Document:

Pooling and Servicing Agreement

 Exhibit 4.1 
  

 NOVASTAR MORTGAGE FUNDING CORPORATION, 
 as Depositor 
 NOVASTAR MORTGAGE, INC., 
 as Servicer and as Sponsor 
 U.S. BANK NATIONAL
ASSOCIATION 
 as Custodian 
 JPMORGAN CHASE BANK, NATIONAL ASSOCIATION 
 as Trustee 
 and 
 J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION 
 as Co-Trustee 
 POOLING AND SERVICING AGREEMENT 
 Dated as of June 1, 2006 
  

 NovaStar Mortgage Funding Trust, Series 2006-2 
 NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2 
  

 TABLE OF CONTENTS 
  

					
	ARTICLE I DEFINITIONS	  	6
			
	     Section 1.01
	  	Defined Terms.	  	6
	     Section 1.02
	  	Accounting.	  	6
	     Section 1.03
	  	Allocation of Certain Interest Shortfalls.	  	7
	     Section 1.04
	  	Calculation of Interest on Certificates.	  	7
		
	ARTICLE II CONVEYANCE OF MORTGAGE LOANS; ORIGINAL ISSUANCE OF CERTIFICATES	  	7
			
	     Section 2.01
	  	Conveyance of Mortgage Loans and Other Trust Assets.	  	7
	     Section 2.02
	  	Acceptance of Mortgage Loans by Custodian, on behalf of the Trustee.	  	10
	     Section 2.03
	  	Repurchase or Substitution of Mortgage Loans by the Sponsor.	  	11
	     Section 2.04
	  	Acknowledgement of Trustee.	  	14
	     Section 2.05
	  	Representations, Warranties and Covenants of the Servicer.	  	14
	     Section 2.06
	  	Representations and Warranties of the Depositor.	  	15
	     Section 2.07
	  	Issuance of Certificates.	  	16
	     Section 2.08
	  	[Reserved]	  	16
	     Section 2.09
	  	Designation Under REMIC Provisions.	  	16
		
	ARTICLE III ADMINISTRATION AND SERVICING OF THE MORTGAGE LOANS	  	16
			
	     Section 3.01
	  	Servicer to Assure Servicing.	  	16
	     Section 3.02
	  	Subservicing Agreements Between Servicer and Subservicers.	  	18
	     Section 3.03
	  	Successor Subservicers.	  	19
	     Section 3.04
	  	Liability of the Servicer.	  	19
	     Section 3.05
	  	Assumption or Termination of Subservicing Agreements by the Trustee.	  	19
	     Section 3.06
	  	Collection of Mortgage Loan Payments.	  	20
	     Section 3.07
	  	Withdrawals from the Collection Account.	  	22
	     Section 3.08
	  	Collection of Taxes, Assessments and Similar Items; Servicing Accounts.	  	24
	     Section 3.09
	  	Access to Certain Documentation and Information Regarding the Mortgage Loans.	  	25
	     Section 3.10
	  	[Reserved].	  	25
	     Section 3.11
	  	Maintenance of Hazard Insurance and Fidelity Coverage.	  	25
	     Section 3.12
	  	Due-on-Sale Clauses; Assumption Agreements.	  	27
	     Section 3.13
	  	Realization Upon Defaulted Mortgage Loans.	  	28
	     Section 3.14
	  	Custodian to Cooperate; Release of Mortgage Files.	  	29
	     Section 3.15
	  	Servicing Compensation.	  	30
	     Section 3.16
	  	Annual Statements of Compliance.	  	31
	     Section 3.17
	  	Assessments of Compliance and Attestation Reports.	  	32
	     Section 3.18
	  	Reports filed with Securities and Exchange Commission.	  	33
	     Section 3.19
	  	Optional Purchase of Defaulted Mortgage Loans.	  	38

  

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	     Section 3.20
	  	Information Required by the Internal Revenue Service Generally and Reports of Foreclosures and Abandonments of Mortgaged Property.	  	38
	     Section 3.21
	  	[Reserved].	  	38
	     Section 3.22
	  	[Reserved].	  	38
	     Section 3.23
	  	Servicing and Administration of the MI Policies.	  	38
	     Section 3.24
	  	Determination Date Reports.	  	39
	     Section 3.25
	  	Advances.	  	40
	     Section 3.26
	  	Compensating Interest Payments.	  	41
	     Section 3.27
	  	Advance Facility.	  	41
	     Section 3.28
	  	Servicer Rights Facility.	  	43
		
	 ARTICLE IV FLOW OF FUNDS
	  	44
			
	     Section 4.01
	  	Distributions.	  	44
	     Section 4.02
	  	Distribution Account.	  	51
	     Section 4.03
	  	Statements.	  	52
	     Section 4.04
	  	Supplemental Interest Trust; Excess Cashflow.	  	55
	     Section 4.05
	  	[Reserved]	  	58
	     Section 4.06
	  	[Reserved]	  	58
	     Section 4.07
	  	Allocation of Realized Losses.	  	58
		
	 ARTICLE V THE CERTIFICATES
	  	59
			
	     Section 5.01
	  	The Certificates.	  	59
	     Section 5.02
	  	Registration of Transfer and Exchange of Certificates.	  	59
	     Section 5.03
	  	Mutilated, Destroyed, Lost or Stolen Certificates.	  	64
	     Section 5.04
	  	Persons Deemed Owners.	  	64
	     Section 5.05
	  	Appointment of Paying Agent.	  	64
		
	 ARTICLE VI THE SERVICER AND THE DEPOSITOR
	  	65
			
	     Section 6.01
	  	Liability of the Servicer and the Depositor.	  	65
	     Section 6.02
	  	Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or the Depositor.	  	65
	     Section 6.03
	  	Limitation on Liability of the Servicer and Others.	  	65
	     Section 6.04
	  	Servicer Not to Resign.	  	66
	     Section 6.05
	  	Delegation of Duties.	  	67
	     Section 6.06
	  	Servicing Rights Owner to Pay Trustee’s Fees and Expenses; Indemnification.	  	67
		
	 ARTICLE VII DEFAULT
	  	68
			
	     Section 7.01
	  	Servicing Default.	  	68
	     Section 7.02
	  	Trustee to Act; Appointment of Successor.	  	70
	     Section 7.03
	  	Waiver of Defaults.	  	72
	     Section 7.04
	  	Notification to Certificateholders.	  	72
	     Section 7.05
	  	Survivability of Servicer Liabilities.	  	72

  

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	 ARTICLE VIII THE TRUSTEE
	  	72
			
	     Section 8.01
	  	Duties of the Trustee.	  	72
	     Section 8.02
	  	Rights of Trustee.	  	74
	     Section 8.03
	  	Individual Rights of Trustee.	  	75
	     Section 8.04
	  	Trustee’s Disclaimer.	  	75
	     Section 8.05
	  	Notice of Servicing Default.	  	76
	     Section 8.06
	  	[Reserved].	  	76
	     Section 8.07
	  	Compensation and Indemnity.	  	76
	     Section 8.08
	  	Replacement of Trustee.	  	76
	     Section 8.09
	  	Successor Trustee by Merger.	  	77
	     Section 8.10
	  	Appointment of Co-Trustee or Separate Trustee.	  	77
	     Section 8.11
	  	Eligibility; Disqualification.	  	78
	     Section 8.12
	  	[Reserved].	  	78
	     Section 8.13
	  	Representations and Warranties.	  	79
	     Section 8.14
	  	Directions to Trustee.	  	79
	     Section 8.15
	  	The Agents.	  	79
	     Section 8.16
	  	Issuing Entity Fiscal Year.	  	80
	     Section 8.17
	  	Execution of the Novation Agreements and Cap Agreements.	  	80
		
	 ARTICLE IX [RESERVED]
	  	80
		
	 ARTICLE X REMIC ADMINISTRATION
	  	80
			
	     Section 10.01
	  	REMIC Administration.	  	80
	     Section 10.02
	  	Prohibited Transactions and Activities.	  	83
		
	 ARTICLE XI TERMINATION
	  	83
			
	     Section 11.01
	  	Termination.	  	83
	     Section 11.02
	  	Additional Termination Requirements.	  	85
		
	 ARTICLE XII MISCELLANEOUS PROVISIONS
	  	86
			
	     Section 12.01
	  	Amendment.	  	86
	     Section 12.02
	  	Recordation of Agreement; Counterparts.	  	87
	     Section 12.03
	  	Limitation on Rights of Certificateholders.	  	88
	     Section 12.04
	  	Compliance with Regulation AB.	  	89
	     Section 12.05
	  	Governing Law; Jurisdiction.	  	89
	     Section 12.06
	  	Notices.	  	89
	     Section 12.07
	  	Severability of Provisions.	  	92
	     Section 12.08
	  	Article and Section References.	  	92
	     Section 12.09
	  	Further Assurances.	  	92
	     Section 12.10
	  	Benefits of Agreement.	  	92
	     Section 12.11
	  	Acts of Certificateholders.	  	92
	     Section 12.12
	  	Confidentiality.	  	93
			
	 APPENDIX A
	  		  	
	 APPENDIX B
	  		  	

  

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 EXHIBITS: 
  

			
	 Exhibit A-1
	  	Form of Class A-1A Certificates
	 Exhibit A-2
	  	Form of Class A-2A Certificates
	 Exhibit A-3
	  	Form of Class A-2B Certificates
	 Exhibit A-4
	  	Form of Class A-2C Certificates
	 Exhibit A-5
	  	Form of Class A-2D Certificates
	 Exhibit A-6
	  	Form of Class M-1 Certificates
	 Exhibit A-7
	  	Form of Class M-2 Certificates
	 Exhibit A-8
	  	Form of Class M-3 Certificates
	 Exhibit A-9
	  	Form of Class M-4 Certificates
	 Exhibit A-10
	  	Form of Class M-5 Certificates
	 Exhibit A-11
	  	Form of Class M-6 Certificates
	 Exhibit A-12
	  	Form of Class M-7 Certificates
	 Exhibit A-13
	  	Form of Class M-8 Certificates
	 Exhibit A-14
	  	Form of Class M-9 Certificates
	 Exhibit A-15
	  	Form of Class M-10 Certificates
	 Exhibit A-16
	  	Form of Class I-1 Certificates
	 Exhibit A-17
	  	Form of Class I-2 Certificates
	 Exhibit A-18
	  	Form of Class CA Certificates
	 Exhibit A-19
	  	Form of Class CB Certificates
	 Exhibit A-20
	  	Form of Class R Certificates
	 Exhibit A-21
	  	Form of Class M-9 DSI Certificates
	 Exhibit A-22
	  	Form of Class M-10 DSI Certificates
	 Exhibit B
	  	Mortgage Loan Schedule
	 Exhibit C
	  	[Reserved]
	 Exhibit D
	  	[Reserved]
	 Exhibit E
	  	Request for Release
	 Exhibit F-1
	  	Form of Custodian’s Initial Certification
	 Exhibit F-2
	  	Form of Custodian’s Final Certification
	 Exhibit G
	  	Form of Investment Letter
	 Exhibit H
	  	Form of Residual Certificate Transfer Affidavit
	 Exhibit I
	  	Form of Transferor’s Certificate
	 Exhibit J
	  	Form of Designation Under REMIC Provisions
	 Exhibit K
	  	Form of Advance Facility Notice
	 Exhibit L
	  	Servicing Criteria to be Addressed in Assessment of Compliance
	 Exhibit M
	  	Form 10-D, Form 8-K and Form 10-K Reporting Responsibility
	 Exhibit N-1
	  	Form of Certification to Be Provided by the Depositor with Form 10-K
	 Exhibit N-2
	  	Form of Certification to Be Provided to the Depositor by the Trustee
	 Exhibit O
	  	Form of Officer’s Certificate Regarding Annual Statement of Compliance

  

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 This Pooling and Servicing Agreement is dated as of June 1, 2006 (the “Agreement”),
among NOVASTAR MORTGAGE FUNDING CORPORATION, as depositor (the “Depositor”), NOVASTAR MORTGAGE, INC., as servicer (the “Servicer”) and as sponsor (the “Sponsor”), U.S. BANK NATIONAL ASSOCIATION, as
custodian (the “Custodian”), JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, as trustee (the “Trustee”) and J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION, as co-trustee (the “Co-Trustee”). 

ARTICLE I 
 DEFINITIONS

 Section 1.01 Defined Terms. 
 Whenever used in this Agreement, except as otherwise expressly provided herein or unless the context otherwise requires, capitalized terms and phrases used herein shall have the meanings assigned to such terms and
phrases in the definitions attached hereto as Appendix A, which is incorporated herein by reference. Unless the context otherwise requires: 
 (a) a term has the meaning assigned to it; 
 (b) an accounting term not otherwise defined has the meaning assigned to it in
accordance with generally accepted accounting principles as in effect from time to time; 
 (c) “or” is not exclusive; 

(d) “including” means including without limitation; 
 (e) words in the singular include the plural and words in the plural include the singular; 
 (f) any
agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in
the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; and 
 (g) references to a
Person are also to such Person’s permitted successors and assigns. 
 Section 1.02 Accounting. 
 Unless otherwise specified herein, for the purpose of any definition or calculation, whenever amounts are required to be netted, subtracted or added or
any distributions are taken into account such definition or calculation and any related definitions or calculations shall be determined without duplication of such functions. 
  

 6 

 Section 1.03 Allocation of Certain Interest Shortfalls. 
 For purposes of calculating the amount of the Monthly Interest Distributable Amount for the Class A Certificates and the Mezzanine Certificates, for
any Distribution Date, (1) the aggregate amount of any Net Prepayment Interest Shortfalls and any Relief Act Shortfalls incurred in respect of the Mortgage Loans for any Distribution Date shall be allocated first to the Excess Cashflow, and
second, on a pro-rata basis based on, and to the extent of, the gross Monthly Interest Distributable Amount for each such Class, among the Class A Certificates and the Mezzanine Certificates and (2) the aggregate amount of any
Available Funds Cap Carryforward Amounts incurred for any Distribution Date shall be allocated to the Class CA and Class CB Certificates to the extent of the gross Monthly Interest Distributable Amount for that Class, after deduction of any Net
Prepayment Interest Shortfalls and any Relief Act Shortfalls. 
 All Net Prepayment Interest Shortfalls and Relief Act Shortfalls shall be
allocated on each Distribution Date among the classes of each of REMIC I, REMIC II, REMIC III and REMIC IV in the proportion that Net Prepayment Interest Shortfalls and Relief Act Shortfalls are allocated to the related Master REMIC Regular
Interests. 
 Section 1.04 Calculation of Interest on Certificates.  
 Unless otherwise specified, all calculations in respect of interest on the Class A Certificates and the Mezzanine Certificates shall be made on the
basis of the actual number of days elapsed in the related Accrual Period on the basis of a 360-day year and all other calculations of interest described herein shall be made on the basis of a 360-day year consisting of twelve 30-day months.

 ARTICLE II 
 CONVEYANCE OF MORTGAGE LOANS; 
 ORIGINAL ISSUANCE OF CERTIFICATES 
 Section 2.01 Conveyance of Mortgage Loans and Other Trust Assets. 
 The Depositor, concurrently with the execution and delivery hereof, does hereby transfer, assign, set over and otherwise convey in trust to the Trustee
without recourse for the benefit of the Certificateholders all the right, title and interest of the Depositor, including any security interest therein for the benefit of the Depositor, in and to (i) each Mortgage Loan identified on the Mortgage
Loan Schedule, including the related Cut-off Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest and principal due after the Cut-off Date; (ii) property which secured
each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) its interest in any insurance policies in respect of the Mortgage Loans; (iv) its interest in the MI Policies; (v) the rights of
the Depositor under the Purchase Agreement; (vi) its interest in the Cap Agreements; (vii) all other assets included or to be included in the Trust Fund; and (viii) all proceeds of any of the foregoing. Such assignment includes all
interest and principal due to the Depositor or the Servicer after the related Cut-off Date with respect to the Mortgage Loans. 
  

 7 

 In connection with such transfer and assignment, the Sponsor, on behalf of the Depositor, does hereby
deliver to, and deposit with the Custodian, as the Trustee’s designated agent, the following documents or instruments with respect to each Mortgage Loan so transferred and assigned (with respect to each Mortgage Loan, a “Mortgage
File”): 
 (i) the original Mortgage Note endorsed to “JPMorgan Chase Bank, National Association, as Trustee for
the NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2”; 
 (ii) the original Mortgage with evidence of
recording thereon, or, if the original Mortgage has not yet been returned from the public recording office, a copy of the original Mortgage certified by the Sponsor or the public recording office in which such original Mortgage has been recorded,
and if the Mortgage Loan is registered on the MERS System, such Mortgage shall include thereon a statement that it is a MOM Loan and shall include the MIN for such Mortgage Loan; 
 (iii) unless the Mortgage Loan is registered on the MERS System, an original assignment (which may be included in one or more blanket
assignments if permitted by applicable law) of the Mortgage endorsed to “JPMorgan Chase Bank, National Association, as Trustee for the NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2”, and otherwise in recordable form;

 (iv) originals of any intervening assignments of the Mortgage showing an unbroken chain of title from the originator
thereof to the Person assigning it to the Trustee (or to MERS, if the Mortgage Loan is registered on the MERS System), and noting the presence of a MIN (if the Mortgage Loan is registered on the MERS System), with evidence of recording thereon, or,
if the original of any such intervening assignment has not yet been returned from the public recording office, a copy of such original intervening assignment certified by the Sponsor or the public recording office in which such original intervening
assignment has been recorded; 
 (v) the original policy of title insurance (or a commitment for title insurance, if the
policy is being held by the title insurance company pending recordation of the Mortgage); and 
 (vi) a true and correct copy
of each assumption, modification, consolidation or substitution agreement, if any, relating to the Mortgage Loan. 
 If a material defect in
any Mortgage File is discovered which may materially and adversely affect the value of the related Mortgage Loan, or the interests of the Trustee or the Certificateholders in such Mortgage Loan, including if any document required to be delivered to
the Custodian has not been delivered (provided that a Mortgage File will not be deemed to contain a defect for an unrecorded assignment under clause (iii) above for 180 days following submission of the assignment if the Sponsor has submitted
such assignment for recording pursuant to the terms of the following paragraph), the Sponsor shall cure such defect or 
  

 8 

 repurchase the related Mortgage Loan at the Repurchase Price or substitute an Eligible Substitute Mortgage Loan for the
related Mortgage Loan upon the same terms and conditions set forth in Section 3.01 of the Purchase Agreement for breaches of representations and warranties. 
 Promptly after the Closing Date in the case of a Mortgage Loan (or after the date of transfer of any Eligible Substitute Mortgage Loan), the Sponsor at its own expense shall complete and submit for recording in the
appropriate public office for real property records each of the assignments referred to in clause (iii) above, with such assignment completed in favor of the Trustee, excluding any Mortgage Loan that is registered on the MERS System, if MERS is
identified on the Mortgage, or on a properly recorded assignment of Mortgage as the mortgagee of record. While such assignment to be recorded is being recorded, the Custodian shall retain a photocopy of such assignment. If any assignment is lost or
returned unrecorded to the Custodian because of any defect therein, the Sponsor is required to prepare a substitute assignment or cure such defect, as the case may be, and the Sponsor shall cause such substitute assignment to be recorded in
accordance with this paragraph. 
 In instances where an original Mortgage or any original intervening assignment of Mortgage is not, in
accordance with clause (ii) or (iv) above, delivered by the Sponsor to the Custodian, on behalf of the Trustee, prior to or on the Closing Date in the case of a Mortgage Loan, the Sponsor will deliver or cause to be delivered the originals
of such documents to the Custodian, on behalf of the Trustee, promptly upon receipt thereof. 
 In connection with the assignment of any
Mortgage Loan registered on the MERS System, promptly after the Closing Date in the case of a Mortgage Loan (or after the date of transfer of any Eligible Substitute Mortgage Loan), the Sponsor further agrees that it will cause, at the
Sponsor’s own expense, the MERS System to indicate that such Mortgage Loan has been assigned by the Sponsor to the Trustee in accordance with this Agreement for the benefit of the Certificateholders by including (or deleting, in the case of
Mortgage Loans which are repurchased in accordance with this Agreement) in its computer files (a) the applicable Trustee code in the field “Trustee” which identifies the Trustee and (b) the code “NovaStar 2006-2” (or
its equivalent) in the field “Pool Field” which identifies the series of the Certificates issued in connection with such Mortgage Loans. The Sponsor further agrees that it will not, and will not permit the Servicer to, and the Servicer
agrees that it will not, alter the codes referenced in this paragraph with respect to any such Mortgage Loan during the term of this Agreement unless and until such Mortgage Loan is repurchased in accordance with the terms of this Agreement.

 Effective on the Closing Date, the Trustee, on behalf of the Certificateholders, hereby acknowledges its acceptance of all right, title
and interest to the Mortgage Loans and other property, existing on the Closing Date and thereafter created and conveyed to it pursuant to this Section 2.01. 
 The Trustee, as assignee or transferee of the Depositor, shall be entitled to all scheduled principal payments due after the Cut-off Date, all other payments of principal due and collected after the Cut-off Date, and
all payments of interest on the Mortgage Loans. No scheduled payments of principal due on or before the Cut-off Date and collected after the Cut-off Date shall belong to the Depositor pursuant to the terms of the Purchase Agreement. Any late payment
charges collected in connection with a Mortgage Loan shall be paid to the Servicer as provided in Section 3.15(b) hereof. 
  

 9 

 The parties hereto intend that the transactions set forth herein constitute a sale by the Depositor to
the Issuing Entity on the Closing Date of all the Depositor’s right, title and interest in and to the Mortgage Loans and other property as and to the extent described above. In the event the transactions set forth herein shall be deemed not to
be a sale, the Depositor hereby grants to the Trustee, on behalf of the Certificateholders, as of the Closing Date a security interest in all of the Depositor’s right, title and interest in, to and under the Mortgage Loans and such other
property, to secure all of the Depositor’s obligations hereunder and this Agreement shall constitute a security agreement under applicable law and in such event, the parties hereto acknowledge that the Custodian, in addition to holding the
Mortgage Loans on behalf of the Trustee for the benefit of the Certificateholders, holds the Mortgage Loans as designee of the Depositor. The Sponsor agrees to take or cause to be taken such actions and to execute such documents, including without
limitation the filing of all necessary UCC-1 financing statements in the State of Virginia (which shall have been submitted for filing as of the Closing Date), any continuation statements with respect thereto and any amendments thereto required to
reflect a change in the name or corporate structure of the Sponsor or the filing of any additional UCC-1 financing statements due to the change in the state of incorporation of the Sponsor, as are necessary to perfect and protect the interests of
the Issuing Entity and its assignees in each Mortgage Loan and the proceeds thereof. 
 Section 2.02 Acceptance of Mortgage
Loans by Custodian, on behalf of the Trustee. 
 (a) The Custodian, on behalf of the Trustee, acknowledges receipt of, subject to the
review described below and any exceptions it notes pursuant to the procedures described below, the documents (or certified copies thereof) referred to in Section 2.01 hereof and declares that it holds and will continue to hold those documents
and any amendments, replacements or supplements thereto and all other assets of the Trust Fund in trust for the use and benefit of all present and future Certificateholders. No later than 45 days after the Closing Date (or, with respect to any
Eligible Substitute Mortgage Loan, within 5 Business Days after the receipt by the Custodian, on behalf of the Trustee, thereof and, with respect to any documents received beyond 45 days after the Closing Date, promptly thereafter), the Custodian,
on behalf of the Trustee, agrees, for the benefit of the Certificateholders, to review each Mortgage File delivered to it and to execute and deliver, or cause to be executed and delivered, to the Sponsor an initial certification in the form annexed
hereto as Exhibit F-1. In conducting such review, the Custodian, on behalf of the Trustee, will ascertain whether all required documents described in Section 2.01 hereof have been executed and received and whether those documents relate,
determined on the basis of the Mortgagor name, original principal balance and loan number, to the Mortgage Loans it has received, as identified in Exhibit B to this Agreement, as supplemented (provided, however, that with respect to those documents
described in subclause (vii) of such section, the Custodian’s obligations shall extend only to documents actually delivered pursuant to such subclause). In performing any such review, the Custodian, on behalf of the Trustee, may
conclusively rely on the purported due execution and genuineness of any such document and on the purported genuineness of any signature thereon. If the Custodian, on behalf of the Trustee, finds that any document constituting part of the Mortgage
File not to have 
  

 10 

 been executed or received, or to be unrelated to the Mortgage Loans identified in Exhibit B or to appear to be defective
on its face, the Custodian, on behalf of the Trustee, shall promptly notify the Sponsor of such finding and the Sponsor’s obligation to cure such defect or repurchase or substitute for the related Mortgage Loan. 
 (b) No later than 180 days after the Closing Date, the Custodian, on behalf of the Trustee, will review, for the benefit of the Certificateholders, the
Mortgage Files and will execute and deliver or cause to be executed and delivered to the Sponsor, a final certification in the form annexed hereto as Exhibit F-2. In conducting such review, the Custodian, on behalf of the Trustee, will ascertain
whether an original of each document described in subclauses (ii)-(iv) of Section 2.01 hereof required to be recorded has been returned from the recording office with evidence of recording thereon or a certified copy has been obtained from
the recording office. If the Custodian, on behalf of the Trustee, finds any document constituting part of the Mortgage File has not been received, or to be unrelated, determined on the basis of the Mortgagor name, original principal balance and loan
number, to the Mortgage Loans identified in Exhibit B or to appear defective on its face, the Custodian, on behalf of the Trustee, shall promptly notify the Sponsor and the Trustee of such finding and the Sponsor’s obligation to cure such
defect or repurchase or substitute for the related Mortgage Loan. 
 (c) Upon deposit of the Repurchase Price in the Collection Account and
notification of the Trustee, by a certification signed by a Servicing Officer (which certification shall include a statement to the effect that the Repurchase Price has been deposited in the Collection Account), the Trustee shall cause the Custodian
to release to the Sponsor the related Mortgage File and shall cause to be executed and delivered all instruments of transfer or assignment, without recourse, furnished to it by the Sponsor as are necessary to vest in the Sponsor title to and rights
under the related Mortgage Loan. Such purchase shall be deemed to have occurred on the date on which certification of the deposit of the Repurchase Price in the Distribution Account was received by the Trustee. The Custodian, on behalf of the
Trustee, shall amend the applicable Mortgage Loan Schedule to reflect such repurchase and shall promptly notify the Servicer, and the Rating Agencies of such amendment. 
 Section 2.03 Repurchase or Substitution of Mortgage Loans by the Sponsor. 
 (a) Upon
discovery or receipt of written notice of any materially defective document in, or that a document is missing from, a Mortgage File or of the breach by the Sponsor of any representation, warranty or covenant under the Purchase Agreement in respect
of any Mortgage Loan which materially adversely affects the value of such Mortgage Loan or the interest therein of the Certificateholders, the Custodian shall promptly notify the Sponsor and the Servicer of such defect, missing document or breach
and request that the Sponsor deliver such missing document or cure such defect or breach no later than 90 days from the date of the discovery or receipt of written notice of such missing document, defect or breach, and if the Sponsor does not
deliver such missing document or cure such defect or breach in all material respects during such period, the Custodian shall notify the Trustee and the Trustee shall enforce the Sponsor’s obligation under the Purchase Agreement and cause the
Sponsor to repurchase such Mortgage Loan from the Trust Fund at the Repurchase Price on or prior to the Determination Date following the expiration of such 90 day period. 
  

 11 

 (b) The Repurchase Price for the repurchased Mortgage Loan shall be deposited in the Collection Account,
and the Trustee, upon receipt of written certification from the Servicer of such deposit, shall cause the Custodian to release to the Sponsor the related Mortgage File and the Trustee shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as the Sponsor shall furnish to it and as shall be necessary to vest in the Sponsor any Mortgage Loan released pursuant hereto and the Trustee and the Custodian shall have no further responsibility with
regard to such Mortgage File (it being understood that the Custodian shall have no responsibility for determining the sufficiency of such assignment for its intended purpose). In lieu of repurchasing any such Mortgage Loan as provided above, the
Sponsor may cause such Mortgage Loan to be removed from the Trust Fund (in which case it shall become a Deleted Mortgage Loan) and substitute one or more Eligible Substitute Mortgage Loans in the manner and subject to the limitations set forth in
Section 2.03(d). It is understood and agreed that the obligation of the Sponsor to cure or to repurchase (or to substitute for) any Mortgage Loan as to which a document is missing, a material defect in a constituent document exists or as to
which such a breach has occurred and is continuing shall constitute the sole remedy against the Sponsor respecting such omission, defect or breach available to the Trustee on behalf of the Certificateholders. 
 (c) Within 90 days of the earlier of discovery by the Servicer or receipt of notice by the Servicer of the breach of any representation, warranty or
covenant of the Servicer set forth in Section 2.05 which materially and adversely affects the interests of the Certificateholders in any Mortgage Loan, the Servicer shall cure such breach in all material respects. 
 (d) Any substitution of Eligible Substitute Mortgage Loans for Deleted Mortgage Loans made pursuant to Section 2.03(a) must be effected prior to the
last Business Day that is within two years after the Closing Date. As to any Deleted Mortgage Loan for which the Sponsor substitutes an Eligible Substitute Mortgage Loan or Loans, such substitution shall be effected by the Sponsor delivering to the
Custodian, for such Eligible Substitute Mortgage Loan or Loans, the Mortgage Note, the Mortgage, the Assignment to the Trustee, and such other documents and agreements, with all necessary endorsements thereon, as are required by Section 2.01,
together with an Officers’ Certificate providing that each such Eligible Substitute Mortgage Loan satisfies the definition thereof and specifying the Substitution Adjustment Amount (as described below), if any, in connection with such
substitution. The Custodian shall acknowledge receipt for such Eligible Substitute Mortgage Loan or Loans and, within ten Business Days thereafter, shall review such documents as specified in Section 2.02 and deliver to the Servicer, with
respect to such Eligible Substitute Mortgage Loan or Loans, a certification substantially in the form attached hereto as Exhibit F-1, with any applicable exceptions noted thereon. Within one year of the date of substitution, the Custodian shall
deliver to the Servicer a certification substantially in the form of Exhibit F-2 hereto with respect to such Eligible Substitute Mortgage Loan or Loans, with any applicable exceptions noted thereon. Monthly Payments due with respect to Eligible
Substitute Mortgage Loans in the month of substitution are not part of the Trust Fund and will be retained by the Sponsor. For the month of substitution, distributions to Certificateholders will reflect the collections and recoveries in respect of
such Deleted Mortgage Loan in the Due Period preceding the month of substitution and the Sponsor shall thereafter be entitled to retain all amounts subsequently received in respect of such Deleted Mortgage Loan. The Sponsor shall give or cause to be
given written notice to the Certificateholders that such 
  

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 substitution has taken place, shall amend the Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan
from the terms of this Agreement and the substitution of the Eligible Substitute Mortgage Loan or Loans and shall deliver a copy of such amended Mortgage Loan Schedule to the Custodian. Upon such substitution by the Sponsor, such Eligible Substitute
Mortgage Loan or Loans shall constitute part of the Mortgage Pool and shall be subject in all respects to the terms of this Agreement and the Purchase Agreement, including all applicable representations and warranties thereof included in the
Purchase Agreement as of the date of substitution. 
 For any month in which the Sponsor substitutes one or more Eligible Substitute Mortgage
Loans for one or more Deleted Mortgage Loans, the Servicer will determine the amount (the “Substitution Adjustment Amount”), if any, by which the aggregate Repurchase Price of all such Deleted Mortgage Loans exceeds the aggregate,
as to each such Eligible Substitute Mortgage Loan, of the principal balance thereof as of the date of substitution, together with one month’s interest on such principal balance at the applicable Net Mortgage Rate. On the date of such
substitution, the Sponsor will deliver or cause to be delivered to the Servicer for deposit in the Collection Account an amount equal to the Substitution Adjustment Amount, if any, and the Custodian, upon receipt of the related Eligible Substitute
Mortgage Loan or Loans and certification by the Servicer of such deposit, shall release to the Sponsor the related Mortgage File or Files and the Custodian or the Trustee, as applicable, shall execute and deliver such instruments of transfer or
assignment, in each case without recourse, as the Sponsor shall deliver to it and as shall be necessary to vest therein any Deleted Mortgage Loan released pursuant hereto. 
 In addition, the Sponsor shall obtain at its own expense and deliver to the Trustee an Opinion of Counsel to the effect that such substitution will not
cause (a) any federal tax to be imposed on the Issuing Entity, including without limitation, any federal tax imposed on “prohibited transactions” under Section 860F(a)(l) of the Code or on “contributions after the startup
date” under Section 860G(d)(l) of the Code, or (b) any REMIC created hereunder to fail to qualify as a REMIC at any time that any Certificate is outstanding. If such Opinion of Counsel can not be delivered, then such substitution may
only be effected at such time as the required Opinion of Counsel can be given. 
 (e) Upon discovery by the Sponsor, the Servicer, the
Custodian or the Trustee that any Mortgage Loan does not constitute a “qualified mortgage” within the meaning of Section 860G(a)(3) of the Code, the party discovering such fact shall within two Business Days give written notice
thereof to the other parties. In connection therewith, the Sponsor or the Depositor, as the case may be, shall repurchase or, subject to the limitations set forth in Section 2.03(d), substitute one or more Eligible Substitute Mortgage Loans for
the affected Mortgage Loan within 90 days of the earlier of discovery or receipt of such notice with respect to such affected Mortgage Loan. Such repurchase or substitution shall be made by the Sponsor. Any such repurchase or substitution shall be
made in the same manner as set forth in Section 2.03(a). The Custodian, on behalf of the Trustee, shall reconvey to the Sponsor, the Mortgage Loan to be released pursuant hereto in the same manner, and on the same terms and conditions, as it
would a Mortgage Loan repurchased for breach of a representation or warranty. 
  

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 Section 2.04 Acknowledgement of Trustee. 
 The Trustee acknowledges that in the event that any transfer of the Mortgage Loans and the MI Policies from the Sponsor to the Depositor, or from the
Depositor to the Trustee on behalf of the Certificateholders, is determined to constitute a financing, then in each case the Custodian, on behalf of the Trustee, and the Trustee hold the Mortgage Loans and the MI Policies as the designee and bailee
of the Depositor subject, however, in each case, to a prior lien in favor of the Certificateholders pursuant to the terms of this Agreement. 
 Section 2.05 Representations, Warranties and Covenants of the Servicer. 
 The Servicer hereby represents,
warrants and covenants to the Trustee, for the benefit of each of the Trustee and the Certificateholders and to the Depositor that as of the Closing Date or as of such date specifically provided herein: 
 (i) The Servicer is a corporation duly organized, validly existing and in good standing under the laws of the State of Virginia and has
the corporate power to own its assets and to transact the business in which it is currently engaged. The Servicer is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction in which the character of the
business transacted by it or properties owned or leased by it requires such qualification and in which the failure to so qualify would have a material adverse effect on the business, properties, assets, or condition (financial or other) of the
Servicer or the validity or enforceability of the Mortgage Loans; 
 (ii) The Servicer has the corporate power and authority
to make, execute, deliver and perform this Agreement and all of the transactions contemplated under this Agreement, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. When executed
and delivered, this Agreement will constitute the legal, valid and binding obligation of the Servicer enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting
the enforcement of creditors’ rights generally and by the availability of equitable remedies; 
 (iii) The Servicer is
not required to obtain the consent of any other Person or any consent, license, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except for such consent, license, approval or authorization, or registration or declaration, as shall have been obtained or filed, as the case may be; 
 (iv) The execution and delivery of this Agreement and the performance of the transactions contemplated hereby by the Servicer will not
violate any provision of any existing law or regulation or any order or decree of any court applicable to the Servicer or any provision of the certificate of 
  

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 incorporation or bylaws of the Servicer, or constitute a material breach of any mortgage, indenture,
contract or other agreement to which the Servicer is a party or by which the Servicer may be bound; 
 (v) No litigation or
administrative proceeding of or before any court, tribunal or governmental body is currently pending, or to the knowledge of the Servicer threatened, against the Servicer or any of its properties or with respect to this Agreement or the Certificates
which, to the knowledge of the Servicer, has a reasonable likelihood of resulting in a material adverse effect on the transactions contemplated by this Agreement; 
 (vi) The Servicer is a member of MERS in good standing, and will comply in all material respects with the rules and procedures of MERS in
connection with the servicing of the Mortgage Loans that are registered with MERS; and 
 (vii) With respect to the Group I
Mortgage Loans, the Servicer will accurately and fully report its borrower credit files to the three largest credit repositories in a timely manner. 
 The foregoing representations and warranties shall survive any termination of the Servicer hereunder. 
 Section 2.06 Representations and Warranties of the Depositor. 
 The Depositor represents and warrants to the
Issuing Entity and the Trustee on behalf of the Certificateholders as follows: 
 (a) The Depositor is duly organized and validly existing as
a corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted. 
 (b) The Depositor is duly qualified to do business as a foreign corporation in good standing and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of its property or the conduct of its business shall require such qualifications and in which the failure to so qualify would have a material adverse effect on the business, properties, assets or
condition (financial or other) of the Depositor and the ability of the Depositor to perform hereunder. 
 (c) The Depositor has the power and
authority to execute and deliver this Agreement and to carry out its terms; the Depositor has full power and authority to purchase the property to be purchased from the Sponsor and the Depositor has duly authorized such purchase by all necessary
corporate action; and the execution, delivery and performance of this Agreement have been duly authorized by the Depositor by all necessary corporate action. When executed and delivered, this Agreement will constitute the legal, valid and binding
obligation of the Depositor enforceable in accordance with its terms, except as enforcement of such terms may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by the availability
of equitable remedies. 
  

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 (d) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms
hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of the Depositor, or any indenture, agreement
or other instrument to which the Depositor is a party or by which it is bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); nor violate any law or, to the best of the Depositor’s knowledge, any order, rule or regulation applicable to the Depositor of any court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Depositor or its properties. 
 Section 2.07 Issuance of
Certificates. 
 The Trustee acknowledges the assignment to the Trustee of the Mortgage Loans and the delivery to the Custodian, on behalf
of the Trustee of the Mortgage Files, subject to the provisions of Sections 2.01 and 2.02, together with the assignment to it of all other assets included in the Trust Fund, receipt of which is hereby acknowledged. Concurrently with such assignment
and delivery and in exchange therefor, the Trustee, pursuant to the written request of the Depositor executed by an officer of the Depositor, has executed, and authenticated and delivered to or upon the order of the Depositor, the Certificates in
authorized denominations. The interests evidenced by the Certificates, constitute the entire beneficial ownership interest in the Trust Fund. 
 Section 2.08 [Reserved] 
 Section 2.09 Designation Under REMIC Provisions. 
 The Trustee shall comply with the provisions set forth in Exhibit J. 
 ARTICLE III 
 ADMINISTRATION AND SERVICING 
 OF THE MORTGAGE LOANS 
 Section 3.01 Servicer to Assure Servicing. 
 (a) The Servicer shall supervise, or take such actions as are
necessary to ensure, the servicing and administration of the Mortgage Loans and any REO Property in accordance with all applicable requirements of the Servicing Criteria, with this Agreement and with its normal servicing practices, which generally
shall conform to the standards of an institution prudently servicing mortgage loans for its own account and shall have full authority to do anything it reasonably deems appropriate or desirable in connection with such servicing and administration.
The Servicer may perform its responsibilities relating to servicing through other agents or independent contractors, but shall not thereby be released from any of its responsibilities as hereinafter set forth. Subject to Section 3.06(b), the
authority of the Servicer, 
  

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 in its capacity as Servicer, and any Subservicer acting on its behalf, shall include, without limitation, the power to
(i) consult with and advise any Subservicer regarding administration of a related Mortgage Loan, (ii) approve any recommendation by a Subservicer to foreclose on a related Mortgage Loan, (iii) supervise the filing and collection of
insurance claims and take or cause to be taken such actions on behalf of the insured Person thereunder as shall be reasonably necessary to prevent the denial of coverage thereunder, and (iv) effectuate foreclosure or other conversion of the
ownership of the Mortgaged Property securing a related Mortgage Loan, including the employment of attorneys, the institution of legal proceedings, the collection of deficiency judgments, the acceptance of compromise proposals and any other matter
pertaining to a delinquent Mortgage Loan. The authority of the Servicer shall include, in addition, the power on behalf of the Certificateholders, the Trustee, or any of them to (i) execute and deliver customary consents or waivers and other
instruments and documents, (ii) consent to transfer of any related Mortgaged Property and assumptions of the related Mortgage Notes and Mortgages (in the manner provided in this Agreement) and (iii) collect any Insurance Proceeds and
Liquidation Proceeds. Without limiting the generality of the foregoing, the Servicer and any Subservicer acting on its behalf may, and is hereby authorized, and empowered by the Trustee when the Servicer believes it is reasonably necessary in its
best judgment in order to comply with its servicing duties hereunder, to execute and deliver, on behalf of itself, the Certificateholders, the Trustee, or any of them, any instruments of satisfaction, cancellation, partial or full release, discharge
and all other comparable instruments, with respect to the related Mortgage Loans, the insurance policies and the accounts related thereto, and the Mortgaged Properties. The Servicer may exercise this power in its own name or in the name of a
Subservicer. 
 The Servicer, in such capacity, may not consent to the placing of a lien senior to that of the Mortgage on the related
Mortgaged Property. 
 The relationship of the Servicer (and of any successor to the Servicer as servicer under this Agreement) to the
Issuing Entity and the Trustee under this Agreement is intended by the parties to be that of an independent contractor and not that of a joint venturer, partner or agent. 
 (b) Notwithstanding the provisions of Subsection 3.01(a), the Servicer shall not take any action inconsistent with the interests of the Trustee, or the Certificateholders or with the rights and interests of the
Trustee, or the Certificateholders under this Agreement. 
 (c) The Trustee shall furnish the Servicer with any powers of attorney and other
documents in form as provided to it necessary or appropriate to enable the Servicer to service and administer the related Mortgage Loans and REO Property and the Trustee shall not be liable for the actions of the Servicer or any Subservicers under
such powers of attorney. 
 (d) The Servicer further is authorized and empowered by the Trustee, on behalf of the Certificateholders and the
Trustee, when the Servicer believes it is appropriate in its best judgment to register any Mortgage Loan on the MERS System, or cause the removal from the registration of any Mortgage Loan on the MERS System, to execute and deliver, on behalf of the
Trustee and the Certificateholders or any of them, any and all instruments of assignment and other comparable instruments with respect to such assignment or re-recording of a Mortgage in the name of MERS, solely as nominee for the Trustee and its
successors and assigns. Any 
  

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 expenses incurred in connection with the actions described in the preceding sentence shall be borne by the Servicer with
no right of reimbursement; provided, that if, as a result of MERS discontinuing or becoming unable to continue operations in connection with the MERS System, it becomes necessary to remove any Mortgage Loan from registration on the MERS System and
to arrange for the assignment of the related Mortgages to the Trustee, then any related expenses shall be reimbursable to the Servicer by the Issuing Entity. 
 Section 3.02 Subservicing Agreements Between Servicer and Subservicers. 
 (a) The Servicer
may enter into Subservicing Agreements with Subservicers for the servicing and administration of the Mortgage Loans and for the performance of any and all other activities of the Servicer hereunder. Each Subservicer shall be either (i) an
institution the accounts of which are insured by the FDIC or (ii) another entity that engages in the business of originating or servicing mortgage loans comparable to the Mortgage Loans, and in either case shall be authorized to transact
business in the state or states in which the related Mortgaged Properties it is to service are situated, if and to the extent required by applicable law to enable the Subservicer to perform its obligations hereunder and under the Subservicing
Agreement. Any Subservicing Agreement entered into by the Servicer shall include the provision that such Agreement may be immediately terminated (i) (x) with cause and without any termination fee by the Servicer hereunder and/or
(y) without cause, in which case the Servicer shall be solely responsible for any termination fee or penalty resulting therefrom and (ii) at the option of the Trustee upon the termination or resignation of the Servicer hereunder, in which
case the Servicer shall be solely responsible for any termination fee or penalty resulting therefrom. In addition, each Subservicing Agreement shall provide for servicing of the Mortgage Loans consistent with the terms of this Agreement. The
Servicer and the Subservicers may enter into Subservicing Agreements and make amendments to the Subservicing Agreements or enter into different forms of Subservicing Agreements providing for, among other things, the delegation by the Servicer to a
Subservicer of additional duties regarding the administration of the Mortgage Loans; provided, however, that any such amendments or different forms shall be consistent with and not violate the provisions of this Agreement, and that no such amendment
or different form shall be made or entered into which could be reasonably expected to be materially adverse to the interests of the Certificateholders, without the consent of the Certificateholders holding at least 51% of the aggregate Voting
Rights. 
 (b) As part of its servicing activities hereunder, the Servicer, for the benefit of the Trustee, and the Certificateholders, shall
enforce the obligations of each Subservicer under the related Subservicing Agreement. Such enforcement, including, without limitation, the legal prosecution of claims, termination of Subservicing Agreements and the pursuit of other appropriate
remedies, shall be in such form and carried out to such an extent and at such time as the Servicer, in its good faith business judgment, would require were it the owner of the related Mortgage Loans. The Servicer shall pay the costs of such
enforcement at its own expense, but shall be reimbursed therefor only (i) from a general recovery resulting from such enforcement only to the extent, if any, that such recovery exceeds all amounts due in respect of the related Mortgage Loan or
(ii) from a specific recovery of costs, expenses or attorneys’ fees against the party against whom such enforcement is directed. 
  

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 (c) The Servicer shall not permit a Subservicer, subcontractor or Servicing Function Participant to
perform any servicing function hereunder with respect to the Mortgage Loans unless such Servicing Function Participant first agrees in writing with the Servicer to deliver an Assessment of Compliance and an Attestation Report in such manner and at
such time that permits the Servicer to comply with Section 3.17 hereof. 
 Section 3.03 Successor Subservicers.

 The Servicer shall be entitled to terminate any Subservicing Agreement that may exist in accordance with the terms and conditions of such
Subservicing Agreement and without any limitation by virtue of this Agreement; provided, however, that upon termination, the Servicer shall either act as servicer of the related Mortgage Loans or enter into an appropriate contract with a successor
Subservicer reasonably acceptable to the Trustee, pursuant to which such successor Subservicer will be bound by all relevant terms of the related Subservicing Agreement pertaining to the servicing of such Mortgage Loans. 
 Section 3.04 Liability of the Servicer. 
 (a) Notwithstanding any Subservicing Agreement, any of the provisions of this Agreement relating to agreements or arrangements between the Servicer and a Subservicer or reference to actions taken through a Subservicer
or otherwise, the Servicer shall under all circumstances remain obligated and primarily liable to the Trustee and the Certificateholders for the servicing and administering of the Mortgage Loans and any REO Property in accordance with this
Agreement. The obligations and liability of the Servicer shall not be diminished by virtue of Subservicing Agreements or by virtue of indemnification of the Servicer by any Subservicer, or any other Person. The obligations and liability of the
Servicer shall remain of the same nature and under the same terms and conditions as if the Servicer alone were servicing and administering the related Mortgage Loans. The Servicer shall, however, be entitled to enter into indemnification agreements
with any Subservicer or other Person and nothing in this Agreement shall be deemed to limit or modify such indemnification. For the purposes of this Agreement, the Servicer shall be deemed to have received any payment on a Mortgage Loan on the date
the Subservicer received such payment. 
 (b) Any Subservicing Agreement that may be entered into and any transactions or services relating
to the Mortgage Loans involving a Subservicer in its capacity as such and not as an originator shall be deemed to be between the Subservicer and the Servicer alone, and the Custodian, the Trustee and the Certificateholders shall not be deemed
parties thereto and shall have no claims, rights, obligations, duties or liabilities with respect to the Subservicer, except as set forth in Section 3.05. 
 Section 3.05 Assumption or Termination of Subservicing Agreements by the Trustee. 
 (a) If
the Trustee or its designee as the successor Servicer, shall assume the servicing obligations of the Servicer in accordance with Section 7.02 below, the Trustee or its designee as the successor Servicer, to the extent necessary to carry out the
provisions of Section 7.02 with respect to the Mortgage Loans, shall succeed to all of the rights and obligations of the 
  

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 Servicer under each of the Subservicing Agreements. In such event, the Trustee or its designee as the successor Servicer
shall be deemed to have assumed all of the Servicer’s rights and obligations therein and to have replaced the Servicer as a party to such Subservicing Agreements to the same extent as if such Subservicing Agreements had been assigned to the
Trustee or its designee as a successor Servicer, except that the Trustee or its designee as a successor Servicer shall not be deemed to have assumed any obligations or liabilities of the Servicer arising prior to such assumption or as a result of
the Trustee’s or its designee’s terminating any Subservicer upon the Trustee or its designee becoming successor Servicer and the Servicer shall not thereby be relieved of any liability or obligations under such Subservicing Agreements
arising prior to such assumption or as a result of the Trustee’s or its designee’s terminating any Subservicer upon the Trustee or its designee becoming successor Servicer. 
 (b) The Trustee or its designee as the successor Servicer may terminate any Subservicer upon becoming successor Servicer. Any termination fees will be
paid by the terminated Subservicer. 
 (c) In the event that the Trustee or its designee as successor Servicer assumes the servicing
obligations of the Servicer under Section 7.02, upon the request of the Trustee or such designee as successor Servicer, the Servicer shall at its own expense deliver to the Trustee, or at its written request to such designee, originals or, if
originals are not available, photocopies of all documents, files and records, electronic or otherwise, relating to the Subservicing Agreements and the related Mortgage Loans or REO Property then being serviced and an accounting of amounts collected
and held by it, if any, and will otherwise cooperate and use its reasonable efforts to effect the orderly and efficient transfer of the Subservicing Agreements, or responsibilities hereunder to the Trustee, or at its written request to such designee
as successor Servicer. 
 Section 3.06 Collection of Mortgage Loan Payments. 
 (a) The Servicer will coordinate and monitor remittances by Subservicers to it with respect to the Mortgage Loans in accordance with this Agreement.

 (b) The Servicer shall make its best reasonable efforts to collect or cause to be collected all payments required under the terms and
provisions of the Mortgage Loans and shall follow, and use its best reasonable efforts to cause Subservicers to follow, collection procedures comparable to the collection procedures of prudent mortgage lenders servicing mortgage loans for their own
account to the extent such procedures shall be consistent with this Agreement. Consistent with the foregoing, the Servicer or the related Subservicer may in its discretion (i) waive or permit to be waived any late payment charge, prepayment
charge, assumption fee, or any penalty interest in connection with the prepayment of a Mortgage Loan and (ii) suspend or reduce or permit to be suspended or reduced regular monthly payments for a period of up to six months, or arrange or permit
an arrangement with a Mortgagor for a scheduled liquidation of delinquencies; provided, however, that the Servicer or the related Subservicer may permit the foregoing only if it believes, in good faith, that recoveries of Monthly Payments will be
maximized; provided further, however, with respect to Mortgage Loans insured by an MI Policy, that the Servicer may not without the prior written consent of the MI Insurer permit any waiver, modification or variance which would (a) reduce or
eliminate the coverage provided under the 
  

 20 

 MI Policy (b) change the loan rate, (c) forgive any payment of principal or interest, (d) lessen the lien
priority or (e) extend the final maturity date of a Mortgage Loan past 12 months after the original maturity date on such Mortgage Loan. In the event the Servicer or related Subservicer shall consent to the deferment of the due dates for
payments due on a Mortgage Note, the Servicer shall nonetheless make an Advance or shall cause the related Subservicer to make an advance to the same extent as if such installment were due, owing and delinquent and had not been deferred through
liquidation of the Mortgaged Property; provided, however, that the obligation of the Servicer or the related Subservicer to make an Advance shall apply only to the extent that the Servicer believes, in good faith, that such advances are not
Nonrecoverable Advances. The Servicer shall pay the amount of any waived prepayment charge at the time of payoff if such prepayment charge was waived for a reason other than that specified in this Section 3.06(b). 
 (c) Within five Business Days after the Servicer has determined that all amounts which it expects to recover from or on account of a Liquidated Mortgage
Loan have been recovered and that no further Liquidation Proceeds will be received in connection therewith, the Servicer shall provide to the Trustee a certificate of a Servicing Officer that such Mortgage Loan became a Liquidated Mortgage Loan as
of the date of such determination. 
 (d) The Servicer shall establish a segregated account (the “Collection Account”),
which shall be an Eligible Account, which shall be titled “Collection Account, JPMorgan Chase Bank, National Association, as Trustee for the registered holders of NovaStar Mortgage Funding Trust 2006-2, Home Equity Loan Asset-Backed
Certificates, Series 2006-2”, in which the Servicer shall deposit or cause to be deposited any amounts representing payments on and any collections in respect of the Mortgage Loans received by it after the Cut-Off Date (other than in respect of
the payments referred to in the following paragraph) within two Business Days following receipt thereof, including the following payments and collections received or made by it (without duplication): 
 (i) all payments of principal or interest on the Mortgage Loans received by the Servicer directly from Mortgagors or from the respective
Subservicer; 
 (ii) the aggregate Repurchase Price of the Mortgage Loans purchased by the Servicer pursuant to
Section 3.19; 
 (iii) Net Liquidation Proceeds; 
 (iv) all proceeds of any Mortgage Loans repurchased by the Sponsor pursuant to the Purchase Agreement, and all Substitution Adjustment
Amounts required to be deposited in connection with the substitution of an Eligible Substitute Mortgage Loan pursuant to the Purchase Agreement; 
 (v) Insurance Proceeds, other than Net Liquidation Proceeds, and MI Insurance Proceeds resulting from any insurance policy maintained on a Mortgaged Property; 
 (vi) any Advance and any Compensating Interest payments; and 
  

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 (vii) any other amounts received by the Servicer, including all Foreclosure Profits,
assumption fees, prepayment penalties and any other fees that are required to be deposited in the Collection Account pursuant to this Agreement; 
 provided,
however, that with respect to each Due Period, the Servicer shall be permitted to retain from payments actually collected in respect of interest on the Mortgage Loans, the Servicing Fee for such Due Period. The foregoing requirements respecting
deposits to the Collection Account are exclusive, it being understood that, without limiting the generality of the foregoing, the Servicer need not deposit in the Collection Account late payment charges payable by Mortgagors, as further described in
Section 3.15, or amounts received by the Subservicer for the accounts of Mortgagors for application towards the payment of taxes, insurance premiums, assessments and similar items. In the event any amount not required to be deposited in the
Collection Account is so deposited, the Servicer may at any time (prior to being terminated under this Agreement) withdraw such amount from the Collection Account, any provision herein to the contrary notwithstanding. The Servicer shall keep records
that accurately reflect the funds on deposit in the Collection Account that have been identified by it as being attributable to the Mortgage Loans and shall hold all collections in the Collection Account for the benefit of the Trustee, and the
Certificateholders, as their interests may appear. 
 Funds in the Collection Account may be invested in Eligible Investments with a maturity
date no later than the Business Day immediately preceding the Servicer Remittance Date, but shall not be commingled with the Servicer’s own funds or general assets or with funds respecting payments on mortgage loans or with any other funds not
related to the Certificates. All such investments shall be made in the name of the Trustee for the benefit of the Certificateholders, provided, however, that income earned on such Eligible Investments shall be for the account of the Servicer. Such
funds shall be invested at the written direction of the Servicer or if the Servicer does not provide such written direction such funds shall be retained by the Trustee uninvested. The Servicer shall be obligated to cover losses on such Eligible
Investments. 
 (e) The Servicer will require each Subservicer to hold all funds constituting collections on the Mortgage Loans, pending
remittance thereof to the Servicer, in one or more accounts in the name of the Trustee meeting the requirements of an Eligible Account, and such funds shall not be invested. The Subservicer shall segregate and hold all funds collected and received
pursuant to each Mortgage Loan separate and apart from any of its own funds and general assets and any other funds. Each Subservicer shall make remittances to the Servicer no later than one Business Day following receipt thereof and the Servicer
shall deposit into the Collection Account any such remittances received from any Subservicer within one Business Day following receipt by the Servicer. 
 Section 3.07 Withdrawals from the Collection Account. 
 (a) The Servicer shall, from time
to time as provided herein, make withdrawals from the Collection Account of amounts on deposit therein pursuant to Section 3.06 that are attributable to the Mortgage Loans for the following purposes (without duplication): 
 (i) to deposit in the Distribution Account, by the Servicer Remittance Date prior to each Distribution Date, all collections on the
Mortgage Loans required to be distributed from the Distribution Account on a Distribution Date; 
  

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 (ii) to the extent deposited to the Collection Account, to reimburse itself or the
related Subservicer for previously unreimbursed expenses incurred in maintaining individual insurance policies pursuant to Section 3.11, or Liquidation Expenses, paid pursuant to Section 3.13, such withdrawal right being limited to amounts
received on particular Mortgage Loans (other than any Repurchase Price in respect thereof) which represent late recoveries of the payments for which such expenses were paid, or from related Liquidation Proceeds; 
 (iii) to pay to itself out of each payment received on account of interest on a Mortgage Loan as contemplated by Section 3.15, an
amount equal to the related Servicing Fee (to the extent not retained pursuant to Section 3.06); 
 (iv) to pay to itself
or the Sponsor, with respect to any Mortgage Loan or property acquired in respect thereof that has been purchased by the Sponsor, the Servicer or other entity, all amounts received thereon and not required to be distributed to Certificateholders as
of the date on which the related Repurchase Price is determined; 
 (v) to reimburse the Servicer or any Subservicer for any
unreimbursed Advance of its own funds or any unreimbursed advance of such Subservicer’s own funds, the right of the Servicer or a Subservicer to reimbursement pursuant to this subclause (v) being limited to amounts received on a particular
Mortgage Loan (including, for this purpose, the Repurchase Price therefor, Insurance Proceeds and Liquidation Proceeds) which represent late payments or recoveries of the principal of or interest on such Mortgage Loan respecting which such Advance
or advance was made; 
 (vi) to reimburse the Servicer or any Subservicer from Insurance Proceeds or Liquidation Proceeds
relating to a particular Mortgage Loan for amounts expended by the Servicer or such Subservicer pursuant to Section 3.13: (x) in good faith in connection with the restoration of the related Mortgaged Property which was damaged by the
uninsured cause, (y) in connection with the liquidation of such Mortgage Loan, or (z) with respect to an MI Claim Payment Advance made by the Servicer with respect to such Mortgage Loan; 
 (vii) to reimburse the Servicer or any Subservicer for any unreimbursed Nonrecoverable Advance previously made, and otherwise not
reimbursed pursuant to this Section 3.07(a); 
 (viii) to withdraw any other amount deposited in the Collection Account
that was not required to be deposited therein pursuant to Section 3.06; 
  

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 (ix) to reimburse the Servicer for costs associated with the environmental report
handling the presence of any toxic or hazardous substance on a Mortgaged Property as set forth in Section 3.13(c); 
 (x)
to clear and terminate the Collection Account upon a termination pursuant to Section 7.08; 
 (xi) to pay to the Servicer
income earned on Eligible Investments in the Collection Account; 
 (xii) to pay to the MI Insurer the monthly MI Premiums due
under each MI Policy from payments received (or Advances made) on account of interest due on the related Mortgage Loan; and 
 (xiii) to make an Advance with respect to a Mortgage Loan that is Delinquent from funds held in the Collection Account as contemplated by Section 3.25, provided that the amount withdrawn for such an Advance is immediately deposited
into the Distribution Account. 
 Withdrawals made pursuant to clause (xii) shall be made on a first priority basis. In connection with withdrawals
pursuant to clauses (ii), (iii), (iv), (v) and (vi), the Servicer’s entitlement thereto is limited to collections or other recoveries on the related Mortgage Loan, and the Servicer shall keep and maintain separate accounting, on a Mortgage
Loan by Mortgage Loan basis, for the purpose of justifying any withdrawal from the Collection Account pursuant to such clauses. 
 (b)
Notwithstanding the provisions of this Section 3.07, the Servicer may, but is not required to, allow the Subservicers to deduct from amounts received by them or from the related account maintained by a Subservicer, prior to deposit in the
Collection Account, any portion to which such Subservicers are entitled as reimbursement of any reimbursable Advances made by such Subservicers. 
 Section 3.08 Collection of Taxes, Assessments and Similar Items; Servicing Accounts. 
 (a) The Servicer shall
establish and maintain or cause the related Subservicer to establish and maintain, one or more Servicing Accounts. The Servicer or a Subservicer will deposit and retain therein all collections from the Mortgagors for the payment of taxes,
assessments, insurance premiums, or comparable items as agent of the Mortgagors. 
 (b) The deposits in the Servicing Accounts shall be held
in trust by the Servicer or a Subservicer (and its successors and assigns) in the name of the Trustee. Such Servicing Accounts shall be Eligible Accounts and, if permitted by applicable law, invested in Eligible Investments held in trust by the
Servicer or a Subservicer as described above and maturing, or be subject to redemption or withdrawal, no later than the date on which such funds are required to be withdrawn, and in no event later than 45 days after the date of investment;
withdrawals of amounts from the Servicing Accounts may be made only to effect timely payment of taxes, assessments, insurance premiums, or comparable items, to reimburse the 
  

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 Servicer or a Subservicer for any advances made with respect to such items, to refund to any Mortgagors any sums as may
be determined to be overages, to pay interest, if required, to Mortgagors on balances in the Servicing Accounts or to clear and terminate the Servicing Accounts at or any time after the termination of this Agreement. Amounts received from Mortgagors
for deposit into the Servicing Accounts shall be deposited in the Servicing Accounts by the Servicer within two days of receipt. The Servicer shall advance from its own funds amounts needed to pay items payable from the Servicing Accounts if the
Servicer reasonably believes that such amounts are recoverable from the related Mortgagor. The Servicer shall comply with all laws relating to the Servicing Accounts, including laws relating to payment of interest on the Servicing Accounts. If
interest earned by the Servicer on the Servicing Accounts is not sufficient to pay required interest on the Servicing Accounts, the Servicer shall pay the difference from its own funds. The Servicing Accounts shall not be the property of the Issuing
Entity. 
 Section 3.09 Access to Certain Documentation and Information Regarding the Mortgage Loans. 
 The Servicer shall provide, and shall cause any Subservicer to provide, to the Trustee, access to the documentation regarding the related Mortgage Loans
and REO Property and to the Certificateholders or Certificate Owners, the FDIC, and the supervisory agents and examiners of the FDIC (to which the Custodian and Trustee shall also provide) access to the documentation regarding the related Mortgage
Loans required by applicable regulations, such access being afforded without charge but only upon reasonable request and during normal business hours at the offices of the Servicer or the Subservicers that are designated by these entities; provided,
however, that, unless otherwise required by law, the Servicer and any Subservicer shall not be required to provide access to such documentation if the provision thereof would violate the legal right to privacy of any Mortgagor; provided, further,
however, that the Trustee shall coordinate its request for such access so as not to impose an unreasonable burden on, or cause an unreasonable interruption of, the business of the Servicer or any Subservicer. The Servicer, the Subservicers, the
Trustee and the Custodian shall allow representatives of the above entities to photocopy any of the documentation and shall provide equipment for that purpose at a charge that covers their own actual out-of-pocket costs. 
 Section 3.10 [Reserved]. 
 Section 3.11 Maintenance of Hazard Insurance and Fidelity Coverage. 
 (a) The Servicer shall maintain and keep,
or cause each Subservicer to maintain and keep, with respect to each Mortgage Loan and each REO Property, in full force and effect hazard insurance (fire insurance with extended coverage) equal to at least the lesser of the Principal Balance of the
Mortgage Loan or the current replacement cost of the Mortgaged Property, and containing a standard mortgagee clause, provided, however, that the amount of hazard insurance may not be less than the amount necessary to prevent loss due to the
application of any co-insurance provision of the related policy. Unless applicable state law requires a higher deductible, the deductible on such hazard insurance policy may be no more than $1,500 or 1% of the applicable amount of coverage,
whichever is less. In the case of a condominium unit or a unit in a planned unit development, the required hazard insurance shall take the form of a multi-peril 
  

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 policy covering the entire condominium project or planned unit development, in an amount equal to at least 100% of the
insurable value based on replacement cost. If the Servicer shall obtain and maintain a blanket policy consistent with its general mortgage servicing activities insuring against hazard losses on all of the Mortgage Loans, it shall conclusively be
deemed to have satisfied its obligations as set forth in this Section 3.11(a), it being understood and agreed that such policy may contain a deductible clause, in which case the Servicer shall, in the event that there shall not have been
maintained on the related Mortgaged Property a policy complying with this Section 3.11(a) and there shall have been a loss which would have been covered by such policy, deposit in the Collection Account the amount not otherwise payable under
the blanket policy because of such deductible clause without any right of reimbursement. Any such deposit by the Servicer shall be made on the last Business Day of the Due Period in the month in which payments under any such policy would have been
deposited in the Collection Account. In connection with its activities as servicer of the Mortgage Loans, the Servicer agrees to present, on behalf of itself, the Issuing Entity, and the Trustee, claims under any such blanket policy. 
 (b) Any amounts collected by the Servicer or a Subservicer under any such hazard insurance policy (other than amounts to be applied to the restoration or
repair of the Mortgaged Property or amounts released to the Mortgagor in accordance with the Servicer’s or a Subservicer’s normal servicing procedures, the Mortgage Note, the Mortgage or applicable law) shall be deposited in the Collection
Account. 
 (c) Any cost incurred by a Servicer or a Subservicer in maintaining any such individual hazard insurance policies shall not be
added to the amount owing under the Mortgage Loan for the purpose of calculating monthly distributions to Certificateholders, notwithstanding that the terms of the Mortgage Loan so permit. Such costs of maintaining individual hazard insurance
policies shall be recoverable by the Servicer or a Subservicer out of related late payments by the Mortgagor or out of Insurance Proceeds or Liquidation Proceeds or by the Servicer from the Repurchase Price, to the extent permitted by
Section 3.07. 
 (d) No earthquake or other additional insurance is to be required of any Mortgagor or maintained on property acquired
with respect to a Mortgage other than pursuant to such applicable laws and regulations as shall at any time be in force and shall require such additional insurance. When, at the time of origination of the Mortgage Loan or at any subsequent time, the
Mortgaged Property is located in a federally designated special flood hazard area, the Servicer shall ensure that, with respect to such Mortgage Loan or such REO Property, flood insurance is acquired (to the extent available and in accordance with
mortgage servicing industry practice). Such flood insurance shall cover the Mortgaged Property, including all items taken into account in arriving at the Appraised Value on which the Mortgage Loan was based, and shall be in an amount equal to the
lesser of (i) the Principal Balance of the related Mortgage Loan and (ii) the minimum amount required under the terms of coverage to compensate for any damage or loss on a replacement cost basis, but not more than the maximum amount of
such insurance available for the related Mortgaged Property under either the regular or emergency programs of the National Flood Insurance Program (assuming that the area in which such Mortgaged Property is located is participating in such program).
Unless applicable state law requires a higher deductible, the deductible on such flood insurance may not exceed $1,500 or 1% of the applicable amount of coverage, whichever is less. 
  

