report”: The monthly report prepared by the Servicer and delivered
to the parties specified in Section 5.24 of the Sale and Servicing Agreement. 
 “Distributable Interest Amount”: With
respect to either Group of Mortgage Loans, as to any Payment Date, the portion of the Interest Remittance Amount derived from the Mortgage Loans of such Group plus any Net Swap Payment and any Cap Payment received by the Issuing Entity paid by the
Issuing Entity to the Hedge Counterparties, in each case with respect to such Payment Date. 
 “Direct Participant”: Any
broker-dealer, bank or other financial institution for which the Clearing Agency holds Notes from time to time as a securities depositary. 
 “Due Date”: With respect to any Mortgage Loan and any Monthly Payment, the date on which such Monthly Payment is due from the related Mortgagor. 
 “Due Period”: With respect to any Payment Date, the period commencing on the second day of the month preceding the month in which such Payment Date occurs and ending on the first day of the month in
which such Payment Date occurs. 
 “Eligible Account”: An account that is either: (A) a segregated account or accounts
maintained with an institution whose deposits are insured by the FDIC, the unsecured and uncollateralized long-term debt obligations of which institution shall be rated “AA” or higher by Standard & Poor’s, “Aa2” or
higher by Moody’s and “AA” or higher by Fitch and in the highest short-term rating category by each of the Rating Agencies, and which is (i) a federal savings and loan association duly organized, validly existing and in good
standing under the federal banking laws, (ii) an institution duly organized, validly existing and in good standing under the applicable banking laws of any state, (iii) a national banking association duly organized, validly existing and in
good standing under the federal banking laws, or (iv) a principal subsidiary of a bank holding company or (B) a segregated trust account or accounts maintained with the trust department of a federal or state chartered depository
institution acceptable to each Rating Agency, having capital and surplus of not less than $100,000,000, acting in its fiduciary capacity. 
 “Eligible Investments”: One or more of the following: 
 (i) direct obligations of, and obligations fully
guaranteed by, the United States of America, any of the Federal Home Mortgage Corporation, the Federal National Mortgage Association, the Federal Home Loan Banks or any agency or instrumentality of the United States of America the obligations of
which are backed by the full faith and credit of the United States of America; 
 (ii) (A) demand and time deposits in, Certificates of
deposit of, banker’s acceptances issued by or federal funds sold by any depository institution or trust company (including the Trustee or its agents acting in their respective commercial capacities) incorporated under the laws of the United
States of America or any State thereof and subject to supervision and examination by federal and/or state authorities, so long as at the time of such investment or contractual commitment providing for such investment, such depository institution or
trust company has a short-term unsecured debt rating in the highest available rating category 

  

 A-16 

 
of each of the Rating Agencies and provided that each such investment has an original maturity of no more than 365 days, and (B) any other demand or
time deposit or deposit which is fully insured by the Federal Deposit Insurance Corporation; 
 (iii) repurchase obligations with a term not
to exceed 30 days with respect to any security described in clause (i) above and entered into with a depository institution or trust company (acting as a principal) rated “A-1+” or higher by S&P, “A2” or higher by
Moody’s and “F-1+” or higher by Fitch; provided, however, that collateral transferred pursuant to such repurchase obligation must (A) be valued daily at current market price plus accrued interest, (B) pursuant to such
valuation, equal, at all times, 105% of the cash transferred in exchange for such collateral and (C) be delivered in such a manner as to accomplish perfection of a security interest in the collateral by possession of certificated securities;

 (iv) securities bearing interest or sold at a discount issued by any corporation incorporated under the laws of the United States of
America or any State thereof which has a long-term unsecured debt rating in the highest available rating category of each of the Rating Agencies at the time of such investment; 
 (v) commercial paper having an original maturity of less than 365 days and issued by an institution having a short-term unsecured debt rating in the
highest available rating category of each of the Rating Agencies at the time of such investment; 
 (vi) a guaranteed investment contract
approved by each of the Rating Agencies and issued by an insurance company or other corporation having a long-term unsecured debt rating in the highest available rating category of each of the Rating Agencies at the time of such investment; and

 (vii) any demand, money market fund, common trust fund or time deposit or obligation, or interest-bearing or other security or investment,
(A) rated in the highest rating category by each Rating Agency (if rated by such Rating Agency) or (B) that would not adversely affect the then current rating by either Rating Agency of any of the Notes. Such investments in this subsection
(vii) may include money market mutual funds or common trust funds, including, without limitation, the J.P. Morgan Prime Money Market Fund or any other fund for which JPMorgan Chase Bank, National Association, the Indenture Trustee or an
affiliate thereof serves as an investment advisor, administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (i) JPMorgan Chase Bank, National Association or an affiliate thereof charges and collects
fees and expenses from such funds for services rendered, (ii) JPMorgan Chase Bank, National Association or an affiliate thereof charges and collects fees and expenses for services rendered pursuant to the Agreement and the Indenture, and
(iii) services performed for such funds and pursuant to the Agreement and the Indenture may converge at any time. The Indenture Trustee specifically authorizes JPMorgan Chase Bank, National Association or an affiliate thereof to charge and
collect from the Trust Estate such fees as are collected from all investors in such funds for services rendered to such funds (but not to exceed investment earnings thereon), 
 provided, however, that each such instrument shall be acquired in an arm’s-length transaction and no such instrument shall be an
Eligible Investment if it represents, either (1) the 

  

 A-17 

 
right to receive only interest payments with respect to the underlying debt instrument or (2) the right to receive both principal and interest payments
derived from obligations underlying such instrument and the principal and interest payments with respect to such instrument provide a yield to maturity greater than 120% of the yield to maturity at par of such underlying obligations; provided,
further, however, that each such instrument acquired shall not be acquired at a price in excess of par. The Indenture Trustee may purchase from or sell to itself or an affiliate, as principal or agent, the Eligible Investments listed above.

 “ERISA”: The Employee Retirement Income Security Act of 1974, as amended. 
 “Event of Default”: As defined in Section 5.01 of the Indenture. 
 “Exchange Act”: Means the Securities Exchange Act of 1934, as amended. 
 “Extra Principal Distribution Amount”: As to any Payment Date, the lesser of (i) the Net Monthly Excess Cashflow and (ii) the
Overcollateralization Deficiency for such Payment Date. 
 “Fannie Mae”: Fannie Mae, formerly known as, The Federal National
Mortgage Association, and any successor thereto. 
 “FDIC”: The Federal Deposit Insurance Corporation, and any successor
thereto. 
 “Final Certification”: A certification as to the completeness of each Custodian’s Mortgage File prepared by
the Custodian, and provided by the Custodian within one hundred eighty (180) days of the Closing Date pursuant to Section 2.06(b) of the Sale and Servicing Agreement. 
 “Final Stated Maturity Date”: The Payment Date occurring in May 2036. 
 “Fitch”: Fitch Ratings, or its successors in interest. 
 “Foreclosure Profits”: As to any Servicer Remittance Date, the excess, if any, of (i) Net Liquidation Proceeds in respect of each Mortgage Loan that became a Liquidated Mortgage Loan during the
Collection Period immediately preceding such Servicer Remittance Date over (ii) the sum of the unpaid Principal Balance of each such Liquidated Mortgage Loan plus accrued and unpaid interest at the applicable Mortgage Interest Rate on the
unpaid Principal Balance thereof from the Due Date on which interest was last paid by the Mortgagor (or, in the case of a Liquidated Mortgage Loan that had been an REO Property, from the Due Date on which interest was last deemed to have been paid
pursuant to Section 5.13 of the Sale and Servicing Agreement) to the next succeeding Due Date following the date such Mortgage Loan became a Liquidated Mortgage Loan, plus any amounts required by applicable law to be paid to the related
Mortgagors. 
 “Formula Rate”: With respect to each class of Notes the annual rate equal to the lesser of (i) LIBOR
plus the Applicable Margin for that class of Notes and (ii) 11%. 
  

 A-18 

 “Freddie Mac”: Freddie Mac, formerly known as The Federal Home Loan Mortgage
Corporation, and any successor thereto. 
 “Free Writing Prospectus”: The Free Writing Prospectus dated April 19, 2006
relating to the Notes filed with the Commission pursuant to Rule 433. 
 “GAAP”: Generally accepted accounting principles,
consistently applied. 
 “Governmental Plan”: A governmental plan within the meaning of Section 3(32) of ERISA.

 “Grant”: To assign, transfer, mortgage, pledge, create and grant a security interest in, deposit, set-over and confirm. A
Grant of a Mortgage Loan and the related Mortgage Files, a Eligible Investment, the Sale and Servicing Agreement, or any other instrument shall include all rights, powers and options (but none of the obligations) of the Granting party thereunder,
including, without limitation, the immediate and continuing right to claim for, collect, receive and give receipts for principal and interest payments thereunder, Loan Repurchase Prices and all other moneys payable thereunder and all proceeds
thereof, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the Granting party or otherwise, and generally to do and receive anything
that the Granting party is or may be entitled to do or receive thereunder or with respect thereto. 
 “Group”: With respect
to the Mortgage Loans, either Loan Group I or Loan Group II, as the context requires. 
 “Group I Allocation Percentage”:
With respect to any Payment Date, the percentage equivalent of a fraction, the numerator of which is (i) the Group I Principal Remittance Amount for such Payment Date and the denominator of which is (ii) the Principal Remittance Amount for
such Payment Date. 
 “Group I Basic Principal Distribution Amount”: With respect to any Payment Date, the excess of
(i) the Group I Principal Remittance Amount for such Payment Date over (ii) the Overcollateralization Release Amount, if any, for such Payment Date multiplied by the Group I Allocation Percentage. 
 “Group I Cap Payment”: The meaning set forth in Section 8.01(a) of the Indenture. 
 “Group I Mortgage Loans”: The Mortgage Loans allocated to Group I which primarily support the Class A-1 Notes. 
 “Group I Principal Distribution Amount”: As to any Payment Date, the sum of the (i) Group I Basic Principal Distribution Amount for
such Payment Date and (ii) the Extra Principal Distribution Amount for such Payment Date multiplied by the Group I Allocation Percentage. 
  

 A-19 

 “Group I Senior Principal Distribution Amount”: With respect to any Payment Date, an
amount equal to the excess of (x) the Class Note Balance of the Class A-1A Notes immediately prior to that Payment Date over (y) the lesser of (A) the product of (i) 69.60% and (ii) the aggregate Principal Balance of
the Group I Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received
during the related Prepayment Period) and (B) the excess, if any, of the aggregate Principal Balance of the Group I Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during
the related Due Period, to the extend received or advanced, and unscheduled collections of principal received during the related Prepayment Period) over $4,522,868. 
 “Group I Swap Payment”: The meaning set forth in Section 8.01(a) of the Indenture. 
 “Group II Cap Payment”: The meaning set forth in Section 8.01(a) of the Indenture. 
 “Group I
Principal Remittance Amount”: For any Payment Date, that portion of the Principal Remittance Amount that was collected or advanced on the Group I Mortgage Loans. 
 “Group II Allocation Percentage”: With respect to any Payment Date, the percentage equivalent of a fraction, the numerator of which is (i) the Group II Principal Remittance Amount for such
Payment Date and the denominator of which is (ii) the Principal Remittance Amount for such Payment Date. 
 “Group II Basic
Principal Distribution Amount”: With respect to any Payment Date, the excess of (i) the Group II Principal Remittance Amount for such Payment Date over (ii) the Overcollateralization Release Amount, if any, for such Payment Date
multiplied by the Group II Allocation Percentage. 
 “Group II Mortgage Loans”: The Mortgage Loans allocated to Group II
which primarily support the Class A-2 Notes. 
 “Group II Principal Distribution Amount”: With respect to any Payment
Date, the sum of (i) the Group II Basic Principal Distribution Amount for such Payment Date and (ii) the Extra Principal Distribution Amount for such Payment Date multiplied by the Group II Allocation Percentage. 
 “Group II Principal Remittance Amount”: For any Payment Date, that portion of the Principal Remittance Amount that was collected or
advanced on the Group II Mortgage Loans. 
 “Group II Senior Principal Distribution Amount”: With respect to any Payment
Date, an amount equal to the excess of (x) the aggregate Class Note Balance of the Group II Notes immediately prior to that Payment Date over (y) the lesser of (A) the product of (i) 69.60% and (ii) the aggregate Principal
Balance of the Group II Mortgage Loans as of the last day of the 

  

 A-20 

 
related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related prepayment period) and (B) the excess, if any, of the aggregate Principal Balance of the Group II Mortgage Loans as of the last day of the related Due Period (after giving effect
to scheduled payments of principal due during the related Due Period, to the extend received or advanced, and unscheduled collections of principal received during the related prepayment period) over $2,227,132. 
 “Group II Swap Payment”: The meaning set forth in Section 8.01(a) of the Indenture. 
 “Hedge Agreements”: Collectively, the Swap Agreements and the Cap Agreements. 
 “Hedge Collateral Account”: With respect to the Hedge Agreements, in the event that a Hedge Counterparty elects to post collateral as
provided in the Hedge Agreements, the non-interest bearing separate trust account established and maintained by the Indenture Trustee which shall be an Eligible Account for the benefit of the Hedge Counterparties and the Noteholders, as their
interests may appear, into which such collateral shall be deposited. 
 “Hedge Counterparties”: Collectively, the Swap
Counterparties and the Cap Counterparty. 
 “Hedge Termination Payment”: Upon the designation of an “Early Termination
Date” as defined in the Hedge Agreements, the payment to be made by the Issuing Entity to the respective Hedge Counterparty, or by the respective Hedge Counterparty to the Issuing Entity, as applicable, pursuant to the terms of the respective
Hedge Agreement. 
 “Highest Lawful Rate”: As defined in Section 11.19 of the Indenture. 
 “Indenture”: The Indenture, dated as of April 1, 2006, between the Issuing Entity and the Indenture Trustee, relating to the
issuance of the Notes. 
 “Indenture Trustee”: JPMorgan Chase Bank, National Association, a national banking association
organized under the laws of the United States, or its successor-in-interest, or any successor Indenture Trustee appointed as provided for in Section 6.09 of the Indenture. 
 “Indenture Trustee Fee”: As to any Payment Date, the product of (i) the Indenture Trustee Fee Rate divided by 12 and (ii) the
sum of the Principal Balance of the Mortgage Loans as of the first day of the related Due Period. 
 “Indenture Trustee Fee
Rate”: 0.0035% per annum. 
 “Indenture Trustee’s Remittance Report”: The statement prepared pursuant to
Section 2.09 of the Indenture. 
 “Independent”: When used with respect to any specified Person, means such a Person
who (i) is in fact independent of the Issuing Entity and any other obligor upon the Notes, 

  

 A-21 

 
(ii) does not have any direct financial interest or any material indirect financial interest in the Issuing Entity or in any such other obligor or in an
Affiliate of the Issuing Entity or such other obligor, and (iii) is not connected with the Issuing Entity or any such other obligor as an officer, employee, promoter, underwriter, trustee, partner, director or person performing similar
functions. Whenever it is herein provided that any Independent Person’s opinion or certificate shall be furnished to the Indenture Trustee, such Person shall be appointed by a Trust Order and such opinion or certificate shall state that the
signer has read this definition and that the signer is Independent within the meaning hereof. 
 “Indirect Participant”: Any
financial institution for whom any Direct Participant holds an interest in a Note. 
 “Individual Note”: A Note of an
original principal balance of $25,000; a Note of an original principal balance in excess of $25,000 shall be deemed to be a number of Individual Notes equal to the quotient obtained by dividing such original principal balance amount by $25,000.

 “Initial Certification”: A certification as to the completeness of each Custodian’s Mortgage File prepared by the
Custodian, and provided by the Custodian within sixty (60) days of the Closing Date pursuant to Section 2.06(a) of the Sale and Servicing Agreement. 
 “Insurance Proceeds”: Proceeds paid by any insurer pursuant to any insurance policy covering a Mortgage Loan to the extent such proceeds are not applied to the restoration of the related Mortgaged
Property or released to the related Mortgagor in accordance with the express requirements of law or in accordance with Accepted Servicing Practices. 
 “Interest Accrual Period”: With respect to the Class A Notes and the Class M Notes and for each Payment Date, the period from and including the prior Payment Date (or, in the case of the first
Payment Date, from the Closing Date) to, but excluding the current Payment Date. Interest will accrue on the Class A Notes and the Class M Notes on the basis of a 360-day year and the actual number of days elapsed in the interest accrual
period. 
 “Interest Determination Date”: With respect to any Interest Accrual Period for the LIBOR Notes, the second London
Business Day prior to the immediately preceding Payment Date; provided, however, that with respect to the May 2006 Payment Date, the Interest Determination Date shall be April 26, 2006. 
 “Interest Payment Amount”: For any Payment Date and Class of Notes, an amount equal to the Accrued Note Interest for such Class of Notes
on such Payment Date, plus the Unpaid Interest Shortfall Amount for such Class of Notes as of such Payment Date. 
 “Interest
Remittance Amount”: With respect to any Payment Date and Group, the Available Funds on such Payment Date attributable to interest received or advanced on the related Group of Mortgage Loans less the Servicing Fees, the Owner Trustee Fees,
the Custodian Fees, the MI Premium and the Indenture Trustee Fees for such Payment Date, to the extent related to such Group. 
  

 A-22 

 “Issuing Entity”: NovaStar Mortgage Funding Trust, Series 2006-1, a Delaware statutory
trust. 
 “Lender Letter”: The lender letter #LL03-00 dated April 11, 2000 for Fannie Mae Sellers. 
 “Letter Agreement”: The Letter of Representations to the Clearing Agency from the Indenture Trustee and the Issuing Entity dated
April 28, 2006. 
 “LIBOR”: With respect to any Interest Accrual Period, the rate determined by the Indenture Trustee
on the related Interest Determination Date on the basis of the posted rate U.S. dollar deposits for one month which appears on Telerate Page 3750, as of 11:00 a.m. (London time) on such Interest Determination Date. If no such posted rate appears,
LIBOR will be determined on the basis of the offered quotation of the Reference Banks for U.S. dollar deposits for one month to prime banks in the London interbank market as of 11:00 a.m. London time, on such date. If fewer than two Reference Banks
provide such offered quotations on that date, LIBOR will be calculated as the offered rate which one or more leading banks in The City of New York selected by the Indenture Trustee (after consultation with the Servicer) are quoting as of 11:00 a.m.,
New York City time, on such date to leading European banks for U.S. dollar deposits for one month; provided, however, that if such banks are not quoting as described above, LIBOR will be equal to the value calculated for the
immediately preceding Interest Accrual Period. 
 In the event that LIBOR must be calculated on the basis of offered rates as set forth
above, LIBOR shall be calculated as the arithmetic mean (rounded, if necessary, to the nearest 1/100th of a percent (0.0001), with upwards rounding of amounts equal to or in excess of 5/1,000th of a percent (0.00005)) of all such quotations.

 “LIBOR Notes”: The Class A Notes and the Class M Notes. 
 “Liquidated Mortgage Loan”: A Mortgage Loan with respect to which the related Mortgaged Property has been acquired, liquidated or
foreclosed and with respect to which the Servicer determines that all Liquidation Proceeds which it expects to recover have been recovered and for which the Servicer has so designated on its Determination Date Report. 
 “Liquidation Expenses”: As to any Liquidated Mortgage Loan, all expenses incurred by the Servicer in connection with the liquidation of
such Mortgage Loan, including, without duplication any unreimbursed Servicing Advances. 
 “Liquidated Loan Loss”: As to any
Liquidated Mortgage Loan, the excess, if any, of (x) the unpaid Principal Balance of such Liquidated Mortgage Loan plus accrued and unpaid interest on such unpaid Principal Balance from the Due Date to which interest was last paid by the
Mortgagor over (y) Net Liquidation Proceeds. 
 “Liquidation Proceeds”: The amount received by the Servicer in
connection with (i) the taking of all or a part of a Mortgaged Property by exercise of the power of eminent domain or condemnation, (ii) the liquidation of a defaulted Mortgage Loan through an Indenture 

  

 A-23 

 
Trustee’s sale, foreclosure sale, REO Disposition or otherwise or (iii) the liquidation of any other security for such Mortgage Loan. 