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

 (g) The Servicer shall obtain and maintain at its own expense, and shall cause each Subservicer to obtain and maintain at its own expense,
and for the duration of this Agreement, a blanket fidelity bond and an errors and omissions insurance policy covering the Servicer’s and such Subservicer’s officers, employees and other persons acting on its behalf in connection with its
activities under this Agreement. The amount of coverage shall correspond with the FNMA/FHMLC levels presently maintained by the Servicer. The Servicer shall promptly notify the Trustee of any material change in the terms of such bond or policy. The
Servicer shall provide annually by March 31st of each year, to the Trustee a certification stating that such bond and policy are in effect. If any such bond or policy ceases to be in effect, the Servicer shall, to the extent possible, give the
Trustee ten days’ notice prior to any such cessation and shall use its reasonable best efforts to obtain a comparable replacement bond or policy, as the case may be. Any amounts relating to the Mortgage Loans collected under such bond or policy
shall be deposited in the Collection Account. 
 Section 3.12 Due-on-Sale Clauses; Assumption Agreements. 
 (a) In any case in which the Servicer is notified by any Mortgagor or Subservicer that a Mortgaged Property relating to a Mortgage Loan has been or is
about to be conveyed by the Mortgagor, the Servicer shall enforce, or shall instruct such Subservicer to enforce, any due-on-sale clause contained in the related Mortgage to the extent permitted under the terms of the related Mortgage Note and by
applicable law. The Servicer or the related Subservicer may repurchase a Mortgage Loan at the Repurchase Price when the Servicer requires acceleration of the Mortgage Loan, but only if the Servicer is satisfied, as evidenced by an Officers’
Certificate delivered to the Trustee, that such Mortgage Loan is in default or default is reasonably foreseeable. If the Servicer reasonably believes that such due-on-sale clause cannot be enforced under applicable law or if the Mortgage Loan does
not contain a due-on-sale clause, the Servicer is authorized, and may authorize any Subservicer, to consent to a conveyance subject to the lien of the Mortgage, and, with the consent of the MI Insurer, if applicable, to take or enter into an
assumption agreement from or with the Person to whom such property has been or is about to be conveyed, pursuant to which such Person becomes liable under the related Mortgage Note and unless prohibited by applicable state law, on condition,
however, that the related Mortgage Loan shall continue to be covered by a hazard policy. In connection with any such assumption, no material term of the related Mortgage Note may be changed. The Servicer shall notify the Custodian and Trustee,
whenever possible, before the completion of such assumption agreement, and shall forward to the Custodian the original copy of such assumption agreement, which copy shall be added by the Custodian to the related Mortgage File and which shall, for
all purposes, be considered a part of such Mortgage File to the same extent as all other documents and instruments constituting a part thereof. 
  

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

 Section 3.13 Realization Upon Defaulted Mortgage Loans. 
 (a) The Servicer shall, or shall direct the related Subservicer to, foreclose upon or otherwise comparably convert the ownership of properties securing
any Mortgage Loans that come into and continue in default and as to which no satisfactory arrangements can be made for collection of delinquent payments pursuant to Section 3.06, except that the Servicer shall not, and shall not direct the
related Subservicer to, foreclose upon or otherwise comparably convert a Mortgaged Property if there is evidence of toxic waste or other environmental hazards thereon unless the Servicer follows the procedures in Subsection (c) below. In
connection with such foreclosure or other conversion, the Servicer in conjunction with the related Subservicer, if any, shall use its best reasonable efforts to preserve REO Property and to realize upon defaulted Mortgage Loans in such manner as to
maximize the receipt of principal and interest by the Certificateholders, taking into account, among other things, the timing of foreclosure and the considerations set forth in Subsection 3.13(b). The foregoing is subject to the proviso that the
Servicer shall not be required to expend its own funds in connection with any foreclosure or towards the restoration of any property unless it determines in good faith (i) that such restoration or foreclosure will increase the proceeds of
liquidation of the Mortgage Loan to Certificateholders after reimbursement to itself for such expenses and (ii) that such expenses will be recoverable to it either through Liquidation Proceeds (respecting which it shall have priority for
purposes of reimbursements from the Collection Account pursuant to Section 3.07) or through Insurance Proceeds (respecting which it shall have similar priority). The Servicer shall be responsible for all costs and expenses constituting
Liquidation Expenses incurred by it in any such proceedings; provided, however, that it shall be entitled to reimbursement thereof (as well as its normal servicing compensation) as set forth in Section 3.07. Any income from or other funds (net
of any income taxes) generated by REO Property shall be deemed for purposes of this Agreement to be Liquidation Proceeds. 
 Any subsequent
collections with respect to any Liquidated Mortgage Loan shall be deposited to the Collection Account. For purposes of determining the amount of any Liquidation Proceeds or Insurance Proceeds, or other unscheduled collections, the Servicer may take
into account any estimated additional Liquidation Expenses expected to be incurred in connection with the related defaulted Mortgage Loan. 
 In the event that a Mortgage Loan would be properly classified as a Liquidated Mortgage Loan but for the fact that not all MI Insurance Proceeds claimed under the related MI Policy have been received, the Servicer may, from its own funds,
make an advance (an “MI Claim Payment Advance”) to the Collection Account in an amount not to exceed the claimed amount of such MI Insurance Proceeds not yet received. The Servicer shall not make any MI Claim Payment Advance with
respect to a claim under an MI Policy if an MI Insurer Insolvency 
  

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 Event has occurred and is continuing with respect to the related MI Insurer. In the event that the MI Claim Payment
Advance equals the claimed amount on such MI Policy, then upon the deposit of such MI Claim Payment Advance into the Collection Account the related Mortgage Loan shall be considered a “Liquidated Mortgage Loan.” 
 In the event that title to any Mortgaged Property is acquired in foreclosure or by deed in lieu of foreclosure, the deed or certificate of sale shall be
issued to the Trustee and held by the Custodian, who shall hold the same on behalf of Trustee and the Issuing Entity in accordance with the Agreement. Notwithstanding any such acquisition of title and cancellation of the related Mortgage Loan, such
Mortgaged Property shall (except as otherwise expressly provided herein) be considered to be an outstanding Mortgage Loan held as an asset of the Issuing Entity until such time as such property shall be sold. 
 (b) The Servicer shall not acquire any real property (or any personal property incident to such real property) on behalf of the Trust Fund except in
connection with a default or reasonably foreseeable default of a Mortgage Loan. In the event that the Servicer acquires any real property (or personal property incident to such real property) on behalf of the Trust Fund in connection with a default
or imminent default of a Mortgage Loan, such property shall be disposed of by the Servicer on behalf of the Trust Fund as soon as reasonably practicable, but in no event later than three years after its acquisition on behalf of the Trust Fund.

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

 Section 3.14 Custodian to Cooperate; Release of Mortgage Files. 
 (a) Upon payment in full of any Mortgage Loan, the Servicer will immediately notify the Custodian and the Trustee by a certification signed by a Servicing
Officer (which certification shall include a statement to the effect that all amounts received in connection with such payment which are required to be deposited in the Collection Account have been so deposited) and shall request delivery to the
Servicer or Subservicer, as the case may be, of the Mortgage File. Upon receipt of such certification and request, the Custodian, on behalf of the Trustee, shall promptly cause to be released the related Mortgage File to the Servicer or Subservicer
and the Trustee shall execute and deliver to the Servicer, without recourse, the 
  

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 request for reconveyance, deed of reconveyance or release or satisfaction of mortgage or such instrument releasing the
lien of the Mortgage (furnished by the Servicer), together with the Mortgage Note with written evidence of cancellation thereon. 
 (b) From
time to time as is appropriate, for the servicing or foreclosure of any Mortgage Loan or collection under an insurance policy, the Servicer may deliver to the Trustee and the Custodian a Request for Release signed by a Servicing Officer on behalf of
the Servicer in substantially the form attached as Exhibit E hereto. Upon receipt of the Request for Release, the Custodian, on behalf of the Trustee, shall deliver the Mortgage File or any document therein to the Servicer or Subservicer, as the
case may be, as bailee for the Trustee. 
 (c) The Servicer shall cause each Mortgage File or any document therein released pursuant to
Subsection 3.14(b) to be returned to the Custodian when the need therefor no longer exists, and in any event within 21 days of the Servicer’s receipt thereof, unless the Mortgage Loan has become a Liquidated Mortgage Loan and the Liquidation
Proceeds relating to the Mortgage Loan have been deposited in the Collection Account or such Mortgage File is being used to pursue foreclosure or other legal proceedings. Prior to return of a Mortgage File or any document to the Custodian, the
Servicer, the related insurer or Subservicer to whom such file or document was delivered shall retain such file or document in its respective control as bailee for the Custodian, on behalf of the Trustee, unless the Mortgage File or such document
has been delivered to an attorney, or to a public trustee or other public official as required by law, to initiate or pursue legal action or other proceedings for the foreclosure of the Mortgaged Property either judicially or non-judicially, and the
Servicer has delivered to the Custodian and the Trustee, a certificate of a Servicing Officer certifying as to the name and address of the Person to which such Mortgage File or such document was delivered and the purpose or purposes of such
delivery. If a Mortgage Loan becomes a Liquidated Mortgage Loan, the Custodian, on behalf of the Trustee, shall deliver the Request for Release with respect thereto to the Servicer upon deposit of the related Liquidation Proceeds in the Collection
Account. 
 (d) The Trustee shall execute and deliver or cause to be executed and delivered to the Servicer any court pleadings, requests for
trustee’s sale or other documents necessary (i) for the foreclosure or trustee’s sale with respect to a Mortgaged Property; (ii) for any legal action brought to obtain judgment against any Mortgagor on the Mortgage Note or
Mortgage; (iii) to obtain a deficiency judgment against the Mortgagor; or (iv) to enforce any other rights or remedies provided by the Mortgage Note or Mortgage or otherwise available at law or equity. Together with such documents or
pleadings the Servicer shall deliver to the Trustee a certificate of a Servicing Officer in which it requests the Trustee to execute or cause to be executed the pleadings or documents. The certificate shall certify and explain the reasons for which
the pleadings or documents are required. It shall further certify that the Trustee’s execution and delivery of the pleadings or documents will not invalidate any insurance coverage under the insurance policies or invalidate or otherwise affect
the lien of the Mortgage, except for the termination of such a lien upon completion of the foreclosure or trustee’s sale. 
 Section 3.15 Servicing Compensation. 
 (a) As compensation for its activities hereunder, the Servicer shall be
entitled to receive the Servicing Fee from full payments of accrued interest on each Mortgage Loan. The 
  

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 Servicer shall be solely responsible for paying any and all fees with respect to a Subservicer, and the Trustee and the
Trust Fund shall not bear any fees, expenses or other costs directly associated with any Subservicer. 
 (b) The Servicer may retain
additional servicing compensation in the form of late payment charges, to the extent such charges are collected from the related Mortgagors and investment earnings on the Collection Account. The Servicer shall be required to pay all expenses it
incurs in connection with servicing activities under this Agreement and shall not be entitled in connection with servicing activities under this Agreement to reimbursement except as provided in this Agreement. Expenses to be paid by the Servicer
without reimbursement under this Subsection 3.15(b) shall include payment of the expenses of the accountants retained pursuant to Section 3.17. 
 Section 3.16 Annual Statements of Compliance. 
 Within 75 days after December 31 of
each year, beginning in 2007, the Servicer at its own expense shall deliver to the Trustee and the Rating Agencies, an Officer’s Certificate of the Servicer (an “Annual Statement of Compliance”) stating, as to the signer
thereof, that (i) a review of the activities of the Servicer during the preceding calendar year and of performance under this Agreement has been made under such officer’s supervision, (ii) to the best of such officer’s knowledge,
based on such review, the Servicer has fulfilled its obligations under this Agreement in all material respects for such year, or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof including the steps being taken by the Servicer to remedy such default; (iii) a review of the activities of each Subservicer during the Subservicer’s most recently ended calendar year and its
performance under its Subservicing Agreement has been made under such officer’s supervision; and (iv) to the best of the Servicing Officer’s knowledge, based on his review and the certification of an officer of the Subservicer (unless
the Servicing Officer has reason to believe that reliance on such certification is not justified), either each Subservicer has performed and fulfilled its duties, responsibilities and obligations under this Agreement and its Subservicing Agreement
in all material respects throughout the year, or, if there has been a default in performance or fulfillment of any such duties, responsibilities or obligations, specifying the nature and status of each such default known to the Servicing Officer.
Copies of such statements shall be provided by the Servicer to the Certificateholders upon request or by the Trustee at the expense of the Servicer should the Servicer fail to provide such copies. Such Annual Statement of Compliance shall contain no
restrictions or limitations on its use. In the event that the Servicer has delegated any servicing responsibilities with respect to the Mortgage Loans to a Subservicer or subcontractor that meets the criteria in Item 1108(a)(2)(i) through
(iii) of Regulation AB, the Servicer shall cause the related Subservicer or subcontractor (as the case may be) to deliver a similar Annual Statement of Compliance by that Subservicer or subcontractor to the Trustee and the Rating Agencies as
described above as and when required with respect to such servicer. To the extent that the Trustee does not receive any such similar Annual Statement of Compliance from a Subservicer or subcontractor (as the case may be) it shall be entitled to
assume no such Subservicer or subcontractor has been used by the Servicer. 
  

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 Section 3.17 Assessments of Compliance and Attestation Reports. 
 The Servicer shall service and administer the Mortgage Loans in accordance with all applicable requirements of the Servicing Criteria. Pursuant to Rules
13a-18 and 15d-18 of the Exchange Act and Item 1122 of Regulation AB, each of the Servicer and the Trustee (each, an “Attesting Party”) shall deliver to the Trustee and the Depositor on or before March 15th of each
calendar year in which the Issuing Entity is required to file a Form 10-K beginning in 2007, a report regarding such Attesting Party’s assessment of compliance (an “Assessment of Compliance”) with the Servicing Criteria during
the preceding calendar year. The Assessment of Compliance, as set forth in Regulation AB, must contain the following: 
 (a) A statement by
such officer of its responsibility for assessing compliance with the Servicing Criteria applicable to the related Attesting Party; 
 (b) A
statement by such officer that such Attesting Party used the Servicing Criteria set forth in Item 1122(d) of Regulation AB to assess compliance with the Servicing Criteria applicable to the related Attesting Party; 
 (c) An assessment by such officer of the related Attesting Party’s compliance with the applicable Servicing Criteria for the period consisting of
the preceding calendar year, including disclosure of any material instance of noncompliance with respect thereto during such period, which assessment shall be based on the activities such Attesting Party performs with respect to asset-backed
securities transactions taken as a whole involving the Servicer, that are backed by the same asset type as the Mortgage Loans; 
 (d) A
statement that a registered public accounting firm has issued an attestation report on the related Attesting Party’s Assessment of Compliance for the period consisting of the preceding calendar year; and 
 (e) A statement as to which of the Servicing Criteria, if any, are not applicable to such Attesting Party, which statement shall be based on the
activities such Attesting Party performs with respect to asset-backed securities transactions taken as a whole involving such Attesting Party, that are backed by the same asset type as the Mortgage Loans. 
 Such report at a minimum shall address each of the Servicing Criteria specified on Exhibit L hereto which are indicated as applicable to the related
Attesting Party. 
 On or before March 15th of each calendar year in which the Issuing Entity is required to file a Form 10-K beginning
in 2007, each Attesting Party specified in this Section shall furnish to the Trustee and the Depositor a report (an “Attestation Report”) by a registered public accounting firm that attests to, and reports on, the Assessment of
Compliance made by the Servicer, as required by Rules 13a-18 and 15d-18 of the Exchange Act and Item 1122(b) of Regulation AB, which Attestation Report must be made in accordance with standards for attestation reports issued or adopted by the
Public Company Accounting Oversight Board. 
 The Servicer or the Trustee, as the case may be, shall cause any Subservicer, and each
subcontractor determined by it to be materially “participating in the servicing function” within the meaning of Item 1122 of Regulation AB, to deliver to the Trustee and the Depositor an Assessment of Compliance and Attestation Report
as and when provided above along with an indication of what Servicing Criteria are addressed in such assessment. 
  

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 Notwithstanding the foregoing, as to any Subservicer or subcontractor, an Assessment of Compliance is not
required to be delivered unless it is required as part of a Form 10-K with respect to the Issuing Entity. 
 In addition, the Custodian shall
deliver to the Sponsor and the Depositor an Assessment of Compliance and Attestation Report, as and when provided above, which shall at a minimum address each of the Servicing Criteria specified on Exhibit L hereto which are indicated as applicable
to a “custodian.” 
 Section 3.18 Reports filed with Securities and Exchange Commission. 
 (a) (i) (A) Within 15 days after each Distribution Date for so long as the Issuing Entity is subject to the Exchange Act reporting requirements,
the Trustee shall, in accordance with industry standards, file with the Commission via the Electronic Data Gathering and Retrieval System (“EDGAR”), a Form 10-D, signed by the Servicer, with a copy of the monthly statement to be
furnished by the Trustee to the Certificateholders for such Distribution Date; provided that the Trustee shall have received no later than five (5) calendar days after the related Servicer Reporting Date, all information required to be provided
to the Trustee as described below. Any disclosure in addition to the monthly statement that is required to be included on Form 10-D (“Additional Form 10-D Disclosure”) shall be approved by the Depositor. 
 Within five (5) calendar days after the related Servicer Reporting Date, (i) the parties set forth in Exhibit M shall be required to provide,
pursuant to section 3.18(a)(iv) below, to the Trustee and the Depositor, to the extent known, in EDGAR-compatible format at the following email address: sf_sec@jpmorgan.com, or in such other form as otherwise agreed upon by the Trustee and the
Depositor and such party, the form and substance of any Additional Form 10-D Disclosure, if applicable, and (ii) the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Additional Form 10-D
Disclosure on Form 10-D. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Trustee in connection with including any Additional Form 10-D Disclosure on Form 10-D pursuant to this Section. 

(B) After preparing the Form 10-D, the Trustee shall forward electronically a draft copy of the Form 10-D to the Depositor and the Servicer for
review. No later than two (2) Business Days prior to the 15th calendar day after the related Distribution Date,
either the Depositor or a senior officer of the Servicer in charge of the servicing function shall sign the Form 10-D and return an electronic or fax copy of such signed Form 10-D (with an original executed hard copy to follow by overnight mail) to
the Trustee. For administrative convenience, the Depositor or the Servicer may deliver executed signature pages to the Trustee to be held by the Trustee in escrow and attached to a Form 10-D only upon such Depositor’s or Servicer’s
electronic notification to the Trustee authorizing such attachment. If a Form 10-D cannot be filed on time or if a previously filed Form 10-D needs to be amended, the Trustee will follow the procedures set forth in Section 3.18(a)(v). Promptly
(but no later than one (1) Business Day) after filing with the 
  

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 Commission, the Sponsor will make available on its internet website a final executed copy of each Form 10-D. The signing
party at the Depositor or the Servicer can be contacted as set forth in Section 12.06. The parties to this Agreement acknowledge that the performance by the Trustee of its duties under Sections 3.18(a)(i) and (v) related to the timely
preparation and filing of Form 10-D is contingent upon such parties strictly observing all applicable deadlines in the performance of their duties under such Sections. The Trustee shall have no liability for any loss, expense, damage, claim arising
out of or with respect to any failure to properly prepare and/or timely file such Form 10-D, where such failure results from the Trustee’s inability or failure to receive, on a timely basis, any information from any other party hereto needed to
prepare, arrange for execution or file such Form 10-D, not resulting from its own negligence, bad faith or willful misconduct. 
 (ii)
(A) Within four (4) Business Days after the occurrence of an event requiring disclosure on Form 8-K (each such event, a “Reportable Event”) for so long as the Issuing Entity is subject to the Exchange Act reporting
requirements, the Trustee shall prepare and file on behalf of the Issuing Entity any Form 8-K prepared by the Depositor, as required by the Exchange Act, provided that the Depositor shall file the initial Form 8-K in connection with the
issuance of the Certificates; provided further, that the Trustee shall only be responsible for filing such Form 8-K if the Trustee has been notified by the Depositor of the necessity therefore and provided with the disclosure to be included therein.
Any disclosure or information related to a Reportable Event or that is otherwise required to be included on Form 8-K (“Form 8-K Disclosure Information”) shall be prepared by the Depositor. 
 (B) For so long as the Issuing Entity is subject to the Exchange Act reporting requirements, no later than 12:00 p.m. New York time on the 2nd Business
Day after the occurrence of a Reportable Event (i) the parties set forth in Exhibit M shall be required pursuant to Section 3.18(a)(iv) below to provide to the Trustee and the Depositor, to the extent known, in EDGAR-compatible format, or
in such other form as otherwise agreed upon by the Trustee and the Depositor and such party, the form and substance of any Form 8-K Disclosure Information, if applicable, and (ii) the Depositor will approve, as to form and substance, or
disapprove, as the case may be, the inclusion of the Form 8-K Disclosure Information on Form 8-K. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Trustee in connection with including any Form 8-K
Disclosure Information on Form 8-K pursuant to this Section. 
 (C) No later than the end of business New York City time on the 3rd Business Day after the Reportable Event, either the Depositor or a senior officer of the Servicer in charge of the servicing
function shall sign the Form 8-K and return an electronic or fax copy of such signed Form 8-K (with an original executed hard copy to follow by overnight mail) to the Trustee. If a Form 8-K cannot be filed on time or if a previously filed Form 8-K
needs to be amended, the Trustee will follow the procedures set forth in Section 3.18(a)(v). Promptly (but no later than 1 Business Day) after filing with the Commission, the Sponsor will, make available on its internet website a final
executed copy of each Form 8-K. The signing party at the Depositor or the Servicer can be contacted as set forth in Section 12.06. The parties to this Agreement acknowledge that the performance by the Trustee of its duties under this
Section 3.18(a)(ii) related to the timely preparation and filing of Form 8-K is contingent upon such parties strictly observing all applicable deadlines in the performance of their duties under this 
  

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 Section 3.18(a)(ii). The Trustee shall have no liability for any loss, expense, damage, claim arising out of or with
respect to any failure to properly prepare and/or timely file such Form 8-K, where such failure results from the Trustee’s inability or failure to receive, on a timely basis, any information from any other party hereto needed to prepare,
arrange for execution or file such Form 8-K, not resulting from its own negligence, bad faith or willful misconduct. 
 (iii) (A) Within
90 days after the end of each fiscal year of the Issuing Entity or such earlier date as may be required by the Exchange Act (the “10-K Filing Deadline”) (it being understood that the fiscal year for the Issuing Entity ends on
December 31st of each year) for so long as the Issuing Entity is subject to the Exchange Act reporting
requirements, commencing in March 2007, the Trustee shall prepare and file on behalf of the Issuing Entity a Form 10-K, in form and substance as required by the Exchange Act. Each such Form 10-K shall include the following items, in each case to the
extent they have been delivered to the Trustee within the applicable time frames set forth in this Agreement, (1) an annual compliance statement of the Servicer and any Subservicer, as described under Section 3.16, the annual reports on
assessment of compliance with Servicing Criteria for the Servicer, each Subservicer and each subcontractor materially participating in the Servicing Function, each Servicing Function Participant, the Trustee and each custodian, as described under
Section 3.17, (2) the registered public accounting firm attestation report for the Servicer, and the Trustee, as described under Section 3.17, which shall identify any material instance of noncompliance, disclosure identifying such
instance of noncompliance, and (3) a Sarbanes-Oxley Certification as described in this Section 3.18(a)(iii)(D) below. Any disclosure or information in addition to (1) through (3) above that is required to be included on Form 10-K
(“Additional Form 10-K Disclosure”) shall be determined and prepared by and approved by the Depositor. 
 (B) No later than
March 5th of each year that the Issuing Entity is subject to the Exchange Act reporting requirements, commencing in 2007, (1) the parties set forth in Exhibit M shall be required to provide pursuant to Section 3.18(a)(iv) below to the
Trustee and the Depositor, to the extent known, in EDGAR-compatible format, at the email address set forth in Section 12.06 hereof with respect to the Trustee, or in such other form as otherwise agreed upon by the Trustee and the Depositor and
such party, the form and substance of any Additional Form 10-K Disclosure, if applicable, and (2) the Depositor will approve, as to form and substance, or disapprove, as the case may be, the inclusion of the Additional Form 10-K Disclosure on
Form 10-K. The Depositor will be responsible for any reasonable fees and expenses assessed or incurred by the Trustee in connection with including any Additional Form 10-K Disclosure on Form 10-K pursuant to this Section. 
 (C) After preparing the Form 10-K, the Trustee shall forward electronically a draft copy of the Form 10-K to the Depositor and the Servicer for review.
No later than 12:00 p.m. New York time on the 4th Business Day prior to the 10-K Filing Deadline, either the Depositor or a senior officer of the Servicer in charge of the servicing function shall sign the Form 10-K and return an electronic or fax
copy of such signed Form 10-K (with an original executed hard copy to follow by overnight mail) to the Trustee. If a Form 10-K cannot be filed on time or if a previously filed Form 10-K needs to be amended, the Trustee will follow the procedures set
forth in Section 3.18(a)(v). Promptly (but no later than one (1) Business Day) after filing with the Commission, the Sponsor will make available on its internet website a final executed copy of each Form 10-K. The signing party at the
Depositor or the Servicer can be contacted as set forth 
  

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 in Section 12.06. The parties to this Agreement acknowledge that the performance by the Trustee of its duties under
Sections 3.18(a)(iii) and (v) related to the timely preparation and filing of Form 10-K is contingent upon such parties strictly observing all applicable deadlines in the performance of their duties under such Section 3.16 and
Section 3.17. The Trustee shall have no liability for any loss, expense, damage, claim arising out of or with respect to any failure to properly prepare and/or timely file such Form 10-K, where such failure results from the Trustee’s
inability or failure to receive, on a timely basis, any information from any other party hereto needed to prepare, arrange for execution or file such Form 10-K, not resulting from its own negligence, bad faith or willful misconduct. 
 (D) Each Form 10-K shall include a certification (the “Sarbanes-Oxley Certification”), required to be included therewith pursuant to the
Sarbanes-Oxley Act. The Servicer and the Trustee, shall and the Servicer shall cause any Subservicer or subcontractor engaged by it to, provide to the Person who signs the Sarbanes-Oxley Certification (the “Certifying Person”), by
March 15 of each year in which the Issuing Entity is subject to the reporting requirements of the Exchange Act, a certification (each, a “Back-Up Certification”), in the form attached hereto as Exhibit N-2, upon which the
Certifying Person, the entity for which the Certifying Person acts as an officer, and such entity’s officers, directors and Affiliates (collectively with the Certifying Person, “Certification Parties”) can reasonably rely. The
senior officer of the Servicer shall serve as the Certifying Person on behalf of the Issuing Entity. Such officer of the Certifying Person can be contacted as set forth in Section 12.06. In the event the Trustee is terminated or resigns
pursuant to the terms of this Agreement, the Trustee shall provide a Back-Up Certification to the Certifying Person pursuant to this Section 3.18(a)(iii) with respect to the period of time it was subject to this Agreement. 
 (iv) With respect to any Additional Form 10-D Disclosure or Additional From 10-K Disclosure (collectively, the “Additional Disclosure”)
relating to the Trust Fund, the Trustee’s obligation to include such Additional Information in the applicable Exchange Act report is subject to receipt from the entity that is indicated in Exhibit M as the responsible party for providing that
information, if other than the Trustee, as and when required as described in Section 3.18(a)(i) through (iii) above. Each of the Servicer, Sponsor, and Depositor hereby agree to notify and provide to the extent known to the Trustee and the
Depositor all Additional Disclosure relating to the Trust Fund, with respect to which such party is indicated in Exhibit M as the responsible party for providing that information. 
 (v) With respect to any Form 8-K Disclosure Information (collectively, the “8-K Additional Disclosure”) relating to the Trust Fund, the
Depositor’s obligation to include such 8-K Additional Information in the applicable Exchange Act report is subject to receipt from the entity that is indicated in Exhibit M as the responsible party for providing that information, if other than
the Depositor, as and when required as described in Section 3.18(a)(i) through (iii) above. Each of the Trustee, Servicer, Sponsor, and Depositor hereby agree to notify and provide to the extent known to the Depositor all 8-K Additional
Disclosure relating to the Trust Fund, with respect to which such party is indicated in Exhibit M as the responsible party for providing that information. 
  

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 (vi) (A) On or prior to January 30 of the first year in which the Trustee is able to do so
under applicable law, the Trustee shall file a Form 15 relating to the automatic suspension of reporting in respect of the Issuing Entity under the Exchange Act. 
 (B) In the event that the Trustee is unable to timely file with the Commission all or any required portion of any Form 10-D or 10-K required to be filed by this Agreement because required disclosure information was
either not delivered to it or delivered to it after the delivery deadlines set forth in this Agreement or for any other reason, the Trustee will immediately notify the Depositor and the Servicer. In the case of Form 10-D and 10-K, the Depositor,
Servicer and Trustee will cooperate to prepare and file a Form 12b-25 and a 10-DA and 10-KA as applicable, pursuant to Rule 12b-25 of the Exchange Act. In the case of Form 8-K, the Depositor will, upon receipt of all required Form 8-K Disclosure
Information provide such Form 8-K Disclosure Information to the Trustee for inclusion on the next Form 10-D. In the event that any previously filed Form 10-D or 10-K needs to be amended, the Trustee (to the extent of actual knowledge) will notify
the Depositor and the Servicer and such parties will cooperate to prepare any necessary 10-DA or 10-KA. Any Form 15, Form 12b-25 or any amendment to Form 8-K, 10-D or 10-K shall be signed by a senior officer of the Servicer. The Depositor and
Servicer acknowledge that the performance by the Trustee of its duties under this Section 3.18(a)(v) related to the timely preparation and filing of Form 15, a Form 12b-25 or any amendment to Form 10-D or 10-K is contingent upon the Servicer
and the Depositor performing their duties under this Section. The Trustee shall have no liability for any loss, expense, damage, claim arising out of or with respect to any failure to properly prepare and/or timely file any such Form 15, Form 12b-25
or any amendments to Forms 10-D or 10-K, where such failure results from the Trustee’s inability or failure to receive, on a timely basis, any information from any other party hereto needed to prepare, arrange for execution or file such Form
15, Form 12b-25 or any amendments to Forms 8-K, 10-D or 10-K, not resulting from its own negligence, bad faith or willful misconduct. 
 The
Depositor agrees to promptly furnish to the Trustee, from time to time upon request, such further information, reports and financial statements within its control related to this Agreement, the Mortgage Loans as is necessary for the preparation and
filing of all required reports with the Commission. The Trustee shall have no responsibility to file any items other than those specified in this Section 3.18; provided, however, the Trustee will cooperate with the Depositor in connection with
any additional filings with respect to the Issuing Entity as the Depositor deems necessary under the Exchange Act. Copies of all reports filed by the Trustee under the Exchange Act shall be sent to the Depositor as set forth in Section 12.06.

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

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 Section 3.19 Optional Purchase of Defaulted Mortgage Loans. 
 Subject to the limitations set forth in Section 10.02 hereof, the Servicer shall have the right, but not the obligation, to purchase any Mortgage
Loan which becomes 90 days or more delinquent at a purchase price equal to the Repurchase Price (a) within 29 days after the date the Mortgage Loan becomes 90 days delinquent or (b) on the date the Servicer liquidates the related Mortgaged
Property. The procedure for such purchase shall be the same as for a repurchase made by the Sponsor under the Purchase Agreement. With respect to any Mortgage Loans being purchased pursuant to this Section 3.19, the Servicer shall purchase the
most delinquent Mortgage Loans before purchasing other less delinquent Mortgage Loans. The Servicer or the related Subservicer may purchase a Mortgage Loan at the Repurchase Price when the Servicer requires acceleration of the Mortgage Loan, but
only if the Servicer is satisfied, as evidenced by an Officers’ Certificate delivered to the Trustee, that such Mortgage Loan is in default or default is reasonably foreseeable. 
 Section 3.20 Information Required by the Internal Revenue Service Generally and Reports of Foreclosures and Abandonments of Mortgaged
Property. 
 The Servicer shall prepare and deliver all federal and state information reports when and as required by all applicable state
and federal income tax laws. In particular, with respect to the requirement under Section 6050J of the Code to the effect that the Servicer or Subservicer shall make reports of foreclosures and abandonments of any mortgaged property, the
Servicer or Subservicer shall file reports relating to each instance occurring during the previous calendar year in which the Servicer (i) acquires an interest in any Mortgaged Property through foreclosure or other comparable conversion in full
or partial satisfaction of a Mortgage Loan, or (ii) knows or has reason to know that any Mortgaged Property has been abandoned. The reports from the Servicer or Subservicer shall be in form and substance sufficient to meet the reporting
requirements imposed by Section 6050J, Section 6050H (reports relating to mortgage interest received) and Section 6050P of the Code (reports relating to cancellation of indebtedness). 
 Section 3.21 [Reserved]. 
 Section 3.22 [Reserved]. 
 Section 3.23 Servicing and Administration of the MI Policies.

 (a) The Servicer shall take all such actions on behalf of the Trustee as are necessary to service, maintain and administer the MI Policies
and to perform the Trustee’s obligations and enforce the Trustee’s rights under the MI Policies, which actions shall conform to the standards of an institution prudently administering MI Policies for its own account. Except as expressly
set forth herein, the Servicer shall have full authority on behalf of the Issuing Entity to do anything it reasonably deems appropriate or desirable in connection with the servicing, maintenance and administration of the MI Policies. The Servicer
shall make its best reasonable efforts to file all insured claims under the MI Policies and collect from the MI Insurer all Insurance Proceeds due to the Trustee under the MI Policies. The Servicer shall not take, or permit any Subservicer to take,
any action which would result in non-coverage under any applicable MI Policy of any loss which, but for the actions of the Servicer or Subservicer, would 
  

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 have been covered thereunder. To the extent coverage is available, the Servicer shall keep or cause to be kept in full
force and effect each such MI Policy for the life of the Mortgage Loan; provided, however, that if a MI Insurer Insolvency Event has occurred and is continuing, the Servicer may terminate the MI Policy on any Mortgage Loan that is not then past due.
The Servicer shall cooperate with the MI Insurer and shall use its best efforts to furnish all reasonable aid, evidence and information in the possession of the Servicer or to which the Servicer has access with respect to any Mortgage Loan.

 (b) The Servicer shall deposit into the Collection Account pursuant to Section 3.06(d)(v) hereof all MI Insurance Proceeds received
from the MI Insurer under the terms of the MI Policies. The Servicer shall withdraw from the Collection Account and pay to the MI Insurer pursuant to Section 3.07(a)(xii) hereof, the monthly MI Premiums due to the MI Insurer in accordance with
the terms of the MI Insurance Agreements. In the event that the Trustee has actual knowledge that any MI Premiums have in fact not been paid, the Trustee shall distribute such amounts (in such amounts as specified by the MI Insurer in writing) to
the MI Insurer from the Interest Remittance Amount for the related Mortgage Loans, at the same level of priority as the Trustee Fee. 
 (c)
Notwithstanding the provisions of Subsection 3.23(a) and (b), the Servicer shall not take any action in regard to the MI Policies inconsistent with the interests of the Trustee or the Certificateholders or with the rights and interests of the
Trustee or the Certificateholders under this Agreement; provided, however, that payments of the monthly MI Premiums to the MI Insurer pursuant to Subsection 3.23(b) above and Section 3.07(a)(xii) hereof shall be deemed not to be inconsistent
with such interests. 
 (d) The Trustee shall furnish the Servicer with any powers of attorney and other documents in form as provided to it
necessary or appropriate to enable the Servicer to service and administer the MI Policies; provided, however, that the Trustee shall not be liable for the actions of the Servicer under such powers of attorney. 
 (e) If at any time during the term of this Agreement, a MI Insurer Insolvency Event has occurred and is continuing, the Servicer agrees to review, not
less often than monthly, the financial condition of the related MI Insurer with a view towards determining whether recoveries under the MI Policy are jeopardized for reasons related to the financial condition of the related MI Insurer. In such
event, the Servicer may obtain an additional MI Policy or a replacement MI Policy, the MI Premiums on which would be paid by the Servicer from the Collection Account pursuant to Section 3.07(a)(xii) hereof. 
 (f) The Servicer shall comply with all other terms, conditions and obligations set forth in the MI Policies. 
 Section 3.24 Determination Date Reports. 
 On the second Business Day following each Determination Date (the “Servicer Reporting Date”), the Servicer shall deliver to the Trustee a report, prepared as of the close of business on the
Determination Date (the “Determination Date Report”), and shall forward to the Trustee in the form of computer readable electromagnetic tape or disk a copy of such report in a 
  

 39 

 format acceptable to the Trustee. The Determination Date Report and any written information supplemental thereto shall
include such information with respect to the Mortgage Loans that is reasonably available to the Servicer and that is required by the Trustee for purposes of making the calculations and providing the reports referred to in this Agreement, as set
forth in written specifications or guidelines issued by the Trustee from time to time. Such information shall include the aggregate amounts required to be withdrawn from the Collection Account and deposited into the Distribution Account pursuant to
Section 3.07. Such information shall also include (a) the number of Mortgage Loans that prepaid in the previous month; (b) the loan balance of each such Mortgage Loan; (c) whether a prepayment penalty was applied to such Mortgage
Loan; and (d) the amount of prepayment penalty with respect to each such Mortgage Loan. The Servicer agrees to cooperate with the Trustee in providing all information as is reasonably requested by the Trustee to prepare the reports required
under the Agreement. 
 The determination by the Servicer of such amounts shall, in the absence of obvious error, be presumptively deemed to
be correct for all purposes hereunder and the Trustee shall be fully protected in relying upon the same without any independent check or verification. 
 Section 3.25 Advances. 
 If any Monthly Payment (together with any advances from the
Subservicers) on a Mortgage Loan that was due on the immediately preceding Due Date and delinquent on the Determination Date is delinquent other than as a result of application of the Relief Act, the Servicer will deposit in the Collection Account
not later than the Servicer Remittance Date immediately preceding the related Distribution Date an amount equal to such deficiency net of the related Servicing Fee for such Mortgage Loan, except to the extent the Servicer determines any such advance
to be nonrecoverable from Liquidation Proceeds, Insurance Proceeds or future payments on such Mortgage Loan. Subject to the foregoing and in the absence of such a determination, the Servicer shall continue to make such advances through the date that
the related Mortgaged Property has, in the judgment of the Servicer, been completely liquidated. 
 The Servicer may fund an Advance from its
own corporate funds, advances made by any Subservicer or funds held in the Collection Account for future payment or withdrawal. 
 Advances
made from funds held in the Collection Account may be made by the Servicer from subsequent collections of principal and interest received on other Mortgage Loans and deposited into the Collection Account. Advances made from the Collection Account
are not limited to subsequent collections of principal and interest received on the delinquent Mortgage Loan with respect to which an Advance is made. If on the Servicer Remittance Date prior to any Distribution Date funds in the Collection Account
are less than the amount required to be paid to the Certificateholders on such Distribution Date, then the Servicer shall deposit its own funds into the Distribution Account in the amount of the lesser of (i) any unreimbursed Advances
previously made by the Servicer with funds held in the Collection Account or (ii) the shortfall in the Collection Account, provided, however, that in no event shall the Servicer deposit into the Collection Account an amount that is less than
any shortfall in the Collection Account attributable to delinquent payments on Mortgage Loans which the Servicer deems to be recoverable and which has not been covered by an Advance from the Servicer’s own corporate funds or any
Subservicer’s funds. If applicable, on the Servicer Remittance Date preceding each 
  

 40 

 Distribution Date, the Servicer shall present an Officers’ Certificate to the Trustee (i) stating that the
Servicer elects not to make an Advance in a stated amount and (ii) detailing the reason it deems the advance to be nonrecoverable. 
 Section 3.26 Compensating Interest Payments. 
 The Servicer shall deposit in the Collection Account not later
than the Servicer Remittance Date preceding the Distribution Date an amount equal to the Compensating Interest related to the related Determination Date. The Servicer shall not be entitled to any reimbursement of any Compensating Interest payment.

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

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 (b) Notwithstanding the foregoing, and for the avoidance of doubt, (i) the Servicer and/or the
Servicer’s Assignee shall only be entitled to reimbursement of Advance reimbursement amounts hereunder from withdrawals from the Collection Account pursuant to Section 3.07 of this Agreement and shall not otherwise be entitled to make
withdrawals or receive amounts that shall be deposited in the Distribution Account, and (ii) none of the Trustee or the Certificateholders shall have any right to, or otherwise be entitled to, receive any Advance reimbursement amounts to which
the Servicer or Servicer’s Assignee, as applicable, shall be entitled pursuant to Section 3.07 hereof. An Advance Facility may be terminated by the joint written direction of the Servicer and the related Advancing Person. Written notice of
such termination shall be delivered to the Trustee in the manner set forth in Section 12.06 hereof. None of the Depositor or the Trustee shall, as a result of the existence of any Advance Facility, have any additional duty or liability with
respect to the calculation or payment of any Advance reimbursement amount, nor, as a result of the existence of any Advance Facility, shall the Depositor or the Trustee have any additional responsibility to track or monitor the administration of the
Advance Facility or the payment of Advance reimbursement amounts to the Servicer’s Assignee. The Servicer shall indemnify the Depositor, the Trustee, any successor Servicer and the Trust Fund for any claim, loss, liability or damage resulting
from any claim by the related Advancing Person, except to the extent that such claim, loss, liability or damage resulted from or arose out of negligence, recklessness or willful misconduct on the part of the Depositor, the Trustee or any successor
Servicer, as the case may be, or failure by the successor Servicer or the Trustee, as the case may be, to remit funds as required by this Agreement or the commission of an act or omission to act by the successor Servicer or the Trustee, as the case
may be, and the passage of any applicable cure or grace period, such that an Event of Default under this Agreement occurs or such entity is subject to termination for cause under this Agreement. The Servicer shall maintain and provide to any
successor Servicer and, upon request, the Trustee a detailed accounting on a loan-by-loan basis as to amounts advanced by, pledged or assigned to, and reimbursed to any Advancing Person. The successor Servicer shall be entitled to rely on any such
information provided by the predecessor Servicer, and the successor Servicer shall not be liable for any errors in such information. 
 (c)
If an Advancing Person is entitled to reimbursement for any particular Advance or Servicing Advance as set forth in Section 3.27(a), then the Servicer shall not be permitted to reimburse itself therefor under Section 3.07, but instead the
Servicer shall include such amounts in the applicable remittance to the Trustee made pursuant to Section 3.06(d) to the extent of amounts on deposit in the Collection Account on the related Servicer Remittance Date. The Trustee is hereby
authorized to pay to an Advancing Person reimbursements for Advances and Servicing Advances from the Distribution Account to the same extent the Servicer would have been permitted to reimburse itself for such Advances and/or Servicing Advances in
accordance with Section 3.07, had the Servicer made such Advance or Servicing Advance. 
 (d) All Advances and Servicing Advances made
pursuant to the terms of this Agreement shall be deemed made and shall be reimbursed on a “first in first out” (FIFO) basis. In the event the Servicer’s Assignee shall have received some or all of an Advance reimbursement amount
related to Advances and/or Servicing Advances that were made by a Person other than such predecessor Servicer or its related Advancing Person in error, then such Servicer’s Assignee shall be required to remit any portion of such Advance
reimbursement amount to each Person entitled to such portion of such Advance reimbursement amount. 
  

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 Without limiting the generality of the foregoing, the Servicer shall remain entitled to be reimbursed pursuant to
Section 3.07 for all Advances and/or Servicing Advances funded by the Servicer to the extent the related Advance reimbursement amounts have not been assigned, sold or pledged to such Advancing Person or Servicer’s Assignee. 
 (e) In the event the Servicer is terminated pursuant to Section 7.01, the Advancing Person shall succeed to the terminated Servicer’s right of
reimbursement set forth in Section 7.02 to the extent of such Advancing Person’s financing of Advances or Servicing Advances hereunder then remaining unreimbursed. 
 (f) Any amendment to this Section 3.27 or to any other provision of this Agreement that may be necessary or appropriate to effect the terms of an
Advance Facility as described generally in this Section 3.27, including amendments to add provisions relating to a successor Servicer, may be entered into by the Trustee, the Depositor and the Servicer without the consent of any
Certificateholder, provided such amendment complies with Section 12.01 hereof. All reasonable costs and expenses (including attorneys’ fees) of each party hereto of any such amendment shall be borne solely by the Servicer. The parties
hereto hereby acknowledge and agree that: (a) the Advances and/or Servicing Advances financed by, sold and/or pledged to an Advancing Person under any Advance Facility are obligations owed to the Servicer payable only from the cash flows and
proceeds received under this Agreement for reimbursement of Advances and/or Servicing Advances only to the extent provided herein, and the Trustee and the Trust Fund are not, as a result of the existence of any Advance Facility, obligated or liable
to repay any Advances and/or Servicing Advances financed by the Advancing Person; (b) the Servicer will be responsible for remitting to the Advancing Person the applicable amounts collected by it as reimbursement for Advances and/or Servicing
Advances purchased or funded by the Advancing Person, subject to the provisions of this Agreement; and (c) the Trustee shall not have any responsibility to track or monitor the administration of the financing arrangement between the Servicer
and any Advancing Person. 
 Section 3.28 Servicer Rights Facility. 
 The Servicing Rights Owner is hereby authorized to finance, pledge and/or assign any or all of its right, title and interest in, to and under this
Agreement to one or more lenders (each, a “Servicing Rights Pledgee”) selected by the Servicing Rights Owner. The Trustee and the Depositor hereby (i) consent to any such financing, pledge and/or assignment (without the need for the
delivery of any notice or other communication to the Trustee or the Depositor, or for the execution by the Trustee or the Depositor of any agreement or other document or instrument, other than this Agreement), and (ii) agree that upon delivery
by the Servicing Rights Pledgee to the Trustee of a letter signed by the Servicing Rights Pledgee (without further need for the delivery of any notice or other communication to the Trustee or the Depositor, or for the execution by the Trustee or the
Depositor of any agreement or other document or instrument in addition to this Agreement), the Trustee shall appoint the Servicing Rights Pledgee or its designee as successor Servicer, provided that at the time of such appointment, the Servicing
Rights Pledgee or such designee meets the requirements of a successor Servicer pursuant to Section 7.02 and agrees to be subject to the terms of this Agreement. For the avoidance of doubt, the Servicing Rights Pledgee or its designee (as the
case may be) shall not be otherwise required to satisfy any other eligibility requirements of a successor Servicer pursuant to Section 6.04. 
  

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 ARTICLE IV 
 FLOW OF FUNDS 
 Section 4.01 Distributions. 
 (a) On each Distribution Date, the Trustee, will first distribute the Prepayment Charges collected on the Group I Mortgage Loans and on the Group II
Mortgage Loans during the prior Prepayment Period to the Holders of the Class CA Certificates. After making that distribution, the Trustee, shall (based solely on the information provided to the Trustee by the Servicer pursuant to Section 3.24
hereof) withdraw from the Distribution Account that portion of Available Funds for such Distribution Date consisting of the Interest Remittance Amount for such Distribution Date, and make the following disbursements and transfers in the order of
priority described below, in each case to the extent of the Interest Remittance Amount remaining for such Distribution Date: 
 (i) On each
Distribution Date, the Trustee, will distribute, pro-rata from the Group I Interest Remittance Amount and the Group II Interest Remittance Amount, the Trustee Fee and the Custodian Fee which are due on that Distribution Date to the Trustee and
Custodian respectively. After making that distribution, the Trustee will then apply the remaining Interest Remittance Amount to the payment of interest then due on the certificates in the following order of priority: 
 (A) first, on each Distribution Date on or prior to the Class I Termination Date, payable (i) from the Group I Interest Remittance Amount to
the Supplemental Interest Trust as the Holder of the Class I Certificates, the product of (x) the sum of (1) the Class I Monthly Interest Distributable Amount and (2) any unpaid Cap Termination Payments that are not Defaulted Cap
Termination Payments, multiplied by (y) the Group I Class I Percentage and (ii) from the Group II Interest Remittance Amount, to the Supplemental Interest Trust as the Holder of the Class I Certificates, the product of (x) the sum of
(1) the Class I Monthly Interest Distributable Amount and (2) any unpaid Cap Termination Payments that are not Defaulted Cap Termination Payments, multiplied by (y) the Group II Class I Percentage; 
 (B) second, concurrently, with equal priority of payment: 
 (I) payable solely from the Group I Interest Remittance Amount for that Distribution Date or, to the extent that the Group I Interest
Remittance Amount is less than the related Monthly Interest Distributable Amount for the Class A-1A Certificates, also from the Group II Cross Collateralization Amount for that Distribution Date, to the Holders of the Class A-1A
Certificates, the unpaid portion of the Monthly Interest Distributable Amount for the Class A-1A Certificates; 
 (II)
payable solely from the Group II Interest Remittance Amount for that Distribution Date or, to the extent that the Group II 
  

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 Interest Remittance Amount is less than the related aggregate Monthly Interest Distributable Amount for
the Class A-2A, Class A-2B, Class A-2C and Class A-2D Certificates, also from the Group I Cross Collateralization Amount for that Distribution Date, concurrently to the Holders of the Class A-2A, Class A-2B,
Class A-2C and Class A-2D Certificates, the related Monthly Interest Distributable Amount, pro-rata based on the amounts of interest each such Class is otherwise entitled to receive on such Distribution Date; 
 (C) third, payable from the remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance Amount, to the Holders of
the Class M-1 Certificates, the Monthly Interest Distributable Amount for the Class M-1 Certificates; 
 (D) fourth, payable from the
remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance Amount, to the Holders of the Class M-2 Certificates, the Monthly Interest Distributable Amount for the Class M-2 Certificates; 
 (E) fifth, payable from the remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance Amount, to the Holders of
the Class M-3 Certificates, the Monthly Interest Distributable Amount for the Class M-3 Certificates; 
 (F) sixth, payable from the
remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance Amount, to the Holders of the Class M-4 Certificates, the Monthly Interest Distributable Amount for the Class M-4 Certificates; 
 (G) seventh, payable from the remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance Amount, to the Holders
of the Class M-5 Certificates, the Monthly Interest Distributable Amount for the Class M-5 Certificates; 
 (H) eighth, payable from
the remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance Amount, to the Holders of the Class M-6 Certificates, the Monthly Interest Distributable Amount for the Class M-6 Certificates; 
 (I) ninth, payable from the remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance Amount, to the Holders of
the Class M-7 Certificates, the Monthly Interest Distributable Amount for the Class M-7 Certificates; 
 (J) tenth, payable from the
remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance Amount, to the Holders of the Class M-8 Certificates, the Monthly Interest Distributable Amount for the Class M-8 Certificates; 
 (K) eleventh, payable from the remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance Amount, to the Holders
of the Class M-9 Certificates, the Monthly Interest Distributable Amount for the Class M-9 Certificates; 
 (L) twelfth, payable from
the remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance Amount, to the Holders of the Class M-10 Certificates, the Monthly Interest Distributable Amount for the Class M-10 Certificates; 
  

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

 (N) fourteenth, payable from the remaining Group I Interest Remittance Amount and the remaining Group II Interest Remittance
Amount, to the Holders of the Class R Certificates, any remainder. 
 (ii) On each Distribution Date (a) prior to the Crossover Date or
(b) on which a Trigger Event is in effect, the Trustee, shall (based solely on the information provided to the Trustee by the Servicer pursuant to Section 3.24 hereof) withdraw from the Distribution Account that portion of the Available
Funds relating to principal plus the Extra Principal Distribution Amount (to be distributed pursuant to Section 4.04 (d)(i)) for such Distribution Date and make the following disbursements and transfers in the order of priority described below:

 (A) first, concurrently, with equal priority of payment: 
 (I) payable solely from the Group I Principal Distribution Amount, to the Holders of the Class A-1A Certificates, the entire amount
of the Group I Principal Distribution Amount, until the Certificate Principal Balance of the Class A-1A Certificates has been reduced to zero; and 
 (II) payable solely from the Group II Principal Distribution Amount, to the Holders of the Group II Certificates (to be distributed to such Certificates pursuant to Section 4.01(d)), the entire amount of the
Group II Principal Distribution Amount, until the aggregate Certificate Principal Balance of the Group II Certificates has been reduced to zero; 
 (B) second, 
 (I) if the Certificate Principal Balance of the Class A-1A Certificates has been reduced
to zero, then to the Holders of the Group II Certificates, the amount of any remaining Group I Principal Distribution Amount, until the aggregate Certificate Principal Balance of the Group II Certificates has been reduced to zero; or 
 (II) if the aggregate Certificate Principal Balance of the Group II Certificates has been reduced to zero, then to the Holders of the
Class A-1A Certificates, the amount of any remaining Group II Principal Distribution Amount, until the Certificate Principal Balance of the Class A-1A Certificates has been reduced to zero; 
 (C) third, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount,
(i) first to the Holders of the Class M-1 Certificates, the entire remaining Principal Distribution Amount until the Certificate Principal Balance of the Class M-1 Certificates has been reduced to zero and (ii) second to the Holders of the
Class M-2 Certificates, the entire remaining Principal Distribution Amount until the Certificate Principal Balance of the Class M-2 Certificates has been reduced to zero; 
  

 46 

 (D) fourth, payable from the remaining Group I Principal Distribution Amount and the remaining
Group II Principal Distribution Amount, to the Holders of the Class M-3 Certificates, the entire remaining Principal Distribution Amount until the Certificate Principal Balance of the Class M-3 Certificates has been reduced to zero; 
 (E) fifth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-4 Certificates, the entire remaining Principal Distribution Amount until the Certificate Principal Balance of the Class M-4 Certificates has been reduced to zero; 
 (F) sixth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-5 Certificates, the entire remaining Principal Distribution Amount until the Certificate Principal Balance of the Class M-5 Certificates has been reduced to zero; 
 (G) seventh, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-6 Certificates, the entire remaining Principal Distribution Amount until the Certificate Principal Balance of the Class M-6 Certificates has been reduced to zero; 
 (H) eighth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-7 Certificates, the entire remaining Principal Distribution Amount until the Certificate Principal Balance of the Class M-7 Certificates has been reduced to zero; 
 (I) ninth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-8 Certificates, the entire remaining Principal Distribution Amount until the Certificate Principal Balance of the Class M-8 Certificates has been reduced to zero; 
 (J) tenth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-9 Certificates, the entire remaining Principal Distribution Amount until the Certificate Principal Balance of the Class M-9 Certificates has been reduced to zero; 
 (K) eleventh, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-10 Certificates, the entire remaining Principal Distribution Amount, until the Certificate Principal Balance of the Class M-10 Certificates has been reduced to zero; 
 (L) twelfth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Trustee and the Custodian, pro-rata, any amounts owed to them under the Basic Documents remaining unpaid; 
  

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 (M) thirteenth, payable from the remaining Group I Principal Distribution Amount and the remaining
Group II Principal Distribution Amount, to the Servicer, the amount of any reimbursement of indemnification owed to it by the Issuing Entity pursuant to Section 6.03 hereof; 
 (N) fourteenth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount and any
remaining Available Funds relating to principal, to the Holders of the Class CA Certificates, for the benefit of the Supplemental Interest Trust, the entire remaining Principal Remittance Amount up to the Overcollateralization Amount; and

 (O) fifteenth, payable from the Group I Principal Distribution Amount and the Group II Principal Distribution Amount, to the
Holders of the Class R Certificates, for the benefit of the Supplemental Interest Trust, any remainder. 
 (iii) On each Distribution Date
(a) on or after the Crossover Date and (b) on which a Trigger Event is not in effect, the Trustee, shall (based solely on the information provided to the Trustee by the Servicer pursuant to Section 3.24 hereof) withdraw from the
Distribution Account that portion of the Available Funds relating to principal plus the Extra Principal Distribution Amount (to be distributed pursuant to Section 4.04 (d)(i)) for such Distribution Date and make the following disbursements and
transfers in the order of priority described below: 
 (A) first, concurrently, with equal priority of payment: 
 (I) payable solely from the Group I Principal Distribution Amount, to the holders of the Class A-1A Certificates, the Group I
Certificate Principal Distribution Amount, until the Certificate Principal Balance of the Class A-1A Certificates has been reduced to zero; and 
 (II) payable solely from the Group II Principal Distribution Amount, to the Holders of the Group II Certificates (to be distributed to such Certificates pursuant to Section 4.01(d)), the Group II Certificate
Principal Distribution Amount, until the aggregate Certificate Principal Balance of the Group II Certificates has been reduced to zero; 
 (B) second, concurrently, with equal priority of payment: 
 (I) if the Group I Principal Distribution Amount
was insufficient to pay the Group I Certificate Principal Distribution Amount, then payable from the remaining Group II Principal Distribution Amount, to the holders of the Class A-1A Certificates, the unpaid portion of the Group I Certificate
Principal Distribution Amount based on the aggregate unpaid portion of the Class A Principal Distribution Amount; or 
 (II) if the Group II Principal Distribution Amount was insufficient to pay the Group II Certificate Principal Distribution Amount, then payable from the remaining Group I Principal Distribution Amount, 
  

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 to the Holders of the Group II Certificates (to be distributed to such Certificates pursuant to
Section 4.01(d)), the unpaid portion of the Group II Certificate Principal Distribution Amount based on the aggregate unpaid portion of the Class A Principal Distribution Amount; 
 (C) third, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-1 and M-2 Certificates, the Class M-1/M-2 Principal Distribution Amount, which shall be distributed (i) first, to the Holders of Class M-1 Certificates until the Certificate Principal Balance of the Class M-1 Certificates
has been reduced to zero and (ii) second, to the Holders of the Class M-2 Certificates, until the Certificate Principal Balance of the Class M-2 Certificates has been reduced to zero; 
 (D) fourth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-3 Certificates, the Class M-3 Principal Distribution Amount, until the Certificate Principal Balance of the Class M-3 Certificates has been reduced to zero; 
 (E) fifth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-4 Certificates, the Class M-4 Principal Distribution Amount, until the Certificate Principal Balance of the Class M-4 Certificates has been reduced to zero; 
 (F) sixth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-5 Certificates, the Class M-5 Principal Distribution Amount, until the Certificate Principal Balance of the Class M-5 Certificates has been reduced to zero; 
 (G) seventh, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-6 Certificates, the Class M-6 Principal Distribution Amount, until the Certificate Principal Balance of the Class M-6 Certificates has been reduced to zero; 
 (H) eighth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-7 Certificates, the Class M-7 Principal Distribution Amount, until the Certificate Principal Balance of the Class M-7 Certificates has been reduced to zero; 
 (I) ninth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-8 Certificates, the Class M-8 Principal Distribution Amount, until the Certificate Principal Balance of the Class M-8 Certificates has been reduced to zero; 
 (J) tenth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Holders of the Class M-9 Certificates, the Class M-9 Principal Distribution Amount, until the Certificate Principal Balance of the Class M-9 Certificates has been reduced to zero; 
  

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 (K) eleventh, payable from the remaining Group I Principal Distribution Amount and the remaining
Group II Principal Distribution Amount, to the Holders of the Class M-10 Certificates, the Class M-10 Principal Distribution Amount, until the Certificate Principal Balance of the Class M-10 Certificates has been reduced to zero; 
 (L) twelfth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the
Trustee and the Custodian, pro-rata, any amounts owed to them under the Basic Documents remaining unpaid; 
 (M) thirteenth, payable
from the remaining Group I Principal Distribution Amount and the remaining Group II Principal Distribution Amount, to the Servicer, the amount of any reimbursement of indemnification owed to it by the Issuing Entity pursuant to Section 6.03
hereof; 
 (N) fourteenth, payable from the remaining Group I Principal Distribution Amount and the remaining Group II Principal
Distribution Amount and any remaining Available Funds relating to principal, to the Holders of the Class CA Certificates, for the benefit of the Supplemental Interest Trust, the entire remaining Principal Remittance Amount up to the extent of the
Overcollateralization Amount; and 
 (O) fifteenth, payable from the remaining Group I Principal Distribution Amount and the remaining
Group II Principal Distribution Amount and any remaining Available Funds relating to principal, to the Holders of the Class R Certificates, for the benefit of the Supplemental Interest Trust, any remainder. 
 (b) Method of Distribution. The Trustee shall make distributions in respect of a Distribution Date to each Certificateholder of record on the
related Record Date (other than as provided in Section 11.01 respecting the final distribution), in the case of Certificateholders of the Regular Certificates, by wire transfer, or upon written request at least five Business Days prior to the
related Distribution Date by check or money order mailed to such Certificateholder at the address appearing in the Certificate Register. Distributions among Certificateholders shall be made in proportion to the Percentage Interests evidenced by the
Certificates held by such Certificateholders. 
 (c) Distributions on Book-Entry Certificates. Each distribution with respect to a
Book-Entry Certificate shall be paid to the Depository, which shall credit the amount of such distribution to the accounts of its Depository Participants in accordance with its normal procedures. Each Depository Participant shall be responsible for
disbursing such distribution to the Certificate Owners that it represents and to each indirect participating brokerage firm (a “brokerage firm” or “indirect participating firm”) for which it acts as agent. Each brokerage firm
shall be responsible for disbursing funds to the Certificate Owners that it represents. All such credits and disbursements with respect to a Book-Entry Certificate are to be made by the Depository and the Depository Participants in accordance with
the provisions of the Certificates. None of the Custodian, the Trustee, the Depositor, the Servicer or the Sponsor shall have any responsibility therefor except as otherwise provided by applicable law. 
  

 50 

 (d) All principal amounts distributed to the Group II Certificates shall be distributed as follows:

  

	 	(i)	first, to the Class A-2A Certificates until its Certificate Principal Balance has been reduced to zero, 

  

	 	(ii)	second, after the Certificate Principal Balance of the Class A-2A Certificates has been reduced to zero, to the Class A-2B Certificates until its Certificate Principal
Balance has been reduced to zero, 

  

	 	(iii)	third, after the Certificate Principal Balances of the Class A-2A Certificates and the Class A-2B Certificates have been reduced to zero, to the Class A-2C
Certificates until its Certificate Principal Balance has been reduced to zero, and 

  

	 	(iv)	fourth, after the Certificate Principal Balances of the Class A-2A Certificates, the Class A-2B Certificates and Class A-2C Certificates have been reduced to zero, to
the Class A-2D Certificates until its Certificate Principal Balance has been reduced to zero. 

 However, if all of the mezzanine
certificates are reduced or written down to zero, the related share of principal amounts from the Group II Mortgage Loans will be distributed to the Group II Certificates pro rata, based on Certificate Balance until their Certificate Balances are
paid to zero. 
 Section 4.02 Distribution Account. 
 (a) No later than the Closing Date, the Trustee, shall establish and maintain a segregated trust account that is an Eligible Account, which shall be
titled “Distribution Account, JPMorgan Chase Bank, National Association, as Trustee for the registered holders of NovaStar Mortgage Funding Trust 2006-2, Home Equity Loan Asset-Backed Certificates, Series 2006-2” (the “Distribution
Account”). The Trustee shall, promptly upon receipt, deposit in the Distribution Account and retain therein the Interest Remittance Amount and the Principal Remittance Amount remitted on each Servicer Remittance Date to the Trustee by the
Servicer. Funds deposited in the Distribution Account shall be held in trust by the Trustee for the Certificateholders for the uses and purposes set forth herein. 
 (b) The Trustee may invest funds deposited in the Distribution Account in Eligible Investments in accordance with the written direction of the Servicer with a maturity date no later than the Business Day immediately
proceeding the date on which such funds are required to be withdrawn from such account pursuant to this Agreement. All income or other gain from such investments may be released from the Distribution Account and paid to the Servicer. The Servicer
shall be obligated to cover losses on such Eligible Investments. If the Trustee does not receive such written investment direction it shall retain the funds uninvested. 
  

 51 

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

 (i) To fund the distributions described in Section 4.01 hereof; 
 (ii) To withdraw any amount not required to be deposited in the Distribution Account or deposited therein in error; 
 (iii) To clear and terminate the Distribution Account upon the termination of this Agreement, with any amounts remaining on deposit
therein being paid to the Holders of the Class R Certificates; and 
 (iv) To distribute any amounts of investment income to
the Servicer. 
 (d) On each Distribution Date, the Trustee shall distribute all amounts on deposit in the Distribution Account (other than
investment income) established by it to Certificateholders in respect of the Certificates and to such other persons in the order of priority set forth in Section 4.01 hereof. 
 Section 4.03 Statements. 
 (a) On each Distribution Date, based solely on information provided to it by the Servicer in its Determination Date Report, the Trustee shall prepare and make available to each Holder of the Regular Certificates, the Cap Counterparties, the
Servicer and the Rating Agencies, a statement as to the distributions made on such Distribution Date: 
 (i) the amount of the
distribution made on such Distribution Date to the Holders of each Class of Regular Certificates, separately identified, allocable to principal and the amount of the distribution made to the Holders of the Class C Certificates allocable to
Prepayment Charges; 
 (ii) the amount of the distribution made on such Distribution Date to the Holders of each Class of
Regular Certificates allocable to interest, separately identified; 
 (iii) the Pool Balance of the Group I Mortgage Loans and
the Group II Mortgage Loans at the Close of Business at the end of the related Due Period; 
 (iv) the number, aggregate
principal balance, and weighted average Mortgage Rate of the Mortgage Loans as of the related Determination Date; 
 (v) the
number and aggregate unpaid principal balance of Mortgage Loans (identified by Group) that (A) were Delinquent (exclusive of Mortgage Loans in bankruptcy or foreclosure and REO Properties) (1) 30 to 59 days, (2) 60 to 89 days and
(3) 90 or more days (B) as to which foreclosure proceedings have been commenced and that (i) are not Delinquent, and (ii) are Delinquent (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days, (C) are
related to a REO Property and that (i) are not Delinquent and (ii) are Delinquent (1) 30 to 59 days, 
  

 52 

 (2) 60 to 89 days and (3) 90 or more days and (D) are related to a Mortgagor that was subject
to a bankruptcy proceeding and that (i) are not Delinquent and (ii) are Delinquent (1) 30 to 59 days, (2) 60 to 89 days and (3) 90 or more days, in each case on a contractual and bankruptcy legal basis; 
 (vi) the aggregate amount of Principal Prepayments made during the related Prepayment Period; 
 (vii) the aggregate amount of Realized Losses incurred during the related Prepayment Period and the cumulative amount of Realized Losses;

 (viii) the Certificate Principal Balance of each class of the Class A Certificates and each class of the Mezzanine
Certificates, after giving effect to the distributions made on such Distribution Date; 
 (ix) the Unpaid Interest Shortfall
Amount, if any, with respect to each class of the Class A Certificates and each class of the Mezzanine Certificates for such Distribution Date; 
 (x) the aggregate amount of any Prepayment Interest Shortfalls for such Distribution Date, to the extent not covered by payments by the Servicer pursuant to Section 3.26; 
 (xi) the Credit Enhancement Percentage for such Distribution Date; 
 (xii) the Available Funds Cap Carryforward Amount for each class of the Class A Certificates and each class of the Mezzanine
Certificates (excluding the Class M-9 DSI Certificates and Class M-10 DSI Certificates) if any, for such Distribution Date and the amount remaining unpaid after reimbursements therefor on such Distribution Date; 
 (xiii) the respective Pass-Through Rates applicable to each class of the Class A Certificates and each class of the Mezzanine
Certificates for such Distribution Date and the Pass-Through Rate applicable to each class of the Class A Certificates and each class of the Mezzanine Certificates for the immediately succeeding Distribution Date; 
 (xiv) the Supplemental Interest Payment for each Class on such Distribution Date; 
 (xv) the difference between (x) the aggregate notional amount of the Cap Agreements and (y) the aggregate Certificate Principal
Balance of the Class A Certificates and Mezzanine Certificates on such Distribution Date; 
 (xvi) the Required
Overcollateralization Amount for such Distribution Date; 
 (xvii) the Excess Cashflow for such Distribution Date; 

 

 53 

 (xviii) the aggregate amount of Scheduled Principal Payments made during the related Due
Period; 
 (xix) the aggregate amount of Principal Prepayments made during the related Due Period in which the related
Mortgagor paid the related Mortgage Loan in full; 
 (xx) the aggregate amount of Principal Prepayments in part made during
the related Prepayment Period; 
 (xxi) the number and the aggregate principal balance of all Liquidated Mortgage Loans for
the related Prepayment Period; 
 (xxii) the aggregate amount of Net Liquidation Proceeds received during the related
Prepayment Period; 
 (xxiii) the dollar amount of claims made, amounts paid by the MI Insurer in respect of claims made, and
premiums due and paid under the MI Policy; and 
 (xxiv) the amount equal to the difference between (x) the Class I
Monthly Interest Distributable Amount and (y) any amounts received by the Supplemental Interest Trust from the Cap Counterparties in respect of the Cap Agreements, respectively; provided, however, that if the resulting number is a negative
number, then the absolute value of such negative number. 
 In the case of information furnished pursuant to subclauses (i) and
(ii) above, the amounts shall be expressed in a separate section of the report as a dollar amount for each Class for each $1,000 original dollar amount as of the Closing Date. 
 The Trustee may, in the absence of manifest error, conclusively rely upon the Determination Date Report of the Servicer in its preparation of the
statement to Certificateholders pursuant to this Section 4.03. 
 (b) Within a reasonable period of time after the end of each calendar
year, the Trustee shall, upon written request, furnish to each Person who at any time during the calendar year was a Certificateholder of a Regular Certificate, if requested in writing by such Person, such information as is reasonably necessary to
provide to such Person a statement containing the information set forth in subclauses (i) and (ii) above, aggregated for such calendar year or applicable portion thereof during which such Person was a Certificateholder. Such obligation of
the Trustee shall be deemed to have been satisfied to the extent that substantially comparable information shall be prepared and furnished by the Trustee to Certificateholders pursuant to any requirements of the Code as are in force from time to
time. 
 (c) On each Distribution Date, the Trustee shall forward to the Residual Certificateholders a copy of the reports forwarded to the
Regular Certificateholders in respect of such Distribution Date with such other information as the Trustee deems necessary or appropriate. 
  

 54 

 (d) Within a reasonable period of time after the end of each calendar year, the Trustee shall deliver to
each Person who at any time during the calendar year was a Residual Certificateholder, if requested in writing by such Person, such information as is reasonably necessary to provide to such Person a statement containing the information provided
pursuant to the previous paragraph aggregated for such calendar year or applicable portion thereof during which such Person was a Residual Certificateholder. Such obligation of the Trustee shall be deemed to have been satisfied to the extent that
substantially comparable information shall be prepared and furnished to Certificateholders by the Trustee pursuant to any requirements of the Code as from time to time in force. 
 (e) On each Distribution Date, the Trustee shall post on its website at www.jpmorgan.com\sfr, which posting shall be accessible to each
Certificateholder, the Cap Counterparties, the statement prepared pursuant to paragraph (a) of this Section 4.03. Assistance in using the website can be obtained by calling the Trustee’s customer service desk at 1-877-722-1095. Such
parties that are unable to use the website are entitled to have a paper copy mailed to them via first class mail by providing a written request of such to the Trustee at is Corporate Trust office. The Trustee shall have the right to change the way
such statements are distributed in order to make such distribution more convenient and/or accessible to the above parties and the Trustee shall provide timely and adequate notification to all above parties regarding any such changes. The Trustee
shall not have any responsibility to (i) verify information provided by the Servicer to be included in such statement or (ii) include any information required to be included in such statement if the Servicer has failed to timely produce
such information to the Trustee, as required pursuant hereto. 
 Section 4.04 Supplemental Interest Trust; Excess
Cashflow. 
 (a) (i) The parties do hereby create and establish a sub-trust of the Trust Fund which shall hold an account, which, no
later than the Closing Date, the Trustee shall, at the direction of the Servicer, establish and maintain, as a segregated trust account that is an Eligible Account, which shall be titled “Supplemental Interest Trust, JPMorgan Chase Bank,
National Association, as Trustee for the registered holders of NovaStar Mortgage Funding Trust 2006-2, Home Equity Loan Asset-Backed Certificates, Series 2006-2.” On the Closing Date, the Trustee shall deposit an amount equal to the Initial Cap
Amount (as identified on the settlement statement provided by the Seller) to the Supplemental Interest Trust. The Trustee shall, promptly upon receipt, deposit in the Supplemental Interest Trust amounts of Excess Cashflow, if any, pursuant to
Section 4.01 and each distribution of the Class I Monthly Interest Distributable Amount pursuant to Section 4.01(a)(i)(A). Funds deposited in the Supplemental Interest Trust shall be held in trust by the Trustee for the Certificateholders
for the uses and purposes set forth herein. Neither the Supplemental Interest Trust nor the related Supplemental Interest Account shall be an asset of any of the REMICs created hereunder. 
 (ii) (a) On each Distribution Date prior to the Class I Termination Date, the funds in the Supplemental Interest Trust (as reduced
from time to time in accordance with this Section 4.04) will equal the sum of (x) any amounts received under any Cap Agreement pursuant to Section 4.04(f), (y) the Class I Monthly Interest Distributable Amount and (z) any
amounts of Excess Cashflow not used to maintain the Required Overcollateralization Amount. 
  

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 On each Distribution Date commencing in May 2009, the funds in the Supplemental Interest Trust (as
reduced from time to time in accordance with this Section 4.04) will equal any amounts of Excess Cashflow not used to maintain the Required Overcollateralization Amount. 
 (b) The Trustee will invest funds deposited in the Supplemental Interest Trust as directed in writing by the Servicer in Eligible Investments with a
maturity date (i) no later than the Business Day immediately preceding the date on which such funds are required to be withdrawn from such account pursuant to this Agreement, if a Person other than the Trustee or an Affiliate manages or advises
such investment, and (ii) no later than the date on which such funds are required to be withdrawn from such account pursuant to this Agreement, if the Trustee or an Affiliate manages or advises such investment. If the Trustee does not receive
such written investment instructions it shall retain such funds uninvested. All income and gain realized from investment of funds deposited in the Supplemental Interest Trust shall be credited to such Account. The Trustee will not be liable for
investment losses on investments selected by the Servicer pursuant to this Section 4.04(b). The Supplemental Interest Trust will not be an asset of any of the REMICs created hereunder. 
 (c) On each Distribution Date, the Trustee shall distribute the funds (other than funds relating to Excess Cashflow and, if such funds are insufficient,
any Excess Cashflow remaining after the distributions set forth in Section 4.04(d)(i)) held in the Supplemental Interest Trust as follows: 
 (i) first, on each Distribution Date up to and including the Class I Termination Date, and on June 25, 2006, to each Cap Counterparty, its related Cap Amount for such Distribution Date or June 25, 2006, as
applicable, and any unpaid Cap Termination Payment owed to a Cap Counterparty that is not a Defaulted Cap Termination Payment; 
 (ii) second, the amount necessary, if any, to eliminate any Overcollateralization Deficiency, after taking into account any Excess Cashflow previously applied to such purpose on such Distribution Date; 
 (iii) third, any remaining amounts to pay, pro-rata based on Certificate Principal Balance of each Class of Class A
Certificates and Mezzanine Certificates, the Supplemental Interest Payment for each Class of Class A Certificates and Mezzanine Certificates (in each only up to the amount necessary to pay any such Supplemental Interest Payment) and provided
that (a) the Supplemental Interest Payment actually distributed to the Class M-9 Certificates will be the Non-Derivative Supplemental Interest Payment for the Class M-9 Certificates and the Supplemental Interest Payment actually distributed to
the Class M-10 Certificates shall be the Non-Derivative Supplemental Interest Payment for the Class M-10 Certificates, and (b) the Derivative Supplemental Interest Payment for the Class M-9 Certificates shall be paid to the Holders of the Class
M-9 DSI Certificates and the Derivative Supplemental Interest Payment for the Class M-10 Certificates shall be paid to the Holders of the Class M-10 DSI Certificates. 
  

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 (iv) fourth, to the Cap Counterparties to which such amounts are owed, pro
rata, any Defaulted Cap Termination Payments and any indemnity payments provided for in Part 5 of the Cap Agreements; and 
 (v) fifth, to the Holders of the Class CB Certificates, an amount equal to the Class CB Interest Distributable Amount for such Distribution Date; and 
 (vi) sixth, any remaining amounts, to the Holders of the Class CA Certificates. 
 (d) On each Distribution Date, the Trustee shall distribute the funds relating to Excess Cashflow as follows: 
 (i) prior to any deposit to the Supplemental Interest Trust, to the Holders of the Class or Classes of Certificates then entitled to
receive distributions in respect of principal, in an amount equal to any Extra Principal Distribution Amount, distributable to such holders in the same order of priority as the Group I Principal Distribution Amount and the Group II Principal
Distribution Amount as described in Section 4.01; and 
 (ii) to the Supplemental Interest Trust to distribute in
accordance with Section 4.04(c). 
 (e) [reserved] 
 (f) [reserved] 
 (g) In the event that a Cap Counterparty elects to post collateral as provided in the
related Cap Agreement, the Trustee shall establish and maintain an Eligible Account with respect to the related Cap Agreement (each, a “Hedge Collateral Account”) for the benefit of such Cap Counterparty, as applicable, and the
Certificateholders, as their interests may appear, into which such collateral shall be deposited. The Trustee may or shall (as indicated) make withdrawals from the related Hedge Collateral Account for the purposes of (i) entering into a
substitute cap agreement, (ii) funding the amount of any payment due to be made by such Cap Counterparty under the related Cap Agreement, as applicable, following the failure by such Cap Counterparty to make that payment or (iii) as
permitted pursuant to the related Cap Agreement or this Agreement. The Trustee shall make withdrawals from the related Hedge Collateral Account and transfer the collateral (i) as required of the Trustee pursuant to the related Cap Agreement or
(ii) to the related Cap Counterparty if the circumstances which required the posting of collateral no longer exist; and to the extent necessary to perform such obligation, the Trustee is required to liquidate any investments held in such Hedge
Collateral Account. In the event that additional collateral is required to be posted by a Cap Counterparty under the related Cap Agreement, as applicable, the Trustee shall promptly make a demand on such 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 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 Trustee uninvested. Any and all interest generated by such investment shall be transferred to the 
  

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 related Cap Counterparty as provided in the related Cap Agreement, as applicable, or where unspecified, on each
Distribution Date. In connection with the maintenance and administration of a Hedge Collateral Account, the Trustee may request and rely on written instructions from the Servicer, which the Servicer hereby agrees to provide, with respect to the
maintenance and administration of such account. For the avoidance of doubt, the Trustee shall not have any right to apply any amounts or assets in any Hedge Collateral Account except in accordance with the enforcement and realization of its security
interest pursuant to the related Cap Agreement or otherwise in accordance with the related Cap Agreement. 
 The 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 Trustee in this subsection (f) shall be to the Trustee’s agent appointed pursuant to this paragraph. 
 Section 4.05 [Reserved] 
 Section 4.06 [Reserved] 
 Section 4.07 Allocation of Realized Losses. 
 All Realized Losses on the Mortgage Loans shall be allocated by the Trustee on each Distribution Date as follows: first, to amounts of Excess
Cashflow, second, to the Overcollateralization Amount, third, to the Class M-10 Certificates, until the Certificate Principal Balance thereof has been reduced to zero; fourth, to the Class M-9 Certificates, until the Certificate
Principal Balance thereof has been reduced to zero; fifth, to the Class M-8 Certificates, until the Certificate Principal Balance thereof has been reduced to zero; sixth, to the Class M-7 Certificates, until the Certificate Principal
Balance thereof has been reduced to zero; seventh, to the Class M-6 Certificates, until the Certificate Principal Balance thereof has been reduced to zero; eighth, to the Class M-5 Certificates, until the Certificate Principal Balance
thereof has been reduced to zero; ninth, to the Class M-4 Certificates, until the Certificate Principal Balance thereof has been reduced to zero; tenth, to the Class M-3 Certificates, until the Certificate Principal Balance thereof has
been reduced to zero; eleventh, to the Class M-2 Certificates; and twelfth, to the Class M-1 Certificates, until the Certificate Principal Balance of each such Class has been reduced to zero. All Realized Losses to be allocated to the
Certificate Principal Balances of all Classes on any Distribution Date shall be so allocated after the actual distributions to be made on such date as provided above. All references above to the Certificate Principal Balance of any Class of
Certificates shall be to the Certificate Principal Balance of such Class immediately prior to the relevant Distribution Date, before reduction thereof by any Realized Losses, in each case to be allocated to such Class of Certificates, on such
Distribution Date. In no event shall Realized Losses be allocated to the Class A-1A Certificates, the Group II Certificates or the Class I Certificates. 
 Any allocation of Realized Losses to a Mezzanine Certificate Certificate on any Distribution Date shall be made by reducing the Certificate Principal Balance thereof by the amount so allocated. Any Subsequent
Recoveries will be allocated to the Overcollateralization Amount and Mezzanine Certificates in the reverse order of the Realized Loss allocation set forth 
  

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 in the preceding paragraph, to the extent of the Realized Loss allocated to each related Certificate (or in the case of
the Overcollateralization Amount, to the extent of the Realized Loss allocated to such Overcollateralization Amount). 
 ARTICLE V

 THE CERTIFICATES 
 Section 5.01 The Certificates. 
 Each of the Class A Certificates, the Mezzanine Certificates, the Class M-9
DSI Certificates, the Class M-10 DSI Certificates, the Class C Certificates, the Class I Certificates and the Residual Certificates shall be substantially in the forms annexed hereto as exhibits, and shall, on original issue, be executed,
authenticated and delivered by the Trustee to or upon the order of the Depositor concurrently with the sale and assignment to the Issuing Entity of the Trust Fund. The Class A Certificates and Mezzanine Certificates shall be initially evidenced
by one or more Certificates representing a Percentage Interest with a minimum dollar denomination of $25,000 and integral dollar multiples of $1,000 in excess thereof, with a minimum investment of $100,000 (if the Certificates are Book-Entry
Certificates), except that one Certificate of each such Class of Certificates may be in a different denomination so that the sum of the denominations of all outstanding Certificates of such Class shall equal the Certificate Principal Balance of such
Class on the Closing Date. The Class M-9 DSI Certificates, the Class M-10 DSI Certificates, the Class C Certificates, the Class I Certificates and the Residual Certificates are issuable in any Percentage Interests; provided, however, that the sum of
all such percentages for each such Class totals 100% and no more than ten Certificates of each Class may be issued. 
 The Certificates shall
be executed on behalf of the Issuing Entity by manual or facsimile signature on behalf of the Trustee by a Responsible Officer. Certificates bearing the manual or facsimile signatures of individuals who were, at the time when such signatures were
affixed, authorized to sign on behalf of the Trustee shall bind the Issuing Entity, notwithstanding that such individuals or any of them have ceased to be so authorized prior to the authentication and delivery of such Certificates or did not hold
such offices at the date of such Certificate. No Certificate shall be entitled to any benefit under this Agreement or be valid for any purpose, unless such Certificate shall have been manually authenticated by the Trustee substantially in the form
provided for herein, and such authentication upon any Certificate shall be conclusive evidence, and the only evidence, that such Certificate has been duly authenticated and delivered hereunder. All Certificates shall be dated the date of their
authentication. Subject to Section 5.02(c), the Class A Certificates and Mezzanine Certificates (other than the Class M-9 Certificates and Class M-10 Certificates) shall be Book-Entry Certificates. The other Classes of Certificates
(including the Class M-9 Certificates and Class M-10 Certificates) shall be Definitive Certificates. 
 Section 5.02
Registration of Transfer and Exchange of Certificates. 
 (a) The Certificate Registrar shall cause to be kept at the Corporate
Trust Office a Certificate Register in which, subject to such reasonable regulations as it may prescribe, the Certificate Registrar shall provide for the registration of Certificates and of transfers and 
  

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 exchanges of Certificates as herein provided. The Trustee shall initially serve as Certificate Registrar for the purpose
of registering Certificates and transfers and exchanges of Certificates as herein provided. 
 Upon surrender for registration of transfer of
any Certificate at any office or agency of the Certificate Registrar maintained for such purpose pursuant to the foregoing paragraph and, in the case of a Residual Certificate, upon satisfaction of the conditions set forth below, the Trustee on
behalf of the Issuing Entity shall execute, authenticate and deliver, in the name of the designated transferee or transferees, one or more new Certificates of the same aggregate Percentage Interest. 
 At the option of the Certificateholders, Certificates may be exchanged for other Certificates in authorized denominations and the same aggregate
Percentage Interests, upon surrender of the Certificates to be exchanged at any such office or agency. Whenever any Certificates are so surrendered for exchange, the Trustee shall execute on behalf of the Issuing Entity and authenticate and deliver
the Certificates which the Certificateholder making the exchange is entitled to receive. Every Certificate presented or surrendered for registration of transfer or exchange shall (if so required by the Trustee or the Certificate Registrar) be duly
endorsed by, or be accompanied by a written instrument of transfer satisfactory to the Trustee and the Certificate Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing. 
 (b) Except as provided in paragraph (c) below, the Book-Entry Certificates shall at all times remain registered in the name of the Depository or its
nominee and at all times: (i) registration of such Certificates may not be transferred by the Trustee except to another Depository; (ii) the Depository shall maintain book-entry records with respect to the Certificate Owners and with
respect to ownership and transfers of such Certificates; (iii) ownership and transfers of registration of such Certificates on the books of the Depository shall be governed by applicable rules established by the Depository; (iv) the
Depository may collect its usual and customary fees, charges and expenses from its Depository Participants; (v) the Trustee shall for all purposes deal with the Depository as representative of the Certificate Owners of the Certificates for
purposes of exercising the rights of Holders under this Agreement, and requests and directions for and votes of such representative shall not be deemed to be inconsistent if they are made with respect to different Certificate Owners; (vi) the
Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its Depository Participants and furnished by the Depository Participants with respect to indirect participating firms and Persons
shown on the books of such indirect participating firms as direct or indirect Certificate Owners; and (vii) the direct participants of the Depository shall have no rights under this Agreement under or with respect to any of the Certificates
held on their behalf by the Depository, and the Depository may be treated by the Trustee, the Trustee and its agents, employees, officers and directors as the absolute owner of the Certificates for all purposes whatsoever. 
 All transfers by Certificate Owners of Book-Entry Certificates shall be made in accordance with the procedures established by the Depository Participant
or brokerage firm representing such Certificate Owners. Each Depository Participant shall only transfer Book-Entry Certificates of Certificate Owners that it represents or of brokerage firms for which it acts 
  

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 as agent in accordance with the Depository’s normal procedures. The parties hereto are hereby authorized to execute
a Letter of Representations with the Depository or take such other action as may be necessary or desirable to register a Book-Entry Certificate to the Depository. In the event of any conflict between the terms of any such Letter of Representation
and this Agreement, the terms of this Agreement shall control. 
 (c) If (i)(x) the Depository or the Depositor advises the Trustee in
writing that the Depository is no longer willing or able to discharge properly its responsibilities as Depository and (y) the Trustee or the Depositor is unable to locate a qualified successor, or (ii) after the occurrence of a Servicing
Default, the Certificate Owners of the Book-Entry Certificates representing not less than 51% of the Voting Rights advise the Trustee and Depository through the Financial Intermediaries and the Depository Participants in writing that the
continuation of a book-entry system through the Depository to the exclusion of definitive, fully registered certificates (“Definitive Certificates”) to Certificate Owners is no longer in the best interests of the Certificate Owners.
Upon surrender to the Certificate Registrar of the Book-Entry Certificates by the Depository, accompanied by registration instructions from the Depository for registration, the Trustee shall, at the Sponsor’s expense, execute on behalf of the
Issuing Entity and authenticate the Definitive Certificates. Neither the Depositor nor the Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Certificates, the Trustee, the Certificate Registrar, the Servicer, any Paying Agent and the Depositor shall recognize the Holders of the Definitive Certificates as Certificateholders hereunder. 
 (d) No transfer, sale, pledge or other disposition of any Class M-9 Certificate, Class M-10 Certificate, Class M-9 DSI Certificates, Class M-10 DSI
Certificates, Class CA Certificate, Class CB Certificate or Residual Certificate shall be made unless such disposition is exempt from the registration requirements of the Securities Act of 1933, as amended (the “1933 Act”), and any
applicable state securities laws or is made in accordance with the 1933 Act and laws. In the event of any such transfer, except with respect to the initial transfers of any Class M-9 Certificate, Class M-10 Certificate, Class M-9 DSI Certificates,
Class M-10 DSI Certificates, Class CA Certificate, Class CB Certificate or Residual Certificates by the Depositor to NCFLLC or NCFC, or by NCFC or NCFLLC to Greenwich Capital Financial Products, Inc., Wachovia Investment Holdings, LLC, or Newport
Funding Corp., unless (i) such transfer is made in reliance upon Rule 144A under the 1933 Act and an investment letter, in substantially the form attached hereto as Exhibit G, is delivered by the Transferee to the Trustee) or (ii) a
written Opinion of Counsel (which may be in-house counsel) acceptable to and in form and substance reasonably satisfactory to the Trustee and the Depositor is delivered to them stating that such transfer may be made pursuant to (x) the 1933
Act, or an exemption thereto, describing the applicable provision or exemption and the basis therefore, and (y) the Investment Company Act of 1940, or an exemption thereto, describing the applicable provision or exemption and the basis
therefore, which Opinion of Counsel shall not be an expense of the Trustee or the Depositor. The Holder of a Class M-9 Certificate, Class M-10 Certificate, Class M-9 DSI Certificate, Class M-10 DSI Certificate, Class CA Certificate, Class CB
Certificate or Residual Certificate desiring to effect such transfer shall indemnify and hold harmless the Trustee and the Depositor against any liability that may result if the transfer is not so exempt or is not made in accordance with such
federal and state laws. 
  

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 The Class I Certificates shall be registered in the name of the Supplemental Interest Trust and shall not
be transferable. 
 No transfer of a Class M-9 Certificate, Class M-9DSI Certificate, Class M-10 Certificate, Class M-10DSI Certificate,
Class CA Certificate, Class CB Certificate or Residual Certificate or any interest therein shall be made to any Plan or to any Person acting, directly or indirectly, on behalf of any such Plan or acquiring such Certificates with “plan
assets” of a Plan within the meaning of the Department of Labor regulation promulgated at 29 C.F.R. § 2510.3-101 or otherwise (“Plan Assets”). Each Person who acquires any Ownership Interest in such classes of Certificates
shall be deemed, by the acceptance or acquisition of such Ownership Interest, to represent that it is not a Plan and is not acting, directly or indirectly, on behalf of a Plan or acquiring such Ownership Interest with Plan Assets. The foregoing
restrictions shall not apply to the transfer of any Class M-9 Certificate that has been sold pursuant to a Qualified Underwriting, provided such transfer satisfies the other conditions under an Underwriter Exemption. The foregoing restrictions shall
not apply to the transfer of any Class M-10 Certificate that has been sold pursuant to a Qualified Underwriting, provided such transfer is to an “insurance company general account” (within the meaning of PTCE 95-60) and the conditions set
forth in Sections I and III of PTCE 95-60 have been satisfied. 
 Each Person who has or who acquires any Ownership Interest in a Residual
Certificate shall be deemed by the acceptance or acquisition of such Ownership Interest to have agreed to be bound by the following provisions and to have irrevocably appointed the Depositor or its designee as its attorney-in-fact to negotiate the
terms of any mandatory sale under clause (v) below and to execute all instruments of transfer and to do all other things necessary in connection with any such sale, and the rights of each Person acquiring any Ownership Interest in a Residual
Certificate are expressly subject to the following provisions: 
 (i) Each Person holding or acquiring any Ownership Interest
in a Residual Certificate shall be a Permitted Transferee and shall promptly notify the Trustee of any change or impending change in its status as a Permitted Transferee. 
 (ii) No Person shall acquire an Ownership Interest in a Residual Certificate unless such Ownership Interest is a pro-rata undivided
interest. 
 (iii) In connection with any proposed transfer of any Ownership Interest in a Residual Certificate, the Trustee
shall as a condition to registration of the transfer, require delivery to it, in form and substance satisfactory to it, of each of the following: 
 (A) an affidavit in the form of Exhibit H hereto from the proposed transferee to the effect that such transferee is a Permitted Transferee and that it is not acquiring its Ownership Interest in the Residual Certificate that is the subject
of the proposed transfer as a nominee, Trustee or agent for any Person who is not a Permitted Transferee; and 
 (B) an affidavit in the form
of Exhibit I hereto from the proposed transferor to the effect that no purpose of the transfer is to impede the assessment or collection of any tax. 
  

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 (iv) Any attempted or purported transfer of any Ownership Interest in a Residual
Certificate in violation of the provisions of this Section shall be absolutely null and void and shall vest no rights in the purported transferee. If any purported transferee shall, in violation of the provisions of this Section, become a Holder of
a Residual Certificate, then the prior Holder of such Residual Certificate that is a Permitted Transferee shall, upon discovery that the registration of transfer of such Residual Certificate was not in fact permitted by this Section, be restored to
all rights as Holder thereof retroactive to the date of registration of transfer of such Residual Certificate. The Trustee shall be under no liability to any Person for any registration of transfer of a Residual Certificate that is in fact not
permitted by this Section or for making any distributions due on such Residual Certificate to the Holder thereof or taking any other action with respect to such Holder under the provisions of this Agreement so long as the Trustee received the
documents specified in clause (iii). The Trustee shall be entitled to recover from any Holder of a Residual Certificate that was in fact not a Permitted Transferee at the time such distributions were made all distributions made on such Residual
Certificate. Any such distributions so recovered by the Trustee shall be distributed and delivered by the Trustee to the prior Holder of such Residual Certificate that is a Permitted Transferee. 
 (v) If any Person other than a Permitted Transferee acquires any Ownership Interest in a Residual Certificate in violation of the
restrictions in this Section, then the Trustee shall have the right but not the obligation, without notice to the Holder of such Residual Certificate or any other Person having an Ownership Interest therein, to notify the Depositor to arrange for
the sale of such Residual Certificate. The proceeds of such sale, net of commissions (which may include commissions payable to the Depositor or its affiliates in connection with such sale), expenses and taxes due, if any, will be remitted by the
Trustee to the previous Holder of such Residual Certificate that is a Permitted Transferee, except that in the event that the Trustee determines that the Holder of such Residual Certificate may be liable for any amount due under this Section or any
other provisions of this Agreement, the Trustee may withhold a corresponding amount from such remittance as security for such claim. The terms and conditions of any sale under this clause (v) shall be determined in the sole discretion of the
Trustee and it shall not be liable to any Person having an Ownership Interest in a Residual Certificate as a result of its exercise of such discretion. 
 (vi) If any Person other than a Permitted Transferee acquires any Ownership Interest in a Residual Certificate in violation of the restrictions in this Section, then the Trustee upon receipt of reasonable compensation
will provide to the Internal Revenue Service, and to the persons specified in Sections 860E(e)(3) and (6) of the Code, information needed to compute the tax imposed under Section 860E(e) of the Code on transfers of residual interests to
disqualified organizations. 
 The foregoing provisions of this Section shall cease to apply to transfers occurring on or after the date on
which there shall have been delivered to the Trustee, in form and 
  

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 substance satisfactory to the Trustee, (i) written notification from each Rating Agency that the removal of the
restrictions on Transfer set forth in this Section will not cause such Rating Agency to downgrade its rating of the Certificates and (ii) an Opinion of Counsel to the effect that such removal will not cause any REMIC created hereunder to fail
to qualify as a REMIC. 
 (e) No service charge shall be made for any registration of transfer or exchange of Certificates of any Class, but
the Certificate Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Certificates. 
 All Certificates surrendered for registration of transfer or exchange shall be cancelled by the Certificate Registrar and disposed of pursuant to its
standard procedures. 
 Section 5.03 Mutilated, Destroyed, Lost or Stolen Certificates. 
 If (i) any mutilated Certificate is surrendered to the Certificate Registrar or the Certificate Registrar receives evidence to its satisfaction of
the destruction, loss or theft of any Certificate and (ii) there is delivered to the Trustee, the Depositor and the Certificate Registrar such security or indemnity as may be required by them to save each of them harmless, then, in the absence
of notice to the Trustee or the Certificate Registrar that such Certificate has been acquired by a bona fide purchaser, the Trustee shall execute on behalf of the Issuing Entity, authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new Certificate of like tenor and Percentage Interest. Upon the issuance of any new Certificate under this Section, the Trustee or the Certificate Registrar may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and the Certificate Registrar) in connection therewith. Any duplicate Certificate
issued pursuant to this Section, shall constitute complete and indefeasible evidence of ownership in the Issuing Entity, as if originally issued, whether or not the lost, stolen or destroyed Certificate shall be found at any time. 
 Section 5.04 Persons Deemed Owners. 
 The Servicer, the Depositor, the Trustee, the Certificate Registrar, any Paying Agent and any agent of the Servicer, the Depositor, the Trustee, the Certificate Registrar or any Paying Agent may treat the Person,
including a Depository, in whose name any Certificate is registered as the owner of such Certificate for the purpose of receiving distributions pursuant to Section 4.01 and for all other purposes whatsoever, and none of the Servicer, the
Issuing Entity, the Trustee nor any agent of any of them shall be affected by notice to the contrary. 
 Section 5.05
Appointment of Paying Agent. 
 (a) The Paying Agent shall make distributions to Certificateholders from the Distribution Account
pursuant to Section 4.01 and shall report the amounts of such distributions to the Trustee. The duties of the Paying Agent may include the obligation to distribute statements prepared by the Trustee pursuant to Section 4.03 and provide
information to Certificateholders as required hereunder. The Paying Agent hereunder shall at all times be an entity duly incorporated and validly existing under the laws of the United States of America or 
  

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 any state thereof, authorized under such laws to exercise corporate trust powers and subject to supervision or
examination by federal or state authorities. The Paying Agent shall initially be the Trustee. The Trustee may appoint a successor to act as Paying Agent, which appointment shall be reasonably satisfactory to the Depositor. 
 (b) The Trustee shall cause the Paying Agent (if other than the Trustee) to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee that such Paying Agent shall hold all sums, if any, held by it for payment to the Certificateholders in trust for the benefit of the Certificateholders entitled thereto until such sums shall be paid to such
Certificateholders and shall agree that it shall comply with all requirements of the Code regarding the withholding of payments in respect of Federal income taxes due from Certificate Owners and otherwise comply with the provisions of this Agreement
applicable to it. 
 ARTICLE VI 
 THE SERVICER AND THE DEPOSITOR 
 Section 6.01 Liability of the Servicer and the Depositor. 
 The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by Servicer herein. The
Depositor shall be liable in accordance herewith only to the extent of the obligations specifically imposed upon and undertaken by the Depositor. 
 Section 6.02 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or the Depositor. 
 Any entity into which the Servicer or Depositor may be merged or consolidated, or any entity resulting from any merger, conversion or consolidation to which the Servicer or the Depositor shall be a party, or any corporation succeeding to
the business of the Servicer or the Depositor, shall be the successor of the Servicer or the Depositor, as the case may be, hereunder, without the execution or filing of any paper or any further act on the part of any of the parties hereto, anything
herein to the contrary notwithstanding; provided, however, that the successor Servicer shall satisfy all the requirements of Section 7.02 with respect to the qualifications of a successor Servicer. 
 Section 6.03 Limitation on Liability of the Servicer and Others. 
 Neither the Servicer nor any of the directors or officers or employees or agents of the Servicer shall be under any liability to the Issuing Entity or the
Certificateholders for any action taken or for refraining from the taking of any action by the Servicer in good faith pursuant to this Agreement, or for errors in judgment; provided, however, that this provision shall not protect the
Servicer or any such Person against any liability which would otherwise be imposed by reason of its willful misfeasance, bad faith or negligence in the performance of duties of the Servicer or by reason of its reckless disregard of its obligations
and duties of the Servicer hereunder. 
  

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 The Servicer and any director or officer or employee or agent of the Servicer may rely in good faith on
any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. The Servicer and any director or officer or employee or agent of the Servicer shall be indemnified by the Issuing Entity and
held harmless against any loss, liability or expense incurred in connection with any legal action relating to this Agreement or the Certificates, including any amount paid to the Trustee pursuant to Section 6.06(b), other than any loss,
liability or expense related to any specific Mortgage Loan or Mortgage Loans (except as any such loss, liability or expense shall be otherwise reimbursable pursuant to this Agreement) and any loss, liability or expense incurred by reason of its
willful misfeasance, bad faith or negligence in the performance of its duties hereunder or by reason of its reckless disregard of its obligations and duties hereunder. The Servicer shall not be under any obligation to appear in, prosecute or defend
any legal action which is not incidental to its duties to service the Mortgage Loans in accordance with this Agreement, and which in its opinion may involve it in any expense or liability; provided, however, that the Servicer may in its sole
discretion undertake any such action which it may deem necessary or desirable in respect of this Agreement, and the rights and duties of the parties hereto and the interests of the Certificateholders hereunder. In such event, the reasonable legal
expenses and costs of such action and any liability resulting therefrom shall be expenses, costs and liabilities of the Issuing Entity, and the Servicer shall be entitled to be reimbursed therefor. The Servicer’s right to indemnity or
reimbursement pursuant to this Section 6.03 shall survive any resignation or termination of the Servicer pursuant to Section 6.04 or 7.01 with respect to any losses, expenses, costs or liabilities arising prior to such resignation or
termination (or arising from events that occurred prior to such resignation or termination). Any reimbursements or indemnification to the Servicer from the Issuing Entity pursuant to this Section 6.03 shall be payable in the priority set forth
in Section 4.01 hereof. 
 Section 6.04 Servicer Not to Resign. 
 Subject to the provisions of Section 6.02, the Servicer shall not resign from the obligations and duties hereby imposed on it except (i) upon
determination that the performance of its obligations or duties hereunder are no longer permissible under applicable law or (ii) upon satisfaction of the following conditions: (a) the Servicer has proposed a successor servicer to the
Trustee in writing and such proposed successor servicer is reasonably acceptable to the Trustee; and (b) each Rating Agency shall have delivered a letter to the Trustee prior to the appointment of the successor servicer stating that the
proposed appointment of such successor servicer as Servicer hereunder will not result in the reduction or withdrawal of then current rating of the Certificates; provided, however, that no such resignation by the Servicer shall become
effective until such successor servicer or, in the case of (i) above, the Trustee or its designee as successor Servicer shall have assumed the Servicer’s responsibilities and obligations hereunder or shall have designated a successor
servicer in accordance with Section 7.02. Any such resignation shall not relieve the Servicer of responsibility for any of the obligations specified in Sections 7.01 and 7.02 as obligations that survive the resignation or termination of the
Servicer. The Servicer shall have no claim (whether by subrogation or otherwise) or other action against any Certificateholder for any amounts paid by the Servicer pursuant to any provision of this Pooling and Agreement. Any such determination
permitting the resignation of the Servicer under clause (i) above shall be evidenced by an Opinion of Counsel to such effect delivered to the Trustee. 
  

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 Section 6.05 Delegation of Duties. 
 In the ordinary course of business, the Servicer at any time may delegate any of its duties hereunder to any Person, including any of its Affiliates, who
agrees to conduct such duties in accordance with the same standards with which the Servicer complies pursuant to Section 3.01. Such delegation shall not relieve the Servicer of its liabilities and responsibilities with respect to such duties
and shall not constitute a resignation within the meaning of Section 6.04. 
 Section 6.06 Servicing Rights Owner to Pay
Trustee’s Fees and Expenses; Indemnification. 
 (a) The Servicing Rights Owner covenants and agrees to pay to the Trustee and any
co-trustee of the Trustee from time to time, and the Trustee and any such co-trustee shall be entitled to, reasonable compensation, including all indemnification payments (which shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) for all services rendered by each of them in the execution of the trusts created hereunder and in the exercise and performance of any of the powers and duties and the Servicing Rights Owner will pay or
reimburse the Trustee and any co-trustee upon request for all reasonable expenses, disbursements and advances incurred or made by the Trustee or any co-trustee of the Trustee in accordance with any of the provisions of this Agreement except any such
expense, disbursement or advance as may arise from its negligence or bad faith. 
 (b) The Servicing Rights Owner agrees to indemnify the
Trustee for, and to defend and hold, the Trustee harmless against, any claim, tax, penalty, loss, liability or expense of any kind whatsoever, incurred without gross negligence or willful misconduct on the part of the Trustee as such and/or in its
individual capacity, arising out of, or in connection with, the performance of the Trustee’s duties under this Agreement or the other Basic Documents, including the reasonable costs and expenses (including reasonable legal fees and expenses) of
defending itself against any claim in connection with the exercise or performance of any of its powers or duties hereunder, provided that: 
 (i) with respect to any such claim, the Trustee shall have given the Servicing Rights Owner written notice thereof promptly after the Trustee shall have actual knowledge thereof; 
 (ii) while maintaining control over its own defense, the Trustee shall cooperate and consult fully with the Servicing Rights Owner in
preparing such defense; and 
 (iii) notwithstanding anything in this Agreement to the contrary, the Servicing Rights Owner
shall not be liable for settlement of any claim by the Trustee entered into without the prior consent of the Servicing Rights Owner, which consent shall not be unreasonably withheld. 
 No termination of this Agreement and resignation and removal of the Trustee shall affect the obligations created by this Section 6.06 of the
Servicing Rights Owner to indemnify the Trustee under the conditions and to the extent set forth herein. This section shall 
  

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 survive the termination of this Agreement and resignation and removal of the Trustee. Any amounts to be paid by the
Servicing Rights Owner pursuant to this Subsection may not be paid from the Trust Fund except as provided in Section 6.03. 
 Notwithstanding the foregoing, the indemnification provided by the Servicing Rights Owner in this Section 6.06 shall not pertain to any loss, liability or expense of the Trustee including the costs and expenses of defending itself
against any claim, incurred in connection with any actions taken by the Trustee at the direction of the Certificateholders, as the case may be, pursuant to the terms of this Agreement. 
 (c) The Servicer agrees to indemnify the Trust Fund in an amount equal to the amount of any claim made under a MI Policy for which coverage is denied by
the MI Insurer because (and if the MI Insurer’s denial of coverage is contested by the Servicing Rights Owner or the Servicer, a court or arbitrator finally determines that coverage is not available under the MI Policy because) of the
Servicer’s failure to abide by the terms of the MI Policy or the MI Insurance Agreement or the Servicer’s failure to abide by the NFI Underwriting Guidelines or the NFI Servicing Guidelines, as attached to the MI Insurance Agreement.

 (d) In the event the Trustee becomes the Servicer pursuant to Section 7.02 hereof, the Trustee shall not be obligated, in its
individual capacity, to pay any obligation of the Servicer under clause (c) above. 
 (e) To the extent any amounts set forth in clause
(a) or (b) above are not paid by the Servicing Rights Owner, such amounts shall be paid by the Servicer. 
 ARTICLE VII 
 DEFAULT 
 Section 7.01
Servicing Default. 
 (a) If any one of the following events (a “Servicing Default”) shall occur and be
continuing: 
 (i) Any failure by the Servicer to deposit in the Collection Account or Distribution Account (A) any
Advances and Compensating Interest or (B) any other Deposit required to be made under the terms of this Agreement, which, in the case of this clause (B), continues unremedied for a period of three Business Days after the date upon which written
notice of such failure shall have been given to the Servicer by the Trustee or to the Servicer and the Trustee by the Holders of Certificates evidencing at least 25% of the Voting Rights; or 
 (ii) Failure on the part of the Servicer duly to observe or perform in any material respect any other covenants or agreements of the
Servicer set forth in this Agreement, which failure, in each case, materially and adversely affects the interests of Certificateholders or the breach of any representation or warranty of the Servicer in this Agreement which materially and adversely
affects the interests of the Certificateholders, and which in either case continues unremedied for a period of 30 days after the date on which written notice of such failure or breach, requiring the same to be remedied, and stating that such notice
is a “Notice of 
  

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 Default” hereunder, shall have been given to the Servicer by the Trustee or to the Servicer and the
Trustee by the Holders of Certificates evidencing at least 25% of the Voting Rights; or 
 (iii) The entry against the
Servicer of a decree or order by a court or agency or supervisory authority having jurisdiction in the premises for the appointment of a trustee, conservator, receiver or liquidator in any insolvency, conservatorship, receivership, readjustment of
debt, marshaling of assets and liabilities or similar proceedings, or for the winding up or liquidation of its affairs, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days; or 
 (iv) The Servicer shall voluntarily go into liquidation, consent to the appointment of a conservator, receiver, liquidator or similar
person in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings of or relating to the Servicer or of or relating to all or substantially all of its property, or a decree or order of a court, agency or
supervisory authority having jurisdiction in the premises for the appointment of a conservator, receiver, liquidator or similar person in any insolvency, readjustment of debt, marshaling of assets and liabilities or similar proceedings, or for the
winding-up or liquidation of its affairs, shall have been entered against the Servicer and such decree or order shall have remained in force undischarged, unbonded or unstayed for a period of 60 days; or the Servicer shall admit in writing its
inability to pay its debts generally as they become due, file a petition to take advantage of any applicable insolvency or reorganization statute, make an assignment for the benefit of its creditors or voluntarily suspend payment of its obligations;
or 
 (v) The Cumulative Loss Percentage exceeds (a) with respect to the first 12 Distribution Dates, 1.75%,
(b) with respect to the next 12 Distribution Dates, 2.75% (c) with respect to the next 12 Distribution Dates, 4.00%, (d) with respect to the next 12 Distribution Dates, 5.00%, (e) with respect to the next 12 Distribution Dates,
6.00%, (f) and with respect to all Distribution Dates thereafter, 7.25%; or 
 (vi) Realized Losses on the Mortgage Loans
over any twelve-month period exceeds 2.45% of the sum of the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date; or 
 (vii) The Rolling 90 Day Delinquency Percentage exceeds 20.00%. 
 (b) then, and in each and every such case,
so long as a Servicing Default shall not have been remedied within the applicable grace period, (x) with respect solely to clause (i)(A) above, if such Advance is not made by 5:00 P.M., New York time, on the Business Day immediately following
the Servicer Remittance Date (provided the Trustee shall give the Servicer notice of such failure to advance by 5:00 P.M. New York time on the Servicer Remittance Date), the Trustee shall terminate all of the rights and obligations of the Servicer
under this Agreement and the Trustee, or a successor servicer appointed in accordance with 
  

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 Section 7.02, shall assume, pursuant to Section 7.02, the duties of a successor Servicer and (y) in the
case of (i)(B), (ii), (iii), (iv), (v) and (vi) and (vii) above, the Trustee shall, at the direction of the Holders of Certificates evidencing at least 51% of the Voters Rights, by notice then given in writing to the Servicer (and to
the Trustee if given by Holders of Certificates), terminate all of the rights and obligations of the Servicer as servicer under this Agreement. Any such notice to the Servicer shall also be given to the Servicing Rights Pledgee, Trustee, each Rating
Agency, the Depositor, each Cap Counterparty (if prior to the Class I Termination Date) and the Sponsor. On or after the receipt by the Servicer (and by the Trustee if such notice is given by the Holders) of such written notice, all authority and
power of the Servicer under this Agreement, whether with respect to the Certificates or the Mortgage Loans or otherwise, shall pass to and be vested in the Trustee or other Successor Servicer appointed in accordance with Section 7.02.

 In the event of a Servicing Default, notwithstanding anything to the contrary in this agreement, the Trustee and the Depositor hereby
agree that upon delivery to the Trustee by the Servicing Rights Pledgee of a letter signed by the Servicing Rights Pledgee within 15 days of when the Servicer provides the Servicing Rights Pledgee notice of such Servicing Default, the Servicing
Rights Pledgee or its designee shall be appointed as successor Servicer, provided that at the time of such appointment, the Servicing Rights Pledgee or such designee meets the requirements of a successor Servicer set forth in Section 7.02
below, the Servicing Rights Pledgee or such designee agrees to be subject to the terms of this Agreement and the Servicing Rights Pledgee or such designee assumes the Advance obligations of the Trustee as outlined in Section 7.02(a), provided,
however, that at such time the Servicing Rights Pledgee will have the right to reimbursement as outlined in Section 3.07. 
 Section 7.02 Trustee to Act; Appointment of Successor. 
 (a) Within 90 days of the time the Servicer (and the
Trustee if notice is sent by the Holders) receives a notice of termination pursuant to Section 7.01, the Trustee (or such other successor Servicer as is approved in accordance with this Agreement) shall be the successor in all respects to the
Servicer in its capacity as servicer under this Agreement and the transactions set forth or provided for herein and shall be subject to all the responsibilities, duties and liabilities relating thereto placed on the Servicer by the terms and
provisions hereof arising on and after its succession. Notwithstanding the foregoing, the parties hereto agree that the Trustee, in its capacity as successor Servicer, immediately will assume all of the obligations of the Servicer to make Advances;
provided however, that the obligation of the Trustee to make Advances is subject to the standards set forth in Section 3.25 hereof. Notwithstanding the foregoing, the Trustee, in its capacity as successor Servicer, shall not be responsible for
the lack of information and/or documents that it cannot obtain through reasonable efforts. As compensation therefor, the Trustee (or such other successor Servicer) shall be entitled to such compensation as the Servicer would have been entitled to
hereunder if no such notice of termination had been given. Notwithstanding the above, (i) if the Trustee is unwilling to act as successor Servicer or (ii) if the Trustee is legally unable so to act, the Trustee shall appoint or petition a
court of competent jurisdiction to appoint, any established housing and home finance institution, bank or other mortgage loan or home equity loan servicer having a net worth of not less than $100,000,000 as the successor to the Servicer hereunder in
the assumption of all or any part of the responsibilities, duties or liabilities of the Servicer hereunder; provided, that the appointment of any such successor Servicer will not result in the qualification, reduction or 
  

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 withdrawal of the ratings assigned to the Certificates by the Rating Agencies as evidenced by a letter to such effect
from the Rating Agencies. Pending appointment of a successor to the Servicer hereunder, unless the Trustee is prohibited by law from so acting, the Trustee shall act in such capacity as hereinabove provided. In connection with such appointment and
assumption, the successor shall be entitled to receive compensation out of payments on Mortgage Loans in an amount equal to the compensation which the Servicer would otherwise have received pursuant to Section 3.15 (or such other compensation
as the Trustee and such successor shall agree, not to exceed the Servicing Fee). The appointment of a successor Servicer shall not affect any liability of the predecessor Servicer which may have arisen under this Agreement prior to its termination
as Servicer to pay any deductible under an insurance policy pursuant to Section 3.11 or to indemnify the Trustee pursuant to Section 3.06, nor shall any successor Servicer be liable for any acts or omissions of the predecessor Servicer or
for any breach by such Servicer of any of its representations or warranties contained herein or in any related document or agreement. The Trustee and such successor shall take such action, consistent with this Agreement, as shall be necessary to
effectuate any such succession. All Servicing Transfer Costs shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs, and if such predecessor Servicer defaults in its obligation to pay such costs, such
costs shall be paid by the successor Servicer or the Trustee (in which case the successor Servicer or the Trustee, as applicable, shall be entitled to reimbursement therefor from the assets of the Issuing Entity). 
 (b) Any successor, including the Trustee, to the Servicer as servicer shall during the term of its service as servicer continue to service and administer
the Mortgage Loans for the benefit of Certificateholders, and maintain in force a policy or policies of insurance covering errors and omissions in the performance of its obligations as Servicer hereunder and a Fidelity Bond in respect of its
officers, employees and agents to the same extent as the Servicer is so required pursuant to Section 3.11. 
 (c) In connection with the
termination or resignation of the Servicer hereunder, either (i) the successor Servicer, shall represent and warrant that it is a member of MERS in good standing and shall agree to comply in all material respects with the rules and procedures
of MERS in connection with the servicing of the Mortgage Loans that are registered with MERS, in which case the predecessor Servicer shall cooperate with the successor Servicer in causing MERS to revise its records to reflect the transfer of
servicing to the successor Servicer as necessary under MERS’ rules and regulations, or (ii) the predecessor Servicer shall cooperate with the successor Servicer in causing MERS to execute and deliver an assignment of Mortgage in recordable
form to transfer the Mortgages from MERS to the Trustee and to execute and deliver such other notices, documents and other instruments as may be necessary or desirable to effect a transfer of such Mortgage Loans or servicing of such Mortgage Loan on
the MERS System to the successor Servicer. The predecessor Servicer shall file or cause to be filed any such assignment in the appropriate recording offices. The predecessor Servicer shall bear any and all fees of MERS, costs of preparing any
assignments of Mortgage, and fees and costs of filing any assignments of Mortgage that may be required under this subsection (c). The successor Servicer shall cause assignment to be delivered to the Trustee promptly upon receipt of the original with
evidence of recording thereon or a copy certified by the public recording office in which such assignment was recorded. 
  

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 Section 7.03 Waiver of Defaults. 
 The Majority Certificateholders may, on behalf of all Certificateholders, waive any events permitting removal of the Servicer as servicer pursuant to this
Article VII by delivering written notice to the Trustee, provided, however, that the Majority Certificateholders may not waive a default in making a required distribution on a Certificate without the consent of the Holder of such Certificate.
Upon any waiver of a past default, such default shall cease to exist and any Servicing Default arising therefrom shall be deemed to have been remedied for every purpose of this Agreement. No such waiver shall extend to any subsequent or other
default or impair any right consequent thereto except to the extent expressly so waived. Notice of any such waiver shall be given by the Trustee to the Rating Agencies. 
 Section 7.04 Notification to Certificateholders. 
 (a) Upon any termination or appointment
of a successor to the Servicer pursuant to this Article VII, the Trustee shall give prompt written notice thereof to the Cap Counterparties, if prior to the Class I Termination Date, to the Certificateholders at their respective addresses appearing
in the Certificate Register and to each Rating Agency. 
 (b) No later than 60 days after the occurrence of any event which constitutes or
which, with notice or a lapse of time or both, would constitute a Servicing Default for five Business Days after a Responsible Officer of the Trustee becomes aware of the occurrence of such an event, the Trustee shall transmit by mail to the Cap
Counterparties, if prior to the Class I Termination Date, and all Certificateholders notice of such occurrence unless such default or Servicing Default shall have been waived or cured. 
 Section 7.05 Survivability of Servicer Liabilities. 
 Notwithstanding anything herein to the contrary, upon termination of the Servicer hereunder, any liabilities of the Servicer which accrued prior to such termination shall survive such termination. 
 ARTICLE VIII 
 THE TRUSTEE

 Section 8.01 Duties of the Trustee. 
 On the Closing Date, the Trustee will act as disbursement agent and will distribute the proceeds from the sale of the Offered Certificates according to the closing settlement statement provided by the Sponsor. If a
Servicing Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Agreement and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of such person’s own affairs. 
  

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 (a) Except during the continuance of a Servicing Default: 
 (i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Agreement with respect to the
Trustee and no implied covenants or obligations shall be read into this Agreement against the Trustee; and 
 (ii) in the
absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements
of this Agreement; provided, however, that the Trustee shall examine the certificates and opinions delivered to it to determine whether or not they conform to the requirements of this Agreement. 
 (b) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except
that: 
 (i) this paragraph does not limit the effect of paragraph (9) of this Section 8.01; 
 (ii) the Trustee shall not be liable for any error of judgment made in good faith by its Responsible Officer unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and 
 (iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a direction received by it from the Majority Certificateholders. 
 The
Trustee shall not be liable for interest on any money received by the Trustee. 
 Money held in trust by the Trustee need not be segregated
from other trust funds except to the extent required by law or the terms of this Agreement. 
 No provision of this Agreement shall require
the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of
such funds or adequate indemnity against such risk or liability is not reasonably assured to it. 
 Subject to the other provisions of this
Agreement and without limiting the generality of this Section 8.01, the Trustee shall have no duty (A) to see to any recording, filing or depositing of this Agreement or any agreement referred to herein or any financing statement or
continuation statement evidencing a security interest, or to see to the maintenance of any such recording or filing or depositing or to any rerecording, refiling or redepositing of any thereof, (B) to see to any insurance, (C) to see to
the payment or discharge of any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect to, assessed or levied against, any part of the Trust Fund other than from funds available in the Distribution
Account, or (D) to confirm or verify the contents of any reports or certificates of the Servicer delivered to the Trustee believed by the Trustee to be genuine and to have been signed or presented by the proper party or parties. 
  

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 (c) The Trustee shall act as successor to the Servicer to the extent provided in Section 7.02
hereof. 
 (d) For all purposes under this Agreement, the Trustee shall not be deemed to have notice or knowledge of any Servicing Default
unless a Responsible Officer assigned to and working in the Trustee’s corporate trust department has actual knowledge thereof or unless written notice of any event which is in fact such Servicing Default is received by the Trustee at the
Corporate Trust Office, and such notice references the Certificates generally, the Issuing Entity, or this Agreement. 
 The Trustee is
hereby authorized to execute and shall execute this Agreement and the Purchase Agreement and shall perform their respective duties and satisfy their respective obligations thereunder. Every provision of this Agreement relating to the conduct or
affecting the liability of or affording protection to the Trustee shall apply to the Trustee’s execution of this Agreement and the Purchase Agreement and the performance of their respective duties and satisfaction of its obligations hereunder
and thereunder. 
 Section 8.02 Rights of Trustee. 
 The Trustee may rely and shall be protected in acting or refraining from acting on any resolution, officer’s certificate, opinion of counsel,
certificate of auditors or other certificate, statement, instrument, or document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

 Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel reasonably
satisfactory in form and substance to the Trustee which Officers’ Certificate or Opinion of Counsel shall not be at the expense of the Trustee or the Trust Fund. The Trustee shall not be liable for any action either of them takes or omits to
take in good faith in reliance on an Officers’ Certificate or Opinion of Counsel. 
 The Trustee may execute any of its trusts or powers
hereunder and the Trustee may perform any of its respective duties hereunder either directly or by or through agents or attorneys or a custodian or nominee and the Trustee shall have no liability for any misconduct or negligence on the part of such
agent, attorney or custodian appointed by the Trustee with due care. 
 The Trustee shall not be liable for any action either of them takes
or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee’s conduct does not constitute willful misconduct, negligence or bad faith. 
 The Trustee may consult with counsel chosen by it with due care, and the advice or opinion of counsel with respect to legal matters relating to this
Agreement and the Certificates shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by either of them hereunder in good faith and in accordance with the advice or opinion of such
counsel. 
  

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 The Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this
Agreement or to institute, conduct or defend any litigation hereunder or in relation hereto at the request, order or direction of any of the Certificateholders, pursuant to the provisions of this Agreement, unless such Certificateholders shall have
offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby (which in the case of the Majority Certificateholders will be deemed to be satisfied by a letter agreement
with respect to such costs from such Majority Certificateholders); nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of a Servicing Default of which a Responsible Officer of the Trustee shall have
actual knowledge (which has not been cured), to exercise such of the rights and powers vested in it by this Agreement, and to use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances
in the conduct of such person’s own affairs. 
 The Trustee shall not be bound to make any investigation into the facts or matters
stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond or other paper or document, unless requested in writing to do by the Majority Certificateholders; provided, however, that
if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Agreement, the Trustee may require reasonable indemnity against such cost, expense or liability as a condition to taking any such action. The reasonable expense of every such examination shall be paid by the
Servicer or, if paid by the Trustee, shall be repaid by the Servicer upon demand from the Servicer’s own funds. 
 The rights of the
Trustee to perform any discretionary act enumerated in this Agreement shall not be construed as a duty, and the Trustee shall not be answerable for other than its negligence or willful misconduct in the performance of such act. 
 The Trustee shall not be required to give any bond or surety in respect of the execution of the Trust Fund created hereby or the powers granted
hereunder. 
 Section 8.03 Individual Rights of Trustee. 
 The Trustee in its individual or any other capacity may become the owner or pledgee of Certificates and may otherwise deal with the Sponsor or its
Affiliates with the same rights it would have if it were not Trustee. Any Certificates Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Section 8.11 hereof. 
 Section 8.04 Trustee’s Disclaimer. 
 The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Agreement or the Certificates, or of any Mortgage Loan or related document, or of MERS or the MERS System.
The Trustee shall not be accountable for the use of the proceeds from the Certificates, and the Trustee shall not be responsible for any statement of the Issuing Entity in this Agreement or in any document issued in connection with the sale of the
Certificates or in the Certificates other than the Trustee’s or the Certificate Registrar’s certificate of authentication. 
  

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 Section 8.05 Notice of Servicing Default. 
 The Trustee shall mail to each Certificateholder notice of the Servicing Default within 10 days after a Responsible Officer has actual knowledge thereof
unless such Servicing Default shall have been waived or cured. Except in the case of a Servicing Default in payment of principal of or interest on any Certificate, the Trustee may withhold the notice if and so long as it in good faith determines
that withholding the notice is in the interests of Certificateholders. 
 Section 8.06 [Reserved]. 
 Section 8.07 Compensation and Indemnity. 
 The amount of the Trustee Fee and Custodian Fee shall be paid to the Trustee and Custodian, respectively, on each Distribution Date pursuant to Section 4.01(a)(i) of this Agreement, and all amounts owing to the
Trustee hereunder in excess of such amount shall be paid solely as provided in this Agreement. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. 
 Section 8.08 Replacement of Trustee. 
 No resignation or removal of the Trustee and no appointment of a successor Trustee shall become effective until the acceptance of appointment by the successor Trustee pursuant to this Section 8.08. The Trustee
may resign at any time by so notifying the Cap Counterparties, if prior to the Class I Termination Date, and the Depositor. The Majority Certificateholders may at any time remove the Trustee by so notifying the Cap Counterparties, if prior to the
Class I Termination Date, the Depositor and the Trustee, and the Depositor may appoint a successor Trustee. The Depositor shall remove the Trustee if: 
 (a) the Trustee fails to comply with Section 8.11 hereof; 
 (b) the Trustee is adjudged a bankrupt or
insolvent; 
 (c) a receiver or other public officer takes charge of the Trustee or its respective property; or 
 (d) the Trustee otherwise becomes incapable of acting. 
 If the Trustee resigns or is removed or if a vacancy exists in the office of the Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Depositor shall promptly
appoint a successor Trustee. 
 A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee, the
Depositor, the Trustee and the Servicer. Thereupon, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee or under this Agreement. The
successor Trustee 
  

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 shall mail a notice of its succession to Cap Counterparties, if prior to the Class I Termination Date, and the
Certificateholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee. 
 If a
successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Depositor, the Trustee or the Majority Certificateholders may petition any court of competent jurisdiction for the
appointment of a successor Trustee. 
 Section 8.09 Successor Trustee by Merger. 
 If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business or assets to, another
corporation or banking association, the resulting, surviving or transferee corporation, without any further act, shall be the successor Trustee; provided, that such corporation or banking association shall be otherwise qualified and eligible under
Section 8.11 hereof. 
 If at the time such successor or successors by merger, conversion or consolidation to the Trustee, shall succeed
to the trusts created by this Agreement and any of the Certificates shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee and deliver such
Certificates so authenticated; and if at that time any of the Certificates shall not have been authenticated, any successor to the Trustee may authenticate such Certificates either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the full force as the Certificates or this Agreement provide that such certificates of the Trustee shall have. 
 Section 8.10 Appointment of Co-Trustee or Separate Trustee. 
 Notwithstanding any other provisions of this Agreement, at any time, for the purpose of meeting any legal requirement of any jurisdiction in which any
part of the Trust Fund may at the time be located, the Trustee shall have the power and may execute and deliver all instruments to appoint one or more Persons to act as a co-trustee or co-trustees, or separate trustee or separate trustees, of all or
any part of the Trust Fund, and to vest in such Person or Persons, in such capacity and for the benefit of the Certificateholders, such title to the Trust Fund, or any part hereof, and, subject to the other provisions of this Section, such powers,
duties, obligations, rights and trusts as the Trustee may consider necessary or desirable. No co-trustee or separate trustee hereunder shall be required to meet the terms of eligibility as a successor trustee under Section 8.11 hereof and
notice to, and no consent of the Certificateholders of the appointment of any co-trustee or separate trustee shall be required. The Trustee hereby appoints J.P. Morgan Trust Company, National Association as Co-Trustee hereunder solely for the
purpose of holding the MI Policies. 
 Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act
subject to the following provisions and conditions: 
 (a) all rights, powers, duties and obligations conferred or imposed upon the Trustee
shall be conferred or imposed upon and exercised or performed by the Trustee and such 
  

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 separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to
act separately without the Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Trustee shall be incompetent or unqualified to perform such act or acts,
in which event such rights, powers, duties and obligations (including the holding of title to the Trust Fund or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely
at the direction of the Trustee; 
 (b) no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee
hereunder; and 
 (c) the Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee. 
 Any notice, request or other writing given to the Trustee shall be deemed to have been given to each of then separate trustees and co-trustees, as
effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Agreement and the conditions of this Article VIII. Each separate trustee and co-trustee, upon its acceptance of the trusts
conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Trustee or separately, as may be provided therein, subject to all the provisions of this Agreement, specifically including
every provision of this Agreement relating to the conduct of, affecting the liability of, or affording protection to, the Trustee. Every such instrument shall be filed with the Trustee. 
 Any separate trustee or co-trustee may at any time constitute the Trustee, its agent or attorney-in-fact with full power and authority, to the extent not
prohibited by law, to do any lawful act under or in respect of this Agreement on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights,
remedies and trusts shall vest in and be exercised by the Trustee, to the extent permitted by law, without the appointment of a new or successor trustee. 
 Section 8.11 Eligibility; Disqualification. 
 The Trustee shall be a corporation or
association organized and doing business under the laws of a state of the United States. The Trustee is subject to supervision or examination by federal or state authority. The Trustee shall at all times be reasonably acceptable to the Depositor and
authorized to exercise corporate trust powers. The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and it or its parent shall have a long-term debt rating
of Baa3 or better by Moody’s, BBB or better by Standard & Poor’s and BBB or F-2 or better by Fitch. The Trustee shall also have a short term rating of A-1 or better by Standard & Poor’s. 
 Section 8.12 [Reserved]. 
  

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 Section 8.13 Representations and Warranties. 
 (a) The Trustee hereby represents that: 
 (i) The Trustee is duly organized and validly existing as a national banking association in good standing under the laws of the United States with power and authority to own its properties and to conduct its business
as such properties are currently owned and such business is presently conducted; 
 (ii) The Trustee has the power and
authority to execute and deliver this Agreement and to carry out its terms; and the execution, delivery and performance of this Agreement have been duly authorized by the Trustee by all necessary corporate action; 
 (iii) The consummation of the transactions contemplated by this Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of organization or bylaws of the Trustee or any agreement or other instrument to which the Trustee is a
party or by which it is bound; and 
 (iv) To the Trustee’s best knowledge, there are no proceedings or investigations
pending or threatened before any court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Trustee or its properties: (A) asserting the invalidity of this Agreement, (B) seeking to
prevent the consummation of any of the transactions contemplated by this Agreement or (C) seeking any determination or ruling that might materially and adversely affect the performance by the Trustee of its obligations under, or the validity or
enforceability of, this Agreement. 
 Section 8.14 Directions to Trustee. 
 The Trustee is hereby directed: 
 (a) to
accept the Mortgage Loans and hold the assets of the Trust Fund in trust for the Certificateholders; 
 (b) to authenticate and deliver the
Certificates of each Class substantially in the forms prescribed by Exhibits A-1, A-2, A-3, A-4, A-5, A-7, A-8, A-9, A-10, A-11, A-12, A-13, A-14, A-15, A-16, A-17, A-18, A-19, A-20, A-21 and A-22 in accordance with the terms of this Agreement;

 (c) to execute the Cap Agreements as trustee on behalf of the Supplemental Interest Trust; and 
 (d) to take all other actions as shall be required to be taken by the terms of this Agreement. 
 Section 8.15 The Agents. 
 The provisions of this Agreement relating to the limitations of the Trustee’s liability and to its indemnity shall inure also to the Paying Agent, and the Certificate Registrar. 
  

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 Section 8.16 Issuing Entity Fiscal Year. 
 The fiscal year of the Issuing Entity shall end on December 31 of each year. 
 Section 8.17 Execution of the Novation Agreements and Cap Agreements. 
 The Depositor hereby directs the Trustee to enter into and execute the Novation Agreements and the Cap Agreements on the Closing Date on behalf of the
Supplemental Interest Trust. The Sponsor, the Depositor, the Servicer and the Certificateholders (by their acceptance of such Certificates) acknowledge that JPMorgan Chase Bank, National Association is entering into the Cap Agreements solely in its
capacity as Trustee of the Trust Fund and not in its individual capacity. 
 If an “Early Termination Date” is designated as a
result of a “Termination Event” or an “Event of Default” (each as defined in the related Cap Agreement) shall occur and be continuing and any Cap Counterparty is the “Defaulting Party” or the “Affected Party”
(as defined in the related Cap Agreement), the Trustee shall, if so directed by the Holders of Certificates evidencing not less than 50% of the Voting Rights (and if permitted by the related Cap Agreement), replace the related Cap Counterparty with
a successor designated by such Holders, provided that such successor must comply with all the applicable requirements of such Cap Agreement. The Trustee will deliver any notices and communications relating to the Cap Agreements, solely as directed
by the Servicer. 
 ARTICLE IX 
 [Reserved] 
 ARTICLE X 
 REMIC ADMINISTRATION 
 Section 10.01 REMIC Administration. 
 (a) [Reserved]. 
 (b) June 15, 2006 is
hereby designated as the “Startup Day” of each REMIC within the meaning of Section 860G(a)(9) of the Code. 
 (c) The Servicer
shall pay any and all tax related expenses (not including taxes) of each REMIC, including but not limited to any professional fees or expenses related to audits or any administrative or judicial proceedings with respect to each REMIC that involve
the Internal Revenue Service or state tax authorities, but only to the extent that (i) such expenses are ordinary or routine expenses, including expenses of a routine audit but not expenses of litigation (except as described in (ii)); or
(ii) such expenses or liabilities (including taxes and penalties) are attributable to the negligence or willful misconduct of the Servicer in fulfilling its duties hereunder. The Servicer shall be entitled to reimbursement of expenses to the
extent provided in clause (i) above from the Collection Account. 
  

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 (d) The Trustee shall (a) maintain (or cause to be maintained) the books of the Issuing Entity on a
calendar year basis using the accrual method of accounting, (b) deliver (or cause to be delivered) to each Certificateholder as may be required by the Code and applicable Treasury Regulations, including the REMIC Provisions, such information as
may be required to enable each Certificateholder to prepare its federal and state income tax returns, (c) prepare and file or cause to be prepared and filed such Tax Returns relating to the Issuing Entity as may be required by the Code and
applicable Treasury Regulations (including timely making elections to treat specified assets of the Issuing Entity as one or more REMICs for federal income tax purposes and any other such elections as may from time to time be required or appropriate
under any applicable state or federal statutes, rules or regulations), (d) collect or cause to be collected any required withholding tax with respect to income or distributions to Certificateholders and prepare or cause to be prepared the
appropriate forms relating thereto and (e) maintain records as required by the REMIC Provisions. 
 (e) The Holder of the Residual
Certificate at any time holding the largest Percentage Interest thereof shall be the “tax matters person” as defined in the REMIC Provisions (the “Tax Matters Person”) with respect to each REMIC and shall act as Tax
Matters Person for each REMIC. The Trustee, as agent for the Tax Matters Person, shall perform on behalf of each REMIC all reporting and other tax compliance duties that are the responsibility of such REMIC under the Code, the REMIC Provisions, or
other compliance guidance issued by the Internal Revenue Service or any state or local taxing authority. Among its other duties, if required by the Code, the REMIC Provisions, or other such guidance, the Trustee, as agent for the Tax Matters Person,
shall provide (i) to the Treasury or other governmental authority such information as is necessary for the application of any tax relating to the transfer of a Residual Certificate to any Disqualified Organization or non-U.S. Person and
(ii) to the Certificateholders such information or reports as are required by the Code or REMIC Provisions. 
 (f) The Trustee, the
Servicer and the Holders of Certificates shall take any action or cause the REMIC to take any action necessary to create or maintain the status of each REMIC as a REMIC under the REMIC Provisions and shall assist each other as necessary to create or
maintain such status. Neither the Trustee, the Servicer nor the Holder of any Residual Certificate shall take any action, cause any REMIC created hereunder to take any action or fail to take (or fail to cause to be taken) any action that, under the
REMIC Provisions, if taken or not taken, as the case may be, could (i) endanger the status of such REMIC as a REMIC or (ii) result in the imposition of a tax upon such REMIC (including but not limited to the tax on prohibited transactions
as defined in Code Section 860F(a)(2) and the tax on prohibited contributions set forth on Section 860G(d) of the Code) (either such event, an “Adverse REMIC Event”) unless the Trustee and the Servicer have received an
Opinion of Counsel (at the expense of the party seeking to take such action) to the effect that the contemplated action will not endanger such status or result in the imposition of such a tax. In addition, prior to taking any action with respect to
any REMIC created hereunder or the assets therein, or causing such REMIC to take any action, which is not expressly permitted under the terms of this Agreement, any Holder of a Residual Certificate will consult with the Trustee and the Servicer, or
their respective designees, in writing, with respect to whether such action could cause an Adverse REMIC Event to occur with respect to any REMIC, and no such Person shall take any such action or cause any REMIC to take any such action as to which
the Trustee or the Servicer has advised it in writing that an Adverse REMIC Event could occur. 
  