“Loan Group”: Any of Loan Group I or Loan Group II. 
 “Loan Group I”: The Mortgage Loans identified in the Mortgage Loan Schedule for Group I. 
 “Loan Group II”: The Mortgage Loans identified in the Mortgage Loan Schedule for Group II. 
 “Loan-to-Value Ratio” or “LTV”: With respect to any Mortgage Loan as of its date of origination, the ratio on such date borne by the original Principal Balance of the Mortgage Loan and, if such Mortgage
Loan is secured by a second lien, the sum of the outstanding principal balance of the related first lien mortgage loan and (ii) the original principal balance of the second lien at the time such Mortgage Loan is originated to the Appraised
Value of the related Mortgaged Property. 
 “London Business Day”: A day on which banking institutions in the City of
London, England, are not required or authorized to be closed. 
 “Majority Noteholders”: With respect to the Notes, the
Holder or Holders of Notes evidencing Note Balances in excess of 51% of the aggregate Class Note Balance. 
 “MERS”:
Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto. 
 “MERS System”: The system of recording transfers of Mortgages electronically maintained by MERS. 
 “MI Insurance Agreement”: A private mortgage insurance agreement issued by the MI Insurer pursuant to which MI Policies are issued on individual Mortgage Loans. 
 “MI Insurance Proceeds”: Proceeds paid by the MI Insurer pursuant to an MI Policy. 
 “MI Insurer”: Each of (i) PMI Mortgage Insurance Co., an Arizona mortgage insurance company, (ii) Radian Guaranty, Inc., a
Pennsylvania mortgage insurance corporation and (iii) Mortgage Guaranty Insurance Corporation, a Wisconsin private mortgage insurance company and their successors and assigns. 
 “MI Insurer Insolvency Event”: (A) The determination by the applicable regulatory or supervisory agency having jurisdiction over
the MI Insurer that such MI Insurer is insolvent or unable to pay its obligations as they mature, (B) following the failure of the MI Insurer to pay under the related MI Policy, the determination by the Servicer that such MI Insurer is
insolvent or unable to pay its obligations as they become due, (C) the long-term rating on the claims paying ability of the MI Insurer shall be lowered by Moody’s below A-2, if such 

  

 A-24 

 
MI Insurer is then rated by Moody’s, or shall be lowered by S&P below AA, if such MI Insurer is then rated by S&P. 
 “MI Policy”: A private mortgage insurance policy underwritten by the MI Insurer with respect to an individual Mortgage Loan, issued
pursuant to the MI Insurance Agreement. 
 “MI Premium”: The primary mortgage insurance premium for each MI Policy, payable
annually to an MI Insurer, as specified in the MI Insurance Agreement, and with respect to each monthly premium payment, 1/12 of the annual premium. 
 “MIN”: The Mortgage Identification Number for Mortgage Loans registered with MERS on the MERS System. 
 “MOM Loan”: A Mortgage Loan for which MERS is acting as the mortgagee of such Mortgage Loan, solely as nominee for the originator of such Mortgage Loan and its successors and assigns, at the
origination thereof. 
 “Monthly Payment”: As to any Mortgage Loan (including any REO Property) and any Due Date, the
payment of principal and interest due thereon as specified for such Due Date in the related amortization schedule at the time applicable thereto (after adjustment for any Curtailments and Deficient Valuations occurring prior to such Due Date but
before any adjustment to such amortization schedule by reason of any bankruptcy, other than Deficient Valuations, or similar proceeding or any moratorium or similar waiver or grace period). 
 “Moody’s”: Moody’s Investors Service, Inc., a corporation organized and existing under Delaware law, or any successor thereto
and if such corporation no longer for any reason performs the services of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized rating agency. 
 “Mortgage”: The mortgage, deed of trust or other instrument creating a first or second lien on the Mortgaged Property. 
 “Mortgage File”: The mortgage documents listed in Section 2.05 of the Sale and Servicing Agreement pertaining to a particular
Mortgage Loan and any additional documents required to be added to the Mortgage File pursuant to the Sale and Servicing Agreement. 
 “Mortgage Interest Rate”: As to any Mortgage Loan, the per annum rate at which interest accrues on the unpaid Principal Balance thereof. 
 “Mortgage Loan Schedule”: With respect to any date, the schedule of Mortgage Loans subject to this Agreement on such date. The schedule of Mortgage Loans as of the Cut-off Date is the schedule set
forth in Schedule I hereto, which schedule sets forth as to each Mortgage Loan: 
 (i) the loan number; 
 (ii) the city, state and zip code of the Mortgaged Property; 
  

 A-25 

 (iii) the Mortgage Rate at origination; 
 (iv) with respect to an Adjustable Rate Mortgage Loan, the Maximum Rate and the Minimum Rate; 
 (v) the maturity date; 
 (vi) the original
Principal Balance; 
 (vii) the first due date; 
 (viii) the type of Mortgaged Property; 
 (ix) the Monthly Payment in effect as of the Cut-off Date;

 (x) the Principal Balance as of the Cut-off Date; 
 (xi) with respect to an Adjustable Rate Mortgage Loan, the Index, the Gross Margin; the Lifetime Rate Cap and the Periodic Rate Cap; 
 (xii) with respect to an Adjustable Rate Mortgage Loan, the first Adjustment Date and next Adjustment Date, if any; 
 (xiii) with respect to an Adjustable Rate Mortgage Loan, the Adjustment Date frequency and Payment Date frequency; 
 (xiv) the
occupancy status; 
 (xv) the purpose of the Mortgage Loan; 
 (xvi) the Appraised Value of the Mortgaged Property; 
 (xvii) the original term to maturity; 
 (xviii) the paid-through date of the Mortgage Loan; 
 (xix) the Loan-to-Value Ratio; 
 (xx) whether the Mortgage Loan is an Adjustable Rate Mortgage Loan or a Fixed Rate Mortgage Loan;

 (xxi) whether or not the Mortgage Loan was underwritten pursuant to a limited documentation program; 
 (xxii) whether the Mortgage Loan is covered by an MI Policy; 
 (xxiii) if the Mortgage Loan is registered with MERS on the MERS System, the MIN; and 
 (xxiv) whether the
Mortgage Loan is in Group I or Group II. 
  

 A-26 

 The Mortgage Loan Schedule shall set forth the total of the amounts described under (x) above for
all of the Mortgage Loans and each Loan Group. 
 “Mortgage Loans”: The Mortgage Loans (together with any Qualified
Substitute Mortgage Loans substituted therefor in accordance with the Basic Documents, as from time to time are held as a part of the Issuing Entity), so being identified in the Mortgage Loan Schedule on the Closing Date. When used in respect of any
Payment Date, the term Mortgage Loans shall mean all Mortgage Loans (including those in respect of which the Indenture Trustee has acquired the related Mortgaged Property) which have not been repaid in full prior to the related Due Period, did not
become Liquidated Mortgage Loans prior to such related Due Period or were not repurchased or replaced by the Sponsor prior to such related Due Period. 
 “Mortgage Note”: The original, executed note or other evidence of any indebtedness of a Mortgagor under a Mortgage Loan. 
 “Mortgaged Property”: The underlying property or properties securing a Mortgage Loan, consisting of a fee simple or leasehold interest in one or more parcels of land. 
 “Mortgagor”: The obligor on a Mortgage Note. 
 “NCFC”: NovaStar Certificates Financing Corporation, a Delaware corporation, and its successors and assigns. 
 “NCFLLC”: NovaStar Certificates Financing LLC, a Delaware limited liability company, and its successors and assigns. 
 “Net Foreclosure Profits”: As to any Servicer Remittance Date, the excess, if any, of (i) the aggregate Foreclosure Profits with respect to such Servicer Remittance Date over (ii) Liquidated
Loan Losses with respect to such Servicer Remittance Date. 
 “Net Liquidation Proceeds”: As to any Liquidated Mortgage
Loan, Liquidation Proceeds net of Liquidation Expenses and net of any unreimbursed Delinquency Advances and Servicing Advances made by the Servicer with respect to such Liquidated Mortgage Loan. For all purposes of the Basic Documents, Net
Liquidation Proceeds shall be allocated first to accrued and unpaid interest on the related Mortgage Loan and then to the unpaid Principal Balance thereof. 
 “Net Monthly Excess Cashflow” With respect to any Payment Date, the sum of (i) the amount of Available Funds in respect of interest, Aggregate Net Swap Payments received from the Swap Providers
and Cap Payments received from the Cap Provider for such Payment Date remaining after making all payments described in Section 8.01(b) of the Indenture and (ii) the Overcollateralization Release Amount. 
 “Net Prepayment Interest Shortfalls”: For any Payment Date and either Loan Group, the amount by which the aggregate Prepayment Interest
Shortfalls for that Loan Group exceeds the sum of (x) the Compensating Interest for that Loan Group and (y) the excess, if any, 

  

 A-27 

 
of the Compensating Interest for the other Loan Group over the Prepayment Interest Shortfalls for such other Loan Group. 
 “Net REO Proceeds”: As to any REO Disposition, REO Proceeds net of any related expenses of the Servicer. 
 “Net Swap Payment”: With respect to each Payment Date and each Hedge Counterparty, the net payment required to be made pursuant to the
terms of each of the Swap Agreements with such Hedge Counterparty which is calculated by netting the amount of any Swap Amount that would otherwise be received by the Issuing Entity from such Hedge Counterparty and any Swap Amount that would
otherwise be received by the Swap Provider with such Hedge Counterparty, which net payment shall not take into account any Hedge Termination Payment. 
 “NFI”: NovaStar Financial, Inc., a Maryland corporation, and its successors and assigns. 
 “Nonrecoverable Advances”: With respect to any Mortgage Loan, (a) any Delinquency Advance or Servicing Advance previously made and not reimbursed pursuant to Section 5.07 of the Sale and Servicing Agreement, or
(b) a Delinquency Advance proposed to be made in respect of a Mortgage Loan or REO Property either of which, in the good faith business judgment of the Servicer, as evidenced by an Officer’s Certificate delivered to the Indenture Trustee
no later than the Business Day following such determination, would not ultimately be recoverable pursuant to Section 5.07 of the Sale and Servicing Agreement. 
 “Note”: Any Class A Note or Class M Note executed by the Owner Trustee on behalf of the Issuing Entity and authenticated by the Indenture Trustee. 
 “Noteholder” or “Holder”: Each Person in whose name a Note is registered in the Note Register, except that, solely for
the purposes of giving any consent, waiver, request or demand pursuant to the Indenture, any Note registered in the name of the Servicer or the Sponsor, or any Affiliate of any of them, shall be deemed not to be outstanding and the undivided
Percentage Interest evidenced thereby shall not be taken into account in determining whether the requisite percentage of Notes necessary to effect any such consent, waiver, request or demand has been obtained. For purposes of any consent, waiver,
request or demand of Noteholders pursuant to the Indenture, upon the Indenture Trustee’s request, the Servicer and the Sponsor shall provide to the Indenture Trustee a notice identifying any of their respective Affiliates that is a Noteholder
as of the date(s) specified by the Indenture Trustee in such request. 
 “Note Rate”: For each Class of Notes, the per annum
rate equal to the lesser of (i) the related Formula Rate and (ii) the Available Funds Cap Rate. 
 “Note
Register”: As defined in Section 2.06 of the Indenture. 
 “Note Registrar”: As defined in Section 2.06
of the Indenture. 
 “Officer’s Certificate”: A certificate signed by the chairman of the board, the president or a
vice president and the treasurer, the secretary or one of the assistant treasurers or 

  

 A-28 

 
assistant secretaries of the Sponsor, the Servicer, or, with respect to the Issuing Entity, a certificate signed by the Servicer pursuant to
Section 12.15 of the Trust Agreement or a Responsible Officer of the Owner Trustee, at the direction of the Certificateholders as required by any Basic Document. 
 “Opinion of Counsel”: A written opinion of counsel, who may, without limitation, be counsel for the Sponsor, the Servicer, the Indenture Trustee, the Owner Trustee, a Noteholder or a Noteholder’s
prospective transferee (including except as otherwise provided herein, in-house counsel) reasonably acceptable to each addressee of such opinion and experienced in matters relating to the subject of such opinion. 
 “Original Class Note Balance”: As of the Closing Date and as to each Class of Notes, as follows. 
  

				
	 Class
	  	Original Class
Note Balance
	 A-1A
	  	$	767,078,000
	 A-2A
	  	$	182,000,000
	 A-2B
	  	$	91,700,000
	 A-2C
	  	$	71,400,000
	 A-2D
	  	$	32,621,000
	 M-1
	  	$	78,300,000
	 M-2
	  	$	21,600,000
	 M-3
	  	$	18,900,000
	 M-4
	  	$	18,225,000
	 M-5
	  	$	12,825,000
	 M-6
	  	$	10,125,000
	 M-7
	  	$	8,775,000
	 M-8
	  	$	7,425,000
	 M-9
	  	$	8,775,000
	 M-10
	  	$	6,750,000
	 M-11
	  	$	6,750,000

 “Outstanding”: As of the date of determination, all Notes theretofore
authenticated and delivered under the Indenture except: 
 (i) Definitive Notes theretofore canceled by the Note Registrar or delivered to
the Note Registrar for cancellation; 
 (ii) Notes or portions thereof for whose payment or redemption money in the necessary amount has been
theretofore deposited with the Indenture Trustee in trust for the Holders of such Notes; provided, however, that if such Notes are to be redeemed, notice of such redemption has been duly given pursuant to this Indenture or provision
therefor, satisfactory to the Indenture Trustee, has been made; 
 (iii) Notes in exchange for or in lieu of which other Notes have been
authenticated and delivered pursuant to this Indenture unless proof satisfactory to the Indenture 

  

 A-29 

 
Trustee is presented that any such Notes are held by a bona fide purchaser (as defined by the Uniform Commercial Code of the applicable jurisdiction); and

 (iv) Notes alleged to have been destroyed, lost or stolen that have been paid as provided for in Section 2.07 of the Indenture;

 provided, however, that in determining whether the Holders of the requisite percentage of the Class Note Balance of the Outstanding Notes
have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Issuing Entity, any other obligor upon the Notes or any Affiliate of the Issuing Entity, the Servicer or the Sponsor or such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes
that a Responsible Officer of the Indenture Trustee has actual knowledge to be so owned shall be so disregarded. Notes so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Indenture Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Issuing Entity, any other obligor upon the Notes or any Affiliate of the Issuing Entity, the Servicer or the Sponsor or such other
obligor. 
 “Overcollateralization Amount”: As to any Payment Date, the amount, if any, by which (x) the Pool Balance
as of the end of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) exceeds
(y) the aggregate Adjusted Class Note Balance of the Notes, after giving effect to payments on such Payment Date. 
 “Overcollateralization Deficiency”: As to any Payment Date, the amount, if any, by which (x) the Required Overcollateralization Amount for such Payment Date exceeds (y) the Overcollateralization Amount for such
Payment Date, calculated for this purpose after giving effect to the reduction on such Payment Date of the Adjusted Class Note Balances of the Notes resulting from the payment of the Principal Remittance Amount on such Payment Date. 
 “Overcollateralization Release Amount”: With respect to any Payment Date, the lesser of (x) the Principal Remittance Amount for
such Payment Date and (y) the excess, if any, of (i) the Overcollateralization Amount for such Payment Date (assuming that 100% of the Principal Remittance Amount is applied as a principal payment on such Payment Date) over (ii) the
Required Overcollateralization Amount for such Payment Date. 
 “Owner-Occupied Mortgaged Property”: A Residential Dwelling
as to which (a) the related Mortgagor represented an intent to occupy as such Mortgagor’s primary residence at the origination of the Mortgage Loan, and (b) the Sponsor has no actual knowledge that such Residential Dwelling is not so
occupied. 
 “Ownership Interest”: As to any Note, any ownership or security interest in such Note, including any interest
in such Note as the Holder thereof and any other interest therein, whether direct or indirect, legal or beneficial, as owner or as pledgee. 
  

 A-30 

 “Owner Trustee”: Wilmington Trust Company, a Delaware banking corporation, not in its
individual capacity, but solely as owner trustee under the Trust Agreement, and any successor owner trustee thereunder. 
 “Owner
Trustee Fee”: As defined in Section 9.01 of the Trust Agreement. 
 “Payahead”: Any payment made by a
Mortgagor during a Due Period which is intended by the Mortgagor to be an early payment of one or more scheduled monthly payments due with respect to subsequent Due Periods, and not as a curtailment to be applied in full as a reduction in the
Principal Balance of the related Mortgage Loan. 
 “Paying Agent”: The Indenture Trustee or any other depository institution
or trust company that is authorized by the Issuing Entity pursuant to Section 3.03 of the Indenture to pay the principal of, or interest on, any Notes on behalf of the Issuing Entity, which agent, if not the Indenture Trustee, shall have signed
an instrument agreeing to be bound by the terms of the Indenture applicable to such Paying Agent. 
 “Payment Account”: The
segregated trust account, which shall be an Eligible Account, established and maintained pursuant to Section 8.01(a) of the Indenture and entitled “JPMorgan Chase Bank, National Association, as Indenture Trustee for NovaStar Mortgage
Funding Trust, Series 2006-1 Asset-Backed Notes, Series 2006-1, Payment Account,” on behalf of the Noteholders. 
 “Payment
Date”: The 25th day of any month or if such 25th day is not a Business Day, the first Business Day immediately following, commencing in May 2006. 
 “Percentage Interest”: With respect to a Note of any Class, the portion of such Class evidenced by such Note, expressed as a percentage rounded to four decimal places, equal to a fraction the
numerator of which is the denomination represented by original Principal Balance of such Note and the denominator of which is the Original Class Note Balance of such Class. With respect to the Certificates, the portion of the Certificates evidenced
thereby as stated on the face of such Certificate. 
 “Person”: Any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, national banking association, unincorporated organization or government or any agency or political subdivision thereof. 
 “Physical Property”: As defined in clause (b) of the definition of “Delivery.” 
 “Plan”: Either (i) an employee benefit plan (within the meaning of Section 3(3) of ERISA) that is subject to Title I of ERISA,
(ii) a plan (within the meaning of Section 4975(e)(1) of the Code) that is subject to Section 4975 of the Code or (iii) a Governmental Plan that is subject to any federal, state or local law that is, to a material extent, similar
to Title I of ERISA or Section 4975 of the Code. 
 “Pool Balance”: For any date and with respect to the Mortgage Loans
or a Group of Mortgage Loans, the aggregate Principal Balance of the related Mortgage Loans as of such date. 
  

 A-31 

 “Predecessor Notes”: With respect to any particular Note, every previous Note evidencing
all or a portion of the same debt as that evidenced by such particular Note; and, for the purpose of this definition, any Note authenticated and delivered under Section 2.07 of the Indenture in lieu of a lost, destroyed or stolen Note shall be
deemed to evidence the same debt as the lost, destroyed or stolen Note. 
 “Prepayment Charge”: With respect to any Mortgage
Loan, the charges or premiums, if any, due in connection with a full or partial Principal Prepayment of such Mortgage Loan in accordance with the terms thereof. 
 “Prepayment Interest Shortfall”: With respect to any Payment Date, for each Mortgage Loan that was the subject of a Principal Prepayment in full during the portion of the related Prepayment Period in
the prior calendar month, an amount equal to the excess, if any, of (a) 30 days’ interest on the Principal Balance of such Mortgage Loan at a per annum rate equal to (i) the Mortgage Interest Rate (or at such lower rate as may be in
effect for such Mortgage Loan pursuant to application of the Relief Act, any Deficient Valuation and/or any Debt Service Reduction) minus (ii) the Servicing Fee Rate, over (b) the amount of interest actually remitted by the related
Mortgagor in connection with such Principal Prepayment in full. 
 “Prepayment Period”: With respect to any Payment Date and
Principal Prepayments in full, the period commencing on the 16th day of the month preceding the month in which such
Payment Date occurs (or, in the case of the first Payment Date, the day following the Cut-Off Date) and ending on the 15th day of the month in which such Payment Date occurs. 
 “Principal Balance”: As to any Mortgage Loan and any
date of determination, the outstanding Principal Balance of such Mortgage Loan as of such date of determination. 
 “Principal
Distribution Amount”: As to any Payment Date, the sum of (i) the Basic Principal Distribution Amount and (ii) the Extra Principal Distribution Amount. 
 “Principal Prepayment”: Any payment of principal made by the Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due Date and which is not accompanied by an amount of interest
representing the full amount of scheduled interest due on any Due Date in any month or months subsequent to the month of prepayment. 
 “Principal Remittance Amount”: For any Payment Date, an amount equal to that portion of the Servicer Remittance Amount for the related Servicer Remittance Date which relates to principal, together with: 
 (i) the principal portion of the proceeds received by the Indenture Trustee upon the exercise by the Sponsor of its option to call the Notes; 

(ii) the principal portion of the proceeds received by the Indenture Trustee on any termination of the Issuing Entity; 
 (iii) the principal portion of the repurchase price for any repurchased Mortgage Loans; 
  

 A-32 

 (iv) the principal portion of Substitution Adjustments received in connection with the substitution of a
Mortgage Loan as of such Payment Date; and 
 (v) the Subsequent Recoveries received. 
 “Proceeding”: Any suit in equity, action at law or other judicial or administrative proceeding. 
 “Prospectus”: The Prospectus Supplement together with the Base Prospectus attached thereto with respect to the Notes. 
 “Prospectus Supplement”: The Prospectus Supplement dated April 20, 2006 relating to the Notes filed with the Commission in
connection with the Registration Statement heretofore filed or to be filed with the Commission pursuant to Rule 424(b)(5). 
 “Qualified Appraiser”: An appraiser, duly appointed by the Sponsor, who had no interest, direct or indirect, in the Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by
the approval or disapproval of the Mortgage Loan, and such appraiser and the appraisal made by such appraiser both satisfy the requirements of Title XI of the Federal Institutions Reform, Recovery and Enforcement Act of 1989 and the regulations
promulgated thereunder, all as in effect on the date the Mortgage Loan was originated. 
 “Qualified REIT Subsidiary”: Has
the meaning set forth in Section 856(i) of the Code. Qualified REIT Subsidiary shall also include any entity that is wholly-owned by a Qualified REIT Subsidiary and is disregarded as an entity separate from its owner under Treasury Regulation
Section 301.7701-3. 
 “Qualified Substitute Mortgage Loan”: Any Mortgage Loan substituted for a Deleted Mortgage Loan
which has a scheduled Principal Balance, after application of all payments received on or prior to the date of substitution not substantially less and not more than the scheduled Principal Balance of the Deleted Mortgage Loan as of such date, and
each of which, among other things, 
  

	 	•	 	relates to a detached one- to four-family residence and has the same or a better lien priority as the Deleted Mortgage Loan and has the same occupancy status as the Deleted Mortgage
Loan or is an owner-occupied mortgaged property, 

  

	 	•	 	matures no later than, and not more than one year earlier than, the Deleted Mortgage Loan, 

  

	 	•	 	has a loan-to-value ratio or LTV at the time of such substitution no higher than the LTV of the Deleted Mortgage Loan, 

  

	 	•	 	has a mortgage interest rate greater than or equal to the interest rate of the Deleted Mortgage Loan, and if the Deleted Mortgage Loan is an adjustable Mortgage Loan, have a gross
margin no lower than and not more than 1% per annum higher than the gross margin of the Deleted Mortgage Loan, 

  

 A-33 

	 	•	 	not be more than 30 days delinquent, 

  

	 	•	 	have a lien priority equal to or superior to the lien priority of the Deleted Mortgage Loan, and 

  

	 	•	 	complies, as of the date of substitution, with each representation and warranty set forth in the sale and servicing agreement. 

 “Rating Agency”: Each of S&P, Moody’s and Fitch. 
 “Rating Agency Condition”: With respect to any action to which a Rating Agency Condition applies, each Rating Agency shall have been given ten (10) days (or such shorter period as is acceptable
to each Rating Agency) prior notice thereof and each of the Rating Agencies shall have notified the Indenture Trustee, the Servicer, the Sponsor, the Depositor and the Issuing Entity in writing that such action will not result in a reduction,
qualification or withdrawal of the then current rating of the Notes that it maintains. 
 “Realized Loss”: The amount determined by
the Servicer, in accordance with its standard procedure, in connection with any Mortgage Loan equal to: 
 (i) with respect to any Mortgage
Loan which has been liquidated, the excess of the Principal Balance of that Mortgage Loan plus interest thereon at a rate equal to the applicable Mortgage Interest Rate less the Servicing Fee Rate from the Due Date as to which interest was last paid
or advanced up to the Due Date next succeeding such liquidation over Net Liquidation Proceeds, if any, received in connection with such liquidation, 
 (ii) with respect to any Mortgage Loan which has become the subject of a Deficient Valuation, the excess of the Principal Balance of the Mortgage Loan over the Principal Amount as reduced in connection with the
proceedings resulting in the Deficient Valuation or 
 (iii) with respect to any Mortgage Loan which has become the subject of a Debt Service
Reduction, the present value of all monthly Debt Service Reductions on such Mortgage Loan, assuming that the Mortgagor pays each scheduled monthly payment on the applicable due date and that no Principal Prepayments are received with respect to such
Mortgage Loan, discounted monthly at the applicable mortgage rate. 
 “Record Date”: With respect to the Notes, the last
Business Day immediately preceding the related Payment Date so long as the Notes are in book-entry form and for Notes in definitive form, the last Business Day of the month immediately preceding the month in which the Payment Date occurs.