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 (g) Each Holder of a Residual Certificate shall pay when due any and all taxes imposed on each REMIC
created hereunder by federal or state governmental authorities. To the extent that such Issuing Entity taxes are not paid by a Residual Certificateholder, the Trustee shall pay any remaining REMIC taxes out of current or future amounts otherwise
distributable to the Holder of the Residual Certificate in the REMICs or, if no such amounts are available, out of other amounts held in the Distribution Account, and shall reduce amounts otherwise payable to Holders of regular interests in the
related REMIC. 
 (h) The Trustee, as agent for the Tax Matters Person, shall, for federal income tax purposes, maintain books and records
with respect to each REMIC created hereunder on a calendar year and on an accrual basis. 
 (i) After the Closing Date, no additional
contributions of assets shall be made to any REMIC created hereunder, except as expressly provided in this Agreement with respect to Qualified Replacement Mortgages. 
 (j) Neither of the Trustee nor the Servicer shall enter into any arrangement by which any REMIC created hereunder will receive a fee or other compensation for services. 
 (k) The Trustee will apply for an Employee Identification Number from the Internal Revenue Service via a Form SS-4 or other acceptable method for REMIC
I, REMIC II, REMIC III and REMIC IV and the Master REMIC. 
 (l) The Trustee shall treat the Supplemental Interest Trust as an outside
reserve fund within the meaning of Treasury Regulation Section 1.860G-2(h) that is owned by the Holders of the Class CA Certificates and that is not an asset of any REMIC. The Trustee shall treat the rights of the holders of the Class A
and Mezzanine Certificates to receive any interest payments in excess of the REMIC Pass-Through Rate on the Master REMIC Regular Interest corresponding to such Class of Certificates as rights in an interest rate cap contract written by the Class CA
Certificateholders in favor of the holders of the Class A and Mezzanine Certificates. Thus, each Class A and Mezzanine Certificate shall be treated as representing not only ownership of a regular interest in the Master REMIC, but also
ownership of an interest in an interest rate cap contract. Furthermore, the Trustee shall treat the obligation of the Holders of the Class A and Mezzanine Certificates to make certain payments to the Supplemental Interest Account to the extent
that the payment on the Pass-Through Rate on the Master REMIC Regular Interest exceeds the interest payment on the corresponding Class of Certificates as an obligation to make payments pursuant to an interest rate cap contract written by the Holders
of the Class A and Mezzanine Certificates in favor of the Class CA Certificateholder. In no event shall any payments provided for in this subsection be treated as payments with respect to a “regular interest” in a REMIC within the
meaning of Code Section 860G(a)(1). The pledge of payments on the Class CB Certificates to the Supplemental Interest Trust will be treated as a limited guaranty written by the Holder of the Class CB Certificate for the benefit of the Holders of
the Class CA Certificate. Such guaranty is expected to have nominal value. To the extent that the Class CB Interest Distributable Amount paid to the Supplemental Interest Trust as described in Section 10.01(n) is not paid in full to the Holders
of the Class CB Certificates pursuant to Section 4.04(c)(v), a right of reimbursement will arise in favor of the Holders of the Class CB Certificates against the Holders of the Class CA Certificates. 
  

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 (m) Notwithstanding the priority and sources of payments set forth in Article IV hereof or otherwise, the
Trustee shall account for all distributions on the Certificates as set forth in this section. 
 (n) For federal income tax purposes,
payments pursuant to Section 4.01(a)(i)(M) shall be treated as having been made to the extent of remaining Interest Remittance Amount (i) first, to the Holders of the Class CA Certificates, the Class CA Interest Distributable Amount and
(ii) second, to the Holders of the Class CB Certificates, the Class CB Interest Distributable Amount. 
 (o) For federal income tax
purposes, payments of Excess Cashflow pursuant to Section 4.04(d)(i) will be treated as having been made (i) first, from Excess Cashflow relating to the Class CB Interest Distributable Amount and (ii) second, from Excess Cashflow
relating to amounts otherwise distributable on the Class CA Certificates. 
 (p) None of the Class M-9 DSI Certificates or the Class M-10 DSI
Certificates will be treated as regular or residual interest in any REMIC created hereunder. 
 Section 10.02 Prohibited
Transactions and Activities. 
 None of the Depositor, the Servicer nor the Trustee shall sell, dispose of, or substitute for any of the
Mortgage Loans, if such disposition, acquisition, substitution, or acceptance would (a) affect adversely the status of any REMIC created hereunder as a REMIC or (b) cause any REMIC created hereunder to be subject to a tax on prohibited
transactions or prohibited contributions pursuant to the REMIC Provisions. 
 ARTICLE XI 
 TERMINATION 
 Section 11.01
Termination. 
 (a) The respective obligations and responsibilities of the Sponsor, the Servicer, the Depositor and the Trustee
created hereby (other than the obligation of the Trustee to make certain payments to Certificateholders after the final Distribution Date and the obligation of the Servicer to send certain notices as hereinafter set forth and the obligation of the
Servicer to indemnify the Trustee in accordance with Section 6.06) shall terminate upon notice to the Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been
reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below and (iv) the Distribution Date in
January 2036. Notwithstanding the foregoing, in no event shall the trust created hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States
to the Court of St. James, living on the date hereof. 
 The Servicer may, at its option, terminate this Agreement on any date on which the
aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less 
  

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

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

 The Servicer may assign or pledge to any Person its right to exercise the foregoing option by giving written notice of the assignment or
pledge to the Trustee. Any assignee of such option may further assign or pledge its interest in such option. 
 (b) In the event that the
Certificate Principal Balances of all of the Class A and Mezzanine have not been reduced to zero by the Distribution Date in January 2036, the Trustee, shall (i) sign a plan of complete liquidation of each REMIC created hereunder meeting
the requirements of a “Qualified Liquidation” under Section 860F of the Code and any regulations thereunder, (ii) sell all of the assets of the Trust Fund for cash in a commercially reasonable manner to maximize the value
thereof, pursuant to the terms of the plan of complete liquidation, (iii) distribute the proceeds of the sale to the Certificateholders in accordance with Section 4.01 hereof, and (iv) terminate the Issuing Entity. By their acceptance
of Certificates, the Holders thereof hereby agree to appoint the Trustee as their attorney in fact to: (i) adopt such a plan of complete liquidation (and the Certificateholders hereby appoint the Trustee as their attorney in fact to sign such a
plan) as appropriate and (ii) to take such other action in connection therewith as may be reasonably required to carry out such plan of complete liquidation in accordance with the terms thereof. 
 (c) Notice of any termination, specifying the Distribution Date (which shall be a date that would otherwise be a Distribution Date) upon which the
Certificateholders may surrender their Certificates to the Trustee for payment of the final distribution and cancellation, 
  

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

(d) Upon presentation and surrender of the Certificates, the Trustee shall cause to be distributed to the Holders of the Certificates on the
Distribution Date for such final distribution, in proportion to the Percentage Interests of their respective Class and to the extent that funds are available for such purpose, an amount equal to the amount required to be distributed to such Holders
in accordance with the provisions of Section 4.01 for such Distribution Date. 
 (e) In the event that all Certificateholders shall not
surrender their Certificates for final payment and cancellation on or before such final Distribution Date, the Trustee shall promptly following such date cause all funds in the Distribution Account not distributed in final distribution to
Certificateholders to be withdrawn therefrom and credited to the remaining Certificateholders by depositing such funds in a separate Servicing Account for the benefit of such Certificateholders, and the Servicer (if the Servicer has exercised its
right to purchase the Mortgage Loans) or the Trustee (in any other case) shall give a second written notice to the remaining Certificateholders, to surrender their Certificates for cancellation and receive the final distribution with respect
thereto. If within nine months after the second notice all the Certificates shall not have been surrendered for cancellation, the Residual Certificateholder shall be entitled to all unclaimed funds and other assets which remain subject hereto, and
the Trustee upon transfer of such funds shall be discharged of any responsibility for such funds, and the Certificateholders shall look to the Residual Certificateholder for payment. 
 Section 11.02 Additional Termination Requirements. 
 (a) In the event that the Servicer exercises its purchase option as provided in Section 11.01 or the Trustee terminates the Issuing Entity, each REMIC shall be terminated in accordance with the following
additional requirements, unless the Trustee shall have been furnished with an Opinion of Counsel to the effect that the failure of the Issuing Entity to comply with the requirements of this Section will not (i) result in the imposition of taxes
on “prohibited transactions” of the Issuing Entity as defined in Section 860F of the Code or (ii) cause any REMIC constituting part of the Issuing Entity to fail to qualify as a REMIC at any time that any Certificates are
outstanding: 
 (i) Within 90 days prior to the final Distribution Date, the Servicer shall adopt and the Trustee shall sign a
plan of complete liquidation of each REMIC created hereunder meeting the requirements of a “Qualified Liquidation” under Section 860F of the Code and any regulations thereunder; and 
  

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 (ii) At or after the time of adoption of such a plan of complete liquidation and at or
prior to the final Distribution Date, the Trustee shall sell all of the assets of the Trust Fund to the Servicer for cash pursuant to the terms of the plan of complete liquidation. 
 (b) By their acceptance of Certificates, the Holders thereof hereby agree to appoint the Trustee as their attorney in fact to: (i) adopt such a plan
of complete liquidation (and the Certificateholders hereby appoint the Trustee as their attorney in fact to sign such plan) as appropriate and (ii) to take such other action in connection therewith as may be reasonably required to carry out
such plan of complete liquidation all in accordance with the terms hereof. 
 ARTICLE XII 
 MISCELLANEOUS PROVISIONS 
 Section 12.01 Amendment. 
 This Agreement may be amended from time to time by the parties hereto, and without the
consent of the Certificateholders or the Cap Counterparties (i) to cure any ambiguity, (ii) to correct or supplement any provisions herein which may be defective or inconsistent with any other provisions herein or (iii) to make any
other provisions with respect to matters or questions arising under this Agreement which shall not be inconsistent with the provisions of this Agreement; provided that any such amendment will have no material adverse effect, as evidenced by an
Opinion of Counsel as described below, on the Cap Counterparties provided, however, that any such action listed in clause (i) through (iii) above shall be deemed not to adversely affect in any respect the interests of (A) any
Certificateholder, if evidenced by (i) written notice to the Depositor, the Servicer and the Trustee from the Rating Agencies that such action will not result in the reduction or withdrawal of the rating of any outstanding Class of Certificates
with respect to which it is a Rating Agency or (ii) an Opinion of Counsel delivered to the Servicer, the Depositor and the Trustee and (B) any Cap Counterparty, (i) if evidenced by an Opinion of Counsel from outside counsel delivered
to the Servicer, the Depositor, the Trustee, each Cap Counterparty with a copy to the Rating Agencies stating that such actions will have no material adverse effect on the Cap Counterparties or (ii) if the written consent of the Cap
Counterparties is obtained. This Agreement may be amended by the parties hereto without the consent of the Cap Counterparties after the Class I Termination Date. 
 In addition, this Agreement may be amended from time to time by the parties hereto with the consent of the Majority Certificateholders for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Holders of Certificates; provided, however, that no such amendment or waiver shall (w) reduce in any manner the amount of, or delay the timing
of, payments on the Certificates or distributions which are required to be made on any Certificate without the consent of the Holder of such Certificate, (x) adversely affect in any material respect the interests of the Holders of any Class of
Certificates in a manner other than as described in clause (w) above, without the consent of the Holders of Certificates of such Class evidencing at least a 66% Percentage Interest in such Class, (y) reduce the percentage of Voting Rights
required by clause (x) above without the consent of the Holders of all Certificates of such Class 
  

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 then outstanding or (z) have a material adverse effect on the interests of the Cap Counterparties without such Cap
Counterparties’ written consent. Upon approval of an amendment, a copy of such amendment shall be sent to the Rating Agencies. 
 Notwithstanding the provisions of this Section 12.01, Sections 3.17 and 3.18 may be amended as necessary to comply with the provisions of Regulation AB without the consent of the Certificateholders. 
 The Servicer shall send to the Cap Counterparties (for so long as the Cap Agreements are outstanding) a copy of any executed amendment made pursuant to
this Section 12.01. If the consent of the Cap Counterparties is required for any amendment, a copy of such proposed amendment shall be sent to the Cap Counterparties 10 days (or such shorter time period as shall be agreed to by the parties)
prior to the effective date thereof. 
 Notwithstanding any provision of this Agreement to the contrary, the Trustee shall not consent to any
amendment to this Agreement unless it shall have first received an Opinion of Counsel, delivered by (and at the expense of) the Person seeking such Amendment, to the effect that such amendment will not result in the imposition of a tax on any REMIC
created hereunder constituting part of the Issuing Entity pursuant to the REMIC Provisions or cause any REMIC created hereunder constituting part of the Issuing Entity to fail to qualify as a REMIC at any time that any Certificates are outstanding
and that the amendment is being made in accordance with the terms hereof. Additionally, prior to entering into any amendment, the Trustee shall be entitled to receive from the party requesting such amendment an opinion of counsel stating that such
amendment is authorized any permitted pursuant to the terms of this Agreement. 
 Promptly after the execution of any such amendment the
Trustee shall furnish, at the expense of the Person that requested the amendment if such Person is the Sponsor or the Servicer (but in no event at the expense of the Trustee), otherwise at the expense of the Issuing Entity, a copy of such amendment
and the Opinion of Counsel referred to in the immediately preceding paragraph to the Servicer and each Rating Agency. 
 It shall not be
necessary for the consent of Certificateholders under this Section 12.01 to approve the particular form of any proposed amendment; instead it shall be sufficient if such consent shall approve the substance thereof. The manner of obtaining such
consents and of evidencing the authorization of the execution thereof by Certificateholders shall be subject to such reasonable regulations as the Trustee may prescribe. 
 The Trustee shall not be obligated to enter into any amendment pursuant to this Section 12.01 that affects its rights, duties and immunities under this Agreement or otherwise. 
 Section 12.02 Recordation of Agreement; Counterparts. 
 To the extent permitted by applicable law, this Agreement is subject to recordation in all appropriate public offices for real property records in all the counties or other comparable jurisdictions in which any or all
of the properties subject to the Mortgages are situated, and in any other appropriate public recording office or elsewhere, such recordation to be effected by the Servicer at the expense of the Issuing Entity, but only upon direction of
Certificateholders accompanied by an Opinion of Counsel to the effect that such recordation materially and beneficially affects the interests of the Certificateholders. 
  

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 For the purpose of facilitating the recordation of this Agreement as herein provided and for other
purposes, this Agreement may be executed simultaneously in any number of counterparts, each of which counterparts shall be deemed to be an original, and such counterparts shall together constitute but one and the same instrument. 
 Section 12.03 Limitation on Rights of Certificateholders. 
 The death or incapacity of any Certificateholder shall not (i) operate to terminate this Agreement or the Issuing Entity, (ii) entitle such
Certificateholder’s legal representatives or heirs to claim an accounting or to take any action or proceeding in any court for a partition or winding up of the Issuing Entity, or (iii) otherwise affect the rights, obligations and
liabilities of the parties hereto or any of them. 
 Except as expressly provided for herein, no Certificateholder shall have any right to
vote or in any manner otherwise control the operation and management of the Issuing Entity, or the obligations of the parties hereto, nor shall anything herein set forth or contained in the terms of the Certificates be construed so as to constitute
the Certificateholders from time to time as partners or members of an association; nor shall any Certificateholder be under any liability to any third person by reason of any action taken by the parties to this Agreement pursuant to any provision
hereof. 
 No Certificateholder shall have any right by virtue of any provision of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless such Holder previously shall have given to the Trustee a written notice of default and of the continuance thereof, as hereinbefore provided, and unless also the Holders of
Certificates entitled to at least 25% of the Voting Rights shall have made written request upon the Trustee to institute such action, suit or proceeding in its own name as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be incurred therein or thereby, and the Trustee for 15 days after its receipt of such notice, request and offer of indemnity, shall have neglected or refused to institute any
such action, suit or proceeding. It is understood and intended, and expressly covenanted by each Certificateholder with every other Certificateholder and the Trustee, that no one or more Holders of Certificates shall have any right in any manner
whatever by virtue of any provision of this Agreement to affect, disturb or prejudice the rights of the Holders of any other of such Certificates, or to obtain or seek to obtain priority over or preference to any other such Holder, which priority or
preference is not otherwise provided for herein, or to enforce any right under this Agreement, except in the manner herein provided and for the equal, ratable and common benefit of all Certificateholders. For the protection and enforcement of the
provisions of this Section 12.03 each and every Certificateholder and the Trustee shall be entitled to such relief as can be given either at law or in equity. 
  

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 Section 12.04 Compliance with Regulation AB. 
 Each of the parties hereto acknowledges and agrees that the purpose of Sections 3.17 and 3.18 of this Agreement is to facilitate compliance by the Sponsor
and the Depositor with the provisions of Regulation AB, as such may be amended or clarified from time to time. Therefore, each of the parties agrees that (a) the obligations of the parties hereunder shall be interpreted in such a manner as to
accomplish compliance with Regulation AB, (b) the parties’ obligations hereunder will be supplemented and modified as necessary to be consistent with any such amendments, interpretive advice or guidance, convention or consensus among
active participants in the asset-backed securities markets, advice of counsel, or otherwise in respect of the requirements of Regulation AB and (c) the parties shall comply, to the extent practicable from a timing and information systems
perspective, with requests made by the Sponsor or the Depositor for delivery of additional or different information as the Sponsor or the Depositor may determine in good faith is necessary to comply with the provisions of Regulation AB. 

Section 12.05 Governing Law; Jurisdiction. 
 This Agreement shall be construed in accordance with the laws of the State of New York, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. With respect
to any claim arising out of this Agreement, each party irrevocably submits to the exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in The City of New York, and
each party irrevocably waives any objection which it may have at any time to the laying of venue of any suit, action or proceeding arising out of or relating hereto brought in any such courts, irrevocably waives any claim that any such suit, action
or proceeding brought in any such court has been brought in any inconvenient forum and further irrevocably waives the right to object, with respect to such claim, suit, action or proceeding brought in any such court, that such court does not have
jurisdiction over such party, provided that service of process has been made by any lawful means. 
 Section 12.06
Notices. 
 All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by certified mail, return receipt requested, or sent by reputable overnight courier service to: 
 (a) in
the case of the Depositor: 
 NovaStar Mortgage Funding Corporation 
 8140 Ward Parkway 
 Suite 300 
 Kansas City, Missouri 64114 
 Attention:
Matt Kaltenrieder 
  

 89 

 (b) in the case of the Servicer or the Sponsor: 
 NovaStar Mortgage, Inc. 
 8140 Ward Parkway

 Suite 300 
 Kansas City,
Missouri 64114 
 Attention: Matt Kaltenrieder 
 (c) in the case of Rating Agencies: 
 Moody’s Investors Service Inc. 
 99 Church Street 
 New York, New York 10007

 Attention: Rachel Peng 
 Standard & Poor’s 
 26 Broadway 
 New York, New York 10004-1064 
 Attention: Daniel Larkin 
 Fitch Ratings 
 One State Street Plaza,
30th Floor 
 New York, New York 10004 
 Attention: Michele Patterson 
 Tel: (212) 908-0779 
 (d) in the case of the Custodian: 
 U.S.
Bank National Association 
 4527 Metropolitan Court 
 Suite C 
 Frederick, MD 21704 
 Attn: Ronald Fisher 
 Tel: (301) 874-4531 
 Fax: (301) 874-6055 
 Attention:
Structured Finance Trust Services 
 (NovaStar Mortgage Funding Trust, Series 2006-2) 
 (e) in the case of the Trustee: 
 JPMorgan
Chase Bank, National Association 
 4 New York Plaza, 6th Floor 
 New York, NY 10004-2477 
 Attention:
Worldwide Securities Services/Structured Finance Services 
 (NovaStar Mortgage Funding Trust, Series 2006-2) 
  

 90 

 provided, however, all reports, statements, certifications and information required to be provided to the
Trustee pursuant to Sections 3.18 shall be electronically forwarded to sf_sec@jpmorgan.com 
 (f) in the case of the Co-Trustee:

 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 2006-2) 
 (g) in the case of The Royal Bank of Scotland plc, as Cap Counterparty: 

c/o RBS Financial Markets 
 Level 7, 135
Bishopsgate 
 London, EC2M 3UR 
 Attention:   Financial Markets Legal 
 Telephone:  44 207 085 5000 
 Facsimile:   44 207 085 8411 
 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 
 (h) in the case of Wachovia Bank, N.A., as Cap Counterparty: 
    Wachovia Bank, N.A. 
 201 South College Street, 6th Floor 
 Charlotte, NC 28288-0601 
 Attention: Collateral Management Group 
 Tel: (704) 715-7663 
 Fax: (704) 383-3394 
 (i) in the case of Deutsche Bank AG, as Cap Counterparty: 
 Deutsche Bank AG 
 Taunusanlage 12 
 60262 Frankfurt

 GERMANY 
 Attention: Legal
Department 
 Telex No: 411836 or 416731 or 41233 
 Answerback: DBF-D 
  

 91 

 or, as to each party, at such other address as shall be designated by such party in a written notice to each other party.
Any notice required or permitted to be mailed to a Certificateholder shall be given by first class mail, postage prepaid, at the address of such Certificateholder as shown in the Certificate Register. Any notice so mailed within the time prescribed
in this Agreement shall be conclusively presumed to have been duly given, whether or not the Certificateholder receives such notice. Any notice or other document required to be delivered or mailed by the Trustee to any Rating Agency shall be given
on a reasonable efforts basis and only as a matter of courtesy and accommodation and the Trustee shall have no liability for failure to deliver such notice or document to any Rating Agency. 
 Section 12.07 Severability of Provisions. 
 If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable
from the remaining covenants, agreements, provisions or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement or of the Certificates or the rights of the Holders thereof.

 Section 12.08 Article and Section References. 
 All article and section references used in this Agreement, unless otherwise provided, are to articles and sections in this Agreement. 
 Section 12.09 Further Assurances. 
 Notwithstanding any other provision of this Agreement, the Trustee shall not have any obligation to consent to any amendment or modification of this Agreement unless they have been provided reasonable security or indemnity against their
out-of-pocket expenses (including reasonable attorneys’ fees) to be incurred in connection therewith. 
 Section 12.10
Benefits of Agreement. 
 Nothing in this Agreement or in the Certificates, expressed or implied, shall give to any Person, other
than the Certificateholders, the Cap Counterparties and the parties hereto and their successors hereunder, any benefit or any legal or equitable right, remedy or claim under this Agreement. For the avoidance of doubt, the parties agree that each of
the Cap Counterparties, prior to the Class I Termination Date, and the Servicing Rights Pledgee are intended and shall have all rights of a third-party beneficiary of this Agreement. 
 Section 12.11 Acts of Certificateholders. 
 (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Agreement to be given or taken by the Certificateholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Certificateholders in person or by agent duly appointed in writing, and such action shall become effective when such instrument or instruments are delivered to the Trustee, the Sponsor and
the Servicer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “act” of the Certificateholders signing 
  

 92 

 such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall
be sufficient for any purpose of this Agreement and conclusive in favor of the Trustee and the Issuing Entity, if made in the manner provided in this Section 12.11. 
 (b) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by the certificate of a notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Whenever such execution is by a signer acting in a capacity other than his or her individual
capacity, such certificate or affidavit shall also constitute sufficient proof of his authority. 
 (c) Any request, demand, authorization,
direction, notice, consent, waiver or other action by any Certificateholder shall bind every future Holder of such Certificate and the Holder of every Certificate issued upon the registration of transfer thereof or in exchange therefor or in lieu
thereof, in respect of anything done, omitted or suffered to be done by the Trustee or the Issuing Entity in reliance thereon, whether or not notation of such action is made upon such Certificate. 
 Section 12.12 Confidentiality. 
 The Trustee hereby agrees to hold and treat all Confidential Information (as defined below) provided to it in connection with the offering of the Certificates in confidence and in accordance with this Section 12.12, and will implement
and maintain safeguards in accordance with the “Interagency Guidelines Establishing Standards for Safeguarding Customer Information” as required by Appendix B to 12 CFR, Chapter I, Part 30, to further assure the confidentiality of such
Confidential Information. Such Confidential Information will not, without the prior written consent of the Servicer, be disclosed or used by the Trustee or by its subsidiaries or, affiliates, or its or their directors, officers, employees, agents or
controlling persons or agents or advisors (collectively, the “Information Recipients”) other than for the purposes of (i) structuring the securitization transaction and the facilitating the issuance of the Certificates, or
(ii) in connection with the performance of its required due diligence on the Mortgage Loans. Disclosure that is not in violation of the Right to Financial Privacy Act of 1978, as amended, the Gramm-Leach-Bliley Act of 1999, as amended, (the
“G-L-B Act”) or other applicable law by the Trustee of any Confidential Information at the request of its outside auditors or governmental regulatory authorities in connection with an examination of the Trustee by any such authority
or for the purposes specified in above shall not constitute a breach of its obligations under this Section 12.12, and shall not require the prior consent of the Servicer. 
 As used herein, “Confidential Information” means non-public personal information (as defined in the G-L-B Act and its enabling regulations
issued by the Federal Trade Commission) regarding obligors on the Mortgage Loans that is identified as such by the Servicer. Confidential Information shall not include information which (i) is or becomes generally available to the public other
than as a result of disclosure by the Trustee or any of its Information Recipients; (ii) was available to the Trustee on a non-confidential basis from a person or entity other than the Servicer; (iii) is requested to be disclosed by a
governmental 
  

 93 

 authority or related governmental, administrative, or regulatory or self-regulatory agencies having or claiming authority
to regulate or oversee any aspect of the Trustee’s business or that of its affiliates or is otherwise required by law or by legal or regulatory process to be disclosed; (iv) becomes available to the Trustee on a non-confidential basis from
a person or entity other than the Servicer who, to the best knowledge of the Trustee, is not otherwise bound by a confidentiality agreement with the Servicer, and is not otherwise prohibited from transmitting the information to the Trustee;
(v) the Servicer provides written permission to the Trustee to release, (vi) is independently developed by employees of the Trustee who did not have access to any or all of the otherwise Confidential Information or (vii) is disclosed
to the Trustee’s auditors or counsel or is required to be disclosed to its lenders or rating agencies, to the extent required for the purpose of consummating the services it is to provide as set forth herein. 
  

 94 

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

			
	NOVASTAR MORTGAGE FUNDING CORPORATION,
	as Depositor
		
	By:	 	 /s/ Matt Kaltenrieder

	Name:	 	Matt Kaltenrieder
	Title:	 	Vice President
	
	 NOVASTAR MORTGAGE, INC.,
 as Servicer and as
Sponsor

		
	By:	 	 /s/ Matt Kaltenrieder

	Name:	 	Matt Kaltenrieder
	Title:	 	Vice President
	
	 U.S. BANK NATIONAL ASSOCIATION,
 as
Custodian

		
	By:	 	 /s/ Maureen Bodine

	Name:	 	Maureen Bodine
	Title:	 	Authorized Agent
	
	 JPMORGAN CHASE BANK, NATIONAL
 ASSOCIATION,
 as Trustee

		
	By:	 	 /s/ Andrew M. Cooper

	Name:	 	Andrew M. Cooper
	Title:	 	Assistant Vice President

 [Pooling and Servicing Agreement Signature Page] 
  

 95 

			
	 J.P. MORGAN TRUST COMPANY, NATIONAL
 ASSOCIATION,

	as Co-Trustee
		
	By:	 	 /s/ Mark W. McDermott

	Name:	 	Mark W. McDermott
	Title:	 	Vice President

 [Pooling and Servicing Agreement Signature Page] 
  

 96 

			
	STATE OF MISSOURI	 	)
		 	) ss.:
	COUNTY OF JACKSON	 	)

 On the 15th day of June, 2006 before me, a notary public in and for said State, personally
appeared Matt Kaltenrieder known to me (or proved to me on the basis of satisfactory evidence) to be a Vice President of NovaStar Mortgage Funding Corporation, a Delaware corporation that executed the within instrument, and also known to me (or
proved to me on the basis of satisfactory evidence) to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument. 
 IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. 
  

			
		 	 /s/ Shawna M. Hart

	Seal	 	Notary Public

  

 i 

			
	STATE OF MISSOURI	 	)
		 	) ss.:
	COUNTY OF JACKSON	 	)

 On the 15th day of June, 2006 before me, a notary public in and for said State, personally
appeared Matt Kaltenrieder known to me (or proved to me on the basis of satisfactory evidence) to be a Vice President of NovaStar Mortgage, Inc., a Virginia corporation that executed the within instrument, and also known to me (or proved to me on
the basis of satisfactory evidence) to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument. 
 IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. 
  

			
		 	 /s/ Shawna M. Hart

	Seal	 	Notary Public

  

 ii 

			
	STATE OF MARYLAND	 	)
		 	) ss.:
	COUNTY OF FREDERICK	 	)

 On the 15th day of June, 2006 before me, a notary public in and for said State, personally
appeared Maureen Bodine, known to me (or proved to me on the basis of satisfactory evidence) to be a Authorized Agent of U.S. Bank National Association, a national banking association that executed the within instrument, and also known to me (or
proved to me on the basis of satisfactory evidence) to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument. 
 IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. 
  

			
		 	 /s/ Debra S. Ousse

	Seal	 	Notary Public

  

 iii 

			
	STATE OF NEW YORK	 	)
		 	) ss.:
	COUNTY OF NEW YORK	 	)

 On the 15th day of June, 2006 before me, a notary public in and for said State, personally
appeared                     , known to me (or proved to me on the basis of satisfactory evidence) to be
                                     of JPMorgan Chase Bank,
National Association that executed the within instrument, and also known to me (or proved to me on the basis of satisfactory evidence) to be the person who executed it on behalf of said association, and acknowledged to me that such corporation
executed the within instrument. 
 IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this
certificate first above written. 
  

			
		 	  

	Seal	 	Notary Public

  

 iv 

 APPENDIX A 
 DEFINITIONS 
 “1933 Act”: The Securities Act of 1933, as amended. 

“Account”: The Collection Account, the Supplemental Interest Account, and the Distribution Account. 
 “Accrual Period”: With respect to each Distribution Date, the period commencing on the preceding Distribution Date (or in the case of
the first Accrual Period, commencing on the Closing Date) and ending on the day preceding the applicable Distribution Date. 
 “Adjustable Rate Mortgage Loan”: A Mortgage Loan which provides at any period during the life of such loan for the adjustment of the Mortgage Rate payable in respect thereto. The Adjustable Rate Mortgage Loans are
identified as such on the Mortgage Loan Schedule. 
 “Adjustment Date”: With respect to each Adjustable Rate Mortgage Loan,
each adjustment date, on which the Mortgage Rate of such Mortgage Loan changes pursuant to the related Mortgage Note. 
 “Administrative Fee”: With respect to each Distribution Date, the sum of the MI Premium, the Servicing Fee, the Custodian Fee and the Trustee Fee with respect to such Distribution Date. 
 “Administrative Fee Rate”: As to each Distribution Date, the sum of (i) the Trustee Fee Rate, (ii) the Servicing Fee Rate,
(iii) the Custodian Fee Rate and (iv) the total MI Premiums due during the related Due Period, expressed as an annual percentage rate of the Pool Balance as of the beginning of that Due Period. 
 “Advance”: As to any Mortgage Loan, any advance made by the Servicer in respect of any Distribution Date pursuant to Section 3.25.

 “Adverse REMIC Event”: As defined in Section 10.01(f) hereof. 
 “Affiliate”: With respect to any Person, any other Person controlling, controlled by or under common control with such Person. For
purposes of this definition, “control” means the power to direct the management and policies of a Person, directly or indirectly, whether through ownership of voting securities, by contract or otherwise and “controlling” and
“controlled” shall have meanings correlative to the foregoing. 
 “Agreement”: This Pooling and Servicing
Agreement and all amendments hereof and supplements hereto. 
 “Allocated Realized Loss Amount”: With respect to any
Distribution Date and any Class of Mezzanine Certificates or the Overcollateralization Amount, the Realized Losses allocated to such Class of Certificates (or, with respect to the Overcollateralization Amount, the Realized Loss allocated to the
Overcollateralization Amount) on such Distribution Date. 

 “Applicable Regulations”: As to any Mortgage Loan, all federal and state laws, statutes,
rules and regulations applicable thereto. 
 “Appraised Value”: The appraised value of a Mortgaged Property based upon the
appraisal made at the time of the origination of the related Mortgage Loan. With respect to a Mortgage Loan the proceeds of which were used to refinance an existing Mortgage Loan, the appraised value of the Mortgaged Property based upon the
appraisal with the lowest appraised value (as reviewed and approved by the Sponsor) obtained within 12 months of the time of refinancing. 
 “Assignment of Mortgage”: An assignment of Mortgage, notice of transfer or equivalent instrument, in recordable form, which is sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located
to reflect of record the sale of the Mortgage, which assignment, notice of transfer or equivalent instrument may be in the form of one or more blanket assignments covering Mortgages secured by Mortgaged Properties located in the same county, if
permitted by law. 
 “Assumed Final Maturity Date”: As to each Class of Certificates, the Distribution Date in June 2036.

 “Available Funds”: As to each Distribution Date, an amount equal to the amount on deposit in the Distribution Account,
representing the sum of (i) the aggregate amount of scheduled payments on the related Mortgage Loans due on the related Due Date and received on or prior to the related Determination Date, (ii) miscellaneous fees and collections, including
prepayment penalties with respect to the Mortgage Loans (but excluding late fees), (iii) any unscheduled payments and receipts, including Mortgagor prepayments on the related Mortgage Loans, received during the related Prepayment Period and
proceeds of repurchases, and adjustments in the case of substitutions and terminations, Net Liquidation Proceeds and Insurance Proceeds, and proceeds from Subsequent Recoveries to pay certain Certificates amounts in respect of Realized Losses
allocated to such Certificates, (iv) all Advances made and Compensating Interest paid for such Distribution Date in respect of the related Mortgage Loans and (vi) on the Distribution Date following the termination pursuant to
Section 11.01 herein, the Termination Price. 
 “Available Funds Cap”: For each Distribution Date, the percentage
equivalent of a fraction, the numerator of which is (a) an amount equal to (i) the aggregate Interest Remittance Formula Amount for the Group I and Group II Mortgage Loans, less (ii) the Administrative Fees, less (iii) the Class
I Monthly Interest Distributable Amount, and less (iv) any unpaid Cap Termination Payments that are not Defaulted Cap Termination Payments, and the denominator of which is (b) the product of (i) the actual number of days in the
related Accrual Period divided by 360 and (ii) the aggregate Principal Balance of the Mortgage Loans. 
 “Available Funds Cap
Carryforward Amount”: With respect to any Class of Class A Certificates and Mezzanine Certificates and any Distribution Date, the sum of (i) the positive 
  

 Appendix A-2 

 excess, if any, of (x) the aggregate cumulative amount of Available Funds Cap Shortfall Amounts for such Class on
all prior Distribution Dates over (y) the aggregate cumulative amount of Supplemental Interest Payments actually paid to the Holders of that Class on all prior Distribution Dates pursuant to those clauses of Section 4.04(c), which relate
to payments to that Class, plus (ii) interest on the amount described in clause (i) at a rate equal to the related Formula Rate for such Class and Distribution Date. 
 “Available Funds Cap Shortfall Amount”: With respect to any Distribution Date and Class of Class A Certificates and Mezzanine
Certificates the excess, if any, of (1) the interest due on such Class calculated using the Formula Rate applicable to such Class over (2) the interest due on such Class, calculated using the Pass-Through Rate applicable to such Class.

 “Balloon Mortgage Loan”: A Mortgage Loan that provides for the payment of the unamortized principal balance of such
Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is substantially greater than the preceding monthly payment. 
 “Balloon Payment”: A payment of the unamortized principal balance of a Mortgage Loan in a single payment at the maturity of such Mortgage Loan that is substantially greater than the preceding Monthly Payment. 
 “Bankruptcy Code”: The Bankruptcy Reform Act of 1978 (Title 11 of the United States Code), as amended. 
 “Base Prospectus”: The base Prospectus, dated April 17, 2006 with respect to the Offered Certificates. 
 “Basic Documents”: This Agreement, the Purchase Agreement, the REMIC Interests Sale Agreement, the Underwriting Agreement, MI Policy,
the Cap Agreements, the Novation Agreements and the other documents and Certificates delivered in connection with any of the above. 
 “Book-Entry Certificates”: Any of the Certificates that shall be registered in the name of the Depository or its nominee, the ownership of which is reflected on the books of the Depository or on the books of a Person
maintaining an account with the Depository (directly, as a Depository Participant, or indirectly, as an indirect participant in accordance with the rules of the Depository and as described in Section 5.02 hereof). On the Closing Date, the
Class A Certificates and the Class M-1, Class M-2, Class M-3, Class M-4, Class M-5, Class M-6, Class M-7 and Class M-8 Certificates shall be Book-Entry Certificates. 
 “Business Day”: Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the City of New York, the State of Missouri or in the city in which the corporate
trust office of the Trustee or Custodian are located, are required or authorized by law to be closed. 
 “Cap Agreement”:
Any of the twelve interest rate Cap Agreements between the Supplemental Interest Trust and a Cap Counterparty which are deemed to be assets of the Supplemental Interest Trust and not an asset of any one of the REMICs created hereunder. 

 

 Appendix A-3 

 “Cap Amount”: The Cap Amount is subject to the verification and confirmation of the Cap
Counterparties who are calculation agents for the Cap Agreements. With regard to each Cap Agreement, Cap Amount shall mean, on each Distribution Date on or prior to the Class I Termination Date, and on June 25, 2006, the product of (i) the
related fixed rate of interest, (ii) 30 divided by 360 and (iii) the related notional amount. 
 “Cap Contract Rights and
Obligations”: The rights of the Class A Certificates and Mezzanine Certificates to receive interest payments in excess of payments at the REMIC Pass-Through Rate on the Master REMIC Regular Interest corresponding to such Class of
Certificates as set forth in Exhibit J and the obligations of the Class A Certificates and Mezzanine Certificates to make certain payments to the Holder of the Class CA Certificates to the extent that the amounts allocated at the REMIC
Pass-Through Rate on the Master REMIC Regular Interest corresponding to such Class of Certificates exceed the amount of interest distributed on such Certificates. 
 “Cap Counterparty”: The Royal Bank of Scotland plc, Wachovia Bank, National Association or Deutsche Bank AG, New York Branch as applicable. 
 “Cap Interest Rate Schedule”: As set forth in Appendix B. 
 “Cap Termination Payment”: Upon the designation of an “Early Termination Date” as defined in the Cap Agreements, the payment to be made by the Supplemental Interest Trust to the respective
Cap Counterparty, or by the respective Cap Counterparty to the Supplemental Interest Trust, as applicable, pursuant to the terms of the respective Cap Agreement. 
 “Cash Liquidation”: As to any defaulted Mortgage Loan other than a Mortgage Loan as to which an REO Acquisition occurred, a determination by the Servicer that it has received all Liquidation Proceeds
and other payments or cash recoveries which the Servicer reasonably and in good faith expects to be finally recoverable with respect to such Mortgage Loan. 
 “Certificate”: Any Regular Certificate, Class M-9 DSI Certificate, Class M-10 DSI Certificate or Class R Certificate. 
 “Certificateholder” or “Holder”: The Person in whose name a Certificate is registered in the Certificate Register, except that a Disqualified Organization or non-U.S. Person shall not
be a Holder of a Residual Certificate for any purpose hereof. 
  

 Appendix A-4 

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

			
	 Class
	  	 Rate

	 A-1A
	  	0.1400%
	 A-2A
	  	0.0500%
	 A-2B
	  	0.1100%
	 A-2C
	  	0.1500%
	 A-2D
	  	0.2300%
	 M-1
	  	0.2700%
	 M-2
	  	0.3000%
	 M-3
	  	0.3500%
	 M-4
	  	0.3800%
	 M-5
	  	0.4700%
	 M-6
	  	0.9000%
	 M-7
	  	1.0500%
	 M-8
	  	1.9000%
	 M-9
	  	2.5000%
	 M-10
	  	2.5000%

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

  

			
	 Class
	  	 Rate

	 A-1A
	  	0.2800%
	 A-2A
	  	0.1000%
	 A-2B
	  	0.2200%
	 A-2C
	  	0.3000%
	 A-2D
	  	0.4600%
	 M-1
	  	0.4050%
	 M-2
	  	0.4500%
	 M-3
	  	0.5250%
	 M-4
	  	0.5700%
	 M-5
	  	0.7050%
	 M-6
	  	1.3500%
	 M-7
	  	1.5750%
	 M-8
	  	2.8500%
	 M-9
	  	3.7500%
	 M-10
	  	3.7500%

  

 Appendix A-5 

 “Certificate Owner”: With respect to each Book-Entry Certificate, any beneficial owner
thereof. 
 “Certificate Principal Balance”: With respect to any Class of Regular Certificates (other than the Class C
Certificates and the Class I Certificates) immediately prior to any Distribution Date, an amount equal to the Initial Certificate Principal Balance thereof reduced by the sum of all amounts actually distributed in respect of principal of such Class
and, in the case of a Mezzanine Certificate, Allocated Realized Loss Amounts applied with respect to that Class on all prior Distribution Dates. The Class C Certificates, Class M-9 DSI Certificate, Class M-10 DSI Certificate and the Class I
Certificates will not have a Certificate Principal Balance. 
 “Certificate Register”: The register maintained by the
Certificate Registrar in which the Certificate Registrar shall provide for the registration of Certificates and of transfers and exchanges of Certificates. 
 “Certificate Registrar”: Initially, the Trustee, in its capacity as Certificate Registrar, or any successor to the Trustee in such capacity. 
 “Class”: Collectively, Certificates which have the same priority of payment and bear the same Class designation and the form of which is
identical except for variation in the Percentage Interest evidenced thereby. 
 “Class A Certificate”: Any Group I
Certificate or Group II Certificate. 
 “Class A Principal Distribution Amount”: For any Distribution Date, the sum of the
Group I Certificate Principal Distribution Amount and the Group II Certificate Principal Distribution Amount for such Distribution Date. 
 “Class A-1A Certificate”: Any one of the Class A-1A Certificates executed, authenticated and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-1, representing the right to
distributions as set forth herein and therein and evidencing a regular interest in the Master REMIC. 
 “Class A-2A
Certificate”: Any one of the Class A-2A Certificates executed, authenticated and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-2, representing the right to distributions as set forth
herein and therein and evidencing a regular interest in the Master REMIC. 
 “Class A-2B Certificate”: Any one of the
Class A-2B Certificates executed, authenticated and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-3, representing the right to distributions as set forth herein and therein and evidencing a
regular interest in the Master REMIC. 
  

 Appendix A-6 

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

 “Class A-2D Certificate”: Any one of the Class A-2D Certificates executed, authenticated and delivered pursuant to
Section 5.01, substantially in the form annexed hereto as Exhibit A-5, representing the right to distributions as set forth herein and therein and evidencing a regular interest in the Master REMIC. 
 “Class C Certificate”: Any Class CA Certificate or Class CB Certificate. 
 “Class CA Certificate”: Any one of the Class CA Certificates executed, authenticated and delivered pursuant to Section 5.01,
substantially in the form annexed hereto as Exhibit A-18, representing the right to distributions as set forth herein and therein and evidencing one or more regular interests in the Master REMIC. 
 “Class CA Interest Distributable Amount”: For any Distribution Date, an amount, if any, equal to the interest payable on the Class CA-1
Master REMIC Regular Interest as described in Appendix J. 
 “Class CB Certificate”: Any one of the Class CB Certificates
executed, authenticated and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-19, representing the right to distributions as set forth herein and therein and evidencing one or more regular interests
in the Master REMIC. 
 “Class CB Certificate Schedule”: As set forth in Appendix B. 
 “Class CB Interest Distributable Amount”: For any Distribution Date, an amount, if any, equal to the interest payable on the Class CB
Master REMIC Regular Interest as described in Appendix J. 
 “Class I-1 Certificate”: Any one of the Class I-1 Certificates
executed, authenticated and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-16, representing the right to distributions as set forth herein and therein and evidencing a regular interest in the Master
REMIC. 
 “Class I-2 Certificate”: Any one of the Class I-2 Certificates executed, authenticated and delivered pursuant to
Section 5.01, substantially in the form annexed hereto as Exhibit A-17, representing the right to distributions as set forth herein and therein and evidencing a regular interest in the Master REMIC. 
 “Class I Monthly Interest Distributable Amount”: For any Distribution Date, shall mean the sum of (i) the Class I-1 Monthly
Interest Distributable Amount and (ii) the Class I-2 Monthly Interest Distributable Amount, each for such Distribution Date. 
 “Class I-1 Monthly Interest Distributable Amount”: For any Distribution Date commencing on the first Distribution Date through and including the Distribution Date in January 2008, an amount equal to the sum of the amounts
described in clauses (I) through (VI) of the definition of Class I Monthly Interest Formula Amounts. 
  

 Appendix A-7 

 For the Distribution Date in February 2008, an amount equal to the sum of the amounts described in
clauses (II) through (VI) of the definition of Class I Monthly Interest Formula Amounts. 
 For the Distribution Date in March 2008, an
amount equal to the sum of the amounts described in clauses (IV) through (VI) of the definition of Class I Monthly Interest Formula Amounts. 
 For the Distribution Date in April 2008, an amount equal to the amount described in clause (VI) of the definition of Class I Monthly Interest Formula Amounts. 
 For the Distribution Date in May 2008 and each Distribution Date thereafter, the Class I-1 Monthly Interest Distributable Amount shall be zero. 
 “Class I-2 Monthly Interest Distributable Amount”: For any Distribution Date commencing on the first Distribution Date through and
including the Distribution Date in January 2009, an amount equal to the sum of the amounts described in clauses (VII) through (XII) of the definition of Class I Monthly Interest Formula Amounts. 
 For the Distribution Date in February 2009, an amount equal to the sum of the amounts described in clauses (VIII) through (XII) of the definition of
Class I Monthly Interest Formula Amounts. 
 For the Distribution Date in March 2009, an amount equal to the sum of the amounts described in
clauses (X) through (XII) of the definition of Class I Monthly Interest Formula Amounts. 
 For the Distribution Date in April 2009, an
amount equal to the amount described in clause (XII) of the definition of Class I Monthly Interest Formula Amounts. 
 For the Distribution
Date in May 2009 and each Distribution Date thereafter, the Class I-2 Monthly Interest Distributable Amount shall be zero. 
 “Class
I Monthly Interest Formula Amounts”: For each Distribution Date up to and including the Distribution Date in April 2009, the following: 
 (I) the product of (x) 0.2350% (on a 30/360 basis) and (y) $80,000,000; and 
 (II) the product of (x) 0.2470% (on a
30/360 basis) and (y) $80,000,000; and 
 (III) the product of (x) 0.2380% (on a 30/360 basis) and (y) $80,000,000; and

 (IV) the product of (x) 0.2380% (on a 30/360 basis) and (y) $80,000,000; and 
 (V) the product of (x) 0.2225% (on a 30/360 basis) and (y) $80,000,000; and 
  

 Appendix A-8 

 (VI) the product of (x) 0.2240% (on a 30/360 basis) and (y) $80,000,000; and 
 (VII) the product of (x) 0.3250% (on a 30/360 basis) and (y) $20,000,000; and 
 (VIII) the product of (x) 0.3460% (on a 30/360 basis) and (y) $20,000,000; and 
 (IX) the product of (x) 0.3300% (on a 30/360 basis) and (y) $20,000,000; and 
 (X) the product of (x) 0.3230% (on a 30/360 basis) and (y) $20,000,000; and 
 (XI) the product of (x) 0.3175% (on a 30/360 basis) (and (y) $20,000,000; and 
 (XII) the product of (x) 0.3190% (on a 30/360 basis) and (y) $20,000,000. 
 “Class I Termination Date”: The Distribution Date occurring in April 2009. 
 “Class III-Accrual Interest”: As defined in Exhibit J hereof. 
 “Class M Certificate”: Any Class M-1 Certificate, Class M-2 Certificate, Class M-3 Certificate, Class M-4 Certificate, Class M-5
Certificate, Class M-6 Certificate, Class M-7 Certificate, Class M-8 Certificate, Class M-9 Certificate or Class M-10 Certificate. 
 “Class M-1 Certificate”: Any one of the Class M-1 Certificates executed, authenticated and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-6, representing the right to
distributions as set forth herein and therein and evidencing a regular interest in the Master REMIC. 
 “Class M-1/M-2 Principal
Distribution Amount”: For any Distribution Date, an amount equal to the excess of (x) the sum of (i) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the
Class A Principal Distribution Amount on such Distribution Date) and (ii) the aggregate Certificate Principal Balance of the Class M-1 and Class M-2 Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 83.90% and (ii) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to
the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) and (B) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving
effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) minus $5,105,510. 
 “Class M-2 Certificate”: Any one of the Class M-2 Certificates executed, authenticated and delivered pursuant to Section 5.01,
substantially in the form annexed hereto as Exhibit A-7, representing the right to distributions as set forth herein and therein and evidencing a regular interest in the Master REMIC. 
 “Class M-3 Certificate”: Any one of the Class M-3 Certificates executed, authenticated and delivered pursuant to Section 5.01,
substantially in the form annexed hereto as Exhibit A-8, representing the right to distributions as set forth herein and therein and evidencing a regular interest in the Master REMIC. 
  

 Appendix A-9 

 “Class M-3 Principal Distribution Amount”: For any Distribution Date, an amount equal to
the excess of (x) the sum of (i) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date),
(ii) the aggregate Certificate Principal Balance of the Class M-1 and Class M-2 Certificates (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Distribution Date) and (iii) the Certificate
Principal Balance of the Class M-3 Certificates immediately prior to such Distribution Date over (y) the lesser of (A) the product of (i) 86.90% and (ii) the aggregate Principal Balance of the Mortgage Loans as of the last day of
the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) and
(B) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and
unscheduled collections of principal received during the related Prepayment Period) minus $5,105,510. 
 “Class M-4
Certificate”: Any one of the Class M-4 Certificates executed, authenticated and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-9, representing the right to distributions as set forth herein
and therein and evidencing a regular interest in the Master REMIC. 
 “Class M-4 Principal Distribution Amount”: For any
Distribution Date, an amount equal to the excess of (x) the sum of (i) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on
such Distribution Date), (ii) the aggregate Certificate Principal Balance of the Class M-1 and Class M-2 Certificates (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Distribution Date),
(iii) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), and (iv) the Certificate Principal Balance of the Class
M-4 Certificates immediately prior to such Distribution Date over (y) the lesser of (A) the product of (i) 89.60% and (ii) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) and (B) the aggregate Principal
Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal
received during the related Prepayment Period) minus $5,105,510. 
 “Class M-5 Certificate”: Any one of the Class M-5
Certificates executed, authenticated and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-10, representing the right to distributions as set forth herein and therein and evidencing a regular interest in
the Master REMIC. 
  

 Appendix A-10 

 “Class M-5 Principal Distribution Amount”: For any Distribution Date, an amount equal to
the excess of (x) the sum of (i) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date),
(ii) the aggregate Certificate Principal Balance of the Class M-1 and Class M-2 Certificates (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Distribution Date) (iii) the Certificate
Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (iv) the Certificate Principal Balance of the Class M-4 Certificates (after taking
into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date) and (v) the Certificate Principal Balance of the Class M-5 Certificates immediately prior to such Distribution Date over (y) the lesser of
(A) the product of (i) 91.60% and (ii) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to
the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) and (B) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving
effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) minus $5,105,510. 
 “Class M-6 Certificate”: Any one of the Class M-6 Certificates executed, authenticated and delivered pursuant to Section 5.01,
substantially in the form annexed hereto as Exhibit A-11, representing the right to distributions as set forth herein and therein and evidencing a regular interest in the Master REMIC. 
 “Class M-6 Principal Distribution Amount”: For any Distribution Date, an amount equal to the excess of (x) the sum of (i) the
aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (ii) the aggregate Certificate Principal Balance of
the Class M-1 and Class M-2 Certificates (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Distribution Date), (iii) the Certificate Principal Balance of the Class M-3 Certificates (after taking
into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (iv) the Certificate Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4 Principal
Distribution Amount on such Distribution Date), (v) the Certificate Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date) and
(vi) the Certificate Principal Balance of the Class M-6 Certificates immediately prior to such Distribution Date over (y) the lesser of (A) the product of (i) 93.20% and (ii) the aggregate Principal Balance of the Mortgage
Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related
Prepayment Period) and (B) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or
advanced, and unscheduled collections of principal received during the related Prepayment Period) minus $5,105,510. 
  

 Appendix A-11 

 “Class M-7 Certificate”: Any one of the Class M-7 Certificates executed, authenticated
and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-12, representing the right to distributions as set forth herein and therein and evidencing a regular interest in the Master REMIC. 
 “Class M-7 Principal Distribution Amount”: For any Distribution Date, is an amount equal to the excess of (x) the sum of
(i) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (ii) the aggregate Certificate Principal
Balance of the Class M-1 and Class M-2 Certificates (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Distribution Date), (iii) the Certificate Principal Balance of the Class M-3 Certificates
(after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (iv) the Certificate Principal Balance of the Class M-4 Certificates (after taking into account the payment of the Class M-4
Principal Distribution Amount on such Distribution Date), (v) the Certificate Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such Distribution Date),
(vi) the Certificate Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Distribution Date), and (vii) the Certificate Principal Balance of the Class
M-7 Certificates immediately prior to that Distribution Date over (y) the lesser of (A) the product of (i) 94.40% and (ii) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) and (B) the aggregate Principal
Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal
received during the related Prepayment Period) minus $5,105,510. 
 “Class M-8 Certificate”: Any one of the Class M-8
Certificates executed, authenticated and delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-13, representing the right to distributions as set forth herein and therein and evidencing a regular interest in
the Master REMIC. 
 “Class M-8 Principal Distribution Amount”: For any Distribution Date, is an amount equal to the excess
of (x) the sum of (i) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such Distribution Date), (ii) the aggregate
Certificate Principal Balance of the Class M-1 and Class M-2 Certificates (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Distribution Date), (iii) the Certificate Principal Balance of the Class
M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (iv) the Certificate Principal Balance of the Class M-4 Certificates (after taking into account the payment of
the Class M-4 Principal Distribution Amount on such Distribution Date), (v) the Certificate Principal Balance of the Class M-5 Certificates (after taking into account the payment of the Class M-5 Principal Distribution Amount on such
Distribution Date), (vi) the Certificate Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal 
  

 Appendix A-12 

 Distribution Amount on such Distribution Date), (vii) the Certificate Principal Balance of the Class M-7
Certificates, (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Distribution Date) and (viii) the Certificate Principal Balance of the Class M-8 Certificates immediately prior to such Distribution
Date over (y) the lesser of (A) the product of (i) 96.40% and (ii) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due
during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) and (B) the aggregate Principal Balance of the Mortgage Loans as of the last day of the
related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) minus
$5,105,510. 
 “Class M-9 Certificate”: Any one of the Class M-9 Certificates executed, authenticated and delivered pursuant
to Section 5.01, substantially in the form annexed hereto as Exhibit A-14, representing the right to distributions as set forth herein and therein and evidencing a regular interest in the Master REMIC. 
 “Class M-9 DSI Certificates”: Any one of the Class M-9 DSI Certificates executed, authenticated and delivered pursuant to
Section 5.01, substantially in the form annexed hereto as Exhibit A-21, which are notional amount certificates based on the Certificate Principal Balance of the Class M-9 Certificates and which represent the right to receive certain
distributions from the Supplemental Interest Trust . 
 “Class M-9 Principal Distribution Amount”: For any Distribution
Date, is an amount equal to the excess of (x) the sum of (i) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such
Distribution Date), (ii) the aggregate Certificate Principal Balance of the Class M-1 and Class M-2 Certificates (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Distribution Date),
(iii) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (iv) the Certificate Principal Balance of the Class M-4
Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (v) the Certificate Principal Balance of the Class M-5 Certificates (after taking into account the payment of the
Class M-5 Principal Distribution Amount on such Distribution Date), (vi) the Certificate Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Distribution
Date), (vii) the Certificate Principal Balance of the Class M-7 Certificates (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Distribution Date), (viii) the Certificate Principal Balance of the
Class M-8 Certificates (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Distribution Date) and (ix) the Certificate Principal Balance of the Class M-9 Certificates immediately prior to such
Distribution Date over (y) the lesser of (A) the product of (i) 98.00% and (ii) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) and (B) the aggregate Principal Balance 
  

 Appendix A-13 

 of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of
principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) minus $5,105,510. 
 “Class M-10 Certificate”: Any one of the Class M-10 Certificates executed, authenticated and delivered pursuant to Section 5.01,
substantially in the form annexed hereto as Exhibit A-15, representing the right to distributions as set forth herein and therein and evidencing a regular interest in the Master REMIC. 
 “Class M-10 DSI Certificates”: Any one of the Class M-10 DSI Certificates executed, authenticated and delivered pursuant to
Section 5.01, substantially in the form annexed hereto as Exhibit A-22, which are notional amount certificates based on the Certificate Principal Balance of the Class M-10 Certificates and which represent the right to receive certain
distributions from the Supplemental Interest Trust. 
 “Class M-10 Principal Distribution Amount”: For any Distribution
Date, is an amount equal to the excess of (x) the sum of (i) the aggregate Certificate Principal Balance of the Class A Certificates (after taking into account the payment of the Class A Principal Distribution Amount on such
Distribution Date), (ii) the aggregate Certificate Principal Balance of the Class M-1 and Class M-2 Certificates (after taking into account the payment of the Class M-1/M-2 Principal Distribution Amount on such Distribution Date),
(iii) the Certificate Principal Balance of the Class M-3 Certificates (after taking into account the payment of the Class M-3 Principal Distribution Amount on such Distribution Date), (iv) the Certificate Principal Balance of the Class M-4
Certificates (after taking into account the payment of the Class M-4 Principal Distribution Amount on such Distribution Date), (v) the Certificate Principal Balance of the Class M-5 Certificates (after taking into account the payment of the
Class M-5 Principal Distribution Amount on such Distribution Date), (vi) the Certificate Principal Balance of the Class M-6 Certificates (after taking into account the payment of the Class M-6 Principal Distribution Amount on such Distribution
Date), (vii) the Certificate Principal Balance of the Class M-7 Certificates (after taking into account the payment of the Class M-7 Principal Distribution Amount on such Distribution Date), (viii) the Certificate Principal Balance of the
Class M-8 Certificates (after taking into account the payment of the Class M-8 Principal Distribution Amount on such Distribution Date), (ix) the Certificate Principal Balance of the Class M-9 Certificates (after taking into account the payment
of the Class M-9 Principal Distribution Amount on such Distribution Date) and (x) the Certificate Principal Balance of the Class M-10 Certificates immediately prior to such Distribution Date over (y) the lesser of (A) the product of
(i) 99.00% and (ii) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or
advanced, and unscheduled collections of principal received during the related Prepayment Period) and (B) the aggregate Principal Balance of the Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled
payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) minus $5,105,510. 

 Appendix A-14 

 “Class R Certificate”: Any one of the Class R Certificates executed, authenticated and
delivered pursuant to Section 5.01, substantially in the form annexed hereto as Exhibit A-20, representing the right to distributions as set forth herein, and evidencing the R-I Interest, the R-II Interest, the R-III Interest, the R-IV Interest
and the R-V Interest, each the sole “residual interest” in REMIC I, REMIC II, REMIC III, REMIC IV and the Master REMIC, respectively. 
 “Close of Business”: As used herein, with respect to any Business Day, 5:00 p.m. (New York time). 
 “Closing Date”: June 15, 2006. 
 “Code”: The Internal Revenue Code of 1986 as it may be
amended from time to time. 
 “Collection Account”: The account or accounts created and maintained by the Servicer pursuant
to Section 3.06(d) hereof, which must be an Eligible Account. 
 “Commission”: The Securities and Exchange Commission.

 “Compensating Interest”: With respect to any Determination Date, an amount equal to the lesser of (i) the aggregate
amount of Prepayment Interest Shortfalls for the related Prepayment Period and (ii) the Servicing Fee for the related Distribution Date. 
 “Corporate Trust Office”: With respect to the Trustee, the Paying Agent and the Certificate Registrar, the principal corporate trust office at which at any particular time its corporation trust business shall be
administered, which office at the date of execution of this Agreement is located at (i) solely for purposes of the transfer, exchange or surrender of Certificates, 2001 Bryan Street, 10th Floor, Dallas, Texas 75201, Attention: Worldwide
Securities Services/Structured Finance Services—NovaStar Mortgage Funding Trust, Series 2006-2 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 2006-2 and with respect to the co-trustee appointed pursuant to Section 8.10, the principal corporate trust office at which at any particular time its corporation trust business
shall be administered, which office at the date of execution of this Agreement is located at ITS—Global Debt, 560 Mission Street, 13th Floor, San Francisco, California 94105, Attention: James Myers, V.P. (NovaStar Mortgage Funding Trust, Series
2006-2). 
 “Corresponding Class of Master REMIC Certificates”: As defined in Exhibit J hereof. 
 “Corresponding Class of REMIC I Regular Interest”: As defined in Exhibit J hereof. 
 “Corresponding Class of REMIC IV Regular Interests”: As defined in Exhibit J hereof. 
 “Corresponding Interest Rate”: As set forth in the Cap Interest Rate Schedule. 
 “Corresponding Interest Rate Strip”: As set forth in the Class CB Certificate Schedule. 
 “Corresponding Maturity Date”: As set forth in the Cap Interest Rate Schedule. 
  

 Appendix A-15 

 “Credit Enhancement Percentage”: For any Distribution Date, is equal to (i) the sum
of the aggregate Certificate Principal Balance of the Mezzanine Certificates and the Overcollateralization Amount, divided by (ii) the Pool Balance, in each case calculated prior to taking into account the distribution of the Principal
Distribution Amount to the Holders of the Certificates then entitled to distributions of principal on such Distribution Date and prior to taking into account distributions of principal on the Mortgage Loans on such Distribution Date. 
 “Crossover Date”: The earlier to occur of (i) the Distribution Date on which the aggregate Certificate Principal Balance of the
Class A Certificates is reduced to zero; and (ii) the later to occur of (x) the Distribution Date occurring in July 2009 and (y) the first Distribution Date on which the Credit Enhancement Percentage (calculated for this purpose
only after taking into account distributions of principal on the Mortgage Loans but prior to the principal distributions to the Certificates) is greater than or equal to 31.00%. 
 “Cumulative Loss Percentage”: As to any Distribution Date, the percentage equivalent of the fraction obtained by dividing (i) the
aggregate amount of Realized Losses on the Mortgage Loans from the Cut-off Date through such Distribution Date by (ii) the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date. 
 “Current Interest”: For any Distribution Date and each Class of Class A Certificates and Mezzanine Certificates the amount of
interest accrued during the related Accrual Period at the related Pass-Through Rate on the Certificate Principal Balance of such Class immediately prior to such Distribution Date, in each case, reduced by any Net Prepayment Interest Shortfalls and
any Relief Act Shortfalls allocated to that Class (allocated to each Certificate based on its respective entitlements to interest irrespective of any Net Prepayment Interest Shortfalls or Relief Act Shortfalls for that Distribution Date).

 “Custodian”: U.S. Bank National Association, a national banking association, and any successor thereto. 
 “Custodian Fee”: With respect to each Distribution Date, the product of (i) $0.20 and (ii) the number of Mortgage Loans.

 “Custodian Fee Rate”: The percentage equivalent of a fraction, the numerator of which is (i) the product of
(a) the Custodian Fee and (b) 12 and the denominator of which is (ii) the aggregate Principal Balance of the Mortgage Loans as of the beginning of the Due Period. 
 “Cut-off Date”: With respect to each Mortgage Loan the later of (i) June 1, 2006 and (ii) the date of origination of such
Mortgage Loan. 
 “Cut-off Date Aggregate Principal Balance”: With respect to the Mortgage Pool, the aggregate of the
Cut-off Date Principal Balances of the Mortgage Loans of $1,021,102,079.95 consisting of $510,530,984.85 related to Group I and $510,571,095.10 related to Group II. 
 “Cut-off Date Principal Balance”: With respect to any Mortgage Loan, the unpaid principal balance thereof as of the applicable Cut-off Date (or as of the applicable date of substitution with respect
to an Eligible Substitute Mortgage Loan). 
  

 Appendix A-16 

 “Debt Service Reduction”: With respect to any Mortgage Loan, a reduction in the
scheduled Monthly Payment for such Mortgage Loan by a court of competent jurisdiction in a proceeding under the Bankruptcy Code, except such a reduction resulting from a Deficient Valuation. 
 “Defaulted Cap Termination Payment”: Any Cap Termination Payment required to be made by the Supplemental Interest Trust to a Cap
Counterparty pursuant to a Cap Agreement as a result of an “Event of Default” with respect to which the Cap Counterparty is the “Defaulting Party” or a “Termination Event” (other than “Illegality” or “Tax
Event”) (each as defined in the Cap Agreements) with respect to which a Cap Counterparty is the sole “Affected Party.” 
 “Deficient Valuation”: With respect to any Mortgage Loan, a valuation of the related Mortgaged Property by a court of competent jurisdiction in an amount less than the then outstanding principal balance of the Mortgage
Loan, which valuation results from a proceeding initiated under the Bankruptcy Code. 
 “Definitive Certificates”: The Class
M-9, Class M-9DSI, Class M-10, Class M-10DSI Class C, Class I and Class R Certificates, and such other Classes of Certificates as become Definitive Certificates pursuant to Section 5.02(c) hereof. 
 “Deleted Mortgage Loan”: A Mortgage Loan replaced or to be replaced by one or more Eligible Substitute Mortgage Loans. 
 “30-Day Delinquency Percentage”: As of the last day of any Due Period, the percentage equivalent of a fraction, (i) the numerator
of which equals the aggregate Principal Balance of the Mortgage Loans that are 30 or more days contractually delinquent, in foreclosure or converted to REO Properties, and (ii) the denominator of which is the Pool Balance as of the last day of
such Due Period. 
 “60-Day Delinquency Percentage”: As of the last day of any Due Period, the percentage equivalent of a
fraction, (i) the numerator of which equals the aggregate Principal Balance of the Mortgage Loans that are 60 or more days contractually delinquent, in foreclosure or converted to REO Properties, and (ii) the denominator of which is the
Pool Balance as of the last day of such Due Period. 
 “90-Day Delinquency Percentage”: As of the last day of any Due
Period, the percentage equivalent of a fraction, (i) the numerator of which equals the aggregate Principal Balance of the Mortgage Loans that are 90 or more days contractually delinquent, in foreclosure or converted to REO Properties and
(ii) the denominator of which is the Pool Balance as of the last day of such Due Period. 
 “Delinquent”: Any Mortgage
Loan, the Monthly Payment due on a Due Date which is not made by the Close of Business on the next scheduled Due Date for such Mortgage Loan. 
 “Depositor”: NovaStar Mortgage Funding Corporation, a Delaware corporation, and its successors and assigns. 
  

 Appendix A-17 

 “Depository”: The initial Depository shall be The Depository Trust Company, whose
nominee is Cede & Co., or any other organization registered as a “clearing agency” pursuant to Section 17A of the Securities Exchange Act of 1934, as amended. The Depository shall initially be the registered Holder of the
Book-Entry Certificates. The Depository shall at all times be a “clearing corporation” as defined in Section 8-102(a)(5) of the Uniform Commercial Code of the State of New York. 
 “Depository Participant”: A broker, dealer, bank or other financial institution or other person for whom from time to time a Depository
effects book-entry transfers and pledges of securities deposited with the Depository. 
 “Derivative Supplemental Interest
Payment”: With respect to each Distribution Date, and the Class M-9 and Class M-10 Certificates, the dollar amount of the excess of (i) the Supplemental Interest Payment for the Class M-9 or Class M-10 Certificates, as appropriate,
over (ii) the Non-Derivative Supplemental Interest Payment for the Class M-9 or Class M-10 Certificates, as appropriate. 
 “Determination Date”: With respect to any Distribution Date, the 15th day of the calendar month in which such Distribution Date occurs or, if such 15th day is not a Business Day, the Business Day immediately preceding such
15th day. 
 “Determination Date Report”: The meaning specified in Section 3.24 hereof. 
 “Disqualified Organization”: “Disqualified Organization” shall have the meaning set forth from time to time in the definition
thereof at Section 860E(e)(5) of the Code and applicable to the Issuing Entity. 
 “Distribution Account”: The trust
account or accounts created and maintained by the Trustee pursuant to Section 4.02 hereof, which must be an Eligible Account. 
 “Distribution Date”: The 25th day of any calendar month, or if such 25th day is not a Business Day, the Business Day immediately following such 25th day, commencing in July 2006. 
 “Due Date”: For any Distribution Date, the first day of the month of that Distribution Date. 
 “Due Period”: With respect to any Mortgage Loan and Due Date, the period commencing on the second day of the month preceding the month
of such Distribution Date and ending on the related Due Date. 
 “Eligible Account”: An account that is either: (A) a
segregated account or accounts maintained with an institution whose deposits are insured by the FDIC, the unsecured and uncollateralized long-term debt obligations of which institution shall be rated “AA” or higher by Standard &
Poor’s, “Aa2” or higher by Moody’s and “AA”/”F-1+” or higher by Fitch and in the highest short-term rating category by each of the Rating Agencies, and which is (i) a federal savings and loan association
duly organized, validly existing and in good standing under the federal banking laws, (ii) an institution duly organized, validly existing and in good standing 
  

 Appendix A-18 

 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 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

  

 Appendix A-19 

 (vii) money market funds having ratings in the highest available long-term rating category of each of the
Rating Agencies at the time of such investment; any such money market funds which provide for demand withdrawals being conclusively deemed to satisfy any maturity requirement for Eligible Investments set forth in the Agreement, 
 provided, however, that each such instrument shall be acquired in an arm’s-length transaction and no such instrument shall be an
Eligible Investment if it represents, either (1) the right to receive only interest payments with respect to the underlying debt instrument or (2) the right to receive both principal and interest payments derived from obligations
underlying such instrument and the principal and interest payments with respect to such instrument provide a yield to maturity greater than 120% of the yield to maturity at par of such underlying obligations; provided, further, however, that each
such instrument acquired shall not be acquired at a price in excess of par. The Trustee may purchase from or sell to itself or an affiliate, as principal or agent, the Eligible Investments listed above. 
 “Eligible Substitute Mortgage Loan”: A Mortgage Loan substituted by the Sponsor for a Deleted Mortgage Loan which must, on the date of
such substitution, as confirmed in an Officers’ Certificate delivered to the Trustee, (i) have an outstanding principal balance, after deduction of the principal portion of the monthly payment due in the month of substitution (or in the
case of a substitution of more than one Mortgage Loan for a Deleted Mortgage Loan, an aggregate outstanding principal balance, after such deduction), not in excess of the outstanding principal balance of the Deleted Mortgage Loan (the amount of any
shortfall to be deposited by the Sponsor in the Collection Account in the month of substitution); (ii) comply in all material respects with each representation and warranty set forth in clauses, (ii) through (xcix) of Section 3.01(b)
of the Purchase Agreement other than clauses (iii), (v)-(xiv), (xlii), (lv), (lvi)-(lviii), (lxxii), (lxxxix) and (xc); (iii) have a Mortgage Rate and, with respect to an Adjustable Rate Mortgage Loan, a Gross Margin no lower than and not
more than 1% per annum higher than the Mortgage Rate and Gross Margin, respectively, of the Deleted Mortgage Loan as of the date of substitution; (iv) have a Loan-to-Value Ratio, at the time of substitution no higher than that of the
Deleted Mortgage Loan at the time of substitution; (v) have a remaining term to stated maturity not greater than (and not more than one year less than) that of the Deleted Mortgage Loan; (vi) not be 30 days or more delinquent;
(vii) not be a negative amortization loan; (viii) have a lien priority equal to or superior to the lien priority of the Deleted Mortgage Loan; and (ix) be a Qualified Replacement Mortgage. 
 “ERISA”: The Employee Retirement Income Security Act of 1974, as amended. 
 “Excess Cashflow”: For any Distribution Date, the excess of (a) the Interest Remittance Amount over (b) the sum of
(x) the Monthly Interest Distributable Amounts for the Class A Certificates and the Mezzanine Certificates, (y) the Class I Monthly Interest Distributable Amount and (z) the Administrative Fees, each for such Distribution Date.

 “Extra Principal Distribution Amount”: For any Distribution Date, the lesser of (x) the sum of (a) Excess
Cashflow for such Distribution Date and (b) the amount remaining in the 
  

 Appendix A-20 

 Supplemental Interest Trust after funding amounts in clause (i) under Section 4.04(c), for such Distribution
Date, and (y) the Overcollateralization Deficiency Amount for such Distribution Date. 
 “Expense Adjusted Mortgage
Rate”: With respect to any Mortgage Loan, as of any date of determination, a per annum rate of interest equal to the then applicable Mortgage Rate for such Mortgage Loan minus the Administrative Fee Rate. 
 “Fannie Mae”: Federal National Mortgage Association or any successor thereto. 
 “FDIC”: Federal Deposit Insurance Corporation or any successor thereto. 
 “Fitch”: Fitch Ratings, or its successors in interest. 
 “Fixed Rate Mortgage Loan”: A first-lien or second-lien Mortgage Loan which provides for a fixed Mortgage Rate payable with respect thereto. The Fixed Rate Mortgage Loans are identified as such on the
Mortgage Loan Schedule. 
 “Foreclosure Profit”: With respect to a Liquidated Mortgage Loan, the amount, if any, by which
(i) the aggregate of its Net Liquidation Proceeds exceeds (ii) the related Principal Balance (plus accrued and unpaid interest thereon at the applicable Mortgage Rate from the date interest was last paid through the last day of the month
of the date of receipt of the final Liquidation Proceeds) of such Liquidated Mortgage Loan immediately prior to the final recovery of its Liquidation Proceeds. 
 “Formula Rate”: For any Distribution Date and any class of Class A Certificates and Mezzanine Certificates the lesser of (i) LIBOR plus the related Certificate Margin and (ii) 11%.

 “Freddie Mac”: The Federal Home Loan Mortgage Corporation, or any successor thereto. 
 “Gross Margin”: With respect to each Adjustable Rate Mortgage Loan, the fixed percentage set forth in the related Mortgage Note that is
added to the Index on each Adjustment Date in accordance with the terms of the related Mortgage Note used to determine the Mortgage Rate for such Mortgage Loan. 
 “Group”: Any of the Group I Mortgage Loans and the Group II Mortgage Loans. 
 “Group I Allocation Percentage”: For any Distribution Date, the percentage equivalent of a fraction, the numerator of which is (i) the Group I Principal Remittance Amount for such Distribution Date and the denominator
of which is (ii) the Principal Remittance Amount for such Distribution Date. 
  

 Appendix A-21 

 “Group I Certificate”: Any Class A-1A Certificate. 
 “Group I Certificate Principal Distribution Amount”: For any Distribution Date, an amount equal to the excess of (x) the
Certificate Principal Balance of the Class A-1A Certificates immediately prior to that Distribution Date over (y) the lesser of (A) the product of (i) 69.00% and (ii) the aggregate Principal Balance of the Group I Mortgage
Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related
Prepayment Period) and (B) the aggregate Principal Balance of the Group I Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the extent
received or advanced, and unscheduled collections of principal received during the related Prepayment Period) minus $2,552,655. 
 “Group I Class I Percentage”: For any Distribution Date beginning on the first Distribution Date through and including the Distribution Date in April 2009, the percentage equivalent of the fraction (a) the numerator of
which is the aggregate principal balance of the Group I Loans and (b) the denominator of which is the aggregate principal balance of the Mortgage Loans. For all Distribution Dates thereafter, 0.00%. The sum of the Group I Class I Percentage
plus the Group II Class I Percentage shall equal 100%. 
 “Group I Cross Collateralization Amount”: For any Distribution
Date, the portion of the Group I Interest Remittance Amount remaining after payment of (a) the Monthly Interest Distributable Amount on the Group I Certificates, (b) the Class I Monthly Interest Distributable Amount multiplied by the Group
I Class I Percentage and (c) the related proportional amount of the Administrative Fees. 
 “Group I Interest Remittance
Amount”: For any Distribution Date, the portion of the Interest Remittance Amount that was collected or advanced on the Group I Mortgage Loans. 
 “Group I Mortgage Loans”: The Mortgage Loans allocated to Group I. 
 “Group I Pool
Balance”: The Pool Balance relating to the Group I Mortgage Loans. 
 “Group I Principal Distribution Amount”: With
respect to any Distribution Date is the sum of (i) the Group I Principal Remittance Amount for such Distribution Date and (ii) the Extra Principal Distribution Amount for such Distribution Date multiplied by the Group I Allocation
Percentage. 
 “Group I Principal Remittance Amount”: For any Distribution Date, the portion of the Principal Remittance
Amount that was collected or advanced on the Group I Mortgage Loans. 
 “Group II Allocation Percentage”: For any
Distribution Date, the percentage equivalent of a fraction, the numerator of which is (i) the Group II Principal Remittance Amount for such Distribution Date and the denominator of which is (ii) the Principal Remittance Amount for such
Distribution Date. 
  

 Appendix A-22 

 “Group II Certificate”: Any of the Class A-2A Certificates, Class A-2B
Certificates, Class A-2C Certificates or Class A-2D Certificates. 
 “Group II Certificate Principal Distribution
Amount”: For any Distribution Date, an amount equal to the excess of (x) the aggregate Certificate Principal Balance of the Group II Certificates immediately prior to that Distribution Date over (y) the lesser of (A) the
product of (i) 69.00% and (ii) the aggregate Principal Balance of the Group II Mortgage Loans as of the last day of the related Due Period (after giving effect to scheduled payments of principal due during the related Due Period, to the
extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) and (B) the aggregate Principal Balance of the Group II Mortgage Loans as of the last day of the related Due Period (after
giving effect to scheduled payments of principal due during the related Due Period, to the extent received or advanced, and unscheduled collections of principal received during the related Prepayment Period) minus $2,552,855. 
 “Group II Class I Percentage”: For any Distribution Date beginning on the first Distribution Date through and including the Distribution
Date in April 2009, the percentage equivalent of the fraction (a) the numerator of which is the aggregate Principal Balance of the Group II Loans and (b) the denominator of which is the aggregate Principal Balance of the Mortgage Loans.
For all Distribution Dates thereafter, 0.00%. The sum of the Group I Class I Percentage plus the Group II Class I Percentage shall equal 100%. 
 “Group II Cross Collateralization Amount”: For any Distribution Date, the portion of the Group II Interest Remittance Amount remaining after payment of (a) the Monthly Interest Distributable Amounts on the Group II
Certificates, (b) the Class I Monthly Distributable Amount multiplied by the Group II Class I Percentage and (c) the related proportional amount of the Administrative Fees. 
 “Group II Interest Remittance Amount”: For any Distribution Date, the portion of the Interest Remittance Amount that was collected or
advanced on the Group II Mortgage Loans. 
 “Group II Mortgage Loans:” The Mortgage Loans allocated to Group II. 

“Group II Principal Distribution Amount”: With respect to any Distribution Date is the sum of (i) the Group II Principal
Remittance Amount for such Distribution Date and (ii) the Extra Principal Distribution Amount for such Distribution Date multiplied by the Group II Allocation Percentage. 
 “Group II Principal Remittance Amount”: For any Distribution Date, the portion of the Principal Remittance Amount that was collected or
advanced on the Group II Mortgage Loans. 
 “Holder”: See “Certificateholder”. 
  

 Appendix A-23 

 “Indenture”: An indenture relating to the issuance of net interest margin notes secured
by the Class C Certificates. 
 “Independent”: When used with respect to any specified Person, any such Person who
(a) is in fact independent of the Depositor, the Servicer and their respective Affiliates, (b) does not have any direct financial interest in or any material indirect financial interest in the Depositor or the Servicer or any Affiliate
thereof, and (c) is not connected with the Depositor or the Servicer or any Affiliate thereof as an officer, employee, promoter, underwriter, trustee, partner, director or Person performing similar functions; provided, however, that a Person
shall not fail to be Independent of the Depositor or the Servicer or any Affiliate thereof merely because such Person is the beneficial owner of 1% or less of any Class of securities issued by the Depositor or the Servicer or any Affiliate thereof,
as the case may be. 
 “Index”: With respect to each Adjustable Rate Mortgage Loan and with respect to each related
Adjustment Date, the index as specified in the related Mortgage Note. 
 “Initial Certificate Principal Balance”: With
respect to any Class of Regular Certificate (other than a Class C Certificate or Class I Certificate), the amount designated “Original Principal Balance” on the face thereof. 
 “Initial Cap Amount”: A payment in the amount of $84,086.12 
 “Insurance Proceeds”: Proceeds paid by any insurer pursuant to any insurance policy covering a Mortgage Loan which are required to be
remitted to the Servicer, including MI Insurance Proceeds in the case of Mortgage Loans covered under a MI Policy, or amounts required to be paid by the Servicer hereunder, net of any component thereof (i) covering any expenses incurred by or
on behalf of the Servicer in connection with obtaining such proceeds, (ii) that is applied to the restoration or repair of the related Mortgaged Property or (iii) released to the Mortgagor in accordance with the Servicer’s normal
servicing procedures. 
 “Interest Determination Date”: With respect to each Accrual Period, the second LIBOR Business Day
preceding the commencement of such Accrual Period. 
 “Interest Remittance Amount”: With respect to any Distribution Date,
that portion of the Available Funds for such Distribution Date allocable to interest (excluding Prepayment Charges). 
 “Interest
Remittance Formula Amount”: As of any Distribution Date and any Group, an amount equal to (1) the product of (x) 1/12 of the Weighted Average Mortgage Rate of the related Group as of the beginning of the prior Due Period and
(y) the Pool Balance related to that Group as of the beginning of the prior Due Period minus (2) the aggregate amount of Relief Act Shortfalls and Net Prepayment Interest Shortfalls for such Group for the prior period. 
 “Issuing Entity”: NovaStar Mortgage Funding Trust, Series 2006-2, the trust created hereunder. 
 “Lender Letter”: The lender letter #LL03-00 dated April 11, 2000 for Fannie Mae Sellers. 
  

 Appendix A-24 

 “LIBOR”: With respect to any Accrual Period, the rate determined by the Trustee on the
related Interest Determination Date on the basis of the offered rates of the Reference Banks for one-month United States dollar deposits, as such rates appear on the Telerate Page 3750, as of 11:00 a.m. (London time) on such Interest Determination
Date. If such rate does not appear on Telerate Page 3750, the rate for that day will be determined on the basis of the rates at which deposits in United States dollars are offered by the Reference Banks at approximately 11:00 a.m., London time, on
that day to prime banks in the London interbank market for a period equal to the relevant Accrual Period (commencing on the first day of such Accrual Period). The Trustee will request the principal London office of each of the Reference Banks to
provide a quotation of its rate. If at least two such quotations are provided, the rate for that day will be the arithmetic mean of the quotations. If fewer than two quotations are provided as requested, the rate for that day will be the arithmetic
mean of the rates quoted by major banks in New York City, selected by the Trustee, at approximately 11:00 a.m., New York City time, on that day for loans in United States dollars to leading European banks for a period equal to the relevant Accrual
Period (commencing on the first day of such Accrual Period). 
 The establishment of LIBOR on each Interest Determination Date by the Trustee
and the Trustee’s calculation of the rate of interest applicable to the Certificates for the related Accrual Period shall (in the absence of manifest error) be final and binding. 
 “LIBOR Business Day”: Any day other than (i) a Saturday or a Sunday or (ii) a day on which banking institutions in the State
of New York or in the city of London, England are required or authorized by law to be closed. 
 “Lifetime Rate Cap”: With
respect to each Adjustable Rate Mortgage Loan, the maximum Mortgage Rate, if any, permitted over the life of such Mortgage Loan under the terms of such Mortgage Note, as set forth on the Mortgage Loan Schedule. 
 “Liquidated Mortgage Loan”: With respect to any Distribution Date, any Mortgage Loan in respect of which the Servicer has determined, in
accordance with the servicing procedures specified in Article III hereof, as of the end of the related Prepayment Period that substantially all Liquidation Proceeds which it reasonably expects to recover with respect to the disposition of the
related Mortgaged Property or REO Property have been recovered. 
 “Liquidation Expenses”: Out-of-pocket expenses (exclusive
of overhead) which are incurred by or on behalf of the Servicer in connection with the liquidation of any Mortgage Loan and not recovered under any insurance policy, such expenses, including, without limitation, legal fees and expenses, any
unreimbursed amount expended respecting the related Mortgage Loan and any related and unreimbursed expenditures for real estate property taxes or for property restoration, preservation or insurance against casualty loss or damage. 
 “Liquidation Proceeds”: Proceeds (including Insurance Proceeds) received in connection with the liquidation of any Mortgage Loan or
related REO Property. 
 “Loan-to-Value Ratio”: With respect to any Mortgage Loan, as of any date of determination, a
fraction expressed as a percentage, the numerator of which is the then current principal amount of the Mortgage Loan, and the denominator of which is the lesser of the purchase price or the Appraised Value of the related Mortgaged Property.

  

 Appendix A-25 

 “Loan Year”: With respect to any Mortgage Loan, the one year period commencing on the
day succeeding the origination of such Mortgage Loan and ending on the anniversary date of such Mortgage Loan, and each annual period thereafter. 
 “Majority Certificateholders”: The Holders of Certificates evidencing at least 51% of the Voting Rights. 
 “Master REMIC”: The REMIC established pursuant to Exhibit J hereof. The assets of the Master REMIC shall be the REMIC IV Regular Interests. 
 “Master REMIC Regular Interests”: As defined in Exhibit J hereof. 
 “Maximum
Collateral Amount”: The sum of the Principal Balance as of the Cut-off Date of the Mortgage Loans. 
 “Maximum Mortgage
Rate”: With respect to each Adjustable Rate Mortgage Loan, the percentage set forth in the related Mortgage Note as the maximum Mortgage Rate thereunder. 
 “MERS”: Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto. 
 “MERS System”: The system of recording transfers of Mortgages electronically maintained by MERS. 
 “Mezzanine Certificate”: Any Class M-1 Certificate, Class M-2 Certificate, Class M-3 Certificate, Class M-4 Certificate, Class M-5
Certificate, Class M-6 Certificate, Class M-7 Certificate, Class M-8 Certificate, Class M-9 Certificate or Class M-10 Certificate. 
 “MI Claim Payment Advance”: As defined in Section 3.13(a) hereof. 
 “MI Insurance
Agreement”: A private mortgage insurance agreement issued by the MI Insurer pursuant to which MI Policies are issued on individual Mortgage Loans. 
 “MI Insurance Proceeds”: Proceeds paid by the MI Insurer pursuant to an MI Policy. 
 “MI Insurer”: Mortgage Guaranty Insurance Corporation, a Wisconsin private mortgage insurance company and their successors and assigns. 
 “MI Insurer Insolvency Event”: (A) The determination by the applicable regulatory or supervisory agency having jurisdiction over the MI Insurer that such MI Insurer is insolvent or unable to pay
its obligations as they mature, (B) following the failure of the MI Insurer to pay under the related MI Policy, the determination by the Servicer that such MI Insurer is insolvent or unable to pay its obligations as they become due,
(C) the long-term rating on the claims paying ability of the MI Insurer shall be lowered by Moody’s below A-2, if such MI Insurer is then rated by Moody’s, or shall be lowered by S&P below AA, if such MI Insurer is then rated by
S&P. 
  

 Appendix A-26 

 “MI Policy”: A private mortgage insurance policy underwritten by the MI Insurer with
respect to an individual Mortgage Loan, issued pursuant to the MI Insurance Agreement. 
 “MI Premium”: The primary mortgage
insurance premium for each MI Policy, payable annually to an MI Insurer, as specified in the MI Insurance Agreement, and with respect to each monthly premium payment, 1/12 of the annual premium. 
 “MIN”: The Mortgage Identification Number for Mortgage Loans registered with MERS on the MERS System. 
 “Minimum Mortgage Rate”: With respect to each Adjustable Rate Mortgage Loan, the percentage set forth in the related Mortgage Note as
the minimum Mortgage Rate thereunder. 
 “MOM Loan”: With respect to any Mortgage Loan, MERS acting as the mortgagee of such
Mortgage Loan, solely as nominee for the originator of such Mortgage Loan and its successors and assigns, at the origination thereof. 
 “Monthly Interest Distributable Amount”: For any Distribution Date and any Class of Class A Certificates and Mezzanine Certificates, the sum of (1) the Unpaid Interest Shortfall Amount for that Class and
Distribution Date and (2) the Current Interest for that Class and Distribution Date. In the event of a shortfall in the full amount necessary to pay both the Unpaid Interest Shortfall Amount and the Current Interest for a Class, the money will
first be applied to the Unpaid Interest Shortfall Amount and then to the Current Interest. 
 “Monthly Payment”: With
respect to any Mortgage Loan (including any REO Property) and any Due Date, the payment of principal and interest due thereon in accordance with the amortization schedule at the time applicable thereto (after adjustment, if any, for partial
Principal Prepayments and for Deficient Valuations occurring prior to such Due Date but before any adjustment to such amortization schedule by reason of any bankruptcy, other than a Deficient Valuation, or similar proceeding or any moratorium or
similar waiver or grace period). 
 “Moody’s”: Moody’s Investors Service, Inc. or its successor in interest.

 “Mortgage”: The mortgage, deed of trust or other instrument creating a first lien on an estate or fee simple interest in
real property securing a Mortgage Note. 
 “Mortgage File”: The mortgage documents listed in Section 2.01 pertaining to
a particular Mortgage Loan and any additional documents required to be added to the Mortgage File pursuant to this Agreement. 
 “Mortgage Loan Schedule”: With respect to any date, the schedule of Mortgage Loans subject to this Agreement on such date. The schedule of Mortgage Loans as of the Cut-off Date is the schedule set forth in Exhibit B hereto,
which schedule sets forth as to each Mortgage Loan: 
 (i) the loan number and name of the Mortgagor; 

 Appendix A-27 

 (ii) the street address, city, state and zip code of the Mortgaged Property; 
 (iii) the Mortgage Rate at origination; 
 (iv) with respect to an Adjustable Rate Mortgage Loan, the Maximum Rate and the Minimum Rate; 
 (v) the maturity date; 

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

 (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; 
  

 Appendix A-28 

 (xxiii) if the Mortgage Loan is registered with MERS on the MERS System, the MIN; and 
 (xxiv) whether the Mortgage Loan is in Group I or Group II. 
 The Mortgage Loan Schedule shall set forth the total of the amounts described under (x) above for all of the Mortgage Loans. 
 “Mortgage Loans”: At any time, collectively, all Mortgage Loans that have been transferred and conveyed to the Issuing Entity, in each case together with the Related Documents, and that remain subject
to the terms of the Agreement. As applicable, a “Mortgage Loan” shall be deemed to refer to the related REO Property. 
 “Mortgage Note”: The original executed note or other evidence of indebtedness evidencing the indebtedness of a Mortgagor under a Mortgage Loan. 
 “Mortgage Rate”: With respect to any Mortgage Loan, the annual rate at which interest accrues on such Mortgage Loan. 
 “Mortgage Pool”: The pool of Mortgage Loans, identified on Exhibit B from time to time, and any REO Properties acquired in respect thereof. 
 “Mortgaged Property”: The underlying property, including real property and improvements thereon, securing a Mortgage Loan. 

“Mortgagor”: The obligor on a Mortgage Note. 
 “Net Liquidation Proceeds”: With respect to any Liquidated Mortgage Loan, Liquidation Proceeds net of Liquidation Expenses. 
 “Net Mortgage Rate”: With respect to any Mortgage Loan and any day, the related Mortgage Rate less the Administrative Fee Rate.

 “Net Prepayment Interest Shortfall”: On any Distribution Date, the excess, if any of (i) any Prepayment Interest
Shortfall and (ii) any payments of Compensating Interest made by the Servicer. 
 “Net WAC”: With respect to any
Distribution Date, the weighted average of the Net Mortgage Rates on the Mortgage Loans (weighted by the Principal Balances of the Mortgage Loans as of the first day of the related Due Period (after giving effect to scheduled payments of principal
due prior to such date, to the extent received or advanced, and unscheduled collections of principal received prior to such date)). 
 “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. 
  

 Appendix A-29 

 “NFI”: NovaStar Financial, Inc., a Maryland corporation, and its successors and assigns.

 “NIM Note”: Any of the notes (i) issued pursuant to a structured net interest margin transaction sponsored by
NovaStar Financial, Inc. or its Affiliates and (ii) evidencing debt of the trust formed pursuant to such transaction. For the avoidance of doubt, any subordinate equity interests (or subordinate certificates issued evidencing an equity
interest) in such trust shall not be considered NIM Notes. 
 “Non-Derivative Supplemental Interest Payment”: With respect
to each Distribution Date, and the Class M-9 and Class M-10 Certificates, the dollar amount of Supplemental Interest Payment which would be distributed to each such Class on such Distribution Date pursuant to Section 4.04(c)(iii) hereof if the
amount received by the Supplemental Interest Trust from each Cap Counterparty on such Distribution Date was zero. 
 “Non-REMIC
Accounts”: The Supplemental Interest Account held by the Supplemental Interest Trust. 
 “Nonrecoverable Advance”:
With respect to any Mortgage Loan: 
 (x) any Advance (i) which was previously made or is proposed to be made by the Servicer; and
(ii) which, in the good faith judgment of the Servicer, will not or, in the case of a proposed Advance, would not, be ultimately recoverable by the Servicer from Liquidation Proceeds, Repurchase Price or future payments on such Mortgage Loan;
and 
 (y) the amount, if any, by which an MI Claim Payment Advance made or to be made by the Servicer exceeds, or would exceed, the amount
actually received, or expected to be received as MI Insurance Proceeds from the related MI Insurer on account of the related claim; provided, however that if an MI Insurer Insolvency Event occurs after the MI Claim Payment Advance has been
made by the Servicer and before the full amount thereof has been reimbursed to the Servicer from the related MI Insurance Proceeds, then any remaining, unreimbursed amount shall be considered a Nonrecoverable Advance as of the date of the MI Insurer
Insolvency Event. 
 “Novation Agreements”: The Novation Agreement, dated as of June 15, 2006, among NovaStar Mortgage,
Inc., the Supplemental Interest Trust and Wachovia Bank, National Association, the Novation Agreement, dated as of June 15, 2006 among The Royal Bank of Scotland plc, the Supplemental Interest Trust and NovaStar Financial, Inc. and the Novation
Agreement, dated as of June 15, 2006 among Deutsche Bank AG, New York Branch, the Supplemental Interest Trust and NovaStar Financial, Inc. 
 “Offered Certificates”: Collectively, the Class A Certificates and the Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates,
Class M-7 Certificates, Class M-8 Certificates, Class M-9 Certificates and Class M-10 Certificates. 
 “Officers’
Certificate”: A Certificate signed by the Chairman of the Board, the Vice Chairman of the Board, the President or any vice president (however denominated), and by the Treasurer, the Secretary, or any assistant treasurer or assistant
secretary of the applicable Person. 
  

 Appendix A-30 

 “Opinion of Counsel”: A written opinion of counsel, who may, without limitation, be a
salaried counsel for the Depositor or the Servicer, acceptable to the Trustee, except that any opinion of counsel relating to (a) the qualification of any REMIC as a REMIC or (b) compliance with the REMIC Provisions which must be an
opinion of Independent counsel. 
 “Optional Termination Date”: The first Distribution Date on which the Servicer may opt to
terminate the Trust Fund pursuant to Section 11.01. 
 “Original Value”: Except in the case of a refinanced Mortgage
Loan, the lesser of the Appraised Value or sales price of the Mortgaged Property at the time a Mortgage Loan is closed, and for a refinanced Mortgage Loan, the Original Value is the value of such property set forth in an appraisal acceptable to the
Servicer. 
 “Ownership Interest”: As to any Certificate, any ownership or security interest in such Certificate, including
any interest in such Certificate as the Holder thereof and any other interest therein, whether direct or indirect, legal or beneficial, as owner or as pledgee. 
 “Overcollateralization Amount”: For any Distribution Date, is equal to (a) the Pool Balance, after giving effect to distributions of principal on the Mortgage Loans, minus (b) the aggregate
Certificate Principal Balance of the Class A Certificates and Mezzanine Certificates, after giving effect to principal distributions to be made on the Class A Certificates and Mezzanine Certificates on such Distribution Date. 

“Overcollateralization Deficiency Amount”: With respect to any Distribution Date equals the amount, if any, by which the Required
Overcollateralization Amount exceeds the Overcollateralization Amount on such Distribution Date (after giving effect to distributions in respect of the Group I Principal Remittance Amount and the Group II Basic Principal Remittance Amount on such
Distribution Date). 
 “Pass-Through Rate”: For any Distribution Date and any Class of Class A Certificates and Class M
Certificates, the lesser of (1) the Formula Rate for such Class for such Distribution Date and (2) the related Available Funds Cap for such Distribution Date. 
 “Paying Agent”: Any paying agent appointed pursuant to Section 5.05. 
 “Percentage Interest”: With respect to any Class A Certificate or Class M Certificate, a fraction, expressed as a percentage, the numerator of which is the Initial Certificate Principal Balance represented by such
Certificate and the denominator of which is the Initial Certificate Principal Balance of the related Class. With respect to a Class I Certificate, Class C Certificate, Class M-9 DSI Certificate, Class M-10 DSI Certificate or Residual Certificate,
the portion of the Class evidenced thereby, expressed as a percentage, as stated on the face of such Certificate; provided, however, that the sum of all such percentages for each such Class totals 100%. 
 “Periodic Rate Cap”: With respect to each Adjustable Rate Mortgage Loan and any Adjustment Date therefor, the fixed percentage set forth
in the related Mortgage Note, which is the maximum amount by which the Mortgage Rate for such Mortgage Loan may increase or decrease (without regard to the Maximum Mortgage Rate or the Minimum Mortgage Rate) on such Adjustment Date from the Mortgage
Rate in effect immediately prior to such Adjustment Date. 
  

 Appendix A-31 

 “Permitted Transferee”: Any transferee of a Residual Certificate other than a
Disqualified Organization or a non-U.S. Person. 
 “Person”: Any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust, unincorporated organization or government or any agency or political subdivision thereof. 
 “Plan”: Either (i) an employee benefit plan (as defined in section 3(3) of ERISA) that is subject to the provisions of Title I of ERISA or (ii) a plan (as defined in section 4975(e)(1) of
the Code) that is subject to Section 4975 of the Code. 
 “Plan Assets”: As defined in Section 5.02(d) hereof.

 “Pool Balance”: As of any date of determination, the aggregate Principal Balance of the related Mortgage Loans as of such
date. 
 “Prepayment Assumption”: As defined in the Prospectus Supplement. 
 “Prepayment Charge”: With respect to any Mortgage Loan, the charges or premiums, if any, due in connection with a full or partial
Principal Prepayment of such Mortgage Loan in accordance with the terms thereof. 
 “Prepayment Interest Shortfall”: As to
any Distribution Date and any Mortgage Loan (other than a Mortgage Loan relating to an REO Property) that was the subject of (a) a Principal Prepayment in full during the portion of the related Prepayment Period in the prior calendar month an
amount equal to the excess of interest accrued during the prior calendar month at the Mortgage Rate (net of the Servicing Fee) on the Principal Balance of such Mortgage Loan over the amount of interest (adjusted to the Mortgage Rate (net of the
Servicing Fee)) paid by the Mortgagor for such Prepayment Period to the date of such Principal Prepayment in full or (b) a partial Principal Prepayment during the prior calendar month, an amount equal to interest accrued during the related
prior calendar month at the Mortgage Rate (net of the Servicing Fee) on the amount of such partial Principal Prepayment. 
 “Prepayment Period”: For any Distribution Date, the period commencing on the day after the Determination Date in the month preceding the month in which such Distribution Date falls (or, in the case of the first Distribution
Date, from the Cut-off Date) and ending on the Determination Date of the calendar month in which such Distribution Date falls. 
 “Principal Balance”: With respect to any Mortgage Loan or related REO Property, at any given time, (i) the Principal Balance of the Mortgage Loan as of the Cut-off Date, minus (ii) the sum of (a) the
principal portion of the Monthly Payments due with respect to such Mortgage Loan or REO Property during each Due Period ending prior to the most recent Distribution Date which were received or with respect to which an Advance was made, and
(b) all Principal Prepayments with respect to such Mortgage Loan or REO Property, and all Insurance Proceeds, Liquidation Proceeds and REO Proceeds, to the extent applied by the Servicer as recoveries of 
  

 Appendix A-32 

 principal in accordance with Section 3.13 hereof with respect to such Mortgage Loan or REO Property, and
(c) the principal portion of any Realized Loss with respect thereto for any previous Distribution Date. 
 “Principal
Prepayment”: Any payment of principal made by the Mortgagor on a Mortgage Loan which is received in advance of its scheduled Due Date and which is not accompanied by an amount of interest representing the full amount of scheduled interest
due on any Due Date in any month or months subsequent to the month of prepayment. 
 “Principal Remittance Amount”: With
respect to any Distribution Date, the sum of (i) each scheduled payment of principal collected or advanced on the Mortgage Loans by the Servicer that were due during the related Due Period, (ii) the principal portion of all partial and
full Principal Prepayments of the Mortgage Loans applied by the Servicer during the related Prepayment Period, (iii) the principal portion of all related Net Liquidation Proceeds and Insurance Proceeds received during such Prepayment Period,
(iv) that portion of the Repurchase Price, representing principal of any repurchased Mortgage Loan, deposited to the Collection Account during such Prepayment Period, (v) the principal portion of any related Substitution Adjustment Amounts
deposited in the Collection Account during such Prepayment Period, (vi) on the Distribution Date on which the Trust Fund is to be terminated pursuant to Section 11.01, that portion of the Termination Price, in respect of principal and
(vii) Subsequent Recoveries to pay certain Certificates amounts in respect of Realized Losses allocated to such Certificates. 
 “Prospectus”: The Prospectus Supplement together with the Base Prospectus attached thereto with respect to the Offered Certificates. 
 “Prospectus Supplement”: That certain Prospectus Supplement dated June 8, 2006 relating to the public offering of the Offered Certificates. 
 “PTCE 95-60”: U.S. Department of Labor Prohibited Transaction Class Exemption 95-60. 
 “Purchase Agreement”: The agreement, dated as of June 1, 2006, between the Sponsor, the Depositor, the Trustee and the Custodian,
regarding the transfer of the Mortgage Loans by the Sponsor to or at the direction of the Depositor. 
 “Qualified
Liquidation”: The meaning set forth from time to time in the definition thereof at Section 860F(a)(4) of the Code and applicable to the Issuing Entity. 
 “Qualified Mortgage”: The meaning set forth from time to time in the definition thereof at Section 860G(a)(3) of the Code and applicable to the Issuing Entity. 
 “Qualified Replacement Mortgage”: A Mortgage Loan substituted for another pursuant to Section 3.01 of the Purchase Agreement and
that satisfies all of the criteria set forth from time to time in the definition thereof at Section 860G(a)(4) of the Code and applicable to the Issuing Entity, all as evidenced by an Officers’ Certificate of the Sponsor delivered to the
Trustee prior to any such substitution. 
  

 Appendix A-33 

 “Qualified Underwriting”: Any public offering or private placement of securities with
respect to which an entity that has received an Underwriter Exemption, is (i) the sole underwriter, (ii) the manager or co-manager of the underwriting syndicate or (iii) a selling or placement agent. 
 “Rate Step-up Date”: The first Distribution Date to occur after the Optional Termination Date has occurred. 
 “Rating Agency”: Any nationally recognized statistical rating organization, or its successor, that rated the Class A Certificates
and Mezzanine Certificates at the request of the Depositor at the time of the initial issuance of the Class A Certificates and Mezzanine Certificates. Initially such rating agencies shall consist of Moody’s, Standard & Poor’s
and Fitch. If such organization or a successor is no longer in existence, “Rating Agency” shall be such nationally recognized statistical rating organization, or other comparable Person, designated by the Depositor, notice of which
designation shall be given to the Trustee. References herein to the highest short-term unsecured rating category of a Rating Agency shall mean “A-1” or better in the case of Standard & Poor’s, “P-1” or better in the
case of Moody’s, “F-1+” or better in the case of Fitch and in the case of any other Rating Agency shall mean such equivalent rating. References herein to the highest long-term rating category of a Rating Agency shall mean
“AAA” in the case of Standard & Poor’s, “Aaa” in the case of Moody’s and “AAA” in the case of Fitch, and in the case of any other Rating Agency, such equivalent rating. 
 “Realized Loss”: With respect to each Mortgage Loan (or REO Property) as to which a Cash Liquidation or REO Disposition has occurred, an
amount (not less than zero) equal to (i) the Principal Balance of the Mortgage Loan (or REO Property) as of the date of Cash Liquidation or REO Disposition, plus (ii) interest (and REO Imputed Interest, if any) at the Net Mortgage Rate
from the Due Date as to which interest was last paid or advanced to Certificateholders up to the last day of the month in which the Cash Liquidation (or REO Disposition) occurred on the Principal Balance of such Mortgage Loan (or REO Property)
outstanding during each Due Period that such interest was not paid or advanced, minus (iii) Net Liquidation Proceeds, if any, received with respect to such Cash Liquidation (or REO Disposition), minus the portion thereof reimbursable to the
Servicer or any Subservicer with respect to related Advances or expenses as to which the Servicer or Subservicer is entitled to reimbursement thereunder but which have not been previously reimbursed. With respect to each Mortgage Loan which has
become the subject of a Deficient Valuation, the difference between the Principal Balance of the Mortgage Loan outstanding immediately prior to such Deficient Valuation and the Principal Balance of the Mortgage Loan as reduced by the Deficient
Valuation. With respect to each Mortgage Loan which has become the object of a Debt Service Reduction, the amount of such Debt Service Reduction. 
 “Record Date”: For as long as there are no definitive certificates, with respect to each Distribution Date, the Close of Business on the Business Day immediately preceding that Distribution Date. If definitive certificates
have been issued, the Record Date is the last business day of the month prior to the related Distribution Date. 
 “Reference
Banks”: Deutsche Bank, Barclays Bank PLC, The Bank of Tokyo-Mitsubishi, LTD. and National Westminster Bank PLC and their successors in interest; provided 
  

 Appendix A-34 

 that if any of the foregoing banks are not suitable to serve as a Reference Bank, then any leading banks selected by the
Trustee which are engaged in transactions in Eurodollar deposits in the international Eurocurrency market (i) with an established place of business in London, (ii) not controlling, under the control of or under common control with the
Sponsor or any Affiliate thereof, (iii) whose quotations appear on the Reuters Screen LIBOR Page on the relevant Interest Determination Date and (iv) which have been designated as such by the Trustee. 
 “Regular Certificate”: Any of the Class A Certificates, Mezzanine Certificates, Class I Certificates or Class C Certificates.

 “Regulation AB”: Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R.
§§229.1100-229.1123, as such may be amended from time to time, and subject to such clarification and interpretation as have been provided by the Commission in the adopting release (Asset-Backed Securities, Securities Act Release
No. 33-8518, 70 Fed. Reg. 1,506, 1,531 (Jan. 7, 2005)) or by the staff of the Commission, or as may be provided by the Commission or its staff from time to time. 
 “Related Documents”: With respect to each Mortgage Loan, the documents specified in Section 2.01 hereof and any documents required to be added to such documents pursuant to this Agreement or the
Purchase Agreement. 
 “Relief Act”: The Servicemembers Civil Relief Act, as amended. 
 “Relief Act Shortfall”: As to any Distribution Date and any Mortgage Loan (other than a Mortgage Loan relating to an REO Property), any
shortfalls relating to the Relief Act or similar legislation or regulations. 
 “REMIC”: A “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code. 
 “REMIC Available Funds Cap”: The weighted
average of the pass-through rates on the Class III-Accrual, Class III-A1A, Class III-A2A, Class III-A2B, Class III-A2C, Class III-A2D, Class III-M1, Class III-M2, Class III-M3, Class III-M4, Class III-M5, Class III-M6, Class III-M7, Class III-M8,
Class III-M9, Class III-M10 and Class III-CA Interests. 
 “REMIC II Net WAC”: The weighted average of the pass-through
rates on the Class I-A, Class I-B, Class I-C, Class I-D, Class I-E, Class I-F, Class I-G, Class I-H, Class I-K, Class I-L, Class I-M, Class I-O and Class I-J Interests. 
 “REMIC Interests Sale Agreement”: The REMIC Interests Sale Agreement, dated as June 1, 2006, between the Depositor and NCFC. 
 “REMIC Pass-Through Rate”: As defined in Exhibit J hereof. 
 “REMIC I Pass-Through Rate”: As to each of the respective REMIC I Regular Interests, the applicable “REMIC I
Pass-Through Rate” set forth in Exhibit J hereof. 
  

 Appendix A-35 

 “REMIC II Pass-Through Rate”: As to each of the respective REMIC II Regular
Interests, the applicable “REMIC II Pass-Through Rate” set forth in Exhibit J hereof. 
 “REMIC III Pass-Through
Rate”: As to each of the respective REMIC III Regular Interests, the applicable “REMIC III Pass-Through Rate” set forth in Exhibit J hereof. 
 “REMIC IV Pass-Through Rate”: As to each of the respective REMIC IV Regular Interests, the applicable “REMIC IV Pass-Through Rate set forth in Exhibit J hereof. 
 “REMIC Provisions”: Provisions of the federal income tax law relating to real estate mortgage investment conduits which appear at
Section 860A through 860G of Subchapter M of Chapter 1 of the Code, and related provisions, and regulations and rulings promulgated thereunder, as the foregoing may be in effect from time to time. 
 “REMIC Regular Interests”: The REMIC I Regular Interests, the REMIC II Regular Interests, the REMIC III Regular Interests, the REMIC IV
Regular Interests and the Master REMIC Regular Interests. 
 “REMIC I Regular Interests”: As defined in Exhibit J
hereof. 
 “REMIC II Regular Interests”: As defined in Exhibit J hereof. 
 “REMIC III Regular Interests”: As defined in Exhibit J hereof. 
 “REMIC IV Regular Interests”: As defined in Exhibit J hereof. 
 “REO Acquisition”: The acquisition by the Servicer on behalf of the Trustee for the benefit of the Certificateholders of any REO
Property pursuant to Section 3.13 hereof. 
 “REO Disposition”: As to any REO Property, a determination by the Servicer
that it has received substantially all Insurance Proceeds, Liquidation Proceeds, REO Proceeds and other payments and recoveries (including proceeds of a final sale) which the Servicer expects to be finally recoverable from the sale or other
disposition of the REO Property. 
 “REO Imputed Interest”: As to any REO Property, for any period, an amount equivalent to
interest (at the Net Mortgage Rate that would have been applicable to the related Mortgage Loan had it been outstanding) on the unpaid Principal Balance of the Mortgage Loan as of the date of acquisition thereof for such period as such balance is
reduced pursuant to Section 3.13 hereof by any income from the REO Property treated as a recovery of principal. 
 “REO
Proceeds”: Proceeds, net of expenses, received in respect of any REO Property (including, without limitation, proceeds from the rental of the related Mortgaged Property), which proceeds are required to be deposited into the Collection
Account within two days of receipt by the Servicer. 
 “REO Property”: A Mortgaged Property that is acquired by the Issuing
Entity by foreclosure or by deed in lieu of foreclosure. 
  

 Appendix A-36 

 “Repurchase Event”: With respect to any Mortgage Loan, either (i) a discovery that,
as of the Closing Date the related Mortgage was not a valid lien on the related Mortgaged Property subject only to (A) the lien of real property taxes and assessments not yet due and payable, (B) covenants, conditions, and restrictions,
rights of way, easements and other matters of public record as of the date of recording of such Mortgage and such other permissible title exceptions as are permitted and (C) other matters to which like properties are commonly subject which do
not materially adversely affect the value, use, enjoyment or marketability of the related Mortgaged Property or (ii) with respect to any Mortgage Loan as to which the Sponsor delivers an affidavit certifying that the original Mortgage Note has
been lost or destroyed, a subsequent default on such Mortgage Loan if the enforcement thereof or of the related Mortgage is materially and adversely affected by the absence of such original Mortgage Note. 
 “Repurchase Price”: With respect to any Mortgage Loan (i) required to be repurchased on any date by the Sponsor pursuant to the
Purchase Agreement or (ii) permitted to be purchased by the Servicer pursuant to Article III hereof, an amount equal to the sum, without duplication, of (i) 100% of the Principal Balance thereof (without reduction for any amounts charged
off) and (ii) unpaid accrued interest at the Mortgage Rate on the outstanding principal balance thereof from the Due Date to which interest was last paid by the Mortgagor (or with respect to which an Advance was last made by the Servicer) to
the first day of the month following the month of purchase plus (iii) the amount of any unreimbursed Servicing Advances or unreimbursed Advances made with respect to such Mortgage Loan plus (iv) any other amounts owed to the Servicer or
the Subservicer pursuant to Section 3.07 hereof and not included in clause (iii) of this definition plus (v) any costs and damages incurred by the Trust Fund in connection with any violation by any Mortgage Loan of any predatory or
abusive lending law or breach of representations and warranties regarding licensing or any predatory or abusive lending law. 
 “Request for Release”: A request for release in substantially the form of Exhibit E hereto. 
 “Required
Overcollateralization Amount”: For any Distribution Date, an amount equal to 0.50% of the aggregate Principal Balance of the Mortgage Loans as of the Cut-off Date. 
 “Residual Certificate”: The Class R Certificates representing beneficial ownership of the Class R-I, Class R-II,
Class R-III, Class R-IV and Class R-V Interests. 
 “Residual Interest”: The sole Class of “residual
interests” in a REMIC within the meaning of Section 860G(a)(2) of the Code. 
 “Responsible Officer”: With respect
to the Trustee, any officer working in the Corporate Trust Office with direct responsibility for the administration of this Agreement and also, with respect to a particular matter, any other officer to whom such matter is referred because of such
officer’s knowledge of and familiarity with the particular subject. 
 “Rolling 60-Day Delinquency Percentage”: For any
Distribution Date, the average of the 60-Day Delinquency Percentages for the Mortgage Loans as of the last day of each of the three (or 1 and 2 in the case of the first two Distribution Dates, as applicable) most recently ended Due Periods.

  

 Appendix A-37 

 “Rolling 90-Day Delinquency Percentage”: For any Distribution Date, the average of the
90-Day Delinquency Percentages for the Mortgage Loans as of the last day of each of the three (or 1 and 2 in the case of the first two Distribution Dates, as applicable) most recently ended Due Periods. 
 “Scheduled Principal Payment”: Any scheduled payment of principal made on a scheduled Due Date. 
 “Servicer”: NovaStar Mortgage, Inc., a Virginia corporation, and its successors and assigns. 
 “Servicer Remittance Date”: The third Business Day prior to each Distribution Date. 
 “Servicer Reporting Date”: As defined in Section 3.24 hereof. 
 “Servicing Account”: The separate trust account created and maintained by the Servicer or each Subservicer with respect to the Mortgage
Loans or REO Property, which shall be an Eligible Account, for collection of taxes, assessments, insurance premiums and comparable items as described in Section 3.08 hereof. 
 “Servicing Advances”: All customary, reasonable and necessary “out of pocket” costs and expenses incurred in connection with a
default, delinquency or other unanticipated event in the performance by the Servicer of its servicing obligations, including, without duplication, but not limited to, the cost of (i) the preservation, restoration and protection of a Mortgaged
Property, (ii) any enforcement or judicial proceedings, including foreclosures, (iii) the management and liquidation of any REO Property, (iv) compliance with the obligations under Section 3.13 hereof, and (v) expenses
incurred in connection with any Mortgage Loan being registered on the MERS System. 
 “Servicing Criteria”: The criteria set
forth in paragraph (d) of Item 1122 of Regulation AB, as such may be amended from time to time. 
 “Servicing
Default”: The meaning assigned in Section 7.01 hereof. 
 “Servicing Fee”: With respect to the Mortgage Loans
and any Distribution Date, the product of (i) the Servicing Fee Rate divided by 12 and (ii) the Pool Balance as of the first day of the related Due Period. 
 “Servicing Fee Rate”: With respect to any Mortgage Loan, 0.50% per annum. 
 “Servicing Function Participant”: Any sub-servicer, subcontractor or any other Person, other than the Servicer and the Trustee, that is performing activities addressed by the Servicing Criteria, unless such Person’s
activities relate only to 5% or less of the Mortgage Loans. 
 “Servicing Officer”: Any officer of the Servicer involved in,
or responsible for, the administration and servicing of the Mortgage Loans whose name and specimen signature appear on a list of servicing officers furnished to the Trustee by the Servicer or a Subservicer, as such list may be amended from time to
time. 
  

 Appendix A-38 

 “Servicing Rights Owner”: NovaStar Mortgage, Inc., or its transferee or assignee, in its
capacity as owner of the servicing rights with respect to the Mortgage Loans. 
 “Servicing Rights Pledgee”: The entity
designated by the Servicing Rights Owner pursuant to Section 3.28. 
 “Servicing Transfer Costs”: Reasonable and
necessary costs and expenses incurred, by or on behalf of the Trustee or successor Servicer in connection with the transfer of servicing in the event of termination of the Servicer as servicer hereunder and the resulting transfer to the successor
Servicer. 
 “Sponsor”: NovaStar Mortgage, Inc., a Virginia corporation, and its successors and assigns. 
 “Standard & Poor’s” or “S&P”: Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc., or its successor in interest. 
 “Startup Day”: As defined in Section 10.01(a) hereof.

 “Subsequent Recovery”: With respect to any Mortgage Loan that had previously been the subject of a Realized Loss, any
principal amount subsequently received in connection with such Mortgage Loan. 
 “Subservicer”: Any Person with which the
Servicer has entered into a Subservicing Agreement and which meets the qualifications of a Subservicer pursuant to Section 3.02 hereof. 
 “Subservicing Account”: An account established by a Subservicer which meets the requirements set forth in Section 3.06(e) and is otherwise acceptable to the Servicer. 
 “Subservicing Agreement”: The written contract between the Servicer and a Subservicer relating to servicing and administration of
certain Mortgage Loans as provided in Section 3.02 hereof. 
 “Subservicing Fee”: With respect to each Mortgage Loan
and any Distribution Date, the portion of the Servicing Fee paid to a Subservicer. 
 “Substitution Adjustment Amount”: As
defined in Section 2.03 hereof. 
 “Supplemental Interest Account”: An account established by the Trustee pursuant to
Section 4.04 and is otherwise acceptable to the Servicer. 
 “Supplemental Interest Amount Due”: With respect to any
Class of Class A Certificates and Mezzanine Certificates and any Distribution Date, the sum of (x) the Available Funds Cap Shortfall Amount for such Class of Certificates and such Distribution Date and (y) the Available Funds Cap
Carryforward Amount for such Class and Distribution Date. 
 (i) “Supplemental Interest Payment”: With respect to any
Distribution Date and any Class of Class A or Mezzanine Certificates, the lesser of (x) the Supplemental Interest Amount Due for that Class and (y) the amounts on deposit and available for distribution to that Class from the
Supplemental Interest Trust on that Distribution Date. 
  

 Appendix A-39 

 “Supplemental Interest Trust”: The supplemental interest trust established and
maintained pursuant to Section 4.04 and designated as such. 
 “Tax Matters Person”: The tax matters person appointed
pursuant to Section 10.01(e) hereof. 
 “Tax Returns”: The federal income tax return on Internal Revenue Service Form
1066, U.S. Real Estate Mortgage Investment Conduit (REMIC) Income Tax Return, including Schedule Q thereto, Quarterly Notice to Residual Interest Holders of REMIC Taxable Income or Net Loss Allocation, or any successor forms, to be filed by the
Trustee, on behalf of each REMIC, together with any and all other information reports, forms or returns that may be required to be furnished to the Certificateholders or filed with the Internal Revenue Service or any other governmental taxing
authority under any applicable provisions of federal, state or local tax laws. 
 “Telerate Page 3750”: The display page
currently so designated on the Moneyline Telerate Service (or such other page as may replace that page on that service for the purpose of displaying comparable rates or prices). 
 “Termination Price”: As defined in Section 11.01(a) of the Pooling and Servicing Agreement. 
 “Treasury Regulations”: Regulations, including proposed or temporary Regulations, promulgated under the Code. References herein to
specific provisions of proposed or temporary regulations shall include analogous provisions of final Treasury Regulations or other successor Treasury Regulations. 
 “Trigger Event”: A Trigger Event is in effect with respect to any Distribution Date, on or after the Crossover Date, if either (i) the Rolling 60-Day Delinquency Percentage (calculated on a
contractual basis) exceeds 54.80% of the current Credit Enhancement Percentage, or (ii) the Cumulative Loss Percentage for such Distribution Date is greater than the applicable percentage set forth below with respect to such Distribution Date:

  

			
	 Distribution Date Occurring In:
	  	Percentage (%)
	 July 2008
	  	1.00
	 August 2008
	  	1.10
	 September 2008
	  	1.19
	 October 2008
	  	1.29
	 November 2008
	  	1.38
	 December 2008
	  	1.48
	 January 2009
	  	1.58
	 February 2009
	  	1.67
	 March 2009
	  	1.77
	 April 2009
	  	1.86

  

 Appendix A-40 

			
	 May 2009
	  	1.96
	 June 2009
	  	2.05
	 July 2009
	  	2.15
	 August 2009
	  	2.22
	 September 2009
	  	2.29
	 October 2009
	  	2.36
	 November 2009
	  	2.43
	 December 2009
	  	2.50
	 January 2010
	  	2.58
	 February 2010
	  	2.65
	 March 2010
	  	2.72
	 April 2010
	  	2.79
	 May 2010
	  	2.86
	 June 2010
	  	2.93
	 July 2010
	  	3.00
	 August 2010
	  	3.04
	 September 2010
	  	3.08
	 October 2010
	  	3.13
	 November 2010
	  	3.17
	 December 2010
	  	3.21
	 January 2011
	  	3.25
	 February 2011
	  	3.29
	 March 2011
	  	3.33
	 April 2011
	  	3.38
	 May 2011
	  	3.42
	 June 2011
	  	3.46
	 July 2011
	  	3.50
	 August 2011
	  	3.52
	 September 2011
	  	3.54
	 October 2011
	  	3.56
	 November 2011
	  	3.58
	 December 2011
	  	3.60
	 January 2012
	  	3.63
	 February 2012
	  	3.65
	 March 2012
	  	3.67
	 April 2012
	  	3.69
	 May 2012
	  	3.71
	 June 2012
	  	3.73
	 July 2012 and thereafter
	  	3.75

 “Trust Fund”: All of the assets of the Issuing Entity, which is the trust created
hereunder consisting of the REMIC I, REMIC II, REMIC III, REMIC IV, the Master REMIC and the Supplemental Interest Trust. 
 “Trustee”: JPMorgan Chase Bank, National Association, a national banking association organized under the laws of the United States, and its successors and assigns or any successor trustee appointed pursuant to the terms of
the Agreement. 
  

 Appendix A-41 

 “Trustee Fee”: With respect to each Distribution Date, the product of (i) the
Trustee Fee Rate divided by 12 and (ii) the Principal Balance of the Mortgage Loans as of the first day of the related Due Period. 
 “Trustee Fee Rate”: 0.0035% per annum. 
 “Underwriter Exemption”: An individual prohibited
transaction exemption, issued by the U.S. Department of Labor, which is described in PTE 2000-58, 65 Fed. Reg. 67,765 (Nov. 13, 2000). 
 “Underwriters”: Deutsche Bank Securities Inc., Wachovia Capital Markets, LLC, Greenwich Capital Markets, Inc., Morgan Stanley & Co. Incorporated, and their successors and assigns. 
 “Underwriting Agreement”: The Underwriting Agreement dated June 8, 2006 among the Underwriters, the Depositor and the Sponsor with
respect to the offer and sale of the Underwritten Certificates, as the same may be amended from time to time. 
 “Underwriting
Guidelines”: The underwriting guidelines set forth in the Prospectus Supplement under the heading “Description of the Mortgage Pool—Underwriting Standards for Mortgage Loans”. 
 “Underwritten Certificates” Collectively, the Class A Certificates and the Class M-1 Certificates, Class M-2 Certificates, Class
M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates and Class M-8 Certificates. 
 “United States Person” or “U.S. Person”: A citizen or resident of the United States, a corporation, partnership or other entity treated as a corporation or partnership for federal income tax purposes (other
than a partnership that is not treated as a U.S. Person pursuant to any applicable Treasury regulations) created or organized in, or under the laws of, the United States, any state thereof or the District of Columbia, or an estate the income of
which from sources without the United States is includible in gross income for United States federal income tax purposes regardless of its connection with the conduct of a trade or business within the United States, or a trust if a court within the
United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have authority to control all substantial decisions of the trust. 
 “Unpaid Interest Shortfall Amount”: With respect to each Class of Class A Certificates and Mezzanine Certificates and (i) the
first Distribution Date, zero, and (ii) any Distribution Date after the first Distribution Date, the sum of (a) the Unpaid Interest Shortfall Amount for that Class as of the prior Distribution Date, (b) the excess of the amount of the
Current Interest due with respect to that Class on the prior Distribution Date over the amount actually distributed to the Holders of that Class on account of the Current Interest on the prior Distribution Date and (c) interest on the sum of
(a) and (b) to the extent permitted by law, at the Pass-Through Rate for such Class for the related Accrual Period. 
 “Voting Rights”: The portion of the voting rights of all of the Certificates which is allocated to any Certificate. At all times the Class A Certificates and the Mezzanine Certificates 
  

 Appendix A-42 

 shall have 97% of the Voting Rights (allocated among the Holders of the Class A Certificates and the Mezzanine
Certificates in proportion to the then outstanding Certificate Principal Balances of their respective Certificates), the Class CA Certificates shall have 1% of the Voting Rights, the Class I Certificates shall have 1% of the Voting Rights and the
Class R Certificates shall have 1% of the Voting Rights. The Voting Rights allocated to any Class of Certificates (other than the Class CA Certificates, Class I Certificates and the Class R Certificates) shall be allocated among all Holders of each
such Class in proportion to the outstanding Certificate Principal Balance of such Certificates and the Voting Rights allocated to the Class CA Certificates, Class I Certificates and the Class R Certificates shall be allocated among all Holders of
each such Class in proportion to such Holders’ respective Percentage Interest; provided, however that when none of the Regular Certificates are outstanding, 100% of the Voting Rights shall be allocated among Holders of the Class R Certificates
in accordance with such Holders’ respective Percentage Interests in the Certificates of such Class. The Class M-9 DSI, Class M-10 DSI Certificates and Class CB Certificates do not have Voting Rights. 
 “Weighted Average Mortgage Rate”: With respect to any Distribution Date, the weighted average of the Mortgage Rates of the Mortgage
Loans (weighted by the Principal Balances of the Mortgage Loans as of the first day of the related Due Period (after giving effect to scheduled payments of principal due prior to such date, to the extent received or advanced, and unscheduled
collections of principal received prior to such date)). 
  

 Appendix A-43 

 APPENDIX B 
 Cap Interest Rate Schedule 
  

						
	 Corresponding REMIC II
 Regular Interest
	  	 Corresponding
 Interest Rate
	 	 	 Corresponding
 Maturity Date

	 All A Interests
	  	0.2350	%	 	January 2008
	 All B Interests
	  	0.2470	%	 	February 2008
	 All C Interests
	  	0.2380	%	 	February 2008
	 All D Interests
	  	0.2380	%	 	March 2008
	 All E Interests
	  	0.2225	%	 	March 2008
	 All F Interests
	  	0.2240	%	 	April 2008
	 All G Interests
	  	0.3250	%	 	January 2009
	 All H Interests
	  	0.3460	%	 	February 2009
	 All K Interests
	  	0.3300	%	 	February 2009
	 All L Interests
	  	0.3230	%	 	March 2009
	 All M Interests
	  	0.3175	%	 	March 2009
	 All O Interests
	  	0.3190	%	 	April 2009

 Class CB Certificate Schedule 
  

			
	 Distribution Date
	  	 Corresponding
 Interest
 Rate Strip (%)

	 July 2006
	  	0.00
	 August 2006
	  	0.00
	 September 2006
	  	0.00
	 October 2006
	  	0.00
	 November 2006
	  	0.00
	 December 2006
	  	0.00
	 January 2007
	  	0.00
	 February 2007
	  	0.00
	 March 2007
	  	0.00
	 April 2007
	  	0.00
	 May 2007
	  	0.00
	 June 2007
	  	0.00
	 July 2007
	  	0.06
	 August 2007
	  	0.06
	 September 2007
	  	0.06
	 October 2007
	  	0.06
	 November 2007
	  	0.06
	 December 2007
	  	0.07
	 January 2008
	  	0.10
	 February 2008
	  	0.10
	 March 2008
	  	0.11
	 April 2008
	  	0.11
	 May 2008
	  	0.11
	 June 2008
	  	0.14
	 July 2008
	  	0.14
	 August 2008
	  	0.14
	 September 2008
	  	0.18
	 October 2008
	  	0.18
	 November 2008
	  	0.18
	 December 2008
	  	0.20
	 January 2009
	  	0.20
	 February 2009
	  	0.20
	 March 2009
	  	0.22
	 April 2009
	  	0.22
	 May 2009
	  	0.22
	 June 2009
	  	0.23
	 July 2009
	  	0.23
	 August 2009
	  	0.23
	 September 2009
	  	0.26
	 October 2009
	  	0.26
	 November 2009
	  	0.29
	 December 2009
	  	0.29
	 January 2010
	  	0.26
	 February 2010
	  	0.26
	 March 2010
	  	0.26

  

 Appendix B-2 

			
	 April 2010
	  	0.31
	 May 2010
	  	0.31
	 June 2010
	  	0.32
	 July 2010
	  	0.40
	 August 2010
	  	0.28
	 September 2010
	  	0.28
	 October 2010
	  	0.32
	 November 2010
	  	0.32
	 December 2010
	  	0.32
	 January 2011
	  	0.28
	 February 2011
	  	0.28
	 March 2011
	  	0.28
	 April 2011
	  	0.32
	 May 2011
	  	0.32
	 June 2011
	  	0.32
	 July 2011
	  	0.24
	 August 2011
	  	0.24
	 September 2011
	  	0.24
	 October 2011
	  	0.28
	 November 2011
	  	0.28
	 December 2011
	  	0.28
	 January 2012
	  	0.18
	 February 2012
	  	0.18
	 March 2012
	  	0.18
	 April 2012
	  	0.20
	 May 2012
	  	0.20
	 June 2012
	  	0.20
	 July 2012
	  	0.12
	 August 2012
	  	0.12
	 September 2012
	  	0.12
	 October 2012
	  	0.13
	 November 2012
	  	0.13
	 December 2012
	  	0.13
	 January 2013
	  	0.07
	 February 2013
	  	0.07
	 March 2013
	  	0.07
	 April 2013
	  	0.07
	 May 2013
	  	0.08
	 June 2013
	  	0.08
	 July 2013
	  	0.01
	 August 2013
	  	0.01
	 September 2013
	  	0.01
	 October 2013
	  	0.01
	 November 2013
	  	0.01
	 December 2013
	  	0.01
	 January 2014
	  	0.01
	 February 2014
	  	0.01
	 March 2014
	  	0.01
	 April 2014
	  	0.01

  

 Appendix B-3 

			
	 May 2014
	  	0.01
	 June 2014
	  	0.01
	 July 2014
	  	0.02
	 August 2014
	  	0.02
	 September 2014
	  	0.02
	 October 2014
	  	0.02
	 November 2014
	  	0.02
	 December 2014
	  	0.02
	 January 2015
	  	0.02
	 February 2015
	  	0.02
	 March 2015
	  	0.02
	 April 2015
	  	0.02
	 May 2015
	  	0.03
	 June 2015
	  	0.03
	 July 2015
	  	0.03
	 August 2015
	  	0.03
	 September 2015
	  	0.03
	 October 2015
	  	0.03
	 November 2015
	  	0.03
	 December 2015
	  	0.03
	 January 2016
	  	0.03
	 February 2016
	  	0.04
	 March 2016
	  	0.04
	 April 2016
	  	0.04
	 May 2016
	  	0.04
	 June 2016
	  	0.04

  

 Appendix B-4 

 Exhibit A-1 
 Form of Class A-1A Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS A-1A CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: A-1A	 	Date: June 15, 2006	 	CUSIP: 66988V AA6
			
	 Original Principal Balance:
 $431,398,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 0.1400%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Group I Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
Funding Corporation, as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S.
Bank National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off 

 Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of
interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies
in respect of such Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment
includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The
Original Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class A-1A Certificates on June 15, 2006
which aggregate amount was $431,398,000. The owner hereof is entitled to principal payments on each Distribution Date, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the final
Distribution Date of the Class A-1A Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class A-1A Certificates (the “Class A-1A Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance
hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2
Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, 
  

 A-1-2 

 Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI
Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. Terms capitalized herein
and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of
each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class A-1A Certificates as of the close of business
on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to the distribution described in Article IV of the Pooling and Servicing Agreement, relating to such Distribution Date. Distributions
will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class A-1A Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on
such Distribution Date to the owners of the Class A-1A Certificates. The Percentage Interest of each Class A-1A Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount
set forth on such Class A-1A Certificate by $431,398,000. 
 The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all
purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing
Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No
appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This
Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar
Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to
the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
  

 A-1-3 

 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate
shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and
such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the
Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the
Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II,
REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish
certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
  

 A-1-4 

 The Class A-1A Certificates are issuable only as registered Certificates in denominations of $25,000
Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class A-1A Certificates are exchangeable for new Class A-1A Certificates
of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in
whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-1-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	Trustee Authentication
	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

 A-1-6 

 Exhibit A-2 
 Form of Class A-2A Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS A-2A CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: A-2A	 	Date: June 15, 2006	 	CUSIP: 66988V AB 4
			
	 Original Principal Balance:
 $195,000,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	 Percentage Interest: 100%
	 	 Pass-Through Rate:
 LIBOR + 0.0500%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Group II Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
Funding Corporation, as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S.
Bank National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off 

 Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of
interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies
in respect of such Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment
includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The
Original Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class A-2A Certificates on June 15, 2006
which aggregate amount was $195,000,000. The owner hereof is entitled to principal payments on each Distribution Date, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the final
Distribution Date of the Class A-2A Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class A-2A Certificates (the “Class A-2A Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance
hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2
Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, 
  

 A-2-2 

 Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI
Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. Terms capitalized herein
and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of
each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class A-2A Certificates as of the close of business
on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to the distribution described in Article IV of the Pooling and Servicing Agreement, relating to such Distribution Date. Distributions
will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class A-2A Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on
such Distribution Date to the owners of the Class A-2A Certificates. The Percentage Interest of each Class A-2A Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount
set forth on such Class A-2A Certificate by $195,000,000. 
 The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all
purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing
Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No
appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This
Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar
Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to
the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
  

 A-2-3 

 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate
shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and
such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the
Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the
Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II,
REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish
certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
  

 A-2-4 

 The Class A-2A Certificates are issuable only as registered Certificates in denominations of $25,000
Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class A-2A Certificates are exchangeable for new Class A-2A Certificates
of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in
whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-2-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	Trustee Authentication
	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its
individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-2-6 

 Exhibit A-3 
 Form of Class A-2B Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS A-2B CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: A-2B	 	Date: June 15, 2006	 	CUSIP: 66988V AB4
			
	 Original Principal Balance:
 $108,500,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 0.1100%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Group II Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
Funding Corporation, as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S.
Bank National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off 

 Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of
interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies
in respect of such Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment
includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The
Original Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class A-2B Certificates on June 15, 2006
which aggregate amount was $108,500,000. The owner hereof is entitled to principal payments on each Distribution Date, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the final
Distribution Date of the Class A-2B Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class A-2B Certificates (the “Class A-2B Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance
hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2
Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, 
  

 A-3-2 

 Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI
Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. Terms capitalized herein
and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of
each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class A-2B Certificates as of the close of business
on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to the distribution described in Article IV of the Pooling and Servicing Agreement, relating to such Distribution Date. Distributions
will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class A-2B Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on
such Distribution Date to the owners of the Class A-2B Certificates. The Percentage Interest of each Class A-2B Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount
set forth on such Class A-2B Certificate by $108,500,000. 
 The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all
purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing
Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No
appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This
Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar
Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to
the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
  

 A-3-3 

 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate
shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and
such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the
Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the
Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II,
REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish
certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
  

 A-3-4 

 The Class A-2B Certificates are issuable only as registered Certificates in denominations of $25,000
Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class A-2B Certificates are exchangeable for new Class A-2B Certificates
of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in
whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-3-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	Trustee Authentication
	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-3-6 

 Exhibit A-4 
 Form of Class A-2C Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS A-2C CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: A-2C	 	Date: June 15, 2006	 	CUSIP: 66988V AD 0 8
			
	 Original Principal Balance:
 $90,300,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 0.1500%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Group II Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
Funding Corporation, as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S.
Bank National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off 

 Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of
interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies
in respect of such Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment
includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The
Original Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class A-2C Certificates on June 15, 2006
which aggregate amount was $90,300,000. The owner hereof is entitled to principal payments on each Distribution Date, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the final
Distribution Date of the Class A-2C Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class A-2C Certificates (the “Class A-2C Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance
hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2
Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, 
  

 A-4-2 

 Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI
Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. Terms capitalized herein
and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of
each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class A-2C Certificates as of the close of business
on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to the distribution described in Article IV of the Pooling and Servicing Agreement, relating to such Distribution Date. Distributions
will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class A-2C Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on
such Distribution Date to the owners of the Class A-2C Certificates. The Percentage Interest of each Class A-2C Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount
set forth on such Class A-2C Certificate by $90,300,000. 
 The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all
purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing
Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No
appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This
Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar
Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to
the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
  

 A-4-3 

 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate
shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and
such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the
Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the
Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II,
REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish
certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
  

 A-4-4 

 The Class A-2C Certificates are issuable only as registered Certificates in denominations of $25,000
Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class A-2C Certificates are exchangeable for new Class A-2C Certificates
of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in
whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-4-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-4-6 

 Exhibit A-5 
 Form of Class A-2D Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS A-2D CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: A-2D	 	Date: June 15, 2006	 	CUSIP: 66988V AE 8
			
	 Original Principal Balance:
 $37,631,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 0.2300%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Group II Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage
Funding Corporation, as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S.
Bank National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off 

 Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of
interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies
in respect of such Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment
includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The
Original Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class A-2D Certificates on June 15, 2006
which aggregate amount was $37,631,000. The owner hereof is entitled to principal payments on each Distribution Date, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the final
Distribution Date of the Class A-2D Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class A-2D Certificates (the “Class A-2D Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance
hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class M-1 Certificates, Class M-2
Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, 
  

 A-5-2 

 Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI
Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. Terms capitalized herein
and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of
each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class A-2D Certificates as of the close of business
on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to the distribution described in Article IV of the Pooling and Servicing Agreement, relating to such Distribution Date. Distributions
will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class A-2D Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on
such Distribution Date to the owners of the Class A-2D Certificates. The Percentage Interest of each Class A-2D Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount
set forth on such Class A-2D Certificate by $37,631,000. 
 The Trustee is required to duly and punctually pay distributions with
respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all
purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing
Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No
appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This
Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar
Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited
in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and
in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to
the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
  

 A-5-3 

 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate
shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and
such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the
Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the
Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II,
REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish
certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
  

 A-5-4 

 The Class A-2D Certificates are issuable only as registered Certificates in denominations of $25,000
Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class A-2D Certificates are exchangeable for new Class A-2D Certificates
of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in
whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-5-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-5-6 

 Exhibit A-6 
 Form of Class M-1 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-1 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: M-1	 	Date: June 15, 2006	 	CUSIP: 66988V AF 54
			
	 Original Principal Balance:
 $60,245,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 0.2700%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the depositor, (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date 

 Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest
and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies in
respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment includes
all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The Original
Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class M-1 Certificates on June 15, 2006 which aggregate
amount was $60,245,000. The owner hereof is entitled to principal payments on each Distribution Date, as hereinafter described, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the
final Distribution Date of the Class M-1 Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class M-1 Certificates (the “Class M-1 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof
assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-2
Certificates, Class M-3 Certificates, 
  

 A-6-2 

 Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates,
Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such
Certificates are collectively referred to as the “Certificates”. Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution
Date”) commencing July 25, 2006, the owners of the Class M-1 Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to receive the
distribution described in Article IV of the Pooling and Servicing Agreement relating to such Distribution Date. Distributions will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the
person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class M-1 Certificate will be entitled to
receive such owner’s Percentage Interest in the amounts distributed on such Distribution Date to the owners of the Class M-1 Certificates. The Percentage Interest of each Class M-1 Certificate as of any date of determination will be equal to
the percentage obtained by dividing the Original Principal Amount set forth on such Class M-1 Certificate by $60,245,000. 
 The Trustee is
required to duly and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered
as having been paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be
serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the
servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as
otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof. 
  