 “Redemption Date”: The Payment Date, if any, on which the Notes are redeemed, in each case, pursuant to Article X of the
Indenture, which date may occur on or after the Clean-Up Call Date. 
 “Reference Banks”: Citibank, Barclay’s Bank PLC,
The Bank of Tokyo-Mitsubishi and National Westminster Bank PLC; provided, that if any of the foregoing banks are not suitable to serve as a Reference Bank, then any leading banks selected by the Indenture 

  

 A-34 

 
Trustee (after consultation with the Servicer) which are engaged in transactions in Eurodollar deposits in the international Eurocurrency market
(i) with an established place of business in London, (ii) not controlling, under the control of or under common control with the Servicer or the Indenture Trustee or any affiliate thereof and (iii) whose quotations appear on the
Telerate Page 3750 on the relevant Interest Determination Date. 
 “Regulation AB”: Subpart 229.1100 – Asset Backed
Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123, as such may be amended from time to time, and subject to such clarification and interpretation as have been provided by the Commission in the adopting release (Asset-Backed
Securities, Securities Act Release No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff of the Commission, or as may be provided by the Commission or its staff from time to time. 
 “Relevant Servicing Criteria”: The Servicing Criteria applicable to the various parties, as set forth on Exhibit H to the Sale and
Servicing Agreement. For clarification purposes, multiple parties can have responsibility for the same Relevant Servicing Criteria. With respect to a Servicing Function Participant engaged by the Servicer and the Indenture Trustee, the term
“Relevant Servicing Criteria” may refer to a portion of the Relevant Servicing Criteria applicable to such parties. 
 “Relief Act”: The Servicemembers Civil Relief Act, as amended. 
 “Relief Act Interest Shortfall”:
With respect to any Payment Date and a Mortgage Loan, an amount equal to the excess, if any, of (a) one month’s interest on the outstanding Principal Balance of a Mortgage Loan at the related Mortgage Interest Rate over (b) the amount
of interest due on such Mortgage Loan because of the application of the Servicemembers Civil Relief Act or any similar state law. 
 “REIT”: A real estate investment trust within the meaning of section 856(a) of the Code that satisfies the requirements of section 857(a). REIT shall also include any entity that is wholly-owned by a REIT and is disregarded
as an entity separate from its owner under Treasury Regulation Section 301.7701-3. 
 “REO Disposition”: As to any REO
Property, a determination by the Servicer that it has received substantially all Insurance Proceeds, Liquidation Proceeds, REO Proceeds and other payments and recoveries (including proceeds of a final sale) which the Servicer expects to be finally
recoverable from the sale or other disposition of the REO Property. 
 “REO Proceeds”: Proceeds, net of expenses, received
in respect of any REO Property (including, without limitation, proceeds from the rental of the related Mortgaged Property), which proceeds are required to be deposited into the Collection Account within two days of receipt by the Servicer.

 “REO Property”: A Mortgaged Property acquired by the Servicer in the name of the Indenture Trustee on behalf of the
Noteholders through foreclosure or deed-in-lieu of foreclosure. 
  

 A-35 

 “Request for Release”: A request for release in substantially the form attached as
Exhibit F of the Sale and Servicing Agreement. 
 “Required Overcollateralization Amount”: As to any Payment Date,
0.50% of the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date. 
 “Repurchase Event”: With respect
to any Mortgage Loan, either (i) a discovery that, as of the Closing Date the related Mortgage was not a valid lien on the related Mortgaged Property subject only to (A) the lien of real property taxes and assessments not yet due and
payable, (B) covenants, conditions, and restrictions, rights of way, easements and other matters of public record as of the date of recording of such Mortgage and such other permissible title exceptions as are permitted, (C) other matters
to which like properties are commonly subject which do not materially adversely affect the value, use, enjoyment or marketability of the related Mortgaged Property and (D) in the case of a second-lien Mortgage, the first-lien or (ii) with
respect to any Mortgage Loan as to which the Seller delivers an affidavit certifying that the original Mortgage Note has been lost or destroyed, a subsequent default on such Mortgage Loan if the enforcement thereof or of the related Mortgage is
materially and adversely affected by the absence of such original Mortgage Note. 
 “Repurchase Price”: With respect to any
Mortgage Loan (i) required to be repurchased on any date by the Sponsor pursuant to the Sale and Servicing Agreement or (ii) permitted to be purchased by the Servicer pursuant to 5.19 of the Sale and Servicing Agreement, an amount equal to
the sum, without duplication, of (i) 100% of the Principal Balance thereof (without reduction for any amounts charged off) and (ii) unpaid accrued interest at the Mortgage Interest Rate on the outstanding Principal Balance thereof from the
Due Date to which interest was last paid by the Mortgagor (or with respect to which an Advance was last made by the Servicer) to the first day of the month following the month of purchase plus (iii) the amount of any unreimbursed Servicing
Advances or unreimbursed Advances made with respect to such Mortgage Loan plus (iv) any other amounts owed to the Servicer or the Subservicer pursuant to Section 5.07 of the Sale and Servicing Agreement and not included in clause
(iii) of this definition plus (v) any costs and damages incurred by the Issuing Entity in connection with any violation by any Mortgage Loan of any predatory or abusive lending law or breach of representations and warranties regarding
licensing or any predatory or abusive lending law. 
 “Residential Dwelling”: A one- to four-family dwelling, a unit in a
planned unit development, a unit in a condominium development or a townhouse. 
 “Responsible Officer”: When used with
respect to the Indenture Trustee or the Owner Trustee, any officer assigned to the Corporate Trust Office (or any successor thereto), including any Vice President, Second or Assistant Vice President, Senior Trust Officer, Trust Officer, Assistant
Trust Officer, any Assistant Secretary, associate, any trust officer or any other officer of the Indenture Trustee or the Owner Trustee customarily performing functions similar to those performed by any of the above designated officers and to whom,
with respect to a particular matter, such matter is referred because of such officer’s knowledge of and familiarity with the particular subject, in each case having direct responsibility for the administration of the Indenture or the Trust
Agreement, as applicable. When used with respect to the Sponsor or the 

  

 A-36 

 
Servicer, the chief executive officer, the president or any vice president, assistant vice president, or any secretary or assistant secretary. 
 “Rolling 60-Day Delinquency Percentage”: For any Payment Date, the average of the 60-Day Delinquency Percentages for the Mortgage Loans
as of the last day of each of the three (or 1 and 2 in the case of the first two Distribution Dates, as applicable) most recently ended Due Periods. 
 “Rolling 90-Day Delinquency Percentage”: For any Payment Date, the average of the 90-Day Delinquency Percentages for the Mortgage Loans as of the last day of each of the three (or 1 and 2 in the case
of the first two Distribution Dates, as applicable) most recently ended Due Periods. 
 “Sale”: The meaning specified in
Section 5.17 of the Indenture. 
 “Sale and Servicing Agreement”: The Sale and Servicing Agreement, dated as of
April 1, 2006, among the Issuing Entity, the Servicer, the Sponsor, the Depositor, and the Indenture Trustee, providing for, among other things, the sale of the Mortgage Loans from the Sponsor to the Depositor and from the Depositor to the
Issuing Entity and the servicing of the Mortgage Loans. 
 “Securities Act”: Means the Securities Act of 1933, as amended.

 “Senior Credit Enhancement Percentage”: For any Payment Date is equal to (i) the sum of (a) the aggregate
Adjusted Class Note Balance of the Class M Notes and (b) the Overcollateralization Amount divided by (ii) the aggregate Principal Balance of the Mortgage Loans, calculated prior to taking into account payments of principal on the Mortgage
Loans and prior to taking into account payments on the Notes on such Payment Date. 
 “Servicer”: NovaStar Mortgage Inc., a
Virginia corporation, and its successors and assigns. 
 “Servicer Remittance Amount”: For a Servicer Remittance Date is
equal to the sum, without duplication, of: 
  

	 	•	 	all scheduled collections of principal of and interest on the Mortgage Loans collected by the Servicer during the related Due Period, 

  

	 	•	 	all partial prepayments of principal and other amounts collected on account of principal, including Net REO Proceeds, Net Liquidation Proceeds, Insurance Proceeds and Subsequent
Recoveries, if any, collected by the Servicer during the previous calendar month, other than Payaheads, 

  

	 	•	 	all principal prepayments in full, including Prepayment Charges, collected by the Servicer during the related Prepayment Period, 

  

 A-37 

	 	•	 	all Delinquency Advances made, and Compensating Interest paid, by the Servicer with respect to payments due to be received on the Mortgage Loans during the related Due Period, and

  

	 	•	 	any other amounts required to be placed in the Collection Account by the Servicer pursuant to the Sale and Servicing Agreement, 

 but excluding the following: 
  

	 	(a)	amounts received on a Mortgage Loan, other than timely scheduled payments of principal and interest, and including late payments, Liquidation Proceeds, and Insurance Proceeds, to
the extent the Servicer has previously made an unreimbursed Delinquency Advance or a Servicing Advance with regard to such Mortgage Loan; 

  

	 	(b)	for such Servicer Remittance Date, the aggregate servicing fees; 

  

	 	(c)	all net income from Eligible Investments that is held in the Collection Account for the account of the Servicer; 

  

	 	(d)	all amounts actually recovered by the Servicer in respect of late fees, assumption fees and similar fees; 

  

	 	(e)	Net Foreclosure Profits; 

  

	 	(f)	all amounts previously advanced by the Servicer as Delinquency Advances or Servicing Advances that are determined in good faith by the Servicer to be unrecoverable from the proceeds
of the particular Mortgage Loan to which they relate; 

  

	 	(g)	certain other amounts which are reimbursable to the Servicer, as provided in the Sale and Servicing Agreement; and 

  

	 	(h)	MI Premium. 

 The amounts described above may be withdrawn
by the Servicer from the Collection Account on or prior to each Servicer Remittance Date. 
 “Servicer Remittance Date”:
With respect to any Payment Date, the third Business Day preceding the Payment Date. 
 “Servicer Reporting Date”: As
defined in Section 5.24 of the Sale and Servicing Agreement. 
 “Service(s)(ing)”: In accordance with Regulation AB,
the act of servicing and administering the Mortgage Loans or any other assets of the Issuing Entity by an entity that meets the definition of “Servicer” set forth in Item 1101 of Regulation AB and is subject to the disclosure
requirements set forth in 1108 of Regulation AB. For clarification purposes, any 

  

 A-38 

 
uncapitalized occurrence of this term shall have the meaning commonly understood by participants in the residential mortgage-backed securitization market.

 “Servicing Advances”: All reasonable and customary “out-of-pocket” costs and expenses incurred in the
performance by the Servicer of its servicing obligations, including, but not limited to, the cost of (a) the preservation, restoration and protection of the Mortgaged Property, including, without limitation, real estate taxes, (b) any
enforcement, collection and judicial proceedings, including foreclosures and liquidations, (c) the management and liquidation of the REO Property, including reasonable fees paid to any independent contractor in connection therewith,
(d) compliance with the obligations under Sections 5.04 and 5.06 of the Sale and Servicing Agreement, all of which reasonable and customary out-of-pocket costs and expenses are reimbursable to the Servicer to the extent provided in Sections
5.07 and 5.06 of the Sale and Servicing Agreement and (e) expenses incurred in connection with any Mortgage Loan being registered on the MERS System. 
 “Servicing Criteria”: The criteria set forth in paragraph (d) of Item 1122 of Regulation AB, as such may be amended from time to time. 
 “Servicing Compensation”: The Servicing Fee and other amounts to which the Servicer is entitled pursuant to Section 5.15 of the
Sale and Servicing Agreement. 
 “Servicing Event of Default”: As defined in Section 7.01 of the Sale and Servicing
Agreement. 
 “Servicing Fee”: With respect to the Mortgage Loans and any Payment Date, the product of (i) the
Servicing Fee Rate divided by 12 and (ii) the Pool Balance as of the first day of the related Due Period (after giving effect to scheduled payments due during the related Due Period, to the extent received or advanced, and unscheduled
collections of principal received during the related Prepayment Period). 
 “Servicing Fee Rate”: With respect to any
Mortgage Loan, 0.50% per annum. 
 “Servicing Function Participant”: Any sub-servicer, subcontractor or any other
Person, other than the Servicer and the Indenture Trustee, that is performing activities addressed by the Servicing Criteria, unless such Person’s activities relate only to 5% or less of the Mortgage Loans. 
 “Servicing Officer”: Any officer of the Servicer involved in, or responsible for, the administration and servicing of the Mortgage Loans
whose name and specimen signature appear on a list of servicing officers furnished to the Indenture Trustee by the Servicer, as such list may from time to time be amended. 
 “Servicing Transfer Costs”: Reasonable and necessary costs and expenses incurred, by or on behalf of the Trustee or successor Servicer
in connection with the transfer of servicing in the event of termination of the Servicer as servicer hereunder and the resulting transfer to the successor Servicer. 
 “Sponsor”: NovaStar Mortgage Inc., a Virginia corporation. 
  

 A-39 

 “Standard & Poor’s” or “S&P”: Standard &
Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc. or any successor thereto and if such corporation no longer for any reason performs the services of a securities rating agency, “S&P” shall be deemed to refer
to any other nationally recognized statistical rating organization. 
 “Stated Principal Balance”: As to any Mortgage Loan
and Payment Date, the unpaid Principal Balance of such Mortgage Loan as of the Due Date in the related Due Period as specified in the amortization schedule at the time relating thereto (before any adjustment to such amortization schedule by reason
of any moratorium or similar waiver or grace period) after giving effect to (i) any previous Principal Prepayments in full received during the related Prepayment Period, (ii) any previous Curtailments and Liquidation Proceeds allocable to
principal received during the prior calendar month (other than with respect to any Liquidated Mortgage Loan) and (iii) the payment of principal due on the Due Date in the related Due Period and irrespective of any delinquency in payment by the
related Mortgagor. 
 “Statutory Trust Statute”: Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code § 3801
et seq., as the same may be amended from time to time. 
 “Subsequent Recovery”: With respect to any Mortgage Loan that had
previously been the subject of a Realized Loss, any amounts (net of reimbursable expenses) subsequently received in connection with such Mortgage Loan. 
 “Subservicer”: Any Person with which the Servicer has entered into a Subservicing Agreement and which meets the qualifications of a Subservicer pursuant to Section 5.02 of the Sale and Servicing
Agreement. 
 “Subservicing Account”: An account established by a Subservicer which meets the requirements set forth in
Section 5.06(d) of the Sale and Servicing Agreement and is otherwise acceptable to the Servicer. 
 “Subservicing
Agreement”: The written contract between the Servicer and a Subservicer relating to servicing and administration of certain Mortgage Loans as provided in Section 5.02 of the Sale and Servicing Agreement. 
 “Subservicing Fee”: With respect to each Mortgage Loan and any Payment Date, the portion of the Servicing Fee paid to a Subservicer.

 “Substitution Adjustment”: As to any date on which a substitution occurs pursuant to Sections 2.06 or 4.01 of the Sale
and Servicing Agreement, the amount (if any) by which the aggregate Principal Balances (after application of principal payments received on or before the date of substitution) of any Qualified Substitute Mortgage Loans as of the date of
substitution, are less than the aggregate Stated Principal Balance of the related Deleted Mortgage Loans (after application of the scheduled principal portion of the Monthly Payments due in the month of substitution) together with 30-days’
interest thereon at the Mortgage Interest Rate, plus any costs and damages incurred by the Issuing Entity in connection with any violation by such Mortgage Loan of any predatory or abusive lending law. 
  

 A-40 

 “Swap Agreements”: Any of the twenty interest rate Swap Agreements between between the
Issuing Entity and the related Swap Counterparty listed below. 
  

							
	 Hedge Counterparty
	  	Notional Amount ($)	  	Fixed Rate	 	Maturity Date
	Greenwich	  	80,000,000	  	4.7675%	 	November 2007
	Greenwich	  	20,000,000	  	4.84125%	 	November 2007
	Deutsche Bank	  	50,000,000	  	4.8860%	 	November 2007
	Wachovia	  	80,000,000	  	4.8950%	 	November 2007
	Greenwich	  	80,000,000	  	4.7200%	 	December 2007
	Greenwich	  	40,000,000	  	4.77875%	 	December 2007
	Greenwich	  	80,000,000	  	4.8400%	 	December 2007
	Deutsche Bank	  	80,000,000	  	4.77875%	 	January 2008
	Greenwich	  	20,000,000	  	4.7800%	 	November 2008
	Wachovia	  	20,000,000	  	4.9300%	 	November 2008
	Wachovia	  	20,000,000	  	4.7300%	 	December 2008
	Greenwich	  	20,000,000	  	4.8650%	 	December 2008
	Deutsche Bank	  	20,000,000	  	4.77875%	 	January 2009

 “Swap Amount”: The calculation of the Swap Amount is subject to the verification
and confirmation of the Swap Counterparties who are calculation agents for the Swap Agreements. Swap Amount shall mean, on each Payment Date on or prior to the date the related Swap Agreement is retired, the excess if any of (x) the product of
(i) the related fixed rate of interest, (ii) 30 divided by 360 and (iii) the related notional amount over (y) the product of (i) LIBOR, (ii) the actual number of days elapsed in the related Accrual Period divided by 360
and (iii) the related notional amount, (so long as such calculation results in a positive number). 
 “Swap Default”:
Any of the circumstances constituting an “Event of Default” under the Swap Agreement. 
 “Swap Counterparty”: The
Royal Bank of Scotland plc, Wachovia Bank, N.A., or Deutsche Bank AG, as applicable. 
 “Telerate Page 3750”: The display
page currently so designated on the Moneyline Telerate Service (or such other page as may replace that page on that service for the purpose of displaying comparable rates or prices). 
 “Termination Event”: As defined in the Swap Agreement. 
 “Termination Price”: The greater of (A) the sum of (i) 100% of the aggregate Class Note Balance of the Notes, (ii) the aggregate amount of accrued and unpaid interest on such Notes
through the related Due Period (including with respect to any related Available Funds Cap Shortfall Amount and any Deferred Interest), (iii) any Indenture Trustee’s fees and unpaid amounts due to the Indenture Trustee pursuant to
Section 7.06 of the Sale and Servicing Agreement, (iv) any Owner Trustee Fees or Expenses that have not been paid by the Sponsor, (v) any unreimbursed Delinquency Advances and Servicing Advances due and owing to the Servicer,
(vii) any costs and damages incurred by the Issuing Entity in connection with any 

  

 A-41 

 
violation by such Mortgage Loan of any predatory or abusive lending law, (viii) any Custodian Fees and expenses and (ix) all unpaid amounts, if
any, owing to the Hedge Counterparties and (B) the fair market value of the Mortgage Loans. 
 “Trigger Event”: A
Trigger Event is in effect on any Payment Date on or after the Crossover Date, if either (i) the Rolling 60 Day Delinquency Percentage exceeds 55.90% of the current Senior Credit Enhancement Percentage, or (ii) cumulative realized losses
as a percentage of the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date are greater than the applicable amount set forth below: 
  

			
	 Payment Date Occurring In:
	  	Percentage
	 May 2008
	  	1.50
	 June 2008
	  	1.58
	 July 2008
	  	1.65
	 August 2008
	  	1.73
	 September 2008
	  	1.80
	 October 2008
	  	1.88
	 November 2008
	  	1.95
	 December 2008
	  	2.03
	 January 2009
	  	2.10
	 February 2009
	  	2.18
	 March 2009
	  	2.25
	 April 2009
	  	2.33
	 May 2009
	  	2.40
	 June 2009
	  	2.45
	 July 2009
	  	2.50
	 August 2009
	  	2.55
	 September 2009
	  	2.60
	 October 2009
	  	2.65
	 November 2009
	  	2.70
	 December 2009
	  	2.75
	 January 2010
	  	2.80
	 February 2010
	  	2.85
	 March 2010
	  	2.90
	 April 2010
	  	2.95
	 May 2010
	  	3.00
	 June 2010
	  	3.04
	 July 2010
	  	3.08
	 August 2010
	  	3.13
	 September 2010
	  	3.17
	 October 2010
	  	3.21
	 November 2010
	  	3.25
	 December 2010
	  	3.29
	 January 2011
	  	3.33
	 February 2011
	  	3.38

  

 A-42 

			
	 March 2011
	  	3.42
	 April 2011
	  	3.46
	 May 2011
	  	3.50
	 June 2011
	  	3.54
	 July 2011
	  	3.58
	 August 2011
	  	3.63
	 September 2011
	  	3.67
	 October 2011
	  	3.71
	 November 2011
	  	3.75
	 December 2011
	  	3.79
	 January 2012
	  	3.83
	 February 2012
	  	3.88
	 March 2012
	  	3.92
	 April 2012
	  	3.96
	 May 2012 and thereafter
	  	4.00

 “Trust Agreement”: The Trust Agreement, dated as of March 13, 2006, as
amended and restated as of April 28, 2006, between the Sponsor, the Depositor and the Owner Trustee, relating to the establishment of the Issuing Entity. 
 “Trust Certificate”: A certificate evidencing the beneficial interest of the Trust Certificateholder in the Issuing Entity substantially in the form of Exhibit A to the Trust Agreement.

 “Trust Estate”: All money, instruments and other property subject or intended to be subject to the lien of the Indenture,
for the benefit of the Noteholders, as of any particular time, including, without limitation, all property and interests, including all proceeds thereof, granted to the Indenture Trustee, for the benefit of the Noteholders, pursuant to the Granting
Clauses of the Indenture. 
 “Trust Indenture Act” or “TIA”: The Trust Indenture Act of 1939, as it may be
amended from time to time. 
 “Trust Order” and “Trust Request”: A written order or request of the Issuing
Entity signed on behalf of the Issuing Entity by Servicer pursuant to Section 12.15 of the Trust Agreement or an Authorized Officer of the Owner Trustee, at the direction of the Certificateholders and delivered to the Indenture Trustee or the
Authenticating Agent, as applicable. 
 “Underwriter Exemption”: An individual prohibited transaction exemption, issued by
the U.S. Department of Labor, which is described in PTE 2000-58, 65 Fed. Reg. 67,765 (Nov. 13, 2000). 
 “Underwriters”:
Greenwich Capital Markets, Inc., Deutsche Bank Securities Inc., Wachovia Capital Markets, LLC and Morgan Stanley & Co. Incorporated, and their successors and assigns. 
  