 A-6-3 

 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate
shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and
such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the
Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the
Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II,
REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
  

 A-6-4 

 The Trustee is required to furnish certain information on each Distribution Date to the owner of this
Certificate, as more fully described in the Pooling and Servicing Agreement. 
 The Class M-1 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-1 Certificates are exchangeable for
new Class M-1 Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof
may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-6-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-6-6 

 Exhibit A-7 
 Form of Class M-2 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-2 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: M-2	 	Date: June 15, 2006	 	CUSIP: 66988V AG
			
	 Original Principal Balance:
 $15,827,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 0.3000%
	 	

 The registered owner named above is the registered owner of a fractional interest in (I) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date 

 Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest
and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies in
respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment includes
all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The Original
Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class M-2 Certificates on June 15, 2006 which aggregate
amount was $15,827,000. The owner hereof is entitled to principal payments on each Distribution Date, as hereinafter described, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the
final Distribution Date of the Class M-2 Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class M-2 Certificates (the “Class M-2 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof
assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1
Certificates, Class M-3 Certificates, 
  

 A-7-2 

 Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates,
Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such
Certificates are collectively referred to as the “Certificates”. Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution
Date”) commencing July 25, 2006, the owners of the Class M-2 Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to receive the
distribution described in Article IV of the Pooling and Servicing Agreement relating to such Distribution Date. Distributions will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the
person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class M-2 Certificate will be entitled to
receive such owner’s Percentage Interest in the amounts distributed on such Distribution Date to the owners of the Class M-2 Certificates. The Percentage Interest of each Class M-2 Certificate as of any date of determination will be equal to
the percentage obtained by dividing the Original Principal Amount set forth on such Class M-2 Certificate by $15,827,000. 
 The Trustee is
required to duly and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered
as having been paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be
serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the
servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as
otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof. 
  

 A-7-3 

 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate
shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and
such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the
Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the
Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II,
REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
  

 A-7-4 

 The Trustee is required to furnish certain information on each Distribution Date to the owner of this
Certificate, as more fully described in the Pooling and Servicing Agreement. 
 The Class M-2 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-2 Certificates are exchangeable for
new Class M-2 Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof
may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-7-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-7-6 

 Exhibit A-8 
 Form of Class M-3 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-3 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: M-3	 	Date: June 15, 2006	 	CUSIP: 66988V AH 1
			
	 Original Principal Balance:
 $15,317,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 0.3500%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date 

 Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest
and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies in
respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment includes
all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The Original
Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class M-3 Certificates on June 15, 2006 which aggregate
amount was $15,317,000. The owner hereof is entitled to principal payments on each Distribution Date, as hereinafter described, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the
final Distribution Date of the Class M-3 Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class M-3 Certificates (the “Class M-3 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof
assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1
Certificates, Class M-2 Certificates, 
  

 A-8-2 

 Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates,
Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificate, and Class R Certificates, and all such
Certificates are collectively referred to as the “Certificates”. Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution
Date”) commencing July 25, 2006, the owners of the Class M-3 Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to receive the
distribution described in Article IV of the Pooling and Servicing Agreement relating to such Distribution Date. Distributions will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the
person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class M-3 Certificate will be entitled to
receive such owner’s Percentage Interest in the amounts distributed on such Distribution Date to the owners of the Class M-3 Certificates. The Percentage Interest of each Class M-3 Certificate as of any date of determination will be equal to
the percentage obtained by dividing the Original Principal Amount set forth on such Class M-3 Certificate by $15,317.000. 
 The Trustee is
required to duly and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered
as having been paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be
serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the
servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as
otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof. 
  

 A-8-3 

 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate
shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and
such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the
Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the
Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II,
REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
  

 A-8-4 

 The Trustee is required to furnish certain information on each Distribution Date to the owner of this
Certificate, as more fully described in the Pooling and Servicing Agreement. 
 The Class M-3 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-3 Certificates are exchangeable for
new Class M-3 Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof
may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-8-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	Trustee Authentication
	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

 A-8-6 

 Exhibit A-9 
 Form of Class M-4 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-4 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: M-4	 	Date: June 15, 2006	 	CUSIP: 66988V AJ 7
			
	 Original Principal Balance:
 $13,785,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 0.3800%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date 

 Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest
and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies in
respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment includes
all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The Original
Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class M-4 Certificates on June 15, 2006 which aggregate
amount was $13,785,000. The owner hereof is entitled to principal payments on each Distribution Date, as hereinafter described, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the
final Distribution Date of the Class M-4 Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class M-4 Certificates (the “Class M-4 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof
assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1
Certificates, Class M-2 Certificates, 
  

 A-9-2 

 Class M-3 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates,
Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such
Certificates are collectively referred to as the “Certificates”. 
 Terms capitalized herein and not otherwise defined herein shall
have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class M-4 Certificates as of the close of business on the business day immediately preceding
such Distribution Date (the “Record Date”) will be entitled to receive the distribution described in Article IV of the Pooling and Servicing Agreement relating to such Distribution Date. Distributions will be made in immediately available
funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class M-4 Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on such Distribution Date to the owners of the Class M-4 Certificates. The Percentage Interest of
each Class M-4 Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount set forth on such Class M-4 Certificate by $13,785,000. 
 The Trustee is required to duly and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and
Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the
Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from
any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or
an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the
Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
  

 A-9-3 

 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the
Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate shall have the right which is absolute and
unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and such right shall not be impaired without the
consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the Issuing Entity, (iii) the optional
purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC III and REMIC IV is effected
pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under the Code, the Mortgage Loans may
be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by
purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage
Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any
unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount
due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice
of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and
Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer
at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
  

 A-9-4 

 The Trustee is required to furnish certain information on each Distribution Date to the owner of this
Certificate, as more fully described in the Pooling and Servicing Agreement. 
 The Class M-4 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-4 Certificates are exchangeable for
new Class M-4 Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof
may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-9-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	Trustee Authentication
	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

 A-9-6 

 Exhibit A-10 
 Form of Class M-5 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-5 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: M-5	 	Date: June 15, 2006	 	CUSIP: 66988V AK 4
			
	 Original Principal Balance:
 $10,211,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 0.4700%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date 

 Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest
and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies in
respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment includes
all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The Original
Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class M-5 Certificates on June 15, 2006 which aggregate
amount was $10,211,000. The owner hereof is entitled to principal payments on each Distribution Date, as hereinafter described, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the
final Distribution Date of the Class M-5 Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class M-5 Certificates (the “Class M-5 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof
assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1
Certificates, Class M-2 Certificates, 
  

 A-10-2 

 Class M-3 Certificates, Class M-4 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates,
Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates and Class R Certificates, and all such
Certificates are collectively referred to as the “Certificates”. 
 Terms capitalized herein and not otherwise defined herein shall
have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class M-5 Certificates as of the close of business on the business day immediately preceding
such Distribution Date (the “Record Date”) will be entitled to receive the distribution described in Article IV of the Pooling and Servicing Agreement relating to such Distribution Date. Distributions will be made in immediately available
funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class M-5 Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on such Distribution Date to the owners of the Class M-5 Certificates. The Percentage Interest of
each Class M-3 Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount set forth on such Class M-5 Certificate by $10,211,000. 
 The Trustee is required to duly and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and
Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the
Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from
any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or
an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the
Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
  

 A-10-3 

 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the
Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate shall have the right which is absolute and
unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and such right shall not be impaired without the
consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the Issuing Entity, (iii) the optional
purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC III and REMIC IV is effected
pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under the Code, the Mortgage Loans may
be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by
purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage
Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any
unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount
due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice
of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and
Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer
at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
  

 A-10-4 

 The Trustee is required to furnish certain information on each Distribution Date to the owner of this
Certificate, as more fully described in the Pooling and Servicing Agreement. 
 The Class M-5 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-5 Certificates are exchangeable for
new Class M-5 Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof
may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-10-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	Trustee Authentication
	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-10-6 

 Exhibit A-11 
 Form of Class M-6 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-6 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: M-6	 	Date: June 15, 2006	 	CUSIP: 66988V AL 2 0
			
	 Original Principal Balance:
 $8,169,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 0.9000%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation, as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date 

 Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest
and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies in
respect of such Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment includes
all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The Original
Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class M-6 Certificates on June 15, 2006 which aggregate
amount was $8,169,000. The owner hereof is entitled to principal payments on each Distribution Date, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the final Distribution Date of
the Class M-6 Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount set forth above.

 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the Trustee. The Pooling
and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement. 
 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE
MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS
(SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO
PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS
CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class M-6 Certificates (the “Class M-6 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof
assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1
Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-7 Certificates, 
  

 A-11-2 

 Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI
Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. Terms capitalized herein
and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of
each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class M-6 Certificates as of the close of business on the
business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to the distribution described in Article IV of the Pooling and Servicing Agreement, relating to such Distribution Date. Distributions will be
made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class M-6 Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on such
Distribution Date to the owners of the Class M-6 Certificates. The Percentage Interest of each Class M-6 Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount set forth on such
Class M-6 Certificate by $8,169,000. 
 The Trustee is required to duly and punctually pay distributions with respect to this Certificate in
accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the Pooling and
Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and
Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a
deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain
collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing
Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing
Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
  

 A-11-3 

 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate
shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and
such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the
Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the
Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II,
REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish
certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
  

 A-11-4 

 The Class M-6 Certificates are issuable only as registered Certificates in denominations of $25,000
Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-6 Certificates are exchangeable for new Class M-6 Certificates of authorized
denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in whose name this
Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-11-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-11-6 

 Exhibit A-12 
 Form of Class M-7 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-7 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: M-7	 	Date: June 15, 2006	 	CUSIP: 66988V AM 0
			
	 Original Principal Balance:
 $6,127,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 1.0500%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as 

 servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date
Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired
by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies in respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the
Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans.

 The Original Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate
and (ii) the aggregate Original Principal Amount of the Class M-7 Certificates on June 15, 2006 which aggregate amount was $6,127,000. The owner hereof is entitled to principal payments on each Distribution Date, as hereinafter described,
which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the final Distribution Date of the Class M-7 Certificates. Therefore, the actual outstanding principal amount of this Certificate,
on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on
this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement. 
 SOLELY FOR
FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2, Class M-7 Certificates (the “Class M-7 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates,
Class A-2B Certificates, 
  

 A-12-2 

 Class A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3
Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2
Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. Terms capitalized herein and not otherwise defined herein shall have the
respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a Business
Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class M-7 Certificates as of the close of business on the business day immediately preceding such
Distribution Date (the “Record Date”) will be entitled to receive the distribution described in Article IV of the Pooling and Servicing Agreement relating to such Distribution Date. Distributions will be made in immediately available funds
to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class M-7 Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on such Distribution Date to the owners of the Class M-7 Certificates. The Percentage Interest of
each Class M-7 Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount set forth on such Class M-7 Certificate by $6,127,000. 
 The Trustee is required to duly and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and
Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the
Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from
any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or
an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the
Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment
of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
  

 A-12-3 

 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate
shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and
such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the
Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the
Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II,
REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under
the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last
survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
  

 A-12-4 

 The Trustee is required to furnish certain information on each Distribution Date to the owner of this
Certificate, as more fully described in the Pooling and Servicing Agreement. 
 The Class M-7 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-7 Certificates are exchangeable for
new Class M-7 Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof
may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-12-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-12-6 

 Exhibit A-13 
 Form of Class M-8 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-8 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 Unless this certificate is presented by an authorized representative of The Depository Trust Company, a New
York corporation (“DTC”), to the Issuing Entity or its agent for registration of transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co. or in such other name as is requested by an
authorized representative of DTC (and any payment is made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein. 
 (This certificate does not represent an
interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and
affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is
payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
  

					
	No.: M-8	 	Date: June 15, 2006	 	CUSIP: 66988V AN 8
			
	 Original Principal Balance:
 $10,211,000
	 	 Registered Owner:
 CEDE & CO.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 1.9000%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date 

 Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect of interest
and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance policies in
respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment includes
all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The Original
Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and (ii) the aggregate Original Principal Amount of the Class M-8 Certificates on June 15, 2006 which aggregate
amount was $10,211,000. The owner hereof is entitled to principal payments on each Distribution Date, as hereinafter described, which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the
final Distribution Date of the Class M-8 Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount
set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A
“REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC
PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES
HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,
Class M-8 Certificates (the “Class M-8 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof
assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1
Certificates, Class M-2 Certificates, 
  

 A-13-2 

 Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates,
Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such
Certificates are collectively referred to as the “Certificates”. 
 Terms capitalized herein and not otherwise defined herein shall
have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a
Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class M-8 Certificates as of the close of business on the business day immediately preceding
such Distribution Date (the “Record Date”) will be entitled to receive the distribution described in Article IV of the Pooling and Servicing Agreement relating to such Distribution Date. Distributions will be made in immediately available
funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class M-8 Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on such Distribution Date to the owners of the Class M-8 Certificates. The Percentage Interest of
each Class M-8 Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount set forth on such Class M-8 Certificate by $10,211,000. 
 The Trustee is required to duly and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and
Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the
Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from
any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or
an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the
Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
  

 A-13-3 

 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the
Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate shall have the right which is absolute and
unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and such right shall not be impaired without the
consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the Issuing Entity, (iii) the optional
purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC III and REMIC IV is effected
pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under the Code, the Mortgage Loans may
be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by
purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage
Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any
unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount
due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice
of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and
Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer
at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
  

 A-13-4 

 The Trustee is required to furnish certain information on each Distribution Date to the owner of this
Certificate, as more fully described in the Pooling and Servicing Agreement. 
 The Class M-8 Certificates are issuable only as registered
Certificates in denominations of $25,000 Original Principal Amount and integral multiples of $1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-8 Certificates are exchangeable for
new Class M-8 Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof
may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-13-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	Trustee Authentication
	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

 A-13-6 

 Exhibit A-14 
 Form of Class M-9 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-9 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of Mortgage Loans 
 The Mortgage Loans are Serviced
by 
 NOVASTAR MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and
Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS
CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
“CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN WITH THE
ASSETS OF ANY SUCH PLAN. 
  

					
	No.: M-9	 	Date: June 15, 2006	 	CUSIP: 66988V AP 3
			
	 Original Principal Balance:
 $8,169,000
	 	 Registered Owner:
 Greenwich Capital Financial Products,
Inc.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 2.5000%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date Principal Balance, all interest
accruing thereon on and after the Cut-off Date and all collections in respect of interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu
of foreclosure; (iii) the Depositor’s interest in any insurance policies in respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all
other assets included or to be included in the Trust Fund. Such assignment includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The Original Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and
(ii) the aggregate Original Principal Amount of the Class M-9 Certificates on June 15, 2006 which aggregate amount was $8,169,000. The owner hereof is entitled to principal payments on each Distribution Date, as hereinafter described,
which will fully amortize such Original Principal Amount over the period from the date of initial delivery hereof to the final Distribution Date of the Class M-9 Certificates. Therefore, the actual outstanding principal amount of this Certificate,
on any date subsequent to July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount set forth above. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on
this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement. 
 SOLELY FOR
FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G
AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX
PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
  

 A-14-2 

 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity
Loan Asset-Backed Certificates, Series 2006-2, Class M-9 Certificates (the “Class M-9 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this
Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates,
Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates, Class M-10 Certificates,
Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the
“Certificates”. Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class
M-9 Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to receive the distribution described in Article IV of the Pooling and Servicing Agreement
relating to such Distribution Date. Distributions will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class M-9 Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on such
Distribution Date to the owners of the Class M-9 Certificates. The Percentage Interest of each Class M-9 Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount set forth on such
Class M-9 Certificate by $8,169,000. 
 The Trustee is required to duly and punctually pay distributions with respect to this Certificate in
accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the Pooling and
Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and
Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer
shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a
deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their
subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain
collections and 
  

 A-14-3 

 recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the
Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall
have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in
compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any
Certificate shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate
upon notice to the Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage
Loan held by the Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and
REMIC I, REMIC II, REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC
IV as a REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
  

 A-14-4 

 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth
and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register,
and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
 The Class M-9 Certificates are issuable only as registered Certificates in denominations of $25,000 Original Principal Amount and integral multiples of
$1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-9 Certificates are exchangeable for new Class M-9 Certificates of authorized denominations evidencing the same aggregate
principal amount. 
 The Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof
for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-14-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	Trustee Authentication
	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

 A-14-6 

 Exhibit A-15 
 Form of Class M-10 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-10 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of Mortgage Loans 
 The Mortgage Loans are Serviced
by 
 NOVASTAR MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and
Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS
CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
“CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN WITH THE
ASSETS OF ANY SUCH PLAN. 
  

					
	No.: M-10	 	Date: June 15, 2006	 	CUSIP: 66988V AQ 1
			
	 Original Principal Balance:
 $5,106,000
	 	 Registered Owner: Greenwich
 Capital Financial Products,
Inc.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Pass-Through Rate:
 LIBOR + 2.5000%
	 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation, as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date Principal Balance, all interest
accruing thereon on and after the Cut-off Date and all collections in respect of interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu
of foreclosure; (iii) the Depositor’s interest in any insurance policies in respect of such Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all
other assets included or to be included in the Trust Fund. Such assignment includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 The Original Principal Amount set forth above is equal to the product of (i) the Percentage Interest represented by this Certificate and
(ii) the aggregate Original Principal Amount of the Class M-10 Certificates on June 15, 2006 which aggregate amount was $5,106,000. The owner hereof is entitled to principal payments on each Distribution Date, which will fully amortize
such Original Principal Amount over the period from the date of initial delivery hereof to the final Distribution Date of the Class M-10 Certificates. Therefore, the actual outstanding principal amount of this Certificate, on any date subsequent to
July 25, 2006 (the first Distribution Date) will be less than the Original Principal Amount set forth above. 
 In order to receive the
final distribution hereon, the owner hereof is required to present this Certificate to the Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate
shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement. 
 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS
CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
  

 A-15-2 

 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity
Loan Asset-Backed Certificates, Series 2006-2, Class M-10 Certificates (the “Class M-10 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this
Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates,
Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates, Class M-9 Certificates,
Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the
“Certificates”. Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class
M-10 Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record Date”) will be entitled to the distribution described in Article IV of the Pooling and Servicing Agreement,
relating to such Distribution Date. Distributions will be made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 Each owner of record of a Class M-10 Certificate will be entitled to receive such owner’s Percentage Interest in the amounts distributed on such
Distribution Date to the owners of the Class M-10 Certificates. The Percentage Interest of each Class M-10 Certificate as of any date of determination will be equal to the percentage obtained by dividing the Original Principal Amount set forth on
such Class M-10 Certificate by $5,106,000. 
 The Trustee is required to duly and punctually pay distributions with respect to this
Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the
Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The
Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any
Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not
represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of
their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to
certain collections and 
  

 A-15-3 

 recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the
Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall
have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in
compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any
Certificate shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such
distribution, and such right shall not be impaired without the consent of such owner. 
 The Pooling and Servicing Agreement will terminate
upon notice to the Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage
Loan held by the Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and
REMIC I, REMIC II, REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC
IV as a REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
  

 A-15-4 

 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth
and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register,
and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
 The Class M-10 Certificates are issuable only as registered Certificates in denominations of $25,000 Original Principal Amount and integral multiples of
$1,000. As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-10 Certificates are exchangeable for new Class M-10 Certificates of authorized denominations evidencing the same aggregate
principal amount. 
 The Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof
for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-15-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-15-6 

 Exhibit A-16 
 Form of Class I-1 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS I-1 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage
Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate representing
a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Trustee relating to the Mortgage
Loans and other assets held in the Trust Fund.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“1933 ACT”), OR THE SECURITIES LAW OF ANY STATE. THIS CERTIFICATE IS NOT TRANSFERABLE. 
  

					
	No.: I-1	 	Date: June 15, 2006	 	CUSIP: 66988V AT 5
			
	Percentage Interest: 100%	 	 Registered Owner:
 NovaStar Mortgage
 Supplemental Interest Trust,
 Series 2006-2
	 	 Final Scheduled Distribution
 Date: April 25,
2008

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

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF
“REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”),
ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE
ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 THIS CERTIFICATE IS AN INTEREST ONLY CERTIFICATE. THE HOLDER OF THIS CERTIFICATE SHALL NOT
BE ENTITLED TO ANY DISTRIBUTIONS OF PRINCIPAL WITH RESPECT TO THE MORTGAGE LOANS. 
 This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2, Class I-1 Certificates (the “Class I-1 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates,
Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-2 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all
such Certificates are collectively referred to as the “Certificates”. 
 Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not
a Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class I-1 Certificates as of the close of business on the business day immediately preceding
such Distribution Date (the “Record Date”) will be entitled to receive the distribution described in Article IV of the Pooling and Servicing Agreement relating to such Distribution Date. Distributions will be made in immediately available
funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
  

 A-16-2 

 Each owner of record of a Class I-1 Certificate will be entitled to receive such owner’s Percentage
Interest in the amounts distributed on such Distribution Date to the owners of the Class I-1 Certificates. 
 The Trustee is required to duly
and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been
paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the
Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as
otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be impaired without the consent of such owner. 
 The Pooling and
Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan held by the Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified
Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of
REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in 
  

 A-16-3 

 no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the
Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period preceding the final Distribution Date plus unreimbursed
Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap Carryforward Amount (without duplication of amounts
already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this
Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or
transferees. 
 The Trustee is required to furnish certain information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement. 
 As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Class I-1 Certificates are exchangeable for new Class I-1 Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the
Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-16-4 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-16-5 

 Exhibit A-17 
 Form of Class I-2 Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS I-2 CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage
Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate representing
a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Trustee relating to the Mortgage
Loans and other assets held in the Trust Fund.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“1933 ACT”), OR THE SECURITIES LAW OF ANY STATE. THIS CERTIFICATE IS NOT TRANSFERABLE. 
  

					
	No.: I-2	 	Date: June 15, 2006	 	CUSIP: 66988V AT 5
			
	Percentage Interest: 100%	 	 Registered Owner:
 NovaStar Mortgage
 Supplemental Interest Trust,
 Series 2006-2
	 	 Final Scheduled Distribution
 Date: April 25,
2009

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

 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF
“REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”),
ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE
ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 THIS CERTIFICATE IS AN INTEREST ONLY CERTIFICATE. THE HOLDER OF THIS CERTIFICATE SHALL NOT
BE ENTITLED TO ANY DISTRIBUTIONS OF PRINCIPAL WITH RESPECT TO THE MORTGAGE LOANS. 
 This Certificate is one of a Class of duly-authorized
Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2, Class I-2 Certificates (the “Class I-2 Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and
Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates,
Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7
Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class CA Certificates, Class CB Certificates, and Class R Certificates, and all
such Certificates are collectively referred to as the “Certificates”. 
 Terms capitalized herein and not otherwise defined herein
shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not
a Business Day, then the next succeeding Business Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class I-2 Certificates as of the close of business on the business day immediately preceding
such Distribution Date (the “Record Date”) will be entitled to receive the distribution described in Article IV of the Pooling and Servicing Agreement relating to such Distribution Date. Distributions will be made in immediately available
funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
  

 A-17-2 

 Each owner of record of a Class I-2 Certificate will be entitled to receive such owner’s Percentage
Interest in the amounts distributed on such Distribution Date to the owners of the Class I-2 Certificates. 
 The Trustee is required to duly
and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been
paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the
Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as
otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be impaired without the consent of such owner. 
 The Pooling and
Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan held by the Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified
Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of
REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in 
  

 A-17-3 

 no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last survivor
of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the
Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal Balance of the Mortgage Loans and REO Properties or the
market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period preceding the final Distribution Date plus unreimbursed
Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap Carryforward Amount (without duplication of amounts
already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this
Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or
transferees. 
 The Trustee is required to furnish certain information on each Distribution Date to the owner of this Certificate, as more
fully described in the Pooling and Servicing Agreement. 
 As provided in the Pooling and Servicing Agreement and subject to certain
limitations therein set forth, Class I-2 Certificates are exchangeable for new Class I-2 Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the
Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-17-4 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-17-5 

 Exhibit A-18 
 Form of Class CA Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS CA CERTIFICATES 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage
Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate representing
a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Trustee relating to the Mortgage
Loans and other assets held in the Trust Fund.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS
OF THE POOLING AND SERVICING AGREEMENT. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT
PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE
OR ANY INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN. 
  

					
	No.: CA	 	Date: June 15, 2006	 	CUSIP: 66988V AR 9
			
	 Notional Amount:
 $1,021,102,080
	 	 Registered Owner:
 Greenwich Capital
 Financial Products, Inc.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 		 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the depositor (the “Depositor”), the Trustee, J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank National Association, as the custodian (the “Custodian”), and
NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect
of interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance
policies in respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment
includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 Each
owner of record of a Class CA Certificate will be entitled to certain distributions, as described under Article IV of the Pooling and Servicing Agreement. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement. 
 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN ONE OR MORE CLASSES OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 DISTRIBUTIONS ON THIS CERTIFICATE WILL BE MADE TO THE OWNER HEREOF FOLLOWING THE PRIOR FUNDING OF AMOUNTS OWED TO CERTAIN CAP COUNTERPARTIES, AND
FOLLOWING THE FUNDING OF SUPPLEMENTAL INTEREST PAYMENTS TO CERTAIN OTHER CLASSES OF CERTIFICATES. 
 THIS CERTIFICATE IS A PASS-THROUGH
CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
  

 A-18-2 

 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity
Loan Asset-Backed Certificates, Series 2006-2, Class CA Certificates (the “Class CA Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this
Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates,
Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates, Class M-9 Certificates,
Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the
“Certificates”. 
 Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the
Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business
Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class CA Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record
Date”) will be entitled to receive payments in respect of interest, principal, if any, and the Prepayment Charges relating to such Distribution Date, all as described in Article IV of the Pooling and Servicing Agreement. Distributions will be
made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 The Trustee is required to duly and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and
Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the
Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from
any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or
an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the
Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
  

 A-18-3 

 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the
Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate shall have the right which is absolute and
unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and such right shall not be impaired without the
consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the Issuing Entity, (iii) the optional
purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC III and REMIC IV is effected
pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under the Code, the Mortgage Loans may
be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by
purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage
Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any
unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount
due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice
of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and
Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer
at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
  

 A-18-4 

 The Trustee is required to furnish certain information on each Distribution Date to the owner of this
Certificate, as more fully described in the Pooling and Servicing Agreement. 
 As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class CA Certificates are exchangeable for new Class CA Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the
Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-18-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-18-6 

 Exhibit A-19 
 Form of Class CB Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS CB CERTIFICATES 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage
Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate representing
a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Trustee relating to the Mortgage
Loans and other assets held in the Trust Fund.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS
OF THE POOLING AND SERVICING AGREEMENT. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT
PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE
OR ANY INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN. 
  

					
	No.: CB	 	Date: June 15, 2006	 	CUSIP: 66988V AS 7
			
	 Notional Amount:
 $1,021,102,080
	 	 Registered Owner:
 Greenwich Capital
 Financial Products, Inc.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 		 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation as the depositor (the “Depositor”), the Trustee, J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank National Association, as the custodian (the “Custodian”), and
NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date Principal Balance, all interest accruing thereon on and after the Cut-off Date and all collections in respect
of interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu of foreclosure; (iii) the Depositor’s interest in any insurance
policies in respect of the Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all other assets included or to be included in the Trust Fund. Such assignment
includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 Each
owner of record of a Class CB Certificate will be entitled to certain distributions, as described under Article IV of the Pooling and Servicing Agreement. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final
distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement. 
 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS AN INTEREST IN A CLASS OF “REGULAR INTERESTS” IN A “REAL ESTATE MORTGAGE INVESTMENT CONDUIT” (“REMIC”) AS THOSE TERMS ARE DEFINED,
RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH 860G) OF THE CODE. 
 DISTRIBUTIONS ON THIS CERTIFICATE WILL BE MADE TO THE OWNER HEREOF FOLLOWING THE PRIOR FUNDING OF AMOUNTS OWED TO CERTAIN CAP COUNTERPARTIES, AND
FOLLOWING THE FUNDING OF SUPPLEMENTAL INTEREST PAYMENTS TO CERTAIN OTHER CLASSES OF CERTIFICATES. 
 THIS CERTIFICATE IS A PASS-THROUGH
CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
  

 A-19-2 

 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity
Loan Asset-Backed Certificates, Series 2006-2, Class CB Certificates (the “Class CB Certificates”) and issued under and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this
Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates,
Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates, Class M-9 Certificates,
Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the
“Certificates”. 
 Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the
Pooling and Servicing Agreement. 
 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business
Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class CB Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record
Date”) will be entitled to receive payments in respect of interest, principal, if any, and the Prepayment Charges relating to such Distribution Date, all as described in Article IV of the Pooling and Servicing Agreement. Distributions will be
made in immediately available funds to such owners, by wire transfer or by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 The Trustee is required to duly and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and
Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the
Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from
any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or
an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not
insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the
Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
  

 A-19-3 

 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the
Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate shall have the right which is absolute and
unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and such right shall not be impaired without the
consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage Loan held by the Issuing Entity, (iii) the optional
purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC III and REMIC IV is effected
pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under the Code, the Mortgage Loans may
be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of
Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by
purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage
Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any
unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount
due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice
of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and
Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer
at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
  

 A-19-4 

 The Trustee is required to furnish certain information on each Distribution Date to the owner of this
Certificate, as more fully described in the Pooling and Servicing Agreement. 
 As provided in the Pooling and Servicing Agreement and
subject to certain limitations therein set forth, Class CB Certificates are exchangeable for new Class CB Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the
Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-19-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-19-6 

 Exhibit A-20 
 Form of Class R Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS R CERTIFICATES 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans 
 The Mortgage Loans are Serviced by 
 NOVASTAR
MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage
Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate representing
a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Trustee relating to the Mortgage
Loans held in the Trust Fund.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“1933 ACT”), OR THE SECURITIES LAW OF ANY STATE. ANY RESALE, TRANSFER OR OTHER DISPOSITION OF THIS CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR
QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY
INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A
PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN DESCRIBED
IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN WITH THE ASSETS OF ANY SUCH PLAN. 
  

					
	No.: R	 	Date: June 15, 2006	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 	 Registered Owner:
 Wachovia Bank N.A.
	 	

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

 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the Trustee. The Pooling
and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement. 
 SOLELY FOR FEDERAL INCOME TAX PURPOSES, THIS CERTIFICATE REPRESENTS “RESIDUAL INTERESTS” IN FIVE “REAL ESTATE MORTGAGE INVESTMENT
CONDUITS” (“REMICs”) AS THOSE TERMS ARE DEFINED, RESPECTIVELY, IN SECTIONS 860G AND 860D OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ASSUMING COMPLIANCE WITH THE REMIC PROVISIONS (SECTIONS 860A THROUGH
860G) OF THE CODE. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST,
NO DEBT OF ANY PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 TRANSFER OF THIS CLASS R CERTIFICATE
IS RESTRICTED AS SET FORTH IN THE POOLING AND SERVICING AGREEMENT. NO TRANSFER OF THIS CLASS R CERTIFICATE MAY BE MADE TO A “DISQUALIFIED ORGANIZATION” AS DEFINED IN SECTION 860E(5) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
“CODE”). SUCH TERM INCLUDES THE UNITED STATES, ANY STATE OR POLITICAL SUBDIVISION THEREOF, ANY FOREIGN GOVERNMENT, ANY INTERNATIONAL ORGANIZATION, ANY AGENCY OR INSTRUMENTALITY OF ANY OF THE FOREGOING (OTHER THAN CERTAIN TAXABLE
INSTRUMENTALITIES), ANY COOPERATIVE ORGANIZATION FURNISHING ELECTRIC ENERGY OR PROVIDING THEREOF SERVICE TO PERSONS IN RURAL AREAS, OR ANY ORGANIZATION (OTHER THAN A FARMERS’ COOPERATIVE) THAT IS EXEMPT 
  

 A-20-2 

 FROM FEDERAL INCOME TAX UNLESS SUCH ORGANIZATION IS SUBJECT TO THE TAX ON UNRELATED BUSINESS INCOME. NO TRANSFER OF THIS
CLASS R CERTIFICATE WILL BE REGISTERED BY THE TRUSTEE UNLESS THE PROPOSED TRANSFEREE HAS DELIVERED AN AFFIDAVIT AFFIRMING, AMONG OTHER THINGS, THAT THE PROPOSED TRANSFEREE IS NOT A DISQUALIFIED ORGANIZATION AND IS NOT ACQUIRING THE CLASS R
CERTIFICATE FOR THE ACCOUNT OF A DISQUALIFIED ORGANIZATION. A COPY OF THE FORM OF AFFIDAVIT REQUIRED OF EACH PROPOSED TRANSFEREE IS ON FILE AND AVAILABLE FROM THE TRUSTEE. 
 A TRANSFER IN VIOLATION OF THE APPLICABLE RESTRICTIONS MAY GIVE RISE TO A SUBSTANTIAL TAX UPON THE TRANSFEROR OR, IN CERTAIN CASES, UPON AN AGENT ACTING
FOR THE TRANSFEREE. A PASS-THRU ENTITY THAT HOLDS THIS CLASS R CERTIFICATE AND THAT HAS A DISQUALIFIED ORGANIZATION AS A RECORD OWNER IN ANY TAXABLE YEAR GENERALLY WILL BE SUBJECT TO A TAX FOR EACH SUCH YEAR EQUAL TO THE PRODUCT OF (A) THE
AMOUNT OF EXCESS INCLUSIONS WITH RESPECT TO THE PORTION OF THIS CERTIFICATE OWNED THROUGH SUCH PASS-THRU ENTITY BY SUCH DISQUALIFIED ORGANIZATION AND (B) THE HIGHEST MARGINAL FEDERAL TAX RATE ON CORPORATIONS. FOR PURPOSES OF THE PRECEDING
SENTENCE, THE TERM “PASS-THRU” ENTITY INCLUDES REGULATED INVESTMENT COMPANIES, REAL ESTATE INVESTMENT TRUSTS, COMMON TRUST FUNDS, PARTNERSHIPS, TRUSTS, ESTATES, COOPERATIVES TO WHICH PART I OF SUBCHAPTER T, CHAPTER 1 OF THE CODE APPLIES
AND, EXCEPT AS PROVIDED IN REGULATIONS, NOMINEES. 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED OR GUARANTEED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a
Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2 Class R Certificates (the “Class R Certificates”) and issued under and subject to the terms, provisions and conditions
of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the Class A-1A Certificates, Class A-2A
Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates, Class M-5 Certificates, Class M-6 Certificates,
Class M-7 Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates and Class CB
Certificates, and all such Certificates are collectively referred to as the “Certificates”. 
 Terms capitalized herein and not
otherwise defined herein shall have the respective meanings set forth in the Pooling and Servicing Agreement. 
  

 A-20-3 

 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business
Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class R Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record
Date”) will be entitled to receive the distribution described in Article IV of the Pooling and Servicing Agreement relating to such Distribution Date. Distributions will be made in immediately available funds to such owners, by wire transfer or
by check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 The Trustee is required to duly
and punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been
paid by the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the
Servicer pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and
administration of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by,
NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the
Government National Mortgage Association, or any other governmental agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as
otherwise provided in the Pooling and Servicing Agreement) all as more specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding, judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the
Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and
Servicing Agreement, the owner of any Certificate shall have the right which is absolute and unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit
for the enforcement of any such distribution, and such right shall not be impaired without the consent of such owner. 
 The Pooling and
Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the Distribution Date on which the Certificate Principal Balances of the Regular Certificates have been reduced to zero, (ii) the final payment or other
liquidation of the last Mortgage Loan held by the Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time 
  

 A-20-4 

 when a Qualified Liquidation of the Master REMIC and REMIC I, REMIC II, REMIC III and REMIC IV is effected pursuant to
the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC IV as a REMIC under the Code, the Mortgage Loans may be sold,
thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the death of the last survivor of the descendants of Joseph P.
Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by
purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage
Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any
unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount
due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice
of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and
Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer
at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling
and Servicing Agreement. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class R
Certificates are exchangeable for new Class R Certificates of authorized denominations evidencing the same aggregate principal amount. 
 The
Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-20-5 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-20-6 

 Exhibit A-21 
 Form of Class M-9 DSI Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-9 DSI CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans The Mortgage Loans are Serviced
by 
 NOVASTAR MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and
Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS
CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
“CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN WITH THE
ASSETS OF ANY SUCH PLAN. 
  

					
	No.: M-9 DSI	 	Date: June 15, 2006	 	CUSIP: 66988V AU 2
			
	 Notional Amount:
 $8,169,000
	 	 Registered Owner:
 Greenwich Capital Financial Products,
Inc.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 		 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation, as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date Principal Balance, all interest
accruing thereon on and after the Cut-off Date and all collections in respect of interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu
of foreclosure; (iii) the Depositor’s interest in any insurance policies in respect of such Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all
other assets included or to be included in the Trust Fund. Such assignment includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 Each owner of record of a Class M-9 DSI Certificate will be entitled to certain distributions, as described under Article IV of the Pooling and Servicing
Agreement. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the Trustee. The
Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement. 
 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY PERSON IS
REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE INSURED
OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2, Class M-9 DSI Certificates (the “Class M-9 DSI Certificates”) and issued under
and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the
Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates,
Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-10 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates,
Class CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the
Pooling and Servicing Agreement. 
  

 A-21-2 

 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business
Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class M-9 DSI Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record
Date”) will be entitled to the distribution described in Article IV of the Pooling and Servicing Agreement, relating to such Distribution Date. Distributions will be made in immediately available funds to such owners, by wire transfer or by
check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 The Trustee is required to duly and
punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by
the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer
pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation,
NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental
agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate shall have the right which is absolute and
unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and such right shall not be impaired without the
consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the 
  

 A-21-3 

 Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage
Loan held by the Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and
REMIC I, REMIC II, REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC
IV as a REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish
certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-9 DSI Certificates are exchangeable for new Class M-9 DSI Certificates of authorized denominations evidencing the same
aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-21-4 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-21-5 

 Exhibit A-22 
 Form of Class M-10 DSI Certificate 
 NOVASTAR MORTGAGE FUNDING TRUST, SERIES 2006-2 
 HOME EQUITY LOAN ASSET-BACKED CERTIFICATE 
 CLASS M-10 DSI CERTIFICATE 
 Comprised of a Certificate Representing 
 Certain Interests Relating to a Pool of 
 Mortgage Loans The Mortgage Loans are Serviced
by 
 NOVASTAR MORTGAGE, INC., as Servicer 
 (This certificate does not represent an interest in, or an obligation of, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, NovaStar
Financial, Inc., NovaStar Capital, Inc. or any of their subsidiaries and affiliates. This certificate is comprised of a Certificate representing a fractional ownership interest in distributions in certain Accounts created pursuant to the Pooling and
Servicing Agreement and certain other rights relating thereto and is payable only from amounts received by the Trustee relating to the Mortgage Loans and other assets held in the Trust Fund.) 
 THIS CERTIFICATE HAS NOT BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE DISPOSITION OF THIS
CERTIFICATE WITHOUT SUCH REGISTRATION OR QUALIFICATION MAY BE MADE ONLY IN A TRANSACTION WHICH DOES NOT REQUIRE SUCH REGISTRATION OR QUALIFICATION AND IN ACCORDANCE WITH THE PROVISIONS OF THE POOLING AND SERVICING AGREEMENT. 
 NO TRANSFER OF THIS CERTIFICATE OR ANY INTEREST HEREIN MAY BE MADE TO (I) AN EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”)) THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (II) A PLAN (AS DEFINED IN SECTION 4975(E)(1) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE
“CODE”)) THAT IS SUBJECT TO SECTION 4975 OF THE CODE OR (III) ANY PERSON ACTING, DIRECTLY OR INDIRECTLY, ON BEHALF OF ANY PLAN DESCRIBED IN (I) OR (II) OR ACQUIRING THIS CERTIFICATE OR ANY INTEREST HEREIN WITH THE
ASSETS OF ANY SUCH PLAN. 
  

					
	No.: M-10 DSI	 	Date: June 15, 2006	 	CUSIP: 66988V AV 0
			
	 Notional Amount:
 $5,106,000
	 	 Registered Owner:
 Greenwich Capital
 Financial Products, Inc.
	 	 Final Scheduled Distribution
 Date: June 25,
2036

			
	Percentage Interest: 100%	 		 	

 The registered owner named above is the registered owner of a fractional interest in (i) each
Mortgage Loan identified on the Mortgage Loan Schedule attached as Exhibit B to that certain Pooling and Servicing Agreement dated as of June 1, 2006 (the “Pooling and Servicing Agreement”) by and among NovaStar Mortgage Funding
Corporation, as the depositor (the “Depositor”), JPMorgan Chase Bank, National Association, as trustee (the “Trustee”), J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), U.S. Bank
National Association, as the custodian (the “Custodian”), and NovaStar Mortgage, Inc. as servicer (the “Servicer”) and as sponsor (the “Sponsor”), including the related Cut-off Date Principal Balance, all interest
accruing thereon on and after the Cut-off Date and all collections in respect of interest and principal due after the Cut-off Date; (ii) property which secured each such Mortgage Loan and which has been acquired by foreclosure or deed in lieu
of foreclosure; (iii) the Depositor’s interest in any insurance policies in respect of such Mortgage Loans; (iv) all proceeds of any of the foregoing; (v) the rights of the Depositor under the Purchase Agreement and (vi) all
other assets included or to be included in the Trust Fund. Such assignment includes all interest and principal due to the Depositor or the Servicer after the Cut-off Date with respect to the Mortgage Loans. 
 Each owner of record of a Class M-10 DSI Certificate will be entitled to certain distributions, as described under Article IV of the Pooling and
Servicing Agreement. 
 In order to receive the final distribution hereon, the owner hereof is required to present this Certificate to the
Trustee. The Pooling and Servicing Agreement provides that, in any event, upon the making of the final distribution due on this Certificate, this Certificate shall be deemed cancelled for all purposes under the Pooling and Servicing Agreement.

 THIS CERTIFICATE IS A PASS-THROUGH CERTIFICATE ONLY AND, NOTWITHSTANDING REFERENCES HEREIN TO PRINCIPAL AND INTEREST, NO DEBT OF ANY
PERSON IS REPRESENTED HEREBY (OTHER THAN AS REQUIRED FOR FEDERAL INCOME TAX PURPOSES). 
 NEITHER THIS CERTIFICATE NOR THE MORTGAGE LOANS ARE
INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION OR ANY OTHER GOVERNMENTAL AGENCY. 
 This Certificate is one of a Class of duly-authorized Certificates designated as NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2, Class M-10 DSI Certificates (the “Class M-10 DSI Certificates”) and issued under
and subject to the terms, provisions and conditions of the Pooling and Servicing Agreement, to which the owner of this Certificate, by virtue of acceptance hereof assents, and is bound. Also issued under the Pooling and Servicing Agreement are the
Class A-1A Certificates, Class A-2A Certificates, Class A-2B Certificates, Class A-2C Certificates, Class A-2D Certificates, Class M-1 Certificates, Class M-2 Certificates, Class M-3 Certificates, Class M-4 Certificates,
Class M-5 Certificates, Class M-6 Certificates, Class M-7 Certificates, Class M-8 Certificates, Class M-9 Certificates, Class M-10 Certificates, Class M-9 DSI Certificates, Class I-1 Certificates, Class I-2 Certificates, Class CA Certificates, Class
CB Certificates, and Class R Certificates, and all such Certificates are collectively referred to as the “Certificates”. Terms capitalized herein and not otherwise defined herein shall have the respective meanings set forth in the Pooling
and Servicing Agreement. 
  

 A-22-2 

 On the 25th day of each month, or, if such day is not a Business Day, then the next succeeding Business
Day (each such day being a “Distribution Date”) commencing July 25, 2006, the owners of the Class M-10 DSI Certificates as of the close of business on the business day immediately preceding such Distribution Date (the “Record
Date”) will be entitled to the distribution described in Article IV of the Pooling and Servicing Agreement, relating to such Distribution Date. Distributions will be made in immediately available funds to such owners, by wire transfer or by
check mailed to the address of the person entitled thereto as it appears on the Certificate Register. 
 The Trustee is required to duly and
punctually pay distributions with respect to this Certificate in accordance with the terms hereof and the Pooling and Servicing Agreement. Amounts properly withheld under the Code or applicable to any owner shall be considered as having been paid by
the Trustee to such owner for all purposes of the Pooling and Servicing Agreement. 
 The Mortgage Loans will be serviced by the Servicer
pursuant to the Pooling and Servicing Agreement. The Pooling and Servicing Agreement permits the Servicer to enter into Sub-Servicing Agreements with certain institutions eligible for appointment as Sub-Servicers for the servicing and administration
of certain Mortgage Loans. No appointment of any Sub-Servicer shall release the Servicer from any of its obligations under the Pooling and Servicing Agreement. 
 This Certificate does not represent a deposit or other obligation of, or an interest in, nor are the underlying Mortgage Loans insured or guaranteed by, NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation,
NovaStar Capital, Inc., NovaStar Financial Inc., or any of their subsidiaries and affiliates and are not insured or guaranteed by the Federal Deposit Insurance Corporation, the Government National Mortgage Association, or any other governmental
agency. This Certificate is limited in right of payment to certain collections and recoveries relating to the Mortgage Loans and amounts on deposit in the Accounts (except as otherwise provided in the Pooling and Servicing Agreement) all as more
specifically set forth hereinabove and in the Pooling and Servicing Agreement. 
 No owner shall have any right to institute any proceeding,
judicial or otherwise, with respect to the Pooling and Servicing Agreement for the appointment of a receiver or trustee, or for any other remedy under the Pooling and Servicing Agreement except in compliance with the terms thereof. 
 Notwithstanding any other provisions in the Pooling and Servicing Agreement, the owner of any Certificate shall have the right which is absolute and
unconditional to receive distributions to the extent provided in the Pooling and Servicing Agreement with respect to such Certificate or to institute suit for the enforcement of any such distribution, and such right shall not be impaired without the
consent of such owner. 
 The Pooling and Servicing Agreement will terminate upon notice to the Trustee upon the earliest of (i) the
Distribution Date on which the Certificate Principal Balances of the 
  

 A-22-3 

 Regular Certificates have been reduced to zero, (ii) the final payment or other liquidation of the last Mortgage
Loan held by the Issuing Entity, (iii) the optional purchase by the Servicer of the Mortgage Loans as described below, (iv) the Distribution Date in June 2036 and (v) at any time when a Qualified Liquidation of the Master REMIC and
REMIC I, REMIC II, REMIC III and REMIC IV is effected pursuant to the Pooling and Servicing Agreement. In addition, under certain circumstances relating to the qualification of either the Master REMIC or any of REMIC I, REMIC II, REMIC III or REMIC
IV as a REMIC under the Code, the Mortgage Loans may be sold, thereby affecting the early retirement of the Certificates. Notwithstanding the foregoing, in no event shall the Issuing Entity hereby continue beyond the expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late ambassador of the United States to the Court of St. James, living on the date of the Pooling and Servicing Agreement. 
 The Servicer may, at its option, terminate the Pooling and Servicing Agreement on any date on which the aggregate of the Principal Balances of the
Mortgage Loans on such date is equal to or less than 10% of the Maximum Collateral Amount, by purchasing, on the next succeeding Distribution Date, all of the outstanding Mortgage Loans and REO Properties at a price equal to the greater of the
Principal Balance of the Mortgage Loans and REO Properties or the market value of the Mortgage Loans and REO Properties, in each case plus accrued and unpaid interest thereon at the weighted average of the Mortgage Rates through the end of the Due
Period preceding the final Distribution Date plus unreimbursed Servicing Advances, Advances, any unpaid Servicing Fees allocable to such Mortgage Loans and REO Properties and any accrued and unpaid Available Funds Cap Shortfall Amount and Available
Funds Cap Carryforward Amount (without duplication of amounts already paid) and any unpaid amount due the Trustee, the Cap Counterparties and the Custodian under the Pooling and Servicing Agreement. 
 The Trustee shall give written notice of termination of the Pooling and Servicing Agreement to each owner in the manner set forth therein. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth and referred to on the face hereof, the transfer
of this Certificate is registerable in the Certificate Register upon surrender of this Certificate for registration of transfer at the office designated as the location of the Certificate Register, and thereupon one or more new certificates of like
class, tenor and Percentage Interest will be issued to the designated transferee or transferees. 
 The Trustee is required to furnish
certain information on each Distribution Date to the owner of this Certificate, as more fully described in the Pooling and Servicing Agreement. 
 As provided in the Pooling and Servicing Agreement and subject to certain limitations therein set forth, Class M-10 DSI Certificates are exchangeable for new Class M-10 DSI Certificates of authorized denominations evidencing the same
aggregate principal amount. 
 The Trustee and any agent thereof may treat the person in whose name this Certificate is registered as the
owner hereof for all purposes, and none of the Trustee or any such agent shall be affected by notice to the contrary. 
  

 A-22-4 

 IN WITNESS WHEREOF, the Trustee has caused this Certificate to be duly executed on behalf of the Issuing
Entity. 
  

			
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Trustee Authentication

	
	 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	 By:
	 	  

	 Name:
	 	
	 Title:
	 	

  

 A-22-5 

 Exhibit B 
 Mortgage Loan Schedule 
 [See Exhibit 1 to the Mortgage Loan Purchase Agreement] 

 Exhibit C 
 [Reserved] 

 Exhibit D 
 [Reserved] 

 Exhibit E 
 Request for Release 
 [date]                 
  

	To:	U.S. Bank National Association, 

	    	as Custodian and JPMorgan Chase Bank, National Association, 

	    	as Trustee 

  

	 	Re:	Pooling and Servicing Agreement, dated as of June 1, 2006 

	 	    	NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2 

 In connection with the administration of the pool of Mortgage Loans held by you as Custodian, we request the release, and acknowledge receipt, of the (Mortgage File/[specify document]) for the Mortgage Loan described
below, for the reason indicated. 
 Mortgagor’s Name, Address & Zip Code: 
 Mortgage Loan Number: 
 Reason for Requesting Documents (check one) 
  

			
	  ̈  1.
	  	 Mortgage Loan Paid in Full
 (Servicer
hereby certifies that all amounts received in connection therewith have been credited to the Collection Account and remitted to the Trustee for deposit into the Distribution Account pursuant to the Pooling and Servicing
Agreement.)

		
	  ̈   2.
	  	 Mortgage Loan Liquidated
 (Servicer
hereby certifies that all proceeds of foreclosure, insurance or other liquidation have been finally received and credited to the Collection Account and remitted to the Trustee for deposit into the Distribution Account pursuant to the Pooling and
Servicing Agreement.)

		
	  ̈  3.
	  	 Mortgage Loan in Foreclosure

		
	  ̈  4.
	  	 Mortgage Loan Purchased Pursuant to Section 11.01 of the Pooling and Servicing Agreement.

		
	  ̈  5.
	  	 Mortgage Loan Repurchased or Substituted pursuant to Article II or III of the Pooling and Servicing Agreement (Sponsor hereby certifies that the repurchase price
or Substitution Adjustment has been credited to the Collection Account and that the substituted mortgage loan is a Qualified Substitute Mortgage Loan.)

		
	  ̈  6.
	  	 Other
 (explain)
_____________________________________________________________

 If box 1 or 2 above is checked, and if all or part of the Mortgage File was previously released to us,
please release to us our previous receipt on file with you, as well as any additional documents in your possession relating to the above specified Mortgage Loan. 
 If box 3, 4, 5 or 6 above is checked, upon our return of all of the above documents to you as Custodian, please acknowledge your receipt by signing in the space indicated below, and returning this form. 
  

			
	 NovaStar Mortgage, Inc.,
 as
[Servicer][Sponsor]

		
	By:	 	  

	Name:	 	
	Title:	 	

  

			
	 Documents returned to Custodian:
  
 U.S. Bank National Association,
 as Custodian

		
	By:	 	  

	Name:	 	
	Title:	 	
	
	Date:                     
	
	 Remittance returned to Trustee:
  
 JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity, but solely in its capacity as
Trustee

		
	By:	 	  

	Name:	 	
	Title:	 	
	
	Date:                     

  

 E-2 

 Exhibit F-1 
 Form of Initial Certification 
 [Date] 
 NovaStar Mortgage, Inc. 
 8140 Ward Parkway, Suite 300 
 Kansas City, Missouri 64114 
 Attention: Chris Miller, Senior Vice President

 NovaStar Mortgage Funding Corporation 
 8140 Ward Parkway,
Suite 300 
 Kansas City, Missouri 64114 
 Attention: Chris
Miller, Senior Vice President 
 U.S. Bank National Association 
 4527 Metropolitan Court, Suite C 
 Frederick, Maryland 21704 
 Attention: Ronald Fisher 
 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 2006-2 
 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 Series 2006-2 
  

	 	Re:	Pooling and Servicing Agreement, dated as of June 1, 2006 (the “Agreement”), among NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, U.S. Bank National
Association (the “Custodian”), JPMorgan Chase Bank, National Association (the “Trustee”) and J.P. Morgan Trust Company, National Association (the “Co-Trustee”), relating to the NovaStar Mortgage Funding Trust, Series
2006-2 Home Equity Loan Asset-Backed Certificates 

 Gentlemen: 
 In accordance with Section 2.03 of the above-captioned Agreement, and Section 2.01(c) of the Mortgage Loan Purchase Agreement, dated as of
June 1, 2006 (the “Purchase Agreement” and, together with the Agreement, the “Agreements”), among NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, the Custodian, the Trustee and U.S. Bank National Association,
the undersigned, as Custodian, on behalf of the Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on the attachment hereto) it has reviewed the Mortgage
File and the 

 Mortgage Loan Schedule and has determined that: (i) all documents required to be included in the Mortgage File are
in its possession; (ii) such documents have been reviewed by it and appear regular on their face and relate to such Mortgage Loan; and (iii) based on examination by it, and only as to such documents, the information set forth in items (i)
- (vii) and (xiv) of the definition or description of “Mortgage Loan Schedule” is correct. 
 The Custodian, on behalf of the
Trustee, has made no independent examination of any documents contained in each Mortgage File beyond the review specifically required in the above-referenced Agreements. The Custodian, on behalf of the Trustee, makes no representation that any
documents specified in clause (vi) of Section 2.01(c) of the Purchase Agreement should be included in any Mortgage File. The Custodian, on behalf of the Trustee, makes no representations as to and shall not be responsible to verify:
(i) the validity, legality, sufficiency, enforceability, due authorization, recordability or genuineness of any of the documents contained in each Mortgage File of any of the Mortgage Loans identified on the Mortgage Loan Schedule,
(ii) the collectability, insurability, effectiveness or suitability of any such Mortgage Loan, or (iii) the existence of any assumption, modification, written assurance or substitution agreement with respect to any Mortgage File if no such
documents appear in the Mortgage File delivered to the Custodian, on behalf of the Trustee. 
 Capitalized words and phrases used herein
shall have the respective meanings assigned to them in the above-captioned Agreement. 
  

			
	U.S. BANK NATIONAL ASSOCIATION, not in its
	individual capacity but solely as Custodian
		
	By:	 	  

	Name:	 	
	Title:	 	

  

 F-1-2 

 Exhibit F-2 
 Form of Final Certification 
 [Date] 
 NovaStar Mortgage, Inc. 
 8140 Ward Parkway, Suite 300 
 Kansas City, Missouri 64114 
 Attention: Chris Miller, Senior Vice President

 NovaStar Mortgage Funding Corporation 
 8140 Ward Parkway,
Suite 300 
 Kansas City, Missouri 64114 
 Attention: Chris
Miller, Senior Vice President 
 U.S. Bank National Association 
 4527 Metropolitan Court, Suite C 
 Frederick, Maryland 21704 
 Attention: Ronald Fisher 
 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 2006-2 
 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 Series 2006-2 
  

	 	Re:	Pooling and Servicing Agreement, dated as of June 1, 2006 (the “Agreement”), among NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, U.S. Bank National
Association (the “Custodian”), JPMorgan Chase Bank, National Association (the “Trustee”) and J.P. Morgan Trust Company, National Association (the “Co-Trustee”) relating to the NovaStar Mortgage Funding Trust, Series
2006-2 Home Equity Loan Asset-Backed Certificates 

 Gentlemen: 
 In accordance with Section 2.03 of the above-captioned Agreement, and Section 2.01(c) of the Mortgage Loan Purchase Agreement, dated as of
June 1, 2006 (the “Purchase Agreement” and, together with the Agreement, the “Agreements”), among NovaStar Mortgage, Inc., NovaStar Mortgage Funding Corporation, the Custodian and the Trustee, the undersigned, as Custodian,
on behalf of the Trustee, hereby certifies that as to each Mortgage Loan listed in the Mortgage Loan Schedule (other than any Mortgage Loan paid in full or listed on the attachment hereto) it has received the documents set forth in
Section 2.01(c) of the Mortgage Loan Purchase Agreement. 

 The Custodian, on behalf of the Trustee, has made no independent examination of any documents contained
in each Mortgage File beyond the review specifically required in the Agreements. The Custodian, on behalf of the Trustee, makes no representation that any documents specified in clause (vi) of Section 2.01(c) should be included in any
Mortgage File. The Custodian, on behalf of the Trustee, makes no representations as to and shall not be responsible to verify: (i) the validity, legality, sufficiency, enforceability, due authorization, recordability or genuineness of any of
the documents contained in each Mortgage File of any of the Mortgage Loans identified on the Mortgage Loan Schedule, (ii) the collectability, insurability, effectiveness or suitability of any such Mortgage Loan or (iii) the existence of
any assumption, modification, written assurance or substitution agreement with respect to any Mortgage File if no such documents appear in the Mortgage File delivered to the Custodian, on behalf of the Trustee. 
 Capitalized words and phrases used herein shall have the respective meanings assigned to them in the above-captioned Agreement. 
  

			
	U.S. BANK NATIONAL ASSOCIATION, not in its
	individual capacity but solely as Custodian
		
	By:	 	  

	Name:	 	
	Title:	 	

  

 F-2-2 

 Exhibit G 
 Form of Investment Letter 
 NovaStar Mortgage, Inc. 
 8140 Ward Parkway, Suite 300 
 Kansas City, Missouri 64114 
 Attention: Chris Miller, Senior Vice President 
 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 2006-2 
 Ladies and Gentlemen: 
 The
undersigned (the “Transferee”) has agreed to purchase from                      (the “Transferor”) the following
certificates: 
  

			
	 Class
	  	 Number

	 ___
	  	
		
	 ___
	  	
		
	 ___
	  	
		
	 ___
	  	
		
	 ___
	  	

 I. The Transferee is (check one): 
  

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

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

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

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

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

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

 G-2 

 Buyer”. The Transferee is not acquiring such Certificates with a view to or for the resale, distribution,
subdivision or fractionalization thereof which would require registration of the Certificates under the Securities Act. 
 III. The
Transferee represents that it is not (i) an employee benefit plan (as defined in section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)) that is subject to the provisions of Title I of ERISA, or
(ii) a plan (as defined in section 4975(e)(1) of the Internal Revenue Code of 1986, as amended (the “Code”)) that is subject to Section 4975 of the Code, and is not acting, directly or indirectly, on behalf of a plan described in
(i) or (ii) or acquiring the Certificates with assets of any such plan. 
  

			
	Very truly yours,
		
	By:	 	  

		
	Title:	 	  

 Dated:
                     
  

 G-3 

 Exhibit H 
 Form of Residual Certificate Transfer Affidavit 
 AFFIDAVIT PURSUANT TO SECTION 860E OF THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED 
 [NAME OF OFFICER], being first duly sworn, deposes and says: 
 1. That he is [Title of Officer] of [Name of Investor] (the “Investor”), a [savings institution] [corporation] duly organized and existing under
the laws of [the State of             ] [the United States], on behalf of which he makes this affidavit and agreement. 
 2. That the Investor (i) is not and will not be a “disqualified organization” as of [date of transfer] within the meaning of
Section 860E(e)(5) of the Internal Revenue Code of 1986 (the “Code”), (ii) will endeavor to remain other than a disqualified organization for so long as it retains its ownership interest in the Class R Certificates, and
(iii) is acquiring the Class R Certificates for its own account or for the account of another investor from which it has received an affidavit and agreement in substantially the same form as this affidavit and agreement. For this purpose, a
“disqualified organization” means the United States, any state or political subdivision thereof, any agency or instrumentality of any of the foregoing (other than an instrumentality all of the activities of which are subject to tax and,
except for the Federal Home Loan Mortgage Corporation, a majority of whose board of directors is not selected by any such governmental entity) or any foreign government, international organization or any agency or instrumentality of such foreign
government or organization, any rural electric or telephone cooperative, or any organization (other than certain farmers’ cooperatives) that generally is exempt from federal income tax unless such organization is subject to the tax on unrelated
business taxable income. 
 3. That the Investor has historically paid its debts as they came due and will continue to pay its debts as they
come due in the future. 
 4. That the Investor has no present knowledge or expectation that it will be unable to pay any United States taxes
owed by it or that it will become insolvent or subject to a bankruptcy proceeding for so long as any of the Class R Certificates remain outstanding. 
 5. That the Investor has been advised of, and understands that as the holder of a noneconomic residual interest it may incur tax liabilities in excess of any cash flows generated by the interest. That the Investor
intends to pay such taxes associated with holding the Class R Certificates as they become due. 
 6. That the Investor will not cause income
from the Class R Certificates to be attributable to a foreign permanent establishment or fixed base (within the meaning of an applicable income tax treaty) of the Investor or another U.S. taxpayer. 

 7. 1[A. Formula Test] That the Investor agrees that the present value of the anticipated tax liabilities associated with holding the Class R Certificates does not exceed the sum of the present value of any
consideration given to the Investor to acquire the Class R Certificates, the present value of the expected future distributions on the Class R Certificates, and the present value of the anticipated tax savings associated with holding the interest as
the REMIC generates losses. That the Investor agrees that it complied with U.S. Treasury Regulations Section 1.860E-1(c)(8) in making such representation. 
 That the Investor agrees that it is not a foreign permanent establishment or fixed base (within the meaning of an applicable income tax treaty) of the Transferor or another U.S. taxpayer. 
 [B. Asset Test] That the Investor, at the time of the transfer, and at the close of the Investor’s two fiscal years preceding the year of the
transfer, had gross assets for financial reporting purposes in excess of $100 million and net assets in excess of $10 million (excluding any obligation of a person related to the Investor within the meaning of U.S. Treasury Regulations
Section 1.860E-1(c)(6)(ii) or any other asset if a principle purpose for holding or acquiring the other asset was to permit the Investor to satisfy the above stated minimum asset requirements). 
 That the Investor is an “eligible corporation,” as defined in U.S. Treasury Regulations Section 1.860E-1(c)(6)(i). That the Investor
agrees, in connection with any subsequent transfer of its ownership interest in the Class R Certificates, to transfer its ownership interest only to another “eligible corporation,” as defined in U.S. Treasury Regulations
Section 1.860E-1(c)(6)(i), and to honor the restrictions on subsequent transfers of the Class R Certificates by transferring its ownership interest only in a transaction that satisfies the requirements of U.S. Treasury Regulations
Section 1.860E-1(c)(4)(i), (ii) (iii) and U.S. Treasury Regulations Section 1.860E-1(c)(5). 
 That the Investor
determined the consideration paid to it to acquire the Class R Certificates in good faith and based on reasonable market assumptions (including, but not limited to, borrowing and investment rates, prepayment and loss assumptions, expense and
reinvestment assumptions, tax rates and other factors specific to the Investor). 
 8. That the Investor is a citizen or resident of the
United States, a corporation, partnership or other entity created or organized in, or under the laws of, the United States or any political subdivision thereof, or an estate or trust whose income from sources without the United States is includable
in gross income for United States federal income tax purposes regardless of its connection with the conduct of a trade or business within the United States. 
 9. That the Investor’s Taxpayer Identification Number is                     . 
 10. That the Investor has reviewed the restrictions set forth on the face of the Class R Certificates and the provisions of Section 5.02(d) of the
Pooling and Servicing 
  

	1	Insert either section 7A or 7B. 

  

 H-2 

 Agreement under which the Class R Certificates were issued, which authorize the Trustee to deliver payments to a person
other than the Investor and negotiate a mandatory sale by the Trustee in the event that the Investor holds such Certificates in violation of Section 5.02(d). That the Investor expressly agrees to be bound by and to comply with all the
provisions of Section 5.02(d) of the Pooling and Servicing Agreement and the restrictions on the face of the Class R Certificates. 
 11. That the Investor will, in connection with any transfer that it makes of the Class R Certificates, deliver to the Trustee a certificate, in form and substance satisfactory to the Trustee, that is in substantially the same form as
Exhibit I attached to the Pooling and Servicing Agreement and that contains the same representations set forth therein. 
 12. That the
Investor will not transfer any of its interest in the Class R Certificates unless (i) it has received from any subsequent transferee an affidavit in substantially the same form as this affidavit containing the same representations set forth
herein, and (ii) as of the time of the transfer, it does not have actual knowledge that such affidavit is false. That the Investor will cause such affidavit to be delivered to the Trustee upon receipt. That the Investor is aware that the
Trustee will not register the transfer of any Class R Certificates unless and until such affidavit is received. 
 13. That the Investor
consents to any additional restrictions or arrangements that shall be deemed necessary upon advice of counsel to constitute a reasonable arrangement to ensure that the Class R Certificates will only be owned, directly or indirectly, by an investor
that is not a disqualified organization. 
 14. That the Investor understands and agrees that any breach of any of the representations
included herein shall render the transfer to the Investor contemplated hereby null and void. 
  

 H-3 

 IN WITNESS WHEREOF, the Investor has caused this instrument to be executed on its behalf, pursuant to the
authority of its Board of Directors, by its [Title of Officer] and its corporate seal to be hereunto attached, attested by its [Assistant] Secretary, this     day
of             . 
  

					
	 [NAME OF INVESTOR]
	  	
			
	 By:
	  	  
	  	
	 [Name of Officer]
	  	
	 [Title of Officer]
	  	
		
	 [Corporate Seal]
	  	
		
	 ATTEST:
	  	
		
	 [Assistant] Secretary
	  	

 Personally appeared before me the above named [Name of Officer], known or proved to me to be the
same person who executed the foregoing instrument and to be the [Title of Officer] of the Investor, and acknowledged to me that he executed the same as his free act and deed and the free act and deed of the Investor. 
  

 H-4 

 Exhibit I 
 Transferor’s Certificate 
  

	 	To:	JPMorgan Chase Bank, National Association 

	 	    	2001 Bryan Street, 10th Floor 

	 	    	Dallas, Texas 75201 

	 	    	Attention: Worldwide Securities Services/Structured Finance Services - NovaStar Series 2006-2 

 Re: The Pooling and Servicing Agreement, dated as of June 1, 2006, among NovaStar Mortgage Funding Corporation, as Depositor, NovaStar Mortgage,
Inc., as Servicer and as Sponsor, U.S. Bank National Association, as Custodian, JPMorgan Chase Bank, National Association, as trustee and J.P. Morgan Trust Company, National Association, as co-trustee 
 Ladies and Gentlemen: 
 This letter is
delivered to you in connection with the transfer by NovaStar Mortgage, Inc. (the “Sponsor”) to
                                     (the
“Purchaser”) of a         % Percentage Interest of NovaStar Mortgage Funding Trust, Series 2006-2, NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2, Class R (the
“Certificates”), pursuant to Section 5.02(d) of the Pooling and Servicing Agreement (the “Pooling and Servicing Agreement”), dated as of June 1, 2006 among NovaStar Mortgage Funding Corporation, as Depositor (the
“Depositor”), NovaStar Mortgage, Inc., as Servicer and Sponsor (the “Servicer and Sponsor”), U.S. Bank National Association, as Custodian (the “Custodian”), JPMorgan Chase Bank, National Association, as trustee (the
“Trustee”) and J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”). All terms used herein and not otherwise defined shall have the meanings set forth in the Pooling and Servicing Agreement. The
Sponsor hereby certifies, represents and warrants to, and covenants with, the Depositor and the Trustee that: 
 1. No purpose of the Sponsor
relating to the transfer of the Certificates by the Sponsor to the Purchaser is or will be to impede the assessment or collection of any tax. 
 2. The Sponsor has conducted a reasonable investigation of the financial condition of the Purchaser and, as a result of such investigation, has concluded that the Purchaser has historically paid its debts as they came due and will continue
to pay its debts as they come due in the future. 
 3. The Sponsor has received, and understands that the Purchaser has delivered to the
Trustee and the Depositor, a Residual Certificate Transfer Affidavit in the form attached to the Pooling and Servicing Agreement as Exhibit H. The Sponsor does not know or believe that any representation contained therein is false. 
 4. The Sponsor does not know or have reason to know that the Purchaser (i) will be unwilling or unable to pay taxes due on its share of the
Certificates or (ii) will not honor the restrictions on subsequent transfers of the Certificates set forth in section 5.02(d) of the Pooling and Servicing Agreement and in the Residual Certificate Transfer Affidavit. 

 5. The Sponsor has no actual knowledge that the proposed Transferee is not both a United States Person
and a Permitted Transferee. 
  

					
	 Very truly yours,
	  	
		
	 (Sponsor)
	  	
			
	 By:
	 	  
	  	
	 Name:
	 		  	
	 Title:
	 		  	

  

 I-2 

 Exhibit J 
 Designation Under REMIC Provisions 
  
 (a) The Trustee shall elect that each of REMIC I, REMIC II, REMIC III, REMIC IV and the Master REMIC be treated as a REMIC under Section 860D of the Code. Any inconsistencies or ambiguities in this Agreement or in the administration of this
Agreement shall be resolved in a manner that preserves the validity of such REMIC elections. 
 (b) The designation of REMIC interests shall
be as follows: 
 (i) REMIC I will consist of all of the assets of the Trust (other than the Supplemental Interest Account,
the Cap Agreements, the Novation Agreements, the Initial Cap Amount and the Supplemental Interest Trust), including the Mortgage Loans, the Accounts, any REO Property and any proceeds of the foregoing. REMIC I will be evidenced by the “REMIC I
Regular Interests” as set forth in (c) below, which will be uncertificated and will represent the “regular interests” in REMIC I. The Class R-I Interest will represent the sole class of residual interest in REMIC I; 
 (ii) REMIC II will consist of the REMIC I Regular Interests and will be evidenced by the “REMIC II Regular Interests” as set
forth in (d) below, which will be uncertificated and will represent the “regular interests” in REMIC II. The Class R-II Interest will represent the sole class of residual interest in REMIC II; 
 (iii) REMIC III will consist of the REMIC II Regular Interests and will be evidenced by the “REMIC III Regular Interests” as
set forth in (e) below, which will be uncertificated and will represent the “regular interests” in REMIC III. The Class R-III Interest will represent the sole class of residual interest in REMIC III; 
 (iv) REMIC IV will consist of the REMIC III Regular Interests and will be evidenced by the “REMIC IV Regular Interests” as set
forth in (f) below, which will be uncertificated and will represent the “regular interests” in REMIC IV. The Class R-IV Interest will represent the sole class of residual interest in REMIC IV; and 
 (v) The Master REMIC will consist of the REMIC IV Regular Interests and will be evidenced, as set forth in (g) below, by (i) the
following Certificates, in each case, other than its respective Cap Contract Rights and Obligations: the Class A-1A, the Class A-2A, the Class A-2B, the Class A-2C, the Class A-2D, the Class M-1, the Class M-2, the Class M-3, the Class M-4, the
Class M-5, the Class M-6, the Class M-7, the Class M-8, the Class M-9 and the Class M-10 Certificates and (ii) the following Certificates: the Class I-1, the Class I-2, the Class CA and the Class CB Certificates which, in the case of each Class
referenced in (i) and (ii), will represent one or more “regular interests” in the 

 Master REMIC. The Class R-V Interest will represent the sole class of residual interest
in the Master REMIC. 
 (vi) The Class R Certificates will represent the beneficial ownership of the Class R-I, Class R-II,
Class R-III, Class R-IV and Class R-V Interests. The Class R Certificates will not have a principal balance and will not bear interest. 
 (vii) The Trustee will hold the REMIC I Regular Interests, REMIC II Regular Interests, REMIC III Regular Interests and REMIC IV Regular Interests. 
 (c) The REMIC I Regular Interests shall have the following principal balances and REMIC I Pass-Through Rates as set forth in the table below: 

 

					
	REMIC I Interests	 	 Initial
 Principal Balances
	 	 REMIC II
 Pass-Through Rates

	I-A	 	$80,000,000	 	(1)
	I-B	 	$80,000,000	 	(1)
	I-C	 	$80,000,000	 	(1)
	I-D	 	$80,000,000	 	(1)
	I-E	 	$80,000,000	 	(1)
	I-F	 	$80,000,000	 	(1)
	I-G	 	$20,000,000	 	(1)
	I-H	 	$20,000,000	 	(1)
	I-K	 	$20,000,000	 	(1)
	I-L	 	$20,000,000	 	(1)
	I-M	 	$20,000,000	 	(1)
	I-O	 	$20,000,000	 	(1)
	I-J	 	$421,101,979.95	 	(1)
	I-P	 	$100	 	(2)

  

	(1)	The pass-through rate for these REMIC I Regular Interests will be the weighted average of the pass-through rates on the Mortgage Loans. 

  

	(2)	The Class I-P Interest shall bear interest at the same rate as the Class I-J Interest. In addition, the Class I-P Interest is entitled to distributions of all Prepayment Charges.

 On each Distribution Date, all Realized Losses, prepayments and payments of scheduled principal with respect to the Mortgage
Loans shall be allocated in the following order: (i) first, to the Class I-J Interest until such class is paid in full or eliminated by such losses; (ii) second, to the Class I-A Interest until such class is paid in full or eliminated by
such losses; (iii) third, to the Class I-B Interest until such class is paid in full or eliminated by such losses; (iv) fourth, to the Class I-C Interest until such class is paid in full or eliminated by such losses; (v) fifth, to the
Class I-D Interest until such class is paid in full or eliminated by such losses; (vi) sixth, to the Class I-E Interest 

  

 2 

 
until such class is paid in full or eliminated by such losses; (vii) seventh, to the Class I-F Interest until such class is paid in full or eliminated
by such losses; (viii) eighth, to the Class I-G Interest until such class is paid in full or eliminated by such losses; (ix) ninth, to the Class I-H Interest until such class is paid in full or eliminated by such losses; (x) tenth, to
the Class I-K Interest until such class is paid in full or eliminated by such losses; (xi) eleventh, to the Class I-L Interest until such class is paid in full or eliminated by such losses; (xii) twelfth, to the Class I-M Interest until
such class is paid in full or eliminated by such losses; (xiii) thirteenth, to the Class I-O Interest until such class is paid in full or eliminated by such losses; and (xiv) fourteenth, to the Class I-P Interest until such class is paid
in full or eliminated by such losses. 
 (d) The REMIC II Regular Interests shall have the following principal balances and REMIC II
Pass-Through Rates set forth in the table below: 
  

							
	REMIC II Interests	 	 Corresponding Class of
 REMIC I Regular Interest
 (respectively)
	 	Initial
Principal
Balances	 	 REMIC II
 Pass-Through Rates

	II-A1	 	I-A	 	(1)	 	(2)
	II-A2	 	I-A	 	(3)	 	(4)
	II-B1	 	I-B	 	(1)	 	(2)
	II-B2	 	I-B	 	(3)	 	(4)
	II-C1	 	I-C	 	(1)	 	(2)
	II-C2	 	I-C	 	(3)	 	(4)
	II-D1	 	I-D	 	(1)	 	(2)
	II-D2	 	I-D	 	(3)	 	(4)
	II-E1	 	I-E	 	(1)	 	(2)
	II-E2	 	I-E	 	(3)	 	(4)
	II-F1	 	I-F	 	(1)	 	(2)
	II-F2	 	I-F	 	(3)	 	(4)
	II-G1	 	I-G	 	(1)	 	(2)
	II-G2	 	I-G	 	(3)	 	(4)
	II-H1	 	I-H	 	(1)	 	(2)
	II-H2	 	I-H	 	(3)	 	(4)
	II-K1	 	I-K	 	(1)	 	(2)
	II-K2	 	I-K	 	(3)	 	(4)
	II-L1	 	I-L	 	(7)	 	(8)
	II-L2	 	I-L	 	(5)	 	(9)
	II-M1	 	I-M	 	(1)	 	(2)
	II-M2	 	I-M	 	(3)	 	(4)
	II-O1	 	I-O	 	(1)	 	(2)
	II-O2	 	I-O	 	(3)	 	(4)
	II-J	 	I-J	 	(1)	 	(5)
	II-P	 	I-P	 	$100	 	(6)

  

 3 

	(1)	These REMIC II Regular Interests will have a principal balance equal to the principal balance of the Corresponding Class of REMIC I Regular Interest 

  

	(2)	The pass-through rate for these REMIC II Regular Interests will be as follows: (i) commencing on the first Distribution Date through and including the Corresponding Maturity
Date from the Cap Interest Rate Schedule, the REMIC II Net WAC minus the Corresponding Interest Rate from the Cap Interest Rate Schedule and (ii) for all Distribution Dates thereafter, REMIC II Net WAC. 

  

	(3)	These REMIC II Regular Interests will have a notional principal balance equal to the principal balance of the Corresponding Class of REMIC I Regular Interest.

  

	(4)	The pass-through rate for these REMIC II Regular Interests will be as follows: (i) commencing on the first Distribution Date through and including the Corresponding Maturity
Date from the Cap Interest Rate Schedule, the Corresponding Interest Rate from the Cap Interest Rate Schedule and (ii) for all Distribution Dates thereafter, zero. 

  

	(5)	The pass-through rate for this REMIC II Regular Interest will be equal to the REMIC II Net WAC. 

  

	(6)	The Class II-P Interest is entitled to all distributions on the Class I-P Interest. 

 On each Distribution Date, all Realized Losses, prepayments and payments of scheduled principal generated with respect to the Mortgage Loans shall be allocated in the following order: (i) first, to the Class II-J
Interest until such class is paid in full or eliminated by such losses; (ii) second, to the Class II-A Interest until such class is paid in full or eliminated by such losses; (iii) third, to the Class II-B Interest until such class is paid
in full or eliminated by such losses; (iv) fourth, to the Class II-C Interest until such class is paid in full or eliminated by such losses; (v) fifth, to the Class II-D Interest until such class is paid in full or eliminated by such
losses; (vi) sixth, to the Class II-E Interest until such class is paid in full or eliminated by such losses; (vii) seventh, to the Class II-F Interest until such class is paid in full or eliminated by such losses; (viii) eighth, to
the Class II-G Interest until such class is paid in full or eliminated by such losses; (ix) ninth, to the Class II-H Interest until such class is paid in full or eliminated by such losses; (x) tenth, to the Class II-K Interest until such
class is paid in full or eliminated by such losses; (xi) eleventh, to the Class II-L Interest until such class is paid in full or eliminated by such losses; (xii) twelfth, to the Class II-M Interest until such class is paid in full or
eliminated by such losses; (xiii) thirteenth, to the Class II-O Interest until such class is paid in full or eliminated by such losses; and (xiv) fourteenth, to the Class II-P Interest until such class is paid in full or eliminated by such
losses. 
 (e) The REMIC III Regular Interests shall have the following principal balances, REMIC III Pass-Through Rates and Corresponding
Classes of REMIC IV Regular Interest, as set forth in the table below: 
  

 4 

							
	REMIC III
Interest	 	Initial Principal
Balance	 	REMIC III
Pass-Through Rate	 	Corresponding Class
of REMIC IV
Regular Interest
	III-Accrual	 	50% of the
Pool Balance	 	(1)	 	N/A
	III-A1A	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-A1A
	III-A2A	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-A2A
	III-A2B	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-A2B
	III-A2C	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-A2C
	III-A2D	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-A2D
	III-M1	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-M1
	III-M2	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-M2
	III-M3	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-M3
	III-M4	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-M4
	III-M5	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-M5
	III-M6	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-M6
	III-M7	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-M7
	III-M8	 	50% of the
Corresponding Class
Balance	 	(1)	 	IV-M8

  

 5 

							
	III-M9	 	50% of the
Corresponding
Class Balance	 	(1)	 	IV-M9
	III-M10	 	50% of the
Corresponding
Class Balance	 	(1)	 	IV-M10
	III-CA	 	50% of the
Corresponding
Class Balance
(Overcollateralization
Amount)	 	(1)	 	IV-CA2/
Overcollateralization
Amount
	III-P	 	$100	 	(2)	 	IV-CA3
	III-I1	 	(3)	 	(3)	 	IV-I1
	III-I2	 	(4)	 	(4)	 	IV-I2

  

	(1)	The pass-through rate for these REMIC III Regular Interests will be the weighted average of the pass-through rates of the Class II-A1, Class II-B1, Class II-C1, Class II-D1,
Class II-E1, Class II-F1, Class II-G1, Class II-H1, Class II-K1, Class II-L1, Class II-M1, Class II-O1 and Class II-J Interests. 

  

	(2)	The Class III-P Interest is entitled to all distributions on the Class II-P Interest. 

  

	(3)	The Class III-I1 Interest will be an interest only regular interest and will be entitled to receive on each Distribution Date the sum of the amounts distributable on the Class
II-A2, Class II-B2, Class II-C2, Class II-D2, Class II-E2 and Class II-F2 Interests on such Distribution Date. 

  

	(4)	The Class III-I2 Interest will be an interest only regular interest and will be entitled to receive on each Distribution Date the sum of the amounts distributable on the Class
II-G2, Class II-H2, Class II-K2, Class II-L2, Class II-M2 and Class II-O2 Interests on such Distribution Date. 

 On each
Distribution Date, 50% of the increase in the Over-collateralization Amount will be payable as a reduction of the principal balances of the Class III-A1A, Class III-A2A, Class III -A2B, Class III-A2C, Class III-A2D, Class III-M1, Class III-M2, Class
III-M3, Class III-M4, Class III-M5, Class III-M6, Class III-M7, Class III-M8, Class III-M9, Class III-M10 and Class III-CA Interests (in the order and relative amount of such reduction to the principal balance of each class’s Corresponding
Class of Master REMIC Certificates) and will be accrued and added to the principal balances of the Class III-Accrual Interest. On each Distribution Date, the increase in the principal balance of the Class III-Accrual Interest may not exceed interest
accruals for such Distribution Date for the respective Class III-Accrual Interests. In the event that (i) 50% of the increase in the related Overcollateralization Amount exceeds (ii) interest accruals on the related Class III-Accrual
Interest for such Distribution Date, the excess for such Distribution Date (accumulated with all such excesses for all prior Distribution Dates) will be added to any increase in the Overcollateralization Amount for purposes of determining the amount
of interest accrual on the related Class III-Accrual Interest 

  

 6 

 
payable as principal on the related Class III-Accrual Interest on the next Distribution Date pursuant to the first sentence of this paragraph. 
 All payments of scheduled principal and prepayments of principal shall be allocated as follows: (i) first, 50% to the Class III-Accrual Interest and
(ii) second, 50% to the Class III-A1A, Class III-A2A, Class III-A2B, Class III-A2C, Class III-A2D, Class III-M1, Class III-M2, Class III-M3, Class III-M4, Class III-M5, Class III-M6, Class III-M7, Class III-M8, Class III-M9, Class III-M10 and
Class III-CA Interests (to each such Class in an amount equal to 1/2 of the principal paid in reduction of the principal balance of the Corresponding Class of Master REMIC Certificates) until paid in full. Notwithstanding the above, principal
payments allocated to the Class CA Certificates that result in the reduction of the Overcollateralization Amount shall be allocated 50% to the Class III-Accrual1 Interest and 50% to the Class III-CA Interest until such classes are paid in full.
Realized Losses shall be applied so that after all distributions have been made on each Distribution Date the principal balances of the Class III-A1A, Class III-A2A, Class III-A2B, Class III-A2C, Class III-A2D, Class III-M1, Class III-M2, Class
III-M3, Class III-M4, Class III-M5, Class III-M6, Class III-M7, Class III-M8, Class III-M9, Class III-M10 are each equal to 50% of the principal balance of its Corresponding Class of Master REMIC Certificates and the Class III-Accrual1 Interest is
equal to 50% of the of the Pool Balance. 
 (f) The REMIC IV Regular Interests shall have the following principal balances, REMIC IV
Pass-Through Rates and Corresponding Classes of Master REMIC Certificates, as set forth in the table below: 
  

							
	REMIC IV
Interest	 	Initial 
Principal
Balance	 	 REMIC IV
 Pass-Through Rate
	 	Corresponding Class
of Master REMIC
Certificates
	IV-A1A	 	$431,398,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	A-1A
	IV-A2A	 	$195,000,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	A-2A
	IV-A2B	 	$108,500,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	A-2B
	IV-A2C	 	$90,300,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	A-2C
	IV-A2D	 	$37,631,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	A-2D
	IV-M1	 	$60,245,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	M-1
	IV-M2	 	$15,827,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	M-2
	IV-M3	 	$15,317,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	M-3
	IV-M4	 	$13,785,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	M-4

  

 7 

							
	IV-M5	 	$10,211,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	M-5
	IV-M6	 	$8,169,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	M-6
	IV-M7	 	$6,127,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	M-7
	IV-M8	 	$10,211,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	M-8
	IV-M9	 	$8,169,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	M-9
	IV-M10	 	$5,106,000	 	the lesser of (i) 11% and
(ii) LIBOR + Certificate Margin (1)	 	M-10
	IV-CA1	 	(2)	 	(2)	 	CA and CB
	IV-CA2	 	(3)	 	(3)	 	CA
(Overcollateralization
Amount)
	IV-CA3	 	$100	 	(4)	 	CA
	IV-I1	 	(5)	 	(5)	 	I-1
	IV-I2	 	(6)	 	(6)	 	I-2

  

	(1)	Subject to the REMIC Available Funds Cap. 

  

	(2)	The Class IV-CA1 Interest will be an interest only regular interest. The Class IV-CA1 Interest will bear interest on its notional principal balance. The Class IV-CA1 Interest will
have a notional principal balance equal to the Pool Balance. The REMIC IV Pass-Through Rate for the Class IV-CA1 Interest will be the excess of: (I) the weighted average of the pass-through rates on the REMIC III Regular Interests (other than
the Class III-I1 and Class III-I2 Interests) over (II) the product of: (A) two and (B) the weighted average pass-through rate of the REMIC IV Regular Interests (other than the Class III-I1 and Class III-I2 Interests) where the Class
III-Accrual Interests and the Class III-CA Interest are subject to a cap equal to zero, and the remaining classes are subject to a cap equal to the REMIC IV Pass-Through Rates on their respective Corresponding Class of REMIC IV Regular Interests.

  

	(3)	The Class IV-CA2 Interest will have an initial principal balance equal to $5,105,979.95. The Class IV-CA2 Interest will not be entitled to any payments of interest.

  

	(4)	The Class IV-CA3 Interest is entitled to all distributions on the Class III-P Interest. 

  

	(5)	The Class IV-I1 Interest will be an interest only regular interest and will be entitled to receive on each Distribution Date all distributions on the Class III-I1 Interest.

  

 8 

	(6)	The Class IV-I2 Interest will be an interest only regular interest and will be entitled to receive on each Distribution Date all distributions on the Class III-I2 Interest.

 On each Distribution Date, all Realized Losses, prepayments and payments of scheduled principal generated with respect to
the Mortgage Loans shall be allocated to each REMIC IV Regular Interest and reduce the principal balance thereof in the order and relative amount of such reduction to the principal balance of each class’s Corresponding Class of Master REMIC
Certificates. 
 (g) The following table sets forth characteristics of the Certificates, each of which (other than the Class R Certificates
and, with respect to the Class A Certificates, Class M Certificates and Class B Certificates, other than its Cap Contract Rights) is hereby designated as a “regular interest” in the Master REMIC: 
  

							
	Class of
Certificates	 	Initial Certificate
Principal Balance	 	 REMIC
 Pass-Through

 Rate
	 	Corresponding Class
of REMIC IV
Regular Interest
	Class A-1A	 	$431,398,000	 	(1)	 	IV-A1A
	Class A-2A	 	$195,000,000	 	(1)	 	IV-A2A
	Class A-2B	 	$108,500,000	 	(1)	 	IV-A2B
	Class A-2C	 	$90,300,000	 	(1)	 	IV-A2C
	Class A-2D	 	$37,631,000	 	(1)	 	IV-A2D
	Class M-1	 	$60,245,000	 	(1)	 	IV-M1
	Class M-2	 	$15,827,000	 	(1)	 	IV-M2
	Class M-3	 	$15,317,000	 	(1)	 	IV-M3
	Class M-4	 	$13,785,000	 	(1)	 	IV-M4
	Class M-5	 	$10,211,000	 	(1)	 	IV-M5
	Class M-6	 	$8,169,000	 	(1)	 	IV-M6
	Class M-7	 	$6,127,000	 	(1)	 	IV-M7
	Class M-8	 	$10,211,000	 	(1)	 	IV-M8
	Class M-9(2)	 	$8,169,000	 	(1)	 	IV-M9
	Class M-10(2)	 	$5,106,000	 	(1)	 	IV-M10
	Class CA-1 (3)	 	(4)	 	(5)	 	IV-CA1
	Class CA-2 (3)	 	(6)	 	(1)	 	IV-CA2
	Class CA-3 (3)	 	$100	 	(1)	 	IV-CA3
	Class CB	 	(4)	 	(7)	 	IV-CA1
	Class I-1	 	(8)	 	(8)	 	IV-I1
	Class I-2	 	(9)	 	(9)	 	IV-I2
	Class R	 	(10)	 	(10)	 	

  

	(1)	These Master REMIC Regular Interests are entitled to all distributions on their respective Corresponding Class of REMIC IV Regular Interest. 

  

 9 

	(2)	The Class M-9 DSI Certificates and the Class M-10 DSI Certificates do not represent regular interests in the Master REMIC or any other REMIC created under the Pooling and Servicing
Agreement. 

  

	(3)	The Class CA Certificates will represent three regular interests in the Master REMIC, the Class CA-1, Class CA-2 and Class CA-3 Interest. 

  

	(4)	These Master REMIC Regular Interests will have a notional principal balance equal to the notional principal balance on their respective Corresponding Class of REMIC IV Regular
Interest. 

  

	(5)	For each Distribution Date, the REMIC Pass-Through Rate for Class CA-1 Interest will equal the excess, if any, of (i) the REMIC IV Pass-Through Rate on the Class IV-CA1
Interest over (ii) the Corresponding Interest Rate Strip from the Class CB Certificate Schedule. 

  

	(6)	The Class CA-2 Interest will have a principal balance equal to the principal balance on its Corresponding Class of REMIC IV Regular Interest. 

  

	(7)	For each Distribution Date, the REMIC Pass-Through Rate for the Class CB Certificate will equal the lesser of (i) the REMIC IV Pass-Through Rate on the Class IV-CA1 Interest
and (ii) the Corresponding Interest Rate Strip from the Class CB Certificate Schedule. 

  

	(8)	The Class I-1 Certificates will be an interest only regular interest and will be entitled to receive on each Distribution Date all distributions on the Class IV-I1 Interest.

  

	(9)	The Class I-2 Certificates will be an interest only regular interest and will be entitled to receive on each Distribution Date all distributions on the Class IV-I2 Interest.

  

	(10)	The Class R Certificates will represent the beneficial ownership of the R-I, R-II, R-III, R-IV and R-V Interests. On each Distribution Date, available funds, if any, remaining in
any of the REMICs after payments of interest and principal, as designated above, will be distributed to the Class R Certificate. It is expected that there shall not be any distributions on the Class R Certificate. 

 (h) For federal income tax purposes, the “latest possible maturity date” for each of the REMIC I Regular Interests, REMIC II Regular Interests,
REMIC III Regular Interests (other than the Class III-I1 and Class III-I2 Interests), REMIC IV Regular Interests (other than the Class IV-I1 and Class IV-I2 Interests) and Master REMIC Regular Interests (other than the Class I1 and Class I2
Certificates) is hereby set to be the Distribution Date of June 25, 2036. The “latest possible maturity date” for the Class III-I1 Interest, the Class IV-I1 Interest and the Class I1 Certificates is hereby set to be the Distribution
Date of April 2008. The “latest possible maturity date” for the Class III-I2 Interest, the Class IV-I2 Interest and the Class I2 Certificates is hereby set to be the Distribution Date of April 2009. 
  

 10 

 (i) NovaStar Financial Inc. (“NFI”) is hereby designated as the “Tax Interests
Registrar” for the purposes of maintaining a register of the tax ownership of all uncertificated Master REMIC Regular Interests. NFI, in such capacity, shall maintain a book-entry register reflecting such tax ownership and shall transfer tax
ownership of such uncertificated Master REMIC Regular Interests at the request of the then-registered owner. The Tax Interests Registrar shall request such documentation in connection with any such transfer as it shall deem appropriate. 

 

 11 

 Exhibit K 
 Form of Advance Facility Notice 
 [date] 
 JPMorgan Chase Bank, National Association 
 4 New York Plaza, 6th Floor 
 New York, NY 10004-2477 
 Attention: Worldwide Securities Services/ Structured
Finance Services - NovaStar Series 2006-2 
  

	 	Re:	Pooling and Servicing Agreement, dated as of June 1, 2006, by and among NovaStar Mortgage Funding Corporation (the “Depositor”), NovaStar Mortgage, Inc., as sponsor
and servicer (the “Sponsor” or “Servicer”), U.S. Bank National Association, as custodian (the “Custodian”) and JPMorgan Chase Bank, National Association (formerly known as JPMorgan Chase Bank), as trustee (the
“Trustee”) and J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”) (the “Agreement”) 

 In accordance with Section 3.26(a) of the above-captioned Agreement, the undersigned hereby notifies the Trustee of the following information: 
 The Servicer has entered into an Advance Facility. 
 The Advancing Person is [                    ]. 
 [                    ], as the Servicer’s Assignee, has the right to make withdrawals from the Collection
Account subject to Section 3.26(b) of the Agreement to reimburse previously unreimbursed Advances and/or Servicing Advances pursuant to Section 3.07 of the Agreement. 
 [Remainder of Page Intentionally Left Blank] 

 Capitalized words and phrases used herein shall have the respective meanings assigned to them in the
above-captioned Agreement. 
  

			
	NOVASTAR MORTGAGE INC.
	as Servicer
		
	By:	 	  

	Name:	 	
	Title:	 	
	
	 [                                ]
 as Advancing Person

		
	By:	 	  

	Name:	 	
	Title:	 	

 The undersigned hereby acknowledges receipt of this notice pursuant to Section 3.26(a) of the
Agreement. 
 ACKNOWLEDGED AND AGREED: 
 JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as Trustee 
  

			
	By:	 	  

	Name:	 	
	Title:	 	

 EXHIBIT L 
 SERVICING CRITERIA TO BE ADDRESSED IN 
 ASSESSMENT OF COMPLIANCE 
 Where there are multiple checks for criteria the attesting party will identify in their management assertion that they are attesting only to the portion of the payment
chain they are responsible for in the related transaction agreements. 
 Key: X – obligation 
  

									
	 Reg AB Reference
	  	 Servicing Criteria
	  	 Servicer
	  	 Trustee
	  	 Custodian

		  	General Servicing Considerations	  		  		  	
					
	 1122(d)(1)(i)
	  	Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements.	  	 X
	  	 X
	  	
					
	 1122(d)(1)(ii)
	  	If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party’s performance and compliance with such servicing
activities.	  	 If applicable
	  		  	
					
	 1122(d)(1)(iii)
	  	Any requirements in the transaction agreements to maintain a back-up servicer for the Pool Assets are maintained.	  	 If become
 contractually
 obligated
	  		  	
					
	 1122(d)(1)(iv)
	  	A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and
otherwise in accordance with the terms of the transaction agreements.	  	 X
	  		  	
					
		  	Cash Collection and Administration	  		  		  	
					
	 1122(d)(2)(i)
	  	Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of
days specified in the transaction agreements.	  	 X
	  	 X
	  	
					
	 1122(d)(2)(ii)
	  	Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel	  	 X
	  	 X
	  	
					
	 1122(d)(2)(iii)
	  	Advances of funds or guarantees regarding collections, cash flows or payments, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the
transaction agreements.	  	 X
	  		  	

									
	 Reg AB Reference
	  	 Servicing Criteria
	  	 Servicer
	  	 Trustee
	  	 Custodian

	 1122(d)(2)(iv)
	  	The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of over collateralization, are separately maintained (e.g., with respect to commingling
of cash) as set forth in the transaction agreements.	  	 X
	  	 X
	  	
					
	 1122(d)(2)(v)
	  	Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, “federally insured depository
institution” with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) of the Securities Exchange Act.	  	 X
	  	 X*
	  	
					
	 1122(d)(2)(vi)
	  	Unissued checks are safeguarded so as to prevent unauthorized access	  	 X
	  		  	
					
	 1122(d)(2)(vii)
	  	Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are
(A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the
reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements.	  	 X
	  	 X
	  	

	*	The Trustee need only provide if it is determined that any account maintained by the Trustee is a custodial account for purposes of the Servicing Criteria. This item is subject to
further clarification from the SEC. 

  

 L-2 

									
	 Reg AB Reference
	  	 Servicing Criteria
	  	 Servicer
	  	 Trustee
	  	 Custodian

		  	Investor Remittances and Reporting	  		  		  	
					
	 1122(d)(3)(i)
	  	Reports to investors, including those to be filed with the Commission, are maintained in accordance with the transaction agreements and applicable Commission requirements. Specifically, such
reports (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the
Commission as required by its rules and regulations; and (D) agree with investors’ or the trustee’s records as to the total unpaid principal balance and number of Pool Assets serviced by the Servicer.	  	 X
	  	 X
	  	
					
	 1122(d)(3)(ii)
	  	Amounts due to investors are allocated and remitted in accordance with timeframes, payment priority and other terms set forth in the transaction agreements.	  	 X
	  	 X
	  	
					
	 1122(d)(3)(iii)
	  	Disbursements made to an investor are posted within two business days to the Servicer’s investor records, or such other number of days specified in the transaction agreements.	  	 X
	  	 X
	  	
					
	 1122(d)(3)(iv)
	  	Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements.	  	 X
	  	 X
	  	
					
		  	Pool Asset Administration	  		  		  	
					
	 1122(d)(4)(i)
	  	Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents.	  	 X
	  		  	 X

					
	 1122(d)(4)(ii)
	  	Pool assets and related documents are safeguarded as required by the transaction agreements	  		  		  	 X

					
	 1122(d)(4)(iii)
	  	Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements.	  	 X
	  	 X
	  	
					
	 1122(d)(4)(iv)
	  	Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the Servicer’s obligor records maintained no more than two business
days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents.	  	 X
	  		  	

  

 L-3 

									
	 Reg AB Reference
	  	 Servicing Criteria
	  	 Servicer
	  	 Trustee
	  	 Custodian

	 1122(d)(4)(v)
	  	The Servicer’s records regarding the pool assets agree with the Servicer’s records with respect to an obligor’s unpaid principal balance.	  	 X
	  		  	
					
	 1122(d)(4)(vi)
	  	Changes with respect to the terms or status of an obligor’s pool assets (e.g., loan modifications or reagings) are made, reviewed and approved by authorized personnel in accordance with the
transaction agreements and related pool asset documents.	  	 X
	  		  	
					
	 1122(d)(4)(vii)
	  	Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and
concluded in accordance with the timeframes or other requirements established by the transaction agreements.	  	 X
	  		  	
					
	 1122(d)(4)(viii)
	  	Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a
monthly basis, or such other period specified in the transaction agreements, and describe the entity’s activities in monitoring delinquent pool assets including, for example, phone calls, letters and payment rescheduling plans in cases where
delinquency is deemed temporary (e.g., illness or unemployment).	  	 X
	  		  	
					
	 1122(d)(4)(ix)
	  	Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents.	  	 X
	  		  	
					
	 1122(d)(4)(x)
	  	Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor’s pool asset documents, on at least an annual basis,
or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30
calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements.	  	 X
	  		  	

  

 L-4 

									
	 Reg AB Reference
	  	 Servicing Criteria
	  	 Servicer
	  	 Trustee
	  	 Custodian

	 1122(d)(4)(xi)
	  	Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such
payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements.	  	 X
	  		  	
					
	 1122(d)(4)(xii)
	  	Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the Servicer’s funds and not charged to the obligor, unless the late payment was
due to the obligor’s error or omission.	  	 X
	  		  	
					
	 1122(d)(4)(xiii)
	  	Disbursements made on behalf of an obligor are posted within two business days to the obligor’s records maintained by the servicer, or such other number of days specified in the transaction
agreements.	  	 X
	  		  	
					
	 1122(d)(4)(xiv)
	  	Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements.	  	 X
	  		  	
					
	 1122(d)(4)(xv)
	  	Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements.	  	 X
	  		  	

  

 L-5 

 EXHIBIT M 
 FORM 10-D, FORM 8-K AND FORM 10-K  
 REPORTING RESPONSIBILITY 
 As to each item described below, the entity indicated as the Responsible Party shall be primarily responsible for reporting the information to the party identified as
responsible for preparing the Securities Exchange Act Reports pursuant to Section 3.18 of the Pooling and Servicing Agreement. 
 Under Item 1 of
Form 10-D: a) items marked “4.03 statement” are required to be included in the periodic reports prepared by the Trustee under Section 4.03 of the Pooling and Servicing Agreement, provided by the Trustee based on information received
from the Servicer; and b) items marked “Form 10-D report” are required to be in the Form 10-D report but not the 4.03 statement, provided by the party indicated. Information under all other Items of Form 10-D is to be included in the Form
10-D report. All such information and any other Items of Form 8-K and Form 10-K set forth in this exhibit shall be sent to the Trustee and the Depositor. 
  

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

	 10-D
	  	Must be filed within 15 days of the payment date for the asset-backed securities.	  		  		  	
									
		  	1	  	 Payment and Pool Performance Information
	  		  		  		  		  		  	
									
		  		  	 Item 1121(a) – payment and Pool Performance Information
	  		  		  		  		  		  	
									
		  		  	(1) Any applicable record dates, accrual dates, determination dates for calculating payments and actual payment dates for the payment period.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	(2) Cash flows received and the sources thereof for payments, fees and expenses.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	(3) Calculated amounts and payment of the flow of funds for the period itemized by type and priority of payment, including:	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	    (i) Fees or expenses accrued and paid, with an identification of the general purpose of such fees and the party receiving such fees or expenses.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	    (ii) Payments accrued or paid with respect to enhancement or other support identified in Item 1114 of Regulation AB (such as insurance premiums or other enhancement
maintenance fees), with an identification of the general purpose of such payments and the party receiving such payments.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	    (iii) Principal, interest and other payments accrued and paid on the asset-backed securities by type and by class or series and any principal or interest shortfalls or
carryovers.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	    (iv) The amount of excess cash flow or excess spread and the disposition of excess cash flow.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	    (4) Beginning and ending principal balances of the asset-backed securities.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	

  

 M-2 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	(5) Interest rates applicable to the pool assets and the asset-backed securities, as applicable. Consider providing interest rate information for pool assets in appropriate distributional groups
or incremental ranges.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	(6) Beginning and ending balances of transaction accounts, such as reserve accounts, and material account activity during the period.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	(7) Any amounts drawn on any credit enhancement or other support identified in Item 1114 of Regulation AB, as applicable, and the amount of coverage remaining under any such enhancement, if
known and applicable.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	(8) Number and amount of pool assets at the beginning and ending of each period, and updated pool composition information, such as weighted average coupon, weighted average remaining term, pool
factors and prepayment amounts.	  		  	 X
  
 (4.03 Statement)
	  		  	Updated pool composition information fields to be as specified by Depositor from time to time	  		  	
									
		  		  	(9) Delinquency and loss information for the period.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	

  

 M-3 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	In addition, describe any material changes to the information specified in Item 1100(b)(5) of Regulation AB regarding the pool assets. (methodology)	  	 X
	  		  		  		  		  	
									
		  		  	(10) Information on the amount, terms and general purpose of any advances made or reimbursed during the period, including the general use of funds advanced and the general source of funds for
reimbursements.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	(11) Any material modifications, extensions or waivers to pool asset terms, fees, penalties or payments during the payment period or that have cumulatively become material over time.	  	 X
	  		  		  	X	  	X	  	
									
		  		  	(12) Material breaches of pool asset representations or warranties or transaction covenants.	  	 X
	  		  		  	X	  	X	  	
									
		  		  	(13) Information on ratio, coverage or other tests used for determining any early amortization, liquidation or other performance trigger and whether the trigger was met.	  		  	 X
  
 (4.03 Statement)
	  		  		  		  	
									
		  		  	(14) Information regarding any new issuance of asset-backed securities backed by the same asset pool,	  		  		  		  	X	  	X	  	

  

 M-4 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	Information regarding any pool asset changes (other than in connection with a pool asset converting into cash in accordance with its terms), such as additions or removals in connection with a
prefunding or revolving period and pool asset substitutions and repurchases (and purchase rates, if applicable), and cash flows available for future purchases, such as the balances of any prefunding or revolving accounts, if applicable.	  	 X
	  		  		  	 X
	  		  	
									
		  		  	Disclose any material changes in the solicitation, credit-granting, underwriting, origination, acquisition or pool selection criteria or procedures, as applicable, used to originate, acquire or
select the new pool assets.	  		  		  		  	 X
	  	 X
	  	
									
		  		  	 Item 1121(b) – Pre-Funding or Revolving Period Information
  
 Updated pool information as required under Item 1121(b).
	  		  		  		  	 X
	  		  	
									
		  	2	  	Legal Proceedings	  		  		  		  		  		  	

  

 M-5 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	Item 1117 – Legal proceedings pending against the following entities, or their respective property, that is material to Noteholders, including proceedings known to be contemplated by
governmental authorities:	  		  		  		  		  		  	
									
		  		  	Sponsor	  		  		  		  		  	 X
	  	
									
		  		  	Depositor	  		  		  		  	 X
	  		  	
									
		  		  	Issuing entity	  		  		  		  	 X
	  		  	
									
		  		  	Servicer, other Servicer servicing 20% or more of pool assets at time of report, other material servicers	  	 X
	  		  		  		  		  	
									
		  		  	Trustee	  		  	 X
	  		  		  		  	
									
		  		  	Custodian	  		  		  		  		  		  	 X

									
		  	3	  	Sales of Securities and Use of Proceeds	  		  		  		  		  		  	
									
		  		  	 Information from Item 2(a) of Part II of Form 10-Q:
  
 With respect to any sale of securities by the sponsor, depositor or issuing entity, that are backed by the same asset pool or are otherwise issued by the issuing entity,
whether or not registered, provide the sales and use of proceeds information in Item 701 of Regulation S-K. Pricing information can be omitted if securities were not registered.
	  		  		  		  	 X
	  		  	

  

 M-6 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  	4	  	 Defaults Upon
  
 Senior Securities
	  		  		  		  		  		  	
									
		  		  	 Information from Item 3 of Part II of Form 10-Q:
  
 Report the occurrence of any Event of Default (after expiration of any grace period and provision of any required notice)
	  		  		  		  	X	  	X	  	
									
		  	5	  	Submission of Matters to a Vote of Noteholders	  		  		  		  		  		  	
									
		  		  	Information from Item 4 of Part II of Form 10-Q	  		  	X	  		  		  		  	
									
		  	6	  	Significant Obligors of Pool Assets	  		  		  		  		  		  	
									
		  		  	Item 1112(b) – Significant Obligor Financial Information*	  		  		  		  	X	  		  	
									
		  		  	*This information need only be reported on the Form 10-D for the payment period in which updated information is required pursuant to the Item.	  		  		  		  		  		  	
									
		  	7	  	Significant Enhancement Provider Information	  		  		  		  		  		  	
									
		  		  	Item 1114(b)(2) – Credit Enhancement Provider Financial Information*	  		  		  		  		  		  	
									
		  		  	    Determining applicable disclosure threshold	  		  		  		  		  	X	  	

  

 M-7 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	 Requesting required financial information or effecting incorporation by reference
	  		  		  		  		  	 X
	  	
									
		  		  	Item 1115(b) – Derivative Counterparty Financial Information*	  		  		  		  		  		  	
									
		  		  	 Determining current maximum probable exposure
	  		  		  		  		  	 X
	  	
									
		  		  	 Determining current significance percentage
	  		  		  		  		  	 X
	  	
									
		  		  	 Requesting required financial information or effecting incorporation by reference
	  		  		  		  		  	 X
	  	
									
		  		  	*This information need only be reported on the Form 10-D for the payment period in which updated information is required pursuant to the Items.	  		  		  		  		  		  	
									
		  	8	  	Other Information	  		  		  		  		  		  	
				
		  		  	Disclose any information required to be reported on Form 8-K during the period covered by the Form 10-D but not reported	  	The Responsible Party for the applicable Form 8-K item as indicated below.
									
		  	9	  	Exhibits	  		  		  		  		  		  	
									
		  		  	Payment Report	  		  	 X
	  		  		  		  	
									
		  		  	Exhibits required by Item 601 of Regulation S-K, such as material agreements	  		  		  		  	 X
	  		  	

  

 M-8 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

	 8-K
	  	Must be filed within four business days of an event reportable on Form 8-K.	  		  		  		  	
									
		  	1.01	  	Entry into a Material Definitive Agreement	  		  		  		  		  		  	
									
		  		  	 Disclosure is required regarding entry into or amendment of any definitive agreement that is material to the securitization, even if depositor is not
a party.
  
 Examples: servicing agreement, custodial agreement.
  
 Note: disclosure not required as to definitive agreements that are fully disclosed in the
prospectus
	  	X	  		  		  	X	  	X	  	
									
		  	1.02	  	Termination of a Material Definitive Agreement	  		  		  		  		  		  	
									
		  		  	 Disclosure is required regarding termination of any definitive agreement that is material to the securitization (other than expiration in accordance
with its terms), even if depositor is not a party.
  
 Examples: servicing agreement,
custodial agreement.
	  	X	  		  		  	X	  	X	  	
									
		  	1.03	  	Bankruptcy or Receivership	  		  		  		  		  		  	

  

 M-9 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	 Disclosure is required regarding the bankruptcy or receivership, if known to the Depositor, Trustee, Sponsor or Servicer, with respect to any of the
following:
  
 Sponsor, Depositor, Servicer, affiliated Servicer, other Servicer servicing
20% or more of pool assets at time of report, other material servicers, Trustee, Trustee, significant obligor, credit enhancer (10% or more), derivatives counterparty, custodian
	  	X	  		  		  	X	  	X	  	
									
		  	2.04	  	Triggering Events that Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement	  		  		  		  		  		  	
									
		  		  	 Includes an early amortization, performance trigger or other event, including event of default, that would materially alter the payment
priority/payment of cash flows/amortization schedule.
  
 Disclosure will be made of events
other than waterfall triggers which are disclosed in the 4.03 statement
	  	N/A	  	N/A	  	N/A	  	N/A	  	N/A	  	N/A

  

 M-10 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  	3.03	  	Material Modification to Rights of Noteholders	  		  		  		  		  		  	
									
		  		  	Disclosure is required of any material modification to documents defining the rights of Noteholders, including the Sale and Servicing Agreement	  		  		  		  	X	  	X	  	
									
		  	5.03	  	Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year	  		  		  		  		  		  	
									
		  		  	Disclosure is required of any amendment “to the governing documents of the issuing entity”	  		  		  		  	X	  		  	
									
		  	5.06	  	Change in Shell Company Status	  		  		  		  		  		  	
									
		  		  	[Not applicable to ABS issuers]	  		  		  		  	X	  		  	
									
		  	6.01	  	ABS Informational and Computational Material	  		  		  		  		  		  	
									
		  		  	[Not included in reports to be filed under Section 3.19]	  		  		  		  	X	  		  	
									
		  	6.02	  	Change of Servicer or Trustee	  		  		  		  		  		  	
									
		  		  	Requires disclosure of any removal, replacement, substitution or addition of any servicer, affiliated servicer, other servicer servicing 10% or more of pool assets at time of report, other
material servicers, or trustee.	  	X	  		  		  	X	  		  	

  

 M-11 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	Reg AB disclosure about any new servicer is also required.	  	X	  		  		  		  		  	
									
		  		  	Reg AB disclosure about any new trustee is also required.	  		  	 X
  
 (by new trustee)
	  		  		  		  	
									
		  	6.03	  	Change in Credit Enhancement or Other External Support	  		  		  		  		  		  	
									
		  		  	Covers termination of any enhancement in manner other than by its terms, the addition of an enhancement, or a material change in the enhancement provided. Applies to external credit enhancements
as well as derivatives.	  		  		  		  	X	  	X	  	
									
		  		  	Reg AB disclosure about any new enhancement provider is also required.	  		  		  		  	X	  		  	
									
		  	6.04	  	Failure to Make a Required Payment	  		  	X	  		  		  		  	
									
		  	6.05	  	Securities Act Updating Disclosure	  		  		  		  		  		  	
									
		  		  	If any material pool characteristic differs by 5% or more at the time of issuance of the securities from the description in the final prospectus, provide updated Reg AB disclosure about the
actual asset pool.	  		  		  		  	X	  		  	

  

 M-12 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	If there are any new servicers or originators required to be disclosed under Regulation AB as a result of the foregoing, provide the information called for in Items 1108 and 1110
respectively.	  		  		  		  	X	  		  	
									
		  	7.01	  	7.01 Regulation FD Disclosure	  	X	  		  		  	X	  	X	  	
									
		  	8.01	  	Other Events	  		  		  		  		  		  	
									
		  		  	Any event, with respect to which information is not otherwise called for in Form 8-K, that the registrant deems of importance to Noteholders.	  		  		  		  	X	  	X	  	
				
		  	9.01	  	Financial Statements and Exhibits	  	The Responsible Party applicable to reportable event.
					
	10-K	  	Must be filed within 90 days of the fiscal year end for the registrant.	  		  		  	
									
		  	9B	  	Other Information	  		  		  		  		  		  	
				
		  		  	Disclose any information required to be reported on Form 8-K during the fourth quarter covered by the Form 10-K but not reported	  	The Responsible Party for the applicable Form 8-K Item as indicated above.
									
		  	15	  	Exhibits and Financial Statement Schedules	  		  		  		  		  		  	
									
		  		  	Item 1112(b) – Significant Obligor Financial Information	  		  		  		  	X	  		  	
									
		  		  	Item 1114(b)(2) – Credit Enhancement Provider Financial Information	  		  		  		  		  		  	

  

 M-13 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	 Determining applicable disclosure threshold
	  		  		  		  		  	X	  	
									
		  		  	 Requesting required financial information or effecting incorporation by reference
	  		  		  		  		  	X	  	
									
		  		  	Item 1115(b) – Derivative Counterparty Financial Information	  		  		  		  		  		  	
									
		  		  	 Determining current maximum probable exposure
	  		  		  		  		  	X	  	
									
		  		  	 Determining current significance percentage
	  		  		  		  		  	X	  	
									
		  		  	 Requesting required financial information or effecting incorporation by reference
	  		  		  		  		  	X	  	
									
		  		  	Item 1117 – Legal proceedings pending against the following entities, or their respective property, that is material to Noteholders, including proceedings known to be contemplated by
governmental authorities:	  		  		  		  		  		  	
									
		  		  	 Sponsor
	  		  		  		  		  	X	  	
									
		  		  	 Depositor
	  		  		  		  	X	  		  	
									
		  		  	 Issuing entity
	  		  		  		  	X	  		  	

  

 M-14 

																	
	 Form
	  	Item	  	 Description
	  	 Servicer
	  	 Trustee
	  	 	  	 Depositor
	  	 Sponsor
	  	 Custodian

		  		  	Servicer, affiliated Servicer, other Servicer servicing 20% or more of pool assets at time of report, other material servicers	  	X	  		  		  		  		  	
									
		  		  	Trustee	  		  	X	  		  		  		  	
									
		  		  	Custodian	  		  		  		  		  		  	X
									
		  		  	Item 1119 – Affiliations and relationships between the following entities, or their respective affiliates, that are material to Noteholders:	  		  		  		  		  		  	
									
		  		  	Sponsor	  		  		  		  		  	X	  	
									
		  		  	Depositor	  		  		  		  	X	  		  	
									
		  		  	Servicer, affiliated Servicer, other Servicer servicing 20% or more of pool assets at time of report, other material servicers	  	X	  		  		  		  		  	
									
		  		  	Trustee	  		  	X	  		  		  		  	
									
		  		  	Custodian	  		  		  		  		  		  	X
									
		  		  	Credit Enhancer/Support Provider	  		  		  		  	X	  		  	
									
		  		  	Significant Obligor	  		  		  		  	X	  		  	
									
		  		  	Item 1122 – Assessment of Compliance with Servicing Criteria	  	X	  	X	  		  		  		  	
									
		  		  	Item 1123 – Servicer Compliance Statement	  	X	  		  		  		  		  	

  

 M-15 

 EXHIBIT N-1 
 FORM OF CERTIFICATION TO BE PROVIDED 
 BY THE DEPOSITOR WITH FORM 10-K 
 Re: NovaStar Mortgage Funding Trust, Series 2006-2 (the “Issuing Entity”) Asset-Backed Notes, Series 2006-2 
 I, [identify the certifying individual], certify, that: 
  

	 	1.	I have reviewed this report on Form 10-K, and all reports on Form 10-D required to be filed in respect of the period covered by this report on Form 10-K of NovaStar Mortgage Funding
Trust, Series 2006-2, Asset Backed Notes, Series 2006-2 (the “Exchange Act periodic reports”); 

  

	 	2.	Based on my knowledge, the Exchange Act periodic reports, taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

  

	 	3.	Based on my knowledge, all of the payment, servicing and other information required to be provided under Form 10-D for the period covered by this report is included in the Exchange
Act periodic reports; 

  

	 	4.	Based on my knowledge and the servicer compliance statement required in this report under Item 1123 of Regulation AB, and except as disclosed in the Exchange Act periodic
reports, the servicer has fulfilled its obligations under the sale and servicing agreement; and 

  

	 	5.	All of the reports on assessment of compliance with servicing criteria for asset-backed securities and their related attestation reports on assessment of compliance with servicing
criteria for asset-backed securities required to be included in this report in accordance with Item 1122 of Regulation AB and Exchange Act Rules 13a-18 and 15d-18 have been included as an exhibit to this report, except as otherwise disclosed in
this report. Any material instances of noncompliance described in such reports have been disclosed in this report on From 10-K. 

 In giving
the certifications above, I have reasonably relied on information provided to me by the following unaffiliated parties:
[                    ]. 
  

			
	NOVASTAR MORTGAGE FUNDING CORPORATION
		
	By:	 	  

	Name:	 	
	Title:	 	
	Date:	 	

 EXHIBIT N-2 
 FORM OF CERTIFICATION TO BE PROVIDED TO THE 
 DEPOSITOR BY THE [TRUSTEE][SERVICER] 
 Re: NovaStar Mortgage Funding Trust, Series 2006-2 (the “Issuing Entity”) Asset-Backed Notes, Series 2006-2 
 Reference is made to the Pooling and Servicing Agreement, dated as of June 1, 2006 (the “Servicer Agreement”), by and among JPMorgan Chase Bank, National
Association (the “Trustee”), NovaStar Mortgage Funding Corporation, as depositor (the “Depositor”), NovaStar Mortgage, Inc., as sponsor and servicer (the “Sponsor” and the “Servicer”, respectively), U.S. Bank
National Association, as custodian (the “Custodian”) and J.P. Morgan Trust Company, National Association, as co-trustee. The [Trustee][Servicer] hereby certifies to the Depositor and its officers, directors and affiliates, and with the
knowledge and intent that they will rely upon this certification, that: 
  

	 	(i)	The [Trustee][Servicer] has reviewed the annual report on Form 10-K for the fiscal year [ ], and all reports on Form 10-D containing distribution reports filed in respect of periods
included in the year covered by that annual report, relating to the above-referenced issuing entity; 

  

	 	(ii)	Subject to paragraph (iv), the distribution information in the distribution reports contained in all monthly Form 10-D’s included in the year covered by the annual report on
Form 10-K for the calendar year [            ], taken as a whole, does not contain any untrue statement of a material fact or omit to state a material fact required by the Servicing
Agreement to be included therein and necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading as of the last day of the period covered by that annual report; 

 

	 	(iii)	The distribution information required to be provided by the [Trustee][Servicer] under the Servicing Agreement is included in these reports; and 

  

	 	(iv)	In compiling the distribution information and making the foregoing certifications, the [Trustee][Servicer] has relied upon information furnished to it by the Servicer under the
Servicing Agreement. The [Trustee][Servicer] shall have no responsibility or liability for any inaccuracy in such reports resulting from information so provided by the Servicer. 

  

			
	 [JPMORGAN CHASE BANK,
NATIONAL ASSOCIATION, not in its individual capacity but solely as Trustee][NOVASTAR MORTGAGE, INC., as
Servicer]

		
	By:	 	  

		
	Name:	 	  

		
	Title:	 	  

 EXHIBIT O 
 OFFICER’S CERTIFICATE REGARDING 
 ANNUAL STATEMENT OF COMPLIANCE 
 NovaStar Mortgage Funding Trust, Series 2006-2 
 Asset-Backed Notes, Series 2006-2 
 I,
                                , hereby certify that I am a duly appointed
                                        
     of NovaStar Mortgage, Inc. (the “Servicer”), and further certify as follows: 
  

	 	1.	This certification is being made pursuant to the terms of the Pooling and Servicing Agreement, dated as of June 1, 2006 (the “Servicing Agreement”), by and among
JPMorgan Chase Bank, National Association (the “Trustee”), NovaStar Mortgage Funding Corporation, as depositor (the “Depositor”), NovaStar Mortgage, Inc., as sponsor and servicer (the “Sponsor” and the
“Servicer”, respectively), U.S. Bank National Association, as custodian (the “Custodian”) and J.P. Morgan Trust Company, National Association, as co-trustee. . 

  

	 	2.	I have reviewed the activities of the Servicer during the preceding calendar year and the Servicer’s performance under the Servicing Agreement has been made under my
supervision and to the best of my knowledge, based on such review, the Servicer has fulfilled all of its obligations under the Servicing Agreement in all material respects throughout the year. 

 Capitalized terms not otherwise defined herein have the meanings set forth in the Servicing Agreement. 
  

	
	Date:
	
	  

	Name:
	Title:Mortgage Loan Purchase Agreement

 Exhibit 10.1 
 NOVASTAR MORTGAGE, INC. as Sponsor, 
 NOVASTAR MORTGAGE FUNDING CORPORATION 
 as Depositor, 
 U.S. BANK NATIONAL ASSOCIATION

 as Custodian 
 and 

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION 
 as Trustee 
 MORTGAGE LOAN PURCHASE AGREEMENT 
 Dated as of June 1, 2006 
 Fixed and Adjustable Rate Mortgage Loans 
 NovaStar Mortgage Funding Trust, Series 2006-2 
 NovaStar Home Equity Loan Asset-Backed Certificate, Series 2006-2 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page(s)
	 ARTICLE I DEFINITIONS
	  	1
	 Section 1.01
	  	Definitions.	  	1
	 ARTICLE II SALE OF MORTGAGE LOANS AND RELATED PROVISIONS
	  	2
	 Section 2.01
	  	Sale of Mortgage Loans and MI Policies.	  	2
	 Section 2.02
	  	Reserved.	  	5
	 Section 2.03
	  	Reserved.	  	5
	 Section 2.04
	  	Reserved.	  	5
	 ARTICLE III REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH
	  	5
	 Section 3.01
	  	Sponsor Representations and Warranties.	  	5
	 Section 3.02
	  	Depositor Representations and Warranties.	  	22
	 ARTICLE IV SPONSOR’S COVENANTS
	  	23
	 Section 4.01
	  	Covenants of the Sponsor.	  	23
	 Section 4.02
	  	Payment of Expenses.	  	24
	 ARTICLE V CONDITIONS TO MORTGAGE LOAN PURCHASE
	  	24
	 Section 5.01
	  	Conditions of Depositor’s Obligations.	  	24
	 ARTICLE VI INDEMNIFICATION BY THE SPONSOR WITH RESPECT TO THE MORTGAGE LOANS
	  	25
	 Section 6.01
	  	Indemnification With Respect to the Mortgage Loans.	  	25
	 Section 6.02
	  	Limitation on Liability of the Sponsor.	  	25
	 ARTICLE VII TERMINATION
	  	26
	 Section 7.01
	  	Termination.	  	26
	 ARTICLE VIII MISCELLANEOUS PROVISIONS
	  	27
	 Section 8.01
	  	Amendment.	  	27
	 Section 8.02
	  	Governing Law.	  	27
	 Section 8.03
	  	Notices.	  	27
	 Section 8.04
	  	Severability of Provisions.	  	29
	 Section 8.05
	  	Relationship of Parties.	  	29
	 Section 8.06
	  	Counterparts.	  	29
	 Section 8.07
	  	Further Agreements.	  	29
	 Section 8.08
	  	Intention of the Parties.	  	30
	 Section 8.09
	  	Successors and Assigns; Assignment of Purchase Agreement.	  	30
	 Section 8.10
	  	Survival.	  	30
	 Section 8.11
	  	Liability of the Trustee.	  	30
			
	 EXHIBIT 1
	  	Mortgage Loan Schedule	  	

 THIS MORTGAGE LOAN PURCHASE AGREEMENT (this “Purchase Agreement”), dated as of
June 1, 2006, is made among NovaStar Mortgage, Inc. (the “Sponsor”), NovaStar Mortgage Funding Corporation (the “Depositor”), U.S. Bank National Association (the “Custodian”) and JPMorgan Chase
Bank, National Association (the “Trustee”). 
 W I T N E S S E
T H T H A T: 
 WHEREAS, pursuant to the terms of this Purchase Agreement, the Sponsor will sell
the Mortgage Loans and the related MI Policies to the Depositor on the Closing Date; 
 WHEREAS, pursuant to the terms of the Pooling and
Servicing Agreement, the Depositor will transfer the Mortgage Loans and the related MI Policies, and assign all of its rights under the Purchase Agreement, to the Trustee, without recourse, on the Closing Date; 
 WHEREAS, pursuant to the terms of the Pooling and Servicing Agreement, the Trustee will issue the Certificates; 
 WHEREAS, pursuant to the terms of the Pooling and Servicing Agreement, the Trustee will transfer the Certificates to the Depositor; 
 WHEREAS, pursuant to the terms of the Underwriting Agreement, the Depositor will sell the Offered Certificates to the Underwriters; 
 WHEREAS, pursuant to the terms of the REMIC Interests Sale Agreement, the Depositor will sell the Class M-9 Certificates, Class M-10 Certificates and
Class CB Certificates to NovaStar Certificates Financing LLC (“NCFLLC”), the Class CA Certificates (including the net value represented by the Class I Certificates) to NovaStar Certificates Financing Corporation
(“NCFC”) and the and the Residual Certificates to Wachovia Bank, N.A.; and 
 WHEREAS, pursuant to the terms of the Pooling
and Servicing Agreement, the Servicer will service the Mortgage Loans. 
 
ARTICLE I 
 DEFINITIONS 
 Section 1.01 
Definitions. 
 For all purposes of this Purchase Agreement, except as otherwise expressly provided herein
or unless the context otherwise requires, capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Definitions contained in Appendix A to the Pooling and Servicing Agreement, dated as of June 1, 2006,
among the Custodian, the Trustee, J.P. Morgan Trust Company, National Association, as co-trustee (the “Co-Trustee”), the Depositor and NovaStar Mortgage, Inc. as sponsor and servicer (the “Servicer”) which is
incorporated by reference herein. All other capitalized terms used herein shall have the meanings specified herein. 
  

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ARTICLE II 
 SALE OF MORTGAGE LOANS AND RELATED PROVISIONS 
 Section 2.01 
Sale of Mortgage Loans and MI Policies. 
 (a) The Sponsor hereby sells, and the Depositor hereby
purchases on the Closing Date the Mortgage Loans identified (and the related MI Policies) on the Mortgage Loan Schedule annexed hereto as Exhibit 1, the proceeds thereof and all rights under the Related Documents (including the related Mortgage
Files). The Mortgage Loans consist of a group of conventional, residential first and second lien mortgage loans with fixed and adjustable interest rates (the “Group I Mortgage Loans”) and a group of conventional, residential first and
second lien mortgage loans with fixed and adjustable interest rates (the “Group II Mortgage Loans”). The Mortgage Loans will have a Principal Balance as of the close of business on the Cut-off Date, after giving effect to any payments due
on or before such date whether or not received, of approximately $1,021,102,080. The sale of the Mortgage Loans will take place on the Closing Date, subject to and simultaneously with the deposit of the Mortgage Loans into the Trust Fund, the
issuance of the Certificates by the Trustee and the sale of the Underwritten Certificates pursuant to the Underwriting Agreement. The purchase price (the “Purchase Price”) for the Mortgage Loans to be paid by the Depositor to the
Sponsor on the Closing Date shall consist of the following: 
 (i) a payment in an amount equal to $1,000,430,911 representing
the net proceeds of the sale of the Underwritten Certificates, which payment shall be paid to the Sponsor by wire transfer in immediately available funds on the Closing Date by or on behalf of the Depositor, or as otherwise agreed by the Depositor;
and 
 (ii) the Class M-9 Certificates, the Class M-10 Certificates, the Class M-9 DSI Certificates, the Class M-10 DSI
Certificates, the Class CA Certificates and the Class CB Certificates (including the net value represented by the Class I Certificates) and the Residual Certificates. 
 (b) [Reserved] 
 (c) In connection with such conveyances by the Sponsor, the Sponsor shall on behalf of and
at the direction of the Depositor deliver to, and deposit with the Custodian on behalf of the Trustee, on or before the Closing Date, the following documents or instruments with respect to each Mortgage Loan (the “Mortgage File”):

 (i) the original Mortgage Note endorsed to “JPMorgan Chase Bank, National Association, as Trustee of the NovaStar
Mortgage Funding Trust, Series 2006-2, relating to the NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2”; 
 (ii) the original Mortgage with evidence of recording thereon, or, if the original Mortgage has not yet been returned from the public recording office, a copy of the original Mortgage certified by the Sponsor or the public recording office
in which such original Mortgage has been recorded and if the Mortgage Loan is registered 
  

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 on the MERS System, such Mortgage shall include thereon a statement that it is a MOM Loan and shall
include the MIN for such Mortgage Loan; 
 (iii) unless the Mortgage Loan is registered on the MERS System, an original
assignment (which may be included in one or more blanket assignments if permitted by applicable law) of the Mortgage endorsed to “JPMorgan Chase Bank, National Association, as Trustee of the NovaStar Mortgage Funding Trust, Series 2006-2,
relating to the NovaStar Home Equity Loan Asset-Backed Certificates, Series 2006-2,” and otherwise in recordable form; 
 (iv) originals of any intervening assignments of the Mortgage showing an unbroken chain of title from the originator thereof to the Person assigning it to the Trustee (or to MERS, if the Mortgage Loan is registered on the MERS System, and
noting the presence of a MIN, if the Mortgage Loan is registered on the MERS System), with evidence of recording thereon, or, if the original of any such intervening assignment has not yet been returned from the public recording office, a copy of
such original intervening assignment certified by the Sponsor or the public recording office in which such original intervening assignment has been recorded; 
 (v) the original policy of title insurance (or a commitment for title insurance, if the policy is being held by the title insurance
company pending recordation of the Mortgage); 
 (vi) true and correct copy of each assumption, modification, consolidation or
substitution agreement, if any, relating to the Mortgage Loan; and 
 (vii) an executed copy of the notice of assignment and
acknowledgement of assignment with respect to the Mortgage Loans covered by the MI Policies. 
 If a material defect in any Mortgage File is
discovered which may materially and adversely affect the value of the related Mortgage Loan, or the interests of the Trustee (as pledgee of the Mortgage Loans), or the Certificateholders in such Mortgage Loan, including if any document required to
be delivered to the Custodian has not been delivered (provided that a Mortgage File will not be deemed to contain a defect for an unrecorded assignment under clause (i) above for 180 days following submission of the assignment if the Sponsor
has submitted such assignment for recording pursuant to the terms of the following paragraph), the Sponsor shall cure such defect, repurchase the related Mortgage Loan at the Repurchase Price or substitute an Eligible Substitute Mortgage Loan for
the related Mortgage Loan upon the same terms and conditions set forth in Section 3.01 hereof for breaches of representations and warranties. 
 Promptly after the Closing Date (or after the date of transfer of any Eligible Substitute Mortgage Loan), the Sponsor at its own expense shall complete and submit for recording in the appropriate public office for real property records each
of the assignments referred to in clause (iii) above, with such assignment completed in favor of the Trustee, excluding any Mortgage Loan that is registered on the MERS System if MERS is identified on the Mortgage or on a properly recorded
assignment of Mortgage as the mortgagee of record. 
  