 A-43 

 “Underwriting Guidelines”: The underwriting guidelines set forth in the Prospectus
Supplement under the heading “Description of the Mortgage Pool—Underwriting Standards for Mortgage Loans”. 
 “United
States Person” or “U.S. Person”: A citizen or resident of the United States, a corporation, partnership or other entity treated as a corporation or partnership for federal income tax purposes (other than a partnership that
is not treated as a U.S. Person pursuant to any applicable Treasury regulations) created or organized in, or under the laws of, the United States, any state thereof or the District of Columbia, or an estate the income of which from sources without
the United States is includible in gross income for United States federal income tax purposes regardless of its connection with the conduct of a trade or business within the United States, or a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or more United States persons have authority to control all substantial decisions of the Issuing Entity. 
 “Unpaid Interest Shortfall Amount”: For any Payment Date and Class of Notes, the sum of (a) the amount, if any, by which
(x) the Interest Payment Amount with respect to such Class as of the immediately preceding Payment Date exceeded (y) the amount of interest actually paid to the holders of such Class of Notes on such immediately preceding Payment Date and
(b) interest for the actual number of days in the Interest Accrual Period, on the amount described in clause (a), calculated at an interest rate equal to the Note Rate applicable to the related Interest Accrual Period. 
  

 A-44 

 SCHEDULE 1 
 MORTGAGE LOAN SCHEDULE 

 SCHEDULE 2 
 SWAP NOTIONAL BALANCES 

 SCHEDULE 3 
 CAP NOTIONAL BALANCES 

 EXHIBIT A 
 FORM OF NOTE 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1 
 CLASS
[                                ] NOTE 
 UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE ISSUING
ENTITY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN. 
 [THIS NOTE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE “1933 ACT”), OR THE DISPOSITION OF THIS NOTE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF THE
INDENTURE.] 
 THE NOTE IS A NON-RECOURSE OBLIGATION OF THE ISSUING ENTITY, AND IS LIMITED IN RIGHT OF PAYMENT TO AMOUNTS AVAILABLE FROM THE
TRUST ESTATE AS PROVIDED IN THE INDENTURE REFERRED TO BELOW. THE ISSUING ENTITY IS NOT OTHERWISE PERSONALLY LIABLE FOR PAYMENTS ON THIS NOTE. 
 THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. 
 THE CLASS M NOTES ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS A NOTES, AND EACH CLASS OF CLASS M NOTES IS SUBORDINATED IN RIGHT OF PAYMENT TO THE
OTHER CLASSES OF CLASS M NOTES THAT HAVE A NUMERICAL DESIGNATION THAT IS LESS THAN SUCH CLASS, AS SET FORTH MORE FULLY IN THE INDENTURE AND THE SALE AND SERVICING AGREEMENT. 
  

			
		  	
	Note No.:	  	CUSIP No.:
	A-[________/ M- _________	  	
	Class A- ___________]	  	Percentage Interest:            

  

 EX A-1 

					
	 Class M-_______________
 Original Class Note
Balance:
                     $____________
	  	100%
	 Date of Indenture:
As of
                                        
    , 2006
	  	First Payment Date: ________________________, 2006	  	
		  		  	

  

 EX A-2 

 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1 
 ASSET-BACKED NOTES, SERIES 2006-1, 
 CLASS
A-                        /CLASS
M-                         
 NovaStar Mortgage Funding Trust, Series 2006-1, a statutory trust organized and existing under the laws of the State of Delaware (herein referred to as the “Issuing Entity”), for value received,
hereby promises to pay to CEDE & CO., or registered assigns, the principal sum of $                        
(                                        
             Thousand Dollars) payable on each Payment Date in an amount equal to the result obtained by multiplying (x) the Percentage Interest of this Note set forth on the cover
page hereof, by (y) the aggregate amount, if any, payable from the Payment Account in respect of principal on the
Class A-[                        ]/Class
M-[                            ] Notes, pursuant to the Indenture, dated as of April 1, 2006,
between the Issuing Entity, JPMorgan Chase Bank, National Association, a banking association organized under the laws of the United States, as Indenture Trustee (the “Indenture Trustee”) and J.P. Morgan Trust Company, National Association,
as Co-Trustee (the “Co-Trustee”); provided, however, that the entire unpaid Class Note Balance of this Note shall be due and payable on the earlier of (i) the Payment Date occurring in May 2036 (the “Final Stated
Maturity Date”), (ii) the Redemption Date, if any, applicable to this Notes pursuant to Article X of the Indenture or (iii) the date on which an Event of Default shall have occurred and be continuing, if the Notes have been
declared to be immediately due and payable in the manner provided in Section 5.02 of the Indenture. Capitalized terms used but not defined herein are defined in Appendix I to the Indenture. 
 Pursuant to the terms of the Indenture, payments will be made on the 25th day of each month or, if such day is not a Business Day, on the Business Day
immediately following such 25th day (each a “Payment Date”), commencing on the first Payment Date specified on the cover page hereof, to the Person in whose name this Note is registered at the close of business on the applicable
Record Date, in an amount equal to the product of (a) the Percentage Interest evidenced by this Note and (b) the sum of the amounts to be paid on the Class A and Class M Notes with respect to such Payment Date, all as more
specifically set forth in the Indenture. 
 Notwithstanding the foregoing, in the case of Definitive Notes, upon written request at least
five (5) days prior to the related Record Date with appropriate instructions by the Holder of this Note (holding an aggregate initial Class Note Balance of at least $1,000,000), any payment of principal or interest, other than the final
installment of principal or interest, shall be made by wire transfer to an account in the United States of America designated by such Holder reasonably satisfactory to the Indenture Trustee. 
 On each Payment Date, Noteholders will be entitled to receive the payment described in Article VIII of the Indenture, relating to such Payment Date.

 The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts. All payments made by the Issuing Entity with respect to this Note shall be applied first to interest due and payable on this Note as provided above and then to the unpaid principal of this
Note. 
  

 EX A-3 

 This Note is one of a duly authorized issue of Notes of the Issuing Entity, designated as the
“NovaStar Mortgage Funding Trust, Series 2006-1, Asset-Backed Notes, Series 2006-1,
Class A-                            ]/Class
M-[                            ],” issued under the Indenture, to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuing Entity, the Indenture Trustee and the Holders of the Notes. Also issued under the Indenture are the
“NovaStar Mortgage Funding Trust, Series 2006-1, Asset-Backed Notes, Series 2006-1,
Class A-[                            ]]/Class
M-[                        ]].” To the extent that any provision of this Note contradicts or is inconsistent with the
provisions of the Indenture, the provisions of the Indenture shall control and supersede such contradictory or inconsistent provision herein. The Notes are subject to all terms of the Indenture. 
 The
Class A-[                            ]/Class
M-[                            ]Notes are and will be equally and ratably secured by the Mortgage
Loans in Loan Group [I][II], the other collateral related thereto pledged as security therefor as provided in the Indenture, and, to the extent provided in the Indenture, by the Mortgage Loans in Loan Group [I][II]. 
 As described above, the entire unpaid Class Note Balance of this Note shall be due and payable on the earlier of the Final Stated Maturity Date and any
Redemption Date, pursuant to Article X of the Indenture. Notwithstanding the foregoing, the entire unpaid Class Note Balance of the Notes shall be due and payable on the date on which an Event of Default shall have occurred and be continuing if the
Indenture Trustee, or the Holders of the Notes representing more than 50% of the Class Note Balance of the Outstanding Notes of both Groups, shall have declared the Notes to be immediately due and payable in the manner provided in Section 5.02
of the Indenture. All principal payments on the Notes shall be made pro rata to the Noteholders entitled thereto. 
 The Issuing Entity shall
not be liable upon the indebtedness evidenced by the Notes except to the extent of amounts available from the Trust Estate which constitutes security for the payment of the Notes. The assets included in the Trust Estate will be sole source of
payments on the Notes, and each Holder hereof, by its acceptance of this Note, agrees that (i) such Note will be limited in right of payment to amounts available from the Trust Estate as provided in the Indenture and (ii) such Holder shall
have no recourse to the Issuing Entity, the Owner Trustee, the Indenture Trustee, the Sponsor, the Depositor, the Servicer, or any of their respective affiliates, or to the assets of any of the foregoing entities, except the assets of the Issuing
Entity pledged to secure the Notes pursuant to the Indenture. 
 Payments of interest on this Note due and payable on each Payment Date,
together with the installment of principal, if any, to the extent not in full payment of this Note, shall be made by wire transfer in immediately available funds to the account designated by such nominee, or if no instructions for wire transfers
have been provided to the Indenture Trustee as provided in the Indenture, then by check mailed to the Person whose name appears as the Holder of this Note (or one or more Predecessor Notes) on the Note Register as of the close of business on each
Record Date. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Note Register as of the applicable Record Date without requiring that this Note be submitted for notation of payment. Any
reduction in the principal amount of this Note (or any one or more Predecessor Notes) effected by any payments made on any Payment Date shall be 

  

 EX A-4 

 
binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then remaining unpaid principal amount of this Note on a Payment Date, then the Indenture Trustee, in the name of and on behalf of
the Issuing Entity, will notify the Person who was the Holder hereof as of the Record Date preceding such Payment Date by notice mailed or transmitted by facsimile prior to such Payment Date, and the amount then due and payable shall be payable only
upon presentation and surrender of this Note at the Indenture Trustee’s designated office or at the office of the Indenture Trustee’s agent designated for such purposes. 
 As provided in the Indenture, all Classes of Notes may be redeemed in whole, but not in part, at the option of the Sponsor on any Payment Date on and
after the date on which the outstanding Principal Balance of the Mortgage Loans is less than or equal to 10% of the aggregate Principal Balance of the Mortgage Loans, in each case after giving effect to distributions on that Payment Date.

 As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note
Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuing Entity pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the
Indenture Trustee duly executed by, the Holder hereof or such Holder’s attorney duly authorized in writing, with such signature guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which
requirements include membership or participation in the Securities Transfer Agent’s Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Note Registrar in addition to, or in
substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended, and thereupon one or more new Notes of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee
or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection
with any such registration of transfer or exchange. 
 In the case of a transfer of a
Class A-[                                    ]/Class
M-[                                    ] Note, the Note
Registrar shall not register the transfer of this Note unless the Note Registrar has received a representation letter from the transferee to the effect that either (i) the transferee is not a Plan and is not, directly or indirectly, acquiring
this Note or any interest herein on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with the assets of a Plan or (ii) the acquisition and holding of this Note by the transferee qualifies for exemptive relief under
a United States Department of Labor prohibited transaction class exemption (or, if the transferee is a Governmental Plan, will not result in a violation of applicable law). Each Beneficial Owner, by acceptance of a beneficial interest herein, shall
be deemed to make one of the foregoing representations. 
 Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the case of a
Beneficial Owner, a beneficial interest in a Note, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuing Entity, the Owner Trustee or the Indenture Trustee on the Notes or under
the Indenture or any certificate or other 

  

 EX A-5 

 
writing delivered in connection therewith, against (i) the Indenture Trustee or the Owner Trustee in its individual capacity, (ii) any owner of a
beneficial interest in the Issuing Entity or (iii) any partner, owner, beneficiary, agent, officer, director or employee of the Indenture Trustee or the Owner Trustee in its individual capacity, any holder of a beneficial interest in the
Issuing Entity, the Owner Trustee or the Indenture Trustee or of any successor or assign of the Indenture Trustee or the Owner Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner,
owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity. 
 Each Noteholder or Beneficial Owner, by acceptance of a Note or, in the case of a Beneficial Owner, a beneficial interest in a Note, covenants and agrees
by accepting the benefits of the Indenture that such Noteholder or Beneficial Owner will not at any time institute against the Issuing Entity, or join in any institution against the Issuing Entity of, any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings under any United States federal or state bankruptcy or similar law in connection with any obligations relating to the Notes; the Indenture, the Trust Agreement and the Sale and Servicing Agreement (the
“Basic Documents”). 
 The Issuing Entity has entered into the Indenture and this Note is issued with the intention that,
for federal, state and local income, single business and franchise tax purposes, the Notes will qualify as indebtedness secured by the Trust Estate. Each Noteholder, by acceptance of a Note (and each Beneficial Owner by acceptance of a beneficial
interest in a Note), agrees to treat the Notes for federal, state and local income, single business and franchise tax purposes as indebtedness. 
 Prior to the due presentment for registration of transfer of this Note, the Issuing Entity, the Indenture Trustee and any agent of the Issuing Entity or the Indenture Trustee may treat the Person in whose name this Note (as of the day of
determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and none of the Issuing Entity, the Indenture Trustee or any such agent shall be
affected by notice to the contrary. 
 The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the
modification of the rights and obligations of the Issuing Entity and the rights of the Holders of the Notes under the Indenture at any time by the Issuing Entity with the consent of the Holders of Notes representing a majority of the Class Note
Balance of the Outstanding Notes affected thereby. The Indenture also contains provisions permitting the Holders of Notes representing specified percentages of the Class Note Balance of Outstanding Notes, on behalf of the Holders of all the Notes,
to waive compliance by the Issuing Entity with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note (or any one or more Predecessor Notes)
shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is
made upon this Note. The Indenture also permits the amendment thereof, in certain limited circumstances, or the waiver of certain terms and conditions set forth in the Indenture, without the consent of Holders of the Notes issued thereunder.

  

 EX A-6 

 The term “Issuing Entity” as used in this Note includes any successor to the Issuing Entity
under the Indenture. 
 Initially, each Class of Notes will be represented by one Note registered in the name of Cede & Co. as
nominees of the Clearing Agency. The Notes will be delivered in denominations as provided in the Indenture and subject to certain limitations therein set forth. The Notes are exchangeable for a like aggregate initial Class Note Balance of Notes of
different authorized denominations, as requested by the Holder surrendering the same. 
 THIS NOTE AND THE INDENTURE SHALL BE CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 
 No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuing Entity, which
is absolute and unconditional, to pay the principal of and interest on this Note at the times, place and rate, and in the coin or currency herein prescribed. 
 Unless the certificate of authentication hereon has been executed by the Authenticating Agent whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred
to herein, or be valid or obligatory for any purpose. 
  

 EX A-7 

 IN WITNESS WHEREOF, the Issuing Entity has caused this Instrument to be signed, manually or in facsimile,
by its Authorized Officer, as of the date set forth below. 
 Dated: April 28, 2006 
  

			
	 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1

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

  

 EX A-8 

 CERTIFICATE OF AUTHENTICATION 
 This is one of the Notes designated above and referred to in the within-mentioned Indenture. 
 Dated: April 28, 2006 
  

			
	 JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
as Authenticating Agent

		
	By:	 	  
		 	 Authorized Signatory

  

 EX A-1 

 ASSIGNMENT 
 Social Security or taxpayer I.D. or other identifying number of assignee: 
 FOR VALUE RECEIVED, the
undersigned hereby sells, assigns and transfers unto: 
 _____________________________________________________________________________

 (name and address of assignee) 
 the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints
                                        
    , attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises. 
 Dated:                             */ 
 Signature Guaranteed: 
                                       
  */ 
  

	*/	NOTICE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration,
enlargement or any change whatever. Such signature must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Note Registrar, which requirements include membership or participation in STAMP or such other
“signature guarantee program” as may be determined by the Note Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. 

  

 EX A-2 

 Exhibit B 
 Form of Investment Letter 
 NovaStar Mortgage, Inc. 
 8140 Ward Parkway, Suite 300 
 Kansas City, Missouri 64114 
 Attention: Chris Miller, Senior Vice President 
 JPMorgan Chase Bank, National Association 
 4 New York Plaza, 6th Floor

 New York, New York 10004 
 Attn: Worldwide Securities
Services/Structured Finance Services - NovaStar Series 2006-1 
 Ladies and Gentlemen: 
 The undersigned (the “Transferee”) has agreed to purchase from
                     (the “Transferor”) the following notes: 
  

			
	 Class
	  	Number
	 ____
	  	
	 ____
	  	
	 ____
	  	
	 ____
	  	
	 ____
	  	

 I. The Transferee is (check one): 
  

			
	 ̈	 	 (i) An insurance company, as defined in Section 2(13) of the Securities Act of 1933, as amended (the “Securities Act”), (ii) an investment company
registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), (iii) a business development company as defined in Section 2(a)(48) of the Securities Act, (iv) a Small Business Investment Company licensed by
the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended, (v) a plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or
its political subdivisions, for the benefit of its employees, (vi) a business development company as defined in Section 202(a)(22) of the Investment Advisors Act of 1940, as amended, (vii) an organization described in Section 501(c)(3) of the
Internal Revenue Code, corporation (other than a bank as defined in Section 3(a)(2) of the Securities Act or a savings and loan association or other institution referenced in Section 3(a)(2) of the Securities Act or a foreign bank or savings and
loan association or equivalent institution), partnership, or Massachusetts or similar business trust; or

  

 EX B-1 

			
		  	(viii) an investment advisor registered under the Investment Advisors Act of 1940, as amended, which, for each of (i) through (viii), owns and invests on a discretionary basis at least $100
million in securities other than securities of issuers affiliated with the Transferee, securities issued or guaranteed by the United States or a person controlled or supervised by and acting as an instrumentality of the government of the United
States pursuant to authority granted by the Congress of the United States, bank deposit notes and certificates of deposit, loan participations, repurchase agreements, securities owned but subject to a repurchase agreement, and currency, interest
rate and commodity swaps (collectively, “Excluded Securities”);
		
	 ̈	  	 a dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that in the aggregate owns and
invests on a discretionary basis at least $10 million of securities other than Excluded Securities and securities constituting the whole or part of an unsold allotment to, or subscription by, Transferee as a participant in a public
offering;

		
	 ̈	  	 an investment company registered under the Investment Company Act that is part of a family of investment companies (as defined in Rule 144A of the Securities
and Exchange Commission) which own in the aggregate at least $100 million in securities other than Excluded Securities and securities of issuers that are part of such family of investment companies;

		
	 ̈	  	 an entity, all of the equity owners of which are entities described in this Paragraph A(I);

		
	 ̈	  	 a bank as defined in Section 3(a)(2) of the Securities Act, any savings and loan association or other institution as referenced in Section 3(a)(5)(A) of the
Securities Act, or any foreign bank or savings and loan association or equivalent institution that in the aggregate owns and invests on a discretionary basis at least $100 million in securities other than Excluded Securities and has an audited net
worth of at least $25 million as demonstrated in its latest annual financial statements, as of a date not more than 16 months preceding the date of transfer of the Certificates to the Transferee in the case of a U.S. Bank or savings and loan
association, and not more than 18 months preceding such date in the case of a foreign bank or savings association or equivalent institution.

 II. The Transferee is acquiring such Notes solely for its own account, for the account of one or
more others, all of which are “Qualified Institutional Buyers” within the meaning of Rule 144A, or in its capacity as a dealer registered pursuant to Section 15 of the 

  

 EX B-2 

 
Exchange Act acting in a riskless principal transaction on behalf of a “Qualified Institutional Buyer”. The Transferee is not acquiring such Note
with a view to or for the resale, distribution, subdivision or fractionalization thereof which would require registration of the Note under the Securities Act. 
 III. The Transferee represents that either (i) it is not (A) an employee benefit plan (as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) that
is subject to the provisions of Title I of ERISA, (B) a plan (as defined in section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the “Code”)) that is subject to Section 4975 of the Code, or (C) a governmental
plan (as defined in Section 3(32) of ERISA) that is subject to any federal, state or local law that is, to a material extent, similar to Title I of ERISA or Section 4975 of the Code (each, a “Plan”), and is not, directly or
indirectly, acquiring the Notes on behalf of, as investment manager of, as named fiduciary of, as trustee of, or with the assets of a Plan or (ii) its acquisition and holding of the Notes qualifies for exemptive relief under a United States
Department of Labor prohibited transaction class exemption (or, if the Transferee is a Governmental Plan, will not result in a violation of applicable law). 
  

			
	Very truly yours,
		
	By:	 	  
		 	 Title: ________________________________________

  

 EX B-3Amended and Restated Trust Agreement

 Exhibit 4.2 
 AMENDED AND RESTATED TRUST AGREEMENT 
 dated as of April 28, 2006 
 by and among 
 NOVASTAR CERTIFICATES FINANCING
CORPORATION 
 as Depositor, 
 and

 WILMINGTON TRUST COMPANY, 
 as
Owner Trustee 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1 
 Asset-Backed Notes, Series 2006-1 

 TABLE OF CONTENTS 
  

					
	ARTICLE I
	DEFINITIONS
	 Section 1.01.
	  	 Capitalized Terms
	  	1
	 Section 1.02.
	  	 Other Definitional Provisions
	  	5
	
	ARTICLE II
	ORGANIZATION
			
	 Section 2.01.
	  	 Name
	  	5
	 Section 2.02.
	  	 Office
	  	5
	 Section 2.03.
	  	 Purposes and Powers
	  	6
	 Section 2.04.
	  	 Appointment of Owner Trustee
	  	6
	 Section 2.05.
	  	 Initial Capital Contribution of Owner Trust Estate
	  	6
	 Section 2.06.
	  	 Declaration of Trust
	  	7
	 Section 2.07.
	  	 Liability of the Certificateholders
	  	7
	 Section 2.08.
	  	 Title to Trust Property
	  	7
	 Section 2.09.
	  	 Situs of Issuing Entity
	  	7
	 Section 2.10.
	  	 Federal Income Tax Treatment of the Issuing Entity
	  	7
	 Section 2.11.
	  	 Covenants of the Certificateholders
	  	8
	 Section 2.12.
	  	 Representations and Warranties of the Depositor
	  	8
	 Section 2.13.
	  	 Covenants of the Depositor
	  	9
	
	ARTICLE III
	[Reserved]
	
	ARTICLE IV
	CERTIFICATES AND TRANSFER OF INTERESTS
			
	 Section 4.01.
	  	 Initial Ownership
	  	10
	 Section 4.02.
	  	 The Certificates
	  	10
	 Section 4.03.
	  	 Execution, Authentication and Delivery of Certificates
	  	10
	 Section 4.04.
	  	 Registration of Transfer and Exchange of Certificates
	  	11
	 Section 4.05.
	  	 Mutilated, Destroyed, Lost or Stolen Certificates
	  	12
	 Section 4.06.
	  	 Persons Deemed Owners
	  	12
	 Section 4.07.
	  	 Access to List of Certificateholders’ Names and Addresses
	  	12
	 Section 4.08.
	  	 Maintenance of Office or Agency
	  	12
	 Section 4.09.
	  	 Restrictions on Transfers of Certificates
	  	13
	
	ARTICLE V
	ACTIONS BY OWNER TRUSTEE
			
	 Section 5.01.
	  	 Prior Notice to the Certificateholders with Respect to Certain Matters
	  	15
	 Section 5.02.
	  	 Action by Certificateholders with Respect to Bankruptcy
	  	17

  

 i 

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

  

 ii 

					
	ARTICLE XI
	SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES
			
	 Section 11.01.
	  	 Eligibility Requirements for Owner Trustee
	  	29
	 Section 11.02.
	  	 Resignation or Removal of Owner Trustee
	  	29
	 Section 11.03.
	  	 Successor Owner Trustee
	  	29
	 Section 11.04.
	  	 Merger or Consolidation of Owner Trustee
	  	30
	 Section 11.05.
	  	 Appointment of Co-Trustee or Separate Trustee
	  	30
	
	ARTICLE XII
	MISCELLANEOUS
			
	 Section 12.01.
	  	 Supplements and Amendments
	  	32
	 Section 12.02.
	  	 No Legal Title to Owner Trust Estate in Certificateholders
	  	33
	 Section 12.03.
	  	 Limitations on Rights of Others
	  	33
	 Section 12.04.
	  	 Notices
	  	33
	 Section 12.05.
	  	 Severability
	  	34
	 Section 12.06.
	  	 Separate Counterparts
	  	34
	 Section 12.07.
	  	 Successors and Assigns
	  	34
	 Section 12.08.
	  	 No Petition
	  	34
	 Section 12.09.
	  	 No Recourse
	  	34
	 Section 12.10.
	  	 Headings
	  	34
	 Section 12.11.
	  	 GOVERNING LAW
	  	34
	 Section 12.12.
	  	 [Intentionally Omitted.]
	  	35
	 Section 12.13.
	  	 Third-Party Beneficiaries
	  	35
	 Section 12.14.
	  	 [Intentionally Omitted.]
	  	35
	 Section 12.15.
	  	 Servicer
	  	35

 EXHIBITS 
  

			
	 Exhibit A
	  	 Form of Trust Certificate

	 Exhibit B
	  	 Form of Certificate of Trust

	 Exhibit C
	  	 Form of Investment Letter

	 Exhibit D
	  	 Form of Transferor Certificate

	 Exhibit E
	  	 Form of Class C Certificate

  

 iii 

 This AMENDED AND RESTATED TRUST AGREEMENT, dated as of April 28, 2006, is between NOVASTAR
CERTIFICATES FINANCING CORPORATION, a Delaware corporation, as depositor (the “Depositor”) and WILMINGTON TRUST COMPANY, a Delaware banking corporation, as owner trustee (the “Owner Trustee”). 
 NOW, THEREFORE, in consideration of the mutual agreements herein contained, and of other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the parties hereto agree as follows: 
 ARTICLE I 
 DEFINITIONS 
 Section 1.01.
Capitalized Terms. For all purposes of this Agreement, the following terms shall have the meanings set forth below: 
 “Agreement” shall mean this Trust Agreement, as may be amended and supplemented from time to time. 
 “Authorized Officer” shall have the meaning assigned thereto in Appendix I to the Indenture. 
 “Basic Documents” shall mean this Agreement, the Sale and Servicing Agreement, the Indenture and the Hedge Agreements. 
 “Business Day” shall mean any day other than (i) a Saturday or Sunday or (ii) a day that is either a legal holiday or a day on which banking institutions in the State of New York, the State
of Delaware, the State of Missouri, or the state in which the Indenture Trustee’s office from which payments will be made to the Certificateholder, are authorized or obligated by law, regulation or executive order to be closed. 
 “Cap Counterparty” Wachovia Bank, N.A. 
 “Certificate” shall mean each Trust Certificate and each Class C Certificate. 
 “Certificateholder” shall mean each Person in whose name a Trust Certificate and a Class C Certificate is registered.

 “Certificate of Trust” shall mean the Certificate of Trust, in the form of Exhibit B, to be filed
for the Issuing Entity pursuant to Section 3810(a) of the Statutory Trust Statute. 
 “Certificate
Register” and “Certificate Registrar” shall mean the register mentioned and the registrar appointed pursuant to Section 4.04. 
 “Class C Certificate”: A certificate entitling the Certificateholder to (i) receive payments from Excess Cashflow,
(ii) receive all collected Prepayment Charges, (iii) the Overcollateralization Amount and representing a. beneficial interest of the Certificateholder in the Issuing Entity substantially in the form of Exhibit E to the Trust
Agreement. 
  

 1 

 “Class Note Balance” shall have the meaning assigned to such term in the
Indenture. 
 “Code” shall mean the Internal Revenue Code of 1986, as amended, and, where appropriate in
context, Treasury Regulations promulgated thereunder. 
 “Corporate Trust Office” shall mean, with respect to
the Owner Trustee, an office of the Owner Trustee which for purposes of the Agreement is located at Wilmington Trust Company, 1100 North Market Street, Wilmington, Delaware 19890-0001, facsimile number: (302) 636-4140, Attention: Corporate
Trust Administration; or at such other address as the Owner Trustee may designate by notice to the Certificateholders and the Depositor, or an office of any successor Owner Trustee (the address of which the successor Owner Trustee will notify the
Certificateholders and the Depositor). 
 “Depositor” shall mean NovaStar Certificates Financing Corporation,
a Delaware corporation. 
 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended. 
 “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended. 
 “Expenses” shall have the meaning assigned to such term in Section 9.02. 
 “Group I Mortgage Loans” shall mean a pool of fixed- and adjustable-rate mortgage loans, as identified in the related
Mortgage Loan Schedule. 
 “Group II Mortgage Loans” shall mean a pool of fixed- and adjustable-rate mortgage
loans, as identified in the related Mortgage Loan Schedule. 
 “Hedge Agreements” the interest rate swap
agreements, dated as of April 28, 2006, between the Issuing Entity and the Swap Providers and the cap agreements, dated as of April 28, 2006, between the Issuing Entity and the Cap Counterparty. 
 “Hedge Providers” means collectively, the Swap Providers and the Cap Counterparty. 
 “Indenture” shall mean the Indenture, dated as of April 1, 2006, by and between the Issuing Entity and the Indenture
Trustee. 
 “Indenture Trustee” means JPMorgan Chase Bank, National Association, as Indenture Trustee under
the Indenture. 
 “Investment Letter” shall have the meaning assigned to such term in Section 4.04.

 “Issuing Entity” shall mean the NovaStar Mortgage Funding Trust, Series 2006-1, the Delaware statutory
trust created pursuant to this Agreement. 
  

 2 

 “Loan Group” shall mean either Loan Group I or Loan Group II.

 “Loan Group I” shall mean the Group I Mortgage Loans. 
 “Loan Group II” shall mean the Group II Mortgage Loans. 
 “Mortgage Loans” shall mean the Group I Mortgage Loans and the Group II Mortgage Loans. 
 “Non-U.S. Person” shall mean an individual, corporation, partnership or other person other than a United States Person.

 “Noteholder” shall have the meaning assigned to such terms in the Indenture. 
 “Notes” shall mean the Class A-1A Notes, Class A-2A Notes, Class A-2B Notes, Class A-2C Notes,
Class A-2D Notes, Class M-1 Notes, Class M-2 Notes, Class M-3 Notes, Class M-4 Notes, Class M-5 Notes and Class M-6 Notes, Class M-7 Notes, Class M-8 Notes, Class M-9 Notes, Class M-10 Notes and Class M-11 Notes. 
 “Outstanding” shall have the meaning assigned to such term in the Indenture. 
 “Ownership Interest” means, with respect to any Certificate, any ownership or security interest in such Certificate,
including any interest in such Certificate as the Certificateholder thereof and any other interest therein, whether direct or indirect, legal or beneficial, as owner or as pledgee. 
 “Owner Trust Estate” shall mean the Trust Estate, including the contribution of $1 referred to in Section 2.05
hereof. 
 “Owner Trustee” shall mean Wilmington Trust Company, a Delaware banking corporation, not in its
individual capacity but solely as owner trustee under this Agreement, and any successor owner trustee hereunder. 
 “Owner Trustee Information” shall mean the information in (a) the Free Writing Prospectus contained in the first two paragraphs under the heading “The Owner Trustee” and (b) the Prospectus Supplement or
any amendment or supplement thereto contained in the first two paragraphs under the heading “The Owner Trustee.” 
 “Payment Date” shall mean the 25th day of each month or, if such 25th day is not a Business Day, the next succeeding Business Day, commencing May 25, 2006. 
 “Percentage Interest” shall mean with respect to any Certificate, the percentage portion of the Certificates evidenced
thereby as stated on the face of such Certificate. 
 “Plan” shall mean (i) an employee benefit plan
(within the meaning of Section 3(3) of ERISA) that is subject to Title I of ERISA, (ii) a plan (within the meaning of Section 4975(e)(1) of the Code) that is subject to Section 4975 of the Code or (iii) a governmental plan

  

 3 

 
(within the meaning of Section 3(32) of ERISA) that is subject to any federal, state or local law that is, to a material extent, similar to Title I of
ERISA or Section 4975 of the Code. 
 “Prospective Holder” shall have the meaning set forth in
Section 4.09(a). 
 “Rating Agency Condition” means, with respect to any action to which a Rating Agency
Condition applies, that each Rating Agency shall have been given ten (10) days (or such shorter period as is acceptable to each Rating Agency) prior notice thereof and that each of the Rating Agencies shall have notified the Indenture Trustee,
the Depositor, the Sponsor, the Servicer, the Owner Trustee and the Issuing Entity in writing that such action will not result in a reduction or withdrawal of the then current rating of the Notes that it maintains. 
 “Record Date” shall mean, with respect to the Certificates and any Payment Date, the last Business Day of the month
preceding the month in which the related Payment Date occurs. 
 “Sale and Servicing Agreement” shall mean
the Sale and Servicing Agreement, dated as of April 1, 2006, among the Sponsor, the Issuing Entity, the Depositor, the Indenture Trustee, and the Servicer. 
 “Secretary of State” shall mean the Secretary of State of the State of Delaware. 
 “Servicer” shall mean NovaStar Mortgage Inc., a Virginia corporation, or any successor servicer appointed pursuant to the
Sale and Servicing Agreement. 
 “Sponsor” shall mean NovaStar Mortgage Inc., a Virginia corporation.

 “Statutory Trust Statute” shall mean Chapter 38 of Title 12 of the Delaware Code, 12 Del. Code
§ 3801 et seq., as the same may be amended from time to time. 
 “Swap Providers” The Royal Bank of
Scotland plc, Wachovia Bank, N.A., or Deutsche Bank AG, as applicable. 
 “Transfer” means any direct or
indirect transfer, sale, pledge, hypothecation or other form of assignment of any Ownership Interest in a Certificate. 
 “Treasury Regulations” shall mean regulations, including proposed or temporary regulations, promulgated under the Code. References herein to specific provisions of proposed or temporary regulations shall include analogous
provisions of final Treasury Regulations or other successor Treasury Regulations. 
 “Trust Certificate”
shall mean a certificate evidencing the beneficial interest of the Certificateholder in the Issuing Entity, substantially in the form attached hereto as Exhibit A. 
 “Underwriters” shall mean Greenwich Capital Markets, Inc., Deutsche Bank Securities Inc., Wachovia Capital Markets, LLC
and Morgan Stanley & Co. Incorporated. 
  

 4 

 Section 1.02. Other Definitional Provisions. 
 (a) Capitalized terms used herein and not otherwise defined herein have the meanings assigned to them in Appendix I to the Indenture and
the Sale and Servicing Agreement. 
 (b) All terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise defined therein. 
 (c) As used in this
Agreement and in any certificate or other document made or delivered pursuant hereto or thereto, accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this Agreement or in
any such certificate or other document to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any
such certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such certificate or other document shall control. 

(d) The words “hereof,” “herein,” “hereunder” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Section and Exhibit references contained in this Agreement are references to Sections and Exhibits in or to this Agreement unless otherwise specified;
and the term “including” shall mean “including without limitation.” 
 (e) The definitions contained in
this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such terms. 
 (f) Any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection
herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein;
references to a Person are also to its permitted successors and assigns. 
 ARTICLE II 
 ORGANIZATION 
 Section 2.01.
Name. The Issuing Entity governed hereby shall be known as “NovaStar Mortgage Funding Trust, Series 2006-1,” in which name the Owner Trustee may conduct the business of the Issuing Entity, make and execute contracts and other
instruments on behalf of the Issuing Entity and sue and be sued on behalf of the Issuing Entity. 
 Section 2.02. Office. The office
of the Issuing Entity shall be in care of the Owner Trustee at the Corporate Trust Office or at such other address in the State of Delaware as the Owner Trustee may designate by written notice to the Certificateholders, Indenture Trustee and the
Depositor. 
  

 5 

 Section 2.03. Purposes and Powers. The purpose of the Issuing Entity is to engage in the following
activities: 
 (a) to issue the Notes pursuant to the Indenture and to sell such Notes; 
 (b) with the proceeds of the sale of the Notes and Certificates, to purchase the Mortgage Loans to be included in the Owner Trust Estate
from the Depositor pursuant to the Sale and Servicing Agreement; 
 (c) to assign, grant, transfer, pledge, mortgage and
convey the Owner Trust Estate pursuant to the Indenture and to hold, manage and distribute to the Certificateholders any portion of the Owner Trust Estate released from the lien of, and remitted to the Issuing Entity pursuant to, the Indenture;

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

  

 6 

 
reimburse the Owner Trustee for any such expenses paid by the Owner Trustee. Concurrently with the execution of this Agreement, the Issuing Entity will enter
into the Sale and Servicing Agreement pursuant to which it will purchase the Mortgage Loans, which comprise the remainder of the Owner Trust Estate. Upon the transfer of the Mortgage Loans pursuant to the Sale and Servicing Agreement, the Owner
Trustee shall transfer the initial capital contribution, in the sum of $1, to the Depositor. 
 Section 2.06. Declaration of Trust.
The Owner Trustee hereby declares that it will hold the Owner Trust Estate in trust upon and subject to the conditions set forth herein for the use and benefit of the Certificateholders, subject to the obligations of the Issuing Entity under the
Basic Documents and subject to the rights of the Noteholders. 
 It is the intention of the parties hereto that the Issuing Entity
constitutes a statutory trust under the Statutory Trust Statute and that this Agreement constitutes the governing instrument of such statutory trust. Effective as of the date hereof, the Owner Trustee shall have all rights, powers and duties set
forth herein and in the Statutory Trust Statute with respect to accomplishing the purposes of the Issuing Entity. The Owner Trustee shall file the Certificate of Trust with the Secretary of State. 
 Section 2.07. Liability of the Certificateholders. No Certificateholder shall have any personal liability for any liability or obligation of the
Issuing Entity. The Certificates shall be fully paid and nonassessable. 
 Section 2.08. Title to Trust Property. 
 (a) Subject to the Indenture, legal title to all of the Owner Trust Estate shall be vested at all times in the Issuing Entity as a
separate legal entity except where applicable law in any jurisdiction requires title to any part of the Owner Trust Estate to be vested in a trustee or trustees, in which case title shall be deemed to be vested in the Owner Trustee and/or a separate
trustee, as the case may be. 
 (b) The Certificateholders shall not have legal title to any part of the Owner Trust Estate.
No transfer by operation of law or otherwise of any interest of the Certificateholders shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to an accounting or to the transfer to it of any part of the Owner
Trust Estate. 
 Section 2.09. Situs of Issuing Entity. The Issuing Entity will be located in the State of Delaware and administered
as expressly stated hereunder by the Owner Trustee in the State of Delaware. The Issuing Entity shall not have any employees; provided, however, that nothing herein shall restrict or prohibit the Owner Trustee from having employees
within or without the State of Delaware. 
 Section 2.10. Federal Income Tax Treatment of the Issuing Entity. The parties hereto
intend that the Depositor, or other entity that is a REIT or a Qualified REIT Subsidiary, will at all times that the Notes are outstanding own a 100% Percentage Interest in the Certificates; that the Depositor or other entity that owns a 100%
Percentage Interest in the Certificates will qualify for taxation as a REIT or a Qualified REIT Subsidiary at all times that it is a 

  

 7 

 
Certificateholder; and that the Issuing Entity will be a Qualified REIT Subsidiary at all times the Notes are outstanding. 
 Section 2.11. Covenants of the Certificateholders. Each Certificateholder by becoming a beneficial owner of the Certificate or by its acceptance
of a Certificate agrees: 
 (a) to be bound by the terms and conditions of the Certificates of which such Certificateholder is
the beneficial owner and of this Agreement and the other Basic Documents, including any supplements or amendments hereto and thereto and to perform the obligations of a Certificateholder as set forth therein or herein, in all respects as if it were
a signatory hereto. This undertaking is made for the benefit of the Issuing Entity, the Owner Trustee and all other Certificateholders, present and future; 
 (b) to the appointment of the Owner Trustee as such Certificateholder’s agent and attorney-in-fact to sign any federal income tax information return filed on behalf of the Issuing Entity and, if requested by the
Issuing Entity, to sign such federal income tax information return in its capacity as holder of an interest in the Issuing Entity; 
 (c) not to take any position in such Certificateholder’s tax returns inconsistent with those taken in any tax returns filed by the Issuing Entity; and 
 (d) not to take any action that would cause the Issuing Entity to become subject to an entity-level tax for federal income tax purposes or
fail to take any action that would prevent the Issuing Entity from becoming subject to an entity-level tax for federal income tax purposes. 
 Section 2.12. Representations and Warranties of the Depositor. The Depositor hereby represents and warrants to the Owner Trustee that: 
 (a) The Depositor is duly organized and validly existing as a Delaware corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business
as such properties are currently owned and such business is presently conducted. 
 (b) The Depositor has the power and
authority to execute and deliver this Agreement and to carry out its terms; the Depositor has full power and authority to transfer and assign the property to be transferred and assigned to and deposited with the Issuing Entity and the Depositor has
duly authorized such transfer and assignment and deposit to the Issuing Entity by all necessary trust action; and the execution, delivery and performance of this Agreement has been duly authorized by the Depositor by all necessary trust action.

 (c) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not
conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or by-laws of the Depositor, or any indenture, agreement or other
instrument to which the Depositor is a party or by which it is bound; nor result in the creation or imposition of any lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than pursuant to
the Basic Documents); nor violate any 

  

 8 

 
law or, any order, rule or regulation applicable to the Depositor of any court or of any Federal or state regulatory body, administrative agency or other
governmental instrumentality having jurisdiction over the Depositor or its properties. 
 (d) There are no proceedings or
investigations pending or notice of which has been received in writing before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties: (x) asserting the
invalidity of this Agreement, (y) seeking to prevent the consummation of any of the transactions contemplated by this Agreement or (z) seeking any determination or ruling that should reasonably be expected to materially and adversely
affect the performance by the Depositor of its obligations under, or the validity or enforceability of, this Agreement. 
 (e)
The Depositor has duly executed and delivered this Agreement, and this Agreement constitutes the legal, valid and binding obligation of the Depositor, enforceable against the Depositor, in accordance with its terms, except as such enforceability may
be limited by applicable bankruptcy, insolvency, moratorium or similar laws affecting the enforcement of creditors’ rights generally and by the application of equitable principles. 
 (f) The Depositor is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal,
state, municipal or other governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or otherwise) or operations of the Depositor or its properties or might have consequences that
would materially and adversely affect its performance hereunder. 
 (g) The Depositor will hold itself out to the public under
its own name as a separate and distinct entity from the Issuing Entity and conduct its business so as not to mislead others as to the identity of the Issuing Entity. 
 Section 2.13. Covenants of the Depositor. The Depositor agrees and covenants for the benefit of each Certificateholder and the Owner Trustee, during the term of this Agreement, and to the fullest extent
permitted by applicable law, that: 
 (a) it shall not, for any reason, institute proceedings for the Issuing Entity to be
adjudicated bankrupt or insolvent, or consent to or join in the institution of bankruptcy or insolvency proceedings against the Issuing Entity, or file a petition seeking or consenting to reorganization or relief under any applicable federal or
state law relating to the bankruptcy of the Issuing Entity, or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuing Entity or a substantial part of the property of the
Issuing Entity or cause or permit the Issuing Entity to make any assignment for the benefit of creditors, or admit in writing the inability of the Issuing Entity to pay its debts generally as they become due, or declare or effect a moratorium on the
debt of the Issuing Entity or take any action in furtherance of any such action; 
 (b) it shall obtain from each counterparty
to each Basic Document to which it or the Issuing Entity is a party and each other agreement entered into on or after the date hereof to which it or the Issuing Entity is a party, an agreement by each such counterparty that prior to the occurrence
of certain events specified in such agreement, such counterparty shall 

  

 9 

 
not institute against, or join any other Person in instituting against, it or the Issuing Entity, any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceedings under the laws of the United States or any state of the United States; and 
 (c) it shall not, for any reason, withdraw or attempt to withdraw from this Agreement or any other Basic Document to which it is a party. 
 ARTICLE III 
 [RESERVED] 
 ARTICLE IV 
 CERTIFICATES AND TRANSFER OF INTERESTS 
 Section 4.01. Initial Ownership. Upon the formation of the Issuing Entity by the contribution by the Depositor pursuant to Section 2.05 and
the filing of the Certificate of Trust with the Secretary of State and until the issuance of the Certificates, the Depositor shall be the sole owner of the Issuing Entity. 
 Section 4.02. The Certificates. The Trust Certificates shall be issued as a single certificate, substantially in the form of Exhibit A hereto, to
or upon the order of direction of the Depositor, concurrently with the sale and assignment to the Issuing Entity of the Mortgage Loans by the Depositor. The Class C Certificates shall be issued as a single certificate, substantially in the form of
Exhibit E hereto, to or upon the order of direction of the Depositor, concurrently with the sale and assignment to the Issuing Entity of the Mortgage Loans by the Depositor. The Certificates shall represent the entire beneficial interest in the
assets of the Issuing Entity subject to the debt represented by the Notes. The Certificates shall be printed, lithographed or engraved or may be produced in any other manner as is reasonably acceptable to the Owner Trustee, as evidenced by its
execution thereof. The Certificates shall be executed on behalf of the Issuing Entity by manual or facsimile signature of an Authorized Officer of the Owner Trustee. Certificates bearing the manual or facsimile signatures of individuals who were, at
the time when such signatures shall have been affixed, authorized to sign on behalf of the Issuing Entity, shall be valid, notwithstanding that such individuals or any of them shall have ceased to be so authorized prior to the authentication and
delivery of such Certificates or did not hold such offices at the date of authentication and delivery of such Certificates. 
 A transferee
of a Certificate shall become a Certificateholder, and shall be entitled to the rights and subject to the obligations of a Certificateholder hereunder upon such transferee’s acceptance of a Certificate duly registered in such transferee’s
name pursuant to Section 4.04. 
 Section 4.03. Execution, Authentication and Delivery of Certificates. Concurrently with the
initial transfer of the Mortgage Loans to the Issuing Entity pursuant to the Sale and Servicing Agreement, the Owner Trustee shall cause the Certificates, representing 100% of the Percentage Interests of the Issuing Entity, to be executed on behalf
of the Issuing Entity, authenticated and delivered to or upon the order of the Depositor as initial Certificateholder. No 

  

 10 

 
Certificate shall entitle its holder to any benefit under this Agreement, or shall be valid for any purpose, unless there shall appear on such Certificate a
certificate of authentication substantially in the form set forth in Exhibit A and in Exhibit E, executed by the Owner Trustee or the Owner Trustee’s authenticating agent, by manual or facsimile signature; such authentication
shall constitute conclusive evidence that such Certificate shall have been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their authentication. 
 Section 4.04. Registration of Transfer and Exchange of Certificates. The Certificate Registrar shall keep or cause to be kept, at the office or
agency maintained pursuant to Section 4.08, a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Certificate Registrar shall provide for the registration of Certificates and of transfers and exchanges
of Certificates as herein provided. The Owner Trustee shall be the initial “Certificate Registrar.” 
 Upon surrender for
registration of transfer of any Certificate at the office or agency maintained pursuant to Section 4.08, the Owner Trustee, upon the satisfaction of the conditions set forth in Section 4.09(c), shall execute, authenticate and deliver (or
shall cause its authenticating agent to authenticate and deliver), in the name of the designated transferee or transferees, one or more new Certificates of a like Percentage Interest dated the date of authentication by the Owner Trustee or any
authenticating agent. At the option of a Certificateholder, Certificates may be exchanged for other Certificates of a like Percentage Interest upon surrender of the Certificates to be exchanged at the office or agency maintained pursuant to
Section 4.08. 
 Every Certificate presented or surrendered for registration of transfer or exchange shall be accompanied by a written
instrument of transfer in the form of Transferor Certificate set forth as Exhibit D hereto, duly executed by the Certificateholder or his attorney duly authorized in writing. 
 No service charge shall be made for any registration of transfer or exchange of Certificates, but the Owner Trustee or the Certificate Registrar may
require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. 
 The preceding provisions of this Section 4.04 notwithstanding, the Certificate Registrar shall not register transfers or exchanges of Certificates for a period of fifteen (15) days preceding the Payment Date
with respect to the Certificates. 
 Notwithstanding anything contained herein to the contrary, neither the Certificate Registrar nor the
Owner Trustee shall be responsible for ascertaining whether any transfer complies with the registration provisions or exemptions from the Securities Act of 1933, as amended, the Securities Act of 1934, as amended, applicable state securities law or
the Investment Company Act of 1940, as amended; provided, however, that if an Investment Letter is specifically required to be delivered to the Owner Trustee by a purchaser or transferee of a Certificate, the Owner Trustee shall be
under a duty to examine the same to determine whether it conforms to the form of Investment Letter set forth as Exhibit C hereto and shall promptly notify the party delivering the same if such Investment Letter does not so conform.