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 While such assignment to be recorded is being recorded, the Custodian shall retain a photocopy of such assignment. If any
assignment is lost or returned unrecorded to the Custodian because of any defect therein, the Sponsor is required to prepare a substitute assignment or cure such defect, as the case may be, and the Sponsor shall cause such substitute assignment to
be recorded in accordance with this paragraph. 
 In instances where an original Mortgage or any original intervening assignment of Mortgage
is not, in accordance with clause (ii) or (iv) above, delivered by the Sponsor to the Custodian, on behalf of the Trustee, prior to or on the Closing Date, the Sponsor will deliver or cause to be delivered the originals of such documents
to the Custodian, on behalf of the Trustee, promptly upon receipt thereof. 
 In connection with the assignment of any Mortgage Loan
registered on the MERS System, promptly after the Closing Date, the Sponsor further agrees that it will cause, at the Sponsor’s own expense, the MERS System to indicate that such Mortgage Loan has been assigned by the Sponsor to the Trustee in
accordance with this Agreement for the benefit of the Certificateholders by including in such computer files (a) the applicable Trustee code in the field “Trustee” which identifies the Trustee and (b) the code “NovaStar
2006-2” (or its equivalent) in the field “Pool” which identifies the series of the Certificates issued in connection with such Mortgage Loans. The Custodian will certify in its final certification that the MERS System shows the
Trustee on behalf of the Certificateholders as the beneficial owner of the Mortgage Loans registered on the MERS System. 
 Effective on the
Closing Date, the Depositor hereby acknowledges its acceptance of all right, title and interest to the Mortgage Loans and other property, existing on the Closing Date and thereafter created and conveyed to it pursuant to this Section 2.01.

 The Trustee, as assignee or transferee of the Depositor, shall be entitled to all scheduled principal payments due after the Cut-off Date,
all other payments of principal due and collected after the Cut-off Date, and all payments of interest on the Mortgage Loans. No scheduled payments of principal due on or before the Cut-off Date and collected after the Cut-off Date shall belong to
the Depositor pursuant to the terms of this Purchase Agreement. The Pooling and Servicing Agreement shall provide that any late payment charges collected in connection with a Mortgage Loan shall be paid to the Servicer as provided therein.

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

  

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 Commonwealth of Virginia (which shall have been submitted for filing as of the Closing Date), any continuation statements
with respect thereto and any amendments thereto required to reflect a change in the name or corporate structure of the Sponsor, as are necessary to perfect and protect the interests of the Depositor and their respective assignees in each Mortgage
Loan and the proceeds thereof. The Depositor agrees to take or cause to be taken such actions and to execute such documents, including without limitation the filing of all necessary UCC-1 financing statements, and continuation statements with
respect thereto and any amendments thereto as are necessary to perfect and protect the interests of the Trustee and its assignees in each Mortgage Loan. 
 The parties hereto understand and agree that it is not intended that any Mortgage Loan be included in the Trust Fund that is a “High-Cost Home Loan” as defined in the New Jersey Home Ownership Act, effective as of
November 27, 2003, the Home Loan Protection Act of New Mexico, effective as of January 1, 2004, the Massachusetts Predatory Home Loan Practices Act, effective as of November 7, 2004, or the Indiana Home Loan Practices Act effective
January 1st, 2005. 
 Section 2.02 
Reserved. 
 Section 2.03 
Reserved. 
 Section 2.04 
Reserved. 
 
ARTICLE III 
 REPRESENTATIONS AND WARRANTIES; 
 REMEDIES FOR BREACH 
 Section 3.01

Sponsor Representations and Warranties. 
 The Sponsor hereby represents and warrants to the Depositor and
the Trustee as of the date hereof and as of the Closing Date (or if otherwise specified below, as of the date so specified): 
 (a) As to the
Sponsor: 
 (i) The Sponsor (i) is a corporation duly organized, validly existing and in good standing under the laws of
the Commonwealth of Virginia and (ii) is qualified and in good standing as a foreign corporation to do business in each jurisdiction where such qualification is necessary, except where the failure to so qualify would not have a material adverse
effect on the Sponsor’s ability to enter into this Purchase Agreement and to consummate the transactions contemplated hereby; 
 (ii) The Sponsor has the power and authority to make, execute, deliver and perform its obligations under this Purchase Agreement and all of the transactions contemplated under this Purchase Agreement, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this Purchase Agreement; 
  

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 (iii) The Sponsor is not required to obtain the consent of any other Person or any
consent, approval or authorization from, or registration or declaration with, any governmental authority, bureau or agency in connection with the execution, delivery, performance, validity or enforceability of this Purchase Agreement, except for
such consents, approvals or authorization, or registration or declaration, as shall have been obtained or filed, as the case may be; 
 (iv) The execution and delivery of this Purchase Agreement and the performance of the transactions contemplated hereby by the Sponsor will not violate any provision of any existing law or regulation or any order or decree of any court
applicable to the Sponsor or any provision of the certificate of incorporation or bylaws of the Sponsor, or constitute a material breach of any mortgage, indenture, contract or other agreement to which the Sponsor is a party or by which the Sponsor
may be bound; 
 (v) No litigation or administrative proceeding of or before any court, tribunal or governmental body is
currently pending, or to the knowledge of the Sponsor threatened, against the Sponsor or any of its properties or with respect to this Purchase Agreement, the Certificates which in the opinion of the Sponsor has a reasonable likelihood of resulting
in a material adverse effect on the transactions contemplated by this Purchase Agreement; 
 (vi) This Purchase Agreement
constitute the legal, valid and binding obligations of the Sponsor, enforceable against the Sponsor in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of creditors’ rights in general and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity);

 (vii) This Purchase Agreement constitutes a valid transfer and assignment to the Depositor of all right, title and interest
of the Sponsor in and to the Cut-off Date Principal Balance of the Mortgage Loans, all monies due or to become due with respect thereto, and all proceeds of such Cut-off Date Principal Balance of the Mortgage Loans, and this Purchase Agreement
constitutes a valid transfer and assignment to the Trustee of all right, title and interest of the Sponsor in, all monies due or to become due with respect thereto,; 
 (viii) The Sponsor is not in default with respect to any order or decree of any court or any order or regulation of any federal, state or
governmental agency, which default might have consequences that would materially and adversely affect the condition (financial or other) or operations of the Sponsor or its properties or might have consequences that would materially adversely affect
its performance hereunder; and 
 (ix) The Servicer or any Subservicer who will be servicing any Mortgage Loan pursuant to the
Pooling and Servicing Agreement or a Subservicing Agreement is qualified to do business in all jurisdictions in which its activities as 
  

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 Servicer or Subservicer of the Mortgage Loans serviced by it require such qualifications except where
failure to be so qualified will not have a material adverse effect on such servicing activities. 
 (b) As to each Mortgage Loan as of the
Closing Date, except as otherwise expressly stated: 
 (i) The information set forth on the Mortgage Loan Schedule with
respect to each Mortgage Loan is true and correct in all material respects as of the Closing Date, and the information regarding the Mortgage Loans on the computer diskette or tape delivered to the Trustee prior to the Closing Date is true and
accurate in all material respects and describes the same Mortgage Loans as the Mortgage Loans on the Mortgage Loan Schedule; 
 (ii) The Mortgage Loans are not being transferred with any intent to hinder, delay or defraud any creditors; 
 (iii)
No more than 6.49% and 7.01% of the Mortgage Loans in Group I and the Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) were secured by condominium units; and no more than 13.80% and 17.73% of the Mortgage Loans in Group
I and the Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) were secured by properties in planned unit developments; 
 (iv) As of the Cut-off Date, the remaining term of each Group I Mortgage Loan is not more than 359 months and not less than 176 months and the remaining term of each Group II Mortgage Loan is not more than 359 months
and not less than 174 months; 
 (v) No more than 61.66% and 56.12% of the Mortgage Loans in Group I and Mortgage Loans in
Group II, respectively, (by Cut-off Date Principal Balance) have been the subject of cash-out refinances; 
 (vi) No more than
3.45% and 2.79% of the Mortgage Loans in Group I and Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance), have been the subject of rate and term (no cash-out) refinances; 
 (vii) No fewer than 34.89% and 41.09% of the Mortgage Loans in Group I and Mortgage Loans in Group II, respectively, (by Cut-off Date
Principal Balance) are purchase money loans; 
 (viii) No more than 12.23% and 19.45% of the Mortgage Loans in Group I and
Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) are secured by Mortgaged Properties located in the State of California; no more than 22.44% and 21.66% of the Mortgage Loans in Group I and Mortgage Loans in Group II,
respectively, (by Cut-off Date Principal Balance) are secured by Mortgaged Properties located in the State of Florida; no more than 3.84% and 4.14% of the Mortgage Loans in Group I and Mortgage Loans in Group II (by Cut-off Date Principal

  

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 Balance) are secured by Mortgaged Properties located in the State of Virginia; no more than 3.40% and
3.33% of the Mortgage Loans in Group I and Mortgage Loans in Group II (by Cut-off Date Principal Balance) are secured by Mortgaged Properties located in the State of New Jersey; no more than 5.90% and 7.09% of the Mortgage Loans in Group I and
Mortgage Loans in Group II (by Cut-off Date Principal Balance) are secured by Mortgaged Properties located in the State of Maryland; no more than 3.02% and 3.62% of the Mortgage Loans in Group I and Mortgage Loans in Group II (by Cut-off Date
Principal Balance) are secured by Mortgaged Properties located in the State of New York; no more than 49.23% and 40.75% of the Mortgage Loans in Group I and Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) are located in
any other state; 
 (ix) The outstanding Principal Balances of the Mortgage Loans in Group I (by Cut-off Date Principal
Balance) ranged from $14,996 to $542,829, the average outstanding Principal Balance of the Mortgage Loans in Group I is approximately $157,523; the outstanding Principal Balances of the Mortgage Loans in Group II (by Cut-off Date Principal Balance)
ranged from $11,237 to $1,348,298, the average outstanding Principal Balance of the Mortgage Loans in Group II is approximately $183,329; 
 (x) Approximately 73.68% and 70.51% of the Mortgage Loans in Group I and Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) were secured by a first lien on a parcel of real property improved
by a detached single family residence; no more than 6.03% and 4.75% of the Mortgage Loans in Group I and Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) were secured by a first lien on a parcel of real estate improved
by a multi-unit residence; 
 (xi) All points and fees related to each Mortgage Loan were disclosed in writing to the borrower
in accordance with applicable state and federal law and the borrower has executed a statement to that effect. No borrower was charged “points and fees” (whether or not financed) in an amount greater than 5% of the principal amount of any
such loan originated by the Sponsor, such 5% limitation calculated in accordance with the Lender Letter. All fees and charges (including finance charges) and whether or not financed, assessed, collected or to be collected with the origination and
servicing of each Mortgage Loan has been disclosed in writing to the borrower in accordance with applicable state and federal law and regulation; 
 (xii) The Mortgage Rates borne by the adjustable rate Mortgage Loans in Group I as of the Closing Date range from 5.990% per annum to 12.850% per annum, and the weighted average Mortgage Rate (by Cut-off
Date Principal Balance) of the adjustable rate Mortgage Loans in Group I was 8.762% per annum; the Mortgage Rates borne by fixed rate Mortgage Loans in Group I as of the Closing Date range from 6.900% per annum to 13.000% per annum,
and the weighted average Mortgage Rate (by Cut-off Date Principal Balance) of the fixed rate Mortgage Loans in Group I was 8.979% per annum; the Mortgage Rates borne by adjustable rate Mortgage Loans in Group II as of the Closing Date range
from 5.700% per annum to 12.625% per annum, 
  

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 and the weighted average Mortgage Rate (by Cut-off Date Principal Balance) of the adjustable rate
Mortgage Loans in Group II was 8.700% per annum; the Mortgage Rates borne by fixed rate Mortgage Loans in Group II as of the Closing Date range from 6.000% per annum to 13.050% per annum, and the weighted average Mortgage Rate (by
Cut-off Date Principal Balance) of the fixed rate Mortgage Loans in Group II was 9.192% per annum; 
 (xiii)
Approximately 44.15% and 44.07% of the Mortgage Loans in Group I and the Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) have a Loan-to-Value Ratio in excess of 80%; no Group I Mortgage Loan or Group II Mortgage Loan in
the Mortgage Pool had a Loan-to-Value Ratio or combined Loan-to-Value Ratio at origination in excess of 100%; and the weighted average Loan-to-Value Ratio (by Cut-off Date Principal Balance) of the Mortgage Loans in Group I and the Mortgage Loans in
Group II was equal to or less than 81.00% and 81.50%, respectively (by Cut-off Date Principal Balance); 
 (xiv) Approximately
97.77% and 95.99% of the Mortgage Loans in Group I and the Mortgage Loans in Group II, respectively (by Cut-off Date Principal Balance), are secured by first liens on the related Mortgaged Property; and approximately 2.23% and 4.01% (by Cut-off Date
Principal Balance) of the Mortgage Loans in Group I and the Mortgage Loans in Group II are secured by second liens on the related Mortgaged Property; 
 (xv) As of the Cut-off Date, the weighted average Loan-to-Value Ratio of the Mortgage Loans secured by first liens in Group I is approximately 80.58%; the weighted average combined Loan-to-Value Ratio of the Mortgage
Loans secured by first and second liens in Group I is approximately 81.00%; the weighted average Loan-to-Value Ratio of the Mortgage Loans secured by first liens in Group II is approximately 80.76%; the weighted average combined Loan-to-Value Ratio
of the Mortgage Loans secured by first and second liens in Group II is approximately 81.50%; the weighted average combined Loan-to-Value Ratio of all of the Mortgage Loans in Group I and Group II is approximately 81.25%; and the gross weighted
average coupon of the Mortgage Loans is approximately 8.789%; 
 (xvi) There is no valid offset, right of rescission, defense,
claim or counterclaim of any obligor under any Mortgage Note or Mortgage, including the obligation of the Mortgagor to pay the unpaid principal of or interest on such Mortgage Note, and any applicable right of rescission has expired, nor will the
operation of any of the terms of such Mortgage Note or Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, recoupment,
counterclaim or defense, including, without limitation, the defense of usury, and no such right of rescission, set-off, recoupment, counterclaim or defense has been asserted with respect thereto, and, to the best of Sponsor’s knowledge, no
Mortgagor of the applicable Mortgage is or since the date of origination has been a debtor in any state or federal bankruptcy or insolvency proceeding and no Mortgaged Property has been subject to any such proceeding; 
  

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 (xvii) There are no mechanics’ liens or any similar liens or claims for work, labor
or material affecting any Mortgaged Property which are or may be a lien prior to, or equal with, the lien of such Mortgage, except those which are insured against by the title insurance policy referred to in clause (xxii) below; 
 (xviii) As of the Closing Date, each Mortgaged Property is free of material damage and is in good repair and there is no proceeding
pending or threatened for the total or partial condemnation of any Mortgage Property. 
 (xix) Each Mortgage is a valid and
enforceable first or second lien on the Mortgaged Property including all improvements on the Mortgaged Property securing the related Mortgage Note and each Mortgaged Property is owned by the Mortgagor in fee simple (except with respect to common
areas in the case of condominiums, PUDs and de minimis PUTDs) subject only to (1) the lien of nondelinquent current real property taxes and assessments, (2) covenants, conditions and restrictions, rights of way, easements and
other matters of public record as of the date of recording of such Mortgage, such exceptions appearing of record being acceptable to mortgage lending institutions generally or specifically reflected in the appraisal made in connection with the
origination of the related Mortgage Loan or referred to in the lender’s title insurance policy delivered to the originator of the related Mortgage Loan and (3) other matters to which like properties are commonly subject that do not
materially interfere with the benefits of the security intended to be provided by such Mortgage. Immediately prior to the sale of such Mortgage Loan to the Depositor pursuant to this Purchase Agreement, the Sponsor had full right to sell and assign
the same to the Depositor or the Trustee, as the case may be. Immediately following the sale of such Mortgage Loan to the Depositor and the Depositor’s assignment and sale thereof of such Mortgage Loan to the Trustee, the Trustee will have good
title thereto subject to no claims or liens, including delinquent tax or assessment liens; 
 (xx) Each Mortgage Loan at
origination complied with applicable local, state and federal laws, including, without limitation, usury, equal credit opportunity, real estate settlement procedures, the Truth In Lending Act of 1968, as amended, all applicable predatory and abusive
lending laws and disclosure laws and consummation of the transactions contemplated hereby, including without limitation, the receipt of interest by the owner of such Mortgage Loan or the Holders of Certificates secured thereby, will not violate any
such laws. Any and all statements or acknowledgments required to be made by the Mortgagor relating to such requirements are and will remain in the Mortgage File. Each Mortgage Loan is being serviced in accordance with applicable state and federal
laws, including, without limitation, the Truth In Lending Act of 1968, as amended, and other consumer protection laws, real estate settlement procedures, usury, equal credit opportunity and disclosure laws and in a prudent and customary manner;

 (xxi) Neither the Sponsor nor any prior holder of any Mortgage has impaired, waived, altered or modified the Mortgage or
Mortgage Notes in any material respect (except that a Mortgage Loan may have been modified by a written instrument which has been recorded, if necessary to protect the interests of the owner of 
  

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 such Mortgage Loan or the Certificates, and which has been delivered to the Trustee); satisfied, canceled
or subordinated such Mortgage in whole or in part; released the applicable Mortgaged Property in whole or in part from the lien of such Mortgage; or executed any instrument of release, cancellation or satisfaction with respect thereto; 

(xxii) A lender’s policy of title insurance (on an ALTA or CLTA form) or binder, or other assurance of title customary in the
relevant jurisdiction insuring the first lien priority of the Mortgage Loan in an amount at least equal to the original Principal Balance of each such Mortgage Loan or a commitment binder or commitment to issue the same was effective on the date of
the origination of each Mortgage Loan, each such policy is valid and remains in full force and effect, and each such policy was issued by a title insurer qualified to do business in the jurisdiction where the Mortgaged Property is located, which
policy insures the Sponsor and successor owners of indebtedness secured by the insured Mortgage as to the first priority lien of the Mortgage as applicable. The Sponsor is, and such successor owners will be, the sole insured under such lender’s
title insurance policy; no claims have been made under such mortgage title insurance policy; no prior holder of the applicable Mortgage, including the Sponsor, has done, by act or omission, anything which would impair the coverage of such mortgage
title insurance policy; and each such policy, binder or assurance contains all applicable endorsements; 
 (xxiii) All of the
improvements which were included for the purpose of determining the Appraised Value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of such property and no improvements on adjoining properties encroach upon
the Mortgaged Property; 
 (xxiv) No improvement located on or being part of the Mortgaged Property is in violation of any
applicable zoning law or regulation, subdivision law or ordinance, except where the failure to comply would not have a material adverse effect on the market value of the Mortgaged Property. All inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities and the Mortgaged Property is
lawfully occupied under applicable law except where the failure to comply would not have a material adverse effect on the market value of the Mortgaged Property; 
 (xxv) Each Mortgage Note and the applicable Mortgage are genuine, and each is the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency, reorganization, moratorium, receivership and other similar laws relating to creditors’ rights generally or by equitable principles (regardless of
whether such enforcement is considered in a proceeding in equity or at law). All parties to the Mortgage Note and the Mortgage had legal capacity to execute the Mortgage Note and the Mortgage and each Mortgage Note and Mortgage has been duly and
properly executed by such parties; 
  

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 (xxvi) The proceeds of the Mortgage Loans have been fully disbursed, there is no
requirement for future advances thereunder and any and all requirements as to completion of any on-site or off-site improvements and as to disbursement of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in
making, closing or recording the Mortgage Loans were paid and the Mortgagor is not entitled to any refund of amounts paid or due under the Mortgage Note; 
 (xxvii) Each Mortgage contains customary and enforceable provisions that render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the
security, including (i) in the case of a Mortgage designated as a deed of trust, by trustee’s sale, and (ii) otherwise by judicial foreclosure or if applicable, non-judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan
and foreclosure on, or trustee’s sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage Loan will be able to deliver good and merchantable title to the property, subject to any applicable rights of
redemption; 
 (xxviii) With respect to each Mortgage constituting a deed of trust, either a trustee, duly qualified under
applicable law to serve as such, has been properly designated and currently so serves and is named in such Mortgage or if no duly qualified trustee has been properly designated and so serves, the Mortgage contains satisfactory provisions for the
appointment of such trustee by the holder of the Mortgage at no cost or expense to such holder, and no fees or expenses are or will become payable by the Certificateholders to the trustee under the deed of trust, except in connection with a
trustee’s sale after default by the Mortgagor; 
 (xxix) There exist no deficiencies with respect to escrow deposits and
payments, if such are required, for which customary arrangements for repayment thereof cannot be made, and no escrow deficits or payments of other charges or payments due the Sponsor have been capitalized under the Mortgage or the applicable
Mortgage Note; 
 (xxx) The Mortgage Note is not and has not been secured by any collateral, pledged account or other security
other than real estate securing the Mortgagor’s obligations and no Mortgage Loan is secured by more than one Mortgaged Property; 
 (xxxi) As of the Closing Date, the improvements upon each Mortgaged Property are covered by a valid and existing hazard insurance policy substantially acceptable to FNMA and acceptable to the Sponsor which policy
provides for fire extended coverage and such other hazards as are customary in the area where the Mortgaged Property is located representing coverage in an amount not less than the lesser of (A) the maximum insurable value of the improvements
securing such Mortgage Loan and (B) the outstanding Principal Balance of the related Mortgage Loan; if the improvement on the Mortgaged Property is a condominium unit, it is included under the coverage afforded by a blanket policy for the
condominium project. All individual 
  

 12 

 insurance policies contain a standard mortgagee clause naming the Sponsor or the original holder of the
Mortgage, and its successors in interest, as mortgagee, and the Sponsor has received no notice that any premiums due and payable thereon have not been paid; the Mortgage obligates the Mortgagor thereunder to maintain all such insurance at the
Mortgagor’s cost and expense, and upon the Mortgagor’s failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at the Mortgagor’s cost and expense and to seek reimbursement therefor from the
Mortgagor. There has been no act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of either; 
 (xxxii) If the Mortgaged Property is in an area identified in the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy in a form meeting the requirements of the current guidelines of the Flood Insurance Administration is in effect with respect to such Mortgaged Property with a generally acceptable carrier in an amount
representing coverage not less than the least of (A) the outstanding Principal Balance of the Mortgage Loan, (B) the minimum amount required to compensate for damage or loss on a replacement cost basis and (C) the maximum amount of
flood coverage that is available under federal law; 
 (xxxiii) Except for the Mortgage Loans referred to in clause
(xlii) as being delinquent, if any, there is no default, breach, violation or event of acceleration existing under the Mortgage or the applicable Mortgage Note; and no event which, with the passage of time or with notice and the expiration of
any grace or cure period, would constitute a material default, breach, violation or event of acceleration, and neither the Sponsor, any of its affiliates nor any servicer or subservicer of any related Mortgage Loan has waived any default, breach,
violation or event of acceleration; no foreclosure action is threatened or has been commenced with respect to the Mortgage Loan; 
 (xxxiv) Each Mortgage Loan is being serviced by the Servicer in accordance with the terms of the Mortgage Note; 
 (xxxv) There is no obligation on the part of the Sponsor or any other party to make any payments with respect to the related Mortgage Loan in addition to the Monthly Payments required to be made by the applicable Mortgagor; 
 (xxxvi) Any future advances made prior to the Cut-off Date, with respect to any Mortgage Loan have been consolidated with the outstanding
principal amount secured by such Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term reflected on the Mortgage Loan Schedule. The consolidated principal amount does not exceed the
original principal amount of the Mortgage Loan. The Mortgage Note with respect to any Mortgage Loan does not permit or obligate the Servicer to make future advances to the Mortgagor at the option of the Mortgagor; 
  

 13 

 (xxxvii) The Sponsor has caused or will cause to be performed any and all acts required
to preserve the rights and remedies of the Depositor and the Trustee evidencing an interest in the Mortgage Loans in any insurance policies applicable to the Mortgage Loans including, without limitation, any necessary notifications of insurers,
assignments of policies or interests therein, and establishments of coinsured, joint loss payee and mortgagee rights in favor of Trustee; 
 (xxxviii) Except as set forth in clause (xlii), there are no defaults by the Mortgagor in complying with the terms of any Mortgage, and all taxes, governmental assessments, insurance premiums, water, sewer and
municipal charges which previously became due and owing have been paid, or, if required by the terms of the Mortgage Loan, an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has
been assessed, but is not yet due and payable. Except for (A) payments in the nature of escrow payments and (B) interest accruing from the date of the Mortgage Note or date of disbursement of the Mortgage proceeds to the day which precedes
by one month the Due Date of the first installment of principal and interest, including, without limitation, taxes and insurance payments, neither the Sponsor nor the Servicer has advanced funds, or induced, solicited or knowingly received any
advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required by the Mortgage; 
 (xxxix) At the time of origination, each Mortgaged Property was the subject of an appraisal which conforms to the underwriting requirements of the related originator; and the Mortgage File contains an appraisal of the
applicable Mortgaged Property; 
 (xl) None of the Mortgage Loans are graduated payment Mortgage Loans or growth equity
Mortgage Loans; 
 (xli) [Reserved.] 
 (xlii) (a) Except with respect to no more than 0.30% and 0.05% of the Mortgage Loans in Group I and the Mortgage Loans in Group II,
respectively, none of the payments of principal of or interest on or in respect of any Mortgage Loans (by Cut-off Date Principal Balance) shall be 30 days or more but less than 60 days past due as of the Cut-off Date; and 0.07% and 0.04 of the
Mortgage Loans in Group I and the Mortgage Loans in Group II, respectively, was 60 days or more past due as of the Cut-off Date; (b) except as set forth in clause (a) above, all payments required to be made by the Mortgagor under the terms
of the Mortgage Note have been made and credited; and (c) to the Sponsor’s knowledge, there was no delinquent recording, tax or assessment lien against the property subject to any Mortgage, except where such lien was being contested in
good faith and a stay had been granted against levying on the property; 
 (xliii) Upon payment of the Purchase Price for the
Mortgage Loans by the Depositor or the Trustee, as applicable, pursuant to this Purchase Agreement, the Sponsor has transferred to the Depositor good and marketable title to 
  

 14 

 each Mortgage Note and Mortgage free and clear of any and all liens, claims, encumbrances, participation
interests, equities, pledges, charges or security interests of any nature and has or had full right and authority, subject to no participation of or agreement with any other person, to sell and assign the same, and following the sale of each
Mortgage Loan, the Depositor, will own such Mortgage Loan free and clear of any encumbrance, equity interest, participation interest, lien, pledge, charge, claim or security interest; 
 (xliv) The Sponsor acquired any right, title and interest in and to the Mortgage Loans in good faith and without notice of any adverse
claim; 
 (xlv) The Mortgage Note, the Mortgage, the related Assignment of Mortgage and any other documents required to be
delivered by the Sponsor have been delivered to the Custodian. The Custodian is in possession of a complete, true and accurate Mortgage File in accordance with Section 2.01 hereof. Substantially all the Mortgage Loans have monthly payments due
on the first day of each month and each Mortgage Loan had an original term to maturity of no greater than 30 years; 
 (xlvi)
Each Mortgage Loan contains a due-on-sale provision, although each Mortgage Loan may be assumable if permitted by the Servicer under certain circumstances; 
 (xlvii) Each of the Mortgage and the Assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located; 
 (xlviii) The Mortgagor has not notified the Sponsor, and the Sponsor has no knowledge of any relief requested or allowed to the Mortgagor
under the Servicemembers Civil Relief Act other than as disclosed pursuant to the Prospectus Supplement; 
 (xlix) To the best
of the Sponsor’s knowledge, there exists no violation of any local, state, or federal environmental law, rule or regulation in respect of the Mortgaged Property which violation has or could have a material adverse effect on the market value of
such Mortgaged Property. The Sponsor has no knowledge of any pending action or proceeding directly involving the related Mortgaged Property in which compliance with any environmental law, rule or regulation is in issue; and, to the best of the
Sponsor’s knowledge, nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation constituting a prerequisite to the use and employment of such Mortgaged Property; 
 (l) Each Mortgage Loan conforms, and all such Mortgage Loans in the aggregate conform, to the description thereof set forth in the
Prospectus and Prospectus Supplement in all material respects; 
 (li) [Reserved] 
  

 15 

 (lii) No Group I Mortgage Loan is subject to the requirements of the Home Ownership and
Equity Protection Act of 1994 (“HOEPA”); 
 (liii) Immediately prior to the transfer to the Depositor or the
Trustee, as applicable, the Sponsor had good and marketable title thereto, and the Sponsor is the sole legal, equitable owner of beneficial title to and holder of the Mortgage Loan. The Sponsor is conveying the same to the Depositor or the Trustee,
as applicable, free and clear of any and all liens, claims, encumbrances, participation interests, equities, pledges, charges or security interests of any nature and has full right and authority to sell and assign the same pursuant to this Purchase
Agreement, except for liens which will be released simultaneously with such conveyance; 
 (liv) For each Mortgage Loan, the
related Mortgage File contains a true, accurate and correct copy of each of the documents and instruments required to be included therein; 
 (lv) The Servicer meets all applicable requirements under the Pooling and Servicing Agreement, is properly qualified to service each Mortgage Loan and has been servicing each Mortgage Loan prior to the Cut-off Date;

 (lvi) No instrument of release or waiver has been executed in connection with the Mortgage Loans, and no Mortgagor has been
released, in whole or in part from its obligations in connection with a Mortgage Loan except in connection with an assumption agreement which has been delivered to the Trustee; 
 (lvii) On the basis of a representation by the Mortgagor at the time of origination of the Mortgage Loans, at least 93.31% and 93.46% of
the Mortgage Loans in Group I and Mortgage Loans in Group II, respectively, (by Cut-off Date Principal Balance) will be secured by Mortgages on owner-occupied primary residence properties; 
 (lviii) Approximately 11.63%, and 13.47% of the Mortgage Loans in Group I and the Mortgage Loans in Group II, respectively, (by Cut-off
Date Principal Balance) provide for a balloon payment and each Mortgage Note with respect to each such Mortgage Loan requires monthly payments of principal based on either a 40 year or 30 year amortization schedules and have scheduled maturity dates
of 30 years or 15 years, respectively, from the due date of the first monthly payment; 
 (lix) No Mortgage Loan was
originated based on an appraisal of the related Mortgaged Property made prior to completion of construction of the improvements thereon; 
 (lx) None of the Mortgage Loans is a “buy down” mortgage loan; 
 (lxi) [Reserved].

 (lxii) No Mortgage Loan is a “High Cost Home Loan” or “Covered Loan,” as applicable, (as such terms are
defined in the then current Standard 
  

 16 

 & Poor’s LEVELS® Glossary which is now Version 5.6(b) Revised, Appendix E) and no Mortgage Loan is a “High Cost Home Loan” as
defined in the Georgia Fair Lending Act, as amended (the “Georgia Act”). No Mortgage Loan that was originated (or modified) on or after October 1, 2002 and before March 7, 2003, is secured by property located in the State of
Georgia. There is no Mortgage Loan that was originated on or after March 7, 2003 which is a “high cost home loan” as defined under the Georgia Fair Lending Act; 
 (lxiii) None of the Mortgage Loans are covered by the requirements of the Home Ownership and Equity Protection Act of 1994, as amended, or
any comparable state or local law; none of the Mortgage Loans are “section 32” loans or “high cost” loans as defined by applicable predatory and abusive lending laws; no proceeds from any Mortgage Loan were used to finance any
single premium credit insurance policies; none of the Mortgage Loans (by Cut-off Date Principal Balance) require a mortgagor to pay a Prepayment Charge if the mortgagor prepays a Mortgage Loan more than five years after the date the Mortgage Loan
was originated; 
 (lxiv) No Mortgage Loan is a “High-Cost Home Loan” as defined in New York Banking Law 6-1;

 (lxv) No Mortgage Loan is a “High-Cost Home Loan” as defined in the Arkansas Home Loan Protection Act effective
July 16, 2003 (Act 1340 of 2003); 
 (lxvi) No Mortgage Loan is a “High-Cost Home Loan” as defined in the
Kentucky high-cost home loan statute effective June 24, 2003 (Ky. Rev. Stat. Section 360.100); 
 (lxvii) No
Mortgage Loan in the trust is a “high-cost home,” “covered” (excluding home loans defined as “covered home loans” in the New Jersey Home Ownership Security Act of 2002 that were originated between November 26, 2003
and July 7, 2004), “high risk home” or “predatory” loan under any applicable state, federal or local law (or a similarly classified loan using different terminology under a law imposing heightened regulatory scrutiny or
additional legal liability for residential mortgage loans having high interest rates, points and/or fees); 
 (lxviii) No
Mortgage Loan is a “High-Cost Home Loan” as defined in the New Mexico Home Loan Protection Act effective January 1, 2004 (N.M. Stat. Ann. §§ 58-21A-1 et seq.); 
 (lxix) No Mortgage Loan is a “High-Risk Home Loan” as defined in the Illinois High-Risk Home Loan Act effective January 1,
2004 (815 Ill. Comp. Stat. 137/1 et seq.); 
 (lxx) No Mortgage Loan is a “High-Cost Home Loan” as defined in the
Massachusetts Predatory Home Loan Practices Act effective November 7, 2004 (MA House Bill 4880); 
  

 17 

 (lxxi) No Mortgage Loan is a “High-Cost Home Loan” as defined in the Indiana
Home Loan Practices Act effective January 1st, 2005 (Indiana Code Ann. §§ 24-9-1 et seq.); 
 (lxxii)
Approximately 63.92% of the Mortgage Loans are subject to prepayment penalty charges as of the Cut-off Date; 
 (lxxiii)
[Reserved.] 
 (lxxiv) No borrower was required to purchase any credit life, disability, accident or health insurance product
as a condition of obtaining the extension of credit. No borrower obtained a prepaid single premium credit life, credit disability, credit unemployment or credit property insurance policy in connection with the origination of the Mortgage Loan; No
proceeds from any Mortgage Loan were used to purchase single premium credit insurance policies as part of the origination of, or as a condition to closing, such Mortgage Loan; 
 (lxxv) With respect to any Group I Mortgage Loan that contains a provision permitting imposition of a penalty upon a prepayment prior to
maturity; (a) the Mortgage Loan provides some benefit to the borrower (e.g., a rate or fee reduction) in exchange for accepting such prepayment penalty; (b) the Mortgage Loan’s originator had a written policy of offering the borrower, or
requiring third-party brokers to offer the borrower, the option of obtaining a Mortgage Loan that did not require payment of such a penalty; (c) the prepayment penalty was adequately disclosed to the borrower pursuant to applicable state and federal
law; (d) no Mortgage Loan originated on or after October 1, 2002 will provide for prepayment penalties for a term in excess of three years and any loans originated prior to such date will not provide for prepayment penalties for a term in
excess of five years; in each case unless the loan was modified to reduce the prepayment period to no more than three years from the date of the note and the borrower was notified in writing of such reduction in prepayment period; and (e) such
prepayment penalty shall not be imposed in any instance where the mortgage loan is accelerated or paid off in connection with the workout of a delinquent mortgage or due to the borrower’s default, notwithstanding that the terms of the Mortgage
Loan or state or federal law might permit the imposition of such penalty; 
 (lxxvi) [Reserved.] 
 (lxxvii) [Reserved.] 
 (lxxviii) [Reserved.] 
 (lxxix) With respect to Mortgaged Properties located in the continental United States and
Puerto Rico, no Group I Mortgage Loan secured by a single-family residence has a Principal Balance at origination in excess of $417,000; no Group I Mortgage Loan secured by a two-family residence has a Principal Balance at origination in excess of
$533,850; no Group I Mortgage Loan secured by a three-family residence has a Principal Balance at origination in excess of $645,300; and no Group I Mortgage Loan secured by a four-family residence has a Principal Balance at origination in excess of
$801,950; with respect to Mortgaged Properties located in Alaska, Guam, Hawaii and the Virgin Islands, no Group I Mortgage Loan secured by a single-family residence has a Principal Balance at origination in excess of $625,500; no Group I Mortgage
Loan secured by a two-family residence has a Principal Balance at origination in excess of $800,775; no Group I Mortgage Loan secured by a three-family residence has a Principal Balance at origination in excess of $967,950; and no Group I Mortgage
Loan secured by a four-family residence has a Principal Balance at origination in excess of $1,202,925; 
 (lxxx) No selection
procedure reasonably believed by the Sponsor to be adverse to the interests of the Certificateholders was utilized in selecting the Mortgage Loans; 
  

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 (lxxxi) The terms of the Mortgage Note related to each adjustable rate Mortgage Loan
provide that, following an initial period of two or three years following the month in which such Mortgage Loan was originated and semiannually or annually thereafter (each such date, an “Adjustment Date”), the Mortgage Rate on such
Mortgage Loan will be adjusted to equal the sum of (a) the related Index and (b) a fixed percentage amount specified in the related Mortgage Note (each, a “Gross Margin”); provided, however, that the Mortgage
Rate generally will not increase or decrease by the related Periodic Rate Cap, and will not increase above a specified maximum Mortgage Rate over the life of the Adjustable Rate Mortgage Loan (the “Maximum Mortgage Rate”) or
decrease below a specified minimum Mortgage Rate over the life of the Adjustable Rate Mortgage Loan (the “Minimum Mortgage Rate”); 
 (lxxxii) None of the Mortgage Loans (by Cut-off Date Principal Balance) are negative amortization loans; 
 (lxxxiii) No error, omission, negligence, misrepresentation, fraud or similar occurrence with respect to a Mortgage Loan has taken place on the part of the Sponsor, its affiliates or employees or any other person
involved in the origination of the Mortgage Loan or in the application for any insurance, including, but not limited to the MI Policy, in relation to such Mortgage Loan; 
 (lxxxiv) Each Mortgage Loan was originated by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections
203 and 211 of the Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or similar institution which is supervised and examined by a federal or state authority; 
 (lxxxv) With respect to each Mortgage Loan secured by manufactured housing, such manufactured housing is permanently affixed to a
foundation and constitutes real estate under applicable state law; 
 (lxxxvi) No Mortgage Loans are date of payment or simple
interest loans; 
 (lxxxvii) The sale, transfer, assignment and conveyance of Mortgage Loans by the Sponsor pursuant to this
Purchase Agreement is not subject to and will not result in any tax, fee or governmental charge payable by the Depositor, the Custodian or the Trustee to any federal, state or local government (“Transfer Taxes”) other than Transfer Taxes
which have or will be paid by the Sponsor as due; 
 (lxxxviii) Each Mortgage Loan is a “qualified mortgage” within
Section 860G(a)(3) of the Code; 
 (lxxxix) Approximately 60.11% of the Mortgage Loans (by Cut-off Date Principal
Balance) with a Loan-to-Value Ratio greater than 60% are covered by an MI Policy issued by an MI Insurer; 
  

 19 

 (xc) Approximately 56.35% of the Mortgage Loans that are identified on Exhibit 1 hereto
are covered by a MI Policy issued by the MI Insurer; 
 (xci) All requirements for the valid transfer of each MI Policy,
including any assignments or notices required in each MI Policy, have been satisfied; 
 (xcii) As of the Closing Date with
respect to each Mortgage Loan that is subject to a MI Policy, the Sponsor is unaware of any existing circumstances which would cause the MI Insurer to deny a claim with respect to such Mortgage Loan; 
 (xciii) All appraisals of the Mortgage Loans by the Sponsor are full URAR/1004 appraisals; 
 (xciv) All Prepayment Charges are enforceable and were originated in compliance with all applicable federal, state, and local laws;

 (xcv) [Reserved.] 
 (xcvi) With respect to mortgage loans that are more than 59 days delinquent as of the Cut-off Date, the Sponsor has made a specific review of the Servicer’s data and records that reflect mortgagor communications
and payment history, and has no actual knowledge of an event, condition or mortgagor communication which would cause the Sponsor to institute foreclosure proceedings; 
 (xcvii) The servicer for each Group I Mortgage Loan has fully furnished (and will fully furnish), in accordance with the Fair Credit
Reporting Act and its implementing regulations, accurate and complete information (i.e., favorable and unfavorable) on its borrower credit files to Equifax, Experian, and Trans Union Credit Information Company (three of the credit repositories), on
a monthly basis; 
 (xcviii) None of the Group I Mortgage Loans are classified as (a) “high cost” loans under
the Home Ownership and Equity Protection Act of 1994 or (b) “high cost,” “threshold,” “covered”, “predatory” or “abusive” loans under any other applicable state, federal or local law (including
without limitation any regulation or ordinance) (or a similarly classified loan using different terminology under a law imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates,
points and/or fees); 
 (xcix) With respect to any Group I Mortgage Loan originated on or after August 1, 2004, neither
the related mortgage nor the related mortgage note requires the borrower to submit to arbitration to resolve any dispute arising out of or relating in any way to the mortgage loan transaction; 
 (c) With respect to any Group I Mortgage Loan, the borrower was not encouraged or required to select a mortgage loan product offered by
the mortgage loan’s originator which is a higher cost product designed for less creditworthy borrowers, taking into account such facts as, without limitation, the mortgage loan’s requirements and the borrower’s credit history, income,
assets and liabilities. For each Group I Mortgage Loan, with respect to a borrowers seeking financing through a mortgage loan originator’s higher-priced subprime lending channel, such borrower was directed towards or offered the mortgage loan
orginator’s standard mortgage line if the borrower was able to qualify for one of the standard products; 
 (ci) With
respect to any Group I Mortgage Loan, the methodology used in underwriting the extension of credit for each Group I Mortgage Loan did not rely on the extent of the borrower’s equity in the collateral as the principal determining factor in
approving such extension of credit. The methodology employed objective criteria that related such facts as, without limitation, the borrower’s credit history, income, assets or liabilities, to the proposed mortgage payment and, based on such
methodology, the mortgage loan’s originator made a reasonable determination that at the time of origination the borrower had the ability to make timely payments on the mortgage loan; 
 (cii) With respect to any Group I Mortgage Loan, no borrower was charged “points and fees” in an amount greater than (a) $1,000
or (b) 5% of the principal amount of such Mortgage Loan, whichever is greater. For purposes of this representation, “points and fees” (x) include origination, underwriting, broker and finder’s fees and charges that the lender imposed
as a condition of making the mortgage loan, whether they are paid to the lender or a third party; and (y) exclude bona fide discount points, fees paid for actual services rendered in connection with the origination of the mortgage (such as
attorneys’ fees, notaries fees and fees paid for property appraisals, credit reports, surveys, title examinations and extracts, flood and tax certifications, and home inspections); the cost of mortgage insurance or credit-risk price
adjustments; the costs of title, hazard, and flood insurance policies; state and local transfer taxes or fees; escrow deposits for the future payment of taxes and insurance premiums; and other miscellaneous fees and charges that, in total, do not
exceed 0.25% of the loan amount; 
 (ciii) For each Group I Mortgage Loan, with respect to any subordinate lien Mortgage Loan,
such lien is on a one- to four-family residence that is the principal residence of the borrower; 
 (civ) For each Group I
Mortgage Loan, no subordinate lien Mortgage Loan has an original principal balance that exceeds one-half of the one-unit limitation for first lien mortgage loans, or $208,500 (in Alaska, Guam, Hawaii or Virgin Islands; $312,750), without regard to
the number of units; 
 (cv) For each Group I Mortgage Loan, the original principal balance of the first lien mortgage loan
plus the original principal balance of any subordinate lien mortgage loans relating to the same mortgaged property does not exceed the applicable loan limit for first lien mortgage loans for that property type (as set out in clause (lxxix) above).

 Upon discovery by the Sponsor or upon notice from the Depositor, the Trustee, or the Custodian, as applicable, of a breach of any
representation or warranty in subsection (a) of this Section which materially and adversely affects the interests of the Certificateholders the Sponsor shall, within 45 days of its discovery or its receipt of notice of such breach, either
(i) cure such breach in all material respects or (ii) to the extent that such breach is with respect to a 
  

 20 

 Mortgage Loan or a Related Document, either (A) repurchase such Mortgage Loan from the Trustee at the Repurchase
Price, or (B) substitute one or more Eligible Substitute Mortgage Loans for such Mortgage Loan, in each case in the manner and subject to the conditions and limitations set forth below. 
 Upon discovery by the Sponsor or upon notice from the Depositor, the Trustee, or the Custodian, as applicable, of a breach of any representation or
warranty in this subsection (b) with respect to any Mortgage Loan or upon the occurrence of a Repurchase Event, which materially and adversely affects the value of the related Mortgage Loan or the interests of any Certificateholders or of the
Depositor or the Trustee in such Mortgage Loan (notice of which shall be given to the Depositor and the Trustee by the Sponsor, if it discovers the same) the Sponsor shall, within 90 days after the earlier of its discovery or receipt of notice
thereof, either cure such breach or Repurchase Event in all material respects or either (i) repurchase such Mortgage Loan from the Trustee at the Repurchase Price, or (ii) substitute one or more Eligible Substitute Mortgage Loans for such
Mortgage Loan, in each case in the manner and subject to the conditions set forth below; provided, however, that a breach of any of the representations and warranties found in subsections b(xx), (b)(lii), (b)(lxii), (b)(lxvii), (b)(lxxiv),
(b)(lxxv), (b)(lxxix), (b)(xcvii), (b)(xcviii) and (b)(xcix) shall be deemed to materially and adversely affect the interest of the Certificateholders. The Repurchase Price for any such Mortgage Loan repurchased by the Sponsor shall be deposited or
caused to be deposited by the Servicer in the Collection Account maintained by it pursuant to Section 3.06 of the Pooling and Servicing Agreement. 
 In the event that the Sponsor elects to substitute an Eligible Substitute Mortgage Loan or Loans for a Deleted Mortgage Loan pursuant to this Section 3.01, the Sponsor shall deliver to the Custodian on behalf of
the Trustee, with respect to such Eligible Substitute Mortgage Loan or Loans, the original Mortgage Note and all other documents and agreements as are required by Section 2.01 hereof, with the Mortgage Note endorsed as required by such
Section 2.01 hereof. No substitution will be made in any calendar month after the Determination Date for such month. Monthly Payments due with respect to Eligible Substitute Mortgage Loans in the month of substitution shall not be part of the
Trust Fund and will be retained by the Servicer and remitted by the Servicer to the Sponsor on the next succeeding Payment Date. For the month of substitution, distributions to the Collection Account pursuant to the Pooling and Servicing Agreement
will include the Monthly Payment due on a Deleted Mortgage Loan for such month and thereafter the Sponsor shall be entitled to retain all amounts received in respect of such Deleted Mortgage Loan. The Servicer shall amend or cause to be amended the
Mortgage Loan Schedule to reflect the removal of such Deleted Mortgage Loan and the substitution of the Eligible Substitute Mortgage Loan or Loans and the Servicer shall deliver the amended Mortgage Loan Schedule to the Custodian and the Trustee.
Upon such substitution, the Eligible Substitute Mortgage Loan or Loans shall be subject to the terms of this Purchase Agreement and the Pooling and Servicing Agreement in all respects, the Sponsor shall be deemed to have made the representations and
warranties with respect to the Eligible Substitute Mortgage Loan contained herein set forth in this Section 3.01(b), to the extent set forth in the definition of “Eligible Substitute Mortgage Loan”, as of the date of substitution, and
the Sponsor shall be obligated to repurchase or substitute for any Eligible Substitute Mortgage Loan as to which a Repurchase Event has occurred as provided herein. In connection with the substitution of one or more Eligible Substitute Mortgage
Loans for one or more Deleted Mortgage Loans, the Servicer 
  

 21 

 will determine the amount (such amount, a “Substitution Adjustment Amount”), if any, by which (i) the
Repurchase Price that would otherwise apply to such Deleted Mortgage Loan, exceeds (ii) the principal balance of the related Eligible Substitute Mortgage Loan (after application of the principal portion of the Monthly Payments due in the month
of substitution that are to be distributed to the Collection Account in the month of substitution). The Sponsor shall pay the amount of such shortfall to the Servicer for deposit into the Collection Account on the day of substitution, without any
reimbursement therefor. 
 Upon receipt by the Trustee of written notification, signed by a Servicing Officer, of the deposit of such
Repurchase Price or of such substitution of an Eligible Substitute Mortgage Loan and deposit of any applicable Substitution Adjustment Amount as provided above, the Custodian shall, on behalf of the Trustee, cause to be released to the Sponsor the
related Mortgage File for the Mortgage Loan being repurchased or substituted for and the Trustee shall execute and deliver such instruments of transfer or assignment prepared by the Servicer, in each case without recourse, as shall be necessary to
vest in the Sponsor or its designee such Mortgage Loan released pursuant hereto and thereafter such Mortgage Loan shall not be an asset of the Trustee. 
 It is understood and agreed that the obligation of the Sponsor to cure any breach with respect to or to repurchase or substitute for, any Mortgage Loan as to which such a breach has occurred and is continuing shall,
except to the extent provided in Section 6.01 of this Purchase Agreement, constitute the sole remedy respecting such breach available to the Depositor, the Trustee, the Certificateholders or the Custodian against the Sponsor. 
 It is understood and agreed that the representations and warranties set forth in this Section 3.01 shall survive delivery of the respective Mortgage
Files to the Custodian on behalf of the Trustee. 
 Section 3.02 
Depositor Representations and Warranties. 
 The Depositor hereby represents and warrants to the Sponsor
and the Trustee as of the date hereof and as of the Closing Date that: 
 (a) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted. 
 (b) The Depositor is duly qualified to do business as a foreign corporation in good standing and has obtained all necessary licenses and approvals in all
jurisdictions in which the ownership or lease of its property or the conduct of its business shall require such qualifications and in which the failure to so qualify would have a material adverse effect on the business, properties, assets or
condition (financial or other) of the Depositor and the ability of the Depositor to perform under this Purchase Agreement. 
 (c) The
Depositor has the power and authority to execute and deliver this Purchase Agreement and to carry out its terms; the Depositor has full power and authority to purchase the property to be purchased from the Sponsor and the Depositor has duly
authorized 
  

 22 

 such purchase by all necessary corporate action; and the execution, delivery and performance of this Purchase Agreement
have been duly authorized by the Depositor by all necessary corporate action. 
 (d) The consummation of the transactions contemplated by
this Purchase Agreement and the fulfillment of the terms hereof do not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation
or bylaws of the Depositor, or any indenture, agreement or other instrument to which the Depositor is a party or by which it is bound; nor result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such
indenture, agreement or other instrument (other than pursuant to the Basic Documents); nor violate any law or, to the best of the Depositor’s knowledge, any order, rule or regulation applicable to the Depositor of any court or of any federal or
state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Depositor or its properties. 
 (e) The Depositor (A) is a solvent entity and is paying its debts as they become due and (B) after giving effect to the transfer of the Mortgage Loans, will be a solvent entity and will have sufficient resources to pay its debts
as they become due. 
 
ARTICLE IV 
 SPONSOR’S COVENANTS 
 Section 4.01 
Covenants of the Sponsor. 
 The Sponsor hereby covenants as of the date hereof and as of the Closing Date
that, except for the transfer hereunder, on and after the Closing Date, the Sponsor will not sell, pledge, assign or transfer to any other Person, or grant, create, incur or assume any Lien on, any Mortgage Loan, whether now existing or hereafter
created, or any interest therein; the Sponsor will notify the Custodian and the Trustee of the existence of any such Lien on any Mortgage Loan immediately upon discovery thereof; the Sponsor will defend the right, title and interest of the Trustee,
on its own behalf and as assignee of the Depositor, in, to and under the Mortgage Loans, whether now existing or hereafter created, against all claims of third parties claiming through or under the Sponsor. 
 In the event that the Custodian or the Trustee receives actual notice of any Transfer Taxes arising out of the transfer, assignment and conveyance of the
Mortgage Loans, on written demand by the Custodian, or upon the Sponsor’s otherwise being given notice thereof by the Custodian, the Sponsor shall pay any and all such Transfer Taxes (it being understood that the Holders of the Certificates,
the Depositor, the Custodian and the Trustee shall have no obligation to pay such Transfer Taxes). 
 Section 4.02 
Payment of Expenses. 
 (a) The Sponsor will pay on the Closing Date all expenses incident to the
performance of its obligations under this Purchase Agreement and the Underwriting Agreement, including (i) the preparation, printing and any filing of the preliminary prospectus, Prospectus 
  

 23 

 Supplement and Prospectus (including any schedules or exhibits and any document incorporated therein by reference)
originally filed and of each amendment or supplement thereto, (ii) the preparation, printing and delivery to the Underwriters of this Purchase Agreement and the Underwriting Agreement, the Pooling and Servicing Agreement and such other
documents as may be required in connection with the offering, purchase, sale and delivery of the Certificates, (iii) the preparation, issuance and delivery of the certificates for the Class A Certificates and Mezzanine Certificates to the
Underwriters, including any charges of DTC, Clearstream Luxembourg and the Euroclear System in connection therewith; (iv) the qualification of the Class A Certificates and Mezzanine Certificates under securities laws in accordance with the
provisions of Section 3(f) of the Underwriting Agreement, including filing fees and the reasonable fees and disbursements of counsel for the Underwriters in connection therewith and in connection with the preparation of the Blue Sky Survey and
any supplement thereto for delivery to potential investors, (v) in addition to the initial printing and filing costs under (i) above, the printing and delivery to the Underwriters of copies of each preliminary prospectus and of the
Prospectus and any amendments or supplements thereto for delivery to potential investors, (vi) the fees and expenses of the Trustee and the Custodian, including the fees and disbursements of counsel for the Trustee and the Custodian in
connection with the Pooling and Servicing Agreement, the Purchase Agreement and the Certificates and (vii) any fees payable in connection with the rating of the Certificates. 
 (b) If the Underwriting Agreement is terminated by the Underwriters in accordance with the provisions of Section 5 or Section 9(a)(i) thereof,
the Sponsor shall reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters. 
 
ARTICLE V 
 CONDITIONS TO MORTGAGE LOAN PURCHASE 
 Section 5.01 
Conditions of Depositor’s Obligations. 
 The Depositor’s obligations to purchase the Mortgage
Loans which each accepts for purchase hereunder shall be subject to each of the following conditions: 
 (i) the Mortgage File
for each Mortgage Loan shall have been delivered in accordance with this Purchase Agreement; 
 (ii) the representations and
warranties set forth in Section 3.01(b) hereof with respect to each Mortgage Loan shall be true as of the Closing Date; 
 (iii) the Underwriters or their affiliates shall have had an opportunity to perform a due diligence review of each Mortgage Loan; and 
 (iv) the Sponsor shall have provided to the Underwriters or their affiliates such other documents which are then required to have been delivered under this Purchase Agreement or which are reasonably requested by the
Underwriters or their affiliates, which other documents may include UCC financing statements, a favorable opinion or opinions of counsel with respect to matters which are reasonably requested by the Underwriters, and/or an Officers’
Certificate. 
  

 24 

 
ARTICLE VI 
 INDEMNIFICATION BY THE SPONSOR WITH RESPECT TO THE MORTGAGE LOANS 
 Section 6.01 
Indemnification With Respect to the Mortgage Loans. 
 The Sponsor shall indemnify and hold harmless the
Depositor, Trustee and the Custodian from and against any loss, liability or expense arising from the breach by the Sponsor of its representations and warranties in Section 3.01 of this Purchase Agreement which materially and adversely affects
the value of any Mortgage Loan or the Depositor’s assignees’ interest in any Mortgage Loan or from the failure by the Sponsor to perform its obligations under this Purchase Agreement in any material respect. 
 Section 6.02 
Limitation on Liability of the Sponsor. 
 None of the directors, officers, employees or agents of the
Sponsor shall be under any liability to the Depositor, it being expressly understood that all such liability is expressly waived and released as a condition of, and as consideration for, the execution of this Purchase Agreement. Except as and to the
extent expressly provided in the Basic Documents, the Sponsor shall not be under any liability to the Trustee, the Custodian or the Certificateholders. The Sponsor and any director, officer, employee or agent of the Sponsor may rely in good faith on
any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising hereunder. 
 
ARTICLE VII 
 TERMINATION 
 Section 7.01 
Termination. 
 (a) Except as provided in Section 7.01(b) hereof, the respective obligations and
responsibilities of the Sponsor, the Depositor, the Trustee and the Custodian created hereby shall terminate, except for the Sponsor’s indemnity obligations as provided herein, upon the termination of the Trust Fund pursuant to the terms of the
Pooling and Servicing Agreement. 
 (b) The Depositor may terminate this Purchase Agreement, by notice to the Sponsor, at any time at or
prior to the Closing Date: 
 (i) if the Underwriting Agreement is terminated by the Underwriters pursuant to the terms of the
Underwriting Agreement or if there has been, since the time of execution of this Purchase Agreement or since the respective dates as of which information is given in the Prospectus, any material adverse change in the financial condition, earnings,
business affairs or business prospects of the Sponsor, whether or not arising in the ordinary course of business, or 
  

 25 

 (ii) if there has occurred any material adverse change in the financial markets in the
United States, any outbreak of hostilities or escalation thereof or other calamity or crisis or any change or development involving a prospective change in national or international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the Underwriters, impracticable to market the Offered Certificates or to enforce contracts for the sale of the Offered Certificates, or 
 (iii) if trading in any securities of the Sponsor has been suspended or limited by the Commission or the New York Stock Exchange, or if
trading generally on the American Stock Exchange or the New York Stock Exchange or in the NASDAQ National Market System has been suspended or limited, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices have been
required, by any of said exchanges or by such system or by order of the Commission, the National Association of Securities Dealers, Inc. or any other governmental authority, 
 (iv) if a banking moratorium has been declared by either federal or New York authorities, 
 (v) either (A) a change in control of the Sponsor shall have occurred other than in connection with and as a result of the issuance
and sale by the Sponsor or registered, publicly offered common stock; or (B) the Underwriters determine in their sole discretion that any material adverse change has occurred in the management of the Sponsor, 
 (vi) there is (A) a material breach by the Sponsor of any representation and warranty contained in this Purchase Agreement or the
Underwriting Agreement other than a representation or warranty relating to particular Mortgage Loans, and the Underwriters have reason to believe in good faith either that such breach is not curable within two (2) days or that such breach may
not have been cured in all material respects at the expiration of two (2) days following discovery thereof by the Sponsor or (B) a failure by the Sponsor to make any payment payable by it under this Purchase Agreement or (C) any other
failure by the Sponsor to observe and perform in any material respect its material covenants, agreements and obligations with the Depositor, including without limitation those contained in this Purchase Agreement, and the Depositor has reason to
believe in good faith that such failure may not have been cured in all material respects at the expiration of two (2) days following discovery thereof by the Sponsor, or 
 (vii) the Sponsor fails to provide written notification to the Underwriters of any change in its loan origination, acquisition or
appraisal guidelines or practices, or the Sponsor, without the prior consent of the Underwriters (which shall not be unreasonably withheld), amends in any material respect its loan origination, acquisition or appraisal guidelines or practices.

  

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 If this Purchase Agreement is terminated pursuant to this Section 7.01(b), such termination shall be
without liability of any party to any other party except as provided in Section 4.02 hereof. 
 
ARTICLE VIII 
 MISCELLANEOUS PROVISIONS 
 Section 8.01 
Amendment. 
 This Purchase Agreement may be amended from time to time by the Sponsor, the Depositor, the
Trustee and the Custodian by written agreement signed by the Sponsor, the Depositor, the Trustee and the Custodian. 
 Section 8.02 
Governing Law. 
 This Purchase Agreement shall be governed by and construed in accordance with the laws
of the State of New York and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws. 
 Section 8.03 
Notices. 
 All demands, notices and communications hereunder shall be in writing and shall be deemed to
have been duly given if personally delivered at or mailed by registered mail, postage prepaid, addressed as follows: 
 (i)   if to the Sponsor: 
 NovaStar Mortgage, Inc. 
 8140 Ward Parkway 
 Suite 300 
 Kansas City, Missouri 64114 
 Attention: Matt Kaltenrieder 
 or, such other
address as may hereafter be furnished to the Depositor in writing by the Sponsor. 
 (ii)   if to the
Depositor: 
 NovaStar Mortgage Funding Corporation 
 8140 Ward Parkway 
 Suite 300 
 Kansas City, Missouri 64114 
 Attention: Matt Kaltenrieder 
 or such other
address as may hereafter be furnished to the Sponsor in writing by the Depositor. 
  

 27 

 (iii)  if to the Custodian: 
 U.S. Bank National Association 
 4527 Metropolitan Court, Suite C 
 Frederick, Maryland 21704 
 Attention: Edward Aquino 
 or such other
address as may hereafter be furnished to the Sponsor in writing by the Custodian. 
 (iv)  if to the Co-Trustee:

 J.P. Morgan Trust Company, National Association 
 ITS - Global Debt 
 560 Mission Street, 13th Floor 
 San Francisco, CA 94105 
 Attn: James Myers, VP (NovaStar Mortgage Funding Trust, Series 
 2006-2) 
 or such other address as may
hereafter be furnished to the Sponsor in writing by the Co-Trustee. 
 (v)  if to the Trustee: 
 JPMorgan Chase Bank, National Association 
 4 New York Plaza, 6th Floor 
 New York, NY 10004-2477 
 Attention: Worldwide Securities Services/Structured Finance 
 Services (NovaStar Mortgage Funding Trust, Series 2006-2) 
 or such other address as may hereafter be furnished to the Sponsor in writing by the Trustee. 
 Section 8.04 
Severability of Provisions. 
 If any one or more of the covenants, agreements, provisions or terms of
this Purchase Agreement shall be held invalid for any reason whatsoever, then such covenants, agreements, provisions or terns shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Purchase Agreement and
shall in no way affect the validity or enforceability of the other provisions of this Purchase Agreement. 
 Section 8.05 
Relationship of Parties. 
 Nothing herein contained shall be deemed or construed to create a partnership
or joint venture between the parties hereto, and the services of the Sponsor shall be rendered as an independent contractor and not as agent for the Depositor. 
  

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 Section 8.06 
Counterparts. 
 This Purchase Agreement may be executed in two or more counterparts and by the different
parties hereto on separate counterparts, each of which, when so executed, shall be deemed to be an original and such counterparts together shall constitute one and the same agreement. 
 Section 8.07 
Further Agreements. 
 The Depositor and the Sponsor each agree to execute and deliver to the other such
additional documents, instruments or agreements as may be necessary or appropriate to effectuate the purposes of this Purchase Agreement. Each of the Depositor and the Sponsor agrees to use its best reasonable efforts to take all actions necessary
to be taken by it to cause the Class A-1A Certificates to be rated “Aaa” by Moody’s, “AAA” by S&P and “AAA” by Fitch, the Class A-2A Certificates to be rated “Aaa” by Moody’s,
“AAA” by S&P and “AAA” by Fitch, the Class A-2B Certificates to be rated “Aaa” by Moody’s, “AAA” by S&P and “AAA” by Fitch, the Class A-2C Certificates to be rated
“Aaa” by Moody’s, “AAA” by S&P and “AAA” by Fitch, the Class A-2D Certificates to be rated “Aaa” by Moody’s, “AAA” by S&P and “AAA” by Fitch, the Class M-1
Certificates to be rated “Aa2” by Moody’s, “AA” by S&P and “AA” by Fitch, the Class M-2 Certificates to be rated “Aa3” by Moody’s, “AA” by S&P and “AA” by Fitch, the Class
M-3 Certificates to be rated “A1” by Moody’s, “AA” by S&P and “AA-” by Fitch, the Class M-4 Certificates to be rated “A2” by Moody’s, “AA-” by S&P and “AA-” by Fitch, the
Class M-5 Certificates to be rated “A3” by Moody’s, “A+” by S&P and “A+” by Fitch, the Class M-6 Certificates to be rated “Baa1” by Moody’s, “A+” by S&P and
“A+” by Fitch, the Class M-7 Certificates to be rated “Baa2” by Moody’s, “A” by S&P and “A” by Fitch, the Class M-8 Certificates to be rated “Baa3” by Moody’s,
“BBB+” by S&P and “BBB+” by Fitch, the Class M-9 Certificates to be rated “Not rated” by Moody’s, “BBB” by S&P and “BBB-” by Fitch, the Class M-10 Certificates to be rated
“Not Rated” by Moody’s, “BB+” by S&P and “BB+” by Fitch, each party will cooperate with the other in connection therewith. 
 Section 8.08 
Intention of the Parties. 
 It is the intention of the parties that (i) the Depositor is purchasing
on the Closing Date, and the Sponsor is selling on the Closing Date, the Mortgage Loans, rather than the Depositor providing to the Sponsor a loan secured by the Mortgage Loans on the Closing Date, and (ii) the Trustee is purchasing on the
Closing Date, and the Depositor is selling on the Closing Date, the Mortgage Loans, rather than the Trustee providing to the Depositor a loan secured by the Mortgage Loans. Accordingly, the parties hereto each intend to treat these transactions as
(i) a sale by the Sponsor, and a purchase by the Depositor, of the Mortgage Loans on the Closing Date, and (ii) a sale by the Depositor, and a purchase by the Trustee, of the Mortgage Loans on the Closing Date. 
 Section 8.09 
Successors and Assigns; Assignment of Purchase Agreement. 
 This Purchase Agreement shall bind and inure
to the benefit of and be enforceable by the Sponsor, the Depositor, the Trustee, the Custodian, and their respective successors and assigns. The obligations of the Sponsor under this Purchase Agreement cannot be assigned or delegated to a third
party without the consent of the Depositor, which consent shall be at the 
  

 29 

 Depositor’s discretion. The parties hereto acknowledge that (i) the Depositor is acquiring the Mortgage Loans
for the purpose of selling them to the Trustee, who will hold the Mortgage Loans in trust for the benefit of the Certificateholders. As an inducement to the Depositor and the Trustee to purchase the Mortgage Loans, the Sponsor acknowledges and
consents to (i) the assignment by the Depositor to the Trustee of all of the Depositor’s rights or remedies against the Sponsor pursuant to this Purchase Agreement and to (ii) the enforcement or exercise of any rights against the
Sponsor pursuant to this Purchase Agreement by the Depositor and the Trustee. Such enforcement of a right or remedy by the Trustee, shall have the same force and effect as if the right or remedy had been enforced or exercised by the Depositor
directly. 
 Section 8.10 
Survival. 
 The representations and warranties made herein by the Sponsor and the provisions of Article V
hereof shall survive the purchase of the Mortgage Loans hereunder. 
 Section 8.11 
Liability of the Trustee. 
 The Trustee is entering into the Basic Documents to which it is a party
solely as Trustee, hereunder and thereunder, and not in its individual capacity, and all persons having any claim against the Trustee by reason of the transactions contemplated by this Agreement or any other Basic Document shall look only to the
Trust Fund for payment or satisfaction thereof. 
 [Signature page to follow] 
  

 30 

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

			
	 NOVASTAR MORTGAGE, INC.
 as Sponsor

		
	 By:
	 	 /s/ Matt Kaltenrieder

	 Name:
 Title:
	 	 Matt Kaltenrieder
 Vice President

	
	 NOVASTAR MORTGAGE FUNDING
 CORPORATION
 as Depositor

		
	 By:
	 	 /s/ Matt Kaltenrieder

	 Name:
 Title:
	 	 Matt Kaltenrieder
 Vice President

	
	 U.S. BANK NATIONAL ASSOCIATION,
 as Custodian

		
	 By:
	 	 /s/ Maureen Bodine

	 Name:
 Title:
	 	 Maureen Bodine
 Authorized Agent

	
	 JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,
 not in its individual capacity,
 but solely as Trustee

		
	 By:
	 	 /s/ Andrew M. Cooper

	 Name:
 Title:
	 	 Andrew M. Cooper
 Assistant Vice President

  

 31 

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

		
	 By:
	 	 /s/ Matt Kaltenrieder

	 Name:
 Title:
	 	 Matt Kaltenrieder
 Vice President

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

 32 

 
EXHIBIT 1 
 MORTGAGE LOAN SCHEDULE 
 [Provided to Depositor and to Trustee at the Closing]

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