  

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 Section 4.05. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any mutilated
Certificate shall be surrendered to the Certificate Registrar, or if the Certificate Registrar shall receive evidence to its satisfaction of the destruction, loss or theft of any Certificate and (b) there shall be delivered to the Certificate
Registrar and the Owner Trustee such security or indemnity as may be required by them to save each of them harmless, then in the absence of notice that such Certificate shall have been acquired by a protected purchaser, the Owner Trustee on behalf
of the Issuing Entity shall execute and the Owner Trustee, or the Owner Trustee’s authenticating agent, shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a new Certificate
of like Percentage Interest. In connection with the issuance of any new Certificate under this Section 4.05, the Owner Trustee or the Certificate Registrar may require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection therewith. Any duplicate Certificate issued pursuant to this Section shall constitute conclusive evidence of ownership in the Issuing Entity, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time. 
 Section 4.06. Persons Deemed Owners. Each person by virtue of becoming a
Certificateholder in accordance with this Agreement shall be deemed to be bound by the terns of this Agreement. Prior to due presentation of a Certificate for registration of transfer, the Owner Trustee or the Certificate Registrar may treat the
Person in whose name any Certificate shall be registered in the Certificate Register as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 6.02 and for all other purposes whatsoever, and neither the
Owner Trustee nor the Certificate Registrar shall be bound by any notice to the contrary. 
 Section 4.07. Access to List of
Certificateholders’ Names and Addresses. The Certificate Registrar shall furnish or cause to be furnished to the Owner Trustee, the Servicer, the Depositor and the Indenture Trustee immediately prior to each Payment Date, a list of the
names and addresses of the Certificateholders as of the most recent Record Date. The Certificate Registrar shall notify the Indenture Trustee of any change in the initial Holders of the Certificates. If one or more Certificateholder, together
evidencing Percentage Interests totaling not less than 25%, apply in writing to the Certificate Registrar, and such application states that the applicants desire to communicate with other Certificateholders with respect to their rights under this
Agreement or under the Certificates and such application is accompanied by a copy of the communication that such applicants propose to transmit, then the Certificate Registrar shall, within five (5) Business Days after the receipt of such
application, afford such applicants access during normal business hours to the current list of Certificateholders. Each Certificateholder, by receiving and holding a Certificate, shall be deemed to have agreed not to hold any of the Depositor, the
Certificate Registrar or the Owner Trustee accountable by reason of the disclosure of its name and address, regardless of the source from which such information was derived. 
 Section 4.08. Maintenance of Office or Agency. The Owner Trustee shall maintain an office or offices or agency or agencies where notices and
demands to or upon the Owner Trustee in respect of the Basic Documents may be served, and so long as the Owner Trustee is the Certificate Registrar, where Certificates may be surrendered for registration of transfer or exchange and notices and
demands to or upon the Certificate Registrar in respect of the Certificates, may be served. The Owner Trustee initially designates the Corporate Trust Office as its principal corporate trust office for such purposes. The Owner Trustee shall give
prompt 

  

 12 

 
written notice to the Indenture Trustee, the Depositor and the Certificateholders of any change in the location of the Certificate Register or any such
office or agency. 
 Section 4.09. Restrictions on Transfers of Certificates. (a) Each prospective purchaser and any subsequent
transferee of a Certificate (each, a “Prospective Holder”), other than the Depositor, shall execute and deliver to the Owner Trustee and the Certificate Registrar and any of their respective successors an Investment Letter in the
form of Exhibit C hereto to the effect that: 
 (i) Such Person is (A) a “qualified institutional buyer” as
defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and is aware that the seller of the Certificate may be relying on the exemption from the registration requirements of the Securities Act
provided by Rule 144A and is acquiring such Certificate for its own account or for the account of one or more qualified institutional buyers for whom it is authorized to act, or (B) a Person involved in the organization or operation of the
Issuing Entity or an affiliate of such Person within the meaning of Rule 3a-7 of the Investment Company Act of 1940, as amended (including, but not limited to, the Sponsor). 
 (ii) Such Person understands that the Certificates have not been and will not be registered under the Securities Act and may be offered,
sold, pledged or otherwise transferred only to a person whom the seller reasonably believes is (A) a qualified institutional buyer or (B) a Person involved in the organization or operation of the Issuing Entity or an affiliate of such
Person, in a transaction pursuant to an effective registration statement under the Securities Act and any applicable state securities laws or exempt from the registration requirements of the Securities Act and any such state securities laws.

 (iii) Such Person understands that the Certificates bear a legend to the following effect: 
 “THIS CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE
SECURITIES LAWS. THIS CERTIFICATE MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE ACT, IN
A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH STATE LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE 

  

 13 

 
ISSUING ENTITY OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3a-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (INCLUDING, BUT NOT LIMITED
TO, NOVASTAR MORTGAGE INC.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS OBLIGATED TO REGISTER THIS CERTIFICATE
UNDER THE ACT OR ANY STATE SECURITIES LAWS.” 
 (b) By its acceptance of a Certificate, each Prospective Holder agrees
and acknowledges that no legal or beneficial interest in all or any portion of any Certificate may be transferred directly or indirectly to an entity that holds residual securities as nominee to facilitate the clearance and settlement of such
securities through electronic book-entry changes in accounts of participating organizations (a “Book-Entry Nominee”) and any such purported transfer shall be void and have no effect. 
 The Certificates shall bear an additional legend referring to the restrictions contained in preceding paragraph to the following effect: 
 THIS CERTIFICATE MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS, PRIOR TO SUCH DISPOSITION, THE PROPOSED TRANSFEREE DELIVERS TO THE OWNER
TRUSTEE AND THE CERTIFICATE REGISTRAR A CERTIFICATE STATING THAT SUCH TRANSFEREE IS NOT AN ENTITY THAT WILL HOLD THIS CERTIFICATE AS NOMINEE TO FACILITATE THE CLEARANCE AND SETTLEMENT OF SUCH SECURITY THROUGH ELECTRONIC BOOK-ENTRY CHANGES IN
ACCOUNTS OF PARTICIPATING ORGANIZATIONS. 
 (c) No transfer of a Certificate or any beneficial interest therein shall be made
to any person unless the Owner Trustee has received a representation letter from the Prospective Holder to the effect that such Prospective Holder is not a Plan and is not, directly or indirectly, purchasing such Certificate or interest therein on
behalf of, as investment manager of, as named fiduciary of, as trustee of, or with the assets of a Plan. 
 (d) The Owner
Trustee shall not execute, and shall not countersign and deliver, a Certificate in connection with any transfer thereof unless the transferor shall have provided to the Owner Trustee an Investment Letter, signed by the transferee, which certificate
shall contain the consent of the transferee to any amendments of this Agreement as may be 

  

 14 

 
required to effectuate further the foregoing restrictions on transfer of the Certificates to Book-Entry Nominees, and an agreement by the transferee that it
will not transfer a Certificate without providing to the Owner Trustee an Investment Letter. 
 (e) [Reserved]. 
 (f) Unless the Prospective Holder delivers a certificate to the Owner Trustee to the effect that it is a United States Person, the
Prospective Holder, other than NovaStar Mortgage Inc. or an affiliate of NovaStar Mortgage Inc., shall obtain and deliver to the Owner Trustee an Opinion of Counsel to the effect that, as a matter of federal income tax law, the transfer of the
Certificate to such Prospective Holder will not result in the imposition of any U.S. withholding tax on payments in respect of the Mortgage Loans or the Certificate. 
 (g) No pledge or transfer of the Certificates shall be effective unless such pledge or transfer is (i) of a 100% Percentage Interest
of all of the Certificates, (ii) to a single beneficial owner that represents that it qualifies for taxation as a REIT or is a Qualified REIT Subsidiary and (iii) accompanied by an Opinion of Counsel satisfactory to the Owner Trustee,
which Opinion of Counsel shall not, unless otherwise agreed, be an expense of the Issuing Entity, the Certificate Registrar, the Servicer, or the Sponsor, to the effect such pledge or transfer will not cause the Issuing Entity to be subject to an
entity-level tax for federal income tax purposes. 
 ARTICLE V 
 ACTIONS BY OWNER TRUSTEE 
 Section 5.01. Prior Notice to the
Certificateholders with Respect to Certain Matters. With respect to the following matters, the Owner Trustee shall not take action unless at least thirty (30) days before the taking of such action, the Owner Trustee shall have notified the
Certificateholders (unless the Certificateholders have directed the Owner Trustee to take action) and the Rating Agencies in writing of the proposed action and the Certificateholders shall not have notified the Owner Trustee in writing prior to the
30th day after such notice is given that such Certificateholders have withheld consent or have provided alternative written direction and in the case of the Rating Agencies, the Rating Agency Condition shall have been met: 
 (a) the initiation of any claim or lawsuit by the Issuing Entity (except claims or lawsuits brought in connection with the collection of
the Mortgage Loans) and the compromise of any action, claim or lawsuit brought by or against the Issuing Entity (except with respect to the aforementioned claims or lawsuits for collection of the Mortgage Loans); 
 (b) the election by the Issuing Entity to file an amendment to the Certificate of Trust (unless such amendment is required to be filed
under the Statutory Trust Statute); 
 (c) the amendment or other change to this Agreement or any Basic Document in
circumstances where the consent of any Certificateholder is required; 
  

 15 

 (d) the amendment or other change to this Agreement or any other Basic Document in
circumstances where the consent of any Certificateholder is not required and such amendment materially adversely affects the interest of the Certificateholders; 
 (e) the appointment pursuant to the Indenture of a successor Note Registrar, or Indenture Trustee or pursuant to this Agreement of a
successor Certificate Registrar or the consent to the assignment by the Note Registrar or Indenture Trustee or Certificate Registrar of their respective obligations under the Indenture or this Agreement, as applicable; 
 (f) the consent to the waiver of any default of any Basic Document; 
 (g) the consent to the assignment by the Indenture Trustee or Servicer of their respective obligations under any Basic Document;

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

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

 (o) change the Issuing Entity’s purpose and powers from those set forth in this Agreement. 
 In addition the Issuing Entity shall not commingle its assets with those of any other entity. The Issuing Entity shall maintain its financial and
accounting books and records separate from those of any other entity. Except as expressly set forth herein, the Issuing Entity shall pay its indebtedness, operating expenses and liabilities from its own funds, and the Issuing Entity shall not pay
the indebtedness, operating expenses and liabilities of any other entity. The Servicer, on behalf of the Issuing Entity, shall maintain appropriate minutes or other records of all appropriate action. The Issuing Entity shall maintain its office
separate from the offices of the Sponsor, the Depositor and the Servicer. 
 Notwithstanding the other provisions of this Section 5.01,
the Owner Trustee shall not have the power, except upon the written direction of the Certificateholders, and to the extent 

  

 16 

 
otherwise consistent with the Basic Documents, to remove or replace the Servicer or the Indenture Trustee. 
 Section 5.02. Action by Certificateholders with Respect to Bankruptcy. The Owner Trustee shall not have the power to (i) institute
proceedings to have the Issuing Entity declared or adjudicated bankrupt or insolvent, (ii) consent to the institution of bankruptcy or insolvency proceedings against the Issuing Entity, (iii) file a petition or consent to a petition
seeking reorganization or relief on behalf of the Issuing Entity under any applicable federal or state law relating to bankruptcy, (iv) consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator (or any similar
official) of the Issuing Entity or a substantial portion of the property of the Issuing Entity, (v) make any assignment for the benefit of the Issuing Entity’s creditors, (vi) cause the Issuing Entity to admit in writing its inability
to pay its debts generally as they become due, or (vii) take any action, or cause the Issuing Entity to take any action, in furtherance of any of the foregoing (any of the above, a “Bankruptcy Action”) without the unanimous
prior written consent and approval of all Certificateholders and the Rating Agency Condition shall have been satisfied and the delivery to the Owner Trustee by each such Certificateholder of a certification that such Certificateholder reasonably
believes that the Issuing Entity is insolvent. So long as the Indenture remains in effect, no Certificateholder shall have the power to take, and shall not take, any Bankruptcy Action with respect to the Issuing Entity or direct the Owner Trustee to
take any Bankruptcy Action with respect to the Issuing Entity. The terms of this Section 5.02 shall survive for one year and one day following the termination of this Agreement. 
 Section 5.03. Restrictions on Certificateholders’ Power. The Certificateholders shall not direct the Owner Trustee to take or refrain from
taking any action if such action or inaction would be contrary to any obligation of the Issuing Entity or the Owner Trustee under this Agreement or any of the other Basic Documents or would be contrary to Section 2.03, nor shall the Owner
Trustee be obligated to follow any such direction, if given. 
 Section 5.04. Majority Control. Except as expressly provided herein,
any action that may be taken by the Certificateholders under this Agreement may be taken by the holders of Certificates evidencing more than 50% of the Percentage Interest in the Issuing Entity and such action shall be binding upon all
Certificateholders. Except as expressly provided herein, any written notice of the Certificateholders delivered pursuant to this Agreement shall be effective if signed by holders of Certificates evidencing more than 50% of the Percentage Interest in
the Issuing Entity at the time of the delivery of such notice and such action shall be binding upon all Certificateholders. 
 ARTICLE VI

 TAX PROVISIONS; CERTAIN DUTIES 
 Section 6.01. Federal Income Tax Provisions. 
 The Issuing Entity will be wholly owned by the sole
Certificateholder, which as of the Closing Date is the Depositor. The Depositor is a Qualified REIT Subsidiary. As such, the Depositor, as the sole Certificateholder, or the Depositor’s owner will be regarded as (i)

  

 17 

 
owning all assets owned by the Issuing Entity and (ii) having incurred all liabilities incurred by the Issuing Entity, and all transactions between the
Issuing Entity and the Depositor will be disregarded. 
 Section 6.02. Withholding Taxes. In the event that any withholding tax is
imposed under federal, state, or local law on the Issuing Entity’s payment (or allocations of income) to a Certificateholder, such tax shall reduce the amount otherwise distributable to such Certificateholder in accordance with this
Section 6.02. The Indenture Trustee, on behalf of the Owner Trustee, is hereby authorized and directed to retain in the Payment Account from amounts otherwise distributable to the Certificateholders sufficient funds for the payment of any tax
that is legally owed by the Issuing Entity (but such authorization shall not prevent the Indenture Trustee from contesting any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such
proceedings). The Depositor will provide the Indenture Trustee with a statement indicating the amount of any such withholding tax. The amount of any withholding tax imposed with respect to a Certificateholder shall be treated as cash distributed to
such Certificateholder at the time it is withheld by the Indenture Trustee and remitted to the appropriate taxing authority from the Payment Account at the direction of the Indenture Trustee. If there is a possibility that withholding tax is payable
with respect to a distribution (such as a distribution to a Certificateholder who is a Non-U.S. Person), the Indenture Trustee may in its sole discretion withhold such amounts in accordance with this paragraph. In the event that a Certificateholder
wishes to apply for a refund of any such withholding tax, the Owner Trustee and the Indenture Trustee shall reasonably cooperate with such Certificateholder in making such claim so long as such Certificateholder agrees in writing to reimburse the
Owner Trustee for any out-of-pocket expenses incurred. 
 Section 6.03. Accounting and Reports to the Certificateholders, the Internal
Revenue Service and Others. The Depositor shall (a) maintain (or cause to be maintained) the books of the Issuing Entity on a calendar year basis on the accrual method of accounting, and (b) deliver (or cause to be delivered) to each
Certificateholder such information, reports or statements as may be required by the Code and applicable Treasury Regulations and as may be required to enable each Certificateholder to prepare its respective federal and state income tax returns.
Consistent with the Issuing Entity’s characterization for tax purposes as a Qualified REIT Subsidiary, no federal income tax return shall be filed on behalf of the Issuing Entity unless either (y) the Issuing Entity, the Indenture Trustee
or the Certificateholders receive an Opinion of Counsel based on a change in applicable law occurring after the date hereof that the Code requires such a filing or (z) the Internal Revenue Service shall determine that the Issuing Entity is
required to file such a return. In the event that the Issuing Entity is required to file tax returns, the Indenture Trustee shall elect under Section 1278 of the Code to include in income currently any market discount that accrues with respect
to the Mortgage Loans. The Depositor shall prepare or shall cause to be prepared any tax returns required to be filed by the Issuing Entity. The Depositor, or any other such party required by law, shall promptly sign such returns and such returns
shall be filed by, or at the direction of, the Depositor with the appropriate tax authorities. In no event shall the Depositor or the Sponsor be liable for any liabilities, costs or expenses of the Issuing Entity arising out of the application of
any tax law, including federal, state, foreign or local income or excise taxes or any other tax imposed on or measured by income (or any interest, penalty or addition with respect thereto or arising from a failure to comply therewith), except, for
any such liability, cost or expense attributable to the Depositor’s breach of its obligations under this Agreement. 
  

 18 

 ARTICLE VII 
 AUTHORITY AND DUTIES OF OWNER TRUSTEE 
 Section 7.01. General Authority. The Owner Trustee is
authorized and directed to execute and deliver or cause to be executed and delivered the Notes, the Certificates and the Basic Documents to which the Issuing Entity is to be a party and each certificate or other document attached as an exhibit to or
contemplated by the Basic Documents to which the Issuing Entity is to be a party and any amendment or other agreement or instrument described in Article IV, in each case, as the Depositor shall approve, as evidenced conclusively by the Owner
Trustee’s execution thereof. In addition, the Owner Trustee is authorized and directed, on behalf of the Issuing Entity, to execute and deliver to the Authenticating Agent the Trust Request and the Trust Orders referred to in Section 2.11
of the Indenture, directing to the Authenticating Agent to authenticate and deliver the following Notes: 
  

				
	 Security
	  	Original Class Note Balance
	 Class A-1A
	  	$	767,078,000
	 Class A-2A
	  	$	182,000,000
	 Class A-2B
	  	$	91,700,000
	 Class A-2C
	  	$	71,400,000
	 Class A-2D
	  	$	32,621,000
	 Class M-1
	  	$	78,300,000
	 Class M-2
	  	$	21,600,000
	 Class M-3
	  	$	18,900,000
	 Class M-4
	  	$	18,225,000
	 Class M-5
	  	$	12,825,000
	 Class M-6
	  	$	10,125,000
	 Class M-7
	  	$	8,775,000
	 Class M-8
	  	$	7,425,000
	 Class M-9
	  	$	8,775,000
	 Class M-10
	  	$	6,750,000
	 Class M-11
	  	$	6,750,000

  

 19 

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

 (ii) to maintain the Issuing Entity’s existence as a statutory trust under the laws of the State of Delaware.

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

 (c) Subject to Article V hereof, whenever the Owner Trustee is unable to decide between alternative courses of action
permitted or required by the terms of this Agreement or under any other Basic Document, the Owner Trustee shall promptly give notice (in such form as shall be appropriate under the circumstances) to the Certificateholders requesting instruction from
the Certificateholders as to the course of action to be adopted, and to the extent the Owner Trustee acts in good faith in accordance with any written instruction of the Certificateholders received, the Owner Trustee shall not be liable on account
of such action to any Person. If the Owner Trustee shall not have received appropriate instruction within ten 

  

 20 

 
(10) days of such notice (or within such shorter period of time as reasonably may be specified in such notice or may be necessary under the circumstances) it
may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with this Agreement or the Basic Documents, as it shall deem to be in the best interests of the Certificateholders, and shall have no liability to any
Person for such action or inaction. 
 (d) Subject to Article V hereof, in the event that the Owner Trustee is unsure as to
the application of any provision of this Agreement or any other Basic Document or any such provision is ambiguous as to its application, or is, or appears to be, in conflict with any other applicable provision, or in the event that this Agreement
permits any determination by the Owner Trustee or is silent or is incomplete as to the course of action that the Owner Trustee is required to take with respect to a particular set of facts, the Owner Trustee may give notice (in such form as shall be
appropriate under the circumstances) to the Certificateholders requesting instruction and, to the extent that the Owner Trustee acts or refrains from acting in good faith in accordance with any such instruction received, the Owner Trustee shall not
be liable, on account of such action or inaction, to any Person. If the Owner Trustee shall not have received appropriate instruction within ten (10) days of such notice (or within such shorter period of time as reasonably may be specified in
such notice or may be necessary under the circumstances) it may, but shall be under no duty to, take or refrain from taking such action, not inconsistent with this Agreement or the other Basic Documents, as it shall deem to be in the best interests
of the Certificateholders, and shall have no liability to any Person for such action or inaction. 
 Section 7.04. No Duties Except as
Specified in this Agreement, the Basic Documents or any Instructions. 
 (a) The Owner Trustee shall not have any duty or
obligation to manage, make any payment with respect to, register, record, sell, dispose of, or otherwise deal with the Owner Trust Estate, or to otherwise take or refrain from taking any action under, or in connection with, this Agreement or any
document contemplated hereby to which the Issuing Entity is a party, except as expressly provided by the terms of this Agreement, any other Basic Document or in any document or written instruction received by the Owner Trustee pursuant to
Section 7.03; and no implied duties or obligations shall be read into this Agreement or any other Basic Document against the Owner Trustee. The Owner Trustee shall have no responsibility for filing any tax document, financing or continuation
statement in any public office at any time or to otherwise perfect or maintain the perfection of any security interest or lien granted to it hereunder or to prepare or file any Securities and Exchange Commission filing for the Issuing Entity or to
record this Agreement or any other Basic Document. The Owner Trustee nevertheless agrees that it will, at its own cost and expense, promptly take all action as may be necessary to discharge any liens on any part of the Owner Trust Estate that result
from actions by, or claims against, the Owner Trustee in its individual capacity that are not related to the ownership or the administration of the Owner Trust Estate. 
 (b) Notwithstanding anything to the contrary herein or in any other document, the Owner Trustee shall not be required to execute, deliver
or certify on behalf of the Issuing Entity or any other Person any filings, certificates, affidavits or other instruments required under the Sarbanes-Oxley Act of 2002. Notwithstanding any Person’s right to instruct the Owner Trustee, neither
the Owner Trustee nor any agent, employee, director or officer of 

  

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the Owner Trustee shall have any obligation to execute any certificates or other documents required pursuant to the Sarbanes-Oxley Act of 2002 or the rules
and regulations promulgated thereunder, and the refusal to comply with any such instructions shall not constitute a default or breach under any Basic Document. 
 Section 7.05. No Action Except under Specified Documents or Instructions. The Owner Trustee shall not manage, control, use, sell, dispose of or otherwise deal with any part of the Owner Trust Estate except
(i) in accordance with the powers granted to and the authority conferred upon the Owner Trustee pursuant to this Agreement, (ii) in accordance with the other Basic Documents and (iii) in accordance with any document or written
instruction delivered to the Owner Trustee pursuant to Section 7.03. 
 Section 7.06. Restrictions. Neither the Owner Trustee nor
the Depositor shall take any action (a) that violates or results in a breach of or is inconsistent with the purposes of the Issuing Entity set forth in Section 2.03; (b) that causes or effectuates a Transfer of the Depositor’s
Ownership Interest in the Certificates of the Issuing Entity for so long as the Depositor is a Qualified REIT Subsidiary other than as set forth in Section 4.09(g) or (c) that, to the actual knowledge of the Depositor and the Owner
Trustee, would result in the Issuing Entity’s becoming subject to an entity-level tax for federal income tax purposes. The Certificateholders shall not direct the Owner Trustee to take action that would violate the provisions of this
Section 7.06. 
 ARTICLE VIII 
 CONCERNING THE OWNER TRUSTEE 
 Section 8.01. Acceptance of Trusts and Duties. The Owner Trustee accepts the trusts
hereby created and agrees to perform its duties hereunder with respect to such trusts, but only upon the terms of this Agreement subject to the other Basic Documents. The Owner Trustee also agrees to disburse all moneys actually received by it
constituting part of the Owner Trust Estate upon the terms of the other Basic Documents and this Agreement. The Owner Trustee shall not be answerable or accountable hereunder or under any other Basic Document under any circumstances, except
(i) for its own willful breach or misconduct or gross negligence or (ii) in the case of the inaccuracy of any representation or warranty contained in Section 8.03 expressly made by the Owner Trustee in its individual capacity. In
particular, but not by way of limitation (and subject to the exceptions set forth in the preceding sentence): 
 (a) The Owner
Trustee shall not be liable for any error of judgment made by a Responsible Officer of the Owner Trustee; 
 (b) The Owner
Trustee shall not be liable with respect to any action taken or omitted to be taken by it in accordance with the instructions of the Certificateholders given in accordance with this Agreement; 
 (c) No provision of this Agreement or any other Basic Document shall require the Owner Trustee to expend or risk funds or otherwise incur
any financial liability in the performance of any of its rights or powers hereunder or under any other Basic Document if 

  

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

  

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the preceding sentence. In the event that said counsel advises the Owner Trustee that such action will result in such consequences, the Owner Trustee will
appoint an additional trustee pursuant to Section 11.05 hereof to proceed with such action. 
 Section 8.02. Furnishing of
Documents. Subject to Section 4.07, the Owner Trustee shall furnish to the Certificateholders promptly upon receipt of a written request therefor, duplicates or copies of all reports, notices, requests, demands, certificates, financial
statements and any other instruments furnished to the Owner Trustee under the Basic Documents. On behalf of the Owner Trustee, the Depositor shall furnish to Noteholders promptly upon written request therefor, copies of the Sale and Servicing
Agreement and the Indenture. 
 Section 8.03. Representations and Warranties of the Owner Trustee. Wilmington Trust Company hereby
represents and warrants to the Sponsor, the Depositor and the Certificateholders, that: 
 (a) It is a banking corporation,
duly organized, validly existing and in good standing under the laws of the state of Delaware. It has all requisite power and authority to execute, deliver and perform its obligations under this Agreement. 
 (b) It has taken all action necessary to authorize the execution and delivery by it of this Agreement, and this Agreement will be executed
and delivered by one of its officers who is duly authorized to execute and deliver this Agreement on its behalf. 
 (c)
Neither the execution nor the delivery by it of this Agreement nor the consummation by it of the transactions contemplated hereby nor compliance by it with any of the terns or provisions hereof will contravene any Delaware or Federal law,
governmental rule or regulation governing the banking or trust powers of Wilmington Trust Company or any judgment or order binding on it, or constitute any default under its charter documents or by-laws. 
 (d) This Agreement has been duly authorized, executed and delivered by Wilmington Trust Company and constitutes a valid, legal and binding
obligation of Wilmington Trust Company, enforceable against it in accordance with the terms hereof, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting the enforcement of creditors’ rights generally
and to general principles of equity, regardless of whether such enforcement is considered in a proceeding in equity or at law. 
 (e) The Owner Trustee is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or governmental agency, which default might have consequences that would materially
and adversely affect the condition (financial or other) or operations of Wilmington Trust Company or its properties or might have consequences that would materially adversely affect its performance hereunder. 
 Section 8.04. Reliance; Advice of Counsel. 
 (a) The Owner Trustee shall incur no liability to anyone in acting upon any signature, instrument, notice, resolution, request, consent, order, certificate, report, opinion, Note, or other document or paper believed
by it in good faith to be genuine and believed by it in 

  

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good faith to be signed by the proper party or parties. The Owner Trustee may accept a certified copy of a resolution of the board of directors or other
governing body of any corporate party as conclusive evidence that such resolution has been duly adopted by such body and that the same is in full force and effect. As to any fact or matter the method of the determination of which is not specifically
prescribed herein, the Owner Trustee may for all purposes hereof rely on a certificate, signed by the president or any vice president or by the treasurer or other authorized officers of the relevant party, as to such fact or matter and such
certificate shall constitute full protection to the Owner Trustee for any action taken or omitted to be taken by it in good faith in reliance thereon. 
 (b) In the exercise or administration of the trusts hereunder and in the performance of its duties and obligations under this Agreement or the other Basic Documents, the Owner Trustee (i) may, at the expense of
the Issuing Entity, act directly or through its agents or attorneys pursuant to agreements entered into with any of them, and the Owner Trustee shall not be liable for the conduct or misconduct of such agents or attorneys if such agents or attorneys
shall have been selected by the Owner Trustee with reasonable care, and (ii) may, at the expense of the Issuing Entity, consult with counsel, Accountants and other skilled persons to be selected with reasonable care and employed by it. The
Owner Trustee shall not be responsible for monitoring the performance of such agents or attorneys or for the failure of others to perform their duties, even if delegated by the Owner Trustee, if such agents or attorneys shall have been selected by
the Owner Trustee with reasonable care. The Owner Trustee shall not be liable for anything done, suffered or omitted in good faith by it in accordance with the written opinion or advice of any such counsel, Accountants or other such persons and not
contrary to this Agreement or any other Basic Document. 
 Section 8.05. Not Acting in Individual Capacity. Except as provided in
Section 8.03, in accepting the trusts hereby created, Wilmington Trust Company acts solely as Owner Trustee hereunder and not in its individual capacity, and all Persons having any claim against the Owner Trustee by reason of the transactions
contemplated by this Agreement or any other Basic Document shall look only to the Owner Trust Estate for payment or satisfaction thereof. 
 Section 8.06. Owner Trustee Not Liable for the Certificates or Mortgage Loans. The recitals contained herein and in the Certificates (other than the signature and countersignature of the Owner Trustee on the Certificates) shall be
taken as the statements of the Issuing Entity, and the Owner Trustee assumes no responsibility for the correctness thereof. The Owner Trustee makes no representations as to the validity or sufficiency of this Agreement, of any other Basic Document
or of the Certificates (other than the signature and countersignature of the Owner Trustee on the Certificates and as specified in Section 8.03 hereof) or the Notes, or of any Mortgage Loans or related documents. The Owner Trustee shall at no
time have any responsibility or liability for or with respect to the legality, validity and enforceability of any Mortgage Loan, or the perfection and priority of any security interest created by any Mortgage Loan or the maintenance of any such
perfection and priority, or for or with respect to the sufficiency of the Owner Trust Estate or its ability to generate the payments to be distributed to the Certificateholders under this Agreement or the Noteholders under the Indenture, including,
without limitation, the existence, condition and ownership of any Mortgaged Property, the existence and enforceability of any insurance thereon, the existence and contents of any Mortgage Loan on any computer or other record thereof, the validity of
the assignment of any Mortgage 

  

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Loan to the Issuing Entity or of any intervening assignment, the completeness of any Mortgage Loan, the performance or enforcement of any Mortgage Loan, the
compliance by the Depositor or the Servicer with any warranty or representation made under any Basic Document or in any related document or the accuracy of any such warranty or representation or any action of the Indenture Trustee or the Servicer or
any subservicer taken in the name of the Owner Trustee. 
 Section 8.07. Owner Trustee May Own Notes. The Owner Trustee in its
individual or any other capacity may become the owner or pledgee of the Notes and may deal with the Sponsor, the Depositor, the Indenture Trustee and the Servicer in banking transactions with the same rights as it would have if it were not Owner
Trustee. 
 Section 8.08. Licenses. The Depositor shall cause the Issuing Entity to use its best efforts to obtain and maintain the
effectiveness of any licenses required in connection with this Agreement and the other Basic Documents and the transactions contemplated hereby and thereby until such time as the Issuing Entity shall terminate in accordance with the terms hereof.

 Section 8.09. Legal Proceedings. As required by Regulation AB, the Owner Trustee will promptly notify the Servicer, the Depositor
and the Issuing Entity of the commencement or, if applicable, the termination of any and all legal proceedings of which any property of the Owner Trustee is the subject, that is material to the Noteholders and any such proceedings known to be
contemplated by governmental authorities. In addition, the Owner Trustee will furnish to the Indenture Trustee, the Servicer, the Depositor and the Issuing Entity, in writing, the necessary disclosure describing such proceedings required to be
disclosed under Item 1117 of Regulation AB, for inclusion in reports filed pursuant to the Exchange Act. 
 ARTICLE IX 

COMPENSATION OF OWNER TRUSTEE 
 Section 9.01. Owner Trustee’s Fees and Expenses. The Owner Trustee shall receive as compensation for its services hereunder such fees as have been separately agreed upon before the date hereof between the Servicer and the Owner
Trustee, and the Owner Trustee shall be entitled to be reimbursed by the Servicer for its other reasonable expenses hereunder as separately agreed (the “Owner Trustee Fee”). 
 Section 9.02. Indemnification. The Servicer shall be liable as obligor for, and shall indemnify the Owner Trustee (in its individual and trust
capacities) and its successors, assigns, agents and servants (collectively, the “Indemnified Parties”) from and against, any and all liabilities, obligations, losses, damages, taxes (other than taxes imposed on net income), claims,
actions and suits, and any and all reasonable costs, expenses and disbursements (including reasonable legal fees and expenses) of any kind and nature whatsoever (collectively, “Expenses”) which may at any time be imposed on,
incurred by, or asserted against any Indemnified Party in any way relating to or arising out of this Agreement, the other Basic Documents, the Owner Trust Estate, the administration of the Owner Trust Estate or the action or inaction of the Owner
Trustee hereunder, except only that the Servicer shall not be liable for or required to indemnify an 

  

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Indemnified Party from and against Expenses arising or resulting from any of the matters described in the third sentence of Section 8.01. The
indemnities contained in this Section 9.02 shall survive the resignation or termination of the Owner Trustee or the termination of this Agreement. In any event of any claim, action or proceeding for which indemnity will be sought pursuant to
this Section, the Servicer will be entitled to participate therein, with counsel selected by the Servicer and reasonably satisfactory to the Indemnified Parties, but after notice from an Indemnified Party to the Servicer of its election to assume
the defense thereof, the Servicer shall not be liable to the Indemnified Party under this Section 9.02 for any legal or other expenses subsequently incurred by such Indemnified Party in connection with the defense of such action;
provided, however, that this sentence shall not be in effect if (1) the Servicer shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after
notice of commencement of the action, (2) the Servicer shall have authorized the employment of counsel for the Indemnified Party at the expense of the Servicer or (3) in the event any such claim involves a possible imposition of criminal
liability or penalty or a material civil penalty on such Indemnified Party, a conflict of interest between such Indemnified Party and the Servicer or another indemnitee or the granting of material injunctive relief against such Indemnified Party,
and such Indemnified Party informs the Servicer that such Indemnified Party desires to be represented by separate counsel, in which case, the reasonable fees and expenses of such separate counsel shall be borne by the Servicer. If the Servicer
assumes the defense of any such proceeding, the Servicer shall be entitled to settle such proceeding without any liability being assessed against any Indemnified Party or, if such settlement provides for release of any such Indemnified Party without
any liability being assessed against any Indemnified Party in connection with all matters relating to the proceeding which have been asserted against such Indemnified Party in such proceeding by the other parties to such settlement, without the
prior written consent of such Indemnified Party, but otherwise only with the prior written consent of such Indemnified Party. 
 Section
9.03. Payments to the Owner Trustee. Any amounts paid to the Owner Trustee pursuant to this Article IX shall be deemed not to be a part of the Owner Trust Estate immediately after such payment. 
 ARTICLE X 
 TERMINATION OF TRUST
AGREEMENT 
 Section 10.01. Termination of Trust Agreement. 
 (a) This Agreement (other than Article IX) shall terminate and the Issuing Entity shall dissolve and be of no further force or effect on
the earlier of: (i) the final payment or other liquidation of the Mortgage Loans and the disposition of all REO Properties and the remittance of all funds due hereunder with respect to such Mortgage Loans and REO Properties after the
satisfaction and discharge of the Indenture pursuant to Section 4.01 of the Indenture; and (ii) the expiration of 21 years from the death of the last survivor of descendants of Joseph P. Kennedy (the late ambassador of the United States to
the Court of St. James). The bankruptcy, liquidation, dissolution, death or incapacity of the any Certificateholder or the Depositor shall not (x) operate to terminate this Agreement or the Issuing Entity, nor (y) entitle
Certificateholders’ or the Depositor’s legal representatives or heirs to claim an accounting or to 

  

 27 

 
take any action or proceeding in any court for a partition or winding up of all or any part of the Issuing Entity or Owner Trust Estate nor
(z) otherwise affect the rights, obligations and liabilities of the parties hereto. 
 (b) Except as provided in
Section 10.01(a) above, none of the Depositor, the Servicer, nor the Certificateholders shall be entitled to revoke or terminate the Issuing Entity. 
 (c) Notice of any termination of the Issuing Entity, specifying the Payment Date upon which the Certificateholders shall surrender their Certificates to the Indenture Trustee for payment of the final distributions and
cancellation, shall be given by the Owner Trustee to the Certificateholders, the Hedge Providers, the Rating Agencies and the Indenture Trustee mailed within five (5) Business Days of receipt by the Owner Trustee from the Servicer of notice of
such termination, which notice given by the Owner Trustee shall state (i) the Payment Date upon or with respect to which final payment of the Certificates shall be made upon presentation and surrender of the Certificates at the office of the
Indenture Trustee therein designated, (ii) the amount of any such final payment and (iii) that the Record Date otherwise applicable to such Payment Date is not applicable, payments being made only upon presentation and surrender of the
Certificates at the office of the Indenture Trustee therein specified. The Owner Trustee shall give such notice to the Certificate Registrar (if other than the Owner Trustee) and the Indenture Trustee at the time such notice is given to
Certificateholders. Upon presentation and surrender of Certificates, subject to Section 3808 of the Statutory Trust Statute, amounts distributable on such Payment Date pursuant to the terms of the Indenture. 
 (d) In the event that Certificateholders shall not surrender their Certificates for cancellation within six months after the date
specified in the above mentioned written notice, the Owner Trustee shall give a second written notice to Certificateholders to surrender the Certificates for cancellation and receive the final distribution with respect thereto. If within one year
after the second notice the Ownership Interest shall not have been surrendered for cancellation, the Owner Trustee may take appropriate steps, or may appoint an agent to take appropriate steps, to contact the remaining Certificateholders concerning
surrender of the Certificates, and the cost thereof shall be paid out of the funds and other assets that shall remain subject to this Agreement. Any funds remaining in the Issuing Entity after exhaustion of such remedies shall be distributed by the
Indenture Trustee to the Certificateholders. 
 (e) Upon the winding up of the Issuing Entity in accordance with
Section 3808 of the Statutory Trust Statute and its termination, the Owner Trustee shall cause the Certificate of Trust to be canceled by filing a certificate of cancellation with the Secretary of State in accordance with the provisions of
Section 3810 of the Statutory Trust Statute. 
  

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 ARTICLE XI 
 SUCCESSOR OWNER TRUSTEES AND ADDITIONAL OWNER TRUSTEES 
 Section 11.01. Eligibility Requirements
for Owner Trustee. The Owner Trustee shall at all times be a corporation or banking association satisfying the provisions of Section 3807(a) of the Statutory Trust Statute; authorized to exercise trust powers; having a combined capital and
surplus of at least $50,000,000 and subject to supervision or examination by Federal or state authorities; and having (or having a parent that has) a rating of at least “Baa3” by Moody’s, and “A-1” by S&P (or otherwise
acceptable to the Rating Agencies). If such entity shall publish reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section 11.01, the
combined capital and surplus of such entity shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. In case at any time the Owner Trustee shall cease to be eligible in accordance with
the provisions of this Section 11.01, the Owner Trustee shall resign immediately in the manner and with the effect specified in Section 11.02. 
 Section 11.02. Resignation or Removal of Owner Trustee. The Owner Trustee may at any time resign and be discharged from the trusts hereby created by giving written notice thereof to the Issuing Entity, the
Hedge Providers, the Depositor, the Servicer and the Indenture Trustee. Upon receiving such notice of resignation, the Depositor shall promptly appoint a successor Owner Trustee by written instrument, in duplicate, one copy of which instrument shall
be delivered to the resigning Owner Trustee and one copy to the successor Owner Trustee. If no successor Owner Trustee shall have been so appointed and have accepted appointment within thirty (30) days after the giving of such notice of
resignation, the resigning Owner Trustee may petition any court of competent jurisdiction for the appointment of a successor Owner Trustee. 
 If at any time the Owner Trustee shall cease to be eligible in accordance with the provisions of Section 11.01 and shall fail to resign after written request therefor by the Certificateholders or the Depositor, or if at any time the
Owner Trustee shall be legally unable to act, or shall be adjudged bankrupt or insolvent, or a receiver of the Owner Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Owner Trustee or of its
property or affairs for the purpose of rehabilitation, conservation or liquidation, then the Certificateholders or the Depositor, may remove the Owner Trustee. If the Certificateholders or the Depositor shall remove the Owner Trustee under the
authority of the immediately preceding sentence, the Depositor, shall promptly appoint a successor Owner Trustee by written instrument in duplicate, one copy of which instrument shall be delivered to the outgoing Owner Trustee so removed and one
copy to the successor Owner Trustee and payment of all fees owed to the outgoing Owner Trustee. 
 Any resignation or removal of the Owner
Trustee and appointment of a successor Owner Trustee pursuant to any of the provisions of this Section 11.02 shall not become effective until acceptance of appointment by the successor Owner Trustee pursuant to Section 11.03, and payment
of all fees and expenses owed to the outgoing Owner Trustee. The Servicer shall provide notice of such resignation or removal of the Owner Trustee to each of the Rating Agencies, the Hedge Providers and the Indenture Trustee. 
 Section 11.03. Successor Owner Trustee. Any successor Owner Trustee appointed pursuant to Section 11.02 shall execute, acknowledge and
deliver to the Issuing Entity, the Depositor, the Indenture Trustee and to its predecessor Owner Trustee an instrument accepting such appointment under this Agreement, and thereupon, subject to the payment of all fees and 

  

 29 

 
expenses owed to the outgoing Owner Trustee, the resignation or removal of the predecessor Owner Trustee shall become effective and such successor Owner
Trustee without any further act, deed or conveyance, shall become fully vested with all the rights, powers, duties, and obligations of its predecessor under this Agreement, with like effect as if originally named as Owner Trustee. The predecessor
Owner Trustee shall upon payment of its fees and expenses deliver to the successor Owner Trustee all documents and statements and moneys held by it under this Agreement; and the Depositor and the predecessor Owner Trustee shall execute and deliver
such instruments and do such other things as may reasonably be required for fully and certainly vesting and confirming in the successor Owner Trustee all such rights, powers, duties, and obligations. 
 No successor Owner Trustee shall accept appointment as provided in this Section unless at the time of such acceptance such successor Owner Trustee shall
be eligible pursuant to Section 11.01. 
 Upon acceptance of appointment by a successor Owner Trustee pursuant to this
Section 11.03, the Depositor shall mail notice of the successor of such Owner Trustee to the Certificateholders, the Indenture Trustee, the Noteholders and the Rating Agencies. If the Depositor fails to mail such notice within ten
(10) days after acceptance of appointment by the successor Owner Trustee, the successor Owner Trustee shall cause such notice to be mailed at the expense of the Depositor. 
 Any successor Owner Trustee appointed pursuant to this Section 11.03 shall file an amendment to the Certificate of Trust with the Secretary of State
identifying the name and principal place of business of such successor Owner Trustee in the State of Delaware. 
 Section 11.04. Merger or
Consolidation of Owner Trustee. Any corporation or banking association into which the Owner Trustee may be merged or converted or with which it may be consolidated or any corporation or banking association resulting from any merger, conversion
or consolidation to which the Owner Trustee shall be a party, or any corporation or banking association succeeding to all or substantially all of the corporate trust business of the Owner Trustee, shall be the successor of the Owner Trustee
hereunder, provided such corporation or banking association shall be eligible pursuant to Section 11.01, without the execution or filing of any instrument or any further act on the part of any of the parties hereto, except the filing of an
amendment to the Certificate of Trust, if appropriate, anything herein to the contrary notwithstanding; provided, further, that the Owner Trustee shall mail notice of such merger, conversion or consolidation to the Rating Agencies and
the Hedge Providers and; provided, further, that the Owner Trustee shall file an amendment to the Certificate of Trust as required under Section 11.03 above. 
 Section 11.05. Appointment of Co-Trustee or Separate Trustee. 
 (a) Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirements of any
jurisdiction in which any part of the Owner Trust Estate or any Mortgaged Property may at the time be located, and for the purpose of performing certain duties and obligations of the Owner Trustee with respect to the Issuing Entity and the
Certificates, the Owner Trustee shall have the power and shall execute and deliver all instruments to appoint one or more Persons approved by the Owner Trustee and 

  

 30 

 
acceptable to the Depositor to act as co-trustee, jointly with the Owner Trustee, or separate trustee or separate trustees, of all or any part of the Owner
Trust Estate, and to vest in such Person, in such capacity, such title to the Issuing Entity, or any part thereof, and, subject to the other provisions of this Section 11.05, such powers, duties, obligations, rights and trusts as the Depositor
and the Owner Trustee may consider necessary or desirable. No co-trustee or separate trustee under this Agreement shall be required to meet the terms of eligibility as a successor trustee pursuant to Section 11.01 and no notice of the
appointment of any co-trustee or separate trustee shall be required pursuant to Section 11.03. 
 (b) Each separate
trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provision and conditions: 
 (i) all rights, powers, duties and obligations conferred or imposed upon the Owner Trustee shall be conferred upon and exercised or performed by the Owner Trustee and such separate trustee or co-trustee jointly (it
being understood that such separate trustee or co-trustee is not authorized to act separately without the Owner Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be
performed, the Owner Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties, and obligations (including the holding of title to the Issuing Entity or any portion thereof in any such
jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Owner Trustee; 
 (ii) no trustee under this Agreement shall be personally liable by reason of any act or omission of any other trustee under this Agreement; and 
 (iii) the Owner Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. 
 (c) Any notice, request or other writing given to the Owner Trustee shall be deemed to have been given to the separate trustees and
co-trustees, as if given to each of them. Every instrument appointing any separate trustee or co-trustee, other than this Agreement, shall refer to this Agreement and to the conditions of this Article XI. Each separate trustee and co-trustee, upon
its acceptance of appointment, shall be vested with the estates specified in its instrument of appointment, either jointly with the Owner Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement,
specifically including every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Owner Trustee. Each such instrument shall be filed with the Owner Trustee. 
 (d) Any separate trustee or co-trustee may at any time appoint the Owner Trustee as its agent or attorney-in-fact with full power and
authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its
estates, properties, rights, remedies and trusts shall vest in and be exercised by the Owner Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. 
  

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 ARTICLE XII 
 MISCELLANEOUS 
 Section 12.01. Supplements and Amendments. This Agreement may be amended by
the Depositor and the Owner Trustee, with prior written notice to the Rating Agencies, but without the consent of any of the Noteholders, the Certificateholders or the Indenture Trustee, to cure any ambiguity, to correct or supplement any provisions
in this Agreement or for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions in this Agreement or of modifying in any manner the rights of the Noteholders or the Certificateholders; provided,
however, such action shall not adversely affect in any material respect the interests of any Noteholder, Certificateholder or the Hedge Providers (unless the consent of the Hedge Providers is obtained). An amendment described above shall be
deemed not to adversely affect in any material respect the interests of any Noteholder if the party requesting the amendment (i) delivers an Opinion of Counsel, at the expense of the party requesting the change, delivered to the Owner Trustee
to such effect and to the effect that such amendment will not cause the Issuing Entity to be subject to an entity-level tax for federal income tax purposes, or (ii) satisfies the Rating Agency Condition with respect to such amendment.

 This Agreement may also be amended from time to time by the Depositor and the Owner Trustee, subject to the satisfaction of the Rating
Agency Condition and with the prior written consent of the Indenture Trustee, the Hedge Providers, the Noteholders evidencing more than 50% of the Class Note Balance of the Outstanding Notes of all of the Classes affected thereby and the
Certificateholders evidencing more than 50% of the Percentage Interests of the Issuing Entity, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner
the rights of the Noteholders or the Certificateholders; provided, however, no such amendment shall (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on the Mortgage
Loans or distributions that shall be required to be made for the benefit of the Noteholders or the Certificateholders, (b) reduce the aforesaid percentage of the Class Note Balance of the Outstanding Notes or the Percentage Interests required
to consent to any such amendment, in either case of clause (a) or (b) without the consent of the holders of all the outstanding Notes affected thereby and the Certificateholders of all the outstanding Certificates. 
 Promptly after the execution of any such amendment or consent, the Depositor shall furnish written notification of the substance of such amendment or
consent to the Certificateholders, the Indenture Trustee, the Hedge Providers and each of the Rating Agencies. 
 It shall not be necessary
for the consent of the Certificateholders, the Noteholders or the Indenture Trustee pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance
thereof. The manner of obtaining such consents (and any other consents of Certificateholders provided for in this Agreement or in any other Basic Document) and of evidencing the authorization of the execution thereof by Certificateholders shall be
subject to such reasonable requirements as the Owner Trustee may prescribe. 
  

 32 

 Promptly after the execution of any amendment to the Certificate of Trust, the Owner Trustee shall cause
the filing of such amendment with the Secretary of State. 
 Prior to the execution of any amendment to this Agreement or the Certificate of
Trust, the Owner Trustee and the Indenture Trustee (if the Indenture Trustee’s consent for such amendment is required) shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized
or permitted by this Agreement and that all conditions precedent have been met. The Owner Trustee may, but shall not be obligated to, enter into any such amendment which affects the Owner Trustee’s own rights, duties or immunities under this
Agreement or otherwise. 
 Section 12.02. No Legal Title to Owner Trust Estate in Certificateholders. The Certificateholders shall not
have legal title to any part of the Owner Trust Estate. The Certificateholders shall be entitled to receive distributions with respect to their undivided beneficial ownership interest therein only in accordance with Articles VI and X. No transfer,
by operation of law or otherwise, of any right, title, or interest of the Certificateholders to and in their ownership interest in the Owner Trust Estate shall operate to terminate this Agreement or the trusts hereunder or entitle any transferee to
an accounting or to the transfer to it of legal title to any part of the Owner Trust Estate. 
 Section 12.03. Limitations on Rights of
Others. The provisions of this Agreement are solely for the benefit of the Owner Trustee, the Sponsor, the Depositor, the Certificateholders and, to the extent expressly provided herein, the Indenture Trustee, the Hedge Providers and the
Noteholders, and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Owner Trust Estate or under or in respect of this Agreement or any covenants,
conditions or provisions contained herein. 
 Section 12.04. Notices. 
 (a) Unless otherwise expressly specified or permitted by the terms hereof, all communications provided for or permitted hereunder shall be
in writing and shall be deemed to have been given if (1) personally delivered, (2) upon receipt by the intended recipient or three Business Days after mailing if mailed by certified mail, postage prepaid (except that notice to the Owner
Trustee shall be deemed given only upon actual receipt by the Owner Trustee), (3) sent by express courier delivery service and received by the intended recipient or (4) except with respect to notices sent to the Owner Trustee, transmitted
by telex or facsimile transmission (or any other type of electronic transmission agreed upon by the parties and confirmed by a writing delivered by any of the means described in (1), (2) or (3), at the following addresses: (i) if to the
Owner Trustee, at its Corporate Trust Office; and (ii) if to the Depositor, NovaStar Certificates Financing Corporation, 8140 Ward Parkway, Suite 300, Kansas City, Missouri 64114, Attention: Matt Kaltenrieder (816) 237-7508; or, as to each
such party, at such other address as shall be designated by such party in a written notice to each other party. 
 (b) Any
notice required or permitted to be given to a Certificateholder shall be given by first-class mail, postage prepaid, at the address of such Certificateholder as shown in the Certificate Register. Any notice so mailed within the time prescribed in
this Agreement 

  

 33 

 
shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. 
 Section 12.05. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable
such provision in any other jurisdiction. 
 Section 12.06. Separate Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. 
 Section 12.07. Successors and Assigns. All covenants and agreements contained herein shall be binding upon, and inure to the benefit of, the
Depositor, the Owner Trustee and its successors and each Certificateholder and its successors and permitted assigns, all as herein provided. Any request, notice, direction, consent, waiver or other instrument or action by a Certificateholder shall
bind the successors and assigns of such Certificateholder. 
 Section 12.08. No Petition. The Owner Trustee, by entering into this
Agreement, each Certificateholder, by accepting a Certificate, and the Indenture Trustee and each Noteholder by accepting the benefits of this Agreement, hereby covenant and agree that they will not at any time institute against the Depositor or the
Issuing Entity, or join in any institution against the Depositor or the Issuing Entity of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy
law in connection with any obligations relating to the Certificates, the Notes, this Agreement or any of the other Basic Documents. 
 This
Section 12.08 will survive for one year and one day following the termination of this Agreement. 
 Section 12.09. No Recourse.
Each Certificateholder by accepting a Certificate acknowledges that such Certificateholder’s Certificate represents a beneficial interest in the Issuing Entity only and does not represent an interest in or an obligation of the Servicer, the
Sponsor, the Owner Trustee or any Affiliate thereof and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated in this Agreement, the Certificates or the other Basic Documents. 

Section 12.10. Headings. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or
limit any of the terms or provisions hereof. 
 Section 12.11. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 
  

 34 

 Section 12.12. [Intentionally Omitted.] 
 Section 12.13. Third-Party Beneficiaries. The Indenture Trustee, the Sponsor and the Hedge Providers are intended third-party beneficiaries of
this Agreement, and this Agreement shall be binding upon and inure to the benefit of the Indenture Trustee, the Sponsor and the Hedge Providers. 
 Section 12.14. [Intentionally Omitted.] 
 Section 12.15. Servicer. The Servicer is authorized to prepare, or cause to be
prepared, execute and deliver on behalf of the Issuing Entity all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuing Entity, the Sponsor or Owner Trustee to prepare, file or deliver
pursuant to the Basic Documents. Upon written request, the Owner Trustee shall execute and deliver to the Servicer a limited power of attorney appointing the Servicer the Issuing Entity’s agent and attorney-in-fact to prepare, or cause to be
prepared, execute and deliver all such documents, reports, filings, instruments, certificates and opinions. 
 [Remainder of Page
Intentionally Left Blank] 
  

 35 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective
officers hereunto duly authorized, as of the day and year first above written. 
  

			
	NOVASTAR CERTIFICATES FINANCING CORPORATION, as Depositor
		
	By:	 	  
	Name:	 	
	Title:	 	
	
	WILMINGTON TRUST COMPANY, as Owner Trustee
		
	By:	 	  
	Name:	 	
	Title:	 	

 Solely with respect to obligation under Section 9.02 of this Trust Agreement 
  

			
	 NOVASTAR MORTGAGE, INC.,
 as Servicer

		
	 By:
	 	  
	 Name:
	 	 Matt Kaltenrieder

	 Title:
	 	 Vice President

 [Signature page to Amended and Restated Trust Agreement] 
  

 36 

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

			
	 Certificate No. 1
	  	Percentage Interest: 100%

 THIS CERTIFIES THAT NovaStar Certificates Financing Corporation (the
“Certificateholder”) is the registered owner of a 100% Percentage Interest in NovaStar Mortgage Funding Trust, Series 2006-1 (the “Issuing Entity”) existing under the laws of the State of Delaware and created
pursuant to that certain Trust Agreement, dated as of March 13, 2006, as amended and restated on April 28, 2006 (as amended and restated, the “Trust Agreement”), by and between NovaStar Certificates Financing Corporation,
as depositor, and Wilmington Trust Company, not its individual capacity but solely as owner trustee under the Trust Agreement (the “Owner Trustee”). Capitalized terms used but not otherwise defined herein have the meanings assigned
to such terms in the Trust Agreement. The Owner Trustee, on behalf of the Issuing Entity and not in its individual capacity, has executed this Certificate by one of its duly authorized signatories as set forth below. This Certificate is one of the
Certificates referred to in the Trust Agreement and is issued under and is subject to the terms, provisions and conditions of the Trust Agreement to which the Certificateholder by virtue of the acceptance hereof agrees and by which the
Certificateholder hereof is bound. Reference is hereby made to the Trust Agreement for the rights of the Certificateholder, as well as for the terms and conditions of the Issuing Entity created by the Trust Agreement. 
 The recitals contained herein (other than the signature and countersignature of the Owner Trustee) shall be taken as the statements of the Depositor, and
the Owner Trustee assumes no responsibility for the correctness thereof. 
 The Certificateholder, by its acceptance hereof, agrees not to
transfer this Certificate except in accordance with terms and provisions of the Trust Agreement. 
 The Certificateholder, by its acceptance
hereof, acknowledges that such Certificateholder’s Certificate represents a beneficial interest in the Issuing Entity only and does not represent an interest in or an obligation of the Servicer, the Depositor, the Sponsor, the Owner Trustee or
any Affiliate thereof and no recourse may be had against such parties or their assets, except as may be expressly set forth or contemplated herein, in the Trust Agreement or the other Basic Documents. 
 No pledge or transfer of the Certificates shall be effective unless such pledge or transfer is (i) of a 100% Percentage Interest of all the
Certificates and (ii) to a beneficial owner that represents that it qualifies for taxation as a REIT or is a Qualified REIT Subsidiary. 
 THIS CERTIFICATE REPRESENTS AN OWNERSHIP INTEREST IN THE ISSUING ENTITY FOR FEDERAL INCOME TAX PURPOSES. 
 THIS CERTIFICATE SHALL
BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. 

 

 A-2 

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

			
	 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1

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

 Dated: April 28, 2006 
 CERTIFICATE OF AUTHENTICATION 
 This
is one of the Certificates referred to in the within-mentioned Trust Agreement. 
  

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

 Dated: April 28, 2006 
  

 A-3 

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

			
		
	 By:
	 	*/
		 	 Signature Guaranteed:

		
	 By:
	 	*/

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

  

 A-4 

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

 B-1 

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

					
	WILMINGTON TRUST COMPANY, not in its individual capacity but solely as trustee
		
	 By:
	 	  
		 	 Name:
	 	
		 	 Title:
	 	

  

 B-2 

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

	 	Re:	NovaStar Mortgage Funding Trust, Series 2006-1 (the “Trust”)  

 Asset-Backed Notes, Series 2006-1 
 Ladies and Gentlemen: 
                                       
                                       (the
“Certificateholder”) has purchased or acquired, or intends to purchase or acquire from
                                        ,
the current Certificateholder (the “Current Certificateholder”), a Trust Certificate representing a 100% Percentage Interest (the “Certificate”) in the Issuing Entity, which represents an interest in the Issuing
Entity created pursuant to that certain Trust Agreement, dated as of March 13, 2006, as amended and restated on                     ,
2006 (the “Trust Agreement”), by and between NovaStar Certificates Financing Corporation, as Depositor and Wilmington Trust Company, as Owner Trustee. Capitalized terms used and not otherwise defined herein have the meanings
assigned to such terms in the Trust Agreement. 
 CERTIFICATION 
 The undersigned, as an authorized officer or agent of the Certificateholder, hereby certifies, represents, warrants and agrees on behalf of the Certificateholder as follows: 
 1. The Certificateholder is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it was formed and is
authorized to invest in the Certificate. The person executing this letter on behalf of the Certificateholder is duly authorized to do so on behalf of the Certificateholder. 
 2. The Certificateholder hereby acknowledges that no transfer of the Certificate may be made unless such transfer is exempt from the registration
requirements of the Securities Act of 1933, as amended (the “Securities Act”); and applicable state securities laws, or is made in accordance with the Securities Act and such laws. 
 3. The Certificateholder understands that the Certificate has not been and will not be registered under the Securities Act and may be offered, sold,
pledged or otherwise transferred to a person whom the transferor reasonably believes is (A) a qualified institutional buyer (as defined in Rule 144A under the Securities Act) or (B) a Person involved in the 

  

 C-1 

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

 C-2 

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

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

			
	 [NAME OF CERTIFICATEHOLDER]

		
	 By:
	 	  
		 	 Name:

		 	 Title:

  

 C-3 

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

	 	Re:	NovaStar Mortgage Funding Trust, Series 2006-1 (the “Trust”) 

	 	Asset-Backed	Notes, Series 2006-1 

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

			
	 [NAME OF TRANSFEROR]

		
	 By:
	 	  
		 	 Authorized Officer

  

 D-1 

 EXHIBIT E 
 Form of Class C Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS C CERTIFICATES 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage
Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Certificates Financing Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate
representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Sale and Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Indenture Trustee
relating to the Mortgage Loans and other assets held in the Issuing Entity.) 
 THE EQUITY INTEREST IN THE ISSUING ENTITY REPRESENTED BY THIS CERTIFICATE HAS
NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAWS. THIS EQUITY INTEREST MAY BE DIRECTLY OR INDIRECTLY OFFERED OR SOLD OR OTHERWISE DISPOSED OF (INCLUDING
PLEDGED) BY THE HOLDER HEREOF ONLY TO (I) A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE ACT, IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT AND OF SUCH STATE LAWS OR (II) A PERSON INVOLVED IN THE ORGANIZATION OR OPERATION OF THE ISSUING ENTITY OR AN AFFILIATE OF SUCH A PERSON WITHIN THE MEANING OF RULE 3A-7 OF THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (INCLUDING, BUT NOT LIMITED TO, NOVASTAR MORTGAGE INC.) IN A TRANSACTION THAT IS REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR THAT IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT AND SUCH LAWS. NO PERSON IS
OBLIGATED TO REGISTER THIS EQUITY INTEREST UNDER THE ACT OR ANY STATE SECURITIES LAWS. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY BENEFICIAL INTEREST HEREIN
SHALL BE MADE TO ANY PERSON UNLESS THE OWNER TRUSTEE HAS RECEIVED A REPRESENTATION LETTER FROM THE TRANSFEREE TO THE EFFECT THAT SUCH TRANSFEREE IS NOT (I) AN EMPLOYEE BENEFIT PLAN (WITHIN THE MEANING OF SECTION 3(3) OF THE EMPLOYEE RETIREMENT
INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO TITLE OF ERISA, (II) A PLAN (WITHIN THE 

  

 E-1 

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

					
	No.: C	  	Date: April 28, 2006	  	CUSIP No.: 669884 AT 5
			
	 Percentage Interest:
 100%
	  	Registered Owner: NovaStar Certificates Financing Corporation	  	Final Scheduled Payment Date: May 25, 2036

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

 Each owner of record of a Class C Certificate will be entitled to certain distributions, as described under Article VIII of the Indenture.

  

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 In order to receive the final distribution hereon, the owner hereof is required to present this
Certificate to the Indenture Trustee. The Indenture provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Indenture. 
 THIS CERTIFICATE REPRESENTS AN OWNERSHIP INTEREST IN THE ISSUING ENTITY FOR FEDERAL INCOME TAX PURPOSES. 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar
Home Equity Loan Asset-Backed Certificates, Series 2006-1, Class C Certificates (the “Class C Certificates”) and issued under and subject to the terms, provisions and conditions of the Trust Agreement, to which the owner of this
Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Trust Agreement are the Trust Certificates and all such Certificates are collectively referred to as the “Certificates”. 
 Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Trust Agreement. 
 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Payment
Date”) commencing May 25, 2006, the owners of the Class C Certificates as of the close of business on the business day immediately preceding such Payment Date (the “Record Date”) will be entitled to receive payments in respect of
interest, principal, if any, and the Prepayment Charges relating to such Payment Date, all as described in Article VIII of the Indenture. Payments will be made in immediately available funds to such owners, by wire transfer or by check mailed to the
address of the person entitled thereto as it appears on the Certificate Register. 
 The Indenture Trustee is required to duly and punctually
pay payments with respect to this Certificate in accordance with the terms hereof and the Indenture. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Indenture Trustee to such owner
for all purposes of the Indenture. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Sale and Servicing Agreement. The
Sale and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any
Sub-Servicer shall release the Servicer from any of its obligations under the Sale and Servicing Agreement. 
 This Certificate does not
represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Certificates Financing Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or
any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit 

  

 E-3 

 
Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to
certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Indenture) all as more specifically set forth hereinabove and in the Indenture. 
 Notwithstanding any other provisions in the Indenture, the owner of any Certificate shall have the right which is absolute and unconditional to receive
payments to the extent provided in the Indenture with respect to such Certificate or to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such owner. 
 The Sponsor may, at its option, terminate the Indenture on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date
is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Payment Date, all of the outstanding Mortgage Loans and REO Properties at the Repurchase Price. 
 As provided in the Trust Agreement and subject to certain limitations therein set forth, Class C Certificates are exchangeable for new Class C
Certificates of authorized denominations evidencing the same aggregate principal amount. 
 No pledge or transfer of the Certificates shall
be effective unless such pledge or transfer is (i) of a 100% Percentage Interest of all the Certificates and (ii) to a beneficial owner that represents that it qualifies for taxation as a REIT or is a Qualified REIT Subsidiary. 

The Indenture Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof for all purposes,
and none of the Indenture Trustee or any such agent shall be affected by notice to the contrary. 
  

 E-4 

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

			
	 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-1

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

 Dated: April 28, 2006 
 CERTIFICATE OF AUTHENTICATION 
 This
is one of the Certificates referred to in the within-mentioned Trust Agreement. 
  

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

 Dated: April 28, 2006 
  

 E-5 

 ASSIGNMENT 
 FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer unto 
  

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

 Dated: 
  

					
		 		 	
			
	 By:
	 	  	 	*/
		 	 Signature Guaranteed:
	 	
			
	 By:
	 	  	 	*/

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

  

 E-6

